What’s the point? Decision on ANZ-Suncorp merger undermines ACCC

Competition should be an essential part of Aussie prosperity but a recent decision in banked shows the whole system is screwed.

ANALYSIS

The Australian Competition and Consumer Commission (ACCC) has a budget of nearly $30 million per year.

It has formidable powers to extract commercially sensitive data from claimants and defenders.

Even so, these resources have served it poorly, enabling greater concentration to develop in every significant economic segment.

However, it is a valuable public service organ that can track and remonstrate against monopolies and oligopolies when their behaviour reaches outrageous levels.

Recent monitoring of the evil gas export cartel and gouging supermarket duopoly are good examples.

The ACCC will conduct an inquiry into Australia’s supermarket sector, including the pricing practices of the supermarkets and the relationship between wholesale and retail prices. Picture: NCA NewsWire

The fact is the ACCC is up against it. It is usually overseeing multibillion-dollar acquisitions and mergers. So the forces arranged against it are fantastically better resourced and, as such, typically attract the better talent.

To put it simply, in the neoliberal world, regulators are up against it. So, up against it, the principles underpinning neoliberalism – freedom and individual success – might inevitably come to grief in greed and regulatory capture.

ANZ-Suncorp

So, when we consider that last year, the ACCC, in its wisdom, rejected a proposed takeover of the Suncorp banking division by ANZ, our instincts should rise in support.

After all, rejections of mergers are rare, and they must be for obvious reasons, as they are in this case.

In 2023, the ACCC rejected a proposed takeover of the Suncorp banking division by ANZ. Picture: NCA NewsWire / John Gass

How can any competition reduction serve consumers’ interests when four banks control three-quarters of the market?

This is a textbook oligopoly that needs to be injected with greater competition to prevent price gouging or the application of a cost-plus regulatory price cap.

So, the ACCC made the right decision.

But, as is so often the case with these bottomless cash transactions, there was recourse for ANZ.

It took the case to the Australian Competition Tribunal (ACT), an opaque body of judges, lawyers and government cronies with no secretariat and no resources of its own to undertake independent research.

What it does have is the power to overturn ACCC decisions if they are deemed unworthy.

And guess what? Three appointees of the ACT just decided that the ANZ purchase of Suncorp Bank was a great idea.

Why?

Justice John Haley declared that “material asymmetry” in the market shares of the major banks, the emergence of Macquarie as a ‘maverick’ in the market and the increasing use of brokers that has reduced consumer choices [are] facilitating greater customer switching.

These are not very good arguments on their merits, and they don’t consider the implications of the decision, either.

How does one conclude that the entrant of a fifth bank into the oligopoly justifies a reduction in competition elsewhere in the same market so that nothing has changed?

The Australian Competition Tribunal decided ANZ can buy Suncorp even though the ACCC blocked it. Picture: NCA NewsWire / Ben Clark

One might as well argue that running on the spot is identical to standing still. Or, for that matter, the emergence of Macquarie as a “maverick” justifies the merger of all remaining banks into a single entity quivering in fear.

There is a line at which competition between multiple banks delivers optimum consumer benefits. But, I put it to you, that that number is much higher than five, as we saw during the Banking Royal Commission.

Moreover, the increase in recent mortgage switching is not so much a structural technology story as it is a cyclical post-Covid panic. All those cheap fixed-rate mortgages taken out during the plague had to be refinanced, and everybody needed a deal as the RBA hiked rates like a lunatic.

The worst case

However, the worst outcome of overturning the ACCC decision is what it means for the future.

All major banks have just been given the signal they can, should and will gobble up any minor competitor they can. The ACCC is a toothless tiger resisting it and maybe won’t even bother.

And even if it does, the eminences of the ACT have established a precedent that can justify any merger between two banks, so long as a tiny Macquarie (5 per cent of the market) is still a “maverick”.

With respect, Your Honours, stop watching Top Gun and start listening to the appropriately resourced regulator you just gutted.

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geopolitics and economics portal. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Originally published as What’s the point? Decision on ANZ-Suncorp merger undermines ACCC