Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Standing Committee on Economics
Australian Competition and Consumer Commission annual report 2017

BEZZI, Mr Marcus, Executive General Manager, Specialised Enforcement and Advocacy, Australian Competition and Consumer Commission

DE GRUCHY, Ms Rayne, Chief Operating Officer, Australian Competition and Consumer Commission

GREGSON, Mr Scott, Executive General Manager, Enforcement Division, Australian Competition and Consumer Commission

GRIMWADE, Mr Tim, Executive General Manager, Consumer, Small Business and Product Safety Division, Australian Competition and Consumer Commission

SIMS, Mr Rod, Chairman, Australian Competition and Consumer Commission

Committee met at 08:34

CHAIR ( Ms Henderson ): I declare open this hearing of the House of Representatives Standing Committee on Economics, and welcome representatives of the Australian Competition and Consumer Commission, members of the public and media. The ACCC is Australia's competition regulator and national consumer law champion. At the last public hearing with the ACCC in August 2017, the committee examined the ACCC on its new financial sector competition unit, FSCU, and the unit's inquiry into residential mortgage products. It also examined the ACCC's broadband performance monitoring program, work to ban excessive payment surcharging, product recalls and sectors of concern for the ACCC, including Australia's energy markets.

The FSCU is undertaking regular inquiries into specific financial system competition issues. Its first task is inquiring into residential mortgage prices. It is examining the prices charged by authorised deposit-taking institutions, or ADIs, affected by the major bank levy from May 2017 to 30 June 2018. The ACCC released an interim report in March 2018 which found that there is a lack of transparency in the residential mortgage prices offered by the five banks affected by the levy. This lack of transparency makes it difficult for customers to make informed decisions. Another preliminary finding was that pricing between the banks is not strongly competitive. The committee continues to monitor the ACCC's work in this area and awaits their final report in November.

A significant ACCC achievement in the competition sphere has been the successful conclusion of the Harper review on competition policy. There have also been ACCC cartel investigations that have resulted in a number of criminal and civil proceedings.

In January the Productivity Commission released a draft report on competition in the Australian financial system. The Productivity Commission found that competition in Australia's financial system is without a champion among the existing regulators. It suggested that the ACCC is well placed to do more than it currently can for competition in the financial system. The committee is interested to hear from the ACCC on its performance in this area and where there is scope to enhance its role as competition regulator and in consumer protection.

I remind you that, although the committee does not require you to give evidence under oath, the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament.

Before commencing, I refer members of the media to the requirement to fairly and accurately report the proceedings of the committee. Mr Sims, would you now like to make an opening statement before we proceed to questions?

Mr Sims : I'm just as happy to proceed to questions, Chair, so that we maximise the time to talk about issues that are of interest to members.

CHAIR: I will begin with questions. Mr Sims, the ACCC has had a particularly busy 12 months, including obtaining only the second successful criminal cartel prosecution in Australia. You've launched one just a short time ago against ANZ Deutsche Bank. Of course, there's been the finalisation of the Harper review and the other matters to which I referred in my opening statement, and a number of inquiries, including the retail electricity pricing inquiry. I would like to start with that inquiry. Tomorrow you're due to hand down this review. Being a Saturday, you're very busy, of course, working all weekend—

Mr Sims : The team is trying to get it done by this evening, Chair, and they have a big incentive to do so.

CHAIR: In light of the ruling that you made initially that the Liddell power station not be sold to AGL because this would lead to less competition and higher prices—and that was of course overturned—there is now a situation where it appears that AGL has declined to proceed to sell its power station. What do you believe needs to happen in relation to increased competition in the electricity market, particularly in New South Wales?

Mr Sims : As you say, Chair, we did oppose AGL's acquisition of both Bayswater and Liddell. We did think it was unfortunate that the three sets of power stations ended up being sold to the three major retailers, which cemented concentration, and we did think it would be helpful to competition and, therefore, prices if Liddell were owned by another party.

We have, as you said, spent 12 or 13 months on the electricity sector. We've given deep thought to recommendations as to how to improve affordability in the electricity sector. We desperately need to get prices down. We think we've come up with ways to achieve price reductions in the electricity sector. I guess it's a bit tricky going into those, given that the Treasurer needs to read the recommendations first. That does make it a bit tricky. I wish we were meeting a week later. We do have a range of proposals to put as to how to get electricity prices down. We've looked right across the supply chain because there are various aspects. I know public debate focuses on particular parts of the electricity sector, but really you have to look at networks, generation, retail and the green costs. We've done all of that, so we do have some quite comprehensive recommendations coming to the Treasurer, hopefully, today.

CHAIR: Have you been disappointed in AGL's approach to these matters in light of the position that it has taken?

Mr Sims : It's always tricky. Retailers are there to make money. I guess I do observe—

CHAIR: But they are also there to comply with the law, aren't they?

Mr Sims : And I think more. If you do whatever it takes skating just within the law—and I'm speaking broadly now—I'm not always sure that's good enough. I think you've got to be looking to comply with not only the black letter of the law but also the spirit of the law if you want to be seen to be a good citizen. We've had a number of issues with AGL in both the gas and electricity markets. There is no doubt that they pursue profits in a very hard way. They're right up there with companies that do play hard. They're extremely interested in their own bottom line. They're allowed to do that, but I do observe that they do play things pretty hard.

CHAIR: So are you implicitly suggesting that AGL in declining to sell the Liddell power station in particular has not acted within the spirit of the law?

Mr Sims : No. It's one thing to say that we think it would have been a much more competitive outcome if Liddell were owned by another player. Of course it would help competition if they sold it to another player but there is no breach of the law in them not doing that, so they're perfectly entitled to pursue their own commercial self-interest.

CHAIR: Would they be a better corporate citizen if they went ahead and sold Liddell rather than shut it down?

Mr Sims : I guess you do need to listen to wider stakeholders in these matters. It very much depends what they do in its stead I suppose. If they and others quickly build capacity that replaces Liddell then that may work out well. If there is not sufficient capacity coming on, then prices will increase and that will increase their profits. AGL's profits have gone up enormously because of the extra money they've made out of generation. They're the largest coal producer in the country. They've got significant assets that benefited from the closure of Hazelwood and Northern. They do have a commercial self-interest in prices going up. As I said, I just think they need to keep an eye on the wider community within which they're operating.

CHAIR: Mr Sims, you've spoken before about your support for the National Energy Guarantee. Could you talk a little bit more about that in the context of the current challenges in the electricity market?

Mr Sims : There are always three issues talked about with electricity: reliability, or making sure that the power is there when you need it; sustainability and the Paris targets; and affordability. We're in the position of having a mandate to focus purely on the third, so our focus is on affordability. The NEG, of course, is trying to contribute on all three fronts. What I think is important about the NEG, though, is that it does integrate the reliability and emission reduction components into the electricity market.

The problem which has long been a problem with the Renewable Energy Target is that you are subsidising power to be supplied without any regard to the needs of the market. So you could bring on power and you'd get the subsidy whether the generation produced energy, whether the market needed it or not—whether it produced it at three o'clock in the morning or seven o'clock at night. That is not really a very satisfactory policy. I think the Renewable Energy Target was not first-best policy.

So having a NEG that integrates all those three things so that you're meeting wider objectives and meeting the needs of the energy market at the same time is a much, much better way to go. That's the key factor behind the NEG. We originally had concerns that it might favour the incumbents, but I think the Energy Security Board has done a good job of taking account of how it could happen without having any anticompetitive effects. There is still detail to work through, but we think it is a major step forward. We think it will reduce prices, and of course it has the other things that it's aiming to do.

CHAIR: Mr Sims, what can you tell us about the criminal cartel proceedings that have been launched against ANZ, Citigroup and Deutsche Bank?

Mr Sims : There's nothing I can say, Chair. This is a matter now before the courts. In a general sense, while we make comments when we institute proceedings, we don't comment on court proceedings. But this is even more sensitive; it's a criminal matter and it's before a jury. As I said on the day the CDPP launched the proceedings, we won't be commenting on that at all. I know when I'm meeting with members of parliament that always sounds to be a rude and unhelpful thing to say, but you can't prejudice these trials, so I'm afraid there is nothing we can say.

CHAIR: In February 2018, the Federal Court made an order that the CFMEU pay a penalty of $1 million for engaging in secondary boycott action contrary to the law. This concerned, of course, actions against Boral by the CFMEU. A suppression order on this case was lifted a short time ago—a number of weeks ago, on 1 June. What can you tell us about this case and the harm secondary boycotts cause to the economy in general when they are contrary to the law?

Mr Sims : It was a very important case. I have just a couple of general statements. I always say of the secondary boycott laws that it's the section of the act that I have read the most and understand the least. It's just a little paragraph, and they don't do commas, so trying to work out what it's meant to mean is incredibly difficult. So it's hard law to interpret. It's also often difficult to get witnesses because you do have intimidation—I'm speaking broadly now—involved, so getting people to come forward is tricky. We certainly do have business groups criticising us for not taking more action, but these are difficult cases.

I think the Boral case illustrated that when we saw what was going on at Boral at the time. We certainly felt what was going on appeared to be secondary boycott activity. We put a team of people on it. We put matters before the court. That did get affected by the criminal proceedings taken by the Victorian police. That did have an unfortunate effect on our case, but in the end we did succeed in two matters. I think there's no question that the harm to the economy from that action was considerable. I mean, you are stopping economic activity. I know there's controversy about whether the secondary boycott laws should be in our act or in an industrial relations act. I understand that. The reality from our point of view is that they are within our act, we will enforce the law and there certainly is harm done by this sort of activity. It really is a slightly strange way to run an economy when you have some people trying to tell other people who can service whom. We think secondary boycotts have the potential to be harmful, and we certainly think that, in the Boral case, they were.

CHAIR: You would regard this as a substantial win, I imagine, and also sending a strong signal to others who might be contemplating this sort of action?

