Competition reforms are on the way — but how tough will they be?

The government has taken the first steps toward repairing Australia’s broken competition laws, releasing a consultation paper for changes to the Competition and Consumer Act, including changes proposed by the Australian Competition and Consumer Commission (ACCC) in relation to the operation of its assessment of mergers.

While the paper provides for the possibility of a lighter-touch regulatory regime and includes industry criticisms of the ACCC’s more hardline stance on the need for greater powers to stop mergers, it also makes the case for the failure of existing competition laws and the impact on productivity and the economy more broadly. Noting that evidence in the Australian economy is patchier than internationally, it argues from a number of sources that:

A range of competition indicators — including industry concentration, incumbency and firm markups — suggest an overall deterioration in competition in Australia since the early 2000s. There is evidence that declining firm entry rates have contributed to a reduced rate of convergence to the productivity frontier within industries, and that the rate of convergence is slower within industries that have experienced the largest increases in markups. The OECD in its recent economic survey of Australia has noted evidence that ‘a growing body of evidence links excessive concentration and market power with a range of poor economic outcomes’.