Time for a rethink on competition policy

At its core, the neoliberalism was a change in public policy based on a faith in competitive markets as both a cost discipline on providers and the harbinger of the benefits of choice for consumers. 

It is true that neoliberalism was ultimately a culmination of decades of campaigning by think tanks all ultimately driven by the work of Fredrick Hayek. However, it was embraced by left-leaning governments for what it promised to do for consumers.

The changes were heavily supported by big business. It was big business that lobbied for the deregulation of telecommunicaions. It was driven by concerns about the extent of the cross subsidy from business to residential consumers ad the slowness of Telecom Australia in developing data products to support the suddenly burgeoning field of computing.

Big business lobbied for the dergulation of airlines as the intercity routes were seen to be over-priced. No one seems to have lobbied on energy prices directly; it got swept up in a review of state government taxes and charges that otherwise fed into Keating's plans for a broad based consumpion tax.

In two big sectors - telecommunications and energy - we have repeatedly experienced cases of what id politely called 'misselling'. At its simplest this consists of slamming - actioning a change of provider without authorisation. In its more subtle form approval is obtained by deception; the deception often relies upon the limited ability of the targeted consumers to engage with the product. 

Separately there is no evidence that the creation of competition improved price outcomes for consumers. The rate of decrease of real prices in telecommunications has been unchanged - it is driven by an experience effect and scale efficiency. Energy is a sadder story.

Despite the problems and the absence of benefits, faith in competition and the value of choice to consumers has driven public policy. The Gillard government was responsible for two policies that have played out badly. The first was creating a level playing field for private sector providers in vocational training. Aside from a proliferation of institutions primarily trading in overseas students, the regulatory and quality accreditation scheme did almost nothing to keep poor providers out at the bottom, it created additional central bureaucracies at the public Universities.

The second was the NDIS with its focus on choice of provider for recipients of payments. But choice is often illusory as there is only one local provider, or where there is more than one the consumer has no ability to determine the differences between the providers before committing. The use of caps on charges roviders can levy in practice works out often to be a market price. 

The most recent case is superannuation. Here the changes were championed by the Coalition. While dressed up in the same competition policy language, the motivation was a distaste for 'industry' funds that do provide some financial support from associated unions for their assistance in marketing. The consequence has not been a shift of consumers to better performing funds; it has exposed super consumers to the same 'misselling' tactics seen in other sectors.

Super Consumers Australia has reported these practices. In this case the model is agents on commission selling consumers inyto failing funds.

It is time to call 'bullshit' on the premise of competition policy. Here are the principles that need to be applied:

1. Are consumers in a position to be able to make an informed choice betwen providers before experiencing the service?
2. Is the information assymetry likely to facilitate misselling?
3. Is it conceivable that there are efficiency gains from competition that will be higher than the added costs of sales, marketing and compliance?

The emperor isn't in a fancy new suit at all!

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Life is what happens while you are busy making other plans JWL