Mr Sims : We were very pleased with the outcome. I think, again, our case was affected. It might have been an even better outcome, but we were very pleased with the outcome. The $1 million fine was, I think, eight to 10 times more than what we've ever achieved before with secondary boycotts, so it does show that the law can work, so it does set a precedent and, in that, it does send a warning. That's the way, effectively, we work. We see unlawful activity, we take action, we get results and, hopefully, that sends messages to others not to do it. We're really hopeful that this does send the message. But, if it doesn't, if we see more secondary boycott activity, we most certainly will act.

CHAIR: Do you have any other current inquiries in relation to this sort of conduct?

Mr Sims : We certainly have had a number of investigations. As I say, it's a difficult area. Mr Bezzi, could you perhaps elaborate?

Mr Bezzi : Yes, we do. They're at a stage where the details of them are confidential. We do have one matter that's very close to there being an announcement. When I say 'very close', these things are always hard to be absolutely certain about in terms of timing, but at this stage we're hopeful that there will be an announcement within the next few months.

CHAIR: Does it involve another union?

Mr Bezzi : I'd rather not go into the details at this stage, if that's okay, because of the nature of the matter.

CHAIR: Mr Sims, just in general there have been a number of contentious issues concerning penalties and the scope of penalties available to the ACCC. How important are high penalties in acting as a deterrent? What is your position currently in relation to the penalties available to you?

Mr Sims : I think this is a hugely important issue. As long as I've been in this job, I've increasingly come to the view that you do need high penalties so that company boards take notice when they're found to have breached the law. We've had cases in competition matters—the penalty, for example, against Flight Centre was $11 million, and it was immediately dismissed by the financial analysts as not being consequential. That doesn't help in sending a deterrence message. We've had penalties on the consumer side which, again, have been below the profit earned from the activity and, again, pass without comment. What we desperately need is penalties that send a message to the boards and top management that what they've done is serious and they can't just say, 'Oh well; that's a shame;' it really is serious. I think we need penalties of tens of millions of dollars. Sometimes we need penalties of well over $100 million to get people to sit up and take notice and say: 'This is important. These are things you shouldn't be doing.'

I'll come back directly to your question. Of course, no board or senior management want their company deliberately going out and breaking the law; there's no doubt about that. It's the effort they put into making sure that that doesn't happen; I don't think there's enough effort going into making sure the law is not breached. I think companies are still a bit too relaxed about their organisations pushing the limits. As I say, you need consequences.

To answer your question: there's a different answer on the competition side from the consumer side. On the competition side, we have had an excellent penalty regime since 2007, put in place by the parliament, which is a maximum of $10 million per breach or three times the profit from the offending activity, or, if you can't determine that—and generally you can't—it's 10 per cent of turnover. The problem is very much with the size of penalties for large companies. That's why the 10 per cent of turnover is important. If you've got $100 million company, that's $10 million. If you've got a billion-dollar company, that's $100 million.

Particularly in the last few years we've been working to get the legal system generally, particularly the legal community—and I'm talking before things get to the courts—to realise that the law as changed in 2007 and precedence for what's an appropriate penalty set pre-2007 are no longer appropriate, because parliament changed the law in 2007 from a $10 million penalty to something that could be up to 10 per cent of turnover. That's a big change. I think we're starting to see that change reflected. The penalty in the most recent case was—

Mr Bezzi : It was $45 million, for Yazaki.

Mr Sims : It was $45 million. That was a big step up, that the Full Federal Court determined. The first-instance penalty was considerably less than $10 million.

Mr Bezzi : I think it was $12 million.

Mr Sims : Okay; it went up a lot. Given the size of the company, because Yazaki's not that big, getting the penalty of $45 million is important. It signals clearly that, when we deal with larger companies, the penalties will be well over $100 million. So I think we're on the right track with competition penalties.

As you know, Chair, the consumer law penalty is a maximum of $1.1 million per breach. Parliament has before it a bill to increase those penalties, and have them the same as the competition law penalties. We think that would be a great thing. The very idea that competition law penalties should be higher than consumer law penalties is ridiculous. The harm done by breaching consumer law can be equally as bad as by breaching competition law. I often use the case of Nurofen as an example. They were misrepresenting that particular pain relief tablets could target just one element of pain when, in fact, they were general pain relief tablets. People were paying double for that; so they were paying twice the price they should have. We rarely find a cartel case where they're doubling the price. So consumer law breaches can be at least as egregious as competition law breaches, and, often, they are felt much more directly by consumers.

CHAIR: So it's very important that the government's bill before the House be passed?

Mr Sims : I think it's absolutely crucial, and I think it will be a great day for Australia when it is passed. I certainly will be celebrating, Chair!

CHAIR: There was also an issue with the competition policy review bill, which sought to impose much larger penalties for breaches of secondary boycott provisions. That was not universally supported. Does that concern you?

Mr Sims : I think it would be good if all the competition law penalties were the same. I think you do need to send a considerable deterrence message. This is all about deterrence and stopping illegal behaviour, so, yes, I would prefer that the penalties were the same as for other breaches of the competition act.

CHAIR: Before I hand to the deputy chair, I just want to ask you about the Productivity Commission's commentary in its draft report saying that Australia's financial system is without a champion amongst the existing regulators. What's your view with the suggestion of the Productivity Commission that the ACCC is well-placed to do more than it currently can do for competition in the financial system?

Mr Sims : As you know, Chair, directly and completely as a result of this committee's work, we were given funds to establish a financial services unit and that allows us not just to reactively look at the financial sector but to proactively look at it. We did reactive looking when we were before this committee and we were being urged to be more proactive. I think in December 2016, we had been successful in cartel cases against Macquarie Bank and ANZ so we had been active in the financial sector, but I accept that was dealing with breaches once they have occurred. We now have the funds to be proactive and we think that can allow us to play a competition champion role. So we are now with that proactive role, much more engaged with APRA, in particular, also the Reserve Bank, even more so with ASIC; although ASIC, as a fellow enforcement regulator, we have always worked fairly closely with. We are getting asked for advice on competition issues. I think we are well placed to play that role and, in fact, it is largely happening.

CHAIR: Is it just a matter of funds or are there areas you would like to see changes in the law or greater powers available to the ACCC?

Mr Sims : No, I think we have got the powers. As you observed at the start when you were introducing our session, the Harper changes have given us the laws we need. We are very comfortable with the competition laws. There are a couple of little changes I would like on the consumer law side but, on the competition law side, we have got what we need. I think we are now well placed to have a big influence in the sector. Dealing with breaches of the law sends important signals about compliance with the law, but being proactive is also important too.

You mentioned the lack of transparency in the financial sector. That is a big issue and it is a big issue in the electricity sector as well. Companies do try and obscure the prices of their products and, in the banking sector, that is quite clear. If you want to really get good price discovery—what are the lowest prices in banking—you have got to apply for a mortgage from more than one bank, and we all know how tedious that is. That is a significant issue. It is significant for consumers because they find it hard to get the best deal and it is significant for the economy because you have got a whole lot of people running around wasting their time to get price discovery in a market that should be much more readily available. So that is where these issues are not so much breaches, although at times they can be; and certainly in the electricity sector, the obscurity there does, on occasion, lead to breaches. But on banking, I think it is more just exposing this behaviour and that in itself is helpful, and then thinking about what the answer is. I don't think it is so much a change in competition laws; it may well be recommendations to government, potentially to industry, on how to deal with the problem. That is certainly something we are focusing on as we get into our work. That proactive look can be really helpful to improving sectors and how they perform and how they deliver for consumers.

Mr Bezzi : Just before you hand over, can I correct the figures that I gave in relation to the Yazaki matter. The first instance penalty was $9.5 million and that was increased on appeal to $46 million by the full court.

Mr THISTLETHWAITE: Mr Sims, I have some questions about the inquiry into mortgage pricing, the interim report. In your media release of 15 March you were quoted as saying:

The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort.

You talk about existing customers being disadvantaged, really, for their loyalty, something I hear quite a bit. You start out paying a mortgage and you think you're getting a great deal, and before you know it a couple of years later you're paying 1½ per cent more than you started off with. Is this an issue that you think the banking royal commission should be looking at and dealing with?

Mr Sims : The honest answer to that is I haven't really thought much about it. It's certainly something we're focusing on, so it's been more an issue for us to deal with, but I'd be delighted for others to deal with it as well. The more minds that focus on this the better. As I said earlier to the chair, it is a broader issue. We find it in electricity as well, which is the other market top of my mind. You've got companies that, basically, are saying, 'Well, if they don't ask for a lower price, why should we give them one?' And you've got consumers sitting there saying, 'I'm being loyal to that company and they're not looking after me.' It's customers losing out but there is a real friction in the community, I think, between what consumers expect and how corporates behave. It's worrying at a number of levels.

It's certainly something we're focusing on. It was also something focused on in the Productivity Commission's interim report. I'm going off memory, but I think they talked about APRA publishing a median discount that was made available so that there's more information out there in the market. I'll be interested to see what the Productivity Commission finally says on this with its final report, which is due in a week or so. So we'll get their input. We are focusing on it. I'd be delighted if the royal commission does as well. I think a bit of transparency on these things is helpful. But it does need sorting out. It's not a satisfactory position at the moment.

Mr THISTLETHWAITE: Do you think it comes from a lack of competition in this sector?

Mr Sims : I think it does. Whenever you get this lack of transparency, this obscurity, it's allowed to happen, because the small number of other players see that the others are doing it. Nobody wants to break ranks. If you had a more competitive market, someone would find it in their interests to differentiate themselves with a clear product that could attract consumers. In my view, both in electricity and banking but particularly in banking, it reflects a lack of competition.

Mr THISTLETHWAITE: They're relying on that stickiness of customers, aren't they—that people are busy in their lives and they're too busy to think about doing the research to try to refinance a mortgage or switch part way through the payment of a mortgage?

Mr Sims : That's exactly right. That's why, certainly one of the answers—I don't think it's the complete answer but it's an important part of the answer—is the access to data, where people can more readily switch. We're now the lead regulator for the open banking arrangements that the government announced recently. If consumers can more readily pass their data to an accredited entity, and that entity could well not only help them find a better deal but help them transition to make it painless, they don't have to spend as much time. They've got a reliable mechanism for getting the best deal. I think that can help a lot. I think that's part of the answer.

Mr THISTLETHWAITE: Is the issue in banking as well that you've got this contest between stability and competition and it appears that stability will always win out? An example of that would be Bankwest and the Commonwealth Bank, and St George and Westpac.

Mr Sims : Yes.

Mr THISTLETHWAITE: You've had consolidation of this market. With the Bankwest example, the bank was facing falling over. Is that an issue, do you think, that there might be a need for some recalibration?

Mr Sims : I think the answer's, yes. If I could move away from those two acquisitions, which were some time ago and occurred in the middle of the financial crisis, banking is an unusual market. You've got regulation in place to make sure you've got a stable system. Sometimes that regulation can be so focused on stability that it can reduce competition and limit the ability of new players to get there. We're all aware of the prudential requirements that favour the larger banks, giving them a 30-basis-point pricing advantage. In concept, there shouldn't be a trade-off in the sense that, if you want strong banks, you want banks that can face strong competition. That's the best way to get strength—make sure you can survive in a competitive market. But there is a sense in which the way we're trying to bring about stability might limit that competition. That's certainly an issue that we're going to be focusing on, and we'll certainly engage APRA in that discussion.

Mr THISTLETHWAITE: In that interim report, something that concerned me—and it was in the last paragraph of your media release—was in relation to the requirement for the ACCC to look into whether or not any of the banks had passed on the bank levy in any of their rates or their fees and charges. The last paragraph says:

Indeed, one bank considered whether the costs could be passed on to customers and suppliers at a range of different time periods, including after the end of the ACCC inquiry.

How did you discover that?

Mr Sims : We do market studies in two ways. When we initiate them, we don't have information-gathering powers, but, when we're instructed to do an inquiry by the Treasurer, we do. We asked them for information. It's a criminal offence not to provide it to us, so we got hold of the emails.

Mr THISTLETHWAITE: So, it was an internal email between—

Mr Sims : In one of the banks, yes.

Mr THISTLETHWAITE: Can you tell us which bank it was?

Mr Sims : No, I can't. I'm sorry. We made a deliberate decision that we would not do that. There's always a trade-off between what you make public and what you don't. We thought very carefully about this and we decided that we could provide the transparency and information to the public through emails, such as the one you've focused on, without necessarily identifying the bank. But it is something we find a lot. Getting back to some of the earlier questions, when we look, it does change behaviour—just because we're looking. We've certainly found that gas prices come down when we start looking at them.

Mr THISTLETHWAITE: Will it be revealed in the final report which bank this was?

Mr Sims : We haven't made that judgement, so that's something else we'll have to think about. We haven't turned our mind to that yet.

Mr Bezzi : There's a particular confidentiality regime that applies to the release of information, and we have to go through a statutory decision-making process in relation to material over which there's a claim for confidentiality.

Mr Sims : We spend a few hours each time going through this as a commission—meeting the test of what we can and can't reveal. So, it's a decision to be made.

Mr THISTLETHWAITE: On face value, that seemed like a bit of sneaky behaviour by one of the banks—passing on costs related to the bank levy to their customers after you've finished your inquiry in order to avoid any scrutiny. There's been quite a bit of concern about some of this trickiness and sneakiness by banks in the industry. Don't you think that the consumers and the customers of that bank deserve to know?

Mr Sims : I think two things: first of all, as I say, we'll have to consider the legal tests when we come to the November report, but, secondly—and this is where I think some of the press commentators sometimes get a bit confused—we're not going away. The levy was the first inquiry, but we're there with a permanent role. All our other inquiries come to a conclusion; they all finish at a certain date. But the banking one goes on forever, so there's nothing to stop us, in a year or two, saying, 'What actually did happen?' So, I think that tactic won't work. But I hear your point, and we'll take that into account.

Mr THISTLETHWAITE: Do you think you'd be willing to provide it to the committee confidentially?

Mr Sims : I would have to pass to my colleague.

Mr Bezzi : We'd have to check the statutory provisions. They're quite significant provisions which carry a criminal sanction.

Mr KEOGH: Mr Bezzi, are you insinuating that you think there's a provision in your act that abrogates the parliamentary power to request it?

Mr Bezzi : No, I'm not suggesting that.

Mr Sims : He is suggesting, though, that if we do something wrong in relation to this law we could go to jail.

Mr KEOGH: I was just clarifying.

Mr THISTLETHWAITE: I want to move on because I'm running out of time. I want to ask some questions about mechanics. Can I show you this email?

CHAIR: I understand that you'd like to table this as an exhibit. Is that right?

Mr THISTLETHWAITE: It doesn't need to be tabled. I just want to ask some questions about it. I'm happy for them just to see it.

CHAIR: Before any documents are handed over, this would need to be considered in a private meeting to see whether we have the agreement of the committee. In the absence of that, could I ask you to perhaps talk to the email or the document, because we wouldn't be able to agree to that unless we had the consent of the committee.

Mr THISTLETHWAITE: Okay. I'm probably going to have to reveal a name here because I can't hand it to you. It's an email from Peter, an FCA customer assistance manager—and FCA is Fiat Chrysler Automobiles. The email was sent on 19 June this year, 2018, and it relates to a request by an independent mechanic for technical information. I think you're aware of this.

Mr Sims : Yes, I'm very much aware of the issue.

Mr THISTLETHWAITE: Peter from FCA says to the independent mechanic: 'Hi, Peter. We do not give out technical information to independent repairers. If the customer requires a repair, they must take the vehicle to an authorised dealership.' I can provide you with the details and phone numbers.

Mr Sims : Please do.

Mr THISTLETHWAITE: What do you think of that email?

Mr Sims : I'll make two comments and then invite either Mr Grimwade or Mr Gregson to add theirs. One, I think it lends tremendous strength to our recommendation for there to be a mandatory code so that manufacturers have to provide technical information so that independent repairers can repair their vehicles. The days are long gone where—my father was a motor mechanic and he could repair anything without any assistance from anybody, basically, but he couldn't do that today. It's much more technical. You've got to have particular technical information to be able to do it. In our view, this is a very important issue, and we're keen for some form of regulation to come in to mandate that. Your example is excellent evidence supporting some regulatory action in that area.

Mr THISTLETHWAITE: Is that a breach of consumer law?

Mr Sims : That's where I was going to go with my second point, and I'm going to defer to my expert on my right. It smells to me like it could be, because it sounds to me like it's misleading. Mr Gregson, good luck!

Mr Gregson : It's certainly misleading to require a party to go to a particular repairer, absent which any rights are waived in terms of the repairs made. Consumer guarantees outlive any contractual requirements. First of all retailers and then manufacturers owe responsibilities under the consumer guarantee laws. Sometimes, depending on the nature of the representation or the nature of the restrictions, yes, there might be an inconsistency there. But I think the real issue we're looking at there is the competition one that we've dealt with through our market study on new vehicles and, as Mr Sims mentioned, the advocacy we're putting in place in relation to a code. We can look at the consumer law issues there as well, but they would only arise in certain circumstances.

Mr THISTLETHWAITE: Would you have a look at this case?

Mr Sims : Absolutely. Please. Very keen.

Mr THISTLETHWAITE: You've recommended a mandatory code. When was the last time that you discussed this with the government?

Mr Sims : I should clarify before answering the question—and Mr Grimwade might help me out here—that we've recommended that action be taken to mandate that manufacturers do make this information available, and we put three options as to how that is done. One of those options is the code, so that was my fault for going shorthand. The last time we discussed it with the government was probably five or six weeks ago I guess.

Mr Grimwade : I might just add a couple of things. The other two options that were addressed in the new-car-retailing market study were a recommendation that this could be mandated either through a code, through amendments to the Motor Vehicle Standards Act and, I think, by specific legislation. At the staff level, our market studies team has been engaging with Treasury, which has responsibility for considering and recommending the design of such a regulation. I believe there was a staff-level meeting as recently as yesterday.


Mr Grimwade : With Treasury. As you would be aware, the new-car-retailing market study was a very extensive and complex investigation, and took 18 months. There were surveys, numerous submissions and stakeholder round tables and so forth. Our team is assisting the Treasury team to understand the context and the detail of the study.

Mr Sims : If I could add—we accept that, whichever way it is done, it is more regulation. We have recommended a mandatory code in the dairy industry, we have been pushing very hard and were successful in getting penalties associated with the franchising code, so we do put a lot of this stuff to the policymakers. They certainly like to look at it very carefully.

Mr THISTLETHWAITE: Can you inform us in what timeline the Treasury has indicated to the ACCC that they would like to implement something here?

Mr Grimwade : I am not aware they have actually indicated to us a timeline they are working to. It is probably best broached with Treasury directly. I don't know.

Mr Sims : Except they are treating it as a priority. There is no doubt. It is not as if—'Go away, come back.' No, they are certainly working on it as a priority. But as to how long that takes, we don't know.

Mr THISTLETHWAITE: I understand a working party that has been established?

Mr Grimwade : I wouldn't say a working party. From our perspective, we had a market studies team that was responsible for developing the report and recommending its publication by the commission and recommendations being made to government. Our market studies role really ended at that point but, because of the expertise that exists in that team, we are assisting the Treasury to understand the issues that we uncovered, so that they can best develop what they need, in terms of what they will recommend to government.

Mr THISTLETHWAITE: You might need to take this on notice: can you provide to the committee the dates of the consultations that have occurred between ACCC and Treasury?

Mr Grimwade : We can do that. I should note that some of these might be informal—they might be phone calls between different staff members. I think there have been two meetings, but I am very happy to take that on notice.

Mr Sims : Whenever we do these market studies, we never vacate the field. We stay on as advocates to see if we can get these things implemented. So, we certainly are going to be putting all of the resources that we can to help Treasury work their way through it.

Mr THISTLETHWAITE: Is the ACCC still happy to take evidence from independent mechanics about these instances?

Mr Sims : Absolutely. The email that you cite is very helpful evidence for us to look at in itself, but also to pass on to Treasury and just illustrate the problem.

Mr BUCHHOLZ: I need to disclose that I emailed earlier on today a virtually identical question from a constituent—to give some background on the questions I am going to ask. Do I need to fix something here?

CHAIR: No. You can do it—there is no issue in a private capacity.


CHAIR: It is just through the committee that we would need to make a decision—

Mr BUCHHOLZ: I was just trying to give you guys a head start—

CHAIR: Just to clarify: it is just through the committee that, in terms of tabling or exhibiting a document or handing a document over during proceedings, we would need to make a determination. But there is no issue with a member of the committee privately providing any particular piece of correspondence to the ACCC.

Mr BUCHHOLZ: No worries. I thought Mr Thistlethwaite's was quite—

CHAIR: And, of course, the deputy chair is entitled to do that, as well.

Mr BUCHHOLZ: The question comes from a grower of mine and is about the Horticulture Code of Conduct. He knew I was having a chat with you guys today. I have flicked the email to you, but if you could get someone to give him a call it would be ideal. My question to the ACCC is this: in the code, why didn't they identify farm-based grower-packers as a legitimate supplier in the produce industry, when it is the biggest supply line? He is saying that he doesn't fit into either merchant or agent. He grows his own product and then he has other farmers grow for him. He will give them the seed, he then goes and gets a dirty carrot out of their paddock and spends 66 per cent of the cost taking the top off it or putting it into a plastic bag and chopping it up in different ways. So there is a point where he doesn't fit into either of the categories. He said a vast majority of the supply chain are finding it difficult to comply with that code. He doesn't want to have to restructure his entire business. Do you understand the question?

Mr Sims : I do—and I will pass it to Mr Bezzi. As a commission, we have recently focused on some of these horticulture matters where there are problems of definition, because the code is really trying to make sure that people get dealt with fairly, that you are either selling the product to the wholesaler, if you are the farmer, or you retain ownership and they are your agent in selling it. The lack of clarity there has cost farmers a lot. It is a big issue. The new code has come in only recently—how some things are defined is tricky. We certainly would be happy to look at that because it may well be that exactly how the code is worded needs a bit of thought.

Mr BUCHHOLZ: Yes, please.

Mr Bezzi : I was just going the say that I do have responsibility for agriculture but and I am aware, exactly as Mr Sims says, that there are issues around some of the interpretation of the code. I think we would have to take on notice the exact circumstances that you have put forward.

Mr Sims : And, as you say, we will talk to the person. You have sent us that information. We will get in touch with them.

Mr BUCHHOLZ: Robert Hinrichsen—Kalfresh is their company. They do about $40 million a year in carrots, beans and cauliflower. He doesn't want to have to restructure his entire operation to be compliant with this. His operation is—the vast majority of the larger growers in the Lockyer Valley and the Fassifern, which are some of the biggest in the country.

Mr Sims : We will look at it.

Mr Bezzi : We will get our team to call him.

Mr BUCHHOLZ: Thank you. I want to understand the spot-pricing of electricity. I learnt the other day—and I don't know if this is correct, so I am just going to ask you to critique it—that if someone buying on the spot market wants to buy 100 meg of power and they buy their first 80 per cent at $40 and then buy another five or 10 per cent at $70 and then buy five per cent at a greater amount, but they buy the last five per cent at $200, the whole lot is then priced at $200. Is that correct?

Mr Sims : Yes. The market sets the price at the—it is like most markets, really. I know it sounds a bit weird, but the price is set at the clearing price. You've always had it that, traditionally, the cheapest players were the Victorian brown coal. Now you have the renewable energy that bid in at zero, but then brown coal used to bid in at $10-15, black coal would bid in at $20-odd and gas would bid in at $40 or $50—I am a bit out of date with my numbers. Then if it got really extreme and you needed diesel, you might be up to $200. That was the curve of bids coming in, and wherever that intersects with demand sets the price. So, yes, it seems weird that—

Mr BUCHHOLZ: But everyone gets the $200 at the end?

Mr Sims : Everybody gets the $200. Keep in mind—

Mr BUCHHOLZ: So, the bloke who quoted $40 is getting paid $200?

Mr Sims : Yes, but be clear that they're bidding in their operating cost. If I could take coal versus gas, because that's the easiest, and the traditional, way of looking at it. Coal has very low operating costs but very high capital costs. It can bid in at $20, but it actually needs, just to pick a number, $50 to make any money, because it has to cover its capital costs. It has to pay its debts, it has to cover depreciation and so forth. Gas, on the other hand, might bid in at $40. It only needs another $10 to cover its capital costs, because it doesn't have very high capital costs. They're bidding in their marginal costs. It's absolutely not a situation where I make an offer to you that I'm willing to sell you a product at a certain price and, lo and behold, I get a lot more than I was willing to sell for. It doesn't work like that. This is people bidding in their marginal costs. They need that higher price to survive. It is a bit more logical than it sounds. I have had a number of people raise this with me over the years. Believe me, it does work.

Mr BUCHHOLZ: Can we use that model for the dairy industry, because they are getting screwed.

Mr Sims : That's a very good question.

Mr BUCHHOLZ: They are getting screwed.

Mr Sims : I think the serious point with dairy is the mandatory code we've recommended, because I think you do have disproportionate bargaining power and I think that that often leads to outcomes that are not as good as they should be for dairy farmers. I think there is an issue there, but not quite in that way.

Mr BUCHHOLZ: How will the code assist a dairy farmer who's been forced to take a price underneath their production cost?

Mr Sims : Look, it will solve some problems, not all problems. At the moment, you can be, as a dairy farmer, asked to commit to a processor before you know what the price is that they're going to give you. Sometimes you can get extra payments from the processor, but only if you commit for the following year. There are various ways that make it hard for dairy farmers to work out where they can get their best price, so we think that a code could help that. We think a code could help with disputes. It's in those sorts of ways. Other than that, we'd like to help and see whether a bit more collective bargaining could help redress bargaining power as well.

Mr BUCHHOLZ: Is there any power that you have with the dairy industry? It appears that there are only two or three players—Parmalat, Norco and Lion—and then that's it. But, unlike when you go to sell at an auction or a marketplace, you have bidders, which create market tension, which puts upward or downward pressure on you?

Mr Sims : Yes.

Mr BUCHHOLZ: When these guys go to negotiate, it's cartel-like, whereby you have to agree to take their price, because it's not much of a negotiation. The other contracts don't mature on the same date, so you might have to wait six or 12 months before you can tender in with a competitor, and you have to throw your milk away while waiting that six months if you don't accept the price.

Mr Sims : Yes.

Mr BUCHHOLZ: The processors have really got them muscled up into a corner. Is there any strength that you guys have to say, 'Do your negotiations on the one day,' so that there's an ability to let the market forces play out in a true bid/auction environment, rather than the pressure being completely reversed out? You spoke about free market, but, even though we did deregulate it, the market is not deregulated.

Mr KEOGH: Well, it's deregulated, but the effect—

Mr BUCHHOLZ: Exactly; the effects aren't there for a deregulated market.

Mr KEOGH: It's not a market.

Mr Sims : I really think that the code, while not addressing all of those issues, can help in terms of how farmers get presented with prices from processors. When they're presented with those prices, I think it can help. It won't solve all the problems, but it can help. I also think we could have improvements to the unfair contract terms laws. If they were made more effective, they could stop unilateral price variations and other terms that farmers have to accept. I think that there are things we can do. Look, we're advocating for the code, just as we are the motor vehicle code, and we are going to be doing more advocacy on unfair contract terms.

Mr BUCHHOLZ: If you could pay a little bit more attention in trying to get a commonality of date of contract so that there's a capacity to bring some market pressure in that bidding process, which doesn't exist at the moment.

Mr Sims : We'll take that on board. It could be relevant. If the code gets accepted, which it hasn't yet been, something could be worked in.

CHAIR: Perhaps on notice you might be able to provide the committee with a bit more detail in relation to some changes to unfair contract law that you would like to see, or if you've had any further consideration?

Mr Sims : I would be delighted to do so.

CHAIR: Thank you.

Mr Grimwade : In relation to that, it might be helpful if we provide you a copy of our submission, which is public to the franchising inquiry, which makes some recommendations in relation to changes to the unfair contract terms laws.

CHAIR: Would that relate to the dairy industry?

Mr Grimwade : It's general. It doesn't relate specifically—

CHAIR: If there are any specific issues relating to the dairy industry, as Mr Buchholz has been addressing, if you could consider that and bring that back to the committee, that would be very helpful.

Mr Sims : Yes.

Mr KEOGH: Mr Thistlethwaite and the Chair referred to penalties issues, and you made reference to the legislation that's going through the parliament at the moment. When did you ask for those penalties to change?

Mr Sims : That's a difficult question, in the sense that we advocate in various ways. We raised it with various speeches that we've given. I would have to take that on notice to be clear—unless Mr Gregson has a clear view—but we've been talking about this for some years now.

Mr Gregson : We certainly have been talking about penalties for some years, but they really got momentum through the review of the Australian Consumer Law, which reported in 2017, being considered with a number of other amendments. It's certainly been moving quite quickly since the recommendations from the ACL review.

Mr KEOGH: It's certainly moving quicker than the ASIC ones, so well done. You're suggesting, though, that, when those changes are implemented, that would fill that gap where you've currently got, in some areas of your law, the capacity to get penalties that are, say, a percentage of revenue and in others you don't?

Mr Sims : Yes.

Mr KEOGH: Is the alternative penalty in those cases also a multiplier of the financial benefit?

Mr Sims : Yes. Usually hard to determine, but yes.

Mr KEOGH: Will that address the issues that came out in the OECD report recently, where they not only identified the low penalties in Australia but also provided a bit of a comparison of cases where the penalties being obtained in the EU, Korea, the UK or the US seem to be five to 10 times higher than what we're seeing here?

Mr Sims : Yes, it will address that.

Mr KEOGH: To the same extent?

Mr Bezzi : It will address it on the consumer side. On the competition side, there aren't any legislative changes being made. Really, it's a different exercise in terms of what needs to be done there to change. I think, as Mr Sims said earlier, we had the change in the law in 2007, but what we haven't really had is a change in our system to produce higher penalties that fit with that law.

