Judging intervention in markets

| July 13, 2018

The Chair of the Australian Competition and Consumer Commission, Rod Sims, has outlined the ACCC’s approach to market intervention in a speech to the Australian Conference of Economists in Canberra.

“Enhancing competition does not mean protecting all market participants from failure, nor does consumer protection extend to shielding consumers from price increases set by the markets.”

“It is not illegal for a company to put their prices up, or even to price gouge, as this term is commonly understood. We largely work to establish an even playing field, where all participants have a fair chance of achieving either success or failure, and we work to ensure consumers are not misled.”

“When we choose to intervene, via enforcement cases, market studies or via general compliance activity, we do so to ensure that markets function correctly. This is important for business, consumer and investor confidence.”

“We have a number of inquiries going on, such as the digital platforms inquiry, our residential energy prices inquiry has just been completed, and we are working hard to develop policies and processes around a new function that we have acquired in the past year: our responsibility for the consumer data right.”

“Much has been written about Google and Facebook’s share of digital advertising revenue and, as our submissions tell us, traditional media have been significantly impacted by the reduction in advertising revenue. However, in many ways, the internet and digital platforms have increased the diversity of news and journalism available to Australians.”

“What is really interesting about this Inquiry is that we don’t yet know what our recommendations are likely to be. Is intervention required, and in what form?”

“The consumer data right will enable customers to safely share their transaction, usage and product data with trusted service providers, if they choose to do so. We see this as a fundamental competition and consumer reform.  But what is the justification of such a broad ranging regulatory intervention and why isn’t the market delivering these benefits absent intervention?

“Markets usually work more efficiently when consumers are well informed about the price and quality of offers available to them, the costs consumers incur when switching between providers are small, and barriers to entry for new providers are low.”

“To me, this is one of those cases where government intervention is totally justified and will be welcomed by consumers, as companies cannot be relied upon to make this data available themselves without the legislative push from government. The consumer data right helps to reduce search costs, and lower the barriers to switching between service providers that consumers currently face.”

“Energy prices remain a significant source of anxiety for Australian residential users, and commercial and industrial users. The big jumps in both electricity and gas prices have hit them hard, particularly those businesses for whom energy costs are a significant input cost.”

“The problems arise because Australians are paying considerably more for electricity than they should be, largely due to poor past decisions by governments, and by the electricity industry. To address all these problems, and more, intervention is certainly needed.”

“The digital platforms inquiry, consumer access to data and energy are three headline issues affecting Australian businesses, consumers, and the economy more broadly.  Each provokes questions about when to intervene, and when not to intervene, and each demands a different response.”

Read the full speech When and how to intervene in markets.