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Standing Committee on Economics
Australian Competition and Consumer Commission annual report 2018

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

COSGRAVE, Mr Michael, Executive General Manager, Infrastructure Regulation Division, Australian Competition and Consumer Commission

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

FEATHER, Mr Mark, General Manager, Policy and Performance, Australian Energy Regulator

GREGSON, Mr Scott, Executive General Manager, Merger and Authorisation Review Division, Australian Competition and Consumer Commission

GREISS, Mr Rami, Executive General Manager, Enforcement Division, Australian Competition and Consumer Commission

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

GROVES, Ms Michelle, Chief Executive Officer, Australian Energy Regulator

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

Committee met at 11:02

CHAIR ( Mr Tim Wilson ): 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, as well as friends from the Australian Energy Regulator. The ACCC is Australia's competition regulator and national consumer law champion. This is the first hearing with the ACCC since Commissioner Hayne released the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The royal commission examined the conduct of financial services entities and found serious instances of misconduct and conduct falling below community expectations. The Hayne royal commission found that competition in parts of the Australian financial services industry is not always strong and has not prevented misconduct considered by the commission. Given its responsibility for competition issues, it is timely to examine the ACCC on these matters and, I'm sure, more.

Arising from the royal commission and Productivity Commission findings, the government has agreed that understanding the longer term market implications of vertical and horizontal integration is an important component of promoting competition in the financial system. The ACCC's remit now includes considering integration issues in the financial system where they are identified as part of its market studies work. The government has also agreed to the royal commission recommendations that a working group be established to monitor remuneration reforms to mortgage brokers fees. The government financial services commission implementation roadmap has signposted that in 2022 the Council of Financial Regulators and the ACCC will review the changes to mortgage broker remuneration and operation of upfront and trail commissions.

The ACCC, in July 2019, released its final report of its inquiry into digital platforms and identified many adverse effects associated with digital platforms, many of which flow from the dominance of Google and Facebook. The ACCC made 23 recommendations to address the digital platforms' impact on Australian businesses and how Australians access news. Treasury commenced a public consultation on the ACCC's report and recommendations on 1 August 2019.

Since the committee's last hearing with the ACCC, in June 2018, the parliament has passed legislation to increase maximum financial penalties under the Australian Consumer Law, lifting the penalties to $10 million or three times the benefit from the conduct or, if that can't be calculated, 10 per cent of companies' annual Australian turnover. The ACL penalties now align with the maximum penalties under the competition provisions of the Competition and Consumer Act 2010.

The ACCC is also continuing to be active in investigations and court proceedings on cartel conduct and consumer protection. So you've been busy, which gives us plenty to ask about, I might add.

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 contempt of parliament. Before commencing, I refer members of the media to the requirement to fairly and accurately report the proceedings of this committee. We do have members of the media present or who, at least, will be listening. Mr Sims, would you like to make an opening statement before we proceed to questions?

Mr Sims : I'm happy to proceed to questions, because, as you say, there are a range of things, and I would rather deal with your agenda than go with ours. I'm happy to take questions, thank you.

CHAIR: Thank you very much. I'll start, then, and go straight to the topic on the front page of today's Australian newspaper, which says that the ACCC may propose to the Treasurer an inquiry into bank competition. Could you, first, confirm whether that is the intention of the ACCC.

Mr Sims : Could I just give a bit of background, then I can answer your question in a good way.

CHAIR: Sure.

Mr Sims : Our role in financial services actually owes quite a bit to this committee. We, as competition enforcer, have a role in all sectors in taking companies to court if they breach the Competition Law. I remember turning up in early 2017, and this committee asked us what we were doing about competition in banking. I said we'd just taken a couple of banks, big banks—ANZ and Macquarie—to court for cartel behaviour, but the committee pressed further and said, 'Why aren't you doing proactive market studies?' I said we didn't have the resources to do that. The then chair was David Coleman, who then went and got us the resources, obviously through the Treasurer. In 2017, with the May budget, the then Treasurer, now the Prime Minister of course, announced that we would have a permanent role looking at competition issues in banking. The idea was that was to start post the Productivity Commission's review—that is, they'd do the broad look and then we'd come along and pick out specific deep dives. The idea was there'd be a sequence of those deep dives. Of course, the only way we can do those deep dives with our information-gathering powers is if the Treasurer gives us a direction. That's how the powers get unlocked. Without the direction, we don't have the powers.

The first one looked at whether the levy had been passed through. The second one was in relation to foreign exchange. That has now finished, so we are in discussions with Treasury and will shortly be talking to the Treasurer about what the next one is. I'm afraid that headline came from a journalist who'd been ringing me up every couple of months, saying, 'When's your next inquiry?' I foolishly said we were talking to the Treasurer's office and the Treasurer about it. That's the beginning of that story. It's just part of a sequence of inquiries that was always intended, and quite what the next one is and when it will occur will come out of the discussions with the Treasurer.

CHAIR: Thank you for at least being straight about where the story came from, because it was very much going to be a line of questioning. In essence, though, the theme of it is that you do see an issue around competition in the banking sector. Certainly that's what your discussions with Treasury were about, and clearly it's something you're seeking to approach the Treasurer about. So what competition issues do you want to explore?

Mr Sims : When I was at a meeting of this committee in 2017 I was asked whether I thought there was a lot of robust competition in banking and I said I didn't think there was, and that's what led to where we are now. But, since then, in the inquiry that looked at whether the levy's getting passed through, we were surprised to see how little price competition there is between the big banks. They seemed to want to position themselves roughly in accord with each other. That's not surprising. Obviously, if one of them started a price war, they'd expect the others to respond, so they'd all lose money. When you have a lot of equal-sized players in a well-established market with common business systems you often get that sort of behaviour.

We don't think there is strong competition in retail banking, and I think that's evident from the study we did. We're also observing that, even though you've got some quite big players outside the big four, it's not clear that any of them are really displacing any of the big four or making serious inroads. Our general concern is that there is a lack of competition, and our doing these ongoing inquiries was what I'm sure the then Treasurer had in mind—to chip away and see how we can deal with each of those issues. As I said, we had a look at foreign exchange. How broad the next one will be, or how narrow, is something we'll be discussing with the Treasurer.

CHAIR: True, but surely you would have some remit or scope around your concerns about retail banking or competition in terms of mortgages? Is there any more clarity about the types of issues or themes you're interested in?

Mr Sims : I don't think so. It really is those two points—a lack of price competition, which seems evident to us, and, with all the other players out there, the issue around: why have we got four players who seem to be able to maintain their share and earn very high profits? If we're going to examine those issues then it does need an inquiry, because only that unlocks our information-gathering powers. If we don't have those then we'd just be doing a desktop study like anybody else; we wouldn't be adding the value that we think the ACCC can add. I think the then Treasurer, in announcing what he described as a 'permanent role in competition in banking', anticipated a series of reviews that would use our information-gathering powers to get at bits of the system and progressively make it more competitive.

CHAIR: Can I get some clarification: how does the ACCC see the role of small banks in competition, particularly in comparison to the big four, and particularly the risks of regulation design for the big four and how that flows through to the smaller banks?

Mr Sims : That's an issue. We've talked to APRA and ASIC about it, but it's probably something we'd need to examine a bit further as well. Obviously, we've had meetings with the Customer Owned Banking Association—if I remember what the acronym stands for—and their view is that, whereas some of the requirements are a burden on the big banks, they're a huge burden on the little banks. They would like differentiated rules. We're talking to people and gathering intelligence, and talking to APRA and ASIC, about these matters. The other thing, which is really important, is that we've been charged with bringing in open banking—a consumer data right in relation to the banking sector. We think that can play an important role in terms of consumer inertia and in trying to lower some of the transaction costs from switching. That's another front that we're working on as well.

CHAIR: But wouldn't the case then be perhaps that you're better off waiting for the implementation of open banking before going into a discussion around competition, because it is so clearly important?

Mr Sims : You could do that. More work might help shape CDR, but I understand that issue. We're really in the hands of the Treasurer, and we will have discussions with the Treasurer about how best to do it. The headline in the paper sort of made it akin to something like a royal commission. No, these are just incremental studies. We think our bank levy study provided very useful information and insight, but I don't think it was on the Richter scale of a royal commission. The same with our foreign exchange one—they are important competition and consumer issues. We judge this series of inquiries to be things that get at quite specific issues so that we can make progress and bring about change. That is, if you like, the different role we play. The Productivity Commission did that big review on competition in financial services, which came out with quite sweeping recommendations. Our job is to dive much deeper and have quite specific recommendations. It's not world-shattering stuff, but it is important.

Dr LEIGH: Mr Sims, on the particular powers that you need in order to do a banking inquiry, is it not correct that you lack a market studies power of the kind that your British counterpart has, and that if you had that power you wouldn't have to ask the government to do this; you'd be able to do it of your own volition?

Mr Sims : The UK have two things. They can, as you say, do it of their own volition. They can also impose remedies from those market studies. We've explicitly said that we don't want the latter power; we'd rather make recommendations to government from our studies. We can self-initiate studies now, but we don't have information-gathering powers. We did that in relation to motor vehicles. We've done it in terms of door-to-door selling. We did it in relation to beef cattle and horticulture.

Dr LEIGH: That's the desktop reviews that you talked about before?

Mr Sims : They were more than desktop. The motor vehicle one led to quite specific recommendations in terms of the need for a new code so that independent dealers could get access to information. I sort of think we cracked that problem. So we can self-initiate without information-gathering powers. I think the philosophical question, which I personally think is a very real one, is: given that these information notices do impose a burden—and there's no doubt about that; nobody likes receiving them, because they are asking for confidential information by definition—should that power be unlocked by government direction or should we be able to self-initiate? Wise heads will take different views on that.

The government, let's just remember, has given us a lot of inquiry directions. We've done dairy, mortgages, gas, electricity, digital platforms—and I've probably forgotten a couple of them. So it's not as if we've been too restrained so far. With the flow of inquiries coming from the government, the last thing we could do is complain that there haven't been enough of them.

Dr LEIGH: But your wise head says that you'd like that power to self-initiate?

Mr Sims : I think anyone sitting in my position would be a bit of a mug to say anything else! Yes, we'd like that power.

Dr LEIGH: And you'd be doing this inquiry already if you had that power, wouldn't you?

Mr Sims : The point I'll make here is that there are some issues on which I will put a pretty strong view and probably not give a lot of weight to the alternative views—I've been known to do that—but on this issue I can see both sides. I can see that you could do it either way. I can see that the government could reasonably decide that, given the burden that these notices impose, that has to be enabled by them. But, to answer your question, yes, if we had the powers, we'd be doing it already. As I said, I can seriously see both sides of that issue.

Dr LEIGH: Looking at one of the self-initiated inquiries you conducted, your new car retailing study that came down December 2017, the ACCC was pretty clear that the voluntary code wasn't working to ensure that the 20,000 independent mechanics in Australia had the data they needed to fix modern cars. But we haven't seen any change to the existing arrangements. The mandatory code recommended hasn't been put in place. The estimate from the US Auto Care Association was that those commensurate changes in the US saved customers in the order of US$26 billion a year. If that figure is correct for the US, that would suggest that the cost to Australians is over $1 billion a year, would it not?

Mr Sims : I can't fault the arithmetic on that. That's right. We did that study. We got to the view that the voluntary system just was not working. We accumulated a lot of evidence. We got independent experts to help us. We are convinced that some form of mandatory arrangement needs to be put in place and so we strongly recommended that. That's with Treasury. Two points if I could. Firstly, we would like it done as soon as possible. There's no doubt about that. The sooner it's done the sooner you are going to make life better for the independent repairers, which in turn will make life better for consumers trying to get their cars repaired at the cheapest price. The only point to make is there is a complexity around it, and that complexity is when do you define information that they don't have to share under a safety heading versus when they should? I understand people are giving further thought to that. Would we like it moving along faster? Yes, of course we would.

Dr LEIGH: It is coming up to two years since your inquiry came down. I haven't seen any evidence that the government is going to introduce legislation to make this change. And modern cars are getting more and more complicated, so, surely, that's making the problem worse for independent mechanics than it was when you wrote your report two years ago?

Mr Sims : I agree. The cars are getting more and more complicated and so the problem is getting progressively worse. I suppose I would just add, as far as the Treasury is concerned and their job of implementing these things, we have been making life rather difficult for them with 56 recommendations on electricity, 23 on digital platforms and I can't remember how many on gas. So I guess it's a question of priorities. I would like it done faster, but I do understand that they've got a fair bit on their plate. There is that complexity with it.

