Kylea Tink (North Sydney, Independent) Share this | Hansard source

():  There's no doubt Australia is in a period of significant economic transition. The COVID-19 pandemic disrupted many critical industries, both globally and domestically, and it will be some time before our economy fully recovers. Coming out the other side of the pandemic, we've entered an inflationary environment that puts immense pressure on consumers, businesses and governments. At the same time, we are embarking on a much-needed transition to a net zero economy. In this context, competition is more important than ever before. This transition will impact Australia's critical industries, consumers and small businesses in profound ways. New markets are on the horizon, and it is impossible to anticipate how they will emerge or develop.

Competition can be a driving force for investment, dynamism and innovation. All are required to undertake this transition; therefore, it is critical we protect it by getting our competition policy reform right from the start. While most merger transactions do not harm competition and, indeed, provide many benefits, some can and do affect the competitive conditions of an industry. The growing trend of market concentration in Australia since the early 2000s is not one that we should continue to ignore.

According to a 2023 report from e61 Institute, in seven per cent of Australian industries the top four firms had more than 80 per cent of the market share. I just want to repeat that. In seven per cent of Australian industries, the top four firms had more than 80 per cent market share. Compare this to countries like the United States, where only one per cent of the industries have a market concentration that high. Ultimately, however, my community and indeed most Australians don't need statistics to understand the problem. Whether it's electricity, health insurance or retail, the Australian economy is rife with examples of markets where a few big players dominate, and, as a consequence, consumers are arguably missing out while producers and suppliers are squeezed ruthlessly.

We see this perhaps most acutely in the tech and supermarket sectors. In tech, a handful of companies are playing an increasingly significant role in our lives, influencing how we interact with each other and do business. I had a striking real-world experience when I recently tried to plug my iPhone into the jack of a Volvo that my friend owns. I received a message from my phone saying, 'This accessory is not supported by the device.' The Volvo was the accessory that the iPhone wouldn't accommodate! I was struck by Apple's market concentration and their ability to corner the market. Meanwhile, in the supermarket sector, Woolworths and Coles alone control about two-thirds of the market. Again, I've witnessed the implications of this personally, with many orchards in my home town of Coonabarabran forced to bulldoze their trees after the long-term local independent grocer was acquired by one of the two large supermarket chains.

Part of the problem is the ability of large businesses to hollow out markets through targeted acquisitions. As multiple former ACCC chairs have acknowledged, Australia's current merger regime is not well placed to deal with this problem. Under the ACCC's current framework, companies aren't required to notify the ACCC of mergers, leaving the commission most often flying blind. Additionally, the ACCC reviews only a fraction of the mergers that happen each year—an average of 330 annually of the more than 1,000 mergers that occur. This gap leads to situations like that of Petstock, which grew through a series of small acquisitions into the second-largest speciality pet supply retail chain in Australia, unbeknownst to the ACCC. No wonder the former ACCC chair Rod Sims has described Australia's merger regime as the weakest of any country we compare ourselves to.

These trends have consequences for us all. Recent decades have seen businesses increase the mark-ups to goods and services by more than two per cent. As CHOICE and the Consumers Federation of Australia put it, consumers pay the price of highly concentrated markets, including through higher prices, poorer customer service and lower product and service quality. In this context, I largely welcome this bill and commend the government for taking steps towards a regime that more effectively targets anticompetitive mergers while fast-tracking mergers that are pro-competition. It is a step towards a future focused economy that is diverse, efficient and welcoming of new market entrants.

However, there are ways I believe this legislation, and competition policy reform more broadly, could be improved. Firstly, we must ensure that the Australian Competition and Consumer Commission are adequately staffed and resourced to effectively manage the significant increase in assessments that will result from the changes outlined in this bill. Secondly, we must strengthen the ACCC's ability to block problematic mergers. Thirdly, we must ensure thresholds for notification capture all anticompetitive acquisitions. Finally, to truly improve competition and innovation in Australia, we must not only prevent anticompetitive mergers but also actively support small and emerging businesses.

I'll go to the specifics of the bill before us. This bill will empower the ACCC as the decision-maker on all mergers. Under this new system, the commission would undertake an economic and legal assessment to determine whether acquisitions are likely to substantially reduce competition or be of public benefit. This would be tied to a mandatory notification system where acquisitions that meet a certain threshold would need to be referred to the ACCC for assessment prior to completion. These key thresholds are (1) when the Australian turnover of the combined business exceeds $200 million and the assets being acquired have either an Australian turnover of more than $50 million or a global transaction value above $250 million; (2) when a business with an Australian turnover of more than $500 million is buying a smaller business with a turnover above $10 million; and, finally, (3) all mergers by businesses with a combined Australian turnover of more than $200 million where total similar acquisitions over a three-year period have a cumulative turnover of at least $50 million. Importantly, the bill allows the Treasurer to adjust these thresholds in response to concerns from the ACCC about high-risk mergers.

