ÌÇÐÄÔ­´´

Welcome and acknowledgements

Hello everybody, and thank you Simon for that reflective introduction.

Thank you, also, to the Law Council for partnering with us to host this lecture here today on Wurundjeri Woi-wurrung country. I pay my respects to Elders, past and present and to Aboriginal and Torres Strait Islander people who are joining us today.

It’s a pleasure to see many familiar faces in the room – many of whom have shaped competition law in Australia.

I am delighted to have the opportunity to make these remarks ahead of the panel discussion with Dr Rhonda Smith, Richard St John, Roger Featherston and Hank Spier, led by Elizabeth Avery. Each of our panellists have special insight into the establishment and work of the Trade Practices Commission under Ron Bannerman’s leadership.

Each year, this lecture provides an opportunity for a lesson in history and a reflection on Ron Bannerman’s legacy and the standards he set. It also provides an opportunity to revisit a question that Ron had to answer, and which is just as important now: how do we make competition law work?

The moment now: a new context with familiar challenges

Prior to the establishment of the office of the Commissioner of Trade Practices in 1966, collusive and restrictive conduct between and by Australian businesses proliferated, largely unchecked. It is not an overstatement to say it was an Australian business norm.^[1]

Ron called this: ’the web of anti-competitive conduct that lay across Australian industry’.

The establishment of the office of the Trade Practices Commissioner and later the Trade Practices Commission, and Ron’s appointment to lead those agencies, reflected an emerging recognition that these widespread practices were stifling economic growth, contributing to higher cost of business and consumer prices, and delivering poor-quality products and services.

This emergence of a proto-competition policy both anticipated and drove a fundamental shift to pro-competitive business norms. Over time of course – this did not happen overnight.

Today, restrictive trade practices are no longer an acceptable business norm. But that does not mean that they no longer exist and don’t have the real capacity to act as a dead weight on the economy.

And in other respects, we have today challenges like those facing Australia in the 70s and 80s.

We have sustained cost of living pressures and declining real living standards. We have geopolitical instability and declining public trust that markets will deliver outcomes that consumers and the community expect. We have increased costs and uncertainty for business. Paradoxically, we see remarkable innovation and the potential for fundamental technological disruption, hand in hand with enduring or even enhanced market power.

The Australian Government has a policy focus on lifting productivity and promoting growth, identifying the need to reduce regulatory costs and imposts on business investment and innovation. It will be obvious to this audience that removing restrictive business practices through enhanced competition law compliance and reducing the burden of inappropriate governmental regulatory costs and imposts on competitive markets, go hand in hand.

The OECD’s most recent Economic Survey of Australia concludes that competition has waned across the Australian economy over the past two decades. The OECD frame the concern that our economy is not becoming more dynamic, but less so, while market concentration and profit margins have risen.^[2]

While I am sure we all want an economy that is inclusive, full of opportunity, and affordable — one that is dynamic and productive — and delivers the outcomes that matter most to the community, including business, it is also the case that we continue to fall short of that ambition.

The OECD is clear that to address this challenge, we must continue to promote strong, proportionate competition regulatory settings – and we must continue to invest in vigorous enforcement.

Research backs this point. For example, academic research of DOJ antitrust enforcement actions shows that strong competition enforcement is positively correlated with enhanced business formation and employment, in short promoting the conditions for stronger economic activity across markets.^[3]

Of course, competition law does not operate automatically. It does not deliver outcomes simply because it exists. Which brings me back to the question that Ron Bannerman faced and we continue to face today: what does it take to make competition law work?

We can look to Ron’s legacy to answer this question:

• First: building a deep understanding of commercial practice and what is actually happening in our markets. That is, understanding what is going on.
• Second: applying the law with clarity and authority – through enforcement that understands and can explain the harm to competition from restrictive trade practices, and that constructively contributes to the development of the law and builds a framework of pro-competitive business norms. 
• Third: investing in the resources, capability and skills – that is, investing in the people who do the work to bring competition law to life.

And it’s these that I will explore in this lecture today

Early days (1966 – 1974): building market and commercial insight

Let me take you back to beginnings.

Ron was first appointed Commissioner of Trade Practices in 1966 under the Trade Practices Act of that year.

Under that Act, restrictive trade practices were not presumptively unlawful. Rather than prohibiting anti-competitive conduct outright, the Act relied on a process of registration, and potential disallowment, based on a public interest test.

From the perspective of cleaning up an economy riddled with restrictive trade practices, it was not particularly ambitious or effective.

