The anti-competitive behaviour of Australia’s biggest corporate thugs will soon be put on public display, with the evidence collected made available to regulators, policy practitioners, researchers and the public under a wholesale push to flush out previously hidden data on harmful concentrations of market power.
That’s the short, sharp takeaway of a key shift in how regulators and the government will look at market behaviour across a raft of oligopoly-prone sectors as assistant minister for competition, charities & treasury and assistant minister for employment Andrew Leigh prepares to let loose a recently-assembled pack of expert data-sniffers to dig out evidence otherwise buried in disparate reporting lines scattered across agencies.
It’s a clinically methodical approach that has worked wonders at the Australian Taxation Office where reforms like Single Touch Payroll have greatly boosted ‘tax efficiency’ — that’s finding money owed and collecting it — by hitting companies big and small that previously used cascading contracting arrangements to dodge tax and hide profit.
Think security, cleaning, shopping trolley collection and IT.
On Tuesday, Leigh will map out a new competition battleplan in a speech to the Chifley Research Centre in Melbourne that focuses on creating timely and lasting indicators of the state of play, and that gives government a far more distilled, detailed and reliable dataset than one-shot inquiries.
The Albanese government has already announced an inquiry into supermarket gouging, while the Australian Competition and Consumer Commission (ACCC) on Monday recommended the government directly intervene in the childcare market to stop subsidy siphoning.
Like a number of sectors, childcare has perennially become the target of so-called ‘aggregator’ or ‘roll-up’ operators who strategically pick off both struggling and buoyant not-for-profits and other businesses to limit competition and jack-up costs, sometimes with disastrous consequences.
In 2008, publicly listed childcare mega-operator ABC Learning hit the wall after a failed push into the US triggered a debt-laden collapse leaving around 1,000 Australian childcare centres in limbo, including several outsourced public service agency premises.
Leigh is now seeking to hardwire a series of competition activity and pressure gauges to determine sectoral temperature and performance across a large chunks of the economy by going directly to the source.
“Competition provides a check on unbridled profit-seeking by business. In a competitive market, innovators can bring new products and services to market, without fear of being shut down by entrenched monopolists,” Leigh said.
“Competition limits unearned privilege and seeks to treat everyone fairly. Competition guides labour and capital to their most valuable uses and combinations, driving productivity that underpins sustainable wages growth.”
A persistent area of market power distortion is around mergers and acquisitions, with Leigh reckoning that “at least two-thirds of mergers fly under the radar because they are not notified to the Australian Competition and Consumer Commission.”
Worse still, the concentration of mergers is most heavily weighted at the top end, with Leigh reckoning the largest 1% of firms accounting for half of all mergers.
That bikie-grade statistic comes courtesy of Leigh’s new Competition Taskforce that’s charged with “the development of Australia’s first whole-of-economy approach to tracking mergers and acquisitions” according to its own description.
Here, Leigh is interested in the finer detail — rather than the names — by pulling on so-called microdata, or much bigger sets of smaller bits of data that he compares to how many millions pixels can form to make a picture: the more pixels you have, the sharper the resolution and the finer the detail you can see.
“In simple terms, this new approach exploits Australian Bureau of Statistics administrative microdata on labour flows between Australian businesses, adapting a US methodology to identify when a merger takes places. Using labour flows allows the authors to define mergers in an economically meaningful way, excluding mergers that are just trivial paper shuffles,” Leigh said.
The new research is a joint effort public sector effort too, with researchers from the Competition Taskforce, Reserve Bank of Australia and Australian National University all taking part to boil a dataset comprising of “the universe of Australian business linked with their employees’ from 2002-03 to 2017-18.
Leigh argues this will yield “an indication of how many mergers take place each year, and the characteristics of the businesses involved in the merger” and “create a platform that will enable examination of the impacts of mergers on key economic outcomes, including business performance, employment and industry concentration.”
It’ll also empirically debunk a huge range of commercially commissioned research lovingly delivered into the arms of policymakers and senior bureaucrats that routinely argue many Australian small businesses are just too feeble to survive without vending themselves into bigger ones.
Leigh said one target was “the extent and effects of ‘serial acquisitions’ and whether such transactions have been silently contributing to higher market concentration in various industries.”
There is, at first glance, a trend where serial acquirers seem to buy Sumo-sized proportions of some markets.
Think aviation, childcare, pets, vets, groceries, aged care and funerals. Leigh wants to put on record “whether such transactions have been silently contributing to higher market concentration in various industries.”
If the adage that you can’t manage what you can’t measure holds true, regulators do presently look to be squinting through a keyhole rather than kicking open the doors of transparency.
“Under the voluntary notification system, the Australian Competition and Consumer Commission has considered about 330 mergers each year on average over the past decade. Initial results from the mergers database tracking labour flows suggests there are many more mergers than this each year, somewhere between 1,000 and 1,500,” Leigh said.
“For every merger that is notified to the Australian Competition and Consumer Commission, there are two to three more mergers and acquisitions that take place.”
If that was the metric for tax collection and tax efficiency, well, there’d be a riot in Treasury. The real question Leigh is asking is how much of a handbrake on the economy the burden of big businesses squashing small ones has created.
It’s probably just as well the Member for Fenner lives in Canberra and doesn’t have to fly there.
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