Dr LEIGH: In terms of the overall trends in the economy, we've had a couple of speeches recently, including one by Meghan Quinn which highlighted problems in lack of dynamism in the economy, a lack of job switching and a decline in the firm entry rate. We have seen a report from the department of industry recently that suggested that market concentration had worsened, that the Herfindahl index had gone up from period 2002 to 2016. How concerned are you that the problems of excessive oligopoly power in the Australian economy are bad and potentially getting worse?

Mr Sims : I think there's definitely a problem. Given your background, I might just put things this way, that famous Solow growth model says that the rate of growth and the economy is a function of labour, capital and productivity. I certainly have some discussions with economists who say you could have a negative sign there for the economic rents generated from excess monopolies. So I think the economic rents from concentrated behaviour are a problem. I think it is a drag on the economy. Is it getting worse? I don't know.

The key issue we have in relation to all of that is, I guess, whether our merger regime is working appropriately to deal with that, because the best way to deal with it is to stop mergers happening in the first place. We have tried and failed to stop mergers in the electricity area, transport and supermarkets. And we are in court at the moment, which limits what I can say in relation to four going to three in mobile phones, which is a crucial area. There is a lot that we are trying to there, but we do have trouble convincing the courts of the problems associated with increasingly concentrated industries.

Dr LEIGH: Are you therefore arguing for a change in the substantial-lessening-of-competition test or a change in your information-gathering powers and your ability to enforce the existing laws?

Mr Sims : That's a good question. We are still working our way through that. The complexity is as follows. You would think that a test that says 'likely to substantially lessen competition' would do it, keeping the emphasis on the words 'likely to substantially lessen competition'. I guess what we are finding is that the Australian environment, which manifests itself through the courts—but I think it is a general issue and the courts are a mechanism through which that gets transmitted—doesn't seem to have the same concerns about concentrated markets as we do. Of course you can have some markets where having three players is fine, but for most markets where there are not really heavy fixed costs you really need more players than that. We think, therefore, that there should be some presumption that there is a problem unless someone can explain why there isn't. Yet we seem to struggle to convince the courts that there are these problems.

I guess there is also this view that it's better to have three or four big players who look alike, whereas our view is that having players that approach the market in different ways is better. We have got four big banks, which have about 70 to 75 per cent of the market, and they are not competing on price because they look similar. If we had different players at different stages of development with different models—as I say, it is before the courts, but that is our issue in the mobile market: we have four players potentially going to three. So we are just trying to begin a discussion. I think it's good that it is a community discussion. How concentrated do we want the market to be? How much do we want to presume that concentration causes problems? I understand the economic arguments that say it doesn't always, but the economic arguments actually say that most of the time it does, so why don't we start with that? We are still thinking it through. It is a complex issue, as you know just as well as I do.

Mr LAMING: Mr Sims, I want to ask about the ACCC's remit, as you describe, about 'likely to lessen competition' to a point where there are actually no providers of a service whatsoever. We are dealing at the moment in the skills sector with a government regulator that is reducing the number of providers. In particular, there is a train-the-trainer module called TAE502, which is a critical unit if one wants to be qualified to train the trainer. We used to have around 900 of those providers nationwide. In the last few years that has been reduced to around 100, and of those 100 only 30 have this module in scope. If you go over the Great Dividing Range in New South Wales there is only one provider left to provide that unit. To put it fairly colourfully, at what point would a regulator gone rogue draw the attention of the ACCC to a point where there is actually no provision of a service?

Mr Sims : I will approach that generally. I can't speak specifically. I will check whether anyone else can, but I will speak generally. Usually it is a requirement that we are given, understandably, in the directions from government not to get too involved with what other regulators are doing, but occasionally we do chat to them. That is not an issue that I am across. I don't know whether anybody else has any comments on that.

Mr LAMING: So they can communicate and, for instance, write a letter to the ACCC? The sector can write to the ACCC if they choose?

Mr Sims : If they want to, yes. But I suspect it would be an advocacy issue. We're playing a role at the moment on e-conveyancing with house transfers. We're doing that as an advocacy thing. I don't think a regulator doing something is ever going to breach the law, so it would just be an advocacy thing. Sure, people can write to us.

CHAIR: I'm going to be somewhat greedy, just because of the topical nature of it, before I throw it to Dr Mulino. The topic is around airports. There is a collusion between Qantas and Virgin today at the National Press Club about pushing back against airports and competition policy. The ACCC has previously flagged concerns that simply monitoring the charges and the like and transparency isn't going to solve some of the issues that arise. Can you outline your reflections on that?

Mr Sims : I do accept that the airlines have got together, which is normally a bit of a worry, but on this occasion they have got together in agreeing with the recommendation we put forward.

CHAIR: So competition isn't necessary when it's an agreement with the ACCC?

Mr Sims : I think, whatever that Shakespearean phrase was, copying is the highest form of—

CHAIR: Imitation is the greatest form of flattery.

Mr Sims : Thank you. I knew you'd help me out. At the moment the airports aren't regulated. They are monopolies. We do have a general concern about monopolies not being regulated. We've got that issue at the moment also with the Port of Newcastle, which is a straight-out monopoly. So that issue is on foot as well. With the airports, where you've got large-scale users, business users—we're not talking about dealing with individuals—what we thought was appropriate was a fairly light handed form of regulation, which would be a negotiate-arbitrate model. It's very hard to negotiate with a monopoly, but if you've got the ability to go to arbitration, which of course is a messy process that no-one wants to do, it can even up the bargaining power. We had in mind a commercial arbitration, so it wasn't trying to create extra work for us, much like the gas pipeline new regime that was brought in by the government. We have proposed a commercial negotiate-arbitrate, and I think that's what the airlines are supporting. I could be wrong, but I think that's the gist of what they're supporting.

CHAIR: Can I seek clarification? Is there another sector—you just mentioned one in gas pipelines—where other equivalents of this model that you're proposing are effective?

Mr Sims : The only one I can think of is gas pipelines. That's for commercial negotiate-arbitrate.

Mr Cosgrave : For a commercial negotiate-arbitrate model that's right. There are and have been in the past various models of negotiate-arbitrate where the arbitration is conducted by a regulator. There was such a model in communications for many years. It's been considered in some other sectors as well.

CHAIR: Obviously the PC has done a report in this space. What are your reflections on their analysis?

Mr Sims : The PC probably has a different philosophical view. We chat to the PC quite a lot. We've got a good relationship with them. They are super-smart economists, there is absolutely no doubt about that. I guess we are a bit more in the camp of regulating monopolies unless there is a very good reason to do it. I think their approach is, 'Show me how they have misbehaved as monopolies before I regulate them.' That's often very tricky to do. If you take a port, for example, or any monopoly asset, they could be increasing their charges by five or six per cent a year, which is probably double the rate of inflation. They could do that over a long time and have a very comfortable existence. They could make a lot of money. They might not be as productive, going back to Dr Leigh's question. So I think that is the difference between us and the PC. It's more of a philosophical starting point than anything else.

CHAIR: You're looking through the lens of competition, and they're looking at it mostly through efficiency?

Mr Sims : No. They would probably characterise us as being a regulator so we like regulation. I understand that. They come from the point of view of saying, 'Don't regulate unless you absolutely have to.' I'm being simplistic about both camps. Our view is that regulating monopolies can improve efficiency because you can put various incentive mechanisms in the regulation. That can keep them more on their toes than if they are not regulated at all.

Dr MULINO: I have a couple of questions around internet comparison sites. Obviously for a lot of people this is a tool that they are using to navigate the comparison of complicated products, whether it be travel, insurance or whatever it may be. We're getting millions of visits to these sites. I note that you've got a couple of proceedings underway. I think there are iSelect and Trivago, and there might be others. My understanding is that a couple of concerns there relate to issues that on occasion those sites aren't comprehensive and that there might be undisclosed arrangements behind the scenes between the comparison site and some of the entities which are being displayed. I was just wondering if you might set out some of the concerns that are involved in those cases?

Mr Sims : I think you've summarised them pretty well. I would put a slight twist on it. I will just generalise. If they are saying, 'Come to us and we will find you the best deal,' when, as you say, they are not comprehensive, they are not looking at all the deals, they're only looking at only those that they have a commercial relationship with, that is a problem. Secondly, when they bias who they send you to on the basis of how much or what sort of commercial relationship it is—when if they send you over here they make more money than if they send you over there—then it could be that they are looking after their commercial interests and not actually giving the consumer the best deal.

I guess the way we would put it is that, when you have a commercial comparison site and it's not charging you to use it, you need to say, 'How are they making their money?' Often they're making their money through commercial relationships with companies that get business out of a referral from a commercial site. In the cases that you mentioned, the Trivago one is before the court right now. The case is running, so I had better be super careful. Both of them are still running. It is that issue about the question of whether the commercial relationship affects where they send you. Do you want to add that?

Mr Greiss : That's right. The allegations are that they hold out that they will offer you the best deal suited to your circumstances, and we allege that that calculus is clouded by the commercial relationship they have with the provider. That is essentially the heart of it.

Dr MULINO: As somebody who's looked at the difficulties of consumers comparing complicated multidimensional products, my sense is that there is a lot of scope for these sites to produce a lot of social benefit, but, as you say, you've got to figure out a way in which they can make profit without disadvantaging consumers. I'm just wondering if the ACCC has turned its mind to a broader potential policy response that might be appropriate on top of dealing with individual cases on an ad-hoc basis?

Mr Sims : My colleagues can correct me if I'm not getting this right, but one of the 56 recommendations in the retail electricity pricing inquiry was to bring in a code that would mandate certain standards that comparator websites would adopt in electricity. That would be about full disclosure of your commercial arrangements and a range of other things so that, rather than leaving what they tell you up to them, you've got some prescribed things they must explain to users of the site.

Dr MULINO: Do you think that, perhaps with appropriate tweaking, that could then be generalised across a number of sectors and applied where we are finding these springing up all over the place?

Mr Sims : I will invite comments from my colleagues, but obviously whenever you impose new regulatory requirements that has a cost. But I think these things are so prevalent that it shouldn't be too costly to just insist on a bit of transparency: 'Just tell us what your commercial arrangements are and tell us whether or not you're being comprehensive, so that that's in a clearly readable form upfront.' I personally don't think that is too much to ask, but I don't know whether anybody else has a view. We would have that view.

Dr MULINO: I have a question in relation to the inquiry that was completed last year in relation to residential mortgage products. Again, some of the conclusions there related to ways in which we can improve consumers proactively comparing products. You made a number of findings in that report that opaque discretionary pricing causes inefficiency and stifles competition and that new borrowers systemically pay lower interest rates than existing borrowers, and you quantified the average cost there. I think you recommended that consumers proactively renegotiate and seek to compare products. Would you like to make any comments about the broad residential mortgage product market in light of the fact that we have moved on since then in terms of the royal commission and government's response? Are there any broader comments you'd like to add?

Mr Sims : I will make one, and then Mr Bezzi might want to add something. That inquiry was mainly to see whether the levy was passed on as distinct from an inquiry that would make recommendations beyond that, so we didn't actually make recommendations in that, but we did make observations. It's a really interesting issue. It happens in banking, it certainly happens in the electricity market and I'm sure it happens in others that there's a growing discrepancy between what you pay if you stay loyal versus what a new player pays. There's nothing illegal about those customers who are loyal to you not being on the best deals—and increasingly not being on the best deals—as long as you're not misleading consumers in the way you're doing that. But what we've seen is that our role is to say to people, 'Look, there is a loyalty tax.' I certainly get letters all the time. One I remember really clearly was from a small business owner who was seeing his electricity bills go up and up. Eventually, he had just had enough of it. He was busy like all small-business people—his was a really small business—and he rang up his provider and as soon as he rang them up, they gave him 20 per cent off the bill. Rather than being grateful, he was absolutely outraged. He said, 'I've been buying my electricity off you basically forever, and you've been doing me down. You've been taking 20 per cent more off me then you needed to.' He was outraged.

It's a tricky issue. The role we've taken so far is just to make that clear and say to people, 'You will get cheaper electricity or you will get a cheaper mortgage if you just ring up and badger every year.' Beyond that, I think the issue from a policy recommendation point of view that probably needs a bit of thinking about is that customer inertia question. Obviously, the consumer data right and open banking will help. There's no doubt about that. We've been very strongly in favour of that. That will help. Whether more needs to be done is something we need to look into more. So far, we're just giving that advice that I've mentioned.

Mr Bezzi : I might just add one small comment. One of the advantages of these market studies is that we get to look inside businesses and understand what their business models are from their perspective. We get access to their commercial documents when we use the powers that we have, and that's a tremendous advantage. One of the things that surprised me and surprised us generally was the extent to which businesses, particularly the banks, build into their business models assumptions about consumer inertia. It shouldn't really be surprising. When you realise it, you think, 'Okay, that makes perfect sense.' But what is the right policy response to deal with that? I'm not quite sure. We haven't really figured out exactly how to deal with it. For years, people have thought that transparency might be the answer, but I'm not sure that it has been a sufficient answer to deal with the problem of consumer inertia.