But in its own way it was revolutionary. Through registration, investigation and review, the Commission gained unprecedented visibility into Australian markets and business practice. And for the first time, brought to the surface the depth and breadth of restrictive trade practices in the economy.

The 1974 shift: combining insight and enforcement

As this audience will know well, the Trade Practices Act 1974 marked a decisive shift – from a system that provided a degree of transparency of business practice, to one actually capable of shaping the conditions for effective competition.

For the first time, Australia had a prohibition-based competition regime, national consumer protection laws, merger control, and an administrative exemption process in cases of public benefit – all administered by a new, independent Commission.

Ron was called on again to lead, as chair of this new Commission.

At the heart of this change was the important role of law enforcement to sanction anti-competitive business practices. However, this law was never anti-business. Properly understood, it is fundamentally a pro-business law, as Ron deeply understood.

At the time, he wrote^[4]:

Looking at the Act in broad, it is not anti-business, although it falls hard on particular companies who engage in anti-competitive behaviour or unfair practices. There is large – not complete, of course, but large – common interest between business and the community in the private enterprise system if it works well. Business prosperity through efficiency and competition furthers not only the gains of private business but also, above all, the interests of the community. Continuing improvement in industry efficiency is necessary to maintain or raise the standard of living. It is not just a matter of cutting the cake fairly, but of increasing the size of the cake there is to cut.

From the outset, the Commission adopted an activist mindset. It moved firmly and relatively swiftly against blatant breaches of the law – including resale price maintenance, price fixing, and exclusive dealing – while also taking on a large volume of consumer protection matters. Merger work was a steady stream.

Under Bannerman’s leadership, the Commission became a place where deep market knowledge and investigative rigour coexisted and reinforced each other. With the benefit of hindsight, it may be noted that Ron’s frugal and cautious management meant the TPC remained a relatively modest operation under his tenure. But, over time, his legacy of integrity and transparency helped build political and public acceptance of the need for a permanent, well-resourced competition regulator.

Enforcement: establishing, defining and clarifying the law

Early enforcement was not straightforward. The law was new, the courts cautious, and the Commission was still learning how to translate market insight into coherent case theories capable of enforceable legal proof. Early losses, particularly in exclusionary conduct cases, exposed the challenges of taking cases in the context of developing Australian law.^[5]

Over time, however, investigative techniques improved, the integration of economics and law became more sophisticated, and case selection became more targeted. The Commission staff actively engaged with the business world and developed a granular understanding of business in practice.

Through cases in the Courts and Tribunal, and as articulated in Ron’s Annual Reports, the concept of competitive markets – and what it meant for that competition to be lessened or hindered was articulated and became clearer.

As many will be familiar, in an early merger review matter involving rival proposals to acquire a competing flour milling businesses, the Tribunal articulated – for the first time – a framework for thinking about competition as a process of rivalry, shaped by market structure and constrained not only by existing competitors, but by the threat of entry.^[6]

It also clarified the central role of the market as the field of that rivalry – defined by the extent to which customers could switch between products or suppliers and business were free to meet those demands.

Subsequent Tribunal and court cases applied and tested this framework of competitive analysis in real-world settings.^[7]

By the early 1980s, a shared understanding over the law began to translate into results. In a major case involving competing flour and stockfeed businesses, the Commission secured its first significant court victory under the restrictive trade practices provisions, along with the first agreed penalty in a cartel matter.^[8]

An approach emerged that focused on the impact of the conduct on the process of competition. The question was less about whether firms were damaging each other, and more about how their conduct was restricting or impeding the competitive process. That is whether it weakened the rivalry essential for markets to work well.

As Ron noted, 'the antithesis of competition is undue market power… the power to raise price and exclude entry… where firms are sufficiently free from market pressures to ‘administer’ their own production and selling policies at their discretion'.^[9]

At the centre of the law was the concept of a likely effect of substantial lessening of competition. This is, fundamentally, a preventative standard. It does not ask, at least not as the critical question, whether there has been harm caused to a competitor or potential competitors. It asks whether the conduct has materially diminished – or will likely diminish – the process of competition itself. Has the conduct reduced the capacity for competition to drive market participants to innovate, to operate more efficiently, to produce better quality products and services, and to lower their prices. 

Addressing this question did not, and does not, require a complex process of predicting various future competitive market outcomes and comparing them, but simply of considering whether the conduct will harm the competitive process that would otherwise exist in a real and meaningful way.

And it recognises that this can happen in different ways: by business conduct that reduces rivalry amongst competitors, to conduct that outright excludes them, or that meaningfully hinders or restricts their competitive freedom. It also recognises that structural impediments can impede competition, including conduct that consolidates, strengthens or entrenches market power or raises barriers to competition, including the potential for entry.

