Australia needs to “have a conversation about competition” as monopolies increase in size while profits and prices balloon.

In Australia, for example, more than 60 per cent of domestic airline passengers travel with Qantas Group airlines (Qantas and Jetstar), and Coles and Woolworths have at least 80 per cent of the supermarket market share.

Matt Grudnoff, senior economist at the Australia Institute, said when a small number of companies control a large portion of the market, it’s bad for consumers.

“The argument is always economies of scale and the idea that bigger companies can produce things more cheaply, and that may or may not be true,” Mr Grundoff said.

“Just because you can produce something cheaply, it doesn’t mean the customer is going to end up paying a lower price if there’s no competition.”

Over 60 per cent of domestic travellers fly with either Qantas or Jetstar, both owned by Qantas Group. Photo: AAP

The Big Four banks – ANZ, CBA, NAB and Westpac – control more than 70 per cent of business and retail lending.

Mr Grudnoff said if governments had the power to create increased competition in these industries, there would be benefits beyond lowered prices.

“We would see firms doing more to satisfy their customers, both by reducing price and providing better service,” he said.

“We would definitely see more investment in innovation, and probably increases in productivity.”

More powers needed?

While the United States made monopolies illegal in 1890 with powerful anti-trust laws, there is little stopping market capture in Australia or monopolistic businesses jacking up prices during a time of crisis.

Gina Cass-Gottlieb, chair of the Australian Competitions and Consumer Commission (ACCC), earlier this year called for increased powers to block mergers and for courts to be able to break up monopolies if the ACCC can prove it is warranted.

“The ACCC needs to have the tools necessary to be able to properly scrutinise and, if necessary, prevent mergers that are likely to substantially lessen competition,” she said in a speech to the National Press Club.

“Without these tools, some markets are particularly vulnerable to being adversely affected by further consolidation.

“In particular, markets that already have large incumbents with positions of market power and markets where it is difficult for new rivals to enter.”

Mergers that are likely to result in a substantial lessening of competition are currently prohibited under law, but the competition watchdog argues they aren’t fit for purpose because “parties are not required to notify the ACCC of planned mergers, or to wait for ACCC clearance before they complete the merger”.

Mr Grudnoff said giving the consumer watchdog powers similar to the US’ anti-trust laws would “be very useful”.

“We’ve got an example with Suncorp and ANZ trying to merge, the ACCC obviously said ‘no’, and now they’re going to take it to court,” he said.

“All our merger laws do is slow things getting worse, when we’re in a place where thing are bad enough now that we need to reverse them.”

The ACCC has temporarily blocked ANZ’s $4.9 billion acquisition of Suncorp. Photo: AAP

ANZ and Suncorp appealed the decision with the Australian Competition Tribunal, which will decide whether the merger can go ahead.

Can monopolies be broken?

Airports, energy companies and telecommunications are just some of the areas which are increasingly monopolistic in Australia, and Mr Grudnoff said there hasn’t been a “real conversation about competition” in the past two decades.

“A lot of the economics that we learn is prefaced on the idea that firms compete, and a lot of those assumptions just fall apart if firms aren’t competing,” he said.

“If firms aren’t competing, you don’t necessarily get the best outcome for consumers.”

Technological advancement and high-performing firms are also contributing to more concentration and less competition.

Dr Adam Fforde, adjunct professor in the Institute for Sustainable Industries and Liveable Cities at Victoria University, said for decades, Australia has been saturated with the idea that the markets will work regardless of other factors.

“If you have banking services that are said to be commercial and capitalistic, then it gets very difficult to force them to do what society wants, which is not close branches in communities that have fewer than 10,000 people,” he said.

“The support for monopoly is encouraged by the idea that they’re for profits and therefore they’re going to compete.”

He said there is evidence to suggest as much as two-thirds of the Australian economy cannot generate economically efficient outcomes, meaning standard ideas for increasing efficiency – like increasing competition – are unlikely to work.

“If you talk to people who’ve got old, ageing parents or are in education or healthcare, a lot of frustration is because of the enormous belief in markets and competition,” he said.

“If you look at not-for-profits and the way they’d organise an old person’s home, you’ll find a lot of evidence for how it should be done.”