Mr KEOGH: What do you mean by 'change to the system'? The examples that the report cites, as far as I can tell—maybe not Visy, but Qantas and Colgate—are all post 2007.

Mr Bezzi : But Qantas and Colgate applied the old penalties and the old penalty regime.

Mr KEOGH: So was the conduct pre-2007?

Mr Bezzi : It was, and—

Mr KEOGH: Were any of those cases in that table related to conduct post-2007?

Mr Bezzi : There are some cases now coming through that relate to conduct post.

Mr KEOGH: Why did that take so long? It's been 10 years now. I say that advisedly. I know it look a long time for the same thing to apply in a corporation space, but this is now a decade later.

Mr Bezzi : The litigation process is lengthy.

Mr KEOGH: It's not that long.

Mr Bezzi : We've just received a judgement that took the court over two years to write.

Mr KEOGH: Now you've received that decision, are you comfortable that you've now seen the dramatic increase that you would expect?

Mr Sims : We are a broad church here. I actually think the Yazaki finding by the full Federal Court has given us a bit of lift-off in this area, so I'm quite confident. But I'm hoping my more learned colleagues can—

Mr Bezzi : I agree, but the really telling part of the OECD report was that they said that in our jurisdiction we don't tend to discriminate very much between large businesses and small businesses. In the systems they referred to, they do. They say it's a fundamentally important thing to penalise businesses according to their size.

Mr KEOGH: If you have a penalty that can be determined based on not just the multiplier of the potential benefit but also a proportion of revenue or turnover, that would do that?

Mr Bezzi : That helps—exactly.

Mr Sims : Absolutely. That's the key change. The 10 per cent of turnover is the core issue to deal with penalties for larger companies.

Mr KEOGH: Is your concern, then, from the decision you received recently, that previous case law or previous penalty decisions, despite the fact they were under an old regime, may act as an anchor or a dead weight in being able to lift these penalties?

Mr Bezzi : Yes, that's certainly a factor, but the other factor—

Mr KEOGH: Is that a factor that was considered by the Federal Court in the decision that they made?

Mr Bezzi : It was not explicitly in their judgement. It did change the way the turnover was assessed. That led to the higher penalty. But really what we need to advocate for in court cases, which we're doing now, is for much greater weight to be given to the size of businesses than has been in the past.

Mr KEOGH: And that's not a matter of law; that's a matter of how you advocate—

Mr Bezzi : Interpret the law and how we apply it to particular cases.

Mr Sims : And how our barristers respond to that when we brief them and how the other side might respond if they're thinking about how they will deal with it. But, as I say, I personally think we've got lift-off now. We've still got a way to go.

CHAIR: Just for the record, can I ask you to clarify which court case or decision you were referring to in referencing a two-year wait.

Mr Bezzi : Yes, that was—

Mr Sims : It's on the tip of his tongue. He really does know it!

Mr Bezzi : Can I come back to you on that?

Mr Sims : Before we finish, he will remember it.

Mr Gregson : I just want to check because I don't want to—

CHAIR: More than two years to hand down a judgement is obviously very concerning.

Mr Bezzi : We've had a number where it has taken quite a while.

Mr KEOGH: Could I maybe augment the Chair's request and ask that you provide us on notice in writing the timetable for those—I think you are referring now to two cases—from investigation through to commencement of action to when the hearing concluded and the judgement was finally delivered and, if there was an appeal, the time line on that just so that we as a committee can get a good sense of the timing issues you are confronting and the citations.

Mr Bezzi : We can certainly do that. The case that I was specifically referring to involved Pfizer. It was a misuse-of-market-power case in which there was an appeal. I think it was nearly 2½ years, actually.

Mr Sims : From the hearing to the decision on the appeal.

CHAIR: Including the appeal?

Mr Sims : No, sorry. There was our investigation time, it was put to the court, there was the hearing time and the judgement time at first instance. Then there was an appeal. It was two years from the appeal hearing to the appeal decision. So that's just this bit. It doesn't include all those other bits.

CHAIR: All right, thank you. We look forward to receiving that further information on notice.

Mr KEOGH: I just want to change tack completely. Initial coin offerings have been a matter of some discussion, particularly with ASIC, in terms of the need to have them properly regulated and the concern about consumer vulnerability to these sorts of products. One of the issues that ASIC has raised and that others have raised is that, in some cases, these initial coin offerings are a financial product because they have some relationship to equity, but in most cases they are actually more properly described as a commodity because you're buying a transactional token, not a link to equity. Consumer protection in that circumstance is actually an issue for yourselves. There has been some discussion, as I understand it, around the potential for the ACCC to refer or offer co-powers with ASIC to try to create a single regulator for this sort of product. Has there been any progress on that?

Mr Gregson : There has, indeed. We have a good history—

Mr KEOGH: If I've mischaracterised anything in that description, please do clarify that. It seems to be quite a complex—

Mr Gregson : You're certainly right. With the carve-out of financial services from the Australian Consumer Law into the ASIC Act, there are a number of crossover matters that don't fit definitions perfectly. We have a good history of working with ASIC to identify who should be the lead regulator and, where there is any ambiguity on the legislation, to provide delegations. We have now over 10 standing delegations that deal with those types of crossover matters and they grow quite regularly. Most recently we provided a delegation from the ACCC to ASIC in relation to cryptocurrencies. That gives them the capacity to take the lead. We are always willing and able to assist them if there are any further issues, but the delegation has been in place since two or three months ago.

Mr KEOGH: Thanks for that. Can I ask you something about eggs—in particular, the marketing of eggs as being either free-range eggs or solely grown in one jurisdiction. Is that a matter that you look into regularly or is it really only prompted if there are complaints not just by consumers but by, say, other competitors? Or does it need to be pursued civilly by individuals?

Mr Sims : We have had complaints, including by competitors. When competitors complain, that can often be quite telling. We decided to proactively do work in relation to free range three or four years ago—perhaps more, but not much more. We sent out substantiation notices which said, 'Please substantiate in what sense your hens are free range.' As a result of that, we ended up taking, I think, four matters to court. Mr Gregson can clarify. We got penalties against four companies. So that helped clarify the law as to basically what access there needs to be inside the barn to have the eggs classified as free range. So we feel that's—

Mr KEOGH: I'm aware there was that action a few years ago. In terms of whether there is further infraction on that or there are concerns about whether things are now being properly marketed in accordance with what happened there, is that something that the commission is looking at going back to at some point or is it something that individuals or other businesses have to pursue themselves?

Mr Sims : I will pass to Mr Gregson to give a better answer, but it would depend on the extent to which we feel there is a widespread problem. We certainly felt there was a widespread problem before. I don't know whether Mr Gregson has a more up-to-date answer.

Mr Gregson : I will add to that. You are probably aware that the new free-range egg standard came into effect at the end of April this year. We provided guidelines to industry about how that works. That flowed from or had its origins around the same time as our concentrated actions and interest. It provides some helpful guidance to industry and consumers about free range. We aren't actively monitoring, but we do get complaints and we are looking at a few matters that are coming to our attention. We are considering presently what form of activity we might take to keep an eye on the industry in relation to the new standard. Just passing through the House recently was the final piece of the legislation that will give us the trigger to have the new full regime.

Mr KEOGH: Okay. Thanks for that. Relatedly, because it seems to be very topical at the moment and it caught my attention—I don't know if you've given this much detailed thought yet—what's your view of a vegetable product being described as a mince.

Mr Gregson : We have had some inquiries about this. It really does depend on the context and representation. If it's misleading consumers then that would be an issue.

Mr KEOGH: Does placement of a product—

CHAIR: Mr Keogh, sorry, that's the last question.

Mr KEOGH: That's fine. As part of that, does placement of a product within a store contribute?

Mr Gregson : Sure. We look at a full range of issues when determining whether something might be misleading. It's a whole contextual issue. I think the very use of the term 'mince', in itself, wouldn't. It comes down to broader issues. The final thing I'd mention is that there is also specific legislation that FSANZ, the food standards authority of New Zealand and Australia, are responsible for, and they might have more specific requirements.

Mr KEOGH: Okay. Thanks.

CHAIR: Thank you very much, Mr Keogh. I'd now like to invite Mr Kelly to ask questions.

Mr CRAIG KELLY: Thank you, Chair. Mr Sims, back in 2014 you opposed AGL's purchase of both Liddell and Bayswater on the grounds that it would substantially lessen competition. You were unsuccessful. The Competition Tribunal decided otherwise. Do you now think, in light of the wholesale price of electricity more than doubling in New South Wales, that you were justified in making the claims you did originally?

Mr Sims : Yes is the short answer. To elaborate: part of the reasoning of the tribunal, as I remember it, was the amount of excess supply, so what could be the problem? Of course that excess supply then went away, which just shows these things can vary quite easily. So, yes, I think it did justify the position we took then; but, as you say, the tribunal didn't agree with us.

Mr CRAIG KELLY: We've had the new change to section 46 of the competition act. Does the definition of 'substantially lessening competition' as the new test of anticompetitive conduct for a company with a substantial degree of market power include a company with a substantial degree of market power limiting production to the prejudice of consumers?

Mr Sims : I will make a couple of points and then see if Mr Bezzi wants to add anything. The essential issue is: is competition limited in any way? As you know, with Liddell, one of the prospective buyers was Alinta. As there are other ways for Alinta to enter the market—they can build capacity—in some senses they're not restricted in competing in the market, so that's an issue in determining whether there's been a substantial lessening of competition. But, going more directly to your question, it's also a question of what they're actually doing to restrict capacity. Of course you've got to establish that they are, because they're partly saying they'll close plant and build other plants. But I think the bigger issue is, for it to be a substantial lessening of competition, there's got to be some inhibition on competition. If competition's not inhibited then it can occur in other ways.

Mr CRAIG KELLY: So you're saying that limiting production, by itself, is not a substantial lessening of competition?

Mr Sims : I don't think, in and of itself, it is.

