Farmers cheer as Fels calls out monopolies and lawful price gouging

The high profile economist and Australian Competition and Consumer Commission's first chairman, until 2003, highlighted how some firms "can price gouge lawfully" as long as they are not unlawfully colluding with each other.

In a report just released he said there were no government policies about excessive prices, which, of late, had contributed to Australia's inflation problem.

Some of the highest price rises occurred in sectors characterised as enjoying disproportionate market power over consumers, or monopoly power over their supply chains and workforce.

His 36 recommendations have included a new national competition and prices commission to examine high prices and reasons behind them; prohibiting mergers which gave rise to, or entrenched substantial market power, and forcing monopolies to be broken up.

The National Farmers Federation welcomed Professor Fels analysis, broadly agreeing with his recommendations to better resource the ACCC, investigate pricing, address competition issues and make the Food and Grocery Code of Conduct mandatory.

Professor Fels has called for Canberra to greatly strengthen competition policy to stop enabling price gouging.

As an example of the federal government sanctioning very high prices, he pointed the finger at its recent refusal to allow more Qatar flights into Australia, effectively supporting high costs to passengers and freight customers, which in that case favoured Qantas.

His report also noted many businesses resorted to dubious inflationary price practices, including loyalty taxes, drip pricing, confusion pricing and "excuse-flation".

A four per cent rise in inflation translated to $100 billion in extra costs carried by the consumer public

Some adopted "rockets and feathers" price strategies whereby product or service costs rocketed up in response to cost pressures, but drifted down unusually slowly when costs fell to previous trends.

The Fels report's findings followed an inquiry commissioned by the Australian Council of Trade Unions involving 750 submissions and public hearings in five cities with ordinary consumers, farmers, academics, businesses, unions and policy think tank representatives.

NSW Farmers said the findings strengthened its argument for "serious and intensive reform within our nation's supermarket sector" so fair prices for farmers and families could be achieved.

The association noted Prof Fels had identified the local supermarket industry as among the most concentrated in the world, finding major retailers not only failed to pass on lower prices to consumers, but exercised their market power over farmers and other suppliers.

"For too long this staggering lack of competition has enabled the major supermarkets to exercise unfair market power, leaving farmers and suppliers with pitiful prices as profit margins increase," said president, Xavier Martin.

"It's not fair on farmers and it's hurting families - and action to bring this behaviour to account is long overdue.

"Meaningful competition reform must be set in motion, now."

NFF chief executive officer, Tony Mahar said the peak farmer body had long called for better competition laws and more transparency in the industry's supply chains.

"This is yet another report echoing what we've been saying," he said.

"It's time the government gets to work to make things fairer for farmers and consumers.

"Our members are increasingly frustrated by the imbalance in market power between small family farming businesses and the large corporates that dominate Australia's food supply chain."

Opposition agriculture spokesman and Nationals leader, David Littleproud, said Allan Fels had "nailed" the problems within multiple industries, including agriculture, aviation, energy, banking and financial services and the emerging electric vehicle sector.

Prof Fels noted Australians paid about $10,000 more for electric vehicles than New Zealand motorists because Australia imposed unwarranted import restrictions on them.

Mr Littleproud agreed there was clear evidence around price gouging, as seen with meat prices when farmgate prices dropped as much as 70 per cent last June, "yet the checkout prices only dropped by 8pc".

"But there needs to be greater architectural reform, which is also what Prof Fels has articulated," he said.

"The Nationals have been saying we need divestiture powers so when you have too much market concentration we can bring forward powers that could be used by a court or by the ACCC."

"There's too much market power in some of these industries and we need to protect suppliers and also the consumer."

Prof Fels said the electricity industry was "riddled with questionable prices", partly because it was concentrated at all levels.

"There is regular price gouging, and according to the regulators themselves, this is brought about by the generator/wholesale market having limited competition and its bid pricing system."

He said electricity consumers paid an excess of about $205 for every $1000 bill compared to the prices charged to large business customers, despite there being no genuine cost differences.

"Likewise with gas, the apparent excess is $348.24 for every consumer gas bill of $1000."