Setting an Agenda for Competition Review

The Commonwealth has announced a ‘root and branch’ competition policy review to, “help identify ways to build the economy and promote investment, growth and job creation. The PM said the review “will examine not only the current laws but the broader competition framework, to increase productivity and efficiency in markets, drive benefits to ease cost of living pressures and raise living standards for all Australians”.

The terms of reference are still being worked out with state governments.  But the agenda will be markedly different from that which followed from the 1993 Hilmer report into competition policy. 

Hilmer itself was largely about the government placing (mainly state) monopoly government suppliers in energy, water, ports etc on a similar footing to private sector suppliers and opening up those parts that were contestable to competition.  Labor at that time was still far from convinced that private supply is always more efficient than government supply but its senior people knew that state-owned businesses in Australia were inefficient and needed to be run along business lines.     

Already, by the time the government had in place a response to Hilmer,  some movement towards disaggregation of state business entities and their separation from ministerial control had commenced, especially in Victoria where Kennett had already moved along the road to privatization of electricity supply.  This was fused with a deregulation program which was also in its fledgling state, where it has remained.

The program response to Hilmer involved the Commonwealth rewarding state governments that acted in accord with their consumers’ interests and reduced regulation and competitive barriers thereby lowering costs. 

The agenda was never completed – we still have regulatory restraints in such areas as coastal shipping and regulations designed to combat mythical dumping of overseas supplied goods.

And the role of the agencies set up to police competition, the National Competition Commission (NCC) and the Australian Competition and Consumer Commission (ACCC) is confused.  Both set out to promote contrived models of competition.  Thus NCC has spent a fruitless decade or so trying to force Rio and BHP to open up their private rail lines to competition. 

ACCC has aided and abetted this and other action that seeks to enforce common carriage at the expense of property rights rather than seeking to eliminate entry barriers. And ACCC’s “consumer” and “competition” functions often clash with the latter losing out.  Thus the ACCC has encouraged dominant electricity retailers to collude in avoiding door-knocking marketing activities that apparently irritate some consumers.  Similarly the ACCC has required Coles and Woolworth’s to limit the discounts they offer on petrol to protect unaffiliated petrol stations. 

Nonetheless these, trade restraints and the remaining areas of government ownership are residuals that would not justify the “root and branch” attack to promote productivity that the PM foreshadowed.  And presumably the very necessary reforms to the labour market will be handled separately.   

Prime productivity killing measures all rest with government regulations.  They include

  • Occupational regulations that have escalated credentialism by, for example, requiring  university degrees of child minders
  • land use regulation that impedes more efficient farming, restrains some areas of mining (especially coal seam and shale gas) and above all by creating artificial scarcities imposes a huge cost premium on land for housing. 
  • Building codes often imposed to promote energy savings (nowadays that means greenhouse gas reductions) and requiring people to incur costs to facilitate better access for the disabled.
  • The ceaseless march of environmental regulations that stop almost all activities from fishing to clearing land for farming or any other development.  It has been a long time since a politician ridiculed such levels of restraint along the lines of Jeff Kennett who was not going to have plans stopped by “some trumped-up corella”

The environmental regulatory front will prove particularly troublesome with Greens and their allies having successfully installed layers of regulations that might stifle all but the most urgent new ventures.  Attempts to create one-stop-shops to avoid duplication are an obvious starting point but even they may get bogged down in judicial appeals.  In this vein, today, Radio National’s Hindsight program predictably wheeled out global warming zealots and lock-up-the-economy promoters to call for the Commonwealth to continue usurping the state role in environmental matters claiming that the Great Barrier Reef was doomed without such duplications.   The program’s producer Lynne Gallacher is a staunch supporter of carbon restraint

And Judith reminds us of the pernicious and powerful bodies like the Forest Stewardship Council which can extract funding from businesses for ticks of approval as an alternative to facing embargoes on their products.  Bodies like this are presently immune from being prosecuted for damages caused by the  false charges they make on businesses.

