ACCC searching for a kill but is Google the right quarry?

ACCC commissioner Liza Carver. Illustration: Sturt Krygsman

The ACCC is pressing ahead with its proposed legal action against Google’s stranglehold on the internet search market despite coming changes to the law and a significant US judgment declaring the company a monopoly.

The outgoing US administration has asked a US court to force Google to sell its Chrome browser to increase competition in the search market, which if successful would deliver global consumer benefits.

The question then is whether it is worth the ACCC using scarce resources for a lengthy battle against the digital platform behemoth ahead of new enforcement powers due to come into effect next year.

The ACCC late last year said Google had 94 per cent of the Australian internet search market and new technology such as artificial intelligence had made no inroads on the business. Google uses its search dominance to control the adtech market.

The landmark Google search case by the ACCC looms as a key test for the competition regulator this year along with the trial of its new merger powers which formally come into effect in January next year.

ACCC enforcement chief Liza Carver will have a busy year with hearings scheduled for its action against Woolworths and Coles for allegedly dodgy discounts.

The good news is while enforcement actions take their time to wind through the courts there is an early announcement effect with pending actions against the retailers and Qantas increasing political and public pressure on the behemoths to change their behaviour.

This can happen before the courts even open their books but not against the global giants such as Google and MasterCard which treat such cases as costs of doing business. This also demonstrates their market power.

Some defendants such as Google are global experts at delaying court proceedings and ahead of the Australian case already have a chunk of the competition law mafia paid up on its side.

MasterCard is another from this school but this year should see some consideration of the ACCC case against it formally launched in May 2022.

When the RBA launched its least cost routing policy aimed at ensuring consumers would pay the lowest payments charges the ACCC alleges MasterCard did a deal with the big retail outlets to ensure they used its services instead of the arguably cheaper EFTPOS services. The ACCC says this was a misuse of market power.

The ACCC is pursuing Google because while the US court has already made its ruling and any penalty would potentially affect Google globally, the case is under Australian law which is different to the US.

The ACCC obviously has the benefit of the US decision to bolster its case.

The new digital platform remedies will be aimed at future activities and will force Google to behave in accordance with its own enforced code of conduct.

This assumes the ACCC recommendations actually make it into law because they were handed to the government in November 2022, sat in Treasurer Jim Chalmers’ bottom drawer until December 2023 when he declared his support subject to further consultation by the Doctor Doom of competition reform, Assistant Treasurer Stephen Jones.

In December 2024 Jones, like Chalmers, said he supported the recommendations subject to further consultation, due to wind up next month. This of course is also an election year and while the Liberals have not opined it is another wildcard adding to the uncertainty.

While the ACCC battles through, two of the key cases this year are private actions, one awaiting judgment, computer game maker Epic’s challenge to Apple and Google’s misuses of power in their control of computer apps, and another potentially overturning the ACCC’s clearance of the BGC takeover of Midland Brick in 2020.

The regulator said if the takeover didn’t proceed Midland was going to shut its doors in any case.

Rival Brickworks has accused BGC of predatory pricing and said the merger was anti-competitive, and if it wins the case it will be an embarrassment for the ACCC ahead of its new merger laws.

The ACCC maintains the changes are necessary because it to hard to challenge mergers but Australia’s biggest brick maker Brickworks disagrees.

The merger changes that squeaked into law late last year will be a test for the ACCC administration, with a rush of proposals under the mandatory disclosure rules. The reporting threshold is very low, which means the vast majority of mergers will be screened, and the process will effectively sideline the courts in the process which requires an ACCC decision for a deal to proceed.

The ACCC figures there are about 1500 mergers a year, of which it looks at 330, with most without question.

To cope with the new regime, the regulator will add another 81 people to the 65-strong division, but opinion among the merger mafia (lawyers and economists) is divided on whether the commission will handle the workload.

There will be a six-month trial from mid-year before the law comes into place in January 2026, and the ACCC figures it will now be looking at anywhere between 300 and 500 mergers a year.

At least in the early stages the number will be at the top end of that range, and then you get to questions of definition – if property acquired in the normal course of business is technically a merger.

Lawyers won’t want to run risks so will err on the side of putting everything to the ACCC, even if it doesn’t quite meet the threshold. The ACCC will have waiver powers, so can adjust the rules to meet demands.

ACCC staff by birth tend to be suspicious, believe everyone outside is trying to game the system and above all questioning, and this mindset may have to change to clear the backlog.

Question then whether the ACCC may drop the ball and let some dodgy deals through.

The original plan was to ensure the ACCC would see the mergers that matter, but the thresholds set are too low, which means at least initially too many deals will go before the commission.

The mafia also will be run off its feet, but then lawyers always do well with change.

Homebase in strife

The UK home improvement chain sold by Wesfarmers six years ago to Chicago-based Hilco Capital is still struggling, with 70 of the stores going into administration late last year, according to UK press reports.

Hilco plans to keep operating 49 of the rebranded Homebase stores, protecting 1600 jobs, but another 2000 jobs are in jeopardy in a tough market for DIY hardware stores.

The stores are also battling market leader Kingfisher.

Wesfarmers acquired the UK business in 2016 from the Home Retail group for $705m, sacked the local executives and rebranded the stores as Bunnings.

Just two years later, in 2018, the then new Wesfarmers boss Rob Scott handed the keys to Hilco Capital, selling the business for just $2 after writing down the value of the asset by $1bn.

Since then, after restoring the Homebase brand, private equity group Hilco has attempted to restructure the group, selling 11 stores to Sainsbury but attempts to sell the business in its entirety have so far failed.