Possibility of ACCC probing into Big Four Banks and all things dodgy. We can send Rod Sims a few
documents to get started on re Banking Cartel.
Sims: ACCC ‘covering most sectors’, won’t confirm banks
The Australian 12:00am July 25, 2016
Michael Roddan
Competition watchdog chairman Rod Sims has not shut the door on the possibility of an ACCC probe into the big four banks for cartel activity, after he warned that up to a dozen cartel investigations were in progress following the landmark criminal charge against shipping giant NYK.
Mr Sims told The Australian that although the big four banks had competitors who were “not insignificant” rivals in the sector, the major lenders still retained their pricing power and heightened profitability, and had been growing market share in recent years.
A week after the Australian Competition & Consumer Commission won its first criminal charge against a corporation — shipping giant Nippon Yusen Kabushiki Kaisha — Mr Sims put the country’s oligopolies on notice and flagged up to a dozen more criminal cartel investigations.
And despite outlining a number of what he believed were the most concentrated sectors in Australia, Mr Sims refused to say whether Australia’s banking oligopoly was the subject of an investigation.
“All I’ll say is we’ve got 10 to 12 active cartel, in-depth, investigations, which means they’re quite serious and quite advanced,” Mr Sims said. “With that many, we’re really covering most sectors.”
“We’re trying to target cartels that cause the biggest detriment — that does mean there’s a bias towards larger companies. Not always, but certainly larger companies, if they are involved in cartel activity, will generally be of much more detriment than smaller companies.”
In naming industries where groups had pricing power, Mr Sims said the energy sector was dominated by three big players (AGL, Origin Energy and Energy Australia), that Woolworths and Coles dominated the grocery market, that Telstra had the power in “telco land” and BHP Billiton and Esso Australia controlled the gas market, and then there were the big four banks.
“With banks, there are four of them, and yet there are other banks who are not insignificant players. Why do they still have pricing power? Because they certainly do,” Mr Sims said. “Our banks are very profitable; they’ve increased their market shares in recent years. One hopes that technology can enable others to attack that pricing power and those very high margins. Hopefully we’ll get more competition in banking and get those margins down,” he said.
CLSA analyst Brian Johnson said the big four had been losing their “remarkable pricing power” since the global financial crisis, and it was likely to further diminish amid the political heat on the sector.
“When you speak to overseas investors, the one thing Australia is known for is for having these real oligopolies,” Mr Johnson said.
“Rod Sims didn’t provide any examples but he said Australia was riddled with oligopolies with pricing power. Banks are an example of that, but there are a lot of other ones as well. I would have thought the ACCC is looking into everything all the time.”
With the amount of broker-originated loans growing, Mr Johnson said banks were competing with themselves as broker commission fees and back-book discounting eroded profitability.
Mr Johnson said a royal commission into the finance sector was still possible, and that meant that pricing power had “fundamentally diminished anyway”.
But Mr Sims warned cartels may not necessarily have much pricing power.
“With cartels, the companies involved really don’t have much pricing power. They are involved in the cartel to fix prices because they don’t have the market power to bring about the prices they want through other means,” he said.