Faith in free markets dependent on stronger Competition and Consumer Act and high penalties for deterrence
Australian Competition and Consumer Chairman Rod Sims addressed the 2017 Competition Law Conference in Sydney on Saturday. He spoke about the role of the Competition and Consumer Act in maintaining and restoring the faith of Australians in our market economy.
“Many question whether open markets really work for the benefit of citizens, or whether open markets result in citizens being ‘ripped off’ by powerful companies,” Mr Sims said.
“The current questioning of free markets, however, is more fundamental than concerns about the power of big business. A recent Harvard poll of young Americans revealed that the majority reject capitalism.”
Mr Sims said that since joining the ACCC he has often heard competition lawyers and economists say, “Companies only succeed if they best satisfy the needs of consumers”.
Mr Sims contests whether this is the only way in which companies endeavour to succeed. While many businesses endeavour to succeed by offering customers a ‘better deal’, many businesses also attempt to succeed by preventing their competitors from doing so.
“As anyone with any commercial experience knows, businesses are at least as much focussed on reducing competition as they are on ‘satisfying the needs of consumers’,” Mr Sims said.
“In essence, anti-competitive conduct is profit-maximising for firms, particularly those with a degree of market power. We should never be surprised that firms seek to handicap their competitors, push the boundaries to the point of misleading consumers or merge so they can raise prices.”
Mr Sims said it is important that Australians believe that our market economy works to their benefit. This is more likely if we have the sensible changes to the law likely to flow from the Harper Review and the recent review of the Australian Consumer Law (ACL), and if a then appropriate Competition and Consumer Act is enforced, and seen to be enforced, vigorously and fairly.
“I believe that a sound Competition and Consumer Act, strongly enforced, is crucial to the proper functioning of, and people having faith in, such a system. Companies need to understand where the line is drawn; most importantly, consumers need to know that there is such a line, and that breaches have consequences.”
Mr Sims concluded by saying that to achieve deterrence, the penalties imposed by the Courts under the Competition and Consumer Act need to be many times higher than they are now for larger firms.
“The current ACL Review has recommended much higher maximum penalties for consumer law breaches, and we very much support this change. In addition, the ACCC must continue to strongly advocate higher penalties in competition law cases before the Courts, in order to bring about Parliament’s clear intention of a step change in penalties for larger companies which breach the competition law provisions,” Mr Sims said.
“The point is not do companies seek to breach the Competition and Consumer Act; the point is how much does it matter to them if, in striving to maximise their profits, they do break the law,” Mr Sims said.
The full speech is available at https://www.accc.gov.au/media/speeches