Australian Competition and Consumer Commission Chairman Rod Sims today explained the fundamental role the ACCC plays in our market economy. In a speech to the American Chamber of Commerce (AmCham) in Melbourne, Mr Sims said a market economy is driven by the power of the profit motive.
“The profit motive very often works for the good of society - but it only does so if it works within boundaries which are largely set by the ACCC.”
Mr Sims also said that it is very important that the ACCC communicates what it is doing.
“It is important to explain where those boundaries are - to act as a form of deterrence but also so that people can have faith that a market economy works for them.”
Mr Sims explained the four main functions of the ACCC.
“First, as the competition regulator. This involves preventing agreements or mergers which substantially lessen competition, preventing cartels and preventing a misuse of market power for purposes of damaging competition. These laws are essentially about protecting the competitive process,” Mr Sims said.
“Second, the ACCC is the national consumer regulator, which in essence means making sure that consumers aren’t misled. Consumers in this case can be both consumers of products or small businesses who are buying from larger businesses.”
“As the consumer regulator, the ACCC also has a role in preventing unconscionable conduct – either between business and consumers or between businesses and other businesses.”
“Third, the ACCC is the product safety regulator. The ACCC gets involved in recalling faulty products, and setting and enforcing safety standards.”
“Finally, the ACCC has a role where normal market mechanisms don’t work - in essence where you have monopoly infrastructure. The ACCC has a role in communications, transport, rural water and energy through the Australian Energy Regulator.”
“On the competition and consumer side the ACCC works through the courts - it does not have power to ban particular behaviour and nor should it. It investigates potential breaches of the [Competition and Consumer] Act and if it feels the Act has been breached, it institutes proceedings in the Federal Court. It is the court which decides whether the Act has been breached and what the penalties should be.”
Mr Sims also addressed some of the major issues currently facing the ACCC.
“On the competition side, the ACCC instituted proceedings in relation to five matters over the past year - four cartel cases and a case involving an alleged misuse of market power.”
The Chairman pointed out that the ACCC has increased its enforcement role and would be taking more cases in the future. He also said that the ACCC has also been involved in a lot of merger activity.
“Most mergers are assessed quickly and raise no concerns under the Act but there always are a few that require close scrutiny. In recent times, the ACCC has had concerns in relation to Heinz takeover of Rafferty’s Garden, CarSales takeover of the Trading Post, Woolworths acquisition at Glenmore Ridge and in relation to Telstra’s proposed acquisition of Adam Internet,” Mr Sims said.
“Today, the ACCC announced it had accepted an 87B undertaking whereby Westfield would divest its shopping centre at Innaloo in Perth if were to buy a nearby shopping centre at Karrinyup. Separately, the ACCC also announced today that it will not oppose the proposed Air New Zealand acquisition of an additional six per cent of Virgin Australia.”
Mr Sims said that on the consumer side, the ACCC announces its priorities yearly.
“Recently, these have been in telecommunications and energy, credence claims, consumer guarantees, unfair contract terms and taking action on behalf of vulnerable consumers.”
He mentioned recent actions against Hewlett-Packard and Harvey Norman in relation to consumer guarantees, the various door-to-door proceedings and the future energy focus on discount on energy bills against an uncertain base price.
Mr Sims said that in its product safety role, the ACCC has dealt with many unsafe products and recalls over the past year and been involved in issues ranging from asbestos in car gaskets to button batteries that can be swallowed by children.
In infrastructure regulation, Mr Sims mentioned the continuing work on the NBN Special Access Undertaking and the coming work on the fixed services review involving the services available over Telstra’s copper wire. He also referred to the ACCC’s role in relation to rural water and the success of the trading regime in the Murray Darling Basin.
Finally, Mr Sims commented on the need for access regulation for Australia’s wheat ports and how this is essential to have effective competition upstream for buying wheat off Australian farmers.