Having seen the ACCC staffing levels increase 10 per cent since 2014 with a further increase of 14 per cent budgeted for next year, Chairman Rod Sims is out campaigning for additional resources to combat cartels. Sims’s views are in line with those of a predecessor, Graeme Samuel, who said ‘cartel behaviour is, in reality, a form of theft and little different from classes of corporate crime that already attract criminal sentences.’
Another predecessor of Sims at the ACCC, Allen Fels, like Sims was a long term ALP client/assister of the ALP and was rewarded with the ACCC job. Fels would mask his proclivity to intervene in markets (i.e. to “correct” them) by citing Adam Smith’s aphorism, ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’
Neither Fels nor Sims would have agreed with Smith’s succeeding sentence, ‘It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice’. Still less would they recognise that the words were in the context of a chapter in The Wealth of Nations that addressed the perverse effects of government regulation in creating monopolies; indeed, government facilitation is only means by which such monopolies can persist.
Ten years ago Julie (now Makayla) Novak and I examined cartel behaviour and its supposed combating by authorities in the US and Australia. In so far as any of the cartels documented stuck, they collapsed as higher prices attracted new competitors or changed conditions meant the collaborators broke the agreement themselves. In some cases, like shipping conferences, which the ACCC has long targeted, the agreements are cooperative measures to bring about benefits (in the case of conferences, assuring more regular services).
In The Australian article announcing the campaign for more resources, the long running ACCC litigation against cardboard box makers Visy, in particular its former Chairman, Richard Pratt, was mentioned. In the end, the ACCC never could win damages against Pratt which encouraged them to press successfully to reduce the required level of proof of wrongdoing.
Actually, the Pratt case only superficially involved an agreement to collude between Visy and Amcor, which together dominated cardboard boxes in Australia. Such agreements normally involve higher prices and stable market shares between the firms. But following the agreement, Visy massively improved its market share especially in the non-seasonal, more profitable parts of the market. It was, in fact an agreement that only one side kept. Pratt reneged on market sharing measures and never intended to do otherwise. There was no real collusion, just a cunning strategy of one firm to spike its competitor’s marketing. Amcor was understandably miffed and spilled the beans in return for immunity. And far from customers being hurt, prices fell.
Sims has paved the way for regular joytrips to Washington via a new agreement to share information with the FBI (although it is the Federal Trade Commission that is responsible for combating cartels). He wants three prosecutions a year and will search till he finds sufficient smoke.
Doubtless, what with banks and other businesses under attack from populist politics, Sims will get his additional resources, even under the Coalition which has shown no ability or willingness to rein-in its own anti-business agencies. Under the ALP such additional resourcing is assured both as a means of further cowing business into acquiescing with its wealth transfer plans and reinforcing another agency that will facilitate government control of business.
It would be neat if the ACCC could confine itself to consumer misinformation and setting prices for natural monopolies. But Winter is already upon us as the nation slouches towards socialistic control under the Coalition and there is every expectation of this being ratchetted up under a Shorten Government.