John Durie: Merger laws “not up to task” says Rod Sims in farewell speech highlighting plight of small business

Outgoing ACCC chief Rod Sims used his farewell speech to the National Press Club to single out the need for better laws to help small business and merger controls.

Sims, who steps down at the end of March, will be replaced by prominent lawyer Gina Cass Gottlieb, who while not saying anything publicly since her appointment, as a private practitioner has rejected the need for more merger controls as being unnecessary.

In his speech on Wednesday, Sims cited the plight of farmers.

“Typical Australian farmers have no say on the prices that the concentrated downstream buyers pay them, and then usually face the risk of a downward adjustment in international prices which they are worst placed to manage,” he noted.

Small businesses are “another group whose voice is often insufficiently heard,” says Sims, who has led the ACCC since 2011 and is the commission’s longest serving chair.

“They suffer badly from unfair contract terms in standard form contracts, and from a range of unfair practices that an Unfair Practices Provision would prevent,” Sims said.

“Small businesses can face contracts for essential inputs, which mean prices can be unilaterally increased mid-contract, or which see automatic contract extensions coupled with punitive termination provisions,” he added.

At the same time, Sims said small businesses are at the mercy of “arbitrary algorithm changes that can destroy their business, and platforms with no products to supply entering their market to attract their customers whom they charge large commissions to purely for being usually an unnecessary intermediary”.

Sims noted that while some small businesses want to be protected from competition “often they are simply after a level playing field on which they can compete”. 

“Not addressing the latter reinforces cries for the former, which is not helpful. Changes to the CCA [Competition and Consumer Act] would, I think, make Australia’s small businesses more productive.”

In Sims’ view, the Australian economy “suffers from high levels of market concentration” that causes a detrimental effect on consumers and productivity. The country’s merger laws are the most important tool to prevent this, argued Sims, but “they are not up to the task”.

However, he noted that changes to competition and consumer laws were often opposed by large incumbent businesses, to the disadvantage of their own long-term interests. 

Sims listed the holes in existing law, noting practices that escape scrutiny such as “not honouring consumer guarantees, provided you do not tell the affected consumer that they have no such right; putting terms into standard form contracts that, for example, allow the large company seller to unilaterally increase the price you must pay during the contract; and large companies abusing their position of strength by treating their customers unfairly”. 

The problems with merger laws, explained Sims, included that the ACCC must prove “if a matter goes to court, that future negative consequences will occur, which can only be speculated on, against the so-called real-world evidence of the necessarily self-interested merger parties about what will happen in the future”.

Sims pushed his attack on government privatisations that don’t focus on competition aspects, which means consumers and small business are the losers. 

“In Australia, almost uniquely, we seem to focus on how much we can sell infrastructure assets for, rather than having our infrastructure benefit our wider economy,” he said.

“Such behaviour can dramatically affect existing users and could be considered a continuing tax on the community.” 

Sims noted while reforms to merger laws would be opposed by big businesses and their advisors, “my guess is that well over 90% of Australians would support them”.

On his record at the ACCC, Sims noted the commission’s “creative wins” against Trivago and Google, as well as the change in perception of court-imposed penalties of $1 million being considered “high”, as a result of much larger penalties being ordered against Telstra ($50 million), Volkswagen ($125 million) and education provider AIPE ($153 million).