I acknowledge the Cammeraygal people of the Eora Nation, on whose traditional lands we meet, and pay respect to all First Nations people here today.
On the table in my parliamentary office sits a board game. Designed in 1973 by economics professor Ralph Anspach, it is called Anti-Monopoly. In the original version of the game, play starts with three kinds of ‘cartels’ – trusts, oligopolies and monopolies – dominating the board. Players represent competition authorities, bringing legal cases against the monopolised businesses. The goal is to make the board akin to a free market system.
I’ve never liked the Monopoly board game, so the competitive spirit of Anti-Monopoly greatly appeals to me. But there’s a further story about Anti-Monopoly that I love. The year after Professor Anspach released his game, Parker Brothers sued him for using the ‘Monopoly’ name. In his defence, Professor Anspach revealed that Monopoly’s roots lay in The Landlord’s Game, designed in 1903 by social campaigner Lizze Magie as a critique of corporate power. After a decade-long dispute, Professor Anspach was able to continue distributing his game under the title ‘Anti-Monopoly’.
Having Anti-Monopoly displayed in my office brings a smile to my face and reminds me of our reform goal. If parents in the room are looking for a board game that will teach your children the value of competition and economic dynamism, I recommend Anti-Monopoly over its more famous counterpart.
It is a pleasure to welcome you all to the 2024 Competition Policy for the Modern Economy Conference.
It’s a rare opportunity to bring together such a distinguished set of competition policy experts from Australia and abroad including academics, members of the Competition Review expert advisory panel, and public servants working to embed pro-competitive reforms into domestic laws, policies, and institutions.
In August 2023, the Treasurer and I announced a review of Australia’s competition policy settings.
The government recognises that competition is critical to our economy and the long-term prosperity of the Australian people.
Competition sustains and promotes dynamism and productivity. It promotes lower prices, higher wages, and more choice.
Competition will also be a critical policy tool in addressing the opportunities and challenges in broader policy areas ahead like the net-zero transformation and the future care and support needs of Australia’s population.
In just over a year the Competition Taskforce has achieved a lot. It has:
- Developed and supported government to introduce the biggest reforms to Australia’s merger laws in half a century.
- Supported work with state and territory counterparts to revitalise National Competition Policy.
- Developed a robust evidence base on the prevalence and use of non-compete clauses in Australian labour contracts to inform policy.
These achievements owe much to the multidisciplinary nature of the Taskforce, with expertise across law, economics, and data analytics.
It also reflects the exceptional calibre of the Review’s advisory panel, many of whom I am pleased to see here today.
Harnessing different perspectives and expertise is also what brings us together for this conference, welcoming an array of Australian and international experts across economics, public policy, and regulation.
The aim of this conference is to build on the achievements of the Review to date.
Topics will not only cover the traditional core competition policy frameworks, but will also extend to issues in the care and support economy, the energy sector, the labour market and the digital economy.
The ideas, practices, and innovative solutions shared at this conference will help us shape a roadmap for potential competition policy in Australia into the future.
Building on a Labor legacy of pro-competition and pro-consumer reforms
The work of the Competition Review announced by this government builds on a Labor legacy of reforms in the service of competition, consumers, and a more seamless and productive national economy.
Fifty years ago, the Government led by Gough Whitlam passed the Trade Practices Act.
Whitlam had planted the seed for such an Act almost two decades earlier. He made it a pillar of Labor’s equality driven platform at the 1972 election. In his famous election speech in Blacktown, Whitlam said ‘Labor will protect the consumers.’ He promised action to ensure people paid fairer prices.
The Trade Practices Act was novel, necessary and effective, a reform that sat alongside other important law reforms such as creating the Federal Court and passing the Family Law Act.
Australian consumers were paying too much for essentials. Restrictive and anti-competitive practices abounded, addressed only in the most ad-hoc manner and when those with means raised an issue.
Attorney-General Lionel Murphy noted when introducing the Act that the world had evolved far beyond simple markets. Untrained consumers were disadvantaged against the increasing sophistication and scale of business:
The existing law is still founded on the principle caveat emptor, “let the buyer beware”…consumers need protection by the law and this Bill will provide such protection.
Fairness for the consumer, empowerment for the individual, and a more competitive economy. Ideals that are uncontroversial today, but revolutionary in their day.
Almost two decades later, the Keating Government moved to make the economy more efficient and competitive. In the early-1990s, the Hilmer Review led to National Competition Policy, one of the most significant economic reforms in Australian history.
National Competition got people talking. As Keating noted, “if you walk into any pet shop in Australia, the resident galah will be talking about microeconomic policy”.
Dr Jill Walker, a former Commissioner of the ACCC, described these competition reforms as a defining moment in Australia’s history.
Where the Trade Practices Act fundamentally reshaped the expectations of business conduct, National Competition Policy reshaped the expectations of government’s role in competition and the reach of competition policy.
In 2010, the Rudd Government passed significant changes to the Trade Practices Act, including a new name that sums up the purpose: the Competition and Consumer Act.
Chief among the changes was the addition of the Australian Consumer Law: one law replacing dozens spread across Commonwealth, state and territory Acts. The Australian Consumer law strengthened consumer protections, safety standards, and enforcement.
These efforts reflect Labor’s long and deeply held commitment to fostering a more equitable marketplace. It is a commitment that in 50 years has taken us from an economy weighed down by that maxim caveat emptor, buyer beware, that Murphy spoke of, to caveat venditor.
By learning from the successes and challenges of past initiatives, we can create a robust framework that further strengthens competition, benefiting consumers and businesses alike.
