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>> Rod Sims: It is great to be here this morning,
and great to participate in the John Kurt Institute [phonetic]
and the discussion series that it holds.
So I'm very pleased to contribute to that.
I've been to WA on countless occasions.
I can't remember how many, but it's at least a hundred I think.
I have fond memories when I was first here.
It was in 1970 as a student laying pipes for some town
that was being built down south.
I can't remember the town, which is probably just as well.
And it was those days when you could be on a building site
and all you had to wear was a pair of boots and a pair
of shorts, so I came away with a wonderful tan, and what passes
for someone with a frame like I've got
as some muscles [background chuckles].
And we spent the whole time listening
to all five test matches being broadcast
by Alan McGilvray over the ABC radio.
So I'm not quite sure how the pipes turned out,
but we certainly enjoyed the cricket
and had a wonderful time.
But as I say, I've been here on many, many occasions
and I enjoy coming over to Perth.
There's a lot I could talk about today, because as you know,
we're responsible for competition.
Regulation.
Consumer Regulation.
And infrastructure issues.
And I think we gave you a title that covered all three,
only because we hadn't worked out what we were going to talk
about then when you asked for the title.
So what I thought I'd do is just talk very briefly about some
of the main competition and consumer things in front of us,
and then spend most of the time talking about a couple
of infrastructure issues.
And I'll try and do that in a way that leaves enough time
for questions, so that I can cover off anything that's
of interest to the audience.
Because that's probably much more useful for you.
So our role in competition covers --
I was supposed to say we're responsible for competition law,
consumer law, and/or regulation.
And the regulation largely of monopoly infrastructure.
Our role in competition covers enforcement issues.
Merger assessments and authorisations.
And so our enforcement efforts are aimed
at ensuring there's no breaches of the act
in relation to cartel conduct.
Agreements that lessen competition.
And misuse of market power.
And did I always say with our act, the relevant textbooks go
for about 1,000 pages, but you could write the essence
of the act on the back of a postage stamp.
The concepts are pretty straight forward.
As one example -- a most recent example
of an enforcement competition activity was last month we
announced federal court proceedings
against two businesses alleging they're engaged
in anti-competitive conduct, including cartel conduct,
in selling liquified petroleum gas
in the Sydney metropolitan area.
Our role in mergers sees us dealing
with about 300 transactions a year.
It's always interesting with mergers, the vast bulk
of them sail through pretty quickly.
You don't even know they came up.
But then there's two or three which the whole world knows
about because they attract an enormous amount
of media attention.
The current transaction that's attracting a fair bit
of attention is the 7 Groups proposed acquisition
of consolidated media holdings.
And today we've just announced that we're releasing a statement
of issues in relation to that,
in which we express our preliminary competition
concerns, given that the transaction could see the 7
Group having a substantial interest, obviously not only
in channel 7, but also in Fox Sports Australia.
And our concerns arise
in the free [inaudible] television market,
given the influence channel 7 may then be able to exert
over Fox Sports Australia in joints bids for sports right.
The potential for that to have an advantage
over other free [inaudible] stations.
And of course our main authorisation activity is the
Qantas/Emirates deal, which you all know
about unless you've been hiding under a rock.
Last Friday, Qantas and Emirates applied for authorisation
from the ACCC to integrate
and coordinate their international networks.
Now this will involve Qantas operating its European services
via Dubai rather than Singapore, so that it can integrate
into the Emirates network.
But the arrangement will also have implications
for Trans-Tasman roots and will involve the party's code-sharing
globally, including in Asia.
Now they're seeking interim authorisation
so that they can plan
and negotiate the details of the arrangements.
And they're aiming to have the arrangements start
in April of 2013.
Now the authorisation process is a very public process.
We see submissions on the likely public benefits
and likely anti-competitive detriments.
And submissions are due on October 1.
And there will be submissions sought
on the interim authorisation request as well, which are due
on the 21st of September.
And all public submissions will, of course, go on our website.
At this stage, we plan to issue a draft decision in December,
before making a final decision in the first quarter of 2013.
There's a 6 month statutory time frame applying to the assessment
of authorisation applications, and large
and complex transactions
like this will typically take the full 6 months.
Now as most of you will know, we grant authorisation
if the likely benefits
to the public outweigh the likely
anti-competitive detriments.
I mean sometimes with authorisations people say,
well can't you see it's anti-competitive?
And I say, well yes it's an authorisation.
That's why we authorise.
We now act rather uniquely in the world allows us
to authorise things that are --
that would otherwise be in breach of the act.
If someone applies to have the behaviour authorised
and we judge there are net public benefits.
And so the benefits of the arrangements are on benefits
to the broader travelling public.
Not benefits to the individual parties.
And that again gets confused mostly
by the relevant parties [background chuckles].
I haven't faced that yet with Qantas or Emirates,
because we've only had early discussions.
But I have some fond memories of previous authorisations
where getting people to distinguish
between public benefits
and their benefits was extremely hard,
and as I say, sometimes amusing.
So that's what we have to be looking at, and this is --
you know, the issue is, someone says, here's a benefit
from what's going to happen.
And you've got to say, well can you get
that benefit any other way?
It may be of benefit to the proposer,
but is it of wider, public benefit?
So that's what that's going to be about.
I've heard some people say
that it should be very quick and easy.
Well it's not and it won't be.
It will take time.
I'm not signalling anything about the outcome.
