Andrew Leigh

LIONEL MURPHY LECTURE

AUSTRALIAN NATIONAL UNIVERSITY, 31 OCTOBER 2018

Executive Summary

Australia has a competition problem: there is not enough of it. Our industries are concentrated. Our markets show signs of weak competition.

The way Australia’s experts think about competition is partly to blame. Although it has been less influential in Australia than in the United States, the Chicago School’s views on competition have shaped our laws, policies and enforcement practices. The Chicago School views market concentration as a virtue more than a vice. Barriers to entry are surmountable, market power tends to be temporary, most mergers are good, vertical restraints and predatory pricing are either benign or efficient.

These views run counter to those of Lionel Murphy. Murphy saw market concentration as a problem. He saw strong competition laws as necessary to protect the competitive process, protect consumers and support the creation of new businesses. He found the Chicago School’s arguments unconvincing. The growing body of research and experience shows Murphy’s concerns were well-founded. The Chicago School’s faith in the ability of markets to self-correct and deliver competitive outcomes was misplaced.

There is a strong progressive case for repositioning how we think about competition. Focusing more on the competitive process, the structure of markets and the incentives those structures create for firms will play an important role in reducing inequality.

Introduction

Back in 1981, there was a community of people who lived lives harder than most. They were denied basic human rights. They were denied the right to self-determination. They lived under constant surveillance. They were subject to the strict and arbitrary controls of government.

These people could own a hot water jug, a radio, an iron and a razor, but if they wanted any other electrical appliance, it had to be approved by an ‘authorised officer’. “We lived under threat” remarked one resident, in his early twenties at the time. “It was pretty horrific”.[1]

This community didn’t live in North Korea. They didn’t live in Syria or any of the other places where these stories are, sadly, all too common. This was Australia, less than four decades ago. They were members of the Yarrabah community, located about 40 kilometres south of Cairns.

The young man in his twenties, who I just quoted, was Percy Neal. Like many in the community, Percy wanted change. He wanted the community to have a say over its own destiny. Percy went about his mission in the right way. In the late 1970s, Percy fought hard to be elected chairman of the Yarrabah Council. He fought and agitated for years to establish some degree of autonomy for the community. But his agitation was mostly in vain.

One night, Percy lost his temper. In a heated exchange with a white shop owner, he allegedly spat at the man. Although Percy denied it, and witness testimony from the shop owner’s wife was inconclusive on whether he spat at all, Percy was arrested.[2]

From his own account, Percy was pretty stroppy. He could have behaved better. But ask yourself: if true, what should be the penalty for Percy’s actions? Astonishingly, the Queensland Court of Appeal sentenced Percy to six months in prison, three times the sentence handed down by the initial Magistrate, which was already excessive.

The severity of the Court’s decision was extraordinary. It did not go unnoticed. The news made the front-page of Brisbane’s Courier-Mail. It received attention from politicians and alarm from the legal profession. The case went all the way to the High Court.

Sitting on the bench was none other than Lionel Murphy. For all those who knew him, Murphy was a man of compassion. He was a warm, loving person who fought for the little guy.[3] He detested racial discrimination, opposed those who perpetrated it and was a staunch advocate of Indigenous rights. Manning Clark described him as “one of those human beings who want all human beings to have not only life, liberty and the opportunity to pursue happiness: he wants all human beings to have life and have it more abundantly”.[4]

Above all else, Murphy was not afraid of a fight. Whether as a lawyer, the Federal Attorney General or a High Court Justice, Murphy was a force to be reckoned with. Something tells me that, going before Justice Murphy in the High Court, the lawyers who were trying to keep Percy in jail might have been a little nervous that morning.

The case was thrown out. Murphy was scathing. He blasted the Magistrate, saying that “anyone who agitated for change… in the Aboriginal communities, would be under a disadvantage in that Magistrate’s Court”[5]. He accused the Court of Appeal of failing in their duty “to see that racism is not allowed to operate within the judicial system”.[6] He took heart for the people of the Yarrabah community. It was then that he gave what is perhaps his most famous quote:

That Mr. Neal was an “agitator”… obviously contributed to the severe penalty. If he is an agitator, he is in good company. Many of the great religious and political figures of history have been agitators, and human progress owes much to the efforts of these and the many who are unknown. As Oscar Wilde aptly pointed out in The Soul of Man under Socialism, “Agitators are a set of interfering, meddling people, who come down to some perfectly contented class of the community and sow the seeds of discontent amongst them. That is the reason why agitators are so absolutely necessary. Without them, in our incomplete state, there would be no advance towards civilisation.” Mr. Neal is entitled to be an agitator.[7]

It's no wonder Lionel Murphy sympathised with an agitator. He was a bit of an agitator himself.

Murphy disliked the mere concept of precedent. “The doctrine of precedent” he said “is one that whenever faced with a decision, you always follow what the last person did who was faced with the same decision. It is a doctrine eminently suitable for a nation overwhelmingly populated by sheep”.[8]

Of his 632 decisions in the High Court, 404 of them were separate judgements, 130 of which were dissenting. Only Michael Kirby, for whom I once worked, has had a higher dissent rate.[9] Murphy rejected a knighthood, but proudly accepted the scientific honour of having a supernova named after him, a picture of which he hung on his wall in the place normally designated for the Queen’s portrait.[10]

Lionel Murphy fought a hostile Senate as Attorney General as he battled for social change. He initiated the Death Penalty Abolition Act 1973. He proposed the Bill which lead to today’s Racial Discrimination Act. He created the Law Reform Commission and the Australian Legal Aid Office. He secularised marriage through the authorisation of civil celebrants. In 1973, he personally led a police raid on the Melbourne headquarters of ASIO.[11] I can’t see many Attorneys General doing that today – perhaps for good reason.

More importantly for today’s topic, Lionel Murphy introduced the Trade Practices Act 1974. The Act was a revolutionary piece of legislation at the time. With the stroke of a pen, the Act made cartels illegal, created offences for the misuse of market power, exclusive dealing, price discrimination, agreements that substantially lessen competition and anti-competitive mergers.[12]

For the first time, consumer protection was given stringent legislative support, prohibiting misleading and deceptive conduct, mandating product safety and giving consumers the power to bring actions in court. He created the Trade Practices Commission, today known as the Australian Competition and Consumer Commission (or ACCC): an independent statutory authority to defend consumers and prosecute wrongdoers.

It’s not surprising that Murphy was a passionate force for competition and consumer protection. Competition is a fundamentally progressive cause. It is a cause which is fought by those who agitate. It is fought by those who do not accept cosy arrangements for monopolists and oligopolists who suck prosperity out of the community, rip-off consumers and exploit the most vulnerable. Murphy’s Act was much more ambitious than the Act it replaced. With a ferocity that would have made Percy Neal proud, Murphy called the McMahon Liberal Government’s Act “a token effort and a flimsy façade of Government action behind which the commercial ethos of profit at any price would continue unchallenged”.[13]

We have a great deal to thank Lionel Murphy for. But my concern is that the very threats to competition that Lionel Murphy fought against are on the rise once again. Changes in the way we think about economics have altered the competition landscape. It has changed the way that Murphy’s Trade Practices Act – now the Competition and Consumer Act – is interpreted by courts and amended by parliament. Over the past generation, the net result has been to weaken competition in Australia, to the detriment of the most disadvantaged in our community. This weakening in competition, this weakening of Murphy’s principles, has inflamed inequality in Australia. A lack of competition isn’t just an issue of efficiency, it can also affect equity.

Murphy’s Law

Lionel Murphy was concerned about many things when it came to competition. But reading through his speeches and articles, three major concerns stand out.

Market concentration

The first was market concentration. This is where a market is dominated by just a few big firms, rather than having multiple competitors. In Federal Parliament in 1965, Murphy remarked:

It is now clear that there is a great deal of concentration of power in Australia and that we are monopolised to a much greater extent than are other industrialised countries. The estimate has been made - it has not been challenged - that the degree of monopolisation and concentration of power in Australia is twice as great as it is in the United Kingdom and three times as great as it is in the United States.[14]

Sadly, if Lionel Murphy was alive today, we would have some bad news for him.

It’s hard to think of many Australian industries these days that are not dominated by just a few behemoths. Whether it’s Coles or Woolworths, Lion or Carlton, Caltex or BP, Medibank Private or BUPA, Qantas or Virgin – it seems consumers don’t have a great deal of choice when it comes to where they get their goods and services from.

This is borne out in the numbers. One standard measure of concentration judges an industry to be concentrated if the top four players control more than one third of the market.[15] Recently, the Australian National University’s Adam Triggs and I calculated this measure across 481 industries. We found that more than half of Australia’s industries were concentrated. Some sectors are particularly tightly controlled. In department stores, newspapers, banking, health insurance, supermarkets, domestic airlines, internet service providers, baby food and beer, the biggest four firms comprise more than 80 per cent of the market.[16]

If you want to see this lack of choice, just look at some of the recent best sellers. Scott Galloway’s 2017 book on the tech giants was called ‘The Four’.[17] Ian Gow and Stuart Kells 2018 book on the accounting firms was called ‘The Big Four’.[18] Even P Diddy’s new reality show is called “The Four: Battle for Stardom” – probably the most competitive of the three.

