Policy Implications

CHAPTER SEVEN

This episode in trade practices law has at least two wider policy implications concerning the ACCC's enforcement procedures which warrant debate and possible reform.

First, the framework used by the ACCC to assess mergers and competition in the communications sector is flawed.  This was touched on in Chapter 5 above.  The ACCC's single-minded focus on the hypothetical impact of a merger on price competition is misplaced and ignores the key features of the competitive process in hi-tech communications sectors.  These features comprise mainly innovation, product quality and gaining consumer acceptance.  The analysis must therefore take into account the evolving nature of the market and the fact that product-market definition and industry boundaries are fuzzy, indeterminate and constantly changing.  While this book is not the place to discuss the reform of Australian trade practices law or to develop a new framework for assessing dynamic competition, there is a need for a competitive framework which places more emphasis on non-price competition over a longer timeframe, and which incorporates supply-side factors such as economic efficiency and investment incentives in a systematic manner that better balances short- and long-term competition concerns.

Second, the intervention of the ACCC raises questions about its role and enforcement policy.  It is received wisdom that the ACCC has become more interventionist than its predecessor, the Trade Practices Commission, and has deployed the media more systematically to publicise its activities.  As a result it is reviled by segments of industry and finance.  If this is because it has become more effective, then there is no policy issue.  But behind the criticism lies a genuine concern that trade practices law has moved beyond its traditional role of preventing anti-competitive behaviour to a more interventionist and proactive stance.  Allan Fels, Chairman of the ACCC, has denied the latter:  "The Commission [ACCC] is not a social engineer, and it doesn't have a positive role in bringing about the most competitive solutions.  Its only role is a backstop, if something is going to worsen competition" (Davidson, 1998, page 18).

Professor Fels's statement ignores the new regulatory role of the ACCC following the reform of Australian trade practices regulation.  The Hilmer Committee recommended the integration of telecommunications regulation into trade practices law, and the enforcement of both by the ACCC. ⁽⁴⁵⁾  Unlike traditional trade practices law, telecommunications regulation seeks to bring about competitive solutions through active intervention.  In the ACCC's pay TV merger decisions, the trade practices goal to prevent lessening of competition and the proactive approach of telecommunications regulation clashed, with the clear sacrifice of the interests of pay TV.  The concern is that, in its desire to promote competition in telecommunications, the ACCC was offering preferential treatment to Optus under the guise of promoting facilities-based competition at the expense of the more narrow interpretation of its role in blocking mergers which substantially lessened competition.  At a minimum, the tensions between competition and communications regulatory approaches have not been adequately resolved, nor have they led to a coherent enforcement policy.

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CASES

Bertelsmann/Kirch/Premiere Case No. IV/M.993 (1998).

Deutsche Telekom/Betaresearch Case No. IV/M.1027 (1998).

Media Council of Australia (1996) ATPR 41–497.

MSG Media Services Case IV/M.469.

News Ltd v Australian Rugby League Ltd (1996) ATPR 41–466.

Nordic Satellite Distribution Case IV/M.490 1996 OJL 53/20.

QCMA (1976) ATPR 40–012.

Queensland Wire Industries Pty Ltd v BHP (1989) 167 CLR 177.

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ENDNOTES

45.  Hilmer et al. (1993) recommended one regulator covering competition and utility regulation and a new legal regime which could give a right of access to specified "essential facilities" on fair and reasonable terms.  While the government did not accept the essential facilities doctrine, an open-access regime administered by the ACCC using an administrative "declaration process" followed by negotiated interconnection terms is now in operation.