I'm just signalling that this is the beginning of a process
that will take a bit of time.
So just moving on from competition issues
to consumer regulation --
and again, that essentially involves misrepresentations
to consumers.
There's a large number of provisions in the act,
which word that in various ways,
but that's essentially what the Australian consumer law is
trying to stop.
And of course we deal with product safety issues as well.
Probably our main current consumer protection case
involves Google.
We took action against Google.
We lost it at first instance in the Federal Court.
We appealed to the full Federal Court which concluded
that Google had indeed created misleading messages
through its technology in response to user search queries.
The High Court has granted Google leave to appeal,
and that leave was heard this week in the high court
and the judgments reserved.
The issue is how much responsibility should Google
have for representations that are made using their software,
where you can have a situation where you can search
for company A, and end up on the website of company B,
because company A had paid
for the privilege [coughs] excuse me.
So now I want to move on to our third area of responsibility
in relation to infrastructure regulation.
And I'll probably spend more time there.
And you know, we are a combined regulator
and that really has an enormous amount of spinoff benefits
because the overlap between [clears throat] -- excuse me --
competition issues
and regulatory issues is really strong.
Particularly when you consider that prior to the Helmer III --
[inaudible] Access Regime a lot of those issues were dealt
with under part IV of the Competition Act.
So they're very closely related issues.
So today I want to draw out what I think are some
of the desired features of regulatory arrangements
and then apply them to some particular matters.
Some of which are also fairly high profile
that we have under consideration.
So I'm going to deal with four things.
One is just talk about the desirability
of whenever you can, introducing incentives into regulation.
And I'll pick that up in relation
to the regulatory arrangements that may well apply to the NBN.
Secondly I want to talk about the role of consumers and users
in formulating regulatory decisions,
and I'll do that a little bit in relation to NBN,
but also regulating wheat ports, which is obviously an issue
in WA, but also regulating energy networks.
Which is an issue all around Australia.
I'll then talk a little bit
about affective demand management, using electricity
in urban transport as examples.
And then I'll talk a little bit about Part III A,
given that the High Court's
about to announce its famous Philber [phonetic]
decision tomorrow.
I must say I'm not -- the Philber thing's been going
on for so long, I'm a little upset
that it's coming to a conclusion.
I was wondering whether someone might actually be able still
to appeal to the Privy Council to keep it running,
but I was told that that can't happen.
Just talking about NBN and trying to introduce incentives,
at the regulatory arrangements for the NBN,
they've been occupying us over the past 12 months.
Obviously the right access settings ar crucial.
Firstly to ensure that you avoid the normal pitfalls
of having a monopoly you know, higher prices.
Inefficient investment.
Poor service quality.
Which is potential pitfalls
that can arise whenever you have a monopoly.
So try to do our best
to minimise those potential effects.
And then, at least as important,
making sure that it facilitates robust competition
in the upstream --
sorry downstream market so that you get competition,
not just between Telstra, Optus, Iinet, and TPG,
but also potentially new players.
So it's important for those two reasons.
The operation of the monopoly asset itself, and the ability
to facilitate competition.
Now NBN Co submitted a special access undertaking late
last year.
It was subject to a lot of consultation.
And it became very clear from that consultation
and the ACCC's own assessment
that the undertaking required a lot of restructuring.
And as NBN Co itself acknowledged,
the various responses they got to it focused on the nature
and extent of the ACCC oversight over the 30 year term of the SAU
and the level of certainty provided to retailers,
as compared to the level of flexibility provided to NBN.
Accordingly, NBN this week has withdrawn the undertaking.
However, recognising the significance
of the feedback received by NBN customers and the ACCC in June,
a couple months ago, NBN gave the ACCC an outline --
which is available on our website --
of a revised SAU and we expect that outline to be turned
into a new access undertaking, which will be formally lodged
in hopefully in coming weeks.
Now the NBN has noted that the revised SAU will commit it
to maintaining the affordability of prices, with the prices
of key products being locked in for five years.
And the inclusion of price controls over all its products.
We would hope that the revised SAU strikes a better balance
between providing NBN the long-run certainty they need
for investment, but also the flexibility
for other access terms to evolve over time.
A key change with the regulatory arrangements for the NBN will be
in creating strong incentives for NBN Co to continue
to meet customers strongly increasing data needs
at a reasonable cost.
And the issue is how we go about doing that.
Now as you all know, usually the way regulation applies,
is you allow a regulated rate of return
on the approved asset base and set prices accordingly.
In this way, regulated monopolies can be largely
guaranteed their regulated rate of return,
irrespective of how they perform.
A key difference -- and this is absolutely crucial --
between the NBN and those established infrastruct --
you know, other established infrastructure monopolies,
is that the NBN will occur significant up-front costs
to build the network.
And customers will only progressively be put
onto the network as the rollout is undertaken.
It follows that in the early days, applying the rate
of return on the capital and trying to get
that revenue covered by prices paid for the small number
of users will lead to excessive prices.
So in response, NBN Co has proposed
that it will fix some prices broadly
at what consumers are willing to pay for broadband services.
They key question that we'll need
to consider is how many prices do you need
to fix, and for how long?
Because it's possible to imagine that if you fix key prices
for sufficiently long, than the only way
that NBN Co will ever make its regulated rate of return is
if it builds capacity to provide the highest speeds --
that is it's actively seeking to promote highest speeds
and get customers onto them.
