The global battle against platform giants hit the Australian payments system this week, with CBA boss “Magic” Matt Comyn warning the Apple digital wallet could hold the Australian system hostage.
The concept of the head of Australia’s most valuable company CBA complaining about market power may seem odd, but the fact is Comyn is correct and it seems inevitable that new regulation will be imposed to curb platform power.
Comyn and others suggested some form of code of conduct may be necessary to ensure the platforms don’t hold Australian consumers to ransom.
The code will be along the lines of the media bargaining code that came into effect last year, forcing the platforms to compensate media for their content.
The payments code would subject Apple to potential RBA sanctions, which could force it out of business in Australia.
The issue is before a parliamentary inquiry but it is being considered around the world. The European Union is looking at imposing regulation and games manufacturer Epic is taking legal action in Australia and the US to block the platform‘s abuse of market power.
Five years ago the banks sought ACCC clearance to negotiate jointly against Apple’s demand that they pay a fee to add their apps to its phone for use in transactions. The ACCC refused and arguably would still say no due to a reluctance to let the big banks do anything jointly.
But platform strength is now a global issue with everyone from US President Joe Biden and Chinese President Xi Jinping down trying to exercise government power to combat it.
Apple’s market value is $3.4 trillion and Amazon’s $5 trillion. While a different measure, by way of comparison CBA’s market value is $176bn and Australia’s GDP is just over $2 trillion.
The issue with Apple is the 30 per cent fees it charges on app revenues, and worse, its insistence that consumers use its payments system to transact with app suppliers.
It charges a fee to use the CBA app.
In most cases Google and Apple impose the same conditions, and given they control the operating systems on 95 per cent or more of mobile phones, their power is enormous.
In this case Apple is fighting to protect its so-called walled garden, while ironically enough, on payments the Google android system is relatively open.
The question is for how long.
Google pays Apple $16bn a year to ensure its search function has priority on Apple iPhones.
State attorneys-general have taken action against Google over its mobile phone market power, while noting there is not any choice because Apple applies the same rules.
As one commented: “These monopolies are maintained through artificial technological and contractual conditions that Google imposes on the Android ecosystem. Because of Google’s exclusionary conduct, even Amazon, one of the biggest and most sophisticated content distributors, has tried but failed to create a competitive Android app store that could weaken Google’s app distribution monopoly through free and fair Competition.” That is the battleground faced by the federal government which is why new regulation is inevitable.
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Dong wrong
The Federal Court may now hear the Vino Money Transfer case. The ACCC is alleging criminal price fixing by five individuals on the Vietnamese dong exchange rate between 2011 and 2016.
The five are also alleged to have charged excessive fees.
The matter was before a magistrate in Melbourne on Thursday but computer malfunctions delayed any decision and the matter was stood over until Wednesday.
The ACCC first took the case in April 2019 after a joint investigation with the Australian Federal Police.
ACCC chief Rod Sims said at the time: “Price fixing involves competitors agreeing on a price rather than competing fairly against one another.
“Such cartel behaviour cheats consumers, and does damage to other businesses and the economy as a whole.”
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Port appeal
The ACCC has surprised observers by lodging an appeal against Federal Court judge Jayne Jagot’s rejection of its case against NSW Ports, over charges to be imposed on any Port of Newcastle move into the container market.
Justice Jagot said the terms of the NSW port sales in 2014 and subsequent threats to impose container charges on any Newcastle move into the game were simply profit maximising.
She distinguished this from substantially lessening competition and hence a breach of the law. The ACCC disputes this, arguing it’s the same thing.
The ACCC also rejects the judge’s finding that the port rules will stay in play for the foreseeable future and objects to the derivative immunity granted to NSW Ports.
The argument here is that state governments have immunity and this is effectively assumed by NSW Ports.
The matter will be heard by the full Federal Court.
It’s part of the ACCC’s war on poorly executed government privatisations that fill state pockets in the short term at the long-run expense of consumers by blocking competition.
BlueScope rebound
When Mark Vassella returned from the US to run BlueScope’s Port Kembla operations their survival was in question, and with the stock price in the $2.00 a share range the future looked bleak.
On Tuesday he was able to unveil a record $1.7bn in earnings after a reported second-half return of $1.2bn.
That’s up from preliminary estimates around the $790m mark.
Vassella upgraded guidance back in April, reflecting the then post-Covid bounce, but Tuesday’s release came out ahead of even those estimates.
While the booming steel sector in the US and Australia wasn’t a surprise the company’s stock price hit a post GFC high of $24.54 after rising nearly 7 per cent on Tuesday.
This comes ahead of a major revamped planned for September when climate control boss Gretta Stephens outlines the company’s future plans to move to a net zero world.
Steel prices have risen sharply through increased demand from the infrastructure and building sectors, both in the US and Australia.
The market environment is perfect for Vulcan’s proposed float, with the company spruiking a valuation as high as $1bn or 10 times earnings.
Sanjeev Gupta will be watching progress closely because the jewel in his crown, Infrabuild, earns around $400m a year.
This means its stockmarket valuation could be as much as $4bn.
Gupta is still fighting for survival post the Greensill collapse, but the sun is starting to shine a little, with Oaktree lined up to provide replacement finance for the Whyalla mill.
The increased demand for steel is across the board and Bluescope’s North Star plant in the US, which sells to the car industry, is also running strongly.
It’s not all blue sky, with the revival of Covid in some overseas markets raising concern and continued problems in NSW raising question marks about the strength of the economic rebound.