Mr Sims : And just briefly, we saw it in foreign exchange as well. The banks aren't the most competitive entities to buy foreign currency from, whether you want to take dollars overseas or you want to send money overseas to family, and our suspicion is that it's largely the case that they know they've got a fixed customer base and they don't have to be price competitive. So, if you want cheaper foreign exchange, you go to the new smaller players.

Dr MULINO: I have one last question on this. I think you're right: in a whole range of areas, because of customer stickiness, there is a penalty for loyalty. In insurance, we saw something similar. In different types of insurance products, what you would find is they would incrementally increase the price above what was actuarially necessary. And, as you say, it's not illegal, but it led to situations like the one you mentioned. One mechanism that I think has been used in insurance is to put last year's premium next to this year's premium, and that mechanism in and of itself has, I think, led to a significantly higher consumer awareness. For example—and I haven't thought through the details of this—you could have entry-level interest rates versus your interest rate, and that might spark the person to actually pick up the phone, rather than relying on people in their busy lives to take that initiative. I would have thought that it would be worth exploring simple mechanisms like that, whether on a pilot basis or ultimately—

Mr Sims : And while we're having these discussions—or we will have them shortly because we're still talking to Treasury at the moment about what we next look at, and there are a whole range of things to look at—you could look at that consumer inertia and try and understand it from the banks' perspective and from the consumers' perspective. You could look inside the banks and do some surveys and see what is the best way to crack the problem. But that's just another example of how, if you're going to deal with that, it's its own deep dive, rather than just floating up here. It's a really important problem. Others have looked at it and mentioned it in passing. If you're going to crack it, it's its own deep dive, so that's why, in our view, what we're doing in financial services is just a continuing number of deep dives. There are many issues that one could look at, but that is an important one.

Mr BANDT: I have some questions for the Energy Regulator. Back in July you flagged, if I've got it right, that you were looking at the issue of negative pricing in the Queensland market or at least you were aware of instances of it, where the spot price of electricity falls below zero so that, in effect, it costs generators to put electricity into the grid. In some instances in Queensland, it's been dropping as low as $1,000, although that gets averaged out over a settlement period. Have you continued to look at that since July?

Ms Groves : I must admit we will constantly monitor instances of price variations and we provide reports on a weekly basis and data about those, so significant variation in prices is something that we have under monitoring all the time, but I'm not aware of specific instances of low prices causing sufficient concern for there to be more detailed investigations at this stage.

Mr BANDT: And does that include the behaviour a fortnight ago in Queensland, which I understand you're aware of? The drop into negative pricing hasn't warranted further investigation either?

Ms Groves : I'm not aware at this stage of more detailed investigations into those, but I can take that on notice. It is possible that the team, having seen data that might be causing them to raise some questions, are conducting further inquiries.

Mr BANDT: This is in part because of data that's publicly available and in part because of reports that you've produced. For example, on 4 September, there were periods of dropping into negative pricing. With negative pricing, you would expect that's because there's too much electricity being provided—more than is needed—and most reasonable people might expect that then some generators would wind back the amount of electricity that they're putting into the grid. But there's evidence that coal-fired power generators have been increasing the amount that they've been putting into the grid during these periods of negative pricing. You might expect that's an ideal time for pumped hydro storage—for example, Wivenhoe—to start switching on because they're going to be able to make money from storing electricity while they are not pumping, and they just happen to be owned by one of these dominant market players that has heavy investment in fossil fuels. Is that an indication of the market working well—that coal-fired power ramps up at a time when prices are negative and pushes out solar, which is what has been happening?

Ms Groves : I'm not aware of the instances that you are talking about, Mr Bandt, so I will need to explore those further. Negative prices can be caused in circumstances that you've described because there's excess capacity available, but there also can be other reasons that can lead to negative prices.

Mr BANDT: But it's not the negative pricing itself; it is increasing in generation from a coal-fired power station at a time of negative pricing. I'm surprised that hasn't come across your radar, but I will move on to something else. In the AER's history, how many times has the AER taken big energy generators to court for allegedly manipulating their generation to ensure favourable pricing?

Ms Groves : The AER has taken court action particularly in respect of Stanwell around its rebidding practices. There aren't provisions that specifically go to, I think, the price manipulation type behaviour. As you've described it, the AER wouldn't have taken any action, but that's not what the rules framework would provide. We have taken action against—

Mr BANDT: Is that something that the ACCC would have to do, rather than the AER, or is it just that you can't do it—no-one can do it?

Mr Sims : Well, for us to do it, we'd have to find a substantial lessening of competition. It's possible, but you'd have to find that they're doing it to damage a competitor as distinct from doing it to manipulate the market. Having said that, the government's new prohibiting energy market misconduct bill might go to that.

Mr BANDT: But, as I understand it, the ACCC hasn't commenced any prosecutions to date for reasons including those?

Mr Sims : That's right.

Mr BANDT: I will go back to the regulator, in relation to the South Australian blackout. I understand you've commenced some proceedings against some wind farms. That's before the court. I don't want to ask about those. But in The black system event compliance report, you basically say, if I can summarise—I'm happy to go to the detail if I need to—that after the system went black, there was then the process of restarting the system. South Australia was without power for an hour longer than it needed to be, in part because the people who'd been contracted to provide the system restart weren't available at the time. Is that a fair summary?

Mr Feather : Following the black system event and in the system restart area, the AER has recently brought forward a rule change proposal to the Australian Energy Market Commission. On the day of the event, there were issues associated with the restart of the quarantine power station and there were problems with that process—

Mr BANDT: Sorry to cut you off, but I have limited time. At page 110 of your report, you talk about the protection settings not being set correctly. There was a misunderstanding, perhaps, between ElectraNet and Origin about the protection settings, and the failure arose out of that. I'm fascinated to know why it is that wind farms get taken to court when their settings aren't right in connection with the South Australian blackout event, but ElectraNet and Origin Energy get off completely scot-free when their protection settings are structured in such a way that South Australia is left without power for an hour.

Mr Feather : The report concluded that the failure in the restart processes at the quarantine power station did not contribute to the system black event, and the recommendation coming from the report—

Mr BANDT: But you do find that South Australia was without power for an hour longer than it needed to be because of it. It didn't contribute to the event, but they were without power for an hour extra, and they don't get taken to court.

I will ask you, Mr Sims, a question about the power price report that you released during the course of this week. I'm interested in this question of network overinvestment and your recommendation 11, which I can take you to in a moment. You make the point that there has been substantial overinvestment in the networks and that this is located in particular states. You say there should be exploration of a write-down, but you say that, in calculating how much overinvestment there has been to date, the calculation should be based on the Grattan Institute report Down to the wire: a sustainable electricity network for Australia. Their estimate is that there has been somewhere in the order of $20 billion of overinvestment over the two five-year periods that we're talking about. Do you agree with that figure broadly, and why is the Grattan Institute report a good starting point for working out the level of overinvestment?

Mr Sims : Good question. The overinvestment—if I could go back to my earlier theme just briefly—was due to a period now 10 or 15 years ago when the poles and wires regulation was almost deregulated. That led to a lot of overinvestment. If you look back on it, you see it's impossible to work out precisely how much the overinvestment is. There are various ways you can do it, but you can't do it precisely, simply because you don't know what investment was responding to what. It would be a mammoth exercise that would tie you up for years. So, when we looked at the Grattan Institute, we thought that methodology was quite a reasonable methodology. It was probably going to get roughly the right number. And so we said in our report that we're happy to go with that and that you could do a hell of a lot more analysis, defer the issue for years and still not come up with a better number.

Mr BANDT: Thanks, Mr Sims. Ms Groves, that report endorsed by the ACCC says on page 28 that part of the reason for that is that 'regulators share some of the blame'. That's you.

Mr Sims : I'm one of the authors of the report and, as someone who has been on this issue for a long time, we absolutely didn't blame—I don't know what Grattan wrote, but our report did not blame the regulator.

Mr BANDT: There's been $20 billion of overinvestment. That was all approved by the AER.

Mr Sims : I will jump in here, seriously—and you can as well, Ms Groves, but this is our report. That came about because the rules were changed. I can talk more on New South Wales and Queensland. What happened was you had particular blackout incidents. In the case of Brisbane, you had a storm. They hadn't been chopping the trees back, so the trees in the storm whacked down the power poles and caused blackouts in Brisbane. So the response was to raise the reliability standard. You had a similar event in Sydney which I won't take time raising.

At the same time, you had a relaxation of the rules. When the AER was formed, it took responsibility for distribution and regulation of distributors, and the way the regulations that the AER had to monitor were put in place limited ability to scrutinise completely.

Mr BANDT: But the AER had control over the rate of return—

Mr Sims : No, it didn't.

Mr BANDT: that was awarded with respect to those projects—or at least had some say over it.

Ms Groves : The AER did set a rate of return for those businesses through that period. That rate of return, however, was challenged by each business and by the energy networks association through subsequent multiple tribunal hearings in which the AER defended its decisions. However, the tribunal and subsequent, at times, Federal Court accepted the network businesses' rates of return and changed them.

Mr BANDT: That will be changed with the limited merits review system being changed. So there will be a bit of a change going forward in that respect. The minister, when introducing the bill to do that, said that the limited merits review had been responsible for maybe $6½ billion worth of extra investment. So, even being the most generous, assuming that all of that fell in those two regulatory periods that we're talking about, there is still $13 billion of overinvestment that the AER has ticked off on, and that is a green light to the big power companies to put their hands in people's pockets through higher power bills. Was there any instance where the AER knocked back an application because, for example, demand management would have been a better option?

Ms Groves : I will talk about that from a couple of things. The AER doesn't approve specific projects anyway. It would certainly look at issues around demand management and has been a proponent of demand management. There are a range of regulatory processes that do require businesses to determine whether there are better ways, other than building poles and wires or substations, to deliver demand, and we do scrutinise businesses' proposals on those.

In respect of the earlier periods, as Mr Sims pointed out, things like the increase for liability standards were mandated. The businesses were required to make investments aligned with that, and the regulatory process and framework under which the AER operates requires the AER to approve investments that are made in line with meeting regulatory obligations such as reliability.

Mr BANDT: I will finish on this; the chair is winding me up. I've had my fair go. One of the things that worries me is that, when we've got $20 billion of overinvestment that has been ticked off by the regulator and it has made its way in the form of higher power bills, we are seeing a repeat of the relationship that the royal commission called out between the banks and ASIC: that the AER has been approving the big energy companies making enormous amounts of money about which in hindsight we look back and say, 'That is actually wasted investment, and people have had to pay for it.' Now, if we have a write-down process, they may have to pay for it again.

Mr Sims : I seriously have to jump in here. As one who lived all through that period—I have never been in the AER, but I was at IPART when we had to approve the increases. Not only did you have the $6 billion out of the $20 billion that came out of the tribunal; not only did you have the mandatory reliability stuff, where the AER had no discretion; but the way the system also worked is: their discretion to determine the investment was limited. If the organisation could show that something was reasonably necessary, they just didn't have the discretion. In my strong view, having lived through this and never having been part of the AER, it was not the AER's fault. It was a combination of the limited merits review; overturning the tribunal decisions; the reliability standards that were imposed, particularly in Queensland and New South Wales, which were a complete overreaction; and the limited discretion the AER had. The limited merits review and the limited discretion now have been fixed.

Mr BANDT: So we can say, hand on heart, it's all been fixed? We don't have to worry about—

Mr Sims : In my view, it has all been fixed, yes. Seriously, having lived through that period, I just think the reality is different and it's been fixed.

CHAIR: Thank you, Mr Bandt. Ms Aly.

Dr ALY: I will go to a different topic. Mr Sims, I refer to an address that you gave to the Law Council of Australia in which you talked about achieving penalties that will deliver more effective deterrence. You talked about the 2018 OECD comparative research on penalties imposed in competition law cases in Australia, saying that that research found that Australian penalties were considerably lower than would be expected in comparable jurisdictions for similar conduct. I just want to explore with you, given the remit of prevention that the ACC has, whether or not you've considered other forms of deterrence that may be more effective than higher penalties or that could complement higher penalties. We all know that, when people do things wrong, they do them thinking they are not going to get caught, because everybody thinks they are smarter than the average bear and it's not going to happen to them. Are there other kinds of mechanisms that you've considered or are considering that would go to that prevention remit?

Mr Sims : I will let one of my colleagues—Marcus is probably the person who is more on top of penalties. There are penalties in consumer law and penalties in competition law. The penalties in consumer law have been too low for a long time. The government changed those in September 2018, so now we have the penalties we need. We haven't yet found a case where all the behaviour was pre September 2018, but it is going to happen, and hopefully we can get extremely high penalties to send that deterrence message.