And that people continue to demand data.
That is, if NBN Co charges broadband users similar prices
to what they pay today, for what they're actually getting today,
it will only earn enough revenue to cover its costs
if there's much higher demand for data,
that the NBN is actually being built to actually supply.
So it will be interesting to see how this plays out.
What is clear, however, is that the discussion
of the regulatory arrangements for the NBN are likely
to focus heavily on the incentives they create
for NBN Co to behave in ways that lead
to positive outcomes for consumers.
And as I explained, that unique situation
of having it being built allows --
gives us much more scope for incentives
than we normally have.
My second topic is the roll of infrastructure uses in consumers
in setting regulatory arrangements.
Now I've been onto this theme for some time.
I think consumers are way under represented
in regulatory decisions.
And I'll give you some insight into why I say that.
So I've just said that NBN will be launching a new SA
and structural access undertaking soon,
and that will trigger discussions with users.
And getting effective input from those users will be essential
to achieving an appropriate structural undertaking.
That's why some people say to me,
well how quickly will we get the undertaking approved?
And I'm saying, well, we've got to go
through this consultation process.
There's big users here.
They'll express their views.
That's going to lead to discussion and it is going
to take a bit of time.
But the crucial thing is we've got to get it right.
So it's quite easy if you've got the desire to get users involved
in NBN regulatory decisions.
Likewise, I just thought I'd say a little bit about wheat ports,
which is another topic I'm very interested in.
And then I'll get onto energy networks
under this same heading.
So we currently have a quite specific role in the ACCC
in regulating wheat ports.
The government identified access to wheat ports
as an important consideration in the dismantling
of the AWB's single desk arrangements.
In moving from a monopoly to competition in the export
and marketing of bulk wheat, the government was concerned
that the port operators could assume positions of power,
and themselves dominate the wheat export market
in their regions by leveraging their ownership
of the bottleneck port infrastructure.
I mean a classic infrastructure access situation.
The government addressed this concern
by requiring the operators at port facilities --
who also exported wheat, so they're vertically integrated --
to provide access undertakings to the ACCC
under Part III A of our act.
Now these undertakings provide the terms and conditions
on which the vertically integrated port operators can
provide access to their wheat exporting competitors.
The reforms have resulted
in over 20 traders entering the market for export wheat,
which means more competition for the produce
of Australia's wheat farmers.
The Wheat Export Marketing Amendment Bill,
which is currently before the Australian Parliament,
would remove the requirement for those access undertakings.
The bill provides that access undertakings will not be
required by 2014 if the industry can develop an acceptable,
voluntary code of conduct to govern those access issues.
Now in order to be approved by the Minister for Agriculture,
Fisheries and Forestry, the voluntary code -- I think --
needs to include key elements
from the existing compulsory undertakings,
and most important will need to meet the needs
of those exporters who are competing with the players
who own the bottleneck facilities.
So the key point for me, is that the government, I think,
has recognised that alternative arrangements
to those applying now will only work if they satisfy the needs
of the exporters who need access
to the bottleneck infrastructure.
And I think this is a very important factor to put
into the regulatory decision making.
It's not enough that those
who own the bottleneck facilities come together
and get agreement on a code of conduct.
You've actually got to make sure the users are completely
comfortable, and in my view, if they're not,
the current arrangements should prevail.
So crucial that the users are seen there as equal participants
in the decision making.
As I say, as they will be with the NBN.
When we turn to the regulation of electricity networks,
we find a different story.
And of course, electricity networks is just a massive story
right across Australia.
People talk to me occasionally about why have we got
so many cost of living concerns?
Well, I just say to them, have a look at what's happened
to electricity prices.
In New South Wales, where I live, they've more than doubled
in the last five years.
In nominal terms, they've gone up by 80% in real terms.
And that's a shock to anybody.
Particularly if you're on low incomes.
So electricity networks matter,
because they're what's been driving the growth in price.
It has nothing to do with gas price.
With coal price.
It's a network story.
And so with the NBN and the wheat ports,
you've got large users who could make their views known.
You've got to let them into the tent, but once in,
they'll make their views known very clearly.
It's a different story, however, with electricity networks.
When most users are quite small,
and indeed mainly consist of households.
How do we get their voices heard?
Now this has been a key area of concern
in recent years for the ACCC.
The AER -- [Inaudible] Energy Regulator --
and other state-based regulators.
And traditionally, when regulating energy networks --
and I know the AER doesn't have responsibility
for the WA situation, but I think they --
the AER and the local regulator operate in a pretty similar way,
so these comments are equally applicable I would guess.
The AER only gets affective input
in its regulatory decision making from companies that are
in the monopoly infrastructure,
and are actually seeking the higher prices.
And from some well organised large users.
This leaves the important voices of smaller users --
especially households -- unheard.
Now there are two important changes
that I think are absolutely fundamental, and fundamental
to the whole debate about electricity prices.
First, rather than have the electricity network company put
in their proposals to the regulator largely unseen,
they should be required in the first instance,
to put out proposals to the public.
Hold meetings with the public.
Hopefully with options that said,
well we can spend this much and you get these outcomes.
And this will be the effect on price, so we can spend that much
and you get these outcomes, and this is the effect on price.
And have the debate.
The draft rules that cover national electricity regulation,
which recently released by the AMC would facilitate such a step
as a sigh in the east coast.
The second step is that there's not --
the suggestion I'm making is equally applicable here.
