Flying under the radar: Australia's silent and growing competition crisis

The measure used is “CR4” – the market share of the top four firms.

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The ConversationThe Conversation
URL: 
https://theconversation.com/flying-under-the-radar-australias-silent-and-growing-competition-crisis-212116https://theconversation.com/flying-under-the-radar-australias-silent-and-growing-competition-crisis-212116
Retrieved on: 
Tuesday, August 29, 2023
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Review, Employment, Industry, Gold Coast, CR4, Statistics, Policy, National Press Club (Australia), Australian Competition & Consumer Commission, Press club, ASX, Research, Australian Securities Exchange, Embarrassment, Government, Competition, Cities and metropolitan areas of the United States, Radar, Guideline, Risk, Consumer, Growth, Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd, Gina Cass-Gottlieb, ACCC, Family, Arms industry, Generic drug, Airline, Retail, Online shopping, Publishing, Health insurance
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AUSTRALIA, UNITED STATES, US
Summary
Key Points: 
  • The measure used is “CR4” – the market share of the top four firms.
  • Average concentration across industry groups, Australia versus United States Market share of the top four firms, per cent Importantly, we find market concentration in Australia increasing over time.

Concentrated industries don’t welcome new entrants

    • But we found that in highly concentrated industries the four largest firms rarely got dislodged from their top positions over the 14 years between 2007 and 2021.
    • And those industries that experienced a rise in concentration over the seven years to 2014 recorded a decline in new firm entry over the following seven years.

Concentrated industries break rules more often

    • Ranking Australian industries by their average concentration, we found the most concentrated had the most infringement notices and enforceable undertakings issued by the Australian Competition and Consumer Commission.
    • The airline industry, which is famously concentrated, has been hit with 12 such notices and enforceable undertakings over the past 30 years compared to only four for the accommodation industry.

Concentration means higher prices

    • To explore the impact of market concentration on prices, we examined margins between retail and wholesale petrol prices in Brisbane and the Gold Coast and their relationship to the number of competing petrol stations within three kilometres.
    • We found that where petrol stations faced less competition they tended to charge higher margins, and that when wholesale prices rose, they appeared to be quicker in passing on this cost to consumers to maintain margins.

Concentration is happening more quietly

    • Whereas in the US large mergers have to be reported to regulators, in Australia mergers are more like marriages.
    • In the US, it is estimated transactions too small to be reported account for 28–47% of the increase in concentration between 2022 and 2016.
    • In Australia, there is a risk that many of these transactions are going undetected.
    • At times overseas authorities knew about proposed transactions involving Australian companies before the Australian authorities.
    • The government has announced a review of competition policy that will include a review of merger laws as well as non-compete clauses.
    • Read more:
      1 in 5 Australian workers have non-compete clauses: new survey

      Dan Andrews is affiliated with the e61 Institute.

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