If we compare this to the United States, as Murphy did back in 1965, things don’t look much better. Australia’s markets are more concentrated than those in the United States in aggregate, but particularly in some of our most important sectors. Our commercial banks, petrol retailers and liquor retailers are more than three times as concentrated as those in the US. Our supermarkets and health insurers are twice as concentrated. Our department stores, airlines, soft drink manufacturers and cardboard box makers are all significantly more concentrated.[19]

An international assessment by the World Economic Forum’s asks experts to rank the ‘extent of market dominance’, with the highest-ranked countries being those where corporate activity is spread among many firms. Australia comes in at 47^th, placing us between Ghana and Brazil.[20] In terms of banking, analysis by the World Bank finds that Australia’s banking sector is more concentrated than the OECD average.[21] A report into competition by the Grattan Institute reached more sanguine conclusions than I would be inclined to, but nonetheless found that print and broadcast media, liquor retailing, domestic aviation and internet platforms were more concentrated in Australia than in other countries.[22]

Anti-competitive conduct

But Murphy wasn’t just concerned about concentration. Murphy’s second major concern was the impact of anti-competitive conduct, particularly on suppliers, small businesses and in preventing new businesses from forming.

In 1974, Murphy cautioned how “restrictive trade practices have long been rife in Australia. Most of them are undesirable and have served the interests of the parties engaged in them, irrespective of whether those interests coincide with the interest of Australians generally”.[23]

He warned that market power “allows discriminatory action against small businesses” warning of “the powerful buyer who has the muscle to prise unjustifiably large discounts from [suppliers], discounts that will often in effect be subsidised by smaller buyers”.[24]

Unfortunately, such practices have not disappeared. One such example is the long payment terms that have been imposed on suppliers during recent years by companies such as BHP, Procter & Gamble, Mars, Kellogg, Heinz and Woolworths.[25] It turns out that large companies, particularly those in concentrated markets, were almost 20 per cent slower in paying their suppliers than small companies.[26]

Another such example is in farming. In 2016, Murray Goulburn retrospectively cut the price it paid to dairy farmers and then asked them to pay back to the difference.[27] Farming is a relatively competitive sector,[28] but they are squeezed by their suppliers and customers: purchasing pesticides, fertilizers and seeds from just a few sellers, and then finding life tough as they sell their produce to a small number of processors and supermarket chains.

Sadly, Lionel Murphy wouldn’t have to look far these days to see anti-competitive conduct in the Australian economy. Whether it’s telcos telling tall tales or cartels in car parts, there’s plenty to go around. “There is clearly no shortage of work for the ACCC” sighed Rod Sims recently, the Chairman of the ACCC. “Many well-known and respected major Australian companies have admitted, or been found, to have breached our competition and consumer laws. These same companies regularly proclaim to put their customers first” he said.[29] Indeed, we can see some of the changes that have been made to Australia’s competition and consumer laws over recent years – civil fines for unconscionable conduct, the criminalisation of cartels, higher penalties for breaches of consumer protection provisions – as a reaction to the growth of market power among Australia’s behemoths.

There have also been problems created by the poor regulation of privatised monopolies. Where a monopoly asset is placed in private hands, our economics textbooks predict that prices will rise well above the marginal cost of production that should govern pricing in a competitive market. In the absence of appropriate regulation or oversight, we should not be surprised if this is exactly how new monopoly owners behave. Whether it is a port or an airport, it is important that governments ensure that the gains to taxpayers from selling an asset aren’t offset by the losses to consumers from higher prices. 

An economy with just a few big firms may be bad news for startups. The Economist recently reported that around the FAANGs – Facebook, Amazon, Apple, Netflix and Google – there is now a ‘kill zone’, in which companies are either acquired or quashed. Mike Driscoll, a partner at Data Collective, says that in recent years, technology conferences “send shock waves of fear through entrepreneurs… Venture capitalists attend to see which of their companies are going to get killed next” he said.[30] This has made some venture capitalists more reluctant to invest in customer-focused start-ups.

Anti-consumer conduct

Murphy’s third and most important concern was the impact that anti-consumer conduct had in weakening competition. In 1973, he warned that:

In consumer transactions, unfair practices are widespread. The existing law is still founded on the principle known as caveat emptor - meaning ‘let the buyer beware'. That principle may have been appropriate for transactions conducted in village markets. It has ceased to be appropriate. Now the marketing of goods and services is conducted on an organised basis and by trained business executives. The untrained consumer is no match for the businessman who attempts to persuade the consumer to buy goods or services on terms and conditions suitable to the vendor.[31]

Things aren’t much better today. In some instances, it’s not simply a case of caveat emptor (buyer beware), but it’s become noli conari (don’t even try). In 2008, the ACCC received about 34,000 complaints.[32] In 2016, it was closer to 60,000.[33] More than 155,000 scams were reported in 2016, costing Australians $86 million a year.[34] These scams varied in how they were executed but were identical in who they targeted: the most disadvantaged and vulnerable people in our community.

The list of companies that have been reprimanded by the competition watchdog or the Federal Court over the past few years reads like the “who’s who” of the top end of town, including Jetstar, Virgin, Arnott’s, Optus, Harvey Norman franchisees, Kogan and Unilever.[35]

We’ve had Kimberly-Clark sell us flushable wipes that are about as flushable as a bathmat.[36] We’ve had Nurofen sell us a variety of different pain medications where the only difference was the colour of the box.[37] We’ve had Heinz market fruit and vegetable products to children with six times more sugar than your average apple.[38] We’ve had Dulux sell us cooling paint that doesn’t cool,[39] Uncle Toby’s sell us protein oats that don’t contain protein[40] and Woolworths sell us deep fryers with handles that only sometimes stay attached.[41] Consumer breaches can also harm competitors, as when Coles was found to have wrongly claimed that its bread was ‘Freshly Baked In-Store’: thereby harming smaller bakeries that really did bake their loaves on the premises.[42]

What went wrong?

So you might be asking yourself: what went wrong? Back in the 1960s and 1970s, Lionel Murphy warned us repeatedly of the dangers of market concentration. He warned us that anti-competitive conduct was rife. He warned us that suppliers, small businesses and start-ups were at risk. He warned us that anti-consumer conduct was widespread. And, to address these concerns, Murphy armed us with one of the most ambitious pieces of legislation in the world at the time: the Trade Practices Act of 1974.

Was Lionel Murphy’s Trade Practices Act a failure?

No. Even to this day the Competition and Consumer Act remains a powerful piece of legislation. It was not the law which led us to this place, it was the economics.   

At its core, the Competition and Consumer Act embodies economic concepts. As Murphy noted in 1973: “Legislation of this kind is concerned with economic considerations. There is a limit to the extent to which such considerations can be treated in legislation as legal concepts capable of being expressed with absolute precision”.[43]

But that didn’t stop him trying. The result is a very long act. Indeed, Allan Fels argues that Australia’s competition legislation is the longest such law in the world – perhaps a function of spelling out for judges the economic principles to be considered.[44]

There’s no denying that competition law embodies some complex economic concepts. For example:

• You get economies of scale from horizontal mergers, economies of scope from cross-market mergers, and network externalities from both.
• Market concentration can make predatory below-cost pricing and resale price maintenance easier to enforce. But all of this depends on the height of barriers to entry.
• Whether it’s a ‘monopolist’, ‘duopolist’ or ‘oligopolist’ depends on the elasticity of demand-side substitution, but whether it’s a ‘monopsonist’ depends on the elasticity of supply-side substitution.

Even among those who should know what all those concepts mean, there is plenty of disagreement about their implications.

This disagreement has significant repercussions. How we understand, interpret and think about each of these economic concepts can fundamentally change the purpose of Murphy’s legislation and the way in which it is applied. This, I argue, is what has happened in Australia. It is a one reason why competition has weakened and why inequality has worsened.

Differing schools of thought

So, how has economic thinking on competition changed in Australia?

Broadly speaking, there are three schools of thought when it comes to competition policy.

The first is what’s referred to as the Industrial Organisation School. If you think market concentration is bad and you’re not a fan of mergers between big companies, then this is probably the school for you.

According to this view, competition and the performance of markets are determined by the structure or organisation of an industry.[45] An industry with only a few competitors is assumed to be less competitive than an industry with lots of competitors. This School argues that concentrated markets make it easier for cartels to form, they make it easier for firms to block new entrants through practices such as predatory pricing and they make it easier for firms to use their bargaining power against consumers, suppliers, and workers, allowing them to hike prices, cut wages, degrade service and reduce quality while maintaining profits.[46]

The Industrial Organisation School, traditionally associated with researchers at Harvard in the decades from the 1930s to the 1960s, viewed market concentration and mergers between firms with great suspicion. If a merger resulted in a market share that was deemed to be too high, then that merger would be blocked.[47] If a merger resulted in what was seen to be a conflict of interest through vertical integration, such as a dominant manufacturer buying up retailers, then that merger would also be blocked, fearing it would give that firm an unfair advantage over the other retailers.[48]

The second school of thought is the Chicago School, which emerged in the 1970s, and is named after the school of economics based in the Windy City. If you think that the Industrial Organisation School is rubbish, that big firms are good because they can produce stuff more cheaply, can compete more effectively overseas and aren’t a threat anyway since the free market will punish them if they try anything dodgy, or will be toppled by new entrants, then this is the School for you.