Second, there needs to be well-funded consumer body
with appropriate technical expertise, that can engage
in each step of the regulatory process,
to ensure that the voices of small users are heard.
You can see those two steps are complimentary;
you can't have one without the other.
These changes have the potential
to greatly improve regulatory outcomes.
When regulators are reaching their conclusions
on network pricing, in my view it's crucial
that they have input not just
from those seeking the higher prices,
but from all affected parties
so that decisions can be well-balanced.
It's very difficult as the regulator
if you're only getting views from the one side.
Let me just talk about demand management --
reasonably briefly.
Of course, demand management is absolutely fundamental
for infrastructure networks, and it's an issue
that I think is not sufficiently recognised,
even though it's completely, logically true.
Because you build a network to cater for peak demand.
Most of the rest of the time it's unused.
And so your electricity network has got to be built to cater
for the maximum demand, which occurs for one minute a year.
Your road has to be built for peak hour in morning and peak.
You can drive down midnight in the wrong lane if you want,
and you'll not hit another car.
So the peakier the demand, the higher the cost
of providing the infrastructure
and the more users will have to pay for it.
In the electricity sector, although demand is falling --
it's falling because the prices are going
through the roof there, what else did people expect?
Peak use has been steadily rising.
Which drives the need for more network investment.
Now there aren't any easy solutions,
but there's some debates with electricity networks that have
to be taken on I think.
The first is how much should we rely on --
so we need to do something
about demand management in electricity.
The question is, how do we do it?
One question is do we rely on market solutions
or non-market solutions?
And that's a debate I just want to phrase --
pose rather than answer.
But market-based solutions would require customers responding
to price signals to shift their demand
to reduce pressures at peak times.
This requires smart meters,
and it requires retail peak period pricing.
It requires retailers to offer contracts
that expose consumers to price signals.
The alternative approach -- or another approach --
and maybe it's a complementary approach --
is to have more direct control of load.
Just like they used to do in the old, vertically integrated days,
to force consumers to reduce load at peak times.
A second issue is the role of regulated monopolies
in driving innovation in demand management.
While the network businesses currently don't have any real
incentive to address peak demand, they do control much
of the critical infrastructure and information required
to implement any solution.
So the difficult issue is how much you want network businesses
to provide demand management services to consumers
in what would be effective competition with retailers
and other third party providers.
And both those debates, I think, are causing a lot of discussion.
And while not solved, they're preventing us moving forward
on electricity demand management.
Now the issue of demand management in relation
to urban transport, is in a sense conceptually much easier.
But most governments have ruled out demand management
to reduce the ever rising costs of urban traffic congestion,
and I think that's a shame.
I believe that the issue of congestion charging --
while of course contentious -- must be addressed.
Because while ever --
while congesting charging is contentious,
so increasingly is the issue of traffic gridlock.
And it just gets worse and worse and worse.
If you've seen any model of -- which all your --
all road traffic authorities have.
The one in Perth will have it.
The one in Melbourne has it.
The one in Sydney have it.
They've got models of road congestion,
and it's heading north with all the models, unless --
you can't build enough roads to avoid it,
because you can't build enough roads to get everybody
into the centre of the city unless you go underground.
Now the thing about congestion charging is not only would it
smooth out the peaks of road use,
it could also help us address the issue of how we pay
for urban transport infrastructure.
The losses usually incurred on public transport are now
so large, that state treasuries -- understandably --
are resistant to expanding the public transport network.
The more they provide it,
the more money they're going to lose.
They don't lose money on people getting in cars; they lose money
on people getting on the train.
Sounds weird.
But some combination, I believe,
of appropriate congestion charging on roads.
Careful use of the revenue
that that congestion charging would provide.
And of course increased efficiency I think is needed
to address Australia's growing transport problem.
And I guess the key point I'm making is,
demand management matters
when you've got infrastructure networks.
And roads are an infrastructure network.
Look my last issue -- so that I keep [inaudible] of time,
is just talking a bit about the Part III A Access Regulation.
And to me the issue there is all
about the timeliness of decision making.
In the early 1990s, as I said, the way to deal
with infrastructure and competition in upstream
or downstream markets from that infrastructure was
under Section 46 of our Act Misuse of Market Power.
However, it wasn't really a very effective instrument for dealing
with access to infrastructure issues.
And in responding to that, the Helmer Review
in the early 1990s recommended that what is now Part III A --
come about the Part III A access regime.
Now the Part III A Regime has facilitated
competitive outcomes.
There have been around 20 declaration applications,
where people have applied to get access
to someone else's infrastructure.
25 declaration applications since 1995.
Many of which have facilitated the parties reaching a
commercial agreement.
The best example was Sydney airport,
where *** couldn't reach agreement with Sydney airport.
They applied for declaration.
They got it.
That facilitated a negotiation.
There was nothing the ACCC ever had to do, it just evened
up the bargaining pair.
But the problem with Part III A is it's been associated
with very lengthy and expensive review processes.
And these delays create uncertainty and increased costs
for the parties involved.
And at a broader level, they undermine the credibility
and effectiveness of the National Access Regime.
And of course the Philber Case -- which I talked about --
which is going to be decided
in the High Court tomorrow, is the classic.
It's been running for 7 years, and as to say,
many of us have had it as a core part of our lives
for so long it will be --
there'll be a bit of depression setting
in when the issue's finally over.
