Sims warns on Big Tech growth

The explosive acquisition-fuelled growth of the world’s large digital platforms is posing a significant challenge, Rod Sims says.

Australian Competition & Consumer Commission Chairman Rod Sims. Picture: AAP

The explosive acquisition-fuelled growth of the world’s large digital platforms is posing a significant challenge for competition authorities, Rod Sims says.

Mr Sims, chairman of the Australian Competition & Consumer Commission, called on global competition regulators to work together to meet this and other challenges, and consider whether traditional approaches to assessing mergers were withstanding the test of time.

“It is easy to suggest our markets would be more competitive if YouTube and DoubleClick were separate to Google, and if Instagram and WhatsApp were separate to Facebook,” he said in a keynote speech at International Competition Network’s merger workshop in Melbourne on Thursday.

“But predicting the future competitive effect of such acquisitions before they occur is extremely difficult.

“This illustrates the difficulties when you only have nascent competitors, or competitors in related markets.”

An ACCC inquiry resulted in Australia becoming one of the first countries in the world to develop broad reforms for the leading digital platforms, after Mr Sims said Google and Facebook had “almost unfettered market power” with a significant impact on consumers.

Under the Morrison Government’s response to the inquiry, the ACCC will oversee the establishment of a new code to address the power imbalance between the platforms and media companies in Australia.

Steps will also be taken to ensure media businesses and digital platforms operate on a more regulatory footing, and that local journalism is supported.

While Mr Sims said be believed the Australian economy was too concentrated, and it was sometimes extremely difficult to challenge proposed mergers.

Competition authorities, he said, often felt like they were “on the back foot”, seeking evidence about the unknown future world when much of the relevant knowledge and evidence was held by the parties to the transaction.

Previous decisions of the Federal Court and the Australian Competition Tribunal suggested there was an added challenge — the considerable weight given to the testimony of senior executives from the merger parties when pre-merger internal company documents showed a different story.

The ACCC this month lost a significant legal challenge to its efforts to block the $15bn merger between TPG and Vodafone, which involves the combination of Australia’s third and fourth-largest telcos.

“My sense is that courts in some other jurisdictions are more sceptical of self-serving testimony by the merger parties,” Mr Sims said.

“The challenge applies to all merger reviews but is even greater when the market environment is rapidly evolving and incumbents are acquiring emerging and innovative new players.”

The ACCC chief said competition authorities could help each other out with these challenges, particularly in matters involving global firms with complex and far-reaching operations.

Google’s proposed $US2bn acquisition of smartwatch maker Fitbit, which some regulators were actively considering, was a key example.

“It’s a very important matter,” Mr Sims said.

In the meantime, the ACCC was looking at some of the key areas of difference with overseas counterparts, including different measures used to challenge anti-competitive mergers such as abuse of market power provisions or attempted monopoly provisions.

Some jurisdictions also allowed courts to start with the premise that increased concentration would cause a lessening in competition, while greater weight was given to the views of competition authorities and their merger guidelines in recognition of their expertise.

The “inherent bias and unreliability” of information created after the deal was agreed was also a consideration, and there was a focus — like in Australia — on the difficult task of determining what was likely to happen to the target company in the future rather than the immediate competitive effects.

Mr Sims said the Australian system was out of place compared to the formal, mandatory and suspensory regimes in many countries.

“We assess the vast majority of mergers under a voluntary and informal merger review process,” he said.