Righting the wrongs of regulatory layers introduced over many decades is likely to prove difficult.  It may even be difficult to get agreement for an agenda which involves paring back the regulations governments have imposed.  It will be a test for the Coalition as well as the ALP, though the Greens will find opposing it straightforward.

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24 Responses to Setting an Agenda for Competition Review

  1. ar

    Sounds like something Krudd would say. He loved a “root and branch” review. Of course it was a snow job… Let’s see if this is a real review…

  2. egg_

    Hilmer itself was largely about the government placing (mainly state) monopoly government suppliers in energy, water, ports etc on a similar footing to private sector suppliers and opening up those parts that were contestable to competition.

    Add the Australian Broadcasting Corporation to said list?

  3. Rabz

    Another bloody review.

    Way to go, softcocks.

  4. AP

    “irritate” hardly covers it, Alan. These bastards would come to my home, when I am at work, and when my wife answers, ask to speak to her parents (shes in her mid 20s ffs). Then they would set about convincing her to provide a bill for them to analyse, to “see if we could get a better deal” before taking down our personal details without getting permission. Before you know it, I am half way signed up for a different bloody energy ccontract (her name was not even on the bloody original account) with her on the phone to me, on the verge of tears because this bastard wont leave. Good on he ACCC for stamping out these predatory tactics. AGL was obviously hopeless at managing its own contractors to an ethical standard of practice.

  5. DrBeauGan

    Rabz, while the sceams of the left being slaughtered would be music to my ears, you have to be prepared for their reaction. Doing it by due process is slower but the results last longer.

  6. wreckage

    Excellent. Rudd gave reviews a bad name, unfortunately. But getting the lay of the land is the correct first step. It also lets you know what the other side of politics are going to try to campaign on, you can then go after everything that doesn’t get much traction first.

  7. Chris

    Thus the ACCC has encouraged dominant electricity retailers to collude in avoiding door-knocking marketing activities that apparently irritate some consumers.

    Its not the “irritation” which I think has been the problem, its the plain out lying by door knockers trying to get consumers to switch electricity and gas providers. I work from home so I probably see more than the average number of door to door salesman. The electricity subcontractors in general have been appalling – they don’t state who they represent and they often start out with a lie. eg “there’s a problem with your electricity bill, can I come inside and talk to you about it?”. Doesn’t get them in my front door, but there would be more vulnerable people (such as the elderly) that sort of high pressure sales tactics work with sometimes. Personally I put these types of salespeople in the same bucket as those people who call me saying they’re from Microsoft and they’ve discovered a virus on my computer – just pure scammers.

    http://www.smh.com.au/business/agl-fined-15m-for-doorknocking-lies-20130521-2jy30.html

    According to orders released by Justice John Middleton today, a Coburg resident, called Mr G in court documents, was called upon by a representative of CPM in September 2011. The representative claimed he was from an “Investigations Department” and that Mr G had been overcharged for electricity and could reclaim the money.
    “In order to avoid being overcharged for the supply of retail electricity and/or retail gas, it was necessary for Mr G to obtain retail electricity and/or retail gas from the distributor of those products [and] if AGL was Mr G’s retail electricity supplier his retail electricity bill would be between $100 and $120 per quarter,” Justice Middleton wrote.

    There have also been issues with sales people ignoring very clearly posted “no door-to-door salespeople” signs at the front of people’s homes. IIRC there was one large electricity retailer who was fined for employing subcontractors who regularly ignored them. I think some states have been talking about legal reforms in this area – I really don’t see why it shouldn’t be a criminal offence (eg something like trespass) to ignore these.

  8. Defunding all socialist fake charities ruthlessly will turf the rent-a-crowd out into real work where they won’t have time to scratch themselves let alone stop others from turning a dollar.

    There should be a crime called ‘industrial sabotage’ with full restitution of costs and lost income.

