The ACCC must continue to publicly oppose collusive business practices

One event which gave me an inkling of the networks of price fixing and collusion that must have been endemic to Australian business was the time Sydney's ice manufacturers were accused of fixing prices on bagged ice.

Nearly 10 years ago I reported on a story in which the old Trade Practices Commission (now the Australian Competition and Consumer Commission) accused 19 ice manufacturers of allegedly striking a price agreement over the bags of ice usually on sale in service stations. The agreement, so the TPC alleged, had been put together to end a price war just before the Christmas rush.

The matter has not been publicly referred to again, as far as I have been able to establish, so it was almost certainly settled out of court (it was a civil action, not a criminal matter), but the incident illustrated for me just how easily businesses will form networks and stake out business turf, so they can take their profits without the trouble of competition.

These are the sort of networks that the ACCC is meant to fight and that task earns the commission and its recently departed chairman Allan Fels, a lot of abuse from the business community. That the business community is abusive over such matters is understandable - businesses want cosy, anti-competitive arrangements, ranging all the way from a wholesaler dictating retail prices to stores (not allowed), through to whole cartels. Going back even further than the ice manufactures, the major music publishers, all overseas owned, were alleged to be involved in a cartel to fix the prices of CDs. They had the help of copyright law which gave them control of imports, even from copyright-abiding countries such as the US.

And those examples are just the tip of the iceberg of anti-competitive practices both hidden (even when they were not particularly unlawful, before the Whitlam government brought in the Trade Practices Act), or fully above-board and legal. There were reams of regulations fixing the prices of commodities such as eggs and milk, not to mention tariffs on almost everything, import quotas, agreements concerning newsagents, closed shop rules to protect the legal profession in each state and volumes upon volumes of industrial relations regulations, to mention but a few.

But the general Australian community, although the community may not fully realise it, wants more competition. They want "damaging" price wars (businesses always refer to price wars as "damaging"). They want price reductions and businesses that are forced to innovate in order to get an edge, any edge, over a competition that will not go away.

Otherwise we will have a situation that occurred in Australia up to the 1980s - before successive governments started dismantling the tariff barriers and sweeping away regulations - with a succession of what were known as "sweetheart" deals. The unions would demand a pay rise; the employers would appeal to the government which would reluctantly agree to lift tariffs; then employers would hand over the wage rise, knowing that their profit margins were safe. For internal markets employers would agree to lift prices. They would not innovate or invest capital on new machines, attempt to find new markets, try to export, or do anything else at all. Why should they? Their markets and profit margins were secure and competing is hard work - very hard work. Much easier to go to the government and point to the job losses that will undoubtedly result from "damaging" price wars. As a result, industry stagnated.

The rediscovery of competition as a driver of business change in the past two decades or so has many sources but perhaps one of the most important source was the publication of The Competitive Advantage of Nations by Harvard Professor Michael Porter (Macmillan Press, 1990). A great deal has since been written about Porter's theories, and he points to a range of factors, not just competition, as the reasons why certain industries in certain nations get ahead while others fail. Nonetheless, competition is an important part of his theoretical mix. Among other examples, Porter points to the Japanese car industry. That industry has been protected since World War II, first by tariff and then by non-tariff barriers, but the crucial difference between it and the Australian industry is that the Japanese car markers were and are in fierce competition with one another. The competition was so fierce that the eventual winners were tough enough to take on manufacturers even in the car making homeland, the USA.

We cannot hope for tough car manufacturers - Australia's manufacturers are all foreign owned and take orders from head office. The government response has been to force them to export. For that matter competition advocates also have to tread carefully when it comes to pay television cable networks, and power distribution networks. But the general principle is still sound and it is worth having the likes of Professor Fels and the ACCC around to keep businesses on their toes, despite business complaints and public hand wringing over job losses in particular companies.

Professor Fels was not in the job he has recently departed from to win popularity contests; the nature of the job is that the business sector will detest him, as they detest the Tax Commissioner, no matter what he does. Fels was there to enforce the law and this he did. His success and integrity was such that about all the business community could realistically accuse him of, as a sort of parting salvo, was that he sought publicity for the ACCC's actions unnecessarily.

I believe that seeking publicity for the commission's actions is part of the job. Just as the tax office publicises successful prosecutions, the ACCC points to its actions as part of the enforcement process, not to so much shame the parties involved (although it may do so) but as a warning to the rest of the community. Perhaps business people who read my report on the ice makers a decade ago backed away from price rigging deals in their own industry as a result. We can only hope.