ACCC’s expectation of competition a Transurban’s motoring monopoly

Transurban’s Scott Charlton. Illustration: Sturt Krygsman

The ACCC has issued a clear challenge to the Victorian government to impose competition on monopoly toll road provider Transurban by noting the clear advantages of incumbency in the market.

Outgoing Transurban chief Scott Charlton has sidestepped ACCC controls by arguing if you want to take the back roads you can avoid the toll road and, in any case, the state government sets the charges.

This is how Charlton gets to secure 78 per cent earnings margins and extend his monopoly by being the only toll road operator in Victoria allowed to make unsolicited proposals, as he did with the West Gate tunnel.

The state could refuse to allow such fast-track concessions and/or mandate alternative proposals by blocking Transurban’s access to the next road.

Toll roads are potential political liabilities which is why the NSW government has former ACCC chief Alan Fels looking at the issue and has also proposed caps on how much revenue Transurban can collect from each driver.

It’s a complex issue and arguably monopolies deliver some efficiencies provided they are well regulated. But right now Transurban enjoys the best of all worlds.

If Charlton has form in running toll roads and pays top dollar for the honour, does the state have a choice taking a lower bid or higher tolls to create competition?

The issue in the Horizon case is all about the impact on future competition because the dice is now loaded so heavily for Charlton that potential bidders steer clear of the battle.

The ACCC warning came in a statement of issues on Transurban’s proposed Horizon bid – and whether the final decision actually rules against Charlton remains to be seen.

If so, with the possible exception of the Pacific National case, it will be a new test on the power of incumbency in lessening competition.

Given the consolidated industry structure in Australia, it is a debate well worth having and the question now is whether the ACCC will actually test its power in court.

It of course makes plenty of sense for state governments to actually make productivity enhancing decisions to encourage competition rather than defer the issue to the ACCC.

That too would take some courage.

Digital giants flex their muscles

The much vaunted Australian media bargaining code was established over two years ago but has yet to be put into action, with no tech giant designated under the law opening the door for the ACCC to set compensation rates for use of media content.

Two weeks ago the Canadian government adopted similar rules. Meta and now Google have laid down the same challenges as they did in Australia by threatening to block access to news on its platform.

The threat is directed at newspaper distribution which Google and Meta say is thanks to them.

The debate comes as discussions about artificial intelligence heats up – at least in Europe and the US – and the reality is, AI arguably exposes a bigger threat to media content because no one knows where the content comes from.

One good thing about technology is it’s a competitive threat, and AI has reintroduced Microsoft to the battle via ChatGPT. Often incumbents like regulation because it cements their position.

The open defiance by Meta and Google to the new media bargaining code in Canada underlines the need for actual mandatory rules which even technology behemoths must obey.

There is no point in voluntary codes which are just ignored.

While former ACCC boss Rod Sims and the commission received due praise in Canada, the facts are that while 30 deals raising an estimated $200m for media company profits showed positive benefits, the tests are about to begin.

Federal Industry Minister Ed Husic leads the government-wide review of AI regulation and the ACCC is taking a back seat.

Australia’s leadership in the tech regulatory debate has reached an apparent acceptance that maybe it is better to let the big countries set the rules and then adopt the pick of the bunch.

The “best follower” approach is okay if you don’t want to encourage local innovation, but it seems Canberra is focused on other issues which are of more immediate political interest – like cost-of-living measures.

Meta’s deals with publishers under the bargaining code in Australia tended to run for three years, which means they will start expiring next year. Google’s deals tended to run for three to five years.

The question then is, will the ACCC flex its muscles on the new deals?

Earlier this year, ACCC boss Gina Cass-Gottlieb called for new ex ante laws dealing with the big tech platforms. The idea is it’s better to lay down the rules in a code of conduct before they play their usual tricks of simply ignoring the ACCC.

The government has yet to respond to the suggestion and not even floated draft legislation to signal its intention, if indeed it wanted to support Cass-Gottlieb.

The AI debate comes to the fore in this context because it would be an ideal platform for Australia’s regulatory response to the fast-growing technology.

The US is considering rules demanding AI-generated content be disclosed as such; copyright material used would be noted and compensated, rules on predictive policing would catch people based on past behaviour rather than present evidence, and bans would be imposed on real-time biometric surveillance.

Endeavour’s shopping list attracts attention

Endeavour Group boss Steve Donohue is busily buying pubs – adding to the 353 owned around the country and 1701 retail stores, including the Dan Murphy liquor outlets – which is why each acquisition attracts the eye of the ACCC.

ACCC chief Gina Cass-Gottlieb has drawn a line in the sand against creeping acquisitions, under which a behemoth buys up little stores – which on their own mean nothing but in total amount to a significant increase in market share.

In May, former Endeavour owner Woolworths was told it wasn’t allowed to buy the small IGA store in Karabar outside Canberra.

Of interest too is Donohue is said to be keen buying wineries, which to some is a mug’s game tying up capital for no good reason, but to others is of value.

He did suggest earlier this year the Cape Mentelle deal would probably round out the acquisitions.

Endeavour acquired the Oakridge wine business in the Yarra Valley, Victoria, from former ASIC chairman Tony D’Aloisio and more recently Cape Mentelle in Margaret River, WA, adding to an existing portfolio which includes Josef Chromy in Tasmania, and in SA the Barossa Valley’s Krondorf and Riddoch in the Coonawarra.

The company is also growing house brands like Monsuta beer.

In business jargon these are called adjacencies and are used to grow a company’s ecosystem so control of one market transforms into a bigger market – as was the case with Bunnings which used to be in home hardware, then outdoor living and now home and lifestyle.

There are thousands of different wineries in Australia so the ACCC concern right now is not that Endeavour is buying control of the wine market, but just that it can use its market power in retail to preference its own wineries.

Next time you walk into Dan Murphy and see the first 10 aisles stacked with Oakridge and Cape Mentelle – and your favourite alternative tucked into the back row – it’s time to blow the whistle.