Monday, March 02, 2009

On Cartels

The Senate Economics Committee has reported on the Government's cartel criminalisation Bill, recommending the adoption of the Bill.

I did intend to make a submission to the committee but I found I couldn't easily find the evidence to make my case. My underlying thesis is that the focus on criminalisation of cartels has come from those sectors of the business, banking, finance and legal communities whose interests lie in increased industry concentration through merger and acquisition activity.

This group of people run the line that it is not industry consolidation per se that causes competition problems, just that the concentration facilitates collusion. So, they argue, what we really need are tougher anti-caretl laws.

The realities are that cartel conduct is exceedingly hard to prove, convictions are usually won more by admission than prosecution (though in the Pratt case the ACCC continued to lay a perjury charge). Even with phone records and the other amendments it is unlikely to be frequently proven, and certainly will not capture any of the cases of tacit collusion that are facilitated by concentrated markets.

Far more useful would be amendments to the TPA to facilitate divestiture orders, and to create ex ante access requirements in markets other than those covered by Parts IIIA and XIC. Also more useful would be a misuse of market power law that really did restrict the use of market power.

Far more distressing is the Committee's recognition that the boundary between the civil and the criminal offence is poorly drawn, and its recommendation that the clarification of that boundary should be left to the ACCC. In reality the boundary will be what the court determines, if the ACCC ever brings a case that tests the boundary. Given the ACCC's reluctance to ever really test its powers we can expect an incredibly cautious approach to the criminal offence provisions.

Perhaps Nick Xenophon is right in his minority report that it is time for a complete review of the TPA. Pity that the great TPA reformer Andrew Murray is not still there to join him in the call.

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