Ron Bannerman’s legacy: late 1980s to today

While the size of the agency and overall portfolio of competition cases taken under Ron’s chairmanship were limited, the groundwork had been laid and we are the beneficiaries of his legacy today.

In the late 1980s and into the early 1990s, the Commission began to take on more and more complex cases, including misuse of market power, exclusionary conduct and cartel and merger matters across a range of industries from petrol to building and construction materials to transport and logistics to consumer grocery products.^[10]

Over that period, the law continued to develop through its application – as the Commission took on matters in areas where the boundaries were not always settled, and where the substantial lessening of competition standard had to be given practical meaning.

The case load deepened in the 1990s and has continued to build over many years, with many competition enforcement matters involving a wide range of conduct across a wide range of markets.

We need only look at the Commission’s work in recent years to see this breadth and depth reflected.

Through cartel proceedings, the Commission has worked to address coordination and pricing conduct across sectors ranging from fresh food to construction, logistics and services sectors.^[11]

At the same time, exclusionary conduct matters have engaged with issues in ports, telecommunications, payment systems, distribution networks, and increasingly in digital and data-driven and dependent markets.^[12]

Right from the earliest enforcement matters, most cases have been difficult, many contested, and not all a success. But each has contributed to a clearer understanding of how competition operates in practice – and how its loss can be identified and addressed.

The same task continues today

This same task continues today.

Deep market insight remains critical. Through investigations, studies and broader market inquiries, the Commission examines how markets are operating in practice – identifying patterns of conduct, structural features, and incentives that may limit competition or harm consumers.

This work increasingly involves new forms of conduct, evolving market structures, and complex economic questions. And the effects of the Commission’s interventions often play out over time.

The OECD’s recent Australia survey pointed to the very important role of market inquiries as a source of insight and intelligence important to effective competition enforcement and policy.^[13]

The ÌÇÐÄÔ­´´'s work in the supermarket sector is one example, amongst many. The first inquiry of the Commission in 2008 identified barriers to competition including, among other things, planning and zoning, and the use of restrictive covenants in retail leasing.^[14]

Over time, these insights helped to change how decisions in the sector were scrutinised – by governments, by businesses and by the ÌÇÐÄÔ­´´ itself. In the years since, Aldi has expanded to hundreds of stores across Australia, entered catchments that had previously been dominated by the two major incumbents, and has become a meaningful source of price constraint for the products it sells.^[15]

On the other end of the spectrum, the Commission has secured more immediate outcomes through targeted interventions.

In some cases, this has been achieved through court-enforceable undertakings that quickly move to remove restrictions and open access.^[16]

In the digital services sector, the importance and benefits of being able to establish bespoke competition and fair-trading rules up-front has been recognised.

But as Ron rightly called out at the earliest opportunity, court enforcement is the cornerstone of competition law and remains so today.   

The Commission continues to bring important cases to the Courts, where it sees collusive or exclusionary conduct that materially weakens competition.^[17]

These cases don’t simply address the specific harmful conduct but ensure that the law remains up to date and responsive to current business practices, and is firmly in the minds of business as a critical set of rules the community expects them to operate by.

Taken together, this work shows an agency applying market insight to identify harm, using enforcement where it is necessary, non-litigated tools where they achieve timely outcomes, and investing consistently in the capability required to do both well.

Conclusion

With that I come back to the question we began with: what does it take to make competition law work?

In many respects, we face similar challenges to those facing Ron Bannerman, that is the need to strengthen competition to help lower the costs of doing business, consumer prices, drive productivity, so that competition laws can play its important part in lifting Australia’s economic performance.

Looking back at his legacy, I believe this takes a clear view of how markets are functioning – even when that view is incomplete. It takes a willingness and a clarity of vision to act – even when the outcomes are uncertain. And it takes the resources, institutional settings, and capability to do the work well.

At its core, this work depends on people – investigators who understand business, economists who understand market dynamics, and lawyers who can translate and present the evidence in enforceable case theories. And the institutional authority, confidence and courage for those people to do their job well.

Beyond the lessons of the past, I believe it also requires one more thing – an acceptance that the work is never finished.

Markets change. Business models evolve. Power can concentrate in new ways, and restrictions can arise in places we did not previously anticipate.

And so, our task is to not only enforce the law against familiar conduct, but to apply it, in new contexts – through inquiries, advocacy and engagement and enforcement — to ensure that competition continues to do its work.

Thank you.