Rod Sims warns business he’s still watching

Australia’s competition chief, Rod Sims, has warned big companies not to take advantage of the coronavirus crisis to nobble their competitors and set themselves up as monopolies.

a man wearing a suit and tie: Photograph: Joel Carrett/AAP

© Provided by The Guardian
Photograph: Joel Carrett/AAP

Stopping Australia emerging from the pandemic as an economy where even more power is concentrated in the hands of a few players is just one entry on a long to-do list kept by Sims, who has spent the crisis helping keep food on the shelves of supermarkets and stopping banks rushing to foreclose on bad loans by authorising companies to coordinate their behaviour in ways that would normally be against the law.

a man wearing a suit and tie: Australian Competition and Consumer Commission (ACCC) chairman Rod Sims.

© Photograph: Joel Carrett/AAP
Australian Competition and Consumer Commission (ACCC) chairman Rod Sims.

Sims has already taken action to keep competition alive in aviation – in March he publicly chastised the Qantas boss, Alan Joyce, for campaigning against any government support for weaker rival Virgin Australia, which at the time was teetering on the verge of collapse.

Related: ACCC orders ticket reseller Viagogo to pay $7m fine for misleading consumers

“Just because we’re watching has a profound effect, we see that every time,” Sims tells Guardian Australia.

“That will inhibit players taking action to knock off their competitors, but if it doesn’t we’re here to take action – either under the Act or through recommendations to government.”

Sims thinks getting Australia out of the recession caused by the business shutdowns, travel bans and other restrictive measures imposed by authorities to fight the virus will require plenty more government spending – something he is expecting to see in Tuesday’s budget.

At the same time as dealing with the financial effect of the virus, which has crushed an economy that was already struggling with weak growth, Sims and the regulator he chairs, the Australian Competition and Consumer Commission, are also under heavy fire from Google over his proposal that it and other digital platforms pay for the news they use on their websites.

As the pandemic measures ease, Sims will also push the federal government and the states for new powers to go after the big end of town for behaving unfairly towards consumers and small businesses, investigating the opaque market for digital ads, stopping cash-strapped states from striking bad privatisation deals and returning the ACCC to its pre-Covid status of the regulator most hated by the country’s business community.

“Being the most hated regulator in Australia is a form of praise, there’s no doubt about that,” Sims says.

“I think the problem that people have with us is that we actually understand business behaviour and markets too well.”

Google and Facebook in ACCC’s sights

Right now, the sector that hates Sims the most is big tech – specifically Google and Facebook.

They are extremely unhappy with the code proposed by the ACCC that would make them pay media companies for the news content they reproduce on their websites.

Confronted with the prospect of paying what could be hundreds of millions of dollars a year to publishers, Facebook threatened to ban all news content from its site, while Google mounted a public campaign that Sims said contained “misinformation” – although he says it falls short of being the kind of misleading or deceptive advertising over which the ACCC can take legal action.

logo: Google and Facebook are unhappy with the code proposed by the ACCC that would make them pay media companies for the news content they reproduce. Photograph: Denis Charlet/AFP via Getty Images

© Provided by The Guardian
Google and Facebook are unhappy with the code proposed by the ACCC that would make them pay media companies for the news content they reproduce. Photograph: Denis Charlet/AFP via Getty Images

Google has said it cannot accept the way the ACCC proposes that prices for news be fixed if the two sides cannot agree, a method called “final offer arbitration”.

The method, which is sometimes called “baseball arbitration” because it is used by the US National Baseball League to strike pay deals for players, involves an arbitrator picking one of the two numbers put forward by each side.

Sims says he is “immovable” on the need for some form of arbitration in the final code – but is less definite about what shape it needed to take.

“I’ve heard their concern about final offer arbitration,” Sims says.

But he believes the method could help overcome the information imbalance between news organisations, which don’t know how much of their material is being used by the platforms.

“You really have to put in a reasonable offer, where if it’s normal arbitration you’ll put in an ambit claim,” Sims says.