The commissions approval system would also be reformed with the goal of completing approvals in under 30 days for mergers that are determined not to pose a threat to competition, and these changes would also provide for the Competition Tribunal to review the ACCC's decisions. Finally, the bill would establish a public register of all mergers and acquisitions, providing all of us a clear line of sight on how our markets and suppliers are developing. As a result of these reforms, there's a lot to like about this legislation. It improves oversight for both large acquisitions and the accumulation of smaller creeping acquisitions, it makes an effort to balance this new oversight with efficiency under a faster approval process for unproblematic mergers, and it allows for the thresholds to be flexible over time.

I've noted that the ACCC currently only assesses a small proportion of mergers, however, and this reform will be a significant change for the commission as it deals with the potential for more assessments and a commitment to faster approvals. The government has argued that the increased resourcing given to the ACCC will be commensurate with the increased workload, and the January 2026 commencement date will give the commission time to prepare for the transition. This may be true, but it isn't guaranteed. We're talking about the biggest merger reform in nearly half a century. The transition will have to be managed properly to prevent a blowout in costs and delays for government and business alike.

Historically, the ACCC has been unable to prevent many large mergers. In fact, just last year, the commission blocked the ANZ bank from a $4.9 billion takeover of Suncorp's banking arm, only to have their decision overturned by the Competition Tribunal. The same thing occurred in 2017 with the merger of Tabcorp and the Tatts Group. This is not to say that the oversight of the Competition Tribunal is a bad thing, but it does suggest that the two organisations are not always aligned on principle, and it's unclear what that means for the ACCC's ability to effectively block what it may deem to be an anticompetitive acquisition.

More importantly, the thresholds in this bill may not capture several kinds of concerning mergers and acquisitions. Under this framework, for example, businesses with a combined Australian turnover of less than $200 million will not need to report unless the business or assets being acquired have a cumulative Australian turnover of over $50 million over a three-year period or a global transaction value of about $250 million.

That is already quite a high bar, but the real problem here is that these thresholds don't consider the size of the market a business is operating in. For large high-turnover markets like medical insurance or electricity retail, these thresholds may be reasonable, but, if the market is smaller, numbers like $200 million may represent a much higher percentage of total market activity, and businesses with significant market share may fly under the radar. We know that the government was considering a market concentration threshold during consultation, so I've got to confess that I'm disappointed to see that it's absent from this bill. Overall market share is a much better indicator of the problem we're trying to prevent than simple monetary turnover.

Similarly, the thresholds don't consider regional market concentration. Again, I speak from personal experience. Having grown up in regional Australia, I'm aware of the limited choices that consumers sometimes face. There might only be one bank, one grocery store and one petrol station in the whole town. Under this legislation, mergers could potentially be used to corner a market in an entire regional area while staying under the notification threshold.

The threshold also wouldn't stop large companies from gaining an early advantage in markets by acquiring early-stage companies who don't yet have a high turnover. The obvious example is Instagram. When Facebook bought Instagram, the company had no revenue. If this purchase happened in the Australian context, this bill wouldn't have required that to be referred to the ACCC. Clearly parts of this legislation could be strengthened. Instead of it simply allowing the Treasurer to adjust these thresholds over time, we should aim to get them right from the beginning. We need merger reform that tackles market share, early acquisitions and geographic considerations.

Finally, I'd like to speak about the role of small business in the context of these reforms. To truly embrace competition, we must do more than simply regulate big mergers. We need to actively support new and established small businesses. According to the Bureau of Statistics, 2023-24 saw a 1.4 per cent decrease in the number of Australian businesses with one to four employees, while businesses with five to 19 employees remained relatively stagnant with only a 0.4 per cent increase. This is reflected in the GDP figures. In 2006, small businesses contributed 40 per cent of our GDP; now that number is 33 per cent.

Australian Small Business and Family Enterprise Ombudsman Bruce Billson described Australia as 'sleepwalking into a big corporate economy'. To increase competition and drive an efficient, diverse economy, we must consider measures to support these small businesses, especially in their early stages. There are many ways we could do this, from expanding the digital learning and practical support tools available online to increasing tax offsets for new small businesses. Of particular relevance to competition reform, however, is the need to implement a ban on unfair business and trading practices which harm small businesses and discourage investment. When there is a power imbalance, big businesses in Australia can impose harsh commercial arrangements or behaviours on smaller ones. Singapore, the United Kingdom and the European Union all have laws that explicitly ban this kind of unfair practice, and Australia should follow suit. In short, we should be using all the tools at our disposal to build a competitive economy with a thriving small business sector.

I commend the government for bringing this bill before the House to improve Australia's management of large mergers and acquisitions, but I also encourage the government to make sure not only that the ACCC is resourced to handle this transition properly but also that the thresholds truly prevent mergers from slipping through the cracks and that, ultimately, we support new small businesses to create a truly future focused economy for all Australians.

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