In the case of the competition issues, that again has been a process of just engaging with the community, the legal community—and that comparison was very helpful. Since that OECD work we have seen some much higher penalties. We have had companies that have a turnover of about a billion dollars, which means 10 per cent of turnover is about $100 million, and we have had penalties. In the case of two of our cartel matters, but for cooperation one would have been $50 million, but it was pushed back to $25 million. Another one was in the low 30s, I think. Then we had the Yazaki appeal, with a $46 million penalty. So, our view is that the penalties are now moving up. We are comfortable with the rate of progress towards that, and we really want to put the focus on penalties. We can, of course, get banning orders and things like that, and in the case of criminal behaviour people can go to jail. So, our focus at the moment is penalties.

Mr Bezzi : To add to what Mr Sims said about the banning orders, we find that they can be a very effective penalty, particularly for a person who has had a long career in business. If they realise that they face disqualification from managing a corporation, that can be a significant deterrent. I have sat in negotiations with parties and seen the impact that that has had on businessmen who were facing the possibility of disqualification. They were actually willing to pay higher penalties than accept a period of disqualification. It is about finding the penalty that is going to be appropriate in the circumstances of the particular case. But in my personal experience the disqualification penalty can be a very powerful one—

Dr ALY: Would it be fair to say that you have anecdotal evidence that penalties are effective to deterrence but that there is no empirical evidence to support that?

Mr Bezzi : There is empirical evidence that supports it, and the OECD report points to some of the evidence that has been gathered around the world. There are lots of references in that report to the evidence that has been gathered on penalties. The OECD has done quite a lot of work in this area.

One other very powerful thing that I would say about penalties is that, it is important for the most serious conduct, as Mr Sims said—cartel, collusive behaviour, price fixing, market sharing between businesses—to come not just with a penalty sanction but with the possibility of jail. In the last month I have seen cartel conduct where the United States has been carved out of a cartel agreement between competitors, because that has had a long history of jail for cartel offences, whereas in Europe they don't have a long history of enforcement. The particular case I am thinking of involves conduct in Europe and other parts of the world, with a specific exclusion of the United States. That tells me that the cartelists are deterred from behaving in that way in the United States because they are aware of the penalty there.

Mr Sims : Obviously penalties come up a lot in these sorts of hearings, but we are pretty comfortable with where we sit at the moment. We have the consumer law penalties we want, and now we have to get the cases to have those penalties that I keep talking about of over $100 million—we are trying to make every possible contribution we can to the federal Treasury. Also, we're seeing a good trajectory of the competition ones. So we don't need any more; we just need to be working with the legal community, bringing in the right cases and hopefully getting much higher penalties.

Mr Gregson : I just might add some important points there. I was in charge of the consumer enforcement side at the time penalties were introduced. We saw that as a massive game changer in terms of the parties we dealt with and their interest in our activity. That aside, inherent within your question was the importance of detection and the importance of a strong enforcement profile. We would 100 per cent agree that, in addition to penalties, you need that capacity for detection and a strong enforcement profile, and we're doing a lot of thinking internally at the ACCC at the moment about the need for proactive measures, not just reactive measures—not just responding to complaints. So we're giving a lot of thought about what it takes to have a modern regulator that uses data, that is scanning the environment and that is taking those proactive steps, and I just make the point that regulators need to be proactive as well as just having the penalty.

Dr ALY: That is actually the heart of my question, because I'm referring to the responsibilities of maintaining and promoting competition and remedying market failure by preventing anticompetitive mergers, stopping cartels and intervening when misuse of market power is identified. Sure, penalties and punitive measures are intervening, and that's where they would come in, but, in terms of more proactive prevention activities, what else are you doing to complement the increase in the penalties?

Mr Sims : Again, I will let Mr Gregson or Mr Greiss add, but we seriously need our IT skills upgraded—

Dr ALY: Everybody does.

Mr Sims : to be able to deal with all the data—that's a prerequisite—and to have the resources to not just deal with the reactive, because at the moment there's no shortage of work. There's a lot of reactive stuff coming at us, so having the resources to do the proactive is probably the constraint.

Mr Greiss : I will just add that we have an annual strategic priority-setting exercise that looks at areas of industry and the economy that we forecast may need special attention. That's ultimately a public document that not only signals our intentions but also allows us to look at where we get maximum bang for our buck in terms of areas to focus on.

Mr Bezzi : We do quite a lot of outreach work as well with businesses and with industry associations. One of my responsibilities is cartels. We do a lot of outreach work with people involved in procurement. We've had people out giving talks to government procurement officers, for example, in the last few months, so there's a lot of outreach work that delivers messages to people about what the laws are and how they comply with them. We've got lots of publications online. We've got quite a good website, and we've also got a very proactive media team that gets the message out.

Dr ALY: Mr Sims, in that speech you also said, 'Deciding which cases to take and which we do not have the resources to take are the most difficult choices we at the ACCC face.' What's the criteria that you apply in terms of how you allocate those limited resources and which cases you do take on?

Mr Sims : It's mainly, and I'll again let my colleagues quickly add—I realise time is short—the level of detriment to consumers, so the ultimate effect that it's going to have. Sometimes it would be a form of behaviour that we felt really needed some attention, otherwise it was going to run away with us.

Mr Greiss : That really feeds into the strategic priority-setting exercise where we canvass our stakeholders and the market generally, see where the harm is and direct our resources. But we have internal processes as well for filtering issues based on that criteria.

Mr Sims : With our consumer work, we're largely taking very large companies—Heinz, Ford, Apple, Telstra, Optus. We take very large companies, so we just don't have the resources to deal with a lot of the smaller companies. That's a judgement call as to how much we should be dealing with those companies, but the detriment usually comes from this behaviour by larger companies.

Mr FALINSKI: You mentioned earlier on, Mr Sims, that you felt, using the Solow model, that there are rents being charged due to the oligopolistic structure of our economy in large parts of the sectors. I don't have a doctorate in economics, but my understanding is—

Mr Sims : I don't either!

Dr ALY: Neither do I.

Mr FALINSKI: But you've got a doctorate.

CHAIR: I don't either!

Mr FALINSKI: Mr Kelly and I have degrees from the university of life! Neoclassical theory says that, if producers are getting supernatural profits, there should be new entrants into the market.

Mr Sims : Yes.

Mr FALINSKI: Why do you think that isn't happening in those sectors you mentioned earlier and cited, and maybe some you didn't cite?

Mr Sims : There are two categories. One is where you've just got monopolies—the Port of Newcastle, airports—

Mr FALINSKI: A natural monopoly.

Mr Sims : a natural monopoly; that's right—and so there can be no competition. In our view, unless they're regulated, you'll have excessive economic rents that sap, that damage, the economy. But in other sectors it's just the height of the entry barriers that make it hard to get in. Either people have got strong investment or they've got strong brands that they can leverage. Obviously, our job is to make sure they're not engaging in anticompetitive activity to keep competitors out, but most businesses are trying to do what they can to protect their barriers to entry. Sorry to quote someone else now, but, in your classic Porter's framework of competitive strategy, one of the things you focus on is erecting the entry barriers as high as you can to keep competitors out. So there is a continual battle to do that. It largely comes down to entry barriers.

Mr FALINSKI: Can I put it to you that there's another reason for it as well, which you didn't just mention, and that is the overregulation of the Australian economy. I cite the example of Bendigo Bank, which is trying to get advanced bank status from APRA—so, not from anyone at this table. They've spent seven years trying to get that application, they've spent $100 million and there's still no end in sight. They have no clear pathway. Wouldn't you consider that a barrier to entry, and, therefore, consumer interests are being injured?

Mr Sims : Without commenting on that particular case, which I don't have the background on, clearly, high levels of regulation can absolutely be a barrier to entry. The larger, established firms have got systems in place to deal with it. For the new players trying to grow, it's just something else they have to deal with that they struggle to deal with. I think your point is right: regulative barriers can also be a problem.

Mr FALINSKI: I appreciate that. Isn't there also another issue, which is the number of regulatory inquiries that we might subject a particular sector to? How many inquiries has the financial services sector been subjected to just in the last 12 months?

Mr Sims : I have no idea. We've been doing one after the other. We've sort of got one on the go—

Mr FALINSKI: There has been yours, there has been a Productivity Commission one, there has been the Hayne royal commission and there have been a slew of others as well, haven't there?

Mr Sims : Sure.

Mr FALINSKI: For the big four, I suppose they can absorb some of that. But they're constantly around this joint saying they're actually finding it quite hard, along with CDRs. Would it maybe be an idea to just pause and see the outcome—what all these changes mean for consumers?

Mr Sims : I understand that view. There are a lot of inquiries, and I certainly understand the burden. I guess it's a judgement that various people like us need to make about where there is a problem. Just going back to the discussion we were having earlier about comparator websites, do we want to deal with that or have the pause? I can see both sides of that question.

Mr FALINSKI: I'll come to that in a minute. The financial services sector is pretty critical to the economy because they're the major allocator of capital and credit creation. The royal commission on its own is, wouldn't you suggest, a meaty piece of work?

Mr Sims : Absolutely.

Mr FALINSKI: And then there's the Productivity Commission and your inquiries and a whole bunch of other inquiries. Don't you think that this critical sector is being loaded up with a lot of inquiries and a lot of government oversight at the moment? I'm not saying, 'Stop doing it,' but shouldn't we give them a chance to absorb it?

Mr Sims : There's certainly an optimum level of regulation and, without getting specific—

Mr FALINSKI: Sorry, I'm not talking about regulation. I mean purely inquiries.

Mr Sims : Sure. I'll stick to that. Look, as I say, having come into this committee 2½ years ago, I was asked, 'What is the ACCC doing in financial services?' and I was silly enough to say, 'Well, you've got all of these other regulators out there, why do you need us involved?' That answer didn't go down too well 2½ years ago. I suspect you weren't here at the time.


Mr Sims : It's a judgement call. These things are always a judgement call.

Mr FALINSKI: I guess a reasonable person's response would be, 'There's a lot that has happened in those 2½ years.' Is that fair, or do you think a person saying that would be unfair?

Mr Sims : There is a lot that has happened, that's true. The four banks are four of our top six companies. They have had that status for a very long time. Our mortgage inquiry showed that they don't compete much. The royal commission showed that perhaps they don't care about their customers enough. I think that's another characteristic of a lack of competition. I totally understand the point about inquiries, but I do seriously go back to saying that I think there are competition issues there. You can think about the timing of how you deal with them, but I think they need to be dealt with.

Mr FALINSKI: I am glad you raised that. In large parts of the world there are massive disruptions to all sorts of sectors of the economy.

Mr Sims : Yes.

Mr FALINSKI: What makes Australia so special that we are at a much lower level than, say, western Europe or the United States or Japan?

Mr Sims : In terms of what, sorry?

Mr FALINSKI: Disruption.

Mr Sims : Do you mean in the finance sector or generally?

Mr FALINSKI: You can concentrate on the financial sector, but just generally?

Mr Sims : Others may have a view on that. It's not obvious to me that we're subject to less disruption than other sectors. I think there is a lot of change happening and a lot of companies would say there is disruption. What concerns me is that disruption doesn't seem to be changing things much. It doesn't seem to be changing market shares. It doesn't seem to be bringing through enough new competitors.

Mr FALINSKI: Is there a way to measure that, do you think? At the moment, it's kind of a perception thing. I have a perception that disruptive commercial behaviour in the United States is at a much, much higher level than it is in Australia. Your perception is it's roughly the same.

Mr Sims : You can measure disruption by the fact that many of the chief disruptors are large American tech companies.


Mr Sims : But they're having an equally disruptive effect in America as they are here. I just came back from America on Monday morning, and the disruption and concern in some of the industries that I heard about there were pretty similar to what I hear about here. Irrespective of where they're based, the disruption is pretty similar. There are a lot positives about it, but there are some negatives as well.

Mr FALINSKI: How many new ADIs have been issued in the last two years?

Mr Sims : Our role is to do these inquiries and enforce the competition law. We're not as on top of the financial sector as the other three regulators are.

Mr FALINSKI: Fair enough. Let me ask you this question: would you be worried if established players were able to use regulation to stymie the growth of new entrants—for example, putting inquiries into ASIC or you that trigger investigations or requests for documents that in a large company are dealt with by the three floors of lawyers that they have, but, in a small company of 80 people, require them to take 10 people off the front line.