Mr Bezzi : It's difficult to talk in general terms. If we're talking specifically about Liddell—if that's what you have in mind—I think the answer is no, given our understanding of all the circumstances. Theoretically, what you put could give rise to concerns in other situations, but as I understand the circumstances of the arrangements at Liddell, where they're representing that they're going to replace the current capacity, it's difficult to see.

Mr CRAIG KELLY: On Liddell's replacement of the current capacity, since Hazelwood closed down in Victoria, New South Wales has exported more electricity into Victoria and imported less. Therefore, how can anyone equate additional capacity that AGL planned to put in the market, specifically due to the closure of Liddell, as opposed to replacing capacity from the closure of Hazelwood?

Mr Sims : You can't. As you implied, it's a dynamic market, so quite what's replacing what is hard to tell. I think, just for context, though, we have to keep in mind Hazelwood's closure occurred very quickly. There was not much notice to the market to adapt, and it immediately wiped the excess capacity from the market and led to a very constrained supply-demand balance. I think that shortage of notice was a big problem.

Mr CRAIG KELLY: AGL and their replacement plan talked about updating Bayswater with an additional 100 megawatts. Why is that considered to be replacing Liddell as opposed to replacing Hazlewood?

Mr Sims : I don't think it is. It's a dynamic market. The point that I think is really crucial is: if somebody is taking capacity out of the market, you do have to ask: what is stopping other people coming into the market? You still do need to wrestle with the question: where is the restriction on competition?

Mr CRAIG KELLY: Looking at AGL's replacement plan, arguably you could say it replaces equivalent capacity. What about production? Have you had a look at the production? They're talking about solar, gas, wind, which have low-capacity factors. So, if we looked at the actual capacity as opposed to the output, does AGL's plan reduce the output in the market if they close Liddell?

Mr Sims : It likely does. But the bigger issue here is: what's the restriction on others building capacity? We're the ones who want more competition. We're the ones who wanted Liddell owned by somebody else. Frankly, it would suit us perfectly if, in AGL closing Liddell, others were the ones building the capacity so that there was more competition in the market. To us, it's not been a question of, 'Well, are they actually replacing the capacity?' As you quite rightly say, capacity goes up and down all the time. I don't think there was any suggestion when ENGIE closed Hazelwood that we should take action against them. They withdrew capacity from the market, the price has doubled, but there was no suggestion that that was a breach of the act. The issue is: are there restrictions on others building?

Mr CRAIG KELLY: That's to demonstrate a substantial lessening of competition?

Mr Sims : That's right.

Mr CRAIG KELLY: There's an article in The Sydney Morning Herald from 5 April that states:

Consumers would get lower energy prices if power giant AGL sold its controversial Liddell coal-fired power station, the competition regulator has declared amid an intense political campaign to force the sale.

Australian Competition and Consumer Commission chairman Rod Sims said the sale of the power station to Alinta Energy would be a win for consumers and prevent any damage to the market from the plan to close Liddell in 2022.

It then quotes you:

"It would benefit consumers if Alinta got hold of Liddell," …

Is that accurate?

Mr Sims : Yes, it's pretty accurate—no, it is accurate. We are concerned about the lack of competition in the electricity market; therefore it would be pro-competitive to have someone else owning Liddell, just like we felt some time ago. But, just because something happening would be pro-competitive, it not happening is not a breach of the act.

Mr CRAIG KELLY: Basically what you're saying is that even though the conduct that AGL are engaged in will reduce or limit production and be to the detriment of consumers that doesn't tick the box of substantially lessening competition?

Mr Sims : I have two points to answer that. The answer is, no, it doesn't, for two reasons: one is that, as I say, there's no restriction on others building plant. There is plenty of notice out there that Liddell is closing; there are plenty of people who've done extensive modelling that says: when Liddell closes, prices will go up. There's nothing to stop other people coming in to take advantage of that. That's the key point. I've lost track of the second point I was going to make.

Mr CRAIG KELLY: That's all right. We can come back to it. Are you aware of a competition case held by the European competition commission in 2008 where they looked at the electricity retailer and generator E.ON in Germany where they found they had withdrawn capacity from the market?

Mr Sims : I'm not. I'll see whether Mr Bezzi is. But keep in mind that there are two sets of rules that can apply here: there are our competition laws, which is what we're discussing, and each overseas jurisdiction, as indeed we have in Australia, has energy-specific laws that talk about what you can and can't do. In Australia we've got laws that go to how you bid into the market. The AER, in the past, took Stanwell to court for the way it bid. It also lost the case. Courts aren't easy.

Mr CRAIG KELLY: On that case in Germany, the competition commission looked at the conduct of E.ON, which I'd say is a very similar company to AGL, with market share, both a retailer and a generator, and they found:

In the course of its investigation, the Commission came to the preliminary view that E.ON might have infringed EC Treaty rules on the abuse of a dominant ... position ...

It goes on to say:

... as a wholesaler on the electricity market, by deliberately not offering for sale the production of certain power plants that was available and that it would have been economically rational to sell ...

If I then go to article 82 of the EU competition laws, it says:

Any abuse by one or more undertakings of a dominant position within the common market ... shall be prohibited as incompatible ...

It goes on to say:

Such abuse may, in parti cular, consist in:

   …    …

(b) limiting production, markets or technical development to the prejudice of consumers;

So I put it to you: if you had that regulation in your toolkit, you could act against a company with a substantial degree of market power, in an essential service, where it engaged in conduct that limited production to the prejudice of consumers? As you've said, AGL's conduct would. Would that enable you to act if you had the same kit in your tool bag?

Mr Sims : I think we largely do have the same power, but—

Mr CRAIG KELLY: Hang on. With respect, you said ours is substantially less in competition and you said that AGL's conduct would reduce the output. You said it will harm consumers, but you can't act. But here we have a case in the EU where they were restricting production and harming consumers, and their law specifically states, 'limiting production to the prejudice of consumers' as ours is substantially less in competition. Isn't 'substantially less in competition' not exactly the same thing as 'limiting production to the prejudice of consumers'?

Mr Sims : I hear the point. The point I was going to make earlier, which I temporarily forgot, is that there's a difference. You've got a market and people are expecting you to bid in real time and, all of a sudden, you withdraw the capacity and the price spikes up. There are ways you could do that which would offend the electricity laws and, potentially, there are ways you could do that that could offend the laws we deal with. With Liddell, you've got something different. Liddell is closing in three or four years time. This isn't withdrawing capacity in the next five-minute bid cycle. Signalling that you're going to close something in four years time is a thoroughly different matter to what E.ON was dealing with, which withdrew capacity, as I remember it—a long time ago—in a short-term way. You just don't know what's going to be built in the next four years.

CHAIR: Thank you very much, Mr Sims. And, Mr Kelly, thank you. I'd now like to invite Mr Evans to ask questions.

Mr EVANS: Thank you, Chair, and, thank you, Mr Sims, and everyone, for being here. Staying on the topic of energy but focusing particularly on the topic of gas markets, your wholesale gas inquiry reported a couple of months ago. I'll come back to some of the findings in a moment. Of course, that inquiry and the monitoring into that sector is going to continue for a few more years. Your initial report last year got a lot of attention. You predicted a gas market shortage by the end of this year, 2018. Broadly, though, what we have seen over the course of this year is wholesale gas prices coming down and that, in turn, has been a significant reason why wholesale electricity prices have started coming down. In my state of Queensland and in a few other states we've seen announcements, both from the regulators, like the Queensland Competition Authority, and from some of the retailers, that from next week, on 1 July, electricity bills will also be coming down for households and some businesses. If I read the Queensland Competition Authority's report and a few other things correctly, the decreases they have identified are due almost entirely to wholesale electricity costs coming down, predominantly because of those gas prices—not from any real reduction in, say, network prices or changes in retailer's models.

So, if I compare this pretty encouraging result to what we feared might happen, it is a pretty big turnaround. There were some big headlines around January and February that your data, and what some analysts were doing with it, were predicting prices to be up to $400 or more—according to some of the headlines I saw in the papers at the time. AEMO has come out and said that the potential gas shortage has been averted, following this government's intervention to ensure sufficient domestic gas supply. Let's start with a broad question: are you happy with the way that gas prices have come down and, indeed, the way that electricity prices appear to be starting to come down?

Mr Sims : They are separate markets, I guess, although I totally accept the link. I'm happy with the gas prices coming down. Of course, they are still very high compared to what they were 2½ years ago, but the work that AEMO has done, and we have done, highlighted the difficulties a year ago and also highlighted that the major LNG players were going to sell a lot of gas on the spot market at the same time that our market was short. That prompted the government to get the gas producers in, and that pressure has meant they have provided more gas and that has brought prices down. So that is very pleasing, but the prices are still high. But they have almost have halved from their absolute peak to where they are now, and that is a good result.

With electricity, yes, those gas prices have had some feed-through to the electricity market, but there is still a lot more work to be done on electricity. As I was saying to the chair earlier, we think there are a number of things that can be done to get prices down, and we'll be passing that through to the Treasurer today.

Mr EVANS: Let's come back to electricity in a moment; I have a few more questions on gas. In your interim gas inquiry report a couple of months ago, I think, speaking broadly, the take-home message was that prices are down about 50 per cent from the peak last year, but the gas market is still not functioning effectively. If I read it correctly, you were attributing that mostly to ongoing problems with supply and transport and, looking long-term, at the moratoria and some of the red tape imposed by the states, but you also honed in on the issue of transparency in terms of gas customers not having enough information.

Mr Sims : Yes.

Mr EVANS: The ACCC said at the time that it would start publishing LNG netback prices and implement a few other measures to assist gas users to have better information and to be in a better bargaining position. How is that body of work going? Where's it up to and where's it going next?

Mr Sims : I imagine our series for the netback will come out in the next couple of months. We've done a lot of consultation on it. We have to negotiate with the people who have the information, so I would need to check, but I think we're planning to have that out in, probably, September.

Mr EVANS: The billion dollar question, I suppose, on wholesale gas prices is: do you think they've stabilised?