Google and Facebook are also in the ACCC’s sights over their dominant position in digital advertising, as the controllers of big markets where ad space is bought and sold.

Sims is concerned that about half the money spent by advertisers never gets to the publisher where the ads run, and is instead gobbled up by intermediaries.

Related: ‘No laughing matter’: Google enlists comedian to help in fight against Australia’s news code

“Google is a very large percentage of the demand side and the supply side and all the other intermediaries who are there,” he says.

“It seems hard to justify why such a large chunk goes to intermediaries rather than the ad.”

‘A time of crisis’

Back in the physical world, the ACCC’s authorisations of anti-competitive behaviour that have allowed supermarkets to collaborate on supply chains and safety, and banks to agree a common set of hardship standards, are not likely to go away soon.

“Yes, things have improved massively, but where will we be in another month?” he asks.

“I guess we feel it’s premature to turn them off now … we’ll probably want a longer time to elapse of having Covid under control before doing that.”

The authorisations have been “very successful”, he says.

“Normally you want competition to prevail but in a time of crisis we acknowledge that sometimes you can get better results with a bit of coordination – providing people aren’t coordinating on prices.”

Sims says federal and state governments have so far “done a very good job” of supporting demand for goods and services by spending tens of billions of dollars on programs such as jobkeeper.

“Certainly a number of businesses I’m aware of have only survived because of jobkeeper,” he says.

He is optimistic about the economy once cities are allowed to reopen, but concerned about how many businesses could survive until then in Victoria.

But he says it is vital to get the health crisis under control first.

“There’s no point opening a restaurant if nobody wants to go because they’re all scared,” he says.

“Once that’s all working there may be things to do on the supply side, to help business function and flourish – and obviously fundamental, from our point of view, is making sure there is enough competition.

“We are monitoring the banking sector, the financial sector, the energy sector, just to make sure that if companies get in trouble we don’t have failures that damage the competition structure of the industry.”

Australia’s economy is concentrated, with just two big supermarkets, two big miners and four banks. Photograph: Joel Carrett/AAP

© Provided by The Guardian
Australia’s economy is concentrated, with just two big supermarkets, two big miners and four banks. Photograph: Joel Carrett/AAP

A Sisyphean task

The ACCC also has a consumer protection role, and there Sims is still pushing for a new law banning unfair practices. Sims – and other regulators – say they have been consistently frustrated by judges taking a narrow view of laws banning unconscionable conduct.

With Josh Frydenberg this week saying the government will abandon laws designed to protect borrowers by making sure banks lend responsibly, Sims’s task might seem Sisyphean – although he does point out that it would also apply to relations between big and small business.

Related: News Corp backs push for ABC and SBS to receive payments from Google and Facebook

“This just comes up all the time where, often, people are taking advantage of their market power,” Sims says.

He says the proposed change is being considered by the commonwealth and the states, which have joint responsibility for consumer protection laws.

“It’s taking a long time but, look, it’s a very important change whose time has definitely come,” he says.

It’s clear Sims sees consumer protection through the lens of misuse of market power – a view that is unsurprising in an economy as concentrated as Australia’s, with just two big supermarkets, two big miners and four banks.

It’s even the frame through which he sees one of the ACCC’s most vigorously fought campaigns, a battle over the safety of quad bikes.

The ACCC has spearheaded new rules that require manufacturers to fit an anti-rollover device – often little more than an aluminium rod – to reduce the danger of bikes flipping over.

The two biggest manufacturers, Yamaha and Polaris, have responded by announcing they will pull out of the Australian market.

Motorbike dealers are also running a public campaign to get rid of the new rules.

“I think the campaign, it’s driven by the pursuit of profit, and I guess it is very surprising that profit will be elevated over safety,” Sims says.

“There’s too much market power in our economy and it manifests itself in various ways.

“You don’t get away with that sort of stuff in a competitive market.”

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