Mr Sims : Look, we would. Well before I joined the ACCC I remember one company that was launching a community campaign to lobby local councils to stop the company rolling out. I won't mention the sector. It was a long time ago anyway; this is more than 20 years ago, probably even 30. These days, with the change in our dominance laws, our misuse of market power laws, we'd probably take that as anticompetitive conduct if we found it. But, yes, companies try to erect—

Mr FALINSKI: But it would be almost impossible to prove, wouldn't it?

Mr Sims : In that case it would have been easy to prove.

Mr FALINSKI: But these days—

Mr Sims : Yes, that's right, but that goes back to the point I raised. Companies try to compete in two ways: they try to outrun their competitors and they try to erect entry barriers to stop their competitors getting into the market. All of those large companies will use all of those tactics, and that includes erecting regulatory barriers.

Mr FALINSKI: And this is my concern, that they're actually using laws that were designed to protect consumers to harm them.

Mr Sims : Conceptually, that's possible. I can see that that could be the case.

Mr TED O'BRIEN: Going back to the topic of energy, and following up on Mr Falinski's comments about monopoly situations, could I have some commentary on the Queensland market, in particular Ergon, which is outside the South-East Queensland area, and whether or not there has been any evidence there of misuse of market power from your point of view?

Mr Sims : Well, it's hardly a monopoly, but do you want to pick that up?

Ms Groves : In respect of Ergon, are you talking about the distribution arm?


Ms Groves : So Ergon is a regulated monopoly. As the distribution network—in fact, within all of the Australian market there are essential regionally based monopolies for distribution and transmission, which is the primary reason that they are regulated. It's because the nature of that sort of technology and the scale of those businesses economically mean it is more efficient for a single company to provide the services, but it creates monopolies, and that's why we regulate them. And that is not uncommon with other forms of utilities either. We see it strongly in electricity and gas, but many other aspects of the ACCC's work with regard to utility regulation and other state regulators is based on that, I guess, contradiction. We recognise that at times a monopoly can be the most efficient way of delivering a service, but it can come at a cost if that is an unconstrained monopoly, and that's what economic regulation is there to do. We have different forms of economic regulation around different types of infrastructure with regard to electricity, and Ergon have their total revenues regulated in a way that they're allowed a maximum allowed revenue that is a regulated one that then feeds through to their tariffs and therefore into customers prices. So those revenues are regulated to protect consumers.

Mr TED O'BRIEN: I don't know if there is a role for the ACCC in this, so my question is more regarding your role. Anecdotally, I have heard that the Queensland state government has instructed some of its utilities in the energy sector to take out debt and then, in the same financial year, instruct those same utilities to deliver a special dividend—I believe that's what it's called—to the state that is the equivalent of the debt they took out. You can imagine where one's mind can go to as to whether or not that's an ethical way of behaving. Looking into those behaviours, does that come into the purview of the ACCC at all?

Mr Sims : Two answers, and then I will pass back to Michelle. If they're running competitive businesses, they're owners of them, they can do that. If they're in a monopoly and they're running a regulated business, then the way the regulatory environment works is that it provides general rules that mean they don't always get rewarded if they have too much debt.

Ms Groves : In respect of the regulation of electricity networks, within the national market we have a combination of privately owned companies or government owned companies. The regulatory framework is designed to set efficient revenues as though the business was an efficient commercial entity. So while individual owners may come up with their own financing structures for whatever reasons they do, we use a benchmark so that the actual practices of, for example, a particular network or a particular network owner are not determinative of the sorts of ways that we provide them with their rate of return, for example. We use this benchmark to ensure there aren't the incentives for individual owners to manipulate the system through their ways of structuring their debt, how they might require dividends to be paid. The system is mindful of that risk, and we use a benchmark concept that is based around the operations of a commercial firm.

Mr CRAIG KELLY: Mr Sims, it's nice to see you again. It's been close to two years since we arguably strengthened the Trade Practices Act and section 46 by bringing in the effects test. How many cases do we have on the go at the moment with this new, strengthened law?

Mr Sims : Mr Bezzi is going to answer that question, but I'm confident we will have one before the court by the end of the year. I say that because in the lift I bumped into the person running it, and I got an undertaking from them about when they'll get that into the court. So I'm hopeful we'll have our first one into court soon.

Just while Mr Bezzi's looking that up, the law changed, as you say, a couple of years ago. I think it was November 2017. You've got to find behaviour, you've got to be ready—it takes a fair amount of time to get the evidence to take someone to court. We've got to have all the documentation lined up to get reasonable grounds before we can take someone to court, so it takes about a year from the start of the investigation to the end. And all of the behaviour that you're looking at effectively has to be post that time. So it does take a bit of time, but I'm confident we'll have our first one in by the end of the year. And Mr Bezzi can now tell you how many we've got in the pipeline.

Mr Bezzi : Just to give you a sense of the pipeline, we have looked at 133 matters, through what we call our under assessment process, since November 2017. That's an initial look at a complaint or something that might have been generated internally as an issue. That's 133 occasions. Of those, 106 have been closed. We've said, 'There's no issue here'. Twenty-seven remain outstanding of those initial looks. If we think there's something in them, we do what we call an in-depth investigation. We've had 31 in-depth investigations under section 46 since November.

Mr CRAIG KELLY: November 2017?

Mr Bezzi : Yes, November 2017. We've completed 19 in-depth investigations, and we've got 12 ongoing, including the one that Mr Sims mentioned he is very optimistic about.

Mr CRAIG KELLY: I know we really shouldn't talk about specific cases, but would you have been able to bring those proceedings under the old law or only under the new law?

Mr Sims : Sorry?

Mr CRAIG KELLY: The proceedings that you're bringing—

Mr Bezzi : The change has helped.

Mr CRAIG KELLY: Would you have been able to bring—

Mr Sims : Although the one that's coming before the end of the year is under the new law.

Mr CRAIG KELLY: Right, but would you have been able to bring those same proceedings under the old law?

Mr Sims : No. I should just add that my own view is that the change in the law has changed behaviour. Lawyers could advise companies, in the past—I'm generalising a bit here—that if you were doing something that a smaller company could do then you wouldn't be taken to court for a breach of misuse of market power. That's how they were advised. They cannot advise them that way now. I think it has changed behaviour. I don't know how much, but I think we've had a beneficial effect just in having the change of law.

Mr CRAIG KELLY: From your assessment of the electricity generation sector, could it be a profitable strategy of one of the large electricity generators to withdraw supply from the market to benefit from a higher wholesale and spot price elsewhere?

Mr Sims : Yes, it absolutely could be. That was our concern when we wanted to oppose, and did oppose, AGL's acquisition of Macquarie Generation—because they had by far the largest share of generation in South Australia, Victoria and New South Wales as a result of that acquisition. Our view was that it was best that didn't happen. We opposed it. It got defeated in the courts—going back to my earlier conversation with Dr Leigh. One of our many concerns was that, with such a strong generation position, they could benefit from withholding capacity and pushing up prices. It's not a breach of the law to do that, though.

Mr CRAIG KELLY: If I were one of these large electricity generators and I said, 'I am going to withdraw supply from the market to push prices up,' that wouldn't be a breach of the current law?

Mr Sims : It wouldn't be a breach, absent doing more to stop competitors coming in. It does very much depend on the circumstances. We have, as you know very well, a spot market. They can make a lot of money quickly doing that. Our judgement, and the legal precedent, is that withdrawing capacity to try to spike the spot market wouldn't constitute a substantial lessening of competition in a market.

Mr CRAIG KELLY: On that point, say you have an asset that you, as an electricity retailer, think you might sell. Rather than sell it, you just close it down, and somewhere in an internal company document it said, 'We've done this to prevent entry of a competitor into the market.' Under the current law, can you—

Mr Sims : How do you mean 'if you've done it to prevent entry'?

Mr CRAIG KELLY: Rather than sell it to a competitor.

Mr Sims : Oh, I see.

Mr CRAIG KELLY: You have a generation asset and you don't want to continue on with it. You say, 'Look, we can sell this for $500 million,' but you say, 'No, let's just close that down.' And in some internal, leaked company document it says, 'We are not going to sell that asset to a competitor, because we want to stop that competitor from entering the market.'

Mr Sims : There's a bit of an asymmetry here in the sense that one of the other reasons we wanted to oppose AGL acquiring Macquarie Generation—there were two assets, as you know extremely well, Bayswater and Liddell—was that we were concerned that they would have an incentive to close Liddell to have an effect on price. That is one of a range of reasons we wanted to oppose the acquisition, which, as I said, we were overruled on by the Competition Tribunal. I happen to think we were right. On the other hand, with them having said, 'We're going to close it in three or four years,' there's ample opportunity for others to come in and set up new plant. In that sense, it would not breach the law, to answer your question.

Mr CRAIG KELLY: What about the regulatory barriers to entry? If someone wants to set up a new coal-fired power station to compete for supply baseload power 24/7, there are enormous regulatory barriers.

Mr Sims : It does take time; it takes five years to build a coal plant—

Mr CRAIG KELLY: There is the time it takes, but there's also the regulatory green and red tape someone would try to go through. I'm in discussions with people at the moment who are going through this.

Mr Sims : If this presumed company we were talking about were actively going around erecting barriers to stop others coming in, then there'd be potential for a breach. Here, yes, there are barriers. There always are when you're building these sorts of things. For example, you could build a gas peaker and potentially have that back some wind farms and use some pumped hydro. There are other ways to get new capacity in the system by the time Liddell closes. That's why I don't think it would be a breach of the act.

Mr CRAIG KELLY: What about the proposed changes to the laws before parliament at the moment?

Mr Sims : You're asking whether they'd change things?


Mr Sims : There are three provisions there. I guess the market manipulation one is the one that—

Mr CRAIG KELLY: At the moment, if I have a generation asset and I say, 'Look, let's just close the thing down,' if I didn't have a substantial degree of market power I would sell it for $500 million, but because I do have a substantial degree of market power it works out that it's better for my profitability, for my company, to close it down and not sell it to a competitor, and therefore I can benefit from a higher wholesale price. Is that conduct potentially captured by the new act?

Mr Sims : I'd have to take that on notice; I looked at those provisions some time ago—unless Mr Greiss has an answer. I think I'd rather take it on notice and give you a decent, thoughtful response.

Mr CRAIG KELLY: My other question was to the Australian Energy Regulator. Do we have the latest figures on the number of electricity disconnections around the nation? Which direction are they going in—up or down?

Ms Groves : We are scheduled to publish the newest figures on disconnection shortly, because we do them quarterly. In our recent affordability report I draw attention to a slight lessening of the affordability indicators. Over the past year, affordability indicators have improved very slightly. Essentially, they've been flat, but after 10 years of increases I think we all welcomed seeing that, while recognising affordability in particular continues to be a very significant issue. I don't have the specific disconnection figures, which are collected on a regional basis—we do those state by state—with me. Perhaps I can provide them to you.

Mr CRAIG KELLY: Why do you not publish Victorian figures?

Ms Groves : Because we're not responsible for regulating Victoria in the retail market. That's a responsibility of the Victorian government.

Mr Sims : They do it separately.

Mr CRAIG KELLY: Okay. Mr Sims, our friends at K-Line have one of the largest fines for cartel conduct. There was a $25 million fine. Have they actually paid that to the Commonwealth as yet?

Mr Bezzi : Yes, to my knowledge they have.

Mr CRAIG KELLY: In that case, I understand that there were similar incidents in the US—

Mr Bezzi : That was $34.5 million. NYK was $25 million.

Mr CRAIG KELLY: There were similar incidents in the USA, where similar cartel conduct had been engaged in. I think there were a couple of executives that were sent to jail because of that conduct.

Mr Bezzi : And there are some that are still on the run—some Norwegian executives.

Mr CRAIG KELLY: Is there any reason why we didn't here use the criminal sanctions that we have?

Mr Bezzi : We did. It's a criminal prosecution.

Mr CRAIG KELLY: Where there was a jail sentence in the USA for this conduct, there was no jail sentence here in Australia.

Mr Bezzi : So you're asking why we didn't prosecute the individuals?


Mr Bezzi : It was difficult, given the evidence that we had. In addition, some of the individuals had already done jail time in the United States. The judgement we made was that it was an appropriate decision to just refer the company. The DPP ultimately makes the decision, and they decided just to prosecute the company.

Mr CRAIG KELLY: Are you noticing a bigger retail margin in petrol pricing and retailing—a greater spread of the price cycle?

Mr Sims : We're noticing the margins have crept up a bit over the last 10 years or so. Keep in mind, when we're concerned about margins, you're talking maybe one or two cents a litre. It's the OPEC cartel I worry about with petrol prices, and also recent events in Saudi Arabia. We have noticed a bit of an increase. That is probably flattening out a bit. The industry says it's because they've got more regulatory burden. Going back to the earlier line of questions, our view is that that is overstated. We think the margins are still a bit high. In terms of the cycles, they have broadened out a bit. I don't think that's getting any worse.

Mr CRAIG KELLY: When you say broadened, do you mean over time or in depth of price?

Mr Sims : We've been monitoring both for some time. I think it's fair to say, if you go back and look at now versus five or six years ago, the cycles are probably longer and deeper—the difference between the top and the bottom is larger. That probably hasn't changed much in recent years, but if you take a five- or six-year spread then they're both longer and bigger. But keep in mind that 'bigger' can mean bigger because they're higher on the up and that bigger can mean that they're lower on the bottom as well.

Mr CRAIG KELLY: Fair enough.

Mr Sims : When prices are at the bottom of the cycle, sometimes companies aren't making any money at all and could be losing money. So that bottom-of-the-cycle price is not a sustainable price either.

Mr Cosgrave : The other factor that we pointed to in our most recent report was that so many of our prices are set by international factors. Certainly we have seen increases at the pump, but that is very much around the reduction in the Australia-US exchange rate.

Mr CRAIG KELLY: Just anecdotally, to my eyes the depth of the variations in the cycle seem to be getting greater. I know that is just anecdotal. I don't know whether your analysis—

Mr Sims : We'll send you something on that.

Mr CRAIG KELLY: That would be interesting.

Mr Sims : We do track it. My sense is that it hasn't got worse in the last couple of years, but I'll come back to you on that; I could be wrong.

Mr Cosgrave : We've done recent work on price levels. We're happy to provide that.

CHAIR: In your Digital platform inquiry report, a recommendation in chapter 6 dealt principally with the issues around making sure there's content generation for the local marketplace. To what extent do you think the ACCC is capable of making this assessment around providing subsidies and grants for journalism? The ACCC's area of expertise is in making sure that markets are open and competitive, and there may be necessary measures to make sure the system has a sort of, shall we say, level playing field—although I hate that term, frankly. Yet, in your recommendation you've got 'stable and adequate funding'—I presume public funding—'for the public broadcasters', which is essentially an issue of public policy. 'Grants for local journalism' is recommendation 10. Does the ACCC actually have the expertise to make these recommendations?

Mr Sims : Our inquiry was, in large part, triggered by discussions that saw the media policies get changed. I can't remember the rules now, but you couldn't own newspaper, radio or television in the one market—all that sort of stuff. So it was partly triggered by that. In a sense, the terms of reference, yes, asked us to look at market power and, yes, asked us to look at information to consumers, but the inquiry had a big focus on the media market. It was triggered by concerns we discovered where the media industry is finding it increasingly hard to make money because of the way the digital platforms, first of all, grab consumer's attention—people are not necessarily clicking through to the newspaper site—and, secondly, because of the way they are dominating more and more advertising. So we then had to look at what to do about that. That was explicitly required in our terms of reference. With local journalism, you've got the same problem in the United States, where there have been a lot of local newspapers closing down. In our view, newspapers are a public good, in the sense that you benefit from them even if you don't buy them, because local journalists are keeping an eye on council meetings and local court cases and other things that have a benefit to the community. But they are increasingly finding it hard to survive. We've lost a lot of them in Australia. They've lost a lot of them in the US. It's a consequence of the digital platforms. I'm not saying they're trying to drive the papers out of business, but our recommendation was for—if we want to address that and make sure there's local journalism—some form of grant program. That wouldn't have anything to do with the ACCC; you would set up a group of experts to allocate the money to make sure that there was local journalism. That's a recommendation that is in the hands of the government to decide whether they're comfortable with that or not. It was part of our terms of reference, absolutely.

CHAIR: I am not contesting whether it was part of the terms of reference—I'm questioning the expertise or judgement to make the recommendation. The first recommendation in that group was around public broadcasters. To what extent does the ACCC see public broadcasters at risk of crowding out alternative private media companies—or private providers being able to do the same thing?

Mr Sims : There are two things. One is that what we were commenting on is that journalism is a public good, and it is supported in just about every country in the world in various ways, be it tax deductibility for charitable donations to journalism or public funding. There are public funding programs in many countries. We didn't invent this idea of local grants. But, in many countries, the dominant way of supporting journalism is through public broadcasting, and that's been the case in Australia for some time. We felt—consistent with looking at the media, which we were asked to do—that the dominant form of funding the public good was through funding the ABC and SBS. So we just said, 'Keep that going.' It wasn't a very controversial matter.

CHAIR: No, but the question mark for me is a competition watchdog recommending that more money is provided for essentially what is—

Mr Sims : I didn't say more; I said keep it going.

CHAIR: I apologise—that was not the spirit of my comment. But ABC and SBS are two very large market players, if you look at it traditionally. I understand the terms of reference led you there, but it seems like there's almost a bit of a contradiction.

Mr Sims : Look, there's no doubt that the commercial players would benefit from the ABC and the SBS not being there; there's no doubt about that.

CHAIR: To clarify, I wasn't making the case for that.

Mr Sims : No, I understood that. But there's no question that there's a crowding-out there. I guess the point we were making is: we've been asked to look at journalism; it absolutely is a public good, and the traditional way that Australia has dealt with that is this way, and we're saying, 'Well, keep that going.'

We were asked to look at the media sector, so we looked at it in the whole and said, 'Actually, there need to be changes on three or four fronts.' A good part of the public contribution to journalism is through the ABC and the SBS; we said, 'Keep that going.' There is a big gap with local journalism, so we said, 'Bring in a program to support that.' In the case of the large media companies we talked about a bargaining code, because they don't have bargaining power with the main digital platforms. Finally, we talked about trying to level the regulatory playing field between the digital platforms and the large media players. So, in a sense, we are dealing with the current way that we fund public journalism, the need for specific help for local journalism and measures to assist the main media companies. I think we were pretty comprehensive.

Mr Gregson : Can I quickly comment on your first question, about our expertise. The digital platforms work was within my division. There are three things that I am sure Rod Sims would agree with: we are experts in gathering evidence and making analysis; when we do market studies, we also bring in other expertise and work very closely with other regulators and departments—which we did very heavily on this matter; and, most importantly, through the market study process, we get all of that information, that consultation, and the engagement with the marketplace and stakeholders. I wasn't as involved as my team, but, yes, I think our capacity to develop and deliver the expertise needed—the market studies framework very much does that.

CHAIR: Thank you.

Dr LEIGH: Mr Sims, I want to ask some questions relating to your retail electricity pricing inquiry. Am I correct to note that the report found that average residential electricity bills increased from 2016-17 to 2017-18?

Mr Sims : Possibly. I'm honestly not trying to be difficult; I don't have the one-year figures in mind. I very much have the 10-year figures in mind, where the prices have gone up and the average bill has gone up by about 35 per cent after inflation. I don't keep the yearly figures in my mind. We can send them to you.

Dr LEIGH: Thank you. How would you characterise the role that wholesale electricity prices have played in that increase?

Mr Sims : It's interesting. With the 10-year focus in mind, wholesale prices have been the smallest contributions to price increases. The network prices and the green scheme costs, as you know, are smoothed—there are feed-in tariff arrangements, there are payments for small-scale solar—so that they are paid by energy consumers. The network prices, the funding of the green scheme and the retailers' costs and margins all made bigger contributions than generation costs. So, over a 10-year period, generation costs haven't been as important as other bits. In the last couple of years, yes, generation costs have dominated. There is no doubt about that.

Dr LEIGH: Your report noted:

… policy uncertainty is likely preventing any meaningful new entry into the market. Until a climate and energy policy such as the National Energy Guarantee is finalised and implemented with bipartisan support this is likely to continue.

I assume that's still your view?

Mr Sims : A little bit. To be honest, I have had the view for some time that the claims by some of the larger energy companies about uncertainty are exaggerated. Personally I think they are trying to shift the blame and shift their roles in the problems. If you are thinking about just electricity affordability—we're not talking about sustainability or reliability, just affordability—then I'd probably come up with 10 policies, which I can reel off if you've got time, that I would go to before I would go to investment uncertainty, personally. Others would have a different view. It's a contested area.

Dr LEIGH: On the issue of the National Energy Guarantee, your report, released on Monday, recommended that the government implement the National Energy Guarantee. That is correct, isn't it?

Mr Sims : No. We had a report that actually didn't mention the National Energy Guarantee, except in an attachment. In that attachment we listed our 56 recommendations. Against the National Energy Guarantee we noted that it had been—and these aren't the words—'half-implemented'. As you know, the National Energy Guarantee was two things: it was a reliability mechanism, which has been implemented; and it was an emissions reduction mechanism, which has not been implemented. So we noted it had been half-implemented; I'm pretty sure that is right.

Dr LEIGH: But, in effect, you're calling for the emissions reduction element to be legislated, are you not?

Mr Sims : Let me be really, really clear here. If you're thinking about how you deal with emissions reduction issues, then, yes, of course. If what you're thinking about is affordability, which is the ACCC's sole remit, then it would not be one of my top issues. We'd much rather deal with network prices, getting the default market offer in and getting rid of conditional discounts. If you wanted to actually deal with affordability, we'd be doing it through those matters in terms of priority. As I say, emissions reduction is its own topic. Our focus is affordability.

Dr LEIGH: Given that both the government and the opposition are committed to Australia meeting its Paris climate targets, emissions reductions, I would have thought, could be regarded by the ACCC as being a bipartisan agreement in the background. Both major parties are at least ostensibly committed to emissions reductions, are they not?

Mr Sims : Sure; sorry, I'm being a bit slow here. Yes, we assume all that. But, as I say, our focus is on affordability. I may have missed the point there.

Dr LEIGH: I am taking you to your recommendation in the retail electricity pricing inquiry, which was a strong recommendation for the National Energy Guarantee. You are seeming to say, 'If you didn't care at all about emissions reductions, perhaps you wouldn't do that.' But, in a world in which both major parties are ostensibly committed to emissions reductions, the National Energy Guarantee ought to remain on the table, ought it not?

Mr Sims : We had 56 recommendations. I'm not discarding the investment certainty issue. We did, in our report, support the National Energy Guarantee. But if you're asking me now—I know I'm answering my own question—what the top 10 measures are to deal with affordability, I don't think the investment certainty question is one of those top 10 measures, in my personal view.

Dr LEIGH: On the issue of divestiture, your report noted:

Requiring the divestiture of privately owned assets is an extreme measure to take in any market, including the electricity market.

While the way in which concentration has developed in the wholesale market is clearly contributing to current high prices, the ACCC considers that the other recommendations made in this report will, if implemented, be a better means to restore competition to a level which serves consumers well.

Is it still your view that the divestiture mechanism is unnecessary?

Mr Sims : I have made comments in the past, and I've contrasted my views with one of my predecessors, Professor Fels, who thinks divestiture is a really important measure. As far as I'm concerned, in relation to the bill, the debate has been had. We've had a good chance to provide our input. Our focus now is to implement the measures as now presented to parliament. We will implement whatever is passed. As I say, different people have different views on that. Our view was that it was better to get more competition into the system; that was why we had a range of recommendations. One recommendation was trying to get bids into the market from the demand side. Another one was our recommendation 4, to get some new players into the market. Our view was to promote competition that way. The debate over what is in the bill that has been introduced today—the government has heard all views. Our focus is now on implementation.

ACTING CHAIR ( Dr Leigh ): Organisationally that's an admirable perspective, but from the point of view of what we're doing today, having a conversation about the ACCC's views on first best policy, it does remain the ACCC's view, does it not, that the divestiture mechanism is unnecessary?

Mr Sims : Look, I'm not walking away from what we wrote in our report. That was the last time we focused on this matter. We haven't given further thought to it. As I said, I've had many a wonderful discussion with my predecessor—who is bordering on obsessed with the topic!—and he and I just have a different view on that. Sensible minds can have different views on that. But we haven't re-engaged since we wrote the report. I'm not walking away from what we said in the report, but we haven't focused on it further.

ACTING CHAIR: Thank you. And I should have asked before, when we were talking about the National Energy Guarantee: have you provided advice to the government on the National Energy Guarantee or similar policies to put downward pressure on prices?

Mr Sims : No, because the NEG was not something we much engaged with. Our focus was 100 per cent on affordability. We did not focus on emissions reduction; we didn't focus on reliability. As I've said on a number of occasions, I'm a strong believer in the Tinbergen rule, which you'll be familiar with: for each objective there is a set of instruments. In our view, if you want to deal with affordability, there are a range of things to do. As I said earlier, we had a top 10 list of recommendations to deal just with affordability, and our top 10 recommendations to deal with affordability did not include the NEG. There's just no doubt about that. The NEG is there for other reasons. The NEG had two bits to it. The NEG was not one policy; it was two policies. It was what's now called a retailer reliability obligation, which has now been fully implemented, as I understand, and there's an emissions reduction component, which hasn't been. But since they're not issues that we focus on, we would focus on them only to the extent that we think they're really relevant to affordability. We put out a view at the time, but it wasn't one of our top 10, by any means. I'm just being clear.

