Australia has long been a land of oligopolies – industries dominated by a few companies. From banking, to airlines, to supermarkets, to insurers, you can often count the number of major players on one hand. Nothing new there, you say? Well, this week the government unveiled a response of sorts – but it’s not the populist answer of breaking up the corporate giants.
Treasurer Jim Chalmers this week highlighted growing market concentration in the economy, as he announced a new regime that should make it easier for the competition watchdog to block anticompetitive mergers.
Credit: Matt Davidson
Chalmers positioned these changes as a win for households and businesses alike, arguing they should be good for competition, help productivity, and ultimately feed into fairer prices for under-the-pump consumers.
But how much difference will merger reforms end up making for households and businesses, really? And why not just break up the corporate behemoths?
A general suspicion there’s not enough competition sits behind much of the recent political backlash against big business and the accusations of gouging.
When former competition tsar Allan Fells delivered a report on price gouging for the ACTU in February, one of his key arguments was that some big and concentrated industries – banking, energy, airlines – suffered from a lack of fierce competition.
This week, Chalmers argued that “competitiveness” had been slipping since the early 2000s – a period that has also included a slump in productivity. He said the largest players had grabbed a bigger share of the market in many industries during this time, and companies’ mark-ups – the difference between a business’s costs and its selling prices – have been on the rise in recent decades.
Previous work from Treasury has also shown it’s overwhelmingly bigger companies who are making the acquisitions. Says Assistant Minister for Competition Andrew Leigh: “Half of all mergers involve a firm that is in the biggest 1 per cent of firms. So there are a significant number of mergers which don’t involve a couple of minnows getting together to take on the whale, but involve the whale snapping up the minnow.”
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