Government | Regulation

Privatisation process needs effective regulatory arrangements

“Governments should not be maximising the value of assets and thereby sale prices by giving monopoly infrastructure operators unfettered pricing power,” Australian Competition and Consumer Commission Chairman, Rod Sims has told a CEDA audience in Perth.

As part of his address at the event, The Regulator’s role in a changing economy, Mr Sims discussed what he referred to as “a hot topic for the ACCC over the las few years” – asset privatisation.

He prefaced by stating that the ACCC is not against privatisation, as “the private sector will generally run businesses more efficiently than government”, however, the ACCC did hold concerns over governments failing to put in place sufficient regulation to prevent monopoly pricing. 

“The long-term effect can be an effective ‘tax’ on Australian consumers and businesses,” Mr Sims said. 

“All of this has been put under the spotlight with the Port of Newcastle, the world’s largest coal export port, which was privatised in 2014 without any effective regulatory regime.

“Less than a year later, the new owner unsurprisingly increased some of its charges.

“What was a surprise to many, however, was the magnitude of the increases – over 40 per cent for some users.”

He detailed how Glencore Coal – one of the users of the Port of Newcastle – has challenged the Port through the Full Federal Court to seek to constrain this monopoly and have “certain services at the Port declared under Australia’s national access regime”.

“This would not set the prices but would even up the bargaining power,” he said.

“As many of you are no doubt aware, the Full Federal Court in a unanimous decision last week upheld the previous decision by the Australian Competition Tribunal to declare the Port, dismissing Port of Newcastle Operations’ appeal. 

“It goes without saying that the ACCC welcomes the decision by the Full Federal Court as it essentially puts in place a negotiate-arbitrate framework, which I have often said is the minimum standard for effective regulation of nationally significant monopoly infrastructure like the Port of Newcastle.”

He used this case study to illustrate why the ACCC has been calling on the government to implement effective regulatory arrangements as part of the privatisation process. 

His address also focused on four other topics that he said had “recently occupied an enormous amount of the ACCC’s time and effort,” these areas were:

The ACCC’s Government-directed inquiries;

  • Broadband speed monitoring;
  • Consumer protection around new cars; and
  • The ACCC’s work to investigate and prosecute cartel behaviour.

Government-directed inquiries

Mr Sims discussed the inquiry the ACCC would be conducting into the financial sector as part of the announcements in the Federal Budget, which he said was well underway.

He said the inquiry “will see the ACCC ensure that banks fully and openly account for their decisions and the way they balance and prioritise the needs of borrowers, savers, shareholders and the wider community”.

Broadband speed monitoring

The advertising of broadband speeds was highlighted by Mr Sims as a major problem for consumers in the broadband market. 

“With our limited resources, we are using three related strategies to ensure consumers get the broadband services they are after,” he said.

“First, we are setting up our broadband monitoring program.

“Second, we are providing updated guidance to industry about truth in advertising and assisting their customers make properly informed purchasing decisions.

“Third, we are investigating and expect to be taking action on misleading conduct around broadband speeds, including practices that fail to meet the consumer guarantees provided under Australian Consumer Law.”

Consumer protection around new cars

Over the past 24 months, Mr Sims said manufacturers of new cars appeared in the ACCC’s top 10 most complained about traders. This included manufacturers refusing to “provide a refund or replacement vehicle to consumers, even after their vehicles had undergone multiple repairs that had not fixed the issue”, and “preventing consumers from obtaining the remedies to which they are entitled under Australian Consumer Law”.

Investigating and prosecuting cartel behaviour

Mr Sims said that over the last three years the ACCC has created a specialist team of criminal cartel investigators. 

“Earlier this month (3 August), the Federal Court convicted Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) of criminal cartel conduct and ordered it to pay a fine of $25 million; the second-highest penalty imposed in ACCC history,” he said.

“The judgment marks the first successful prosecution under the criminal cartel provisions of the Competition and Consumer Act 2010 (CCA).”

In closing the event, Mr Sims said: “The work of the ACCC is remarkably uniform: protecting consumer rights, protecting and promoting competition, and having competitively priced infrastructure. Only the industries change.”