  9. Alan Moran

    Chris, AP To the guillotine with doorknockers!
    Overzealous sales people and puffed up advertising makes the world go round! People involved in downright deceit is a different matter and that is illegal and rightly punished.What we have got in much of Australia is a very competitive energy retailing system caused by retailers cutting each others’ throats n seeking out some cheap wholesale contracts and then flogging them to consumers.

    This has brought low prices. But the ACCC has put codes in place that allows the dominant retailers to cease fire and milk their customers secure in the knowledge that a major competitor or hungry newcomer will not eat the customer base.

    There are plenty of cooling off periods and codes to prevent customers being exploited but retailers have found the most effective way to win markets is have people knock on doors and explain why the product they are offering is better than the one being used

  10. johanna

    It depends entirely on who they get to run the review and what the ToRs are. Ideally, they should use the blank sheet of paper approach – if there was no legislation whatsoever, what would we do? (Yes, I know, I know, many would say the best answer is “nothing” but that would be political suicide).

    The ACCC is utterly compromised – it just acts as a very sluggish mediator between warring parties, and often thinks that more regulation is the answer. It routinely takes the views of industry incumbents as a critical factor when it makes decisions which affect potential new entrants or small players. The relationship between consumers and providers is conceptually incoherent. And the accreted legislation, regulations and rulings which apply are several housebricks high.

    Time for a purge, IMO.

    Industry will be just as hostile as the usual suspects if they do this properly. The ACCC is the legitimiser of cosy cartels.

  11. Jim Rose

    The austrian view that every market with free entry is competitive is a bridge too far for me at network industries

  12. cohenite

    And Judith reminds us of the pernicious and powerful bodies like the Forest Stewardship Council which can extract funding from businesses for ticks of approval as an alternative to facing embargoes on their products. Bodies like this are presently immune from being prosecuted for damages caused by the false charges they make on businesses.

    Why are they immune?

  13. HRT

    Another review. Hallelujah – we are surely saved.

    This crowd is so like the one just departed, I am reminded of them.

    A one term government must now be odds on.

  14. Token

    Remember when Rudd developed an infrastructure investment authority to advise on government which infrastructure to invest in, then blew all his and the next 2 governments sare funds making Labor cronies in the teleco industry rich by blowing it all on the NBN?

    Enough with the reviews. The policy required is the one to reduce government interference.

  15. Token

    This crowd is so like the one just departed, I am reminded of them.

    Abbott is trying to replicate not even one term Red Ted’s failures.

  16. Chris

    Alan – I have no problem with door knockers as such. As long as they don’t lie or intimidate people in their own homes, and I believe they should honour people’s wishes when they put up a sign saying they don’t want door knockers to ring their doorbell. I don’t think any of those are unreasonable restrictions.

    There are plenty of cooling off periods and codes to prevent customers being exploited but retailers have found the most effective way to win markets is have people knock on doors and explain why the product they are offering is better than the one being used

    Well in practice I think what retailers found (perhaps inadvertently because they outsourced the work) is that lying and intimidating when door knocking on houses is the best way to win market share. 7 or 30 day cooling off periods are no use when its likely to be at least 3 months before someone gets their next bill and then realises they’ve been ripped off. Once the fines for such bad behavior started being applied, some of large retailers decided that it was just too hard to ensure that subcontractors behaved and they didn’t want to take on the work directly where they have more control. That’s really up to them. Though I did notice that one large electricity retailer who no longer employs door knockers has been distributing free “do not door knock” signs to their customers :-)

    I’m all for more competition in the retail electricity space – I’d be fine with less regulation on retail pricing for example. And in an era where nearly everyone has some form of internet access one good way to promote competition would be to allow customers to access their own usage data and make it available to whomever they want. So companies would be able to provide very accurate written information on just how much money they could save if they changed plans rather than making guesses on typical usage patterns. Very efficient. The data is all there and I suspect that a central organisation gathers it in the first and just passes it onto the retailers anyway. So that information probably falls under the domain of a regulator.

