Last month, the Australian government took firm steps to explore whether Australia has an issue with monopolies in technology. It’s likely that they will find that the nation does, with uncompetitive environments stymying innovation and slowing international competition.
In August, Federal Treasurer Jim Chalmers and Assistant Minister for Competition Andrew Leigh announced a two-year review by the new Treasury Competition Taskforce. As an indication that the Australian government considers this to be a pressing issue, the taskforce is set to provide “continuous” advice to the government, rather than a final report of recommendations at the end of the two years.
“We give ourselves the best chance of making our economy more productive and more dynamic if we make it more competitive at the same time, and that’s what today is all about,” Chalmers said at the time.
Anticompetitiveness is an ongoing concern in Australia
Chalmers is an alumnus of the Australian National University. In 2020, another economist from the same university, Adam Triggs, warned that the COVID-19 pandemic was going to make the existing concern with noncompetitive markets, which was already substantial, worse.
“When we looked across the economy, and collected data on every single industry, we found that more than half of Australia’s markets are concentrated,” said Triggs. “That means the four biggest players control at least a third of the market.”
In several areas of critical importance to Australian lifestyles, including banking, supermarkets, internet service providers and health insurance, the concentration levels are as high as 80% in some areas.
With limited or no competition, consumers have no choice but to pay elevated prices for these services, and with the cost of living spiraling, news of mega-profits across many of these sectors highlight the negative impact they have on Australian lifestyles and the poor customer experience they deliver.
SEE: Despite interest in AI to improve customer experience, Australians seem to prefer human-led interactions.
And of particular relevance to the tech industry, monopolies make it more difficult for startups and entrepreneurship to thrive. Indeed, it can create barriers to getting started. Australia already struggles with elevating entrepreneurs, and the lack of competition in many areas of technology — particularly from large, global players — hinders the ability for Australia to develop a vibrant tech sector of its own.
Large, global companies push out Australia-owned businesses
Apple and Google are both currently under investigation by the ACCC for the duopoly they effectively have over app payments on mobile devices. Currently, neither allows for third-party platforms to process payments for applications on Apple and Android devices, meaning there’s little avenue for an Australian-owned payments platform in this critical area of both work productivity and entertainment.
Meanwhile, highlighting the fact that social media also acts as an information monopoly, in 2021 Facebook briefly removed the ability for Australian media organizations to share stories and news on the platform. This had a substantial impact on the local media and demonstrated how little sovereignty Australians have over domestic information thanks to the large, global monopolies.
A need for total reform to prevent monopolies
In addition to the need for better checks on international tech platforms, Australia needs to look at its merger laws to prevent monopolies from forming, according to former ACCC chair Rod Sims in his final presentation in the role.
Sims noted that Australia lacks a formal merger approval system, meaning organizations have a much lower bar to mergers and acquisitions here than almost any other Western nation.
“The ACCC must prove, if a matter goes to court, that future negative consequences will occur, which can only be speculated on, against the so-called real-world evidence of the necessarily self-interested merger parties about what will happen in the future,” Sims said. “Our merger laws … are not up to the task.”
A good example of a time where having a more robust approach to M & A activity would have been welcome is the proposed acquisition of Activision Blizzard by Microsoft. Where several nations, including the U.K., went through a due diligence process that nearly resulted in the acquisition being denied, the ACCC has had little recourse to act.
This is despite the deal having a substantial impact on the domestic development scene. Activision has a development studio in Melbourne — one of the largest and most well-funded games companies in Australia. And Australian game development already struggles for exactly the reasons listed above: a lack of resources to compete with the global players and limited capacity to grow domestically.
What, if anything, the Australian government can do to address the issue Australia has with monopolies, across all sectors including internet services and IT, remains to be seen. Australia has a substantial history in being able to innovate in areas where monopolistic control hasn’t been established, as the likes of Atlassian and AfterPay proved in canvassing new tech fields at the time.
However in other critical areas, Australia’s ability to have domestic solutions directly support the population are undermined by monopolies, and that’s not a good thing for Australians and local tech pros.