Represented by US judges such as Richard Posner and Robert Bork and economists such as George Stigler, Aaron Director, Harold Demsetz and Milton Friedman,[49] the Chicago School reject the structuralist approach of the Industrial Organisation School. The views of the Chicago School are rooted in a deep faith in the efficiency of markets and recommend minimal government intervention.[50] If a firm tried to charge a higher price, it would be punished by the market. Competitors would quickly take its market share. If there were no competitors, then new ones would enter. Conversely, if a firm tried to charge a lower price to predatorily damage their competitors, they would suffer a loss which they could never recoup since, as soon as they tried to charge higher prices later, new firms would enter. Predatory pricing without a reasonable prospect of recoupment would be irrational, so would not take place.[51]

For the Chicago School, market concentration was more of a virtue than a vice. In this framework, market structures are shaped by the differing efficiencies of firms over time.[52] Accordingly, market concentration is not regarded as a sign of market power. It is rather the result of superior efficiencies. Large firms are more efficient and have greater economies of scale, meaning they can produce more with less. The fact that new entrants could only compete by obtaining similar scale was irrelevant. If the market delivered large firms then large firms must be the efficient size and did not, therefore, represent a barrier to entry. Industrial Organisation School tended to block mergers of firms that possessed only small market shares, and did so even if they led to provable efficiencies. The Chicago School, on the other hand, saw most mergers as being good.[53] 

Unsurprisingly, there has been a search for some middle ground between the Industrial Organisation School and the Chicago School views.[54] This came in the form of the Post-Chicago School, which emerged in the late-1980s and early-1990s.[55] The Post-Chicago School approach has tried to learn from both and tends to focus less on theory and more on application. This approach is characterised by a richer factual analysis of individual cases and the application of more complex rules based on strategic game theoretic models rather than reliance on more ideological frameworks.[56] The Post-Chicago School emphasises the importance of strategic behaviour of firms, noting that firms do not just respond passively to structural market conditions; they actively attempt to influence those conditions through strategic behaviour.[57]

So, what does all of this mean for Australia?

I don’t think I’m misrepresenting him by saying that Lionel Murphy was probably a student of the Industrial Organisation School. As some of his earlier quotes suggest, Murphy was fundamentally concerned about the structure of markets. He was deeply suspicious of concentrated markets and was much more comfortable with markets where there were lots of competitors. He was sceptical of the benefits from large mergers and was concerned by the risk posed by market concentration in facilitating anti-competitive and anti-consumer conduct. In 1973, he warned that:

Positions of economic dominance are susceptible to abuse; they interfere with the interplay of competitive forces which are the foundation of any market economy; they allow discriminatory action against small businesses, exploitation of consumers and feather-bedding of industries.[58]

But Murphy’s Trade Practices Act, and the economic concepts it embodied, were not immune to changes in economic thinking. While the Industrial Organisation School dominated thinking in competition policy at the time of the Trade Practices Act, the views of the Chicago School rose to prominence in the early-1980s: an era coinciding with the election of Ronald Reagan and Margaret Thatcher. As a former Federal Trade Commission chairman put it, the United States ‘went from being the most vigorous of countries in enforcement in the 1960s to one of the least aggressive in the 1980s’.[59]

The windy city blows into Australia

It can be difficult to identify with precision how much influence a particular school of thought has on any individual or institution. But the influence of the Chicago School on Australia can be observed directly when our judges, for example, reference Chicago School jurists and economists.

Australia’s courts, it must be said, have been much less influenced by the Chicago School than in the United States.[60] Nonetheless, the significant influence of the Chicago School on Australia’s courts has been documented by many thoughtful legal scholars, including Kathryn McMahon,[61] Stephen Corones,[62] Alex Bruce[63] and David Round.[64]

Vertical restraints

One area of Chicago School influence is in vertical restraints. For example, a manufacturer might limit what its distributors can do with its product, including the prices they can charge, through licensing or price restrictions.

The Industrial Organisation School sees such restraints as being problematic, because they allow firms to leverage power from one market to another. For example, a powerful manufacturer might impose its market power at the retail level, potentially killing off competition and spreading their influence.

The Chicago School, in contrast, sees any attempts to regulate vertical restraints as misconceived, arguing that such restraints can improve efficiency by allowing seamless supply chains from manufacturer to distributor, from distributor to retailer, and from retailer to consumer. These restraints are generally explicable on the basis of efficiencies (such as by preventing free-riding) and are therefore good for consumer welfare.

The US Supreme Court’s decision in Sylvania[65] adopted the Chicagoan view and approached vertical restraints from the perspective of the manufacturer. In the Australian case of Melway,[66] the High Court then adopted the view of the Supreme Court which, indirectly, meant adopting the views of the Chicago School. Melway published and distributed street directories through its own selective distribution system. (For the millennials in the room, a street directory is what you’d get if you printed out a city’s Google maps and bound them together in a book.) In this case, Melway refused to supply its street directories to a company called Auto Fashions after it discovered that Auto Fashions was distributing the street directories itself, competing with Melway’s own distribution channels. Consistent with American authorities, the majority found that there was no problem with Melway blocking supply to Auto Fashions. They concluded that limiting intra-brand competition, such as limiting the competition between Melway and Auto Fashions in distributing Melway’s street directories, could actually help rather than harm competition.

The High Court has considered economic efficiency arguments, critical to the Chicago School’s reasoning on market concentration, regarding misuse of market power provisions.[67] Before the 2017 ‘effects test’ amendments, these provisions prohibited a firm from taking advantage of (or using) its substantial market power for the purpose of damaging a competitor. The High Court has, however, held that a firm which undertakes some act which damages its competitor is not in breach of this provision if its act was for the primary purpose of improving efficiency (often dubbed the ‘legitimate business rationale’ defence).[68]

Predatory pricing

Another example arises in the case in predatory pricing, where a firm deliberately charges a price that is below-cost to push its competitors out of the market and scare off any new ones from coming in. The challenge for our courts is how you prove it.

The approach taken by the Industrial Organisation School is to first look at the market and determine whether a firm could make more profit by temporarily pricing low in order to drive rivals out of business. They saw it as quite conceivable that there might be markets where this was an attractive strategy for a large incumbent. The second part of the test was whether a firm was setting prices below its average variable costs. If both standards were met, then this was presented as evidence of predatory pricing.[69]

The Chicago School takes a different approach. The Chicago School sees predatory pricing as being fundamentally irrational.[70] If a firm wants to charge below cost, then so be it. That’s great news for consumers who get ultra-cheap goods and services. And even if it does manage to kill off its competitors (which the Chicago School thinks is unlikely since a firm cannot price below cost forever) as soon as it tries to increase prices in the future to recoup its losses, new firms will enter and prevent it from doing so.

The Post-Chicago School would say that this is all too simple. They would argue that this ignores the strategic ways in which firms try to shape markets in their own favour. A firm engaging in predatory pricing or over-investing in production capacity may, for example, send a warning shot to new entrants: “enter this market” they say “and we’ll instantly undercut your prices and ramp up production”. This, they argue, can have a chilling effect on competition and should therefore be outlawed.

Historically, the approach of Australia’s courts was more in-line with the Industrial Organisation approach. A typical case was the 1992 decision of Eastern Express[71], in which the majority of the High Court opted for an approach of assessing the firm’s costs and then determining whether they were pricing below it. Like the Industrial Organisation School, they were open to the prospect that there might be plenty of markets in which recoupment was possible.

But in the years that followed, the High Court’s approach shifted in favour of the Chicago School. Many in the Chicago School found it difficult to see how there would be markets where predatory pricing would be a profitable strategy. The ‘recoupment test’ involved asking whether or not the firm that was allegedly pricing below cost would be able to charge higher prices in the future, thus recouping its lost profits. For those who were faithful to the Chicago School, however, the answer was almost always “no” since the Chicago School tends to believe that barriers to entry are low such that new entrants can quickly emerge.[72]

This shift in thinking is particularly evident in the 2003 Boral Case, which involved the supply of concrete masonry products – not what you might regard as the easiest industry for a new competitor to break into.[73] The Boral Case involved a price war in the supply of such products in Melbourne. The war got so severe that the ACCC took Boral to court. It alleged that Boral was supplying concrete masonry products at below cost and was ramping up production with the purpose of driving its competitors out of the market.[74]

In the first instance judgement, Heerey J rejected precedent and adopted the recoupment test put forward by the Chicago School. Legal expert Kathryn McMahon called this “a deference to the self-regulating capabilities of the market” and a clear adoption of the Chicago School’s views.[75] On appeal, Finkelstein J discussed the recoupment standard that had been adopted by Heerey J and noted its direct origins to the Chicago School way of thinking.[76]

Finkelstein J recognised that the practical implications of adopting the standard may frustrate the objects of the provision. Kathryn McMahon argued that “recoupment should have been identified as a particularly Chicagoan approach that rejects cost standards as the sole determinant of predatory pricing conduct” suggesting there was a lack of transparency in the Court’s decision.[77] Garth Campbell, from Wentworth Chambers, noted that “the requirement for recoupment in [the US case of] Brooke Group implicitly recognised the Chicago School’s theories, as it did not consider the other less obvious motivations for predatory pricing recognised by the Post-Chicago School… This decision was referred to with approval by the Australian High Court in Boral”.[78]