But 7 years is too long.
We have to find a way
to streamline the Part III A processes.
The key issue the High Court's going to rule on,
which everybody who's following the case is exceptionally keen
to find out an answer to is the issue
of what is uneconomic to duplicate.
Does it have to be what's known in economics
as a natural monopoly?
Or is it sufficient that someone else would find it profitable
to build another asset.
So the high court will rule on that tomorrow.
Now we've got the Productivity Commission review
into the National Access Regime, and one issue I'm hoping that's
on the table is how do we streamline the process.
I think having a Part III A Regime is absolutely needed,
but you've got to have a process for getting decisions
out a lot quicker than 7 years.
The party's otherwise just move on.
So looking conclusion with the ACCC, I have a very rich agenda
of issues that we're dealing with at the moment.
We're obviously very closely involved with NBN
and closely involved with Energy Network regulation issues,
and exactly how those issues turn
out will have a big influence on everybody.
So thank you very much, and I'm happy to answer questions
on any topic, including the football.
[ Chuckles and Applause ]
>> Dale Pinto: Thanks.
Dale Pinto from Curtain University.
Thanks Rod, really enjoyed your wide ranging address.
My question does relate to petrol pricing boards,
and the prospect of national standards.
As we all know, concerns continue to be raised
about the prominent display of discounted petrol prices
on fuel boards, which may be misleading consumers.
So my question against that background is in your view,
what's the desirability and likelihood
of a national approach being taken to boards --
fuel boards under the Australian Consumer Law?
>> Rod Sims: Look thanks for that.
I think the [break in audio] can you hear me alright?
Oh yeah. Sorry.
Is quite high.
The problem we've noticed at the ACCC is
that you've got just this range of price boards,
some of which do breach the act by, for example,
displaying essentially only the discounted price,
which means you drive into the service station thinking you're
getting petrol for $1.30 only to find you'll get it for $1.30
if you've got a $0.10 supermarket voucher.
But otherwise, if you don't you're going to pay $1.40.
And that is misleading.
Other boards though, it's a complex issue.
You can see how consumers are going to be confused.
It's not a breach of the act.
I mean people are driving by those things day and night.
You want them to get accurate information.
We've formed the view that it's too hard to try and sort
that out by, you know, taking cases to court.
It's better just to set a standard.
And so having a reasonably simple standard
that everybody would have to adhere
to would be the best outcome.
So we're supporting the standard.
I think the commonwealth is.
I know New South Wales is.
I think other states probably will,
although they have it all -- they're formed view.
Their issue is, can they agree
on what a common standard should be?
It's ultimately a decision for ministers.
But I think the prospects are quite good
that we'll get a quite simple standard,
which in essence says display the undiscounted prices.
If you want to add things, you maybe can.
But you've got to actually make it clear what the undiscounted
price is.
So I think it's going to happen.
[ Pause ]
>> Peter Ryan: Hello, Peter Ryan from Department of Transport.
I was just wondering if you could just reflect on some
of the airport regulatory oversight role that you have,
particularly in terms of commentary around the
under provision of capital into Australia's airports.
Particularly I'm thinking here of Perth airport.
And I'm just wondering if there's going to be any changes
to the ACCC Regime around the site of airports.
>> Rod Sims: Look, a very good question
and it's a fascinating -- absolutely fascinating issue.
Airports were privatised in various ways.
Prior to privatisation --
as you know better than I do I'm sure --
but for the rest of the audience, there was a --
all airports were price-controlled.
And I think most people think that was way too intrusive,
having to set the prices that airports could charge airlines.
But those price controls were gradually removed.
In Sydney they were removed just as the airport was sold,
so because of that it went for about double the price.
I think that was a neat trick by the Department of Finance.
And just as on the side, I think it probably gives privatisation
a bad name, because then everybody links privatisation
with high prices.
Whereas in the case of Sydney airport --
and sorry to be Sydney focused, but it was the classic case
of price controls being moved.
They paid this enormous amount, and low and behold
up went all the prices.
So it was just really a wealth transfer.
And when you associate that with privatisation, naturally,
people out there think whenever you privatise something,
prices have got to go up.
Which doesn't have to be the case,
and certainly wasn't the case with privatisation
of electricity in Victoria.
Anyway, that's to diverge.
So one issue that we've been concerned
about has been whether it's better to do
with airports what we've in fact done with wheat exports.
That is require them to give an undertaking
around which terms they would provide access to airlines.
Now the traditional argument back is no,
if the airlines want access,
they'll go through the Part III A process.
I think it took *** five years to get that through.
I could be wrong, but it was something like that.
And where you've got an airport --
which is a straight out common user facility, it's not clear
to me that you need to go
through a 5 year process to get access to it.
My own personal view is it would be better if we had a process
that required undertakings.
Now if the airport --
I mean those undertakings shouldn't be difficult
to reach agreement around, and if the airports are right,
that they don't have as much market power as some think,
than the undertaking's a pretty easy thing to give.
So it sort of sorts itself out.
So that's around pricing, which is not what you asked about.
But pricing does, I think sometimes also affect
investment decisions.
I mean if you've got a monopoly that's got market power,
that can translate -- as we all know in theory.
I'm not making a direct accusation here,
I'm just saying the theory
of monopolies is they can raise prices
or they can lower service.
If you've got a monopoly that's what you can do
to maximise your profit.
