With the reputation of this independent Australian Government authority resting on his shoulders, chairman of the Australian Competition and Consumer Commission, Rod Sims, takes us through elements of his work and explains why it’s vital to keep a strong amount of scepticism in mind.
Despite the magnitude of the proposed merger of Fairfax and Nine sending tremors through the media landscape, Sims revealed the proposal hasn't risen to the top of the ACCC’s to–do list. In addition to the Nine–Fairfax deal, the ACCC has also been busy with Ooh!Media's acquisition of Adshel, JCDecaux’s proposed acquisition of APN Outdoor, and the Digital Platforms Inquiry.
While Sims, now in his eighth year as chairperson, has the final say on all matters, the Commission has a small team that includes two deputy chairs and three commissioners. With such major media and advertising industry–changing decisions at hand, while tasked to enforce the Competition and Consumer Act 2010, it’s easy to see why Sims made a strong appearance on this year’s AdNews Power 50.
What’s the make–up of the ACCC?
The ACCC covers a very broad area and we have a very small number of people allocated to a large number of things. Ultimately, we’re a pretty small group that works in a committee structure.
Are you making judgements every day?
We have a decision–making meeting every day and people will either be on our communications committee, for example, which is where the economic regulator of telecommunications is — or it could be infrastructure, it could be mergers, it could be enforcements, it could be from clients. There’s a whole range of issues we cover.
Who covers the mergers and are you present at every meeting?
Our decision–making on mergers is governed by the mergers committee which meets once a week and discusses the main merger assessments and where they're up to. There are four commissioners on that group. I am in every meeting.
And the process for the government inquiries?
Yes, in addition we've got the enquiries we've been asked to do by government. We've just finished the retail electricity inquiry, but we've still got four going. One of those four is the Digital Platforms Inquiry. We set up project boards for those and they meet every fortnight. So, every week in addition to all those decision–making committees, we've got at least a couple of projects.
What happens when news of a merger arrives?
When a new merger comes through, and if you think about the Nine–Fairfax merger as an example, we'll have a look at it and we'll write to all the people we think would have an interesting view, to get their views.
We'll put something out for public comment where we'll talk about what the issues are and really, in a very open way, just pose questions to which we don't know the answer. They're not meant to be linear questions, but they are meant to focus the debate on the way we look at things.
And so, those responses will come in. The committee will consider those, think what it wants to do about them and think what the next step is. This might be more information requests to the merger parties, it might be more evidence gathering in different ways, and the process just goes on from there. It is a very intensive evidence–based process.
Timeframe–wise, how long does each stage take?
Stage one is where we're forming a view about whether we have competition concerns or not. If we don't, then that's the end of it and we write to the parties and say we will not be opposing the merger.
If we do, we put out a statement of issues where we're clearly defining what our issues are and getting more feedback on that.
The stage one process can be anywhere between eight and 12 weeks, but the complex ones we set down 12 weeks, and that's what we've done for Nine and Fairfax.
We have our own timeframes. We get about 300 merger applications each year. Ninety percent of them we determine a view within two to four weeks. And the other 10% goes through the process that Nine–Fairfax will go through.
And at the end of the 12 weeks?
Then we'll either say we're not going to oppose the merger or we'll put out a statement of issues which will illustrate clearly our concerns and, then once we do that, it can often be eight to 12 weeks for stage two.
It is a very evidence–based approach and the reason why it’s evidence–based is we have no administrative power to wipe a merger. We can't say, "you can't merge". Our power comes from the Act, which says, "Don't merge if it will have the likely effect of substantially lessening competition”. If we form the view that it does, we have to go to court to stop the merger happening.
Having said all that, as a final comment, our timeframes are much faster than the United States or Europe. That eight to 12 weeks and then the eight to 10 weeks is well–short of what you'd find in the United States or Europe. They can take up to a year.
Does it often get that far, legally?
Now, quite often if we say we'll go to court, the merger parties walk away. But, we have to be ready to go to court. So, it's a very evidence–based approach and it does take time to get to that point.
As was the case with Ooh!Media and APN Outdoor Group which dropped plans to merge after conceding the deal would not get past the ACCC?
Yes, that's right.
There’s been a lot of media attention around the Nine–Fairfax deal, does this impact processing times?
Obviously the Nine–Fairfax matter dominates the media. We understand that but, from our point of view, it's just another matter as are the other two advertising mergers.
We've got a whole lot of mergers. We've got very big enforcement cases in banking and healthcare and a range of other sectors. So, it's just one of the many things we do. It doesn't occupy any more of a special place. There’s many big fish to fry.