Others have been more direct. McHugh J, in the High Court, has on many instances directly cited the works of Chicago School economists in his judgements. Citing Richard Posner, one of the leading voices of the Chicago School, McHugh J puts forward the Chicago School’s view of the duties of the dominant market player, saying that “even a firm with a substantial degree of market power has no general duty to help its competitors, whether by holding a price umbrella over their heads or by otherwise pulling its competitive punches”.[79]

When the Boral Case went to the High Court, McHugh J again cited Posner to support his preference for the recoupment standard over pricing or cost standards for predatory pricing. “In my view” he said “what is required is not a bright line rule about costs but a more sophisticated analysis of the firm, its conduct, the firm’s competitors, and the structure of the market not only at the time in which the firm has engaged in conduct allegedly in breach of the Act but also before and after that conduct”.[80]

The Chicago School’s view on recoupment has not been universally accepted. Although it has been highly influential in the US, it has been rejected by courts in both the UK and Europe.[81] Similarly, the Australian parliament swept away recoupment entirely, via a 2008 amendment (repealed in 2017) which stated that a firm could breach predatory pricing laws even if it was unable to recoup its losses from supplying at below cost.[82]

Barriers to entry

Another critical area of the Chicago School’s influence in Australian courts is regarding barriers to entry. The economic concept of barriers to entry is critical. It influences multiple provisions of the Act. If barriers to entry are perceived to be low, then mergers are more likely to be approved on the grounds that the risk of anti-competitive conduct in a more concentrated market structure is reduced by the prospect of new entry. Barriers and market contestability help courts decide whether a firm has substantial market power – and therefore can potentially misuse that power. Additionally, barriers to entry are relevant to determining whether horizontal and vertical agreements have anti-competitive effects.

The Chicago School tends to view barriers to entry as being low. Even in markets with substantial economies of scale, such as supermarkets where Coles and Woolworths own hundreds of stores that are vertically integrated from retail into wholesale, distribution and even manufacturing (in the case of private label products), the Chicago School views this as simply being the scale required to compete and therefore does not constitute a barrier to entry.

This is particularly the case for ‘strategic barriers to entry’, where firms erect their own barriers to strategically deter new entrants. These include predatory pricing policies, investment in excess capacity, and locking in long-term contracts – all tactics with the objective of scaring off potential competitors.[83] The Post-Chicago School, in particular, stresses the importance of these strategic barriers, barriers which are discounted by the Chicago School given its trust in the ability of markets to punish those who try it.[84]

In the Boral case, the High Court expressly considered this Post-Chicago School literature. But ultimately, it deferred to the approach of the Chicago School. The majority concluded that where structural barriers to entry are low, it is not legitimate for a court to base a finding of substantial market power simply upon incidents of abuse of power, or strategic entry-deterring tactics in that market. In short, they concluded that strategic barriers to entry, alone, were not enough.[85]

The great dissenter, Kirby J, disagreed. Eloquently as ever, he argued that “it is precisely in the context of a market where such structural barriers are not particularly high, that an incumbent corporation which has the capacity to do so, would have a greater incentive to invest in building up a predatory reputation in order to deter competitive conduct or entry”.[86] He went on to say that “the strengthening of the predatory reputation of [Boral] had a tendency to increase the concentration of the market and to chill the competitive conduct of rivals, including the entry of potential new competitors. Such conduct invariably harms consumers”.[87]

Legislation and the regulator

The influence of the Chicago School is not limited to our courts. A body of research similarly suggests that the Chicago School has been influential in Australia’s legislation, particularly the laws governing mergers and acquisitions.

Surveying Australian legislative history, Maxine Rich concludes that Chicago School thinking has played a significant role in shaping the merger laws, albeit less than in the United States.[88] Stephen Corones similarly concluded that “Australia's current merger law reflects Chicago School thinking according to which mergers should generally be allowed to the point of duopoly in the name of efficiency”.[89]

Australia’s merger laws are contained primarily in Section 50 of Lionel Murphy’s Trade Practices Act. Given Murphy was staunchly anti-Chicagoan in his thinking, it wasn’t until after the Whitlam dismissal that the Chicagoan view got its run. After the dismissal, the Fraser Government, under the ministerial responsibility of a young man in large glasses named John Howard, went about reforming Murphy’s Act. The Fraser Government was much more sympathetic to Chicago arguments, particularly around the need for Australian firms to achieve scale to compete internationally. Section 50 of the Act was their primary target.

Under Murphy’s Act, a merger would be opposed if it resulted in a ‘substantial lessening of competition’. For the Fraser Government, this threshold was considered to be too onerous. So as to encourage more mergers and acquisitions, the Fraser Government changed the Act. Now, a merger would only be opposed if it resulted in or substantially strengthened a ‘position to control or dominate a market’.[90]

The Merger Guidelines at the time of the then Trade Practices Commission (now the ACCC) also adopted the Chicago School’s approach. Rich notes that “under its Merger Guidelines, the TPC has adopted a general formulation of "market" which applies both to product and geographic market definition. It largely reflects the price-based analysis advocated by Chicago School proponent, Judge Posner”.[91]

The 1999 version of the Merger Guidelines similarly had a Chicagoan feel. The first substantive paragraph of the guidelines referred to the important role of mergers in allowing “firms to achieve efficiencies such as economies of scale, synergies and risk spreading”.[92]

The ACCC’s most recent guidelines, however, have deviated significantly. The 2008 guidelines outline what the ACCC considers to be the primary change to the guidelines since the previous version, noting that the new guidelines have “an increased emphasis on the competitive theories of harm and the effect of constraints, which facilitates a more integrated analysis”.[93] The current guidelines acknowledge that efficiencies may constitute a public benefit, but emphasise that they need to be sure that this “outweighs the public detriment from the substantial lessening of competition”.

The ACCC’s attitudes on mergers has shifted in other ways, too. ACCC Chairman Rod Sims recently made a number of observations in a speech to the Law Council about mergers, acknowledging that the ACCC has had a historically poor track record of opposing some mergers and the need to change approach. He noted the ACCC’s increased use of Section 155 notices to remedy this – mandatory information gathering powers to command information, documents and oral evidence in merger assessments.[94] In this sense, the shift in the ACCC’s approach is perhaps less about their economic assessment than about their ability to gather sufficient evidence to be ready for litigation against well-resourced opponents.

Another sign of the evolution of our competition watchdog is a recent ACCC report recommending a number of actions to help reduce electricity prices. These include a cap on mergers which prevents any merger that resulted in a market share of 20 per cent or more in electricity generation. This suggests that the ACCC sees a significant link between market concentration, market power and weakening competition.[95]

Rich similarly notes that Australia’s legislative approach to mergers and acquisitions has shifted.[96] Following the report of the Cooney Committee, the Keating Government in 1993 restored Murphy’s original ‘substantial lessening of competition’ test. For some sectors, the change came too late. In 2002, Alan Fels, then Chairman of the ACCC, criticised the Fraser Government’s dominance test for failing “to prevent a significant category of mergers that were likely to substantially lessen competition” noting “criticisms that the dominance test had failed to deliver the gains in efficiency and international competitiveness that would supposedly be achieved by allowing more mergers”.[97]

Fels noted a series of mergers that went through under the dominance test which would not have been allowed under Murphy’s ‘substantial lessening of competition’ test. These included the mergers between Coles and Myer, News Ltd and Herald & Weekly Times and Ansett Airlines and East West Airlines. Each of these industries now rank as some of Australia’s most concentrated markets. The Fraser Government must take some of the blame for the lack of diversity in department stores, print media and airlines.[98] (As an aside, it didn’t help that until 1992, the maximum penalty for anti-competitive conduct was a mere $250,000.[99])

The consequences of complacency

These are just a few examples of where Australia’s thinking on competition has lurched towards the Chicago School. The fundamental problem, however, is that a growing body of research and many years of empirical evidence are casting doubt over the views of the Chicago School. To put it bluntly, it appears increasingly to be the case that Lionel Murphy’s concerns from almost 50 years ago were correct.

The strongest evidence of this is that the Chicago School is, itself, stepping back from its previous positions. In 2017, the Chicago School held a summit on the threat that monopolies posed to the American economy. Such an event would have been unheard of in the last century. The Economist quipped that “convening a conference supporting [competition] concerns in the Windy City was like holding a symposium on sobriety in New Orleans”. “What changed?” asks The Economist, “The facts. The pendulum has swung heavily in favour of incumbent businesses”.[100]

I have already referred to the evidence that many Australian markets are highly concentrated. There are two main reasons for this. The first reason is that we are also seeing a steady decline in the rate at which new businesses are being created: falling from an average of 16 per cent before 2010 to 13 per cent since then.[101] The second reason is that the number of mergers and acquisitions has increased significantly. From 1992 to 2017 the number of mergers and acquisitions in Australia increased from 394 to 1,960 per year, an increase of almost five-fold.[102]

Does this mean competition is lower? If you want to know whether firms are worried about competition, don’t just listen to what they say. Listen to what they don’t say. A study by AXA trawled through thousands of annual reports by US companies. They found that the use of the word ‘competition’ in those reports has declined by 75 per cent since the year 2000.[103]

Another way of assessing competition is to look at the mark-ups being charged by firms. Jan De Loecker from Princeton and Jan Eeckhout from University College London extracted data from the financial statements of over 70,000 firms in 134 countries and analysed and the evolution of markups over the last four decades. In Australia, they found that the average prices charged by large listed firms were close to the marginal cost of production in 1980 and hovered around that point until the late 1990s. By the early 2000s, the average prices charged by listed firms were 40 per cent above the marginal cost of production. By 2010, they were 50 per cent above marginal cost. By 2016, they were 60 per cent above marginal cost.[104]

There is growing evidence that market concentration may be supressing investment more generally. Germán Gutiérrez and Thomas Philippon from NYU, for example, find that industries with more concentration and more common ownership invest less, even after controlling for current market conditions. They conclude that 80 percent of the decline in investment since 2000 can be explained by less competitive markets and increased ownership of stock by institutional investors.[105] As Paul Krugman[106] and Larry Summers point out, if market power was increasing, we would expect to see high corporate profits but low rates of investment, despite relatively low interest rates and high stock prices. “This” Larry Summers points out “is exactly what we have seen in recent years!”.[107]

The other critical challenge facing many economies is weak wage growth. Could weak competition be part of this story? Wages are fundamentally driven by the competition between firms for workers. Less competition means lower wages. This can happen directly, as was the case in 2010 when Apple, Google, Intel, Intuit and Pixar were taken to court by the Department of Justice for secretly agreeing not to hire each other’s workers to avoid bidding up wages.[108] It was a great arrangement for those companies, but not so good for their workers who, despite years of education and skills that (should have) been in high demand, were struggling to get promotions.

At the macro level, David Autor and colleagues analysed panel data from the US Economic Census from 1982 to 2016. They found that industries in which market concentration had risen the most also saw the largest declines in the labour share.[109] The issue has even attracted the attention of the world’s central bankers, who considered this very issue at their annual gathering in Jackson Hole, Wyoming. “A few years ago, questions of monopoly power were studied by specialists in a very technical way, without linking them to the broader issues that animate economic policy,” said Jason Furman, an economist at Harvard’s and former chief economist in Obama White House. “In the last few years, there’s been an explosion of research that breaks down those walls.”[110]

The classic Chicago School response would be that none of this was a problem given the increased efficiencies that flow from having larger businesses. Yet the evidence points in the opposite direction.

A British study by Stephen Nickell found that a 25 per cent increase in market concentration leads to a one per cent fall in productivity, rather than any increase.[111] Bruce Blonigen at the University of Oregon and Justin Pierce at the US Federal Reserve used detailed firm-level data to study the impact of mergers and acquisitions on productivity and market power across all US manufacturing industries. They found that while mergers are associated with increases in average mark-ups, they found little evidence for effects in boosting productivity. They similarly found no other efficiency gains often cited as possible from mergers, including reallocation of activity across plants or scale efficiencies in non-productive units of the firm.[112]

The other Chicago School argument frequently put forward to justify concentrated markets is that barriers to entry are low and easily surmountable. The Chicago School’s central contention is that if a firm can exploit monopoly profits then more firms will quickly enter that market. We can easily test this in Australia by seeing whether the industries which have enjoyed the largest increase in profits have also seen an increase in new entrants. Across 15 industries, one can look at the correlation between profits in 2008-09 and the percentage change in the number of firms over the next 8 years. The results are mixed. In mining, for example, profits[113] increased 42 per cent from 2008-09 to 2016-17. Yet, the number of firms operating in the industry remained unchanged. The industry for professional services, many of which are subject to professional licensing and other restrictions, saw profits increase 62 per cent while the number of firms increased by only 9 per cent. There are similar results for the industry for transport, postal and warehousing. Looking across all industries, profits increased 13 per cent over this period while the number of businesses increased by less than half that: only 5 per cent. In short, the correlation between profits and new entry is a modest 0.29.

The Post-Chicago literature has emphasised the prevalence of strategic barriers to entry and the chilling effect these can have on competition and new entry. Duke University’s Sandeep Vaheesan details compelling evidence that leading US firms in the airline, coffee, oil, shipping, sugar, telecommunications, and tobacco industries, among others, have used predatory pricing to preserve or enhance their market power.[114] Lina Khan, legal fellow at the US Federal Trade Commission, makes similar warnings about Amazon. “Although Amazon has clocked staggering growth” warns Khan, “it generates meagre profits, choosing to price below-cost and expand widely instead”.[115] Khan notes that “In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space”.[116]

Traditional barriers to entry are just as important. If you want to create a search engine that can compete with Google, you don’t just need a better algorithm, you also need a set of servers large enough to store some version of the internet. There are only a handful of companies in the world that have the resources to do this. We can see it in advertising, too. While total spending on online advertising has risen in recent years, more than 90 percent of the growth in 2017 went to Google and Facebook. The number of independent advertising technology firms has declined, and venture capital investors are increasingly reluctant to back advertising technology start-ups.[117]

I should note at this point that there remains a lively debate about the extent to which technology firms with large market shares today can be confident about their futures. For example, Robert Akerlof, Richard Holden and Luis Rayo argue that in the presence of network externalities, the position of large incumbents can be more fragile than it might initially appear.[118] They point to the historical example of Internet Explorer displacing Netscape in the 1990s ‘browser wars’, and argue that the potential entry of a rival has led dominant firms such as Uber, Amazon Web Services and Google to keep prices low. As a policymaker, my concern is that if this more sanguine perspective turns out to be wrong, we may end up entrenching a small number of powerful monopolists. As history reminds us, there is also a risk that these firms parlay their market share into political influence, further tipping the scales against potential rivals.[119]

If there’s one thing that all these challenges feed in to – whether it is weak wages, a declining labour share, reduced employment, increased mark-ups or less competition for workers – it is inequality. While competition has declined in Australia, inequality has risen. Over the period 1975–2016, real earnings in Australia rose by 24 per cent at the 10th percentile, 46 per cent at the median and 74 per cent at the 90th percentile.[120] Since 2012, real wage growth for the typical Australian worker has been close to zero.

A growing body of evidence suggests that the rise in inequality and the fall in competition are not merely coincidental. A 2017 study from the OECD analysed data from eight economies – Canada, France, Germany, Korea, Japan, Spain, the United Kingdom and the United States. They found that, on average, market power increases the wealth of the richest 10 per cent by between 12 and 21 per cent for a range of reasonable assumptions about savings behaviour, while it reduces the income of the poorest 20 per cent by between 14 and 19 per cent.[121] Similar work, studying the United States over time, finds that corporate equity has become even more skewed relative to consumption. This has exacerbated the extent to which increased mark-ups raise inequality.[122]

Research by John Creedy and Robert Dixon, using Australian data, found that monopoly power has a larger impact on lower income groups and increases inequality.[123] William Comanor and Robert Smiley reached a similar conclusion in the United States, finding that possibly one-half of existing wealth holdings by the richest 2.4 per cent of American households was due to monopoly gains.[124]

Surveying the literature in both developed and developing nations, Begazo Gomez and Sara Nyman from the World Bank similarly concluded that a lack of competition tends to hurt the poorest households the most.[125] William Comanor and Robert Smiley found that past and current monopoly have had a major impact on the current degree of inequality in the United States. They found that possibly one-half of existing wealth holdings by the richest 2.4 per cent of American households was due entirely to capitalised monopoly gains.[126]

In Australia, Paul Frijters and Gigi Foster analyse how the richest 200 made their money, and conclude that just five had become rich primarily by inventing a new product or service. Far more commonly, the most affluent operated in industries with limited competition or with significant reliance on government decisions.[127] One analysis from the 1990s looked at the industries in which the rich-listers made their fortunes. It concluded that about one-quarter grew wealthy in an industry that was uncompetitive at the time.[128] Since then, the problem may have become worse. As John Stensholt noted, ‘There is a dearth of new, young and entrepreneurial people on the latest BRW rich list.’[129]

Conclusion

Australia has a competition problem: there is not enough of it. Our industries are concentrated. Anti-competitive conduct is rife. Our consumers are treated poorly. Our markets show signs of weak competition. There has been a massive increase in mark-ups among large listed firms over the past two decades.

Much of the popular analysis of these trends focuses on technological changes. Commentators rightly debate the potential for the internet and mobile computing to provide the FAANGs with a far greater degree of market dominance than their old economy forebears.

But heavily concentrated markets are also a reminder of the need to ensure that the correct philosophy undergirds Australian competition policy. Although it was much less influential in Australia than in the United States, the Chicago School’s views on competition have influenced our laws and policies. The Chicago School viewed market concentration as a virtue more than a vice. Barriers to entry are surmountable, market power tends to be temporary, most mergers are good, vertical restraints and predatory pricing are either benign or efficient.

The growing body of empirical evidence shows that these views were misplaced. The Chicago School is, itself, beginning to backtrack. A blind faith in the absolute ability of markets to self-regulate and deliver competitive outcomes has not stood the test of time. 

When it comes to competition policy, Lionel Murphy has proven himself to be, once again, almost eerily prophetic. The warnings he gave back when he was writing the Trade Practices Act and when he was sitting on the bench in the High Court ring as true today as they did back then. Murphy saw market concentration as a problem. He saw strong competition laws as necessary to protect the competitive process, protect consumers and support the creation of new businesses. He warned that there was more to competition than just low prices.  