ACTING CHAIR: Thank you. In terms of the digital platforms inquiry, there has also been in Britain the Furman inquiry handed down. It went further, in some respects, than the digital platforms inquiry—for example, arguing that merger policy should be updated and also advocating a greater degree of open standards to permit mobility. The Furman inquiry made the point that mobile phone portability came about only as a result of government intervention, and it's the same here. What caused the ACCC to approach the issues in Australia with a greater sense of timidity than the Furman inquiry?

Mr Sims : In relation to mergers, they've got a recommendation in there that merger policy be changed to focus on potential competitors and to focus specifically on data. We figure that's a better way to do it than the balance-of-harms approach adopted by Furman. We thought about it a lot and we preferred the potential-competitor approach. In terms of data portability, there's no doubt that being able to port your mobile phone number helps competition. But one of the advantages we had in doing the inquiry was that we were also putting in place the consumer data right; we used that knowledge to inform ourselves on this. We just think there are many practical issues. To give a simple example: if you're on Facebook it's very hard to port your Facebook data to somebody else, because you're not only porting stuff about yourself; you're also porting stuff about all your friends, such as photos. So there are practical privacy issues to go through. We think there are practical problems to be overcome, having looked at this through the consumer data right lens, which I think we have pretty well, and better than others. Also, we just think portability may be something that's done through the consumer data right down the track. It may have practical benefits for consumers, but we don't see it as beneficial to competition outcomes as others do. We honestly think others are taking a bit of a simplistic view on this. We've thought about it a lot.

ACTING CHAIR: In terms of one of the issues you just raised—the consumer data right, which will begin here in the form of open banking—should we be disappointed by the British experience of fairly low switching costs following the introduction of open banking?

Mr Sims : I'm going to turn to my expert on my right to answer that question.


Mr Gregson : Consumer data right also sits within my division. We worked very closely with the UK authorities and learnt many of the lessons they have. But we also don't look to complete take-up on day one as being the measure of success. The benefits of the consumer data right will start to occur on day one, but they will grow exponentially month by month, year by year—

ACTING CHAIR: Exponentially? That's a big promise.

Mr Gregson : I have confidence that it is a 'change the world' type policy. We don't see day one as being the measure of success, other than ensuring that we have done our best to make sure it is rolled out and available. It really will grow. Importantly, we already have strong interest from data receivers to participate, and the work with the banks is putting us on track for the February release date. Many of the use cases will evolve and emerge, and that is starting to be the experience in the UK. The lessons from the UK include making sure that we are going through a good testing and assurance regime. That is what we are now building into the system here in the time that we have between now and February. We think that will put us in a much better position. Importantly, too, in Australia we have learnt that it is important to have an enforcement regime backing up open banking. So, as well as our very constructive engagement with participants we also have the capacity to say that it isn't voluntary or un-mandated. In the ACCC there is a strong regulator that will make sure that participants are rolling out when they have to.

Mr Sims : We would much rather that it was done well and done right. Like all new things, they usually have that sort of trajectory, so our focus is on doing it well and doing it right.

ACTING CHAIR: Are you aiming for higher levels of uptake than Britain has seen, or would you be happy if you had the levels of uptake that the UK has experienced?

Mr Sims : Mr Gregson is more familiar with it.

Mr Gregson : Again, we are not really putting measures on what we would expect to see. What we want to ensure is that the system is sound—it is to manage that tension between security and privacy, which is important. That is going to be the real hallmark. If we are going to have security and trust in that system it will actually grow in the future. So, we are not using those sort of benchmarks, but I think we have learnt a lot from the UK experience, which means that we, hopefully, will avoid some of the challenges they have had on implementation.

Dr LEIGH: To what extent are you prepared for cyberattacks? Do you have backup plans in place, such as taking the system down if there are major integrity breaches?

Mr Gregson : We have engaged external providers to assist us with our component of the IT infrastructure, which is the registry and the accreditation process. We have invested now in the testing and assurance regime. That shows not only that the banks and the data receivers have done their own testing and are up to speed but also that the ecosystem is in place to manage that. And, yes, we have contingency plans. We have built in security mechanisms. That has been a bit of a learning curve for the ACCC. You might appreciate that that is not our normal skill set. We have spent a lot of time and effort getting the expertise in to ensure that we get it right.

Dr LEIGH: Given that Australians collectively lost millions of hours of their time when the census website went down on the night of the last census, how worried are you that the very integrity of open banking could be at threat, if there is a significant breach?

Mr Gregson : The system won't have the same central aspects that some of those other systems have. Primarily, this is data holders—in this case, banks—making sure they are making available to their customers the capacity to request that their data be released. So, yes, there will be issues. There are undoubtedly going to be issues in terms of every component working, but it is not susceptible to the same central flaws. Our central register will be an important part of it, but we have been making sure we have built in the mechanisms there. Some people have commented to us that consumer data right is an important policy initiative, but, primarily, it is also an IT delivery mechanism and that is what we are investing in to make sure that we know what we are doing with the IT infrastructure, and rolling it out well.

Dr LEIGH: How should a consumer champion and competition lover think about Facebook Libra, the proposal of Facebook to create its own digital currency?

Mr Sims : There is a plus and a minus, I think. Competition is good. Having mentioned that we haven't really moved the shares of the big 4 in banking, it is to be welcomed. On the other hand, in our experience, having done the digital platform inquiry, you'd be concerned to make sure that consumers are well informed in terms of what they're getting into—that they're not misled—and that their privacy is looked after. Both those points are important: do they understand the deal they're entering into, and how is their data used?

Facebook and Google make a lot of money out of your attention and your data. At first blush it's hard to see how that way of monetising things—they wouldn't want to apply that in the financial sector, so that's something you'd need to watch very, very closely.

Dr LEIGH: You'd be aware of the research by David Byrne and Nicolas de Roos on Perth petrol prices, in which they found that tacit collusion, in their estimate, pushed up profit margins for Perth petrol retailers by 50 per cent. They made the interesting observation that this was not a matter of explicit collusion but of tacit collusion. In their words:

Big players can act like conductors, and smaller players can act like the orchestra, in coordinating on tacitly collusive pricing behaviour.

They called for a policy response to deal with what is, in effect, the use of big data by monopolists to pad their profit margins. To what extent is the ACCC concerned about tacit collusion, and what are the appropriate reforms that policymakers should consider?

Mr Sims : There are two things. Certainly we're concerned about tacit collusion. It's a problem. It's one of the classic problems when you have high levels of concentration. You get big players who look like each other, watching each other, moving their prices in ways that benefit each other, because they're so equally positioned. They don't have any incentive to lower prices and they've got an incentive to keep them up. In the petrol sphere, the greater concentration that would have come about through BP buying Woolworths is why we opposed that. We felt that, given the nature of the petrol market, you wouldn't want it any more concentrated than it is, so we were pleased that we were successful in blocking that.

In terms of the data, our view is that the counter to the petrol companies having access to this data is making sure the consumers have the data as well so that they can work out where the best deals are. Petrol is this stunningly irritating market where prices go up and down in cycles for reasons no-one can fully understand. The negative of that is that people get really annoyed when the price of petrol goes up by 30c a litre in a couple of days. The plus of that is that at virtually all times, particularly when the prices are moving up or coming down, there's a wide disparity in petrol prices in the major cities, so there's a lot of money to be made—way more than any view of excess margins—if you want to keep an eye on that. In New South Wales, there's FuelCheck, run by the government. We've got a website trying to advise people on where to buy. But there are many websites you can load on your app to help you get cheaper fuel. You can see that even in places that don't have cycles, like Darwin, Cairns and Armidale. They've all got some low-price players.

Dr LEIGH: But, with respect, Mr Sims, this seems like a 2010 view. The point that Byrne and de Roos make is that we might have thought big data would advantage the consumer, but it turned out to advantage the producer to a much larger degree, and take-up of the apps you talked about is strikingly low. Wouldn't it be better, rather than almost blaming the consumer for not using an app, to think about how the regulator might have greater powers to prevent producers from gouging by using the very same big data?

Mr Sims : Certainly we're never blaming consumers. We just do not do that. We're trying to give them advice; we're not trying to blame them. The evidence from the study that you mentioned is consistent with evidence from other studies around the world. What it shows is that, if there's no data available in the market, if data is available to the producers then they will use that to help their tacit collusion, as you say—not illegal, but tacit—to raise prices. If you've already got that situation where they've got that data then adding on to that the ability for consumers to see that data as well helps lower prices. So it depends what your starting point is.

We were running a case against a company called Informed Sources and all of the petrol companies. We instituted proceedings against them probably five years ago now, give or take a bit, for running a service where all the petrol companies would provide their data on a 15-minute basis to Informed Sources, who then would send it back out to everybody, saying, 'Here is what everybody has just done.' It was not what they were going to do but what they had just done. So you could instantaneously see what people were doing with petrol prices. Our argument that we put before the court was that that gave people the ability to quickly see, if they pushed up prices, whether others followed or not. We felt that was anticompetitive. The problem that we had was: what's the alternative? In the old days, before you had technology, they'd each employ someone to get in a car and drive around and see what everyone else was doing anyway. So we had to show that this was anticompetitive. What we decided to do, rightly or wrongly, was reach a settlement in the case where we said, 'We'll settle the case provided that information is instantly made available to consumers as well.' From all the literature, that extra step helps consumers. Proving we had a case for anticompetitive behaviour was difficult. I won't rule out that we may take it out again if circumstances allow. We are still watching the market very carefully. So we've still got an open mind.

Dr LEIGH: But you've accepted that the Byrne and de Roos finding holds more generally—in other words, that profit margins might be up as much as 50 per cent as a result of tacit collusion. Are there really no additional powers that government could bestow upon the ACCC to directly tackle tacit collusion?

Mr Sims : We have thought about that. We will keep thinking about that. We can't see immediately what you could do. One of the problems that you have with petrol companies is that you have the larger companies that are making quite healthy margins and you have the smaller companies that are getting by on the smell of an oily rag and so things that you do could have an effect on a lot of small businesses as well. But I think the bigger point is that, when you start to talk about a 50 per cent increase in margins, the net margin, as distinct from the gross, is probably only 2c, 3c or 4c a litre and so 50 per cent of that is whatever that arithmetic turns out to be. You can save yourself a lot more by working out when to buy, where to buy and who to buy off. There clearly are much more expensive brands out there. Traditionally Coles has been the most expensive and the smaller players are the least expensive. So you can save way more from that margin. Our focus at the moment is trying to inform consumers about how they can approach the market.

Dr LEIGH: I am sure it's a conversation we will continue, but given the low uptake of these apps it seems wishful thinking.

Moving on to the issue of price parity clauses for online travel agencies, the ACCC has been focused on this issue over recent times. Expedia has agreed not to explicitly enforce price parity clauses so as to allow hotels to offer a better price on their own websites than they do through Expedia., as I understand it, has not made such an undertaking. Is it the ACCC's view that it would be in the interests of these smaller hotels if the duopoly online travel agencies of and Expedia were prevented in some statutory fashion from enforcing price parity clauses?

Mr Sims : I will say one more thing on petrol very quickly before I go to that. As Mr Bezzi has just reminded me, we now have the concerted practice laws that came in in November 2017. That's something we didn't have when we reached that settlement. We are continuing to watch the petrol market. We are engaged on that. In the online market, we're certainly of the view that we would like to make the same commitment that Expedia has done. Beyond that, I'll go to Mr Bezzi.

Mr Bezzi : In fact, we've invited them to do that. They are considering their position. In the meantime, we are continuing our investigation in relation to their conduct and we are keen to bring that matter to a head as soon as we can.

Dr LEIGH: What sort of a time line do you have, Mr Bezzi? When I speak to small hotels this is now their top issue. I don't think any of us would be terribly worried if these platforms were charging one or two per cent, but when they are charging 10 to 30 per cent it does start to look a whole lot more like gouging.

Mr Bezzi : There are some practical problems associated with the investigation. The business is based in the Netherlands. We've been working at ways to deal with some of those practical problems. They have voluntarily assisted us with our inquiries, but we are getting to a point where some of the practical problems might cause some further delays.

Mr Sims : We are trying to work out whether we are going with the investigation. We don't rule out that we may want to think about recommending things to government. We're not there yet, but, to go to your question, there may well be more that needs to be done. We are very much focused on this, we understand the concern by the smaller hotels, so we're not going to dillydally. But we have to go through certain processes and come up with the right answer. It is quite complex, but were alive to the issue and it could be that a recommendation is appropriate.