An historic moment in competition
We are at an historic moment in competition. Competition policy in Australia and globally needs to grapple with the fundamental shifts in the economy as our economies become more digital-based and transition to net zero which Olivier Blanchard has dubbed the most profound structural transformation in human history. I acknowledge that these issues have been carefully considered in other jurisdictions, for example in the course of the review of competition in the European Union recently conducted by former Italian Prime Minister Mario Draghi.
When Lionel Murphy spoke 50 years ago of consumers facing the increasing sophistication and scale of business, no one could foresee today the complex economy that consumers interact with.
Consider the emergence of big data and sophisticated algorithms. Large in scale yet capable of being very small in focus, honing in on the browsing and purchase history of individual consumers and shaping their wants and decisions. Information asymmetry on a whole different scale to that contemplated back when the Trade Practices Act was introduced.
And who would have thought that digital-based companies would now be some of the biggest drivers of physical investment globally? Amazon, Alphabet, and Meta and Microsoft spent a cumulative US$150 billion on physical capex in 2023, a 10-fold increase from a decade earlier. Much of this huge investment is in building new data warehouses for AI and cloud computing.
In addition to these profound structural changes, the cyclical surge in global inflation coming out of the pandemic has refocused policymakers on how competition policy and regulatory action can mitigate cost of living pressures faced by households.
Competitive markets are the first line of defence in preventing Australians from paying more than they need to for goods and services.
The ACCC has continued to undertake strong enforcement action. Last year, the ACCC secured the highest ever penalty for cartel conduct in Australia against BlueScope steel. Litigation against Bingo and Aussie Skips for cartel conduct not only saw one of the largest financial penalties, they also resulted in significant criminal sanctions against senior executives. Future enforcement will benefit from the government’s work to reform competition laws, particularly relating to mergers in Australia.
Despite these successes, Australia shares challenges faced by many economies in the ongoing pursuit of greater competition. United States Assistant Attorney General Jonathan Kanter recently identified three challenges for competition enforcement that are equally relevant to Australia. Expertise, international cooperation, and labour market collusion.
If Australia is going to continue to reap the benefits of a competitive economy, we need to invest in this expertise and continue to build international relationships to tackle global challenges impacting competition at all points of the supply chain.
One area where Australia is leading the way is the development and use of microdata in policymaking.
Data and evidence to advance competition reform in the future
Besides reshaping the economy, the emergence of data within government is transforming policy makers capacity to identify competition issues and develop tailored policy and regulatory responses. Unit-level records that track businesses and households over time allow granular analysis of the way policies are influencing the economy.
Research from the e61 Institute – using newly linked ABS microdata – shows that workers at firms heavily using non‑competes earn 4 per cent less on average. Extrapolating across the workforce, and accounting for the fact that one in five workers are subject to a non-compete clause, this implies that non‑competes are driving down average wages by more than $500 every year – equivalent to $7 billion annually.
Data analytics is a crucial tool for policy.
It enables policymakers to identify patterns, trends, and insights to guide regulatory decisions.
Microdata also allows regulators to better tackle emerging market issues and create a more equitable economic landscape.
For example, to support the new merger system, the Taskforce is working with ACCC to develop a microdata tool to identify ‘competition hotspots’ – segments of the economy where further merger activity could pose the greatest risk to competition. This could help inform how the ACCC administers the new system and future ministerial designation of sectors for mandatory notification.
This new tool builds upon the Taskforce’s merger database project which also utilised BLADE. This database has already revealed some interesting patterns including that the top 4 sub-industries for serial acquisitions are all consumer facing health or caring related services, namely: childcare; aged care; medical GPs and dentists.
Without doubt, the formation of future competition policy will benefit immensely from a data driven and evidence-based approach.
A goal to work towards
Data-driven economic analysis can also help us understand the present and how we might shape the future.
And we know something of the issues competition should help to address in the future.
A cost-effective transition to a lower carbon economy. A human services sector that delivers efficiency, choice, and quality outcomes for all Australians. The opportunity for consumers and business to benefit from the incredible technological transformations underway.
It can also enhance our understanding the current state of affairs. For example, we now have a better appreciation of the channels by which competition can increase productivity and incomes across the economy. For illustration, Treasury and Reserve Bank research referenced later today suggests the decline in competition since the 2000s has reduced GDP by 1-3%. This is a big number, on par with the estimated gains delivered by the Hilmer reforms.
Interestingly, these estimates are much larger than the traditional Harberger (1954)[1] estimates of 0.1-0.3% of GDP associated with monopoly power, which implied it was barely worth getting out of bed for competition policy and probably influenced the lax approach to US competition policy in following decades.
The much larger GDP estimates in more recent studies reflects a couple of key features neglected in the Harberger study: supply chain links; and a distribution of businesses in each industry rather than a single representative firm. While these might seem like obvious improvements, it is only in recent years that we have had the necessary microdata to estimate these more realistic models.
The framers of the Trade Practices Act 50 years ago, and of the Hilmer Reforms 30 years ago, could not have imagined the world we have today.
Yet the enduring value of those and the other competition and consumer reforms we look back on proudly, is a credit to those who shaped them.
Their efforts to design provisions, principles and institutions that have remained relevant and adaptable.
While we have some idea of the challenges and opportunities ahead, we cannot hope to foresee the world 30 years from now any more than they did.
But over this conference I am confident we will share ideas and discussions similarly capable of shaping policy that is robust, adaptable, and serves future generations. And maybe then head home for a game of Anti-Monopoly with the kids.
[1] Arnold Harberger (1954), ‘Monopoly and Resource Allocation’, the American Economic Review Vol. 44, No. 2, Papers and Proceedings of the Sixty-sixth Annual Meeting of the American Economic Association (May, 1954), pp. 77-87 (11 pages)).