So whether a lack of airport regulation has led
to underinvestment, I think is an interesting issue.
I don't have an answer to it,
but I think it is an interesting issue that needs to be explored.
The issue that's now occurring of course is --
which maybe you're referring to even more --
is having privatised the airports,
they could in many ways live off a lot of the investment.
And now some of them are being required to invest a lot
of money to expand their airport.
And look, I have been brought up-to-date on what's going
on at Perth airport, but right off the top of my head,
I'm not on top of that.
So I apologise for that.
But I do know that there's a big issue over airport expansion.
I'm just not quite sure where it's up to.
But in some other cities, there is a bit of a standoff,
as you want to increase --
you want to greatly expand the airport capacity;
undertake investments worth hundreds of millions or billions
of dollars of investment.
And then the question of who's going to pay for that
and how you get that back from the users has caused a bit
of friction at some of the airports.
I don't know whether that's the issue you're referring to here.
The airlines, of course, are used to flying into Singapore
or Seoul, and as someone who's recently flown
into both those airports, of course,
they're magnificent things.
You can play a game of Aussie rules football
in the main stadium, even on a peak day
and still not run into anybody.
And so they're massively government funded.
And the airlines are still pushing back
on how much they have to fund that.
Now belatedly realising
that governments have got out of the way.
So a very long-winded answer to your question.
But I think the whole question
of how we fund airport upgrades is going to come
on the regulatory table as well.
To answer your question directly,
none of that has manifested itself in a way
that has anybody particularly suggesting a role
for us at the moment.
But that debate is still live, and may pop out at any time.
But there's nothing going on at the moment
that suggests a greater role for us.
At the moment, our role is negligible.
We do a report on airports.
We've got an airport monitoring role.
I must say, I rather dislike monitoring roles,
because it convinces everybody we can do more than we can.
The classic one is our petrol monitoring role.
We monitor petrol prices.
We got no extra powers under the act,
we just monitor petrol prices.
But it conveys to the public
that we've got some role in petrol prices.
Well we've got an airport monitoring role.
And it conveys to the public,
I think we've got a greater role than we do have.
But we just have the normal set.
So we don't really have any role in airport regulation apart
from that monitoring role.
But I think the issue, in terms of pricing of aircraft landing.
In terms of pricing of car parks.
And the whole investment issue is just getting bigger
on the table.
So a very rambling answer to your question I'm afraid.
[ Pause ]
>> Iden Barker: Hi.
Thank you for the talk.
Iden Barker [phonetic], Department of Finance.
You spoke earlier about the importance of consumer advocacy
in the NG regulation space.
I was wondering if you could comment
on the Consumer Advocacy Panel in terms of efficacy
of both the funding model.
And also the outcomes from grants
that are provided under that model.
>> Rod Sims: So alright, the last bit of your question?
I pick up all -- just that last phrase I missed.
Sorry.
>> Iden Barker: Well --
well there's a model there that provides funding for grants.
>> Rod Sims: Yeah.
>> Iden Barker: Are the outcomes good?
>> Rod Sims: Look, I just think that doesn't do the trick.
I'm not going -- I mean I'm all for consumer advocacy,
about the idea that you've got a body and it gives out grants.
I mean what I want is a well-funded consumer body
that has on the board of it, or in [inaudible] positions,
people who know a lot about regulatory issues,
but they had a represented view.
So I would want a body that knows its charge
with representing the household view,
or the small user view would get out there
and consult small users.
Would have the funding to hire consultants,
just as the companies who want the price increases have got
money to do that.
And would have the technical expertise to, dare I say it,
even engage in the discussions on what the various components
of the cost of capital should be.
I've spent my entire career avoiding understanding the
various components of the cost of capital,
and I'm going to continue that way.
But it's a hugely important issue,
and I think the consumers have to be --
have the technical expertise to engage in it.
Otherwise you're sitting there with the regulator
and the large companies arguing what the cost of debt should be.
The regulator's trying to think
through what the right answer is.
The company's are finding 17 different ways to push it up.
It would be nice to have somebody
on the other side finding 15 different ways to push it down.
And that way the regulator is in a better position.
So I just think a lot more funding and a lot more skills.
And also a body that represents consumers generally.
Consumer bodies -- and I understand this,
and I don't criticise this at all,
but generally they represent disadvantaged consumers.
I'm after a body that can do that.
Of course you can't take that away.
And the number of consumers who are paying more than 10%
of their disposable income from energy
in our country is frightening.
But the consumer body I want is one that represents all users
and plays the general consumer role.
So that's a big difference to what we've got now.
So thanks for the question.
[ Pause ]
>> Calvin Willoughby: Thank you.
Calvin Willoughby; Curtin University.
I'm wondering whether the ACCC takes much interest
in the interplay between competition law
and intellectual property law.
I think, for example, of the recent fight
between Apple and Samsung.
In other countries, many people argue
that intellectual property law should not be used
to allow a company like Apple to enjoy its success
in the market the way it does.
Do you take an interest in these questions?
>> Rod Sims: Look, I take a bit of an interest in the questions.
I have three commissioners on the ACCC who, or two at least
who are absolutely besotted by the issue.
So if you had them here, you probably wouldn't get
out of here short of 10 o'clock.
And so I must admit to largely leaving the issue to them.
So I don't -- I have not spent a lot of time on the issue.
My instinctive reaction is firstly, there's nothing wrong
with copywrite, per se.
