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Interview: Regulating the Competition

Wednesday 13 September 2017

Recently, GRC Professional got an opportunity to pose some questions to Marcus Bezzi, Executive General Manager of Competition Enforcement at the Australian Competition and Consumer Commission (ACCC).

What are some of the major challenges to competition you see in the market?
The ACCC reviews its compliance and enforcement priorities annually. We published revised priorities earlier this year that identify the following ‘enduring priority areas’ relating to competition:

  • Cartel conduct causing detriment in Australia;
  • Anti-competitive agreements and practices; and
  • The misuse of market power.

We also identify particular sectors in which we are focussing resources on competition problems. These are:
  • The agriculture sector:
  • The commercial construction sector; and
  • The financial sector.

In addition we currently have market studies into new car retailing, retail electricity, gas, North Queensland insurance and the dairy industry. 

Previously, the ACCC noted its concerns about the apparent lack of robust competition in the banking sector. The degree of competition in the financial system is not just measured by the number of players in the market. Changes in market structure, the ease of customer switching, innovation and contestability can also determine effective competition.

  • The ACCC now has a dedicated Financial Services Unit (FSU) that will examine competition issues in the financial sector.
  • The FSU’s work will complement the Productivity Commission’s Inquiry into Competition in the Australian Financial System, a process with which the ACCC is engaging closely. 
  • We have not yet finalised our views about the sorts of issues the FSU might examine in future. We anticipate that the PC Inquiry report will inform our selection of issues to examine. 

Are there any recent shifts in your enforcement priorities to which businesses should be paying particular attention?
Each February, the ACCC publishes a revised Compliance and Enforcement policy that sets out our updated enforcement priorities. Businesses should pay attention to the revised priorities explained in the policy and by the ACCC Chairman in his speech when he launches the revised policy.

One of the solutions to tackling the lack of competition the banking sector is that the ACCC was charged to set up a financial competition unit. Any idea what the unit might look like and what kind of engagement would you expect form the financial sector?
As part of the 2017-18 Budget, the Government announced it would provide the ACCC with additional funding to examine competition issues in the financial system.

$13.2 million over four years from 2017-18 has been provided to establish the FSU.

The first key task for the FSU is the Residential Mortgage Products Pricing Inquiry (the Inquiry). On 9 May 2017, the Treasurer directed the ACCC to conduct an inquiry into the pricing of residential mortgage products by banks affected by the Major Bank Levy (i.e. ANZ, Commonwealth Bank, NAB, Westpac and Macquarie Bank).

The Inquiry will consider prices for the period 9 May 2017 to 30 June 2018, with a final report to be provided to the Treasurer after this date.

In undertaking the Inquiry, the Government has requested we have regard to the Government’s view that banks need to fully and transparently account for their decisions and hence how banks balance the needs of borrowers, savers, shareholders and the wider community.

The ACCC has engaged with the five banks that are the subject of the Inquiry and has sought information and documents from them. The banks are producing information in tranches up to the end of September 2017. We are reviewing the information and documents provided so far.

We will seek to understand and explain how each bank makes their pricing decisions and report on whether there are any changes to the pricing of residential mortgage products over the next year, and the factors considered in making those pricing decisions.

The ACCC considers the pricing inquiry to be a transparency exercise. We cannot stop the banks from increasing or decreasing their prices as they see fit. What we can do is to seek to understand and report on what pricing changes are made and why, including whether the major bank levy has been passed on to consumers of residential mortgage products.

Will this financial competition unit extend to looking at the Fintechs start-ups as well?
The ACCC now has a broad mandate to examine specific financial sector competition issues. This will allow for increased and more regular scrutiny of competition issues in the financial sector as a whole, not just in retail banking.

To the extent that the ACCC observes or receives reports of competition issues in the financial services sector, including in relation to fintech start-ups, the ACCC may investigate further.

As noted above, the current focus of the FSU’s work is the Inquiry. At this stage, it is not yet clear what issues the FSU may focus on once the Inquiry is complete. This is likely to be informed by the outcome of the PC’s Inquiry.

Do you have any advice for risk and compliance professionals of the business who are trying to follow best practice and be compliant?
Be aware of and pay attention to the guidance the ACCC publishes that may be relevant for your business. For example, recently, the ACCC published guidance for businesses that charge surcharges to consumers for use of debit or credit cards.