Price gouging and the possible effects of Corporate Behaviour and Government policy and law

Money
21

I am not saying anyone here is pushing a barrow by cherry picking data. I am speaking generally about handling data and formatting graphs not just this example.

Aside from which data to include here are other issues that determine usefulness. One that seems useful is what a graph looks like but looks can be deceiving. Saying it looks exponential or linear is not that useful as they both look the same in some situations. With a bit of noise thrown in the flatter part of the exponential curve is indistinguishable from linear. The apparent slope and whether the change in slope is visible to the eye or not depends on several things including the scale. So graphs can be made to include what looks like only the straight bit or the bent bit by cherry picking data and the slope can be exaggerated or disguised by altering the scale. Such choices may be because that is all the data there is or other reasons. Let us not be too distracted by labelling what things look like as it might be a red herring.

22

Well they could take it back 10,000 years and show the Profits over Low Growth Wages under Slavery.

23

The discussion on what is contributing to the increase in inflation in Australia.

The challenge as always?
Whether the pain of inflation should be born by consumers loosing purchasing power through depression of wages and conditions,
Or
Businesses should give up profitability to ensure products and services remain affordable ensuring there is less of a downturn in sales.

On the trend in corporate profitability.
I’ll be looking for a similar magnitude increase and trend in total corporate tax take as reported by the ATO.

It’s interesting to note government assistance supported enterprise and the average Aussie through Covid, at great expense. The latest economic pain needs to be shared, and not a burden on just one. Although taking profit at the expense of another is a time honoured tradition.

24

Yes and there are more ways to catch a rabbit than buttering it with parsnips.

25

I’ve found freshly harvested whole dandelion works a treat with the local hares. Jugging optional. :wink:

Might need a different lure and larger pot for feral corporates. :joy:

26

Buy shares in Australian companies and share in the profits then if you have the guts.

27

A fine statement targeting those with the risk capital to bet with. How about the others?

29

Two different takes on corporates and how they are impacting inflation.

The first highlights that the ABS when it determines the CPI index for food price increases includes take away food in the index.

It’s evident in Brisbane VBD that post Covid many of the lunchtime food venues have closed with numerous vacant sites. Even the lunchtime crowds are fewer and the venues that remain appear to be closing earlier following the lesser rush. We could even find seats and table for 2 in the peak noon to 1pm time slot.

The RBA has a more worrying view on why inflation has not slowed in response to higher interest rates.

Businesses are putting the profit margin before investing in expansion/growth. Curiosity is to ask, what targets the CEO’s and directors renumeration KPI’s are now aligned.

30

Today the ACTU funded inquiry into price gouging has been released. Professor Fels (a former ACCC Chairman) led the inquiry. In January 2024, Professor Fels wrote to the Federal Treasurer to request that the ACCC conduct an inquiry into the price gouging allegations. This request may have added fuel to the Government asking the ACCC to conduct their inquiry that is now occurring.

In the ACTU report at Table 1 is the following breakdown of cost increases for a number of areas and products

Screenshot 2024-02-07 121810

The ACTU report can be found at the following address

Recommendations from the ACTU inquiry

"SUMMARY OF RECOMMENDATIONS

RECOMMENDATIONS RELATING TO PRICES

Recommendation 1.1: The Australian Government should use its power to require the ACCC to conduct
more price and market investigations.
Recommendation 1.2: The Australian Government should have power to require the ACCC to undertake
market studies as well as price studies.
Recommendation 1.3: The ACCC should have power of its own to initiate price and market studies.
Recommendation 1.4: The GST pricing legislation of 2000-2003 provisions regarding the naming of
businesses and industries that overcharge should be reinstated.
Recommendation 1.5: Section 46 of the Australian Competition and Consumer Act should be amended to
make it an offence to charge excessive prices in terms similar to the European Union provisions.
Recommendation 1.6: The Government could establish a Commission on Competition and Prices to review
Government and other restrictions on competition and high prices caused by a lack of competition.

RECOMMENDATIONS RELATING TO MERGERS AND DIVESTITURE

Recommendation 2.1: The Australian government should establish a pre-merger notification system along
similar lines to most OECD countries.
Recommendation 2.2: That in merger matters the onus should be on applicants to satisfy the ACCC and on
appeal the Australian Competition Tribunal that the merger is not anticompetitive and is in the public interest.
Recommendation 2.3: The merger test should be augmented to continue to prohibit mergers which
substantially lessen competition but there should be an additional provision prohibiting mergers that give rise
to substantial market power (a more structural and immediate test) and/or which entrench, create, or add to
market power.
Recommendation 2.4: A divestiture power should be introduced into the competition law.

RECOMMENDATIONS RELATING TO COMPETITION

Recommendation 3.1: The Australian Consumer and Competition Act needs to be shortened.
Recommendation 3.2: If the secondary boycott law is retained in the Competition Law there should be a
provision that secondary boycotts are only unlawful if they substantially lessen competition.
Recommendation 3.3: Australia should ban non-compete clauses in employment contracts affecting both
employees during and post-employment.
Recommendation 3.4: The current National Competition Review should examine policies and laws that
prevent Governments from needlessly restricting competition.
Recommendation 3.5: The ACCC receives further funding for strong enