The Hindu Business Line : `Ready, fire, aim' to keep competition alive

COMPETITION works. If you have any doubt on that, read Allan Fels: A Portrait of Power", by Fred Brenchley, a book from Wiley (www.wiley.com). The man you see on the cover headed the Australian Competition and Consumer Commission (ACCC), earned the wrath of big business, fought battles with politicians and tycoons, and became a `modern-day Robin Hood' for consumers. He was even voted "the third most powerful person in Australia" by The Australian Financial Review, after the PM and Treasurer. Fels relished talking direct to the public, "putting political noses out of joint", and his sin was that he was "too powerful".

It was a natural way of Australian business to be "hamstrung by thousands of trade associations that tightly controlled prices, supply and membership — many with penalties for member who did not toe the line." When free market reforms were touted, what blocked them were business and political interests.

The author adds: "Adam Smith's much-quoted dictum — that `people of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public, or on some contrivance to raise prices' — resonated deeply two centuries down the track in Australia." Is that true here too?

Created in 1995 to administer the Trade Practices Act 1974 and the Prices Surveillance Act 1983, the ACCC is less than a decade old. Earlier to that, Fels, who was an academic once, had led the Trade Practices Commission (TPC) and to him lay the credit of making the body a household name with mega-dollar wins: "Freight express companies and their executives were hit with fines and costs of more than $14 million, while mixed concrete companies paid $20 million, in two separate cartel busts. Action was taken against life insurance companies; in one case AMP refunded $50 million to consumers over misleading policies. Telstra refunded $45 million in telephone wire repairs."

Any competition law is obsessed about mergers. "Mergers can be good for an economy," notes the book. "But they can be damaging if they create monopolies that can control prices." One of the most `contentious' issues is to define a `market'. For instance, the ACCC considers the free-to-air TV networks and the pay-TV operators as being in different markets. "If these were regarded as being in the same market, a merger could be considered as substantially lessening competition." Ditto with TV versus newspapers.

The book traces the economic transformation that happened in Australia and the challenge it presented for streamlining competition. One such was to completely overhaul the state statutes that in one way or another hampered competition — "some 1,800 different pieces of legislation in all." In a chapter titled `ready, fire, aim', one gets to have a peek at some of the restrictive trade practices, what with the `Untouchables' chasing `Chicago gangsters'.

While Fels was Mr Outside with his media skills to publicise the consumer messages of new cases, Allan Asher was Mr Inside who ran the internal enforcement committee, preparing the litigation. "They turned the Commission's enforcement into an outcomes approach, picking up cases that would generate the maximum leverage to ensure compliance across an industry."

An ACCC study, along with the central bank, revealed that interchange fees charged by the banks for credit cards were excessive. "In some cases banks were earning revenues of 64 per cent above costs." Another interesting case was when the body went after the medical profession: "Anaesthetists of a few private hospitals in Sydney had reached an unlawful agreement to charge a $25 per hour on-call fee for emergencies and after hours, even though they were not on site at the hospitals."

A prescribed read for our own Competition Commission of India (www.competition-commission-india.nic.in), where the only order that is posted reads: "In exercise of powers conferred by Section 13 of the Competition Act, 2002, the Central Government hereby designates Shri Vinod K. Dhall, Member, Competition Commission of India (CCI) as Member Administration of that Commission, until further orders." It is dated October 21, 2003. Are we waiting too long for further orders from the CCI to know that it is working?

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