29/10/2010 - 15:53

Bank price signalling a worry: ACCC boss

29/10/2010 - 15:53

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The head of Australia's competition watchdog has taken a veiled swipe at Australia's big banks, declaring "price signalling" in public statements was a growing concern and should be subject to more stringent policing powers.

Bank price signalling a worry: ACCC boss

The head of Australia's competition watchdog has taken a veiled swipe at Australia's big banks, declaring "price signalling" in public statements was a growing concern and should be subject to more stringent policing powers.

The comments from Australian Competition and Consumer Commission chief Graeme Samuel follow recent warnings by Australian bank chiefs that rising funding costs would force them to raise interest rates independent of any increases made by the Reserve Bank.

Those warnings have been interpreted by some observers as a sign that additional interest rate hikes by any one bank are likely to be quickly mirrored by its competitors.

Speaking at an Australian Institute of Company Directors lunch in Perth, Mr Samuel was eager to distance himself from the heated political debate over the banks' interest rate intentions, but said price signalling in the form of public commentary was a worrying development across a broad range of industries, including banking.

While such commentary could be useful to consumers, he said it could also potentially be used by companies in tightly consolidated sectors to communicate their business and pricing intentions to their competitors.

"The public statements issue is one that does require quite careful consideration, because you don't want to stifle what is fair objective debate," Mr Samuel said.

"As you move into the public arena, we have to start looking a lot more carefully at whether the communication is intended to be a communication for public debate or ... a communication to your competitors to try and diminish the competitive tension."

Mr Samuel said laws in other western jurisdictions such as the United States, Europe and Britain enabled such issues to be tested in court to determine whether such commentary could "facilitate coordination of behaviour" and result in collusion.

Asked if Australian bank chiefs' comments would put them in legal strife under US laws, Mr Samuel noted a federal court in Atlanta was currently testing a similar case involving the airline industry.

"They haven't determined that case yet, but they say there is a plausible case to be argued," he said.

Mr Samuel said the issue could be a problem in any industry, and was specifically identified as a concern by the ACCC in its 2007 investigation into the petrol retailing sector.

"Price signalling is an issue in every industry, particularly where you have a small number of players," he said.

It would therefore be useful to have stronger powers in Australia, similar to those in the US and Europe, to deal with such issues, he said.

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