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Australians pay for declining corporate competition: Chalmers

Declining competition among bigger and more dominant businesses has left Australians paying higher prices for worse products and services, the Treasurer says.

ACCC chairwoman Gina Cass-Gottlieb has asked for more powers to regulate mergers, including making it mandatory for companies above a certain size to notify the regulator before pursuing any deals. Picture: Sam Ruttyn
ACCC chairwoman Gina Cass-Gottlieb has asked for more powers to regulate mergers, including making it mandatory for companies above a certain size to notify the regulator before pursuing any deals. Picture: Sam Ruttyn

Jim Chalmers says Australia must consider reforming its corporate merger rules, and declining competition among bigger and more dominant businesses over recent decades has left citizens paying higher prices for worse products and services.

Writing in The Australian to coincide with the release of a consultation paper on major proposed changes to the way the competition watchdog regulates mergers and acquisitions, the Treasurer says “right now, Australia needs innovative businesses more than ever to help drive the transition to net zero, to make the most of emerging data and digital innovations, and to seize the opportunities from the growth of the care economy”.

The Albanese government on August 23 said a taskforce would take two years to conduct a sweeping review of competition policy settings, including the Australian Competition & Consumer Commission’s request for more powers to stop anti-competitive mergers.

The ACCC has proposed that firms above a certain size would have to gain formal approval from the watchdog before pursuing any deals, along with a special “call-in” power to capture smaller mergers that raised specific competition concerns.

This would be a sharp break with current rules where firms are not required to notify or get clearance from the ACCC before any takeover is finalised, and which force the regulator to make the case to the Federal Court to unwind deals.

Rather than having to prove that a merger was likely to substantially lower competition, the ACCC has recommended that the onus of proof be switched to companies to make the case that their union would not substantially lower competition.

The consultation paper outlines three options to reform the merger regime, including the ACCC’s, with the other two options granting varying degrees of extra powers to the regulator.

The ACCC in August blocked ANZ’s $4.9bn acquisition of Suncorp, and more recently has raised concerns about Woolworths’ $586m deal to take a controlling stake in Petstock.

The looming shake-up follows similar changes made in recent years in the US, Britain and the EU to beef up regulators’ powers, particularly in the context of the rise of digital giants such as ­Google and Facebook, which have hoovered up smaller players to cement their dominance.

While the ACCC’s proposed changes received support from its former head Rod Sims, the Productivity Commission has said “overall, there does not appear to be a strong case for implementation of a new formal authorisation regime as proposed”.

Dr Chalmers pointed to academic research showing top firms in Australia had become more entrenched and more powerful.

He pointed to evidence showing that a decline in competition was stifling new entrants and firms were increasingly able to charge higher mark-ups.

“These factors may have contributed to Australia’s weaker productivity performance in recent decades,” he said.

“For consumers and workers, the implications are simple: a less competitive market means higher prices, less choice, worse products and services, and lower wages growth.

“Other businesses also suffer from unfair practices and higher business costs. Less competitive markets reduce the incentives and opportunities for businesses to invest, grow and innovate.”

Dr Chalmers said “most mergers do not raise competition concerns … Mergers can support competition, including by making businesses more sustainable and giving them the scale to enter new markets. That’s why we need to ensure our regulatory arrangements operate efficiently, focus on the small number of mergers likely to harm competition and harm the community, and provide certainty for businesses and investors as well as protection for consumers.”

Patrick Commins
Patrick ComminsEconomics Correspondent

Patrick Commins is The Australian's economics correspondent, based in Canberra. Before joining the newspaper he worked for more than a decade at The Australian Financial Review, where he was a columnist and senior writer. Patrick was previously a research analyst at the Australian Prudential Regulation Authority.

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Original URL: https://www.theaustralian.com.au/nation/politics/australians-pay-for-declining-corporate-competition-chalmers/news-story/2a8de55e5a1ab20bc1aefe22dfa7446e