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The competition watchdog has warned the nation’s consumers and businesses will be worse off if the laws governing corporate mergers are not toughened as Treasurer Jim Chalmers says the government wants to “light a fire” under competition across the economy.
Australian Competition and Consumer Commission chair Gina Cass-Gottlieb on Wednesday said there was already evidence that a lack of competition was hurting the economy, potentially pushing up prices to shoppers, farmers and small businesses.
ACCC chair Gina Cass-Gottlieb says the economy is being affected by mergers that reduce competition.Credit: Alex Ellinghausen
The federal government has launched a two-year competition review, headed by public infrastructure and finance expert Kerry Schott, to examine possible impediments to competition across the economy.
There are growing concerns globally that the domination of certain sectors, from technology to supermarkets, by a handful of businesses is reducing competition, which in turn is curbing productivity improvements.
In its preliminary submission to the review, the ACCC said current laws governing business mergers did not require the affected firms to notify the commission of their plans. If a potentially anti-competitive merger occurs without the commission reviewing it, the authority has to go to the Federal Court to unwind the action.
Cass-Gottlieb said this lack of notification made Australia an international outlier while increasing the risk of reducing competition across the economy.
“Evidence shows that Australia’s economy is being impacted by weakened competition in many sectors, risking higher prices for consumers and businesses,” she said.
“The ACCC does not have the tools it needs to see and prevent all anti-competitive mergers, and it means that harmful mergers may be taking place under the radar.”
The ACCC wants new powers that would require companies to notify it of proposed mergers. It estimates about 90 per cent of applications would be waved through as they would not pose a risk to competition.
Those proposed mergers that required closer examination would have to pass a particular test to ensure the public economic interest was protected.
Cass-Gottlieb said under the current system, companies were increasingly engaging in legal brinkmanship to pressure the ACCC into not opposing mergers.
“We shouldn’t have a process that is prey to legal brinkmanship, with all the uncertainty and expense that entails,” she said.
“Consumers, small businesses and farmers will benefit from the ACCC reforms, which will include high levels of transparency and provide certainty. But we also believe that companies and other businesses concerned about their suppliers, customers or rivals merging will also benefit.”
While the competition review is planned to run for two years, it can make ongoing recommendations to the government. It is specifically looking at rules around mergers at present.
The ACCC is already looking separately at the issue of non-compete clauses in employment contracts. Research from the non-partisan think tank e61 released last month found that impediments to job switching such as non-compete clauses were making it harder for businesses to become more efficient and productive.
Chalmers said one of the reasons the review was started was because of growing concern that a lack of competition was contributing to Australia’s faltering productivity rates.
“If you think about productivity, you think about the next generation of growth, our economy broadly needs to be much more competitive,” he said in an interview.
“We do need to light a fire under competition in our economy and that’s what the review is all about.”
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