There is a strong progressive case for repositioning how we think about competition. Ensuring that we do not adopt an overly permissive approach to mergers. Taking a more circumspect approach to claims of efficiency when considering anti-competitive conduct. Giving the regulator the investigatory powers it needs. Making sure that penalties are not treated as just a cost of doing business. Considering the impact of anti-competitive conduct on innovation. Recognising that unchecked market power can harm workers as well as consumers.

Inequality is not simply a function of taxation and government programs, important as they are. Focusing more on the competitive process, the structure of markets and the incentives those structures create for firms will play an important role in reducing inequality. The functioning of our markets, the adequacy of our regulators and institutions, the structure of firms and the interactions between them shape Australian egalitarianism.

I have spent much of my working life studying inequality and what practical things we can do to reduce it. I am convinced that competition policy is a critical part of this story. Many of those opposite me in our Parliament haven’t always agreed with me. Many don’t believe that we have a problem with inequality, let alone a problem with competition in Australia. But I am confident that as the body of evidence continues to grow, those voices will continue to grow silent. And for those who remain unconvinced and think I’m talking nonsense, well, that’s okay too. After all, I am entitled to be an agitator.

ENDS

Authorised by Noah Carroll ALP Canberra

* My thanks to Caron Beaton-Wells, Craig Emerson, Allan Fels, Richard Holden, Ray Steinwall, and others for feedback on earlier drafts. Naturally, these experts should not be assumed to agree with the entirety of the talk. Adam Triggs provided invaluable drafting assistance.

[1] Chesterman, J. and Villafor, G. (2000). Mr Neal’s Invasion: Behind an Indigenous Rights Case. Australian Journal of Law and Society, Vol. 15, 2000-2001: 90-100. Availability: http://classic.austlii.edu.au/au/journals/AUJlLawSoc/2000/1.pdf

[2] Chesterman, J. and Villafor, G. (2000). Mr Neal’s Invasion: Behind an Indigenous Rights Case. Australian Journal of Law and Society, Vol. 15, 2000-2001: 90-100. Availability: http://classic.austlii.edu.au/au/journals/AUJlLawSoc/2000/1.pdf

[3] For a discussion, see Hocking, J. (2000). Lionel Murphy: A political biography. Cambridge University Press. London, 30 August.

[4] Clark, M. (1986). Lionel Murphy:  The Rule of Law. Edited by Jean and Richard Ely. Akron press. October 1986.

[5] Neal v The Queen, (1982) 149 CLR 305 at 316-17.

[6] Neal v The Queen, (1982) 149 CLR 305 at 316-17.

[7] Neal v The Queen, (1982) 149 CLR 305 at 316-17.

[8] Murphy, L. (1979). The Responsibility of Judges. Opening address for the First national Conference of Labor Lawyers, 29 June 1979, in G Evans (ed) Law Politics and the Labor Movement, Legal Service Bulletin, 1980 Clayton Victoria.

[9] Galligan, B. (2012). Murphy, Lionel Keith (1922–1986). Australian Dictionary of Biography, Volume 18, (MUP), 2012. http://adb.anu.edu.au/biography/murphy-lionel-keith-15823.

[10] Galligan, B. (2012). Murphy, Lionel Keith (1922–1986). Australian Dictionary of Biography, Volume 18, (MUP), 2012. http://adb.anu.edu.au/biography/murphy-lionel-keith-15823.

[11] Hocking, J. (2000). Lionel Murphy: A political biography. Cambridge University Press. London, 30 August.

[12] Now the Competition and Consumer Act (Cth) 2010.

[13] Canberra Times (1971). Senator assails new trade practices Bill. Parliament. Canberra Times, 10 November, page 14. https://trove.nla.gov.au/newspaper/article/110686818?searchTerm=murphy%20competition%20%20%20%20%20%20%20%20%20%20%20%20&searchLimits=exactPhrase|||anyWords|||notWords|||requestHandler|||dateFrom=1971-01-01|||dateTo=1975-12-10|||l-advtitle=11|||sortby

[14] Murphy, L. (1965). Hansard. Trade Practices Bill 1965. Second Reading. 8 December. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=HANSARD80;id=hansard80%2Fhansards80%2F1965-12-08%2F0104;query=Id%3A%22hansard80%2Fhansards80%2F1965-12-08%2F0088%22.

[15] The Economist (2016). Too much of a good thing: Business in America. 26 March. https://www.economist.com/briefing/2016/03/26/too-much-of-a-good-thing

[16] Leigh A. and Triggs A. (2016). Markets, monopolies and moguls: The relationship between inequality and competition policy. Australian Economic Review, Volume 49, No. 4, pp.389-412. https://adamtriggs.files.wordpress.com/2017/01/aere12185.pdf.

[17] Galloway, S. (2017). The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google. Random House. London. 3 October. https://www.amazon.com/Four-Hidden-Amazon-Facebook-Google/dp/0525501223

[18] Gow, I.D. and Kells, S. (2018). The Big Four: The Curious Past and Perilous Future of the Global Accounting Monopoly. Berrett-Koehler Publishers. 28 August. https://www.amazon.com/Big-Four-Perilous-Accounting-Monopoly/dp/1523098015/ref=sr_1_1?s=books&ie=UTF8&qid=1538706860&sr=1-1&keywords=The+Big+Four

[19] Leigh A. and Triggs A. (2016). Markets, monopolies and moguls: The relationship between inequality and competition policy. Australian Economic Review, Volume 49, No. 4, pp.389-412. https://adamtriggs.files.wordpress.com/2017/01/aere12185.pdf.

[20] World Economic Forum (2017). Global competitiveness index 2017-2018: Extent of Market Dominance. http://reports.weforum.org/global-competitiveness-index-2017-2018/competitiveness-rankings/#series=EOSQ105

[21] World Bank (2017). Databank: Global financial development: Bank concentration. Washington, D.C. http://databank.worldbank.org/data/reports.aspx?source=global-financial-development&preview=on

[22] Minifie, J. (2017). Competition in Australia: Too little of a good thing? Grattan Institute. Melbourne. 3 December. https://grattan.edu.au/report/competition-in-the-australian-economy/

[23] Murphy, L. (1965). Hansard. Trade Practices Bill 1965. Second Reading. 8 December. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=HANSARD80;id=hansard80%2Fhansards80%2F1965-12-08%2F0104;query=Id%3A%22hansard80%2Fhansards80%2F1965-12-08%2F0088%22.

[24] Murphy, L. (1965). Hansard. Trade Practices Bill 1965. Second Reading. 8 December. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=HANSARD80;id=hansard80%2Fhansards80%2F1965-12-08%2F0104;query=Id%3A%22hansard80%2Fhansards80%2F1965-12-08%2F0088%22.

[25] See Strom, S. (2015). Big Companies Pay Later, Squeezing Their Suppliers. New York Times. April 6. https://www.nytimes.com/2015/04/07/business/big-companies-pay-later-squeezing-their-suppliers.html. See Sprague, J. (2016). BHP Billiton accused of being unfair as it widens tougher payment terms across the Pilbara. Australian Financial Review. 10 August. https://www.afr.com/business/mining/bhp-billiton-accused-of-being-unfair-as-it-widens-tougher-payment-terms-across-the-pilbara-20160810-gqpj50. See Koehn, E. (2017). Woolworths to follow Coles with 14-day payment terms as supermarkets chase good relationships with suppliers. Smart Company. 13 April. https://www.smartcompany.com.au/finance/cashflow/woolworths-to-follow-coles-with-14-day-payment-terms-as-supermarkets-chase-good-relationships-with-suppliers/

[26] Dun and Bradstreet (2014). Trade Payments Analysis: Payments at pre-GFC levels. http://dnb.com.au/article-tpa-payment-times-return-to-pre-gfc-levels.html#.WMJGTfmGNPY See also Australian Small Business and Family Enterprise Ombudsman, 2017, Payment Times and Practices Inquiry - Final Report, ASBFEO, Canberra.

[27] See Long, W. and French, R. (2017). Murray Goulburn, corporate regulator ASIC reach settlement over continuous disclosure breach. ABC News. 16 November. http://www.abc.net.au/news/rural/2017-11-16/murray-goulburn-settles-with-asic-over-disclosure-breach/9156484.

[28] Leigh A. and Triggs A. (2016). Markets, monopolies and moguls: The relationship between inequality and competition policy. Australian Economic Review, Volume 49, No. 4, pp.389-412. https://adamtriggs.files.wordpress.com/2017/01/aere12185.pdf.

[29] Sims, R. (2018). Companies behaving badly? Press Release. Australian Competition and Consumer Commission. Canberra, 13 July. https://www.accc.gov.au/media-release/companies-behaving-badly.

[30] The Economist (2018). American tech giants are making life tough for startups. The Economist. London. 2 July. https://www.economist.com/business/2018/06/02/american-tech-giants-are-making-life-tough-for-startups.

[31] Parliamentary Debates (Hansard) Senate, 27 September 1973, 1013; 24 October 1973; 1414.

[32] Australian Competition and Consumer Commission (2007). Annual Report: 2006-07. Canberra. September. https://www.accc.gov.au/system/files/ACCC%20and%20AER%20Annual%20report%202006-07.pdf

[33] Australian Competition and Consumer Commission (2017). Annual Report: 2016-17. Canberra. September. https://www.accc.gov.au/system/files/ACCC%20and%20AER%20Annual%20Report%202016-17_0.pdf

[34] Australian Competition and Consumer Commission (2017). Annual Report: 2016-17. Canberra. September. https://www.accc.gov.au/system/files/ACCC%20and%20AER%20Annual%20Report%202016-17_0.pdf

[35] Australian Competition and Consumer Commission (2018). Media releases. Canberra. https://www.accc.gov.au/media/media-releases.

[36] Australian Competition and Consumer Commission (2018). Pental to pay $700,000 in penalties for ‘flushable’ wipes claims. Media release. Canberra. 12 April. https://www.accc.gov.au/media-release/pental-to-pay-700000-in-penalties-for-%E2%80%98flushable%E2%80%99-wipes-claims.

[37] Australian Competition and Consumer Commission (2018). Empowering consumers against companies. Media release. Canberra. 31 July. https://www.accc.gov.au/media-release/empowering-consumers-against-companies.

[38] Australian Competition and Consumer Commission (2018). Empowering consumers against companies. Media release. Canberra. 31 July. https://www.accc.gov.au/media-release/empowering-consumers-against-companies.

[39] Australian Competition and Consumer Commission (2016). Dulux to pay $400,000 for misleading cooling paint claims. Media release. Canberra. 3 November. https://www.accc.gov.au/media-release/dulux-to-pay-400000-for-misleading-cooling-paint-claims.

[40] Australian Competition and Consumer Commission (2015). Uncle Tobys (Cereal Partners Australia) pays $32,400 in penalties for alleged false or misleading representations about Uncle Tobys oats. Media release. Canberra. 26 November. https://www.accc.gov.au/media-release/uncle-tobys-cereal-partners-australia-pays-32400-in-penalties-for-alleged-false-or-misleading-representations-about-uncle-tobys-oats

[41] Australian Competition and Consumer Commission (2016). Woolworths misled consumers over product safety hazards – Ordered to pay over $3 million in penalties. Media release. Canberra. 5 February. https://www.accc.gov.au/media-release/woolworths-misled-consumers-over-product-safety-hazards-%E2%80%93-ordered-to-pay-over-3-million-in-penalties.

[42] Australian Competition and Consumer Commission (2015). Coles to pay $2.5m for misleading "Baked Today" and "Freshly Baked In-Store" bread promotion. Media release. Canberra. 10 April

[43] Murphy, L. (1965). Hansard. Trade Practices Bill 1965. Second Reading. 8 December. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=HANSARD80;id=hansard80%2Fhansards80%2F1965-12-08%2F0104;query=Id%3A%22hansard80%2Fhansards80%2F1965-12-08%2F0088%22.

[44] Allan Fels, ‘The Competition Law’, Speech Delivered at Melbourne University Law School, 19 May 2014. Fels contrasts Australia’s legislation with the US Sherman Act, which is a couple of sentences, and the European Treaty, which is less than a page.

[45] See for example Church, Jeffrey R., and Roger Ware. 2000. Industrial organization: a strategic approach. Boston: Irwin McGraw Hill.

[46] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. p.20.

[47] Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[48] Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[49] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. P.26.

[50] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. P.26.

[51] See Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[52] Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[53] For example, the Chicago School opposed horizontal mergers that were large enough to create monopolies directly: see Posner, R.A., 1978. The Chicago School of Antitrust Analysis. University of Pennsylvania Law Review, vol. 127, pp.925-948.

[54] European competition law has its own distinct intellectual origins, including the Ordoliberal School, which emphasises the importance of checks on monopolies as a means of ensuring that powerful economic forces do not adversely affect the health of the democracy.

[55] See Pitofsky, R. (Ed.). (2008). How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on US Antitrust. Oxford University Press.

[56] McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171. See also

Eastman Kodak Co v Image Technical Services Inc, [1992] USSC 73; 504 US 451 (1992); United States v Microsoft Corporation, [2001] USCADC 115; 253 F 3d 34 (DC Cir, 2001). Cf Bolton, Brodley and Riordan, above n 168; but see Trinko [2004] USSC 4; 540 US 398 (2004).

[57] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. Pp. 27-28.

[58] Murphy, L. (1965). Hansard. Trade Practices Bill 1965. Second Reading. 8 December. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=HANSARD80;id=hansard80%2Fhansards80%2F1965-12-08%2F0104;query=Id%3A%22hansard80%2Fhansards80%2F1965-12-08%2F0088%22.

[59] Robert Pitofsky, quoted in Stephen Labaton, ‘Scholarly Regulator Guides Antitrust Law Into New Age’, New York Times, 11 December 2000.

[60] The High Court continues to approach competition law issues using the structure-conduct-performance approach that had its origins in the Industrial Organisation School, dating back to the Trade Practices Tribunal’s landmark decision in the QCMA case. The Dawson Committee in the early 2000’s similarly rejected the idea of including an economic efficiency test which, consistent with the Chicagoan approach, would allow more mergers to be approved. See

[61] See McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171.

[62] See Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney.

[63] See Bruce, A. (2013). Australian Competition Law. LexisNexis Butterworths. 2nd edition. 2013.

[64] See Round, D. K. (1994). The Australian Trade Practices Act 1974: proscriptions and prescriptions for a more competitive economy. Kluwer Academic Publishers. Boston.

[65] Continental TV Inc v GTE Sylvania Inc 433 US 36 (1977) at 55-56.

[66] Melway Publishing Pty Ltd v Robert Hicks Pty Ltd t/as Auto Fashions Australia. [2001] HCA 13; (2001) 205 CLR 1; (2001) 178 ALR 253; [2001] ATPR 41-805; (2001) 75 ALJR 600; (2001) 50 IPR 257; (2001) 22 Leg Rep 2

[67] Referring to Section 46 of the Competition and Consumer Act (Cth) 2010.

[68] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. P.39.

[69] Areeda, P. and Turner, D.F., 1975. Predatory Pricing and Related Practices under Section 2 of the Sherman Act. Harvard Law Review, vol. 88, no. 4, pp.697-733.

[70] See for example Easterbrook, Frank H. "Predatory strategies and counterstrategies." University of Chicago Law Review 48, no. 2 (1981): 263-337. Note however that the Chicago School is not monolithic on this point. For example, Richard Posner argues that predatory pricing can exist, but the test should be whether an incumbent was pricing below marginal cost with intent to harm a rival: Posner, R.A., 2009. Antitrust Law. University of Chicago Press, Chicago, p.216.

[71] Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43

[72] For a discussion on the recoupment cost, see Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[73] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; 215 CLR 374; 195 ALR 609; 77 ALJR 623 (7 February 2003). http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2003/5.html.

[74] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; 215 CLR 374; 195 ALR 609; 77 ALJR 623 (7 February 2003). http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2003/5.html.

[75] McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171.

[76] Boral Federal Court Appeal [2001] FCA 30, per McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171.

[77] McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171.

[78] Campbell, G. (2009). Quo Vadis? Towards an effective predatory pricing provision. (2009) 17 TPLJ 82.

[79] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] 195 ALR 609; 665.

See also Quo, S. (2012). Interpretation and application of the purpose test in s. 46 of the Competition and Consumer Act 2010—Part 2, Competition and Consumer Law Journal, 19, 2012, pp. 215–230 at pp. 221–222.

[80] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] 195 ALR 609; 462.

[81] Finkelstein J recognised this in Boral Federal Court Appeal [2001] FCA 30; (2001) 106 FCR 328, 397, per McMahon, K. (2006). Competition Law, Adjudication and the High Court. Melbourne University Law Review. 25; (2006); 30(3); 782. http://classic.austlii.edu.au/au/journals/MelbULawRw/2006/25.html#fn171.

[82] This provision was originally inserted as the Trade Practices Act 1974 (Cth), s46(1AAA).

[83] On the use of long-term contracts as barriers to entry, see Aghion, P. and Bolton, P., 1987. Contracts as a Barrier to Entry. American Economic Review, vol 77, no. 3, pp.388-401.

[84] See Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. Pp. 114 to 117.

[85] See Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. Pp. 114 to 117.

[86] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 492[361]

[87] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 492[361]

[88] Rich, M. (1994). Sons of Uncle Sam: have they grown up in his image? A comparative analysis of the merger laws and policies of Australia and the European Union in the context of us antitrust theory. UNSW Law Journal. 1994. pp.109-155. http://www5.austlii.edu.au/au/journals/UNSWLawJl/1994/5.pdf

[89] Corones, S.G. (2007). Competition law in Australia. Lawbook Co. Fourth Edition. Sydney. Pp. 114.