How does it weigh on you, having that level of power and authority to make these really important decisions?
It doesn't weigh. That would indicate my head is bowed and I'm a servant. As much as people might like to think that I am, I'm not. It really just means you've got to take each matter seriously, give it your best shot, and weigh things up.
At the end of the day, often they're judgement calls and you've got to live with the knowledge that occasionally - hopefully very rarely - you get the judgements wrong. But, if you give it your best shot, you apply yourself diligently and hopefully you're in the job you're in because people think you get most of the judgements right. And so, you just go forward on that basis.
How does that final decision come about and as chairperson can you overrule the rest of the commissioners?
In a practical sense we work in a very collegiate way so that we try and do it through consensus. But, there are times when we have different views, and if the majority is in favour - there are six commissioners - if the majority is in favour of one approach, then that's where we go. I guess in a practical sense, if I express an extremely strong view, I could get some flexibility from my colleagues, but I don't do that often. If it's three–all, then I get a casting vote.
Is three–all in voting rare?
Yes, it is. It's probably a once a year thing.
How is the ACCC shaping a better economy?
I'm a passionate believe in a market economy - or if you call it a capitalist economy. I don't particularly mind which term you use, but it's one that's driven largely by the private sector. However, it only works properly and only benefits consumers if companies are strongly adhering to the provisions of our Act. So, by enforcing those, I just think we have a better economy.
We have consumers much less misled than otherwise. We have much more competition. We have much less cartel behaviour, and we have better informed markets on things like electricity. We've just done one on beef cattle. Hopefully we'll have a better informed market on digital platforms.
So, all that is satisfying because it makes a contribution to the Australian economy working in the interests of consumers or in the interests of the people of Australia. That's why we're here and hopefully we make a difference.
What’s the biggest challenge of your role?
It's getting the big calls right. I'm often more distracted as I walk down the street, so if I know you and walk past you, that's probably because I'm thinking about the big decision we've got to make - which way do we go? And, at the end of the day, pretty well all the judgements we make, I get to a point in my mind where I'm comfortable that it's absolutely the right decision.
There have been some where it was a difficult call, but mostly if you spend enough time on them and ask the right questions, you'll get it right.
Have you always got it right?
Now, there's some decisions - one or two decisions since I've been here - where we absolutely gave it our best shot. Whether we got it right or not, I'm still not sure, but there's only one or two of those. Most of them, I'm sure we got it right. I mean, we may not have. I'm just saying I'm sure we got it right. Other people may have a different view.
You don't take big decisions in one hit, uninformed or unprepared to take them. You have to put the work in.
In following the media, do you anticipate more of these big mergers in the media and advertising sector moving forward?
On the one hand, yes. On the other hand - just to slightly qualify that - obviously we'll look at the Nine–Fairfax bid in the context of what other things could happen, but each decision is its own decision.
As in you’d be concerned about setting the bar for other deals to come?
Yes, that's 100% right, but I'll add to it by saying it wouldn't be the case that, "Okay, this one on its merits I should approve, but I better not because it will open the door to another one". That won't happen.
How do you feel about being referred to as one of the most powerful people across our industry?
I get described in all sorts of ways - some of them flattering and some of them not. I try not to get too taken with that. Sometimes they're very complimentary, sometimes they're talking about power as you say, sometimes they're completely damning.
In the case of our electricity report, there have been people questioning our motives and a whole range of things. I think you just get on and do your job. I know that sounds trying, but you just can't really be too distracted by what people say about you.
One of the advantages for doing this job when you've been around for a while is you don't get distracted.
What are the quality of submissions like and are there big differences between sectors?
We are extraordinarily sceptical people. We get told things - and I’m talking generally now, not about advertising - we get told things by merger parties that simply aren't true. Absolutely no doubt about that. Whether they're being mischievous or they're so driven to do the deal that they can't themselves distinguish between fact and fiction, I don't know.
So you must read everything with extreme caution?
Yes. We get these independent reports and, strangely, we haven't had an independent report from a merger party that didn't support what the merger party wanted that report to say. I'm waiting for that moment, but it hasn't happened yet.
How best do you get to the truth?
We use their information as gathering powers in mergers. So, we have the ability to issue what are called 155 Notices and when you receive one of these notices, it's illegal not to comply and it's illegal not to fully comply. That's how we get our information we know we can rely on.
I’d also add that getting information before the merger was contemplated is much more important than information post–merger contemplation. Because once they start thinking about the merger, they create a lot of facts that support the merger.
So, we are in the scepticism business.
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