Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims has slammed the corporate sector as arrogant and warned companies that mislead consumers to expect fines in the hundreds of millions of dollars this year.
Mr Sims also predicted the ACCC will increasingly clash with companies over merger proposals, and accused dealmakers of lying about wider benefits of potential takeovers.
The ACCC chairman said the Hayne royal commission into misconduct in the financial services sector and other scandals had exposed the business community for losing focus on their customers.
“I think there’s an element of arrogance about corporate Australia, that they are in a privileged position and they can do as they like in almost an unfettered way,” Mr Sims told The Australian Financial Review.
“They just need to come down to earth a bit and realise why they exist and what they’re there for. They need to regain control and focus on long-term shareholder value, which means a focus on customers.”
Mr Sims pointed to cases involving Telstra, which was hit with AU$10 million (US$7.1 million) in penalties by the Federal Court last April for misleading consumers about its premium direct billing services, and the Ford Motor Company, which was ordered to pay the same amount after being found to have engaged in unconscionable conduct in relation to a problem with its transmissions.
“In the case of Telstra, you’re getting 10,000 complaints or more about their premium direct billing and you’re doing nothing about it. I mean, how does that happen?” Mr Sims asked.
“Ford Motor company knew there were problems with its PowerShift transmission, customers came into complain about it, and they said it was their driving style. How does that happen?
“Companies have got to get back to what they used to do much better, which was focus on their own customers.”
Mr Sims warned that breaches of consumer laws will be even more harshly dealt with under a new penalty regime that came into effect on January 1.
Where companies could be hit with a penalty of up to AU$1.1 million (US$782,970) for each breach, they will now face penalties up to the higher of AU$10 million (US$7.1 million) or 10% of turnover.
Under the new regime, Mr Sims said the ACCC would have pushed for penalties against Telstra and Ford “way north of $100 million.”
“That’s going to be a focus for us in 2019 and there will be some big penalties.”
Mr Sims’ comments come after the Australian Securities and Investments Commission said last week in the Financial Review that it was adopting a court first approach against business breaches and misconduct.
The ACCC faces several crucial merger decisions in the early months of 2019, led by the merger between Vodafone and TPG Telecom, which will see the third and fourth biggest players in telecommunications market brought together.
The ACCC announced in December that it had concerns about the deal and is scheduled to make a decision in late March.
Mr Sims recalled a line he attributed to former Telstra chief David Thodey, who said that “whenever you’ve got three players you get rational prices, whenever it goes to four you get pricing that can damage shareholder value.”
Mr Sims said that despite this being obviously true, merger parties often tried to claim that a deal that increased their profits could still be good for consumers.
“Why do profits go up? Because prices go up or services declines,” Mr Sims said.
“We do get told lies, frankly. We get told all sorts of things that are just commercially unbelievable.
“Companies think we are commercially naive – we are not. And they need to understand that.”
Mr Sims accused the business community and financial media of too easily supporting mergers and said this thinking had to change.
“I just think we’ve still got a long way to go with mergers in Australia. I think there’s this presumption that all mergers are OK, no merger should be stopped and it’s OK to merge with your closest competitor,” he said.
“We’re ultimately going to look after the interests of consumers and I think increasingly there will be mergers where the aspirations of the merger parties will clash with the ACCC’s interest in protecting competition and consumers.”
Mr Sims said the ACCC’s focus on misleading of consumers would extend across motor vehicles, travel, health, online businesses, communications and other sectors.
The ACCC will also launch its first action under section 46, which targets abuses of market power, and also tipped a sharp rise in the number of criminal cartel cases on foot.
“I am confident we will have at least three criminal cartel cases next year and I think that will cement the program in.”
In the middle of the year the watchdog will also release its final report into digital platforms. While this could have big implications for the media sector, Mr Sims says there are broader questions about how companies are using customer data.
“Companies trading their customers’ data is something that I think is going to grow in focus, and it will growth beyond Facebook and Google,” he said.
“At the moment companies get their consumers data and feel they can do anything they want with it. I think we just really need to reflect on that.”
Full Content: Financial Review
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