Professor Allan Fels' legacy is that of a populist technocrat who promoted the popularity of the Australian Competition and Consumer Commission at the cost of public support for market-based competition. And although he achieved some positive things during his 12 years as competition watchdog, his interventionist approach, while well-meaning and pursued beyond the call of duty, was flawed. He won't be missed. His central flaw was to succumb to the lure of populism. He read the tea leaves of popular dissent and seldom let pass an opportunity to demonise big business, particularly those of a multinational nature in "political incorrect industries".
He latched on to the growing political influence of the consumer movement and brought them into the fold as "strategic stakeholders". He saw the public demand for a competition tsar and interfered too often.
Of course, he has elevated the ACCC to star status in the public's mind. But in so doing, he has undermined public trust in the operation of markets and the ethics of corporations. While fond of quoting Adam Smith's warning about the collusive proclivities of corporations, he failed to remember Schumpeter's insights on the inherent tendency of markets to search and destroy privilege.
Indeed, I cannot recall a single occasion during his whole reign when Fels openly defended the markets. And this, at a time when markets all across the globe were driving margins to record lows, generating low-inflation economies and pushing prosperity to unprecedented growth levels.
Consider his repeated assault on the reputation and behaviour of the petrol industry. Before Anzac Day when people traditionally go bush, he would characteristically issue a stern warning to oil companies against price fixing. (He did this in 2000, 2001 and 2002). He would often -- again, with great fanfare -- accuse the petrol companies of being "un-Australian" for raising petrol prices on the public holiday and announce a study into the industry's behaviour.
Invariably, with no fanfare, he would announce that there was no evidence of improper conduct and no cause for concern in the first place. He and his people knew after participating in more than 43 studies into the industry over the past 20 years that the industry was highly competitive and produced the lowest (after tax) petrol prices in the OECD.
In short, instead of praising the workings of the market, he took cheap shots to pander to populist sentiment. We expect this from an agrarian socialist such as the independent MP Bob Katter, or a globophobe such as Greens leader Bob Brown, but not the learned chairman of the nation's competition and consumer watchdog.
True, he has subsequently admitted that the raid on the offices of petrol refiners in April 2002 on the whispers of unknown whistleblowers was a mistake, but his remorse was misdirected. Indeed, his concern was motivated more by the harm done to the reputation of the ACCC rather than the cost it imposed on the firms involved. The raid did great harm to the reputations of the firms and people involved. Importantly, it signalled to others to take a legalistic and risk-averse position rather than a market-based approach to competitive actions.
Fels has sought the political support of the so-called consumer movement. The former chief executive of the Australian Consumer Association, Allan Asher, became deputy director of the ACCC. The present chief executive of the ACA, Louise Sylvan, has been promoted by Fels as the next deputy head of the ACCC despite having no qualifications for the job other than being an activist. He has welcomed consumer groups in as stakeholders.
And just last week, as a parting thank you to the movement, he suggested that fines on corporations be used to establish endowment funds for consumer groups.
While the consumer groups have repaid his favours with political support, the alliance was not been made in heaven. It has resulted in the commission pursuing short-term goals at the expense of the long-term gains. And it has created a democratic deficit by allowing the unrepresentative few who are the consumers' movement, to speak for the many.
Fels has also often fallen for the popular desire to out-guess the market and to regulate anything new. This has resulted in the ACCC taking an intrusive and risk-adverse approach to merger policy. It has also led to regulations that stifle investment in essential infrastructure such as new gas pipelines.
In the post-Fels era, the ACCC needs a leader who leaves the politics up to the politicians. Above all, it needs to pursue the task of assisting market-driven competition to the advantage of the consumer.
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