  17. Tator

    Had an experience many years ago when I built the house that I have just sold. As we were in a new development, a certain alarm company had various contractors doing door to door sales. As I was working at Comcen at that time, I had daily dealings and intimate knowledge of their SOPs and protocols. I gave one sales man an absolute bollocking when he made claims that were completely false and aimed at convincing a member of the public that their system had special direct access to my workplace when I knew otherwise.

  18. johanna

    Alan Moran, your purist approach is not working here. The fact is, sleazebags representing energy companies (and telecoms companies) lied and cheated to get their foot in the door.

    Now, that’s all very fine if you’re someone with the educational and financial resources to seek justice through our constipated and expensive courts. But, people who suddenly got bills from providers that they’d never heard of, as a result of forged signatures and all the rest should just suck it up is just not going to be acceptable in this world. Suggesting that a person of adequate, but limited, means should embark on a case in the Supreme Court is just nonsense.

    It may be that there is a better way of dealing with them. But, suggesting that it is the Supreme Court or nothing is just ridiculous.

  19. Struth

    “Defunding all socialist fake charities ruthlessly will turf the rent-a-crowd out into real work where they won’t have time to scratch themselves let alone stop others from turning a dollar.

    There should be a crime called ‘industrial sabotage’ with full restitution of costs and lost income.”

    +1

  20. Struth

    Another review.

    God help us.

    “help identify ways to build the economy and promote investment, growth and job creation. The PM said the review “will examine not only the current laws but the broader competition framework, to increase productivity and efficiency in markets, drive benefits to ease cost of living pressures and raise living standards for all Australians”.

    This dumb prick does not have the time for a review.
    A golden opportunity is being wasted, where we also have mostly state liberal governments.
    Very soon he will be back to the situation Howard was in with the states doing their best to sabotage him at the expense of ordinary Australians.
    We need action. We know what needs to be done. Why doesn’t he?
    Go through every government department that controls business and sort them out.
    Get down to the coal face and f$%^$**ing do something.
    Change the tax laws to make Australian business more competitve.
    There’s your review Abbott, now get to work.

  21. Struth

    We have a minister for just about every industry and industry generally.
    They get in to power, and sort their respective portfolios out.
    They sort industry legislation out based on the ideology they advertised they believed in before the election.

    Get to work. No time for more public relations stunts.
    We have had this sort of crap up to our eye teeth with the last traitorous rabble.
    Stick your review.

  22. AP

    Alan, I believe the article in today’s Australian proves my point. It’s beyond a minor irritation, and I have experienced exactly what Chris describes. I think it was actually the company in the article on one or two of the occasions. Why should I have my liberties (to chose my own energy provider), and to peaceful enjoyment of my property usurped by door to door salesman? Even if what they are doing does not cross the line to being illegal (and sometimes it does), it is certainly unethical. Energy providers are free to compete and advertise using a range of means, but I will chose my energy provider on my own terms thank you very much. My wife does not handle confrontation, is not capable of being rude to tell them to f-off (its not in her nature) and these people are predatory arseholes. She didnt seek this out, and purposefully avoids these type of situations where possible. This is a bit hard to understand for some, I know.

  23. .

    It’s a bit hard for you to understand you can tell anyone who comes to your house their services aren’t required?

    Your wife needs to harden up. We ought not to change a centuries old principle based on your wife’s inability to tell a dickhead to bugger off.

    You don’t understand the law. You don’t have the right to peaceful enjoyment to have people not knock on your front door.

    I changed providers recently, none of the offers were “predatory”.

  24. Rob MW

    “…………….promoters to call for the Commonwealth to continue usurping the state role in environmental matters………..”

    Alan – For the States, the problem arises out of the exclusiveness of ‘External Affairs’ which brings in all environmental law and regulation into Australia and in which can (and has) delegated to the States under Acts like the National Environment Protection Council Act (Intergovernmental Agreement on the Environment) and the Environment Protection & Biodiversity Conservation Act for Commonwealth approved environmental planning instruments with which to clobber people with.

    The Tasmanian Dam case saw to that.

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