Solid year for competition watchdog, but still more to do

Cartoon: John Spooner.

Wednesday marks the two-year anniversary of the federal government asking the ACCC to prepare a report on digital platforms.

After the report was completed in July, decisions are still pending.

That is part of the curse of being a regulator — waiting for others to make decisions.

But when ACCC chief Rod Sims had Christmas drinks with the “ACCC mafia” (aka the Law Council) at Allens’ offices in Sydney last night, he should have been well satisfied with the year’s work.

The lawyers present will certainly give him a pass mark, in stark contrast to ASIC and APRA, who are still playing catch-up from a shellacking in the financial services royal commission.

On Thursday in Sydney the landmark ACCC criminal cartel case against the ANZ, Deutsche Bank and Citibank moves a step closer when past and present JPMorgan executives are ­quizzed about the bank’s immunity from prosecution.

Next week, senior ACCC staffer Marcus Bezzi and colleagues will also be questioned about how they obtained evidence in the case.

A spokesman for Treasurer Josh Frydenberg said a decision was yet to be made on the ACCC Digital Platforms Inquiry, but he hoped a decision would be out, as promised, before years’ end.

Reports in The Australian indicate the government supports the establishment of a digital platforms unit in the ACCC and, importantly, the establishment of a shorter review of the ad tech market.

News Corp and others have pushed for greater transparency in the sector so the move would be welcomed by the industry.

But Rod Sims would be disappointed if this was the only one of his more than 20 recommendations that was accepted.

The ACCC has signalled its own intentions by placing the Google acquisition of Fitbit on formal review and undertaking a world-first legal action against Google’s location data powers.

ACCC enforcement is ultimately the most effective defence against the platforms’ power, but Google et al have proved in battling the Europeans that they are adept at delaying the impact of decisions to allow them more time to entrench their market power.

The reality facing the platform powers Google and Facebook is that they have moved from being innovators to acquirers and their march through the industry has done little to help consumers but plenty to boost their own powers to gather data, which they can monetise.

The ACCC list of requests to the government included a substantial boost in privacy laws, codes of conduct to regulate behaviour, changes to the competition laws to allow for future effects to be taken into account in competition matters, harmonising media laws to incorporate Google and Facebook, and prohibition of unfair contract terms and trading. And on the list goes.

Facebook has opened up the prospect of paying for the use of media content, which is a big step in the right direction if it follows through.

The ACCC and Sims have won plaudits from around the world for the digital platforms inquiry, but government delays have dented the impact, and given other decisions on issues like the TPG-Vodafone court case, the report card for Sims would read: a solid year but more work to do.

High-profile consumer cases including against Telstra-owned Health Engine, Samsung, Google and Medibank are attempts to both protect consumer rights and , importantly, make them aware of those rights.

Slowly but surely the courts are aware of the need for higher penalties, as in the Volkswagen case where the court question whether a $75m penalty was sufficient.

Justice Lindsay Foster said that given the “scale, impact and deliberateness” of the company’s misconduct the fine was outrageously low.

In short, the grade for Sims would be a solid seven out of 10.

Proxy power

When proxy advisers support the board there are few complaints, and if you talk to Westpac’s Lindsay Maxsted you may even hear some compliments about their role.

But when proxy advisers advise against the board and the vote is negative it tends to result in a chorus of criticism calling for their heads.

This puts the complaints in context while also underlining the need for more consultation with shareholders.

As events transpire, with bank annual meeting season starts next week Ownership Matters and CGI Glass Lewis are largely supporting the boards, including Westpac. The standout is ISS, which is highlighted in part because it is perceived as being less open to discussion, is widely followed by offshore funds, has its own sometimes confusing peer group to benchmark companies and is known in the US to offer consulting services to help companies with negative recommendations.

Last week Seek copped its first strike, with 25.91 per cent votes against its remuneration report and big 20 per cent votes against equity grants to chief and 4.2 per cent shareholder, Andrew Bassat.

ISS was the only house to recommend against the remuneration report.

It so happens offshore shareholders are big on the register, led by active US-based manager Fidelity with 7.3 per cent, with passive funds Vanguard with 5.1 per cent and Blackrock with just over 5 per cent.

Voter turnout is relatively large at over 70 per cent, but still, if passive funds control, say, 12 per cent of a company, then their vote effectively increases.

There may have been fallout with the $3.2m sign-on given to former CBA boss Ian Narev even if it was all in the form of long dated equity issues.

Executive pay is heavily tilted to equity at well over 50 per cent and short-term bonuses are history.

On most reckoning the remuneration structure is both ahead of the market and improved from a year ago, but the way the game works ISS’s “no” recommendation appears to have won the day.

Long-term view

In a matter of months Canada’s Public Sector Pension Investment Board (PSP) and circa $1.6bn has become arguably Australia’s biggest nut farmer.

Yesterday it signed a deal with Singapore-based Olam to buy $490m in water rights to use on 12,000 hectares of almond orchards acquired from Schroder Adveq.

PSP is also waiting on FIRB approval to buy Websters and more nuts in a deal that will see the water rights shared with Websters chair Chris Corrigan, who will take some of the assets in return for his shareholding.

The PSP deal is in stark contrast with Rob McGarvin from Boundary Bend, the owner of the Cobram olive oil business, who a decade ago sold his water rights to finance the land purchase.

Olam will continue managing the assets for PSP’s Marc Druin under a 25 year deal, with an option to double it in what is described as a revenue-sharing deal splitting the spoils on future almond sales.

Without knowing the terms of that deal, the value of the water deal is hard to quantify.

The bottom line is at the top of the market, when water rights are at record levels in the middle of a drought and a problematic global economy, a Canadian pension fund is prepared to put $1.7bn on the table to invest long-term in Australian agriculture.

While we await Treasurer Josh Frydenberg’s FIRB decision, that is worth noting.