Client Update: Competition in electricity and financial services markets – common issues, common solutions?
30 August 2018
In brief: The level of competition in both the electricity and financial services sectors has been closely scrutinised by the Australian Competition and Consumer Commission and the Productivity Commission. While there are fundamental differences in market structures in both sectors, the respective commissions have identified common concerns and made common proposals to address those concerns.
Common issues, common solutions
We set out a comparison of the key themes arising from the Productivity Commission's (PC) report into Competition in the Australian Financial System and the Australian Competition and Consumer Commission's (ACCC) report into Retail Electricity Pricing.
PC/ACCC CONCERNS |
PROPOSED SOLUTIONS |
|
---|---|---|
Unintended market effects of past policy decisions |
Past policy decisions have caused unintended market effects to the detriment of consumers:
|
Role of the ACCC In addition to the ACCC's existing role as competition authority, solutions involving the ACCC that have been put forward include:
Both the ACCC and PC advocate for the Consumer Data Right as a way to improve competitive outcomes by:
Both reports emphasise the need to reduce retail prices and improve the ways in which offers are marketed. It is suggested that this could be achieved by:
Neither the ACCC nor the PC recommend proactive changes to market structure, such as forced divestitures, and instead focus on driving behavioural change through incentives and governance. However, both reports propose monitoring market structure:
|
High degree of concentration |
There is a high degree of concentration in certain market segments:
|
|
Illusion of choice |
The proliferation of offers gives the illusion of competition:
|
|
Discount marketing |
Discount claims made in marketing materials are of limited utility:
|
|
Customer inertia |
Consumers rarely engage with the market or switch suppliers:
|
|
Loyalty tax |
Consumer inertia has enabled suppliers to charge loyal customers higher prices:
|
For further information, please contact:
- Jacqueline DownesPartner, Practice Leader, Competition, Consumer & Regulatory,
Sydney
Ph: +61 2 9230 4850
Jacqueline.Downes@allens.com.au - Fiona CrosbieChairman,
Sydney
Ph: +61 2 9230 4383
Fiona.Crosbie@allens.com.au - Carolyn OddiePartner,
Sydney
Ph: +61 2 9230 4203
Carolyn.Oddie@allens.com.au - Ted HillPartner,
Melbourne
Ph: +61 3 9613 8588
Ted.Hill@allens.com.au - Kon StelliosPartner,
Sydney
Ph: +61 2 9230 4897
Kon.Stellios@allens.com.au - John HedgePartner,
Brisbane
Ph: +61 7 3334 3171
John.Hedge@allens.com.au - Rosannah HealyPartner,
Melbourne
Ph: +61 3 9613 8421
Rosannah.Healy@allens.com.au - Robert WalkerPartner,
Melbourne
Ph: +61 3 9613 8879
Robert.Walker@allens.com.au - Anna CollyerPartner & Head of Innovation,
Melbourne
Ph: +61 3 9613 8650
Anna.Collyer@allens.com.au - Kate AxupPartner,
Melbourne
Ph: +61 3 9613 8449
Kate.Axup@allens.com.au - Andrew MansourPartner, Sector Leader, Power & Utilities,
Sydney
Ph: +61 2 9230 4552
Andrew.Mansour@allens.com.au - John GreigPartner,
Brisbane
Ph: +61 7 3334 3358
John.Greig@allens.com.au - Paul KennyPartner, Sector Leader, Government,
Melbourne
Ph: +61 3 9613 8860
Paul.Kenny@allens.com.au - Jodi ReinmuthPartner,
Perth
Ph: +61 8 9488 3702
Jodi.Reinmuth@allens.com.au
You can leave a comment on this publication below. Please note, we are not able to provide specific legal advice in this forum. If you would like advice relating to this topic, contact one of the authors directly. Please do not include links to websites or your comment may not be published.