Australian Competition and Consumer Commission chairman Graeme Samuel is telegraphing a greater willingness to allow mergers to proceed providing the parties offer undertakings that they will not act anti-competitively.
This makes a great deal of sense for a number of reasons. Not the least of these is that the genuine monopolies that are unchallenged by competition are quite rare.
But the change in the ACCC's approach is coming all too slowly. The regulator continues to campaign for increased powers and to retain controls even when competition has eroded the case for this.
The ACCC's naivety on mergers was demonstrated in its contesting the Loy Yang takeover by an AGL-led consortium. Its knee-jerk opposition was to an acquisition strategy designed to reduce business risk, which would have no effect on competitive provision.
As that case illustrates, competitive processes are far more sophisticated than the "perfect competition" model of a homogenous good with many suppliers and many customers.
It is that simplistic market model that has for too long conditioned the ACCC's assessment approach. And it is an approach that has fostered deficient analyses in other areas.
In the case of the two gas pipelines serving Sydney, from Bass Strait and Moomba, the ACCC holds the view that both are monopolies; it even commissioned "research" to demonstrate that, notwithstanding the apparent rivalry, the prices were higher than the marginal cost-based levels it considered should prevail.
The current case to prevent Alinta controlling two competing pipelines has substantial merit. However, if both pipelines are monopolies, as the ACCC has maintained, then nothing is changed by them being merged and there is no greater need for them to be regulated. In this respect, by detecting a monopolist under every bed, the ACCC undermines its credentials in cases more worthy of regulatory attention.
The view implicit in the ACCC's indications of dissent to Alinta controlling both Sydney pipelines means it now accepts there is genuine commercial rivalry between the two facilities. This in turn means it acknowledges its earlier estimates of the genuine market price for carriage on the two facilities to be off the mark.
The ACCC's erroneous insistence that it, not commercial providers, can best establish the appropriate market price damages confidence in the agency in its stoushes with Telstra.
Telstra is refusing to build its new fibre network until it has assurances it will not have its profits squeezed after it has disbursed shareholders' funds. Its refusal to accept the regulator's "trust me" invocations is founded on its experiences of price determinations on the copper wire network. Telstra, rightly or wrongly, sees the ACCC's decisions as underpricing the services on that facility.
Because it must "smear" costs, rather than charge cost-reflective prices, it says its rivals should incur similar cross-subsidies, to avoid them cherry-picking the best markets -- leaving Telstra carrying excess baggage.
The ACCC is demanding a lower price. Worryingly, one of the grounds it states is that Telstra's proposed price would not increase competition -- a view that seems to value competition per se rather than as a means to improving consumer value.
A greater concern from the national perspective is the regulatory position on the prospective fibre network. The ACCC's telecoms commissioner, Ed Willett, argues that there are many alternatives to the Telstra fibre network and that the ACCC is looking to ensure the fibre broadband launch promises "better offerings for consumers than the likely alternative".
This places the ACCC as the love-child of the "picking winners" approach that governments themselves now acknowledge to have been misplaced.
Regulating facilities established under government control and protection is one thing. Hence, though the ACCC may incorrectly price the copper network, the network's owners must accept regulation -- at least until technology and other changes enfeeble their monopoly powers.
But seeking to regulate new facilities before they have been built is another.
The ACCC continues to campaign against regulatory holidays for greenfield gas and telecommunications facilities. This can bring only suboptimal investment and deterioration in infrastructure services.
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