Mr Sims : Well, they are linked—there are two things going on. Because we are now exporting gas and the east coast is now subject to that export price, there is tremendous uncertainty. I read that there are some people who are convinced gas prices are going up and some people who are convinced they are coming down. There has been upward pressure recently, but, on the other hand, the extra gas being put into the market has seen prices come down at the same time as world prices have gone up. So there are two things going on. I am hopeful that prices have stabilised, but it is certainly something that we have got to keep a close eye on, and we will be.

Mr EVANS: Maybe if we can try to put some sort of time lines around that. AEMO made a statement along the lines of no domestic gas shortages until at least 2030. Are you that confident?

Mr Sims : We are still doing our own work and we will come out with something in July that will give our view. There are certainly things that have got to happen on the supply side to justify that statement, which we need to have a closer look at, and there are, of course, issues on the demand side. How much demand will there be for gas-fired power generation? So, I think there are things that we have got to assess on both demand and supply sides before we come to that view.

Mr EVANS: I'm happy for you to take it on notice. There was a small article a couple of months back that caught my attention where the ACCC was quoted as saying it was concerned that six LNG producers in WA and, I think, the Northern Territory, were sharing information with each other about their maintenance and shutdown schedules. Reading between the lines, I think the concern seemed to be that those gas producers might be gaming each other's shutdown and maintenance periods and reaping some sort of temporary windfall gains out of the process. Can you give us an update on that matter?

Mr Sims : If I remember correctly—and if I am wrong, we will come back to you—that is part of an authorisation application for them wanting to work together. We haven't in any way identified that they have done anything like you have suggested; we were concerned that if we authorised the behaviour they might. I think there have been previous authorisations in place. We are looking at this issue again and we will be coming to a decision in the next couple of months, because that is when these things normally need to be decided. It is a matter of making sure that any coordination of maintenance that we authorise doesn't have unintended consequences. The logic is there: you don't want them all closing for maintenance at once; and you have limited people able to do the maintenance, because it is specialised work. So we see the advantage of a bit of coordination. We just want to make sure that it's not abused.

Mr EVANS: When we were here last time we had a discussion—and I think it was shut down because of divisions in the House—around the fact that the Queensland government owns about two-thirds of the generation capacity in Queensland. You were pretty unequivocal and clear in your comments at the time that you were disappointed—I think was the word that you used—that the Queensland generators seemed to be bidding high at the times of high demand just because they were able to and they knew they could get away with it and, therefore, gouging profits not just out of the customers and users in Queensland but presumably right around the NEM. Do you have any update on what has happened since then?

Mr Sims : It is absolutely clear that they do have that ability, because we all had evidence of that when the Queensland energy minister instructed Stanwell to curb its bidding—prices came down straightaway. The evidence is there that, because they have got over 60 per cent of the capacity, there are times when they absolutely are certain they are going to get dispatched and so they can push the price up, and they did. The minister has pulled them back so that they hopefully won't do it as much in future. It is an issue which we are going to be providing recommendations on in our report.

Mr EVANS: Is there any breach of laws there?

Mr Sims : No. The problem with the electricity market is that, because it is a bidding market as it is—I was discussing this with Mr Buchholz earlier—and if you have entities that have too much capacity there are too many times when they know they can be dispatched, and that raises prices. So it is a problem with a lack of competition, but, in exercising power the way that they have, it is not a breach, unfortunately.

Mr EVANS: I'll just flag that I am going to have a few follow-up questions on notice in relation to a very, very different topic. There are some existing authorisations which are coming up for re-authorisation in the space of the music industry, and some authorisations of some associations that aggregate activities around how copyright and recordings are used.

Mr Sims : I am familiar with those.

Mr EVANS: I'll just flag broadly that I have concerns that since the last period of authorisation technology and the world have moved on, and there are significant risks that those authorised might be leveraging the authorised, potentially anti-competitive conduct into new industries and preventing the uptake and the use of new technology.

Mr Sims : We would be delighted to get that input. We welcome all this sort of input when we do these authorisations. They're very complex matters. Technology does move on, and that sometimes can mean when things are appropriate or not. We would welcome that.

Mr THISTLETHWAITE: Thank you, Mr Sims. Has the ACCC provided the government any advice on the 3.5 gigahertz spectrum auction?

Mr Sims : Yes. We have been asked for advice and we have provided that advice.

Mr THISTLETHWAITE: What was that advice?

Mr Sims : We eventually do make our advice public, but at the moment that's advice that has gone to the minister. I think it's appropriate that we leave it there for the moment. We do make our advice public once the decisions have been made.

Mr THISTLETHWAITE: Do you have any concerns about the amount of spectrum that's being auctioned and the number of bidders that are bidding for it?

Mr Sims : It's clear there are competition concerns there. I think just about everybody would accept that there has to be some form of competition limit. The question is, what is that limit? We do have a fantastic opportunity to make sure we end up with four players in the mobiles market, and it would be really good to make sure that we do.

Mr THISTLETHWAITE: Is that concern related to a lack of bidders, a lack of people that are interested?

Mr Sims : No. There are a lot of people interested. Unfortunately, there is only 125 gigahertz of spectrum available—sorry, I deal with too many industries—only 120 megahertz of capacity available. So really there's not as much capacity available as the bidders would like. You need competition limits because whenever companies bid for capacity, they're bidding firstly for what they need, and they're bidding for what they can prevent others getting access to. Whenever the companies do the bidding, they're both working out the value to them to use it and working out the value to keep it away from other people. There are enough bidders out there. Unfortunately, there's not a lot of capacity. So there's definitely a need to make sure that the big players can't soak up all the capacity and exclude the other players from the market.

Mr KEOGH: Do you look at each block of spectrum that's being bid on, or do you look at the overall spectrum that would be available for that use? If other players have already acquired spectrum in previous processes—

Mr Sims : That's factored in.

Mr KEOGH: So you're looking at the whole, and not just each process?

Mr Sims : Yes. We're seeing it as the 3.4 to 3.6.

Mr KEOGH: Maybe if I put it a different way. Are you looking at just what's coming up for bid, or are you looking at everything that would be available for 5G operations?

Mr Sims : Everything that would be available for 5G, keeping in mind that's in the 3.4 to 3.6 band. That's right. So the fact that Optus and NBN have already got it is fully factored in to our advice, yes.

Mr THISTLETHWAITE: So in terms of the investigation that the ACCC undertook into speeds that were being sold that couldn't be delivered, and the subsequent action that you took against Telstra and Optus, was that investigation initiated by the ACCC, or was it a request from the government?

Mr Sims : I'll take that on notice. The essence of the matter is that it was something that we were aware of but we also did get correspondence from the minister asking us to look at various things. I can't remember now. I'll come back to you on that. It was an issue that we were aware of, but I'm pretty sure we did get a letter from the minister as well.

Mr THISTLETHWAITE: If you could take that on notice and provide the date of that letter from the minister, that would be helpful.

Mr Sims : Yes.

Mr THISTLETHWAITE: When did the ACCC receive its first formal correspondence from the minister on the matter of speeds being sold that the copper network couldn't deliver?

Mr Sims : I'm not aware. I'd have to take that on notice, I'm sorry.

Mr THISTLETHWAITE: Okay. I want to quickly ask some questions about airports. It appears that if you want to make super profits in an industry, that's the business to go into—10 per cent growth, yet again, over the course of this year.

Mr Sims : Yes.

Mr THISTLETHWAITE: One element where they do make quite good returns is on parking around airports. Sydney Airport, last financial year, made a $97 million profit. That represents a profit margin of 72 per cent on revenue, which isn't bad. What can we do about this issue of parking around airports? I think there was an investigation last year which found that it was actually cheaper to fly from Sydney to Melbourne than it was to park your car there.

Mr Sims : Yes, it's a tricky issue. There are regulatory issues associated with the landing charges, which are a bit easier to handle. The car parking is tricky. One issue is: is there access for those who want to provide alternative ways of getting access to car parks? If you park at one of the car parks near the airport, they bus you in, so you've got to make sure you've got enough access to provide competition. That's one issue. The other issue is just making sure people take advantage of booking online, because where you really suffer is if you just turn up and say, 'I want to park the car.' If you look online prior to going to the airport, they know you know you've got a choice. You may be looking online to think about: 'Will I park at the airport car park or will I park at a car park close by, or will I take a taxi or whatever?' So there's advice we give to consumers, but the whole issue of the regulation of airports is something the Productivity Commission has, I think, in the last week or two, kicked off a review of and will certainly be giving a lot of thought to that. But the car park issue is a tricky one.

Mr THISTLETHWAITE: The ordinary response would be that there are competitors that set up around the airport, but, for an airport like Sydney, that's near impossible because there's no land available. There's one bus service into Sydney Airport, believe it or not. If you don't live near the train line, you've got no alternative.

Mr Sims : That's right.

Mr THISTLETHWAITE: It really is a monopoly, isn't it?

Mr Sims : Sydney is a particular problem, and the owners of Sydney Airport have demonstrated a very strong ability to take advantage of their monopoly position.

Mr THISTLETHWAITE: I want to finish off with some questions about this issue of the power stations. It is the fact, isn't it, that Liddell and Hazelwood are owned by the private sector?

Mr Sims : One was owned by MG and one by AGL.

Mr THISTLETHWAITE: Yes, that's right. The reason they're closing those assets down is because they're very old. A great person to speak to about this is Senator Doug Cameron, who worked on Liddell Power Station as a maintenance fitter in the 1970s, and he says that it was old back then. It's 40-odd years later now and it's gone beyond its depreciable life. How can anyone be critical of a company for shutting something down and providing plenty of notice to the market if it's something that's gone beyond its workable life?

Mr Sims : I certainly take the point about notice to the market, and that's what differentiates this issue from Hazelwood considerably. Quite what the working life of a plant is, I don't know—I am not an engineer. I've certainly been around long enough to know that plants can kick on for some time. There's no absolute cut-off. Just because you depreciate something over a certain number of years doesn't mean you turn it off at the end of that. It just means that the older the plant is, once it's fully depreciated there isn't much capital cost to recover, but your maintenance costs go up.

Mr THISTLETHWAITE: Exactly, and you spoke about marginal costs a moment ago. Your marginal costs start to go up because your maintenance goes up.

Mr Sims : It does. There's no question about that.

Mr THISTLETHWAITE: So, ultimately, it is consumers who will pay for that because they're bidding in at a higher price to cover those maintenance costs.

Mr Sims : It is an assessment. I'm not an engineer; I don't know. Certainly the older they are the more maintenance they need. There's no doubt that Liddell was the less reliable plant of Bayswater and Liddell. Bayswater is more modern and more reliable. I understand that. I just make the point that there's no absolute of when you close these things.

Mr THISTLETHWAITE: I don't think that the government should be in the business of forcing companies to keep assets going beyond their depreciable life, do you?

Mr Sims : As I was explaining to Mr Kelly—and we've had a number of very pleasant discussions on this topic—basically companies close things all the time and it's usually not of concern to government. This is a tricky asset here. But companies have the ability to open new plant and close plant.

Mr THISTLETHWAITE: AGL have got some land and an asset that is coming to the end of its depreciable life. The board has to make a decision about it. That board live in the real world and have said that coal-fired power is on its way out for a whole host of reasons, but predominantly because it produces carbon emissions that are a big factor in global warming. Australia has signed up to commitments to reduce the amount of our carbon emissions. Even putting all of that aside, it is the right thing to do by our kids, because they're the ones who'll have to live in this environment in the future. They've said that they want to keep that land and replace it with a new asset. You spoke earlier about it would work well if they did replace the capacity. They're saying that they want to replace that capacity and it is their plan to replace that capacity with cleaner generation assets, renewable assets. Isn't that a good thing?

Mr Sims : Our focus in our work is on the affordability. In the past all we observed is it would be better if we had more competition in the system. There are many aspects to your question, but I accept that they own the plant and they've got the ability to do things with it and they're providing enough notice. If others think the capacity to be short, they can build it.

Mr THISTLETHWAITE: Mr Keogh reminded me of an important point. In terms of maintenance there are technical costs as well in terms of capital upgrades to keep it going.

Mr Sims : Yes, that's right. There is stay-in-business capital as well as the maintenance costs. There's no question that, as these plants get older, the costs go up and there's no question that, when those operating and stay-in-business capital costs get up to a point, you close them. There's no doubt about that. I was just saying that there are no absolutes as to when you get there. It's an engineering question. We at the ACCC have not looked at, nor are we qualified to look at, when is the right time to close Liddell. We don't have that expertise.

Mr THISTLETHWAITE: Thanks very much.

CHAIR: Thank you very much, Deputy Chair. I want to finish with some questions to Mr Sims. I want to first of all reference your market study into the sale, regulation, maintenance and repair of new cars. I note that Assistant Minister Sukkar announced on 4 May that the government is consulting with industry and stakeholders in considering the design of a mandatory scheme. I just want to put that on the record. On 13 May the opposition announced that it would follow the government in supporting a mandatory scheme. Mr Sukkar on 17 May made reference to the fact that the 'government is absolutely committed to the principles of competition; the independent automotive repair industry is an essential competitive force which keeps a check on prices'. In light of the government's focus on this issue, how quickly do you think that we can get this mandatory code—if that's what you're recommending—in place? Is there anything else we can do?

Mr Sims : I'll say a bit and then Mr Grimwade can. There are a number of things you've got to look at. If you do mandate it in some way then the way you mandate it has to say that you've got to provide the information in this way and you've got to take into account existing systems, so there's a bit of complexity.

Mr Grimwade : I will just add two points. In terms of the speed with which this could be mandated and implemented, I really think it's a matter for those who are designing it, who are not us but the Treasury. One of the complications is that any scheme needs to have regard to the fact that security and safety information are not compromised in an access regime as well. There are some complexities about how you design that to ensure that the security information around locking a car and the alarms and so forth are not necessarily available to all.

Mr Sims : But these issues are solvable and they've been solved overseas, so there are ways through this.

CHAIR: I want to return to the issue with AGL and Liddell, and the reference the deputy chair made to Hazelwood, and note that the decision to close down Hazelwood was made very quickly with very little notice in the market. And the Victorian government tripled coal royalties, which also played a role. I think it's fair to say that that's had a very significant impact in the Victorian electricity market. What do you say about the importance of notice? And in relation to replacing capacity, AGL's time line is obviously an issue. If capacity can't be replaced quickly, surely that's an issue for both prices and competition?

Mr Sims : Hazelwood's rapid closure was clearly a problem. You just couldn't get capacity in time, so that was extremely unfortunate. There were estimates at the time that it wouldn't have much effect on price. Those seemed rather strange comments at the time and, as it turned out, it had a catastrophic effect on wholesale prices in Victoria and other states. With the Liddell closure, I think it's four or five years—it's certainly been a significant amount of time. I would just observe that you can, from start to finish, get a gas plant up in that time, so it is enough time for new capacity to come in and for the market to be aware of it. Particularly if the NEG design can get sorted out, you'd hope there'd be capacity built by other players as well as AGL. If this is on opportunity to get new competitors into the market, that would be a great thing.

CHAIR: But isn't the criticism about this issue focusing on the fact that AGL rejected an offer from a competitor to purchase the power station? That's where a lot of the controversy has been.

Mr Sims : Yes, that's right. In our view, that's not a breach of the act; it's a policy issue. As I understand it, just from reading the media, there were accounts of conversations held about whether it would or wouldn't be sold. All we've ever done is observe that getting more competition into market would be a good thing. We don't believe there's any breach of the act involved here.

CHAIR: Mr Sims, this is more a comment than a question. I just wanted to note in reference to the deputy chair's comments about airports that I agree. I think car parking is a very major issue, particularly at Melbourne and at Sydney airports. Avalon Airport, which is about to open a new international terminal, has got very good car-parking prices. I say that as a local member very much focused on my own region.

Mr Sims : I use the Avalon Airport quite a lot when I go and visit my family because, as you know, I come from your electorate.

CHAIR: Yes, it's a very good airport. There's a very exciting future ahead for Avalon. I want to briefly touch on petrol prices. We haven't raised petrol prices. It's a very big issue, particularly in regional Australia. The ACCC has done a lot of work on petrol prices, but I think it's fair to say that motorists and consumers still don't have the requisite confidence that they are getting the best deal, and there's still a very strong smell or sniff in the air of cartel behaviour happening in the petrol market. Can you update us on your work and how consumers can be given greater confidence that they are getting the best possible deal when it comes to the cost of petrol?

Mr Sims : Yes. We took most of the petrol companies to court when they had a system set up, when they were exchanging near-real-time petrol prices amongst themselves. We eventually settled what would have been a complex case, even though we were confident of our position, on the basis that they provided that information to the public. Now that that information is out there, there are various apps and web pages where you can get access to that information. While the petrol market is terribly annoying, because the prices in the cities go up and down a lot and the prices in the country are often high, you do have the capacity to look for better prices.

CHAIR: But not if you're living in a small regional town. That's one of the big issues, isn't it? Competition operates in a very different way.

Mr Sims : That is true, but we have done work in a number of places—Cairns is the one that's top of my mind but there are definitely others. In Cairns there are two service stations pricing 10 cents per litre below the others. They're there in Cairns.

CHAIR: Maybe they behave themselves when you're there visiting!

Mr Sims : No, I accept—

CHAIR: I think that might have also happened in Darwin, when you visited.

Mr Sims : I accept we had a bit of an effect on Darwin, but petrol stations in Cairns pricing 10 cents lower per litre has been happening for some time. There was one when we first looked, and now a new one has opened up. They are there. I accept there's a problem where those two stations don't always show up on the web pages, which is why more people would get to know about them if there was some compulsory system for showing the prices. It still is disappointing that the two players there, who are pricing lower, don't get more people coming to them, and that has an effect on the others.

CHAIR: What can be done about this? I think it's fair to say that consumers are still pretty unhappy with the petrol market and would like to see greater transparency and better prices.

Mr Sims : I think the more transparency, the better. We have a price monitoring role, as you know. Our job in monitoring is to help consumers navigate the very complex market. We'd like for there to be more tools out there, to make sure that people can see what the prices are. Even in regional areas—not all of them but many of them—there are different prices. Having those different prices known to consumers would be a great thing. There is definitely money to be saved, even in regional areas.

CHAIR: Could you give us, on notice, the tools that you might seek to put forward as a way of giving consumers greater transparency and access to competitive prices, if you would be happy to do so?

Mr Sims : Sure.

CHAIR: I want to return to the transparency of pricing—we talked about this at the beginning of the hearing—in relation to both electricity and residential mortgages. Have you considered some sort of standardised form? You made particular reference to the fact that when you're applying for a loan with a bank, it is a very long and complex procedure, and it's only by the time you get through it all that you might work out how much it's all going to cost. Have you considered whether there might be some standardised way that consumers can access the core price of a loan, by way of a one-page summary, before they go through the loan process so that they can more easily compare prices and so that there is greater transparency in the market?

Mr Sims : It's something we're going to look at. We've only just started on this area. Whether the open banking regime can help—because, of course, that could give more efficient price discovery—or whether, as you suggest, there is something else needed, I agree that it has got to be looked at. We will do that.

CHAIR: The government's action in relation to placing pressure on electricity retailers, some of whom were obviously gouging and only providing better prices when consumers threatened to leave them, has obviously made some differences in the market?

Mr Sims : Yes, it has.

CHAIR: Even so, would you like to see greater transparency and standardisation of electricity bills so that consumers can better understand the prices they're paying and are better able to compare prices?

Mr Sims : There is more that can be done there. We're putting recommendations to the government on that today, so I'll leave that there. But, hopefully, all will be revealed in the next couple of weeks.

CHAIR: We look forward to reading your report when it becomes public.

Mr Sims : Set aside a bit of time; it's a long read!

CHAIR: Thank you all very much for being here today and for your attendance. If you've been asked to provide additional material, which you have, could you please forward it to the committee secretariat. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. As Hansard may wish to check some details concerning your evidence, would you please check if the reporting staff have any questions before you leave. Thank you again for your attendance today.

Committee adjourned at 10:40