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ACCC powers

By David Leyonhjelm - posted Monday, 6 October 2014


'The Sims 4' is the latest instalment of a computer game best described as a virtual but living dollhouse. There's no specific goal; players just create characters and then care for or irritate them as they please. It has been promoted as the 'game that lets you play with life like never before'.

It's hard to fathom, but 'The Sims' is one of the most popular computer games ever. It's also highly addictive, with players glued to their computers day and night.

I suspect that Rod Sims is a Sims addict.

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Mr Sims is the chairman of the Australian Competition and Consumer Commission. It seems he loves to delve into the mundane, day-to-day interactions of everyday Australians. I'm sure he cares for his characters, but they nonetheless register a fair deal of irritation in response to his manipulations. And often his manipulations do not seem to serve a specific goal.

For instance, Mr Sims and the ACCC love to check labels. They decided that Maggie Beer's slogan 'A Barossa Food Tradition' could appear on most of her food range, but not the ice-cream, biscuits, vinegar and olive oil. While they tasted exquisite, they were made in Queensland and Victoria.

Mr Sims and the ACCC also check websites. They don't like it when a website like Urbanspoon hosts comments from reviewers like 'this restaurant has nice ambience', when in fact the restaurant is far too noisy. That's why they said, 'It's time for the industry to bring its behaviour into line with ACCC expectations.'

Mr Sims and the ACCC set rules for the design of everyday items, so everyday Australians needn't worry about how to use things safely. For instance, they now regulate what type of material a hot water bottle must be, what thickness it must be, and how its cap needs to be shaped - even producing a video showing best practice hot water bottle use. This is in response to estimates of around 200 hospitalisations each year from hot water bottle related burns, out of a population of 23½ million.

Mr Sims and the ACCC like clear boundaries between the markets they scrutinise. So when Coles and Woollies offer fuel discounts that a business solely operating in the fuel market can't match, they don't like it. Four cents a litre off is okay, 8 cents is not.

Mr Sims and the ACCC want people to play fair, so they police rules preventing 'unconscionable' conduct. This may be a vague lawyer's term for something between 'unfair' and 'immoral', but rest assured, the ACCC knows it when it sees it. Mr Sims and the ACCC also issue various mandatory industry codes. In these they share, and impose, their wisdom in areas of ACCC expertise ranging from horticulture to groceries.

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Mr Sims and the ACCC spend around $175 million a year manipulating markets as if they were playing a computer game. This cost does not count the red tape and legal costs imposed on businesses. The ACCC takes a lot of businesses to court, tending to lose the big cases but gaining comfort from putting businesses through the legal wringer. It would probably fail a cost benefit analysis, even if its market manipulations sometimes save consumers money.

The ACCC believes in a quaint microeconomic theory of yesteryear. Like Keynesian macroeconomics, it was crafted in a time of hope and innocence, when analysis was 'partial' and 'static' - to use the language of economists - and the bureaucracy was assumed to be omniscient, omnipotent, and benevolent. Unfortunately for the ACCC, 'general' and 'dynamic' analysis that accounts for imperfections in bureaucracy leads to far less interventionist conclusions.

The manipulations of Mr Sims would be vital if the world were as simple as the ACCC's microeconomic theory suggests. But alas, such a simple world is but a simulation.

In certain respects, the ACCC is a victim of progress. As markets have opened and liberalised over past decades, and as technology has quickened the sharing of information about good and bad businesses, the need for a market nanny has diminished. So we are left with a staffed-up bureaucracy that seeks to legitimise the complaints of busybodies rather than promote competition with grown-up advice: 'buyer beware'. This leaves the ACCC tilting at windmills.

Mr Sims is passionate and energetic. He is also highly esteemed. He played a key role in the Prime Minister's Department driving the wide-sweeping deregulatory reforms of the Hawke-Keating era. It is just a shame that quixotic verve was more useful then, rather than now he is ACCC chair.

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This article was first published in the Australian Financial Review.



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About the Author

David Leyonhjelm is the Liberal Democrat Senator for NSW.

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