THURSDAY, 8 JUNE 2017
Subjects: Competition law, wage growth
PETER BELL: So you're at the Bottle-O and you're having a look at the huge number of beers that are on display and you decide, you know what? I'm going to support the little guy. I'm going to choose the craft beer over there with the curious label and I'm going to do my bit and support someone who's trying to make their way in business. Well credit to you for making that decision, but just bear in mind that there isn't much choice at all when it comes to beer, apparently. Ninety percent of the market is controlled by just four companies. Have a think about that for a moment - 90 percent controlled by just four companies. And it begs the question, are too many of Australia's industries controlled by too few?
That question is being contemplated by federal Shadow Assistant Treasurer, Andrew Leigh, while in Perth this week. He's using the beer sector as an example of market concentration leading to higher prices at the tap for you and for me. Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Peter, how are you?
BELL: Well, thank you. How much of a problem is market concentration in Australia?
LEIGH: Well, I think it's pretty serious and one of the examples of course is the beer industry. Western Australia has that great story of the creation of Matilda Bay, Phil Sexton taking on the big guys, who tried to squeeze him out from various pubs, eventually starting his own pub in order to sell his craft beer. But then ending up having to sell his beer off to what's now the biggest brewer in the world, Anheuser-Busch InBev. So that's just one of the craft beers that’s now owned by one of the big companies. Little Creatures, Kosciusko, Knappstein, the list goes on - faux craft beers that are actually owned by large mega-corporations.
BELL: There's incredible innovation in the industry and there's always new and exciting labels that we can find in the bottle shop or at the pubs or wherever it is that we like a beer, but what happens is that they get market share and they're quickly snapped up by one of these big businesses?
LEIGH: That's right and it's not just in this sector that we're seeing it going on, we're seeing it going on in banking, telecommunications. There's a host of Australian industries that are overly concentrated and consumers aren't getting a good enough deal. You've just got to look at the petrol market, where BP’s dominance of the Perth petrol market according to one academic study has allowed what's called 'tacit collusion' where companies use big data to drive up prices at the bowser, costing around $300 a year for the average Perth motorist.
BELL: So, using the beer for the context, do you think most people are aware of the lack of competition? Because when you talk about banks or perhaps petrol stations, I think people are aware, but they might be surprised at some of the other industries where there’s a lack of concentration.
LEIGH: Yes, I think that’s right Peter. Bill Shorten asked me to take on the competition portfolio in 2013 and I have to say at that stage, even although I’d worked as an economist for quite a while, I wasn’t aware of the extent of market concentration. Industries like credit unions, cinemas, bottled water, fruit juice, baby food – all of these are heavily concentrated industries, dominated by just a few big players. So one of the things that’s Labor’s doing now is thinking about what are the policies that might help us get a little bit more competition in the market and how do we see fewer mergers and more start-ups.
BELL: It’s an interesting question that I’m going to put to everyone this morning, Andrew. Is competition something which changes your spending behaviour? Do you try and how successful are you in supporting the little guy?
You’ve touched on it there, Andrew. We’re well aware of the problems. What can be done about it?
LEIGH: Well, one of the things we think can be done is to raise the penalties for anti-consumer and anti-competitive conduct. We went to the last election, Peter, calling for the penalties for ripping off consumers to be raised to $10 million and Shadow Consumer Minister Tim Hammond and I were very pleased in the budget when the government adopted that policy.
But we also think that the penalties for anti-competitive conduct should be tied to the extent of the revenue that you make. They do that in the European Union and it gives the competition watchdog a bigger stick to take on bad behaviour, such as cartels. We also think the competition watchdog should have a market studies power, the ability to go in and do full blown investigations in effect where they think there might be some problems rather than waiting for the government to call it in on a case by case basis like they’ve recently done with banking and energy. So a couple of creative ways in which we believe there are ways of boosting the extent of competition in Australia’s fairly uncompetitive markets.
BELL: Andrew, on that, is it a similar situation in other similar sized Western economies, what we’re going through here in Australia?
LEIGH: Look, that’s a good point. We wouldn’t expect us to have the full extent of competition that we get in the market of over 300 million people in the United States. But I do think the problem’s getting worse. We talk a lot about start-ups, but actually the new business formation rate has fallen this decade compared to last decade. There are mergers going on left, right and centre. If you want an answer as to why real wages are going backwards while corporate profits are skyrocketing, part of that has to do with rising market concentration in Australia.
So it’s not just a narrow little legal issue – it’s actually fundamentally tilting the playing field against the little guy in Australia. And that really matters in Perth, the city the New York Times recently dubbed hipster heaven. Hipsters are the quintessential start-ups – they’re people who are always looking for the little guy, for something a bit different and if we want more hipsters in Australia, more start-ups, then we have to have settings that encourage more innovation and competition.
BELL: Thanks Andrew. Andrew Leigh, Federal Shadow Assistant Treasurer.