Big companies getting away with hurting consumers, stifling competition

As the performance and behaviour of Qantas has come under sharp scrutiny over poor service standards and allegations of anti-competitive conduct, a study undertaken by the e61 Institute shows Australia has much higher rates of industry concentration than the United States, with 7 per cent of industries exceeding 80 per cent concentration compared with just 1 per cent in the world's largest economy.

According to the study, not only are Australian industries much more likely than those in the US to be concentrated, but rates of concentration have increased significantly since 2007.

It found that large firms in concentrated markets were less likely to be displaced by rivals, and as concentration increases the number of new entrants goes down.

While rates of concentration have remained high over the last 16 years in areas such as aviation, banking, IT, mining and manufacturing, it has grown substantially in industries including utilities and retail, particularly fuel, e-commerce and electronics.

In a finding that has echoes in current concerns about the behaviour of Qantas and the major banks, supermarkets and utilities, the authors of the report, Dan Andrews, Elyse Dwyer and Adam Triggs, said increasing market concentration is correlated with anti-competitive behaviour and worse treatment of consumers.

Their study found that the airline industry had been subject to 12 infringement notices and enforceable undertakings by the Australian Competition and Consumer Commission in the past 30 years, compared just four infringements for the far less concentrated accommodation sector.

The federal government has been forced on to the defensive following its controversial decision to block a bid by Qatar Airways to put on more flights to Australia.

The government has claimed the decision was taken in the national interest and Transport Minister Catherine King said that "no one factor swayed my consideration one way or the other".

But Assistant Treasurer Stephen Jones told the Australian Financial Review that the commercial viability of existing airlines was an important factor in the government's decision, arguing that while the government was concerned to drive down airfares, "we want to ensure that they do it in a way that doesn't destroy the industry over the medium and long term".

Under hostile questioning before a Senate committee on Monday, Qantas chief executive Alan Joyce confirmed his company had lobbied the government against approving the Qatar flights and defended the airline's performance, which has come under heavy criticism from travellers and airports, including Canberra Airport, over frequent flight delays and cancellations, lost baggage and flights credits that are difficult to use.

READ MORE:

Ms King said there was "no doubt that they need to do better. They have let a lot of consumers down. People are very angry about the way in which services have been operating and they need to do better," she said.

Assistant Competition Minister Andrew Leigh told the National Press Club the government's goal was to ensure "we have a competitive aviation ecosystem".

"I saw Alan Joyce get a fair shellacking from senators on both sides of the political spectrum yesterday. That accountability is appropriate," he said.

According to the e61 report, increasing market concentration can have tangible adverse consequences for consumers.

It found that surge in the concentration of service station ownership in Brisbane had been accompanied by higher wholesale prices.

"As wholesale costs rose in 2022, margins fell at a slower pace for stations in more concentrated markets, suggesting alack of competitors may reduce the incentive to absorb a cost increase," the report said.