Competition Law

Australian Competition Law and Policy Discussion

Bank competition again – the Zumbo claims

Posted by Julie Clarke on 12 November 2010

Frank Zumbo is at it again, claiming Australia has ‘some of the weakest competition laws in the world’ in his latest Punch editorial.  These ‘weak’ competition laws are what he blames for the ‘mess’ we are said to be in with the four big banks.

This is not the first time Zumbo has made this claim and he’s never explained the basis on which it is made.  It is simply not accurate.  Some explanation for the claim would be nice.  The mere existence of a number of oligopolistic markets is not evidence of weak competition laws, as there are other explanations for this is many cases (market size, geographic isolation etc).

However, having made the claim Zumbo goes on to argue that, naturally, ‘stronger competition laws’  and ‘effective enforcement’ by the ACCC are ‘essential’.  I’m not going to comment on the ‘proposals’ made (including that the government set up a ‘people’s bank’ with outlets in Australian post offices), save for one – the claim that the ACCC should be using phone tapping powers against the banks.

The ACCC gained indirect power to request phone tapping warrants last year when the criminal cartel laws were introduced. But obtaining them in situations like this is not a simple task.  The ACCC is not able to obtain a phone tapping warrant itself – it must ask the Australian Federal Police (or other authorised body) to obtain one – and it can only be sought where the ACCC suspect an organisation is involved in anti-competitive conduct defined as a cartel; various other criteria must also be met.  Even if the ACCC think the banks are ‘price signalling’ this is not the same as a cartel as defined in the Act – the whole point of seeking price signalling laws is because existing cartel laws do NOT capture this sort of conduct.  The telephone interception warrants can’t be obtained and used in the mere hope that the banks might be privately meeting to discuss interest rates.

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