Andrew Leigh

  Labor’s Making Merger Law Fit For A Modern Economy - Op Ed

Economists know two big facts about mergers. On the upside, size can bring economies of scale. Larger firms can deploy their network to produce goods and services more efficiently.

On the downside, monopoly isn’t just an infuriating board game. When firms control a market, they tend to cut back output and raise prices. There’s a reason that much of corporate strategy is devoted to keeping competitors out: when you’re the only player, the game looks a whole lot sweeter.

Encouraging firms to enjoy economies of scale while curbing monopoly power is at the heart of merger laws. Most mergers are not anti-competitive, and can be beneficial to the economy. But some mergers deserve closer scrutiny, to ensure that they are providing real benefits.

Unfortunately, Australia’s current system for scrutinising mergers is unfit for a modern economy. Analysis from the Australian Treasury’s Competition Taskforce finds that there are around 1400 mergers taking place annually. Yet the Australian Competition and Consumer Commission only sees around 300 of these mergers. Three out of four mergers fly under the radar.

This system looks even odder in an international context. Almost every advanced country, including the United States, Japan, Canada and all European Union members, has a system that requires the compulsory notification of mergers. Australia is an outlier in not requiring merger notification. The result is that our competition watchdog is flying blind.

It’s hard to imagine anyone arguing that if we were building a merger approval system from scratch, Australia’s current system is optimal. There are no less than three pathways, which contributes to needless confusion and delays and can create an opportunity for strategic behaviour to avoid detection.  And for the most part it isn’t transparent, with only a fraction of mergers reviewed by the Australian Competition and Consumer Commission every year done so publicly. There is too little available data on mergers and acquisitions, in an age where companies themselves are relying heavily on data.

Unenforceable And Unnecessary Non-Competes Hold Us Back - Opinion Piece

Seventeen-year-old Charlotte landed her first casual job as a dance teacher. It was her dream job, but she was forced to quit after experiencing harassment.

So she took a job at a different dance studio. Suddenly, a letter arrived in the mail. Charlotte's contract with the first employer had a non-compete clause, which prevented her from working at a competing dance studio within 15km for three years after her employment stopped. The old employer told her she had to quit her new job.

One in five Australian workers now has a non-compete clause in their employment contract. We're not just talking about senior managers. Non-competes are showing up in the employment agreements of boilermakers and disability support workers. When chief executives are forced to take a break between jobs, we call it gardening leave. Now, even gardeners are being compelled to take gardening leave.

Businesses legitimately want to protect their trade secrets and confidential information, as well as their customer lists. But doing so with a non-compete clause is deploying the bluntest tool in the shed.

It stops a worker from moving to any competing business, or from starting a new one. A growing body of evidence suggests the use of non-compete clauses is harming job mobility, innovation and wage growth.

Job-switching is a sign of a dynamic and healthy economy.

For businesses, it means improved productivity as they can attract the talent and skills they need. This is especially important for startups and firms looking to expand.

For workers, it means job satisfaction and higher wages as they move to more productive firms. Research from the e61 Institute finds that younger job switchers can earn on average $7500 more per year than job stayers. Yet despite these benefits, Australia has seen a general decline in job mobility during the past 30 years, part of a broader fall in dynamism since the early 2000s.

Given that, it makes sense to carefully assess any barriers that may be limiting people from moving jobs, limiting businesses from expanding and limiting the flow of innovation in the economy.

Under common law, many non-compete clauses are probably unenforceable. But that's not much help to the typical employee.

Workers may be too afraid to face the risk of a bout of unemployment or a court dispute, so don't move to a better-paying job or start a new business.

It's not as though employers are powerless to prevent their secrets walking out the door. Businesses can use the Corporations Act, which bans employees during or after employment from improperly using a company's information for personal gain, third-party gain, or to cause detriment to the company.

Around the world, many jurisdictions have either banned or restricted the use of non-compete clauses. In the US, five States have bans in place, including California, the home of Silicon Valley. The Albanese Government established the competition task force last year to examine whether Australia's competition laws, policies and institutions remain fit for purpose.

Now, the task force has launched its issues paper Non-Competes and Other Restraints: Understanding the Impacts on Jobs, Business, and Productivity. The issues paper is an open invitation for everyone - businesses, employees, academics, think-tanks - to provide their views.

Already, we know that millions of Australian workers don't have the freedom to quit their jobs and immediately move to a better job.

We know that these restraint clauses don't just apply to the boardroom. They apply to workers in the mail room too.

They are just as likely to apply to the person guarding the carpark as they are to the person guarding trade secrets.

Taking a hard look at non-compete clauses is just one step in our efforts to build a more competitive and dynamic economy.

Originally published in the West Australian on 16 April 2024.

Recent years have seen an explosion in interest in artificial intelligence and big data. The technology is promising, but its use in government rightly makes people nervous. If RoboCop hadn’t persuaded you that letting machines run amok was a bad idea, the Coalition’s Robodebt scandal proved it once and for all.

Yet it’s useful to see areas where artificial intelligence and big data have helped produce better outcomes for citizens, without undermining key ethical values of transparency, privacy and human oversight.

E&OE TRANSCRIPT
RADIO INTERVIEW
ABC RADIO CANBERRA DRIVE WITH ROSS SOLLY
WEDNESDAY, 10 APRIL 2024

SUBJECTS: Palestinian statehood, merger reforms, competition policy, Australia’s Indigenous history, British influence and multicultural story.

ROSS SOLLY: Great to have you on the show, Dr. Leigh.

ASSISTANT MINISTER, ANDREW LEIGH: Great to be back with you, Ross.

