Report finds price-gouging is rife in Australia

Prices move like rockets and feathers – they’re quick to rise and slow to fall – which is why Australians are paying so much for even bare necessities, a report into price-gouging has found.

Feb 08, 2024, updated Feb 08, 2024
Professor Allan Fels at the National Press Club in Canberra on Wednesday. Photo: Mick Tsikas/AAP

Professor Allan Fels at the National Press Club in Canberra on Wednesday. Photo: Mick Tsikas/AAP

Supermarkets, electricity companies, childcare centres, airlines, pharmaceuticals, electric vehicle makers and banks are among the many sectors that overcharge consumers by leveraging a lack of competition and implementing a plethora of exploitative practices.

That’s the verdict of leading economist and ex-chair of the Australian Competition and Consumer Commission Professor Allan Fels, who produced the 80-page report into price gouging and unfair pricing for the ACTU.

“When costs rise, business prices rise fast like a rocket; when costs for business prices fall, (they fall) slowly to the ground like a feather,” he told the National Press Club on Wednesday.

“It’s very profitable to delay price falls.

“(And) now as inflation starts to fall, I’m concerned there may be a rockets and feathers effect.”

Prof Fels said supermarkets and fuel companies used supply chain disruptions caused by the pandemic, war or natural disasters to disguise price fluctuations.

He also had “considerable reservations” about childcare prices, saying both the early childhood education and care sectors were “riddled with overcharging”, principally because of the market’s design and the difficulty people faced switching services.

Many of these issues were exacerbated in remote areas where Australians were paying two to three times more for everyday items.

At the same time, companies were making record profits, which had added significantly to inflation.

Prof Fels took aim at Qantas, an airline that has historically held a large market share.

“We’ve had a dominant Qantas and then a much smaller competitor, Virgin, and a few hangers-on – which make a difference,” he said.

“As I experienced in the ’90s, if you have a third airline, it brings prices down a lot … (so) if we do have new entrants, we should give them a chance.”

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The report recommends introducing divestiture laws that would allow big businesses to be broken up if they are found to have breached competition law and if a court determines it is the best remedy.

Asked if this should be applied to Qantas, Prof Fels said “there is a case for it” and noted the airline had already skirted legal barriers in the past when it was granted an exemption from merger laws in the 1980s.

But all eyes are on Qantas after the carrier endured a gauntlet of PR disasters including the expedited exit of its former CEO, court losses and allegations of false, misleading and deceptive conduct by the consumer watchdog.

“They’ve invoked the ‘national champion’ argument and got a lot of benefits and were paid a lot for it,” Prof Fels said

“(But now) have squandered some of their good name as a national champion and it’s made us less hesitant to impose more competition.”

Qantas hit back at the assertion the Australian aviation market was not competitive

“There are now four large jet operators, with Regional Express expanding onto mainline routes and the entry of Bonza,” the airline said in response to Prof Fels’ report.

Prof Fels had several suggestions to prevent excessive price increases, including setting up a national competition and prices commission.

The man who led the ACCC from 1995 to 2003 also wants legal powers to expose firms charging excessive prices reinstated after they were used by the coalition in 2000 when the GST was introduced.

Governments should also require bank accounts to be portable, the same way they made mobile phone businesses allow customers to switch suppliers and retain their numbers.

Businesses often say they must increase their margins in anticipation of costs later on, but Prof Fels was sceptical of such claims, calling them “PR lines fed to the public” to excuse price hikes.

Greens senator Nick McKim said the report confirmed what Australians had long suspected and showed the nation needed to consider corporate super-profits tax.


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