[90] See Fels, A. (2002). The Change from a Dominance to a Substantial Lessening of Competition Test in Australia’s Merger Law. 2002 Fordham Corporate Law Institute Conference. Roundtable on Substantive Standards for Mergers and the Role of Efficiencies. 31 October 2002. https://www.accc.gov.au/system/files/The%20Change%20from%20a%20Dominance%20to%20a%20Substantial%20Lessening%20of%20Competition%20Test%20in%20Australia.pdf

[91] Rich, M. (1994). Sons of Uncle Sam: have they grown up in his image? A comparative analysis of the merger laws and policies of Australia and the European Union in the context of us antitrust theory. UNSW Law Journal. 1994. pp.109-155. http://www5.austlii.edu.au/au/journals/UNSWLawJl/1994/5.pdf

[92] Australian Competition and Consumer Commission (1999). Merger guidelines. ACCC. Canberra. https://www.accc.gov.au/system/files/Merger%20guidelines%201999.pdf

[93] Australian Competition and Consumer Commission (2008). Merger guidelines. ACCC. Canberra. https://www.accc.gov.au/system/files/Merger%20guidelines%20-%20Final.PDF

[94] Sims, R. (2018). Address to the Law Council of Australia Annual General Meeting. Speech. Law Council of Australia - Annual General Meeting. 3 August. https://www.accc.gov.au/speech/address-to-the-law-council-of-australia-annual-general-meeting.

[95] Australian Competition and Consumer Commission (2018). Restoring electricity affordability and Australia’s competitive advantage. June 2018. Canberra. https://www.accc.gov.au/system/files/Retail%20Electricity%20Pricing%20Inquiry%E2%80%94Final%20Report%20June%202018_0.pdf

[96] Rich, M. (1994). Sons of Uncle Sam: have they grown up in his image? A comparative analysis of the merger laws and policies of Australia and the European Union in the context of us antitrust theory. UNSW Law Journal. 1994. pp.109-155. http://www5.austlii.edu.au/au/journals/UNSWLawJl/1994/5.pdf

[97] Fels, A. (2002). The Change from a Dominance to a Substantial Lessening of Competition Test in Australia’s Merger Law. 2002 Fordham Corporate Law Institute Conference. Roundtable on Substantive Standards for Mergers and the Role of Efficiencies. 31 October 2002. P.8. https://www.accc.gov.au/system/files/The%20Change%20from%20a%20Dominance%20to%20a%20Substantial%20Lessening%20of%20Competition%20Test%20in%20Australia.pdf 

[98] Fels, A. (2002). The Change from a Dominance to a Substantial Lessening of Competition Test in Australia’s Merger Law. 2002 Fordham Corporate Law Institute Conference. Roundtable on Substantive Standards for Mergers and the Role of Efficiencies. 31 October 2002. https://www.accc.gov.au/system/files/The%20Change%20from%20a%20Dominance%20to%20a%20Substantial%20Lessening%20of%20Competition%20Test%20in%20Australia.pdf

[99] In 1992, the Keating Government increased the maximum level of penalties under the Trade Practices Act from $250,000 to $10 million.

[100] The Economist (2017). The University of Chicago worries about a lack of competition. The Economist. 12 April. London. https://www.economist.com/business/2017/04/12/the-university-of-chicago-worries-about-a-lack-of-competition.

[101] Australian Bureau of Statistics (2018). Counts of Australian Businesses, including Entries and Exits, Jun 2013 to Jun 2017. Category 81 65.0. 20 February. http://www.abs.gov.au/ausstats/[email protected]/mf/8165.0.

[102] Institute for Mergers, Acquisitions and Alliances 2017, ‘M&A statistics – Number and value and largest M&A transactions by region’.

[103] Per The Economist. (2017). What annual reports say, or do not, about competition. The Economist. 16 November. London. https://www.economist.com/finance-and-economics/2017/11/16/what-annual-reports-say-or-do-not-about-competition.

[104] De Loecker, J. and Eeckhout, J. (2018). Global market power. NBER Working Paper Series. WP 24768. NBER.

[105] Gutiérrez, G. and Philippon, T. (2017). Investment-less Growth: An Empirical Investigation. The National Bureau of Economic Research. NBER Working Paper No. 22897. http://www.nber.org/papers/w22897.

[106] Krugman, P. 2016, ‘Robber baron recessions’, New York Times, 18 April, p. A21.

[107] Summers, L. 2016b, ‘Corporate profits are near record highs. Here’s why that’s a problem’, Washington PostWonkblog, 30 March, viewed July 2016. https://www.washingtonpost. com/news/wonk/wp/2016/03/30/larrysummers-corporate-profits-are-near-recordhighs-heres-why-thats-a-problem/

[108] Department of Justice (2010). Justice Department Requires Six High Tech Companies to Stop Entering into Anticompetitive Employee Solicitation Agreements. Office of Public Affairs. Media Release. 24 September. https://www.justice.gov/opa/pr/justice-department-requires-six-high-tech-companies-stop-entering-anticompetitive-employee

[109] Autor, D. et al (2017). The Fall of the Labor Share and the Rise of Superstar Firms. Massachusetts Institute of Technology. https://economics.mit.edu/files/12979.

[110] Irwin, N. (2018). Are Superstar Firms and Amazon Effects Reshaping the Economy? New York Times. 25 August. https://www.nytimes.com/2018/08/25/upshot/big-corporations-influence-economy-central-bank.html?emc=edit_th_180826&nl=todaysheadlines&nlid=67792490826

[111] Nickell, S. (1996). Competition and Corporate Performance. Journal of Political Economy, Volume 104, Issue 4, pp. 724-726. https://ideas.repec.org/a/ucp/jpolec/v104y1996i4p724-46.html

[112] Blonigen, B. and Pierce, J. (2016). Evidence for the Effects of Mergers on Market Power and Efficiency. National Bureau of Economic Research. NBER Working Paper No. 22750. http://www.nber.org/papers/w22750.

[113] Measured as inflation-adjusted grow pre-tax business profit.

[114] Sandeep Vaheesan, Reconsidering Brooke Group: Predatory Pricing in Light of the Empirical Learning, 12 Berkeley Bus. L.J. 81, 82 (2015); https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1109&context=bblj

[115] Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[116] Khan, L. M. (2017). Amazon’s antitrust paradox. The Yale Law Journal. Vol. 126; 3; January 2017.

[117] Ballentine, C. (2018). Google-Facebook Dominance Hurts Ad Tech Firms, Speeding Consolidation. New York Times. 12 August. https://www.nytimes.com/2018/08/12/technology/google-facebook-dominance-hurts-ad-tech-firms-speeding-consolidation.html?emc=edit_th_180813&nl=todaysheadlines&nlid=67792490813

[118] Robert Akerlof, Richard Holden and Luis Rayo, 2018, ‘Network Externalities and Market Dominance’, Working paper.

[119] For an intriguing discussion of these issues, see Jonathan Tepper and Denise Hearn, 2018, The Myth of Capitalism: Monopolies and the Death of Competition, forthcoming.

[120] For other analyses of long-run inequality in Australia, see Atkinson, A. and Leigh, A. 2007, ‘The distribution of top incomes in Australia’, Economic Record, vol. 83, pp. 247–61; Burkhauser, R., Hahn, M. and Wilkins, R. 2015, ‘Measuring top incomes using tax record data: A cautionary tale from Australia’, Journal of Economic Inequality, vol. 13, pp. 181–205 Wilkins, R. 2015, ‘Measuring income inequality in Australia’, Australian Economic Review, vol. 48, pp. 93–102; and Katic, P. and Leigh, A. 2016, ‘Top wealth shares in Australia 1915–2012’, Review of Income and Wealth, vol. 62, pp. 209–22.

[121] Ennis, S., Gonzaga, P. and Pike, C. (2017). Inequality: A hidden cost of market power. OECD. http://www.oecd.org/daf/competition/Inequality-hidden-cost-market-power-2017.pdf

[122] Joshua Gans, Andrew Leigh, Martin Schmalz and Adam Triggs, ‘Inequality and Market Concentration, When Shareholding is More Skewed than Consumption’, Oxford Review of Economic Policy, forthcoming.

[123] The 1998 study used Australian Household Expenditure Survey data to generate demand elasticities for 14 commodity groups to obtain estimates of the relative welfare loss for households with different income levels. They found that the welfare loss associated with monopoly power is largest for poor households, which depend on government pensions and benefits for their principal source of income: Creedy, J. and Dixon, R. 1998, ‘The relative burden of monopoly on households with different incomes’, Economica, vol. 65, pp. 285–93. The 1999 study extended this analysis with more detailed measures of welfare (through equivalent variations) and inequality (using a larger number of households in the Household Expenditure Survey) and confirmed their findings that reduced competition can have substantial effects on the distribution of welfare: Creedy, J. and Dixon, R. 1999, ‘The distributional effects of monopoly’, Australian Economic Papers, vol. 38, pp. 223–37.

[124] Comanor, W. and Smiley, R. 1975, ‘Monopoly and the distribution of wealth’, Quarterly Journal of Economics, vol. 89, pp. 177–94.

[125] Gomez, T. and Nyman, S. (2016). Competition and poverty. How competition affects the distribution of welfare. Viewpoint, Note no. 350, World Bank Group, Washington, DC

[126] Comanor, W. and Smiley, R. (1975). Monopoly and the distribution of wealth. Quarterly Journal of Economics, vol. 89, pp. 177–94

[127] Frijters, P. and Foster, G. (2015). Rising inequality: A benign outgrowth of markets, or a symptom of cancerous political favours? Australian Economic Review. Vol. 48, pp. 67–75.

[128] Siegfried, J. and Round, D. (1994). How did the wealthiest Australians get so rich? Review of Income and Wealth, vol. 40, pp. 191–204.

[129] Stensholt, J. (2012). Portrait of rich change: Ageing fortunes. Australian Financial Review. 26–27 May, pp. 50–1.