Monday's decision by the Australian Competition and Consumer Commission to ban the use of iHail, a smartphone application to book taxis, is yet more proof its attitude to competition and innovation is outdated and old-fashioned. The ACCC of 2015 would have been right at home in the Australia of Gough Whitlam in 1975. There is no role for it in the age of digital disruption. If anyone at the ACCC had ever come across the term "creative destruction" their first reaction would probably have been to ask "how do we stop it?"
On these pages in 2004, I wrote that unless the ACCC's powers were restricted it should be abolished. In the 11 years since the ACCC has got from both Coalition and Labor governments more money and more power. Just on Tuesday the Turnbull government announced it was giving the ACCC an extra $1.4 million to enforce new rules against "unfair" contracts for small business. In 2014 the government gave the ACCC $179 million. The year before it got $150 million. With this money it makes stickers for people to put on their letterbox to warn off door-to-door salespeople. In its so-called "horror" first budget the Abbott government cut welfare by $3 billion but it didn't dare touch the ACCC. Its budget was merely kept at it was. Meanwhile, the ACCC boss Rod Sims complains of his "constrained financial environment" and his "significantly fewer resources". If he really wants to know what a "constrained financial environment" looks like he could go to work in the private sector with the people who pay the taxes that pay his salary.
MORE CONVENIENT WAY
In simple terms, the ACCC ruled against iHail because it is the product of a joint venture between a number of large taxi companies and the ACCC had the opinion that it would be impossible to say whether any future success of iHail would be because of its inherent advantages or because it was going to be used in lots of taxis. If it was the latter, then iHail would be against the law because the "market power" of the large taxi companies would be being used to have an impact on competition from other taxi booking applications. It took the six ACCC commissioners 19,000 words to make this single point. The best part of this whole sorry story is that the ACCC admitted iHail would be a "more convenient way for consumers to book taxi services" but it would come at "too big a cost to competition".
This is one of the most starkly absurd decisions the ACCC has made, probably in its entire history. In the midst of a furious contest between taxis and Uber, the ACCC has decided to cripple the taxi companies' ability to innovate in response to competition.
READ AND WEEP
If anyone has ever wondered what government regulators do all day, they can go to the ACCC website and read the correspondence between the ACCC and iHail's lawyers. They can read — and weep — about how in making its decision the ACCC wanted to know from iHail its "view about the extent to which the iHail app may provide an incentive, or disincentive" to compete on things like price and service levels. This is a completely hypothetical and speculative question and in any case the answer is "who cares?" The idea that if iHail is better than the alternative people will use it and if it isn't they won't seems to be beyond the comprehension of the ACCC.
Any entrepreneur giving an honest answer to such a ridiculous question would say "I hope my product is so amazing that everyone buys it, all my competitors go out of business, and then I IPO the company and become a billionaire".
A month ago, at his press conference held minutes after becoming Liberal leader, Malcolm Turnbull said: "The Australia of the future has to be a nation that is agile, that is innovative, that is creative." Turnbull is right, of course. Unfortunately that future won't eventuate if the Australian Competition and Consumer Commission has anything to do with it.
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