Big business should be at its finest
Big business is looking decidedly grubby just as it should be dressed in its finest for the federal election.
Big business is looking decidedly grubby just as it should be dressed in its finest and dodging as many bullets as possible as the federal election campaign rolls into action.
A series of unrelated allegations has appeared in recent weeks, apparently mere coincidence, but any way you look at it big business does not look good right now.
The Heydon royal commission was seen by some as a successful attempt to make sections of the trade union movement look bad, but business is doing it all to itself.
In recent weeks we have the banks led by ANZ and now Westpac being accused of rigging market benchmarks among other misdemeanours, CommInsure, bribery allegations that led to the resignation of the head of the ASX, Elmer Funke Kupper, who also stepped aside from the Tabcorp board pending full clearance, ancient stones being thrown around Leighton, allegations of profit shifting by Wesfarmers, and the long-standing concerns about the low level of tax paid by big business.
It’s not exactly a great position to advance pro-business election policies and, worse, has the effect of prompting yet more regulation to “remedy” the wrongs.
Bank of England chief Mark Carney has spoken in recent weeks about business’s social licence to operate and the danger that business may lose that licence.
NAB chairman Ken Henry has mused on the need to recognise the imbalance in some customer relationships and adjust for it.
“We owe a duty of care,” he said.
Henry was happy to accept board responsibility for corporate culture, which is something ASIC boss Greg Medcraft among others has pushed.
All of the above complaints may be historical but they have appeared in the press in recent weeks and, without even attempting to analyse each issue, the perception left in the minds of mum-and-dad punters is clear — big business rorts the system.
Forget the fact that big business is the nation’s biggest employer, the vehicle by which superannuation contributions are earned, the service provider and the growth engine of the economy.
In the election context, big business doesn’t represent any votes so no party is going to come running to its defence.
The phenomenon is not restricted to Australia, with the US presidential elections leading the way as Donald Trump attacks Ford, Kraft and Apple for daring to make things outside America, Bernie Sanders naturally enough is kicking Wall Street, and even Hillary Clinton is promising to ditch the Trans-Pacific Partnership.
A recent Bloomberg article says big business is keeping quiet, in part because it is hoping to get the election over with, and in part because what it does say will be damned.
The best response, of course, is for business to lift its game and be seen to be doing so.
Arrium talks poised
Arrium chairman Jerry Maycock was still negotiating with his banks last night in an attempt to avoid any step into voluntary administration.
The company was prepared to make management concessions to appease the banks, but the issue was finely poised last night ahead of the expected market statement this morning.
ACCC slow to anger
When does a regulator overstep the mark? Maybe when it investigates a merger that happened in January last year and the acquirer has since been taken over in a thriving sector called home food delivery.
The ACCC listed a review of the Menulog takeover of Eat Now Service, which happened early last year, and since then British-based Just Eat has snapped up Menulog, paying a massive 369 times earnings, or $885 million.
The sector is a classic new economy industry based on computer apps, which in Menulog’s case direct you to 505 specials at 127 different restaurants.
The company doesn’t make the food or deliver the produce, it just shows you where to look.
Some 22 per cent of inner-city Melbourne and Sydney restaurants are now covered, and international players such as Delivery Hero, Supper time and Uber EATS are all now in the game.
None of which would suggest there is a major issue with competition in the sector, but it seems Menulog didn’t notify its merger and there have been complaints, so the ACCC decided it wants to take a look at the sector.
Spooking the cattle
If the ACCC is sticking its nose where it doesn’t belong in the home delivery game, questions could be asked just why it felt the need to do a market study on the cattle industry.
After all, it is just one month before a year-long Senate inquiry into the consolidation of red meat processing is due to report.
Tom Maguire, from cattle buyer Teys, said if the ACCC study increased the trust in the sector then it would serve a useful purpose.
The sector is cyclical and weather dependent, with herd number at record lows and consequently prices at record highs.
The question is how the spoils are shared in the good times between the producers, the processors and the retailers.
The ACCC insists it will make full use of the Senate inquiry work and apply its own skills to analysing the $11.4 billion industry.
The industry produces about 666,300 tonnes of beef, of which 65 per cent is exported and most of which is processed by three companies: market leader JBS, NH Foods (Nippon) and a Teys-Cargill joint venture.
The consolidation of the processing sector along with the dominance of the big two retailers has attracted some concern among producers and maybe should worry consumers.
The regulator is in receipt of an extra $11.4m in funds to apply more time to the farm sector, and in Mick Keogh has its own farm commissioner who will be part of the inquiry team under ACCC chief Rod Sims.
The concept of a dedicated farm commission is, of course, an anathema to the ACCC, which is meant to be an economy-wide, sector-neutral body, but Keogh himself is highly regarded.
Two concerns that have featured in Senate estimates have helped prompt this inquiry: the 2014 JBS takeover of Primo and the 2015 Barnawartha processor boycott, which involved nine processors refusing to attend an auction because the cattle were to be weighed pre-sale rather than following the purchase.
The ACCC study will be wide-ranging, whereas the Senate inquiry just looked at concentration in the red meat processing sector. The ACCC will look at the competition efficiency and transparency across the whole cattle supply chain.
Market studies are a valuable resource, if used correctly, and this is the first of its kind to be initiated by the ACCC, with some guidance no doubt from its past Senate estimates appearances.
Two other studies into the east coast gas industry and the petrol industry were previously directed by the government.
The gas inquiry is due to be handed to the government next week, with the release of the other report pencilled in for the following week.
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