The ACCC is interfering with the competitive process to try to promote competition, complains Richard Wood.
Under Professor Fels, the Australian Competition and Consumer Commission is sacrificing the shareholders of Australis to promote the viability of Optus.
The blocking of the Australis-Foxtel proposals on the grounds that it will create excessive market power is one of a number of examples where the ACCC has sought to transform markets to accord with its views of the best competitive outcome.
In approving the recent merger between Wespac and the Bank of Melbourne, the ACCC insisted that Westpac maintain Saturday trading, not increase fees for particular current account holders and open up its ATMs to a wide range of financial institutions operating in Victoria.
In the laudable name of increasing competition and favouring consumers, the ACCC used its regulatory powers to require a bank to proffer the business services it thought should be provided.
In its inquiry into petroleum products, the ACCC extracted undertakings from Ampol and Caltex on oil storage terminals as a condition of the merger and claims to have been a catalyst for greater imports. It is also pressuring the oil companies to provide new capacity in terminals, specifically in Darwin.
This sits uneasily with the Competition Policy Reform Act which stipulates that "the Commission must not make a determination that would require the provider to bear some or all of the costs of extending the facility or maintaining extensions of the facility".
Requiring the incumbents to undertake investments that are not in their corporate interests is inconsistent with prevailing notions of light handed regulation that pervade the present approach to competition in Australia.
These petroleum interventions cover an industry engaged in cut-throat competition. With four major oil businesses having independent storage facilities, with non-affiliated facilities available at 17 locations around Australia and new facilities that can be constructed at modern cost, the industry is one of the least likely candidates for regulatory control. The vulnerable nature of the majors to challenge is further demonstrated by the rapid development of competition from supermarkets.
The rival players in the pay TV market are incurring losses of $900 million a year. This cannot persist and to prevent the financially strapped Australis from salvaging its position amounts to expropriating its shareholders.
Moreover, ongoing advances in technology have brought a fluidity in the pay-TV and the telephony market that will confound any attempts to establish a structural design. What is required is a market that is free of government intervention not one that is plagued by regulators imposing their ideal model.
In its interventionist approach, the ACCC is departing from its sister bodies: the National Competition Council (NCC) and the Industry Commission. The NCC has curbed its power base to avoid intrusion into business affairs.
For example, the NCC has drawn the line at extending its powers over "essential facilities" into areas of manufacturing, even where these can be bottlenecks. Thus, the NCC specifically excludes gas processing plant from within the territory it controls on the basis that this is a manufacturing facility which can be readily duplicated.
By contrast, in the context of water, Professor Fels speculates on filtration plants and associated equipment falling within the ambit of the Competition Reform Act.
It may seem that the consumer will benefit from having a watchdog to require providers of goods and services to offer greater convenience or lower prices. However, unless there is monopoly, the outcome of such interference in the competitive process usually backfires against the consumers.
Where competition is evident, commercial rivalry will dictate the service and price conditions. For a government agency to do so distorts this process and engenders additional costs. It undermines property rights, the key component of the competitive processes.
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