It's just like any other asset.
And secondly, I think it should just essentially be left
to issues of Part IV,
rather than having complicated exemptions to Part IV
in relation to copywrite issues.
But look, I think if I go beyond that,
I'm going to be misleading you.
It's not an issue I'm an expert on,
but I've sure got a couple who are.
[ Pause ]
>> Jonathan Barrett: Jonathan Barrett [phonetic]
at the "Financial Review".
Just on the proposed tie up between Qantas and Emirates.
Is there an issue over that jointly they will decrease
capacity out of Australia?
And also is there an issue
that Emirates prices might rise to match Qantas'?
>> Rod Sims: Yeah, look I'm making it a general disclaimer,
and then I'll answer the question as best I can.
Obviously I can't get drawn into this too much,
because the submissions just come in.
I've got a copy in my bag, but I haven't memorised it yet.
Even though various staff at the ACCC are all over it.
But it's very early days in getting on top of it,
and of course we're going to go out for consultation.
So I don't want to start saying things that can be seen
to preempt the issues.
But I think it's fair to say, almost at a theoretical
or even -- it's almost tautological I think,
that if you're worried
about what are the anti-competitive detriments,
then volume and price are the two ways anti-competitive
detriments manifest themselves.
So I think the answer to your question, you know, are we going
to look at capacity issue and pricing issues, almost,
as they say, tautologically has to be yes.
I guess to give an example, I mean obviously this idea
of what benefits Qantas and what benefits the travelling public
-- just to give a sort of simplistic view of that --
I mean Qantas will naturally say, if you book with us,
now you've only got limited access to Europe.
But after the tie up with Emirates,
you'll get much better access to Europe.
To which one answer is, well yes, but you could have gone
with Emirates in the first place, and still had
that good access to Europe.
So the question for us is,
what does this deal give consumers generally,
that they're not getting now?
Not the issue of how does it help Qantas.
And we've just got to work our way through that.
It's a complex topic.
It's complex because you've got to work out what's the --
what will happen if the deal goes ahead
versus what would have happened if the deal didn't go ahead.
And in working out what happens if the deal didn't go ahead,
you can look at the past.
But of course Qantas, who are already out there
in the public saying, well the past is no guide to what's going
to happen in the future, because if the deal doesn't go ahead,
we're going to cut back our services anyway.
So all that, I think, just shows what a complex issue this is.
While there's only a limited amount I can say, but it is --
we're looking at this from the point of view
of consumers generally, and therefore price
and volume are going to be key issues.
And of course we are aware
that Emirate prices generally are lower than Qantas prices.
So naturally we're concerned too --
we're going to look at the price issue closely.
[ Pause ]
>> [Inaudible] from Curtin University.
Thank you again, I'd like to echo Dale's comments.
It's been a most enjoyable morning.
The ACL introduced some significant changes,
I guess to consumers.
And I'm thinking mostly of the Unfair Contracts Regime.
How consumer guarantees now operate in a different way.
>> Rod Sims: Yeah.
>> And they were introduced for reasons, you know,
to improve protection for consumers.
Has there been any indication, or does the ACCC feel
that it's achieved those outcomes?
Or are there indications that those provisions are working?
>> Rod Sims: Look, thank you for that question.
One of the things -- I guess the -- as you come into a new job,
you're struck by a few things.
And probably the main --
if I had to pick one thing that struck me more than others,
it's the under acknowledgement of the importance of the changes
to Australian consumer law.
I mean people -- I still talk to people who say to me, oh well,
the biggest changes were the Helmer Review, and Part III A
and the other changes that were made.
Getting rid of Section 49 and all that sort of stuff.
They occasionally talk about the Dawson Review.
They talk about the criminalisation of cartels.
But unquestionably the changes
to the ACL I think top all of that.
And yet, you don't get much reporting of it.
It's been revolutionary in a number of ways.
Frankly the dominant way is
that now we've got penalties we can get under the ACL.
I mean just think about this.
We've now had -- the new regime came in, in the middle
of 2010 -- this is one of my best topics, so thank you
for asking -- and I didn't plant the question either
[background chuckles].
But the thing came in, in 2010, and since 2010 --
and of course the behaviour to attract a penalty has
to be post the ACL coming in --
we've now had 6 penalties at least more
than a million dollars.
So previously to 2010 we'd have found people doing the
wrong thing.
And all we could go to court is to get them to stop doing it.
Now we can go to court and get them penalised.
And it has an amazing influence on the way the media picks
up the issue -- which is relevant
for general compliance in the community.
I get the boards of those companies walking
through my door saying, what can we do
to stop this happening again?
Whereas before, you know, they wouldn't have cared less.
I mean why would you care?
You went to court and someone said, stop doing something.
And you said, okay I'll stop.
Now you get penalties associated with it.
It is just a revolution in terms
of how affectively you can send compliance messages in relation
to not misleading consumers.
Which as I say, is essentially what the law is about.
So we've had very important cases --
I know we'll run on a little bit here, I'll get back
to your question in a second --
but you know, we had a two point --
over $2 million penalty against Apple for saying
that its iPad connected to 4G when it didn't.
And you have -- of course you had the Samsung product
out there that did connect to 4G.
So there was a competition as well as a consumer issue there.
We've had communications cases and energy market cases
where consumers were misled
into thinking they were getting it the best deal.
Or thinking they were paying X and getting a certain product
when they had to pay more.
