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ACCC discusses action taken against College of Surgeons; price fixing by Safeway; concentration in telecommunications, energy, post, media and airline industries.

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Monday 30 June 2003

ACCC discusses action taken against College of Surgeons; price fixing by Safeway; concentration in telecommunications, energy, post, media and airline i ndustries


MARK COLVIN: Allan Fels retired today as Chairman of the Australian Competition and Consumer Commission after 12 years in the job, and he's just been handed a farewell present by the Federal Court, in the form of a major legal victory. Late toda y, the full court unanimously upheld the ACCC's claim that the Woolworth's subsidiary, Safeway, engaged in price fixing. 


It found that Safeway had abused its market power by refusing to accept bread supplies, while bakers were supplying retailers who sold at discount prices. It's a rare court victory on abuse of market power - only the second in the past 12 years.  


Allan Fels also left the job with a couple of parting shots - plans to break up what he alleged was a "closed shop" run by the College of Surgeons, and Federal Court action against Woolworths and the Coles Liquorland business. 


The ACCC claims the supermarket giants dropped objections to hotel liquor license applications in New South Wales, after hotels agreed to stifle competition in liquor retailing. When Allan Fels spoke to Finance Correspondent Stephen Long, he began by explaining those allegations. 


ALLAN FELS: The restrictive agreements we allege might have had conditions that would prevent the liquor license applicant from selling takeaway liquor from their premises, or maybe opening a dedicated bottle shop, or other things that could reduce competition - and we allege that's unlawful. 


STEPHEN LONG: And this from the outlets that control 40 per cent of the retail liquor market… Now, what would the potential penalties be if they are found guilty? 


ALLAN FELS: Up to a maximum of up to $10 million per offence. 


STEPHEN LONG: You've also take action against what you allege is a "closed shop" in the medical field for surgeons. Can you explain what is happening there? 


ALLAN FELS: We have required in our decision today, that for all surgeons that they change the closed shop arrangements about the training and selection of surgeons, and also the accrediting of hospitals to which there could be surgery. 


(Also) that the whole thing be opened up to a significant public participation, e.g. by Government representatives on selection committees, on training matters, on assessment of hospitals. 


That also there be better rights of appeal by people knocked back, that there be a whole lot more published information about who gets in, who doesn't, what the tests are, how many are being rejected, and so on. 


STEPHEN LONG: So, what were your specific concerns about the College of Surgeons and the way that they were operating? 


ALLAN FELS: Well, our basic concern is one that arises from the inherent-looking conflict of interest between surgeons who genuinely want to maintain high standards of surgery by setting tough standards, and the possible economic benefit to themselves from restricting the number of fellow surgeons. We foresee a serious emerging shortage of surgeons in metropolitan and also particularly in rural and regional Australia, which must be tackled. 


STEPHEN LONG: What industries worry you the most in Australia in terms of lack of competition? 


ALLAN FELS: I am worried about the high degree of concentration in telecommunications, I'm pretty worried about energy, post, media, airlines, they'd be some of them. 


STEPHEN LONG: How much of a problem is Telstra? 


ALLAN FELS: Well, it's a dominant player, it has a stranglehold on one of the most important industries of all, and all the little particular markets within it. 


STEPHEN LONG: Some suggest the size of the market leads to a lack of competition because we're simply too small. Is it the case that in areas such as telecommunications and airlines, we are just too small a country to have more than limited competition? 


ALLAN FELS: Well, in telecommunications, the lack of competition is not due to the economies of scale you mention, but to a series of poor historical decisions, where the telco structure is anti-competitive.  


Telstra was given a monopoly until 1991 - you can't knock that over in a few years of liberation. It was allowed to take over overseas telephone calls, then when there was competition for six years, it was just from one player. It was a managed duopoly.  


By '97, the fate of new players was set already - very difficult for them. And the Telstra-Foxtel combination also deeply concerns us, because one of the biggest things for this country is to have a good, efficient, competitive consumer-sensitive broadband, and we have a Telstra stranglehold on that. 


STEPHEN LONG: You've been described as the most famous regulator in the world, aside from Alan Greenspan, fair assessment? 


ALLAN FELS: That could be just a little bit over the top. I'm not quite the household name in the United States, Europe, Asia, South America, or Africa, or even the Antarctic.  


MARK COLVIN: Have they asked the penguins, I wonder. Allan Fels on his last day as Chairman of the ACCC, speaking to Stephen Long.