|

Consumers, cowboys, & cops.

Tony French.

Consumer Directions. Jeremy Brooks. flickr cc.

When my daughter, Kate, recently joined the Australian Competition & Consumer Commission (ACCC) as a graduate trainee, I thought, there’s not much long-term future for her being a ‘consumer cop’.

My reasoning was, isn’t there already a well accepted and established Australian consumer law at State and Federal levels, and plenty of awareness in the community and the corporate world of the rights of consumers?

Big corporations have their squadrons of in-house corporate lawyers well-versed in Australian consumer law. And for smaller enterprises, there are plenty of available advisers and a plenitude of helpful websites. Finally, hadn’t business ethics evolved since the Wild West days of rough capitalist excess? Consumer rights had triumphed, right?

I was surprised, then, when Kate said the ACCC is exceptionally busy, with many investigations into businesses and individuals engaged in ‘deceptive and misleading conduct’. That’s the nice legal expression which you and I might less elegantly call perpetrating a fraud on the public, or, more colloquially, conning the consumer.

Just in case Kate was being deceptive and misleading with me, I turned to the ACCC Annual Report, only to find that complaints to the ACCC had risen by a third over the last three years.

Trying now to justify myself, I thought, maybe there are lot more scammers out there, the dodgy kinds doomed to be highlighted on TV’s Today Tonight programs and the like. There will always be such hucksters, and we gullible Aussies, including the sadly susceptible elderly and poorly educated, need to wise up. Just like the online scams to which you and I are hastily wising up.

Dishonesty by major corporations

But no, said Kate. Much of the dishonesty is not just individual, but perpetrated by large corporations. And she referred me to a long list of recent ACCC actions. Victories for the consumer, she said. Hard fought they were, ranging from penalising Domino’s Pizza which breached the Franchise Code to the detriment of its franchisors, E-Cigarettes which deceptively claimed there were no carcinogens in e‑cigarettes, Virgin and Jetstar for being less than honest about their ‘drip’ pricing, Woolworths for demanding money from suppliers and continuing to sell knowingly unsafe products, and Coles for menacing its suppliers.

Then, Flushsafe wipes, which despite their name will clog your pipes, and Nurofen’s ‘targeted’ pain products which all had the same ingredient. And, let’s not even begin looking closely at the banks’ bad behaviour which anyway the ACCC cannot investigate.

All right, I had to admit, these are not actions of little Aussie shonkies but instead the calculated efforts of large and supposedly trusted corporations.

And these corporations have one thing in common, they control their markets. For example, the four large banks, the big two supermarkets, the airlines, pizza delivery providers, and even baby food manufacturers, dominate their commercial space.

According to Andrew Leigh and Adam Triggs in their blog article A Few Big Firms, it’s hard to come up with Australian industries not dominated by a few big players. They found that, generally, the four biggest firms dominate 80% or more of their respective markets (the beer market for example).

It’s a depressing fact that market dominance does not translate into responsible market behaviour – big, yet benign. Quite the reverse. Fewer and bigger businesses than ever use their enhanced market power for anti-competitive purposes. Those affected are not just consumers, but small businesses and workers.

Small businesses are either absorbed or eliminated. How many mum and dad hardware shops are there now? They were long ago squeezed out by the ‘category killer’ giants setting unsustainably low prices. Which is what 7/11 and Domino’s Pizza are now being accused of to the detriment of their workers. The workers cannot expect higher pay or improved conditions just because their employer is minting pure gold, illustrating yet another failure of the neoliberal trickle-down doctrine.

Monopolies eliminate competition

And, also, don’t expect improved consumer choice and quality, or, as Leigh and Adams add, increased product safety or innovation. These are monopolies, after all, decreasing what they give you, the consumer, but increasing prices.

Monopolies collude. Think globally of OPEC the oil cartel, or locally of Visy and Amcor some years ago, who between them controlled 92% of the market yet colluded to win that little remaining share. And the four big banks – can you honestly say they are in hot competition with each other, except for the annual Bank of the Year award?

What is lacking is real competition. Competition which lowers prices, creates jobs, lifts wages, and conditions, and, say Leigh and Adams, reduces social inequality. They claim competition isn’t just about efficiency, but also about equity. Competition encourages innovation and benefits consumers. It’s the competition which economists tell us we need to have, yet which seems stubbornly marooned in economic textbooks as academic.

What can be done? Could we begin by encouraging corporate social responsibility, educating an ‘ethical’ manager, one who acts out of some accepted ‘societal mores and ethical norms’? Hardly. Business is largely an ethics-free zone and business ethical values are far from agreed. Ethical training is unlikely ever to become a prerequisite for becoming a manager.

Hefty penalties needed, even jail time

What the business manager espouses is that what is allowed is just short of outright deceit and mere market and consumer manipulation. And that’s more or less what is permitted within corporate law. The legal system is a kind of codified ethics. For example, you shouldn’t murder your competitor, but you can bankrupt him. In between, there is a lot of ‘grey’ law activity, dressed up, for example, as ‘making a return on investment’, or adding ‘shareholder value’. The latter does, I suppose, benefit a small part of the community.

What urgently needs be done is to strengthen the legal framework with hefty penalties. Think of this as a legislative stiffening of the kind we are seeing in anti-terror legislation. Penalties need to be increased. For example, when Nurofen was recently fined $6 million, a record top-of-the-range penalty under Australian Consumer Law, Nurofen had already banked $85 million in sales. For the company, it was a small cost of doing business. All Neurofen’s profit should have been forfeit, giving it a genuine targeted corporate headache.

And there need to be wide criminal sanctions, if for no other reason than that the shiny-suited white-collar businessman fears nothing more than a stretch in jail. For too long, the businessman’s fear of incarceration among fearsome felons has been a very far distant fear. The ACCC has rarely used its criminal prosecution powers, and the rare white-collar crims, even when charged, have the freedom-enhancing advantage of good expensive legal defence teams. It’s headline stuff when they go to jail.

You have to be pretty bad – read reckless and unlucky – to be sent down as a white-collar criminal. None of the banks’ ‘independent’ financial advisers, who notoriously rogued many customers, making millions along the way while ruining thousands of people, have gone into the slammer. Yet deceptive and misleading conduct, if not outright fraud, ought to incur greatly enhanced financial penalties on companies, plus the possibility of an individual ‘doing time’.

Fear of the loss of your freedom is, I suggest, a better predicator of future (good) behaviour than mere ethical exhortation or expectation.

And there are other anti-monopoly options. For example, we could loosen up our monopoly markets, let in increased numbers of competitors, such as banks, supermarket chains, and start-ups. And encourage venture capital raising and small businesses.

And we should support the strengthening of the anti-competitive market investigation powers, penalties, and resources of the ACCC under Australian Consumer Law.

Yes, I have been converted on the future of consumer law: it has a future. Well, until that far-off day when companies are really good corporate citizens contributing their resources philanthropically to improve the quality of our lives. Am I dreaming?

Good on you, Kate, and your enthusiastic fellow ACCC colleagues, for looking after the consumer. Yeeha, go for it gal, and catch those corporate culprits!

 

Posted by on Jul 3 2017. Filed under Economic issues, Feature, Recent articles by SPC members. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply