Allan Fels: The challenges ahead of Gina Cass-Gottlieb when she becomes ACCC chair

The proposed appointment of Gina Cass-Gottlieb as chair of the Australian Competition and Consumer Commission (ACCC) next year is welcome, as is the appointment of Liza Carver as ACCC enforcement commissioner.

If approved by a majority of the states, they will start in March.

Cass-Gottlieb is a fine appointment. She is widely regarded as the leading practitioner of competition law in Australia. Besides her outstanding skills, she has been adept at understanding the mind of the regulator and persuading clients to adapt their defence accordingly, quite often arriving at outcomes suitable for the defendant and the regulator.

A critical requirement is that the chair is a person of integrity who puts the public interest first. I believe Gina Cass-Gottlieb will do this despite years of being on the big business defence side.

I myself have urged her (and Liza Carver) to join the ACCC for over 20 years because I believe both have this essential attribute as well as the required skills.

Gina Cass-Gottlieb will be the first female chair since the establishment of competition institutions in the mid-1960s.

Interestingly, there has been a recent awakening by competition authorities and the OECD to the existence of gender issues in competition policy.

To take but one example, as everyone knows there has been massive discrimination past and present against women in terms of access to jobs, education, finance, small business opportunities, and so on.

This discrimination is not only inherently objectionable, but also constitutes a substantial restriction to competition in itself.

It will be interesting to see if the new leadership team addresses these issues — at least in their advocacy. I doubt there will be much litigation on this subject.

Liza Carver is also a very good appointment. In the 1990s, she was an associate commissioner of the ACCC for six years.

Her original background was from the consumer and public interest law community.

Like Gina Cass-Gottlieb, for the last 20 years she has been on the defence side, but I believe she too has the necessary public interest commitment essential for the appointment.

It is also timely to appoint a lawyer as chair.

Many years ago, I used to say that lawyers had an unwarranted monopoly on the chairmanship, as they did in the first 20 years of competition law.

These days I would say the opposite: economists should not have a monopoly and where they are appointed, they need to have a strong feel for legal questions.

Despite what you’ve heard, the ACCC litigated well

Some claim that the appointments have been made because the ACCC has been poor at litigation, citing evidence of a set of recent losses in merger cases. However, the ACCC’s litigation generally across the whole field of competition and consumer law has been effective and successful.

Its recent losses in merger cases are not essentially the fault of a weak litigation team, but rather reflect the fact that the test for substantial lessening of competition introduced in the 1990s has proved problematic.

The old pre-1990s test that a merger would only be prohibited if it gave rise to dominance had shortcomings. In particular, mergers that clearly would lessen competition — such as those where the number of major competitors was reduced from three to two — generally were left untouched.

But the test had one advantage: it was easy for courts to apply. It focused on the structure of the market at the time. It was not highly forward looking.

The current prohibition on mergers that are likely to “substantially lessen competition” is right in principle, but asks what the state of competition might be a few years after a merger.

Numerous fanciful stories are presented to the courts about how future competition is a real possibility, with the courts placing too much weight on the self-interested evidence of business applicants.

Sims put the public interest first

This problem has been added to by the substantial upskilling of the legal defence establishment compared with times in the 1990s when it was less equipped to deal with new vigorous enforcement of the law.

Claims that the ACCC’s own litigation skills are inadequate pale into insignificance compared with the forces arrayed against them.

ACCC chair Rod Sims.

Outgoing ACCC chair Rod Sims has proposed changes in merger law because of his concerns. One way of fighting off a stronger merger law is to claim it is the regulator’s skills in enforcing the law that are the problem, not the law.

Sims himself has a record of fine achievements across the range of litigation, consumer protection, regulation, market studies and advocacy.

He brought to bear his skills and experience working in government bureaucracy, as a regulator and as a person who spent 10 years in the private sector.

He has made a special contribution with his world-first pioneering work on digital platforms, which is being copied around the world.

Sims also had that essential commitment to putting the public interest first, despite enormous pressures from those affected by the application of the law.

Crytocurrencies, cartels among priorities

Looking ahead, there are some challenges for the new ACCC chair: above all, continued vigorous and intelligent day-to-day enforcement of competition and consumer law across the board.

Continuing to make progress on the application of the law to the digital platforms will be especially challenging. The economic analysis needed in this area is essentially new and different from that needed in past litigation and regulation.

Big changes are looming in the financial services sector, including the rise of cryptocurrency and new forms of business like those in the buy now and pay later arena. These require careful handling to protect consumers.

Recent changes in the law need careful application. Historically there has been some limitation on the reach of cartel law. In former times, certain business practices that brought about the same results as would an agreed cartel were not covered by the law.

These days if there is a “concerted practice” by business that falls short of an agreement to fix prices — but if it has that effect — it is covered by the new law. This will require careful testing.

I do not agree with the view that the ACCC should not advocate for changes in the law nor comment on competition issues.

Speaking up will matter

Without strong ACCC advocacy, most of the good changes in competition law in the past 30 years would not have occurred, including the improved, strong merger law, more sensible provisions about the abuse of market power, criminal sanctions for cartel conduct, unconscionable conduct laws and public support for the Hilmer competition reforms.

In these matters the ACCC has usually started out as a lone voice fighting often loud, hysterical and uninformed opposition from the big end of town, both corporates and lawyers defending their clients.

Many challenges lie ahead for the new chair, but she will find Rod Sims has left the ACCC in excellent shape. We wish her well.

Allan Fels was chair of the ACCC from its inception in 1995 until June 2003.

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