SOLLY: Just before we talk about this, can I get your thoughts on what Penny Wong had to say last night? About the only way to work towards a long-term peace prospect in the Middle-East is that maybe we should recognise Palestine as a state. What are your thoughts?

LEIGH: Well, I think everyone recognises that the two-state solution is the only lasting way of achieving peace. And this is about building the pathways out of an endless cycle of violence. You only get security and prosperity for both Israelis and Palestinians with a two-state solution. So, while Australia is a respected voice, we're not a central player in the Middle East. Our role is to argue for a humanitarian ceasefire, return of hostages, the protection of civilians, but also to give our support to what the international community has broadly recognised. A two-state solution.

Foreign investment is great, until it becomes a drain

A few years ago, the Australian Taxation Office won a court case against energy giant Chevron that saw the company pay an extra $10bn over the following decade.

That's equal to 10 hospitals, hundreds of schools, or thousands of kilometres of rail.

One way Chevron cut its tax bill was by lending money to itself. Interest payments are tax deductible, so by creating an internal loan from the US parent to its Australian subsidiary, Chevron reduced its taxes.

Over the past two centuries, Australia has benefited greatly from foreign investment. But multinationals still have an obligation to pay their fair share. Multinational companies benefit from Australia's infrastructure and rule of law. It's only fair that they contribute.

E&OE TRANSCRIPT
TV INTERVIEW
ABC AFTERNOON BRIEFING WITH GREG JENNETT
MONDAY, 8 APRIL 2024

SUBJECTS: Reforms to the Food and Grocery Code, divestiture powers, merger reforms, non-compete clauses.

GREG JENNETT, HOST: So, a mandatory code of conduct is on the way, or soon will be for Woolworths, Coles, Aldi and Metcash. That is the interim recommendation from Craig Emerson. But that represents only a part of the project the Government's doing on competition. Assistant Minister for Competition Andrew Leigh joins us in the studio now. Welcome back to the programme, Andrew. So, a firm recommendation just to clarify the status of Craig Emerson's advice in the Interim Report. He says a firm recommendation. There's no doubt, is there, that the Government will proceed with this mandatory code?

ASSISTANT MINISTER ANDREW LEIGH: Well, we clearly need to go through cabinet and caucus processes, but we're certainly looking very seriously at the important recommendations that Craig Emerson has made. And I was pleased, Greg, that you put that into context. The broader work that we're doing on competition, the ACCC's grocery review, the CHOICE price monitoring to ensure Australians can see where they can get the best deal, the first report of which will be coming out towards the end of June.

E&OE TRANSCRIPT
RADIO INTERVIEW
ABC RADIO MELBOURNE WITH ALI MOORE
MONDAY, 8 APRIL 2024

SUBJECTS: Divestiture powers for competition regulators, the government’s work to improve supermarket competition.

ALI MOORE, HOST: Well, as I said, we've been talking about how to make the supermarkets play fair for a long time. Today, one recommendation, a mandatory code of conduct and you've been hearing about that during the news today with the Interim Report of the Review into the Food and Grocery Code of Conduct, which right now, of course, is not mandatory, it's voluntary.

Now, that Review also recommends hefty fines. What difference would they make? And will the government accept the recommendations? Dr Andrew Leigh is the Assistant Minister for Competition, Charities and Treasury. Dr Leigh, welcome to Drive.

ASSISTANT MINISTER ANDREW LEIGH: Thanks, Ali. Great to be with you and your listeners.

E&OE Transcript
DOORSTOP
PARLIAMENT HOUSE, CANBERRA
MONDAY, 8 APRIL 2024

SUBJECTS: Interim report on the Food and Grocery Code, mergers process, cost of living, divestiture powers.

JIM CHALMERS, TREASURER: I wanted to thank Craig Emerson for his interim report reviewing the grocery code and I wanted to acknowledge Andrew’s work in the competition policy space as well. This interim report will help us strengthen the Food and Grocery Code for the better. This is all about a fair go for farmers and families - that's what this is all about. It recognises that by replacing a voluntary code with a mandatory code, it's easier to enforce. We can impose penalties on people who do the wrong thing, and it's also harder for people to walk away from. This is about getting a better deal for people right up and down the supply chain. This is a perennial challenge in our economy and in our markets and this interim report from Craig Emerson will help us address that.

JOINT MEDIA RELEASE

TREASURER JIM CHALMERS

RELEASE OF FOOD AND GROCERY CODE REVIEW INTERIM REPORT

Today we have released the interim report of the Food and Grocery Code of Conduct independent review, commissioned by the Albanese Government.

We want a fair go for families and a fair go for farmers.

This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible.

Following extensive stakeholder engagement, the interim report recommends the Code be made mandatory, with heavy penalties for major breaches.

FRIDAY 5 APRIL 2024, SYDNEY

It is a pleasure to be here today, with cooperative producers from across industry and around Australia. Thank you to Melina Morrison, chief executive of the Business Council of Co-operatives and Mutuals, for convening today’s conversation, and to all participants for joining us in Sydney, on the lands of the Gadigal people.

Let me start off with a with a story. My grandfather Keith Leigh was born in 1912. In 1929, when the stock market crashed and the Great Depression began, he was just 17 years old. In order to make ends meet, he hit the road as a travelling salesman, largely selling hosiery. As Keith liked to say of his business role, he was a ‘traveller in ladies’ underwear’.

The 1930s were tough on Keith, as they were for many Australians. At the end of the decade, he and his friend Lindsay Brehaut set up the Hobson’s Bay Co-Op, named after the little bay that sits at the top of Port Phillip Bay in Melbourne. The Hobson’s Bay Co-Op allowed locals to pool their buying power at a time when so many were feeling the pinch.