Fels fires up to fight collusion

WA-TRAINED economist and Australian Competition and Consumer Commission (ACCC) chief, Professor Allan Fels, has presented his agency’s Trade Practices Act (1974) submission.

Last October, Prime Minister John Howard announced an independent review of the competition provisions of this important act and their administration.

In May, Treasurer Peter Costello disclosed terms of reference and membership of the review committee.

Professor Fels recommended introduction of criminal sanctions, including jail for up to seven years, for the most serious breaches of the act’s competition provisions, that is, ‘hard-core cartels’ by big business.

“Nevertheless, the ACCC will itself study all submissions to the inquiry,” Professor Fels said.

“If there are ways of improving the operation of the act, they should be considered.”

He said this and several other ACCC proposals “would bring Australia into line with other countries”.

“It would make the act serve the public interest better,” Professor Fels said.

There is, of course, nothing undesirable about the Fels attempt to put penal provisions into this act.

Clandestine collusion by highly paid company executives or senior employees limits competition and basically constitutes a conspiracy against consumers and other businesses.

They distort markets, and so are reprehensible.

The ACCC has uncovered extensive collusive activity, some of which has attracted multi-million dollar fines. But company-paid fines are one thing, a CEO going to jail is another.

However, not everyone agrees with the ACCC, especially, and not entirely surprisingly, what’s called the ‘big end of town’. In other words, many of the people the Fels proposals would be directed at.

The review is certainly attracting considerable interest. By last week over 100 submissions had been received by the review committee.

One that caught my eye was from the Melbourne-based Institute of Public Affairs, which promotes itself as “Australia’s Premier Think Tank for over 50 years”.

The IPA was one of the catalysts in the creation of the Liberal Party in the mid-1940s.

In 1992 former ALP leader and Governor-General Bill Hayden, a long-time leftist, said: “The activities and influence of the IPA have been of pro-found significance for the development of economic, political and social thought in this country for close to 50 years.”

The IPA – meaning indirectly its business backers – played an important and highly commendable role in fighting the powerful forces of socialism that, in the 1940s to 1960s, were so strong because of Australia’s then influential pro-Stalinist Communist Party and the Labor Party’s socialisation plank.

Throughout the 1950s and 1960s the IPA distributed to schools Australia-wide a small, easy-to-read publication called Facts that assisted tens of thousands of students.

Not coincidently two Howard Government ministers, David Kemp and his brother Rod, are sons of a one-time influential IPA director.

Like most such think tanks, the IPA is significantly financed by big business. However, it goes to some trouble distancing itself from this sector.

IPA literature says: “We ensure that our funding base is wide and diverse.

“Unlike some other institutions, we do not accept government funding, nor are we beholden to, or the mouthpiece for, any particular section of the community or any particular economic activity or group.

“Our annual budget – of about $1 million – is obtained from more than 2000 individuals, corporations and foundations.

“No single source accounts for more than 7 per cent and no sector accounts for more than 15 per cent of total funds.”

I’m not disputing this carefully worded disclaimer.

But it’s something of a surprise to see the IPA opposing the punishment by jailing of businessmen for conspiring against, if not perfect, then at least open or above-board competition.

Look at some of IPA’s contentions in its submission.

p “The regulation of competition in Australia has become too intrusive and heavy handed.”

p “The regulation of economic activity is the restriction of freedom to conduct private affairs.”

p “. . . the ACCC is abusing its power.”

p “We believe that the imposition of jail sentences for breach of any of the provisions of Part IV would be wrong.”

One reason so many Australians so doggedly opposed socialism between the 1940s and 1960s was that it meant market choices were severely limited, something the IPA rightly opposed.

But there’s more than one way of skinning felines – big business doesn’t need to monopolise.

It can simply collude with competitors, that is, secretly and jointly set price levels, thereby limiting competition.

That’s what Professor Fels believes is wrong and, to help counter colluding culprits, he contends it’s time the jailing sanction existed.

The IPA’s contention that “the regulation of economic activity is the restriction of freedom to conduct private affairs”, is, quite frankly, wrong.

Markets are the most public of venues so government has a legitimate role, indeed a duty to citizens, in ensuring conspiracies against them aren’t practised. And if culprits are convicted they should be punished. If that means jail, so be it.

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