And so it had -- the penalties has had an amazing effect.
Secondly, we've got the ability to issue infringement notices,
which some don't like.
Some people don't like our ability to do that.
But it allows us to deal with a whole lot
of cases really easily.
We had with -- in our carbon work, a gymnasium that sent
out a letter to everybody saying, you can avoid the impact
of the carbon price -- and I've forgotten how big they said the
impact would be, but it was way exaggerated on what it would be.
If you sign up and you renew your membership
for 2 or 3 years.
Now that was a misrepresentation.
Rather than take them to court, they settled fairly quickly
and paid an infringement notice.
And that was $6,600.
So -- but they're a small company.
They're one firm.
They run a gymnasium.
So what a nonsense, them going to court; us going to court.
We issued the infringement notice; they paid it,
and they got a lot of adverse publicity.
So that, you know, I think the fact that they got a fine,
even though it was short, meant you got the media attraction.
Then of course you've had much improved law --
and you've mentioned two excellent examples.
Consumer guarantees and unfair contract terms.
We've done a lot to publicise the consumer guarantees,
and that is working.
We have a few enforcement cases underway,
where we'll be taking some companies to court fairly soon,
for not adhering to the Consumer Guarantee Policy.
So the Consumer Guarantee Policy that's changed means
that now you have a statutory right to a replacement or refund
of a good if it fundamentally doesn't do what it was meant
to do.
In the old days, you'd get told by the firm, well,
have you got an extended warranty?
What does the warranty say?
These days you've got a statutory right.
It doesn't matter what the warranty says.
If the thing doesn't do what it was meant to do,
on a reasonable assessment of what it was meant to do,
you've got those inherent rights.
So it's a massive change to the consumer law.
We've been out there educating people about it.
It's an easy one to get out and talk about.
We've got more to do.
But I think we've done a lot of education.
I think we now need some enforcement cases
to focus the minds of some companies,
and we'll be doing that.
Unfair Contract Terms.
We've gone through a lot of contracts.
I guess the main one we can all relate to is -- in my household,
I mean I'm married to a woman who's got a PhD in law,
and yet she always let me deal with the mortgages.
Because she said, look, I'm not going to have anything
to do with this contract.
I refuse to be involved in signing it.
Its terms are outrageous.
And I said, yes, but it doesn't matter
if we pay our mortgage on time.
But it did have -- so we've been able to work with banks
and airlines and get those contracts changed.
But I think now we're going to be making even more use
of Unfair Contract Terms, because we're seeing terms
in some energy contracts, for example, that are interesting.
And so we'll be working on that.
So I think it is having a very big effect,
and of course it's given us greater powers.
The power to issue substantiation notices,
which means, if somebody says something --
and again, our consumer law's all about misrepresentations --
we can ask them to substantiate it.
So I think consumer law has been transformed.
I think we are making -- I mean we -- we've put --
indeed I've probably spent more of my first year talking
about consumer issues than I have about competition.
That's because in seeing that the consumer issue --
the consumer law had been changed,
I wanted to make absolutely sure we took full advantage of it
and we got focus on it.
And so we've tried to do that.
We think it's working okay,
but you may have your own perspective on it.
So thanks for the question.
[ Pause ]
>> Maybe one more?
Or maybe [inaudible].
You got -- you got more -- I'll try one more.
I mean you talked about the role of consumers and [inaudible]
but there's also certain types of consumers who --
[inaudible] fleeting like tourists, for example.
Or international students -- I know we've got people here
from Curtin University.
Is there anything in particular you can do --
what the ACCC does in terms of those sorts of consumers,
who if you like, a -- sort of a captive market.
And then they go back again
if the service isn't doing what they actually were looking
for in terms of, you know, the advertisement or the appeal
to those sorts of consumers.
I'm not sure the ACCC does anything
on those sorts of [inaudible].
>> Rod Sims: Look I haven't --
I understand the problem precisely, having --
my wife is British, so we have a succession of cousins and nieces
and nephews now -- next generation --
coming to visit us all the time.
So I do see the problem.
But we haven't -- there hasn't been an issue that's been raised
much with us, so it's not one
where we're putting much attention to.
We get very few complaints, and probably
because they just put up with it and go.
But in terms of our priorities, trying to make the most
of all the ACL issues I just mentioned.
Dealing with all the other issues, I'm afraid it's not
up there on their radar.
>> Okay. Give you the last - give you one last one.
Sorry -- [inaudible].
[ Background question ]
>> Rod Sims: The honest answer is,
that issue hasn't been raised with me before,
so I've only been there for 12 months, and that's not an issue
that with all the other things I've been focusing
on that's come up.
We -- and look, I've -- as I say, having spent a lot of time
on the consumer law issue, and dealt with a large number
of cases, I haven't had to jump that hurdle.
I don't know whether Sam, in the back there,
thinks I'm missing anything.
But I don't -- and I won't put you on the spot Sam,
but I don't -- unless I'm wrong, I don't think it's an issue
that slows us down in any of our enforcement cases.
I mean we treat consumers as being any --
I mean we treat consumers as being everyone
in this room when you go shopping.
But also small business as consumers as well.
And we've never had a problem with the definition.
So maybe you can -- [background conversations]
[background chuckles].
It hasn't -- and look, Sam's agreeing I think.
It's not an issue that worries us in a practical sense.
It's not holding us back at all [pause].
[ Music ]