Insights

03/12/18

I am not an antitrust hipster, says Rod Sims

At the 2018 Annual RBB Economics Conference last Thursday, Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims delivered an important speech that highlighted Australia’s position on competition law in light of the current “hipster antitrust” debate.

Mr Sims told the audience that competition law’s primary purpose is, and should continue to be, the promotion of consumer welfare. In his view, it should not be broadened to include a range of public interest objectives.

Background

Consumer welfare

The economic foundation of competition or antitrust law in Australia, the US and internationally is consumer welfare. It is well established that competition law focused on consumer welfare aims to “protect competition in the market as a means to enhancing consumer welfare and ensuring an efficient allocation of resources”.[1]

Hipster antitrust

Despite this international consensus, there is now debate about whether the consumer welfare standard is appropriate. Some are concerned that the narrow focus on consumer welfare does not allow regulators to prosecute types of conduct that competition law should or was intended to have reach over. These concerns have arisen, in part, due to the new data economy and the rise of digital platforms with dominant market positions. This debate has been jokingly named “hipster antitrust”.

Consumer welfare remains the foundation in Australia

Mr Sims told the audience that consumer welfare remains the economic foundation for competition law enforcement in Australia.

We at the ACCC believe in the power of competition to deliver good outcomes for consumers and the Australian economy. Virtually all of what the ACCC does fits nearly within a framework of promoting consumer welfare and making markets work for consumers.

Mr Sims made it clear that he was opposed to introducing broader public interest considerations – such as addressing income inequality and protecting democracy, financial stability, media diversity or small business – into the core of competition law enforcement. In fact, his view was that “it is bad public policy to attempt to achieve these goals with the single instrument of competition or consumer policy”.

Mr Sims outlined a number of reasons why it was inadvisable and “counterproductive to the core of competition” to import broad public considerations into the objectives of competition law.

  • Competition law is enforced by an independent authority and not by elected officials. It is not the domain of the ACCC to promote public policy objectives regardless of how legitimate they may appear.
  • Public policy objectives should be addressed in separate laws or instruments. Competition law is not a melting pot for miscellaneous non-economic objectives.
  • While competition law may achieve non-economic policy objectives such protecting media diversity or addressing income equality, these are ancillary effects of properly applied competition law.

Conclusion

Rod Sims’ speech is a welcomed and important contribution to the current international debate about the purpose of competition law. Mr Sims has set out a well-reasoned, compelling analysis in defence of the consumer welfare standard as the basis for competition law. He cuts through much of the recent debate on the scope of competition law to point out that competition law cannot be a solution to all of society’s concerns.

The analysis is also particularly significant in the context of the amended misuse of market power prohibition (s 46 of the Competition and Consumer Act 2010), the scope of which is yet to be tested in the Courts.  Given the removal of the “taking advantage” element of the s 46 test, there has been much uncertainty around whether the ACCC may seek to adopt a broader view of its policy goals in enforcing s 46. The Chairman’s views expressed in this speech appear to indicate that the ACCC will continue to enforce unilateral conduct issues consistent with the orthodox policy goals of competition law, embodied in the consumer welfare standard.

The full transcript of Rod Sims' speech is available here.

 

[1] Neelie Kroes, 'European Competition Policy – Delivering Better Markets and Better Choices', European Consumer and Competition Day, London, 15 September 2005.

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