Dr MULINO: I have a question in relation to the gas market. There has been a lot of discussion over recent times around a mechanism to reserve gas for domestic consumers. What are some considerations that should be borne in mind when, for example, considering how to tweak the Australian domestic gas security mechanism? How might one sensibly balance the design of that in a way to benefit consumers against sovereign risk issues?

Mr Sims : I think you have adequately explained why it's a very complex issue. The government has said it is going to have a look at that, and we'll certainly contribute to that. I expect that the mechanism could be usefully tweaked, but it is complicated. People often make the comparison with Western Australia, which I think has a 15 per cent gas reservation policy. The three LNG players—not individually but collectively—sell more than 15 per cent of their product to the domestic market anyway. So if you had brought in the Western Australian policy you might still have had the same problem. The real issue with our gas market is deciding to build three $20 billion projects at the same time, when there wasn't enough gas in the market at that time, coinciding with bans on exploration and development in Victoria and New South Wales. None of the gas policy people really saw this coming, so it is just a very messy situation to be in. It is partly the industry's fault for overestimating what they could supply. We are going to participate in the process, but if I said anymore I think I'd be stretching what we know.

Dr MULINO: But another consideration would be supply constraints within the Australian market. For example, we are seeing consideration of a terminal in Victoria, presumably as a result of pipeline constraints. That is another factor that would reflect how consumers are affected by any particular solution.

Mr Sims : It could. Those import terminals will help supply, but they may not help price very much because—

Mr Cosgrave : They won't be cheap gas.

Mr Sims : No. By definition, they are going to be the overseas price of gas, plus shipping to get it here plus re-gasification. Doing those three steps is about $2 or $3 a gigajoule, which is about the same cost as it is to get the gas from Queensland down to Victoria anyway. They'll help supply. They won't help price.

Dr MULINO: I have just one other quick question on a different point. The ABA is currently working on amending the Banking Code and one of the issues is a basic bank account. My understanding is that you're currently considering a proposal. Some consumer groups have raised some concerns. What are some of the considerations that you'll have to balance in evaluating any proposal?

Mr Sims : I will pass it to Mr Gregson, but I'll just say we have some concerns as well that we're assessing. This comes under our authorisation process, where because its banks getting together the behaviour has to be authorised. Mr Gregson is responsible for many things and also authorisation. But we have concerns with where this is up to as well.

Mr Gregson : There are a number of things in the Hayne royal commission that the banks are responding to and doing that through their code of conduct. Some of those raise competition concerns—hence why, as Mr Sims mentioned, the matter is before our adjudication branch for potential authorisation. In relation to the basic banking aspects, a few concerns have been raised, including, for example, whether at all times banks could guarantee that you can't be put into overdraft. There are certain concerns and issues with that and consumer groups have a particular view. We are considering those issues. There are further concerns about whether the arrangements under the code would actually mandate or require banks to offer a basic banking product or, indeed, whether it would be possible for banks that currently offer it to withdraw those offers. They're the types of things that are being put forward to us. We're at a critical moment at the moment where we're working towards our draft determination. We expect that to be out towards the end of this month, and that will set out our position on the test that we have to apply and whether we're comfortable with the proposals for us.

Dr MULINO: The process is that you'll put out a draft determination at the end of this month—and what is the next step after that?

Mr Sims : Commentary, submissions on it, leading to a final which should be a couple of months later I would guess.

Mr Gregson : That's right. We are aiming for November for our final determination—subject, of course, to whether various steps are available, such as a conference; that can take a bit of extra time.

Dr MULINO: Thanks. Thanks for your evidence today.

CHAIR: I'm just going to jump in and use the indulgence of the chair before I hand back to Dr Leigh. Has the ACCC done any work essentially assessing or weighting the impact of security decisions or concerns in the context of competition policy? I'm mindful that, for instance, we had limitations on Chinese-based company Huawei in terms of its involvement with the rollout of 5G. Whether it is state-owned entities, or private companies of foreign nations, becoming more likely players where there may be security concerns, to what extent has the ACCC done work to assess the impact on competition?

Mr Sims : We largely haven't. We treat security as the domain of others. We work within that framework. With the Huawei announcement, we felt that it obviously had implications for the spend of Optus, TPG and Vodafone. They were all affected by it. That was clear. We're not going to take a position on security and try and say, 'Hang on, weigh up security and competition—

CHAIR: Sorry, that wasn't quite the point, and maybe it was poorly expressed by myself. It is the challenge of, if it has a deleterious impact on competition, when we have national security considerations—for instance, we may end up in a circumstance where there might be two entities and one is owned by a foreign actor and, therefore, in the end for one reason or another they're either limited or banned, which could substantially lessen competition. Is there any assessment about how the ACCC might approach such a situation or might inform its conduct?

Mr Sims : Largely we would wait to be asked. We wouldn't generally weigh into those decisions, because generally they're taken for reasons that we respect. We generally wait to be asked. We get involved in decisions taken by the Foreign Investment Review Board where they're weighing up these sorts of things. We give a competition assessment into that. But that's about the extent of it. So we're really waiting to be asked, generally.

CHAIR: Sorry, you were gesturing towards somebody.

Mr Sims : I was just seeing whether anybody else had anything to add.

CHAIR: From where I sit, I see it as potentially a bigger challenge over coming years. I don't want to sound like I'm trying to forewarn anything. We are obviously seeing a lot of these discussions coming out in the public square. We've gone through a period of about 30 years of the market being largely left to its devices with competition policy, obviously, and others making sure it's a competitive marketplace. Security is going to become a much bigger factor in terms of informing decisions. As to whether the ACCC had commenced any work, it sounds like the answer is that it hasn't, beyond what it's expected to do. But there is also whether there may be a need to start to consider how that type of conversation may be had or factored into consideration.

Mr Sims : We take note of your comments. I guess, as evidenced by the discussion today, we've got a fair number of things on—

CHAIR: That is not in dispute.

Mr Sims : so we have not turned our mind to it. Our dominant approach has been to wait until we are asked, if somebody's forming a view on security, and often the competition issues are fairly clear. Occasionally we'll make a comment, but, no, we haven't done any systematic work.

Dr LEIGH: Mr Sims, you would be familiar with a report from Michael Roddan in The Australian on the duration that Australia's largest firms have maintained their auditors, showing that in one case audit firms hadn't been changed for 65 years and estimating that across the ASX 20 the average large Australian firm had maintained its auditor for 22.4 years. In Australia, the audit partner rotation is required after seven years, but there's no requirement for an audit firm rotation, unlike in Europe, which requires a tender at the 10-year mark and mandatory turnover at the 20-year mark. Does the ACCC have a view on audit firm rotation and whether that would be pro-competitive?

Mr Sims : Subject to any injection from my colleagues, my answer would be no. We largely leave that sort of thing to ASIC, because it really goes to the quality of auditing and conflicts with auditing, which firmly come under ASIC's remit. As I just mentioned to the chair, we've got more than enough to go on with. That hasn't come across our radar. Our interest in audit firms might come about if we felt there was any market sharing or anything like that going on. There have been things put to us about that, which we have responded to. We haven't yet got any evidence of that. If we found evidence of that, we would be incredibly interested. But, in terms of rotation and things like that, our judgement would be that that's an ASIC issue.

Dr LEIGH: How would you characterise the audit market in Australia?

Mr Sims : As I understand it, and I don't understand it well—I don't know whether Mr Bezzi or anyone else has a better view—it's obviously got four main players. There used to be six; there are now four. Without knowing a lot about it, I'd say it's perhaps not as competitive as you'd like it to be. Obviously a lot of the larger firms only want to use one of the four. Going back to your tacit coordination issue, there may be issues like that. But, seriously, I'm not close enough to market. I don't know whether Mr Bezzi has a view.

Mr Bezzi : I know that some of our colleagues in other jurisdictions have looked at these issues, particularly the CMA in the UK, but it's not an issue that we've had cause to look at more closely than when we looked at some allegations of market sharing.

Mr Sims : Given it's got ASIC all over it, particularly on conflicts and quality, we see bigger issues elsewhere. Maybe we're making the wrong call—I don't know. So we haven't really looked at it.

Dr LEIGH: I'm not sure if this is a question for you, Mr Sims, or for Mr Bezzi. To what extent has the ACCC embarked on proactive cartel detection? Many cartels are uncovered because someone decides to squeal rather than because the regulator uncovers them directly. What does the ACCC's proactive cartel detection program look like?

Mr Sims : Mr Bezzi would just love to answer that.

Mr Bezzi : For some time, we've benefited from a cartel immunity program that has delivered us lots of very interesting investigations. That has taken almost all of our investigation capacity. I've been concerned, and the managers of the cartel team have been concerned, that we've had to enhance our ability to do that proactive cartel work. So we've taken some steps to increase our activity in that area. We've done it in a number of ways. We've been conscious that the FBI has got considerable investigative skills in this area, and we organised some training last year where they helped us work through ways in which we might go about detecting cartels in a more proactive way. That was training for our whole branch. That was very good. We've since combined that with some initiatives with our intelligence team. We've done some proactive monitoring work. I'd love to do more, but at the moment our branch is pretty full in terms of its dance card. And, really, the capacity is limited by the resources that we've got.

Mr Sims : So it's a serious resource issue. Obviously the ones coming to us need to be investigated. The other problem we've got is that we're a bit of a victim of our own success. We keep taking cases. We've got a number in court at the moment, and having them in court means you've got to staff the court cases. So the more you've got in court, the less staff you've got to look into new matters. So we've got some serious resource issues.

Dr LEIGH: That's seriously troubling for the Australian economy. We know the cost of cartels is massive, and the notion that you are constrained from tracking down cartels through inadequacy of resources ought to be pretty troubling. Have you asked the government for more resources to focus your work in this area?

Mr Sims : There are two answers to that. One is that we did late last year, with actually probably quite short notice to the government, and they were kind enough to give us an extra $10 million, which helped quite a lot. Now we've gone through a more considered process, because, if you're going to ask governments for money, you've got to do a lot of work. So we're dealing with the government—through Treasury, Finance and Prime Minister and Cabinet—on a very formal process which Rayne is running. Rayne never gets many questions in these things, but she basically runs the place in terms of HR, funding, IT and everything else that matters. So she's been running a process engaging with all those departments and dealing with them on resourcing.

Dr LEIGH: Are there sources of data that would improve your ability to detect cartels?

Mr Sims : Absolutely, and that's one of the issues we do face. The data needs of organisations like ours have just taken off and I think it's fair to say they've massively outstripped our financial capacity. And I think it's fair to say the government—but, more importantly, Treasury, Finance and PM&C, who are overseeing this resource assessment process—are alive to the fact that the data needs have gone up. At the moment, there is much more sophisticated data in terms of reading documents and in terms of computer systems to analyse behaviour. We're way behind on that, and it has got away from us pretty quickly—

Dr LEIGH: That's your analytical side. Have you thought about asking for, for example, procurement data to look for tender collusion? That seems an obvious thing to look at.

Mr Sims : We've had a big program. When Mr Bezzi was describing what we've done, we've got outreach programs in some sectors where we're letting people know that we're here and that this is what a cartel looks like. In particular in government procurement, we've had a program, which we might just want to briefly describe, which goes to exactly that.

Mr Bezzi : We've had an outreach program for quite a few years where we've prepared a guide for government procurers on how they might approach the procurement—

Mr Sims : And recognise a cartel.

Mr Bezzi : and recognise a cartel. We've also given some guidance on clauses that they might include in procurement contracts, which might help to prevent cartel conduct. Just on your question about data, some of our colleagues in overseas jurisdictions do have access to very significant data sources—for example, government procurement contracts or government tender contracts for all governments, from local governments through to their national governments—and that is analysed using tools that they have, to see if they can identify sources for inquiries. The Koreans, for example, have spotted significant cartel activity, which they've then taken action against, in relation to bidding for some very substantial commercial construction contracts in Korea, because they've had that tool available to them. In my dream world, we would have that sort of data available to us and—

Dr LEIGH: You don't already?

Mr Bezzi : we would have the significant resources that you need to actually analyse all of that data.

Dr LEIGH: But you don't get those data?

Mr Bezzi : No.

Mr Sims : Anyway, Rayne is working on making Marcus's dreams come true, but we'll see how that goes.

CHAIR: Related to data.

Dr LEIGH: There are supply and demand issues there.

CHAIR: That concludes today's hearing. Thank you for your attendance here today. We've covered an awful lot of subject matter, and I know you have a lot on your plate, so we do appreciate the breadth and depth you've gone into. If you've been asked to provide additional material—and I'm not sure you have—

Mr Sims : Yes, we have. We've volunteered quite a few.

CHAIR: 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.

Resolved that these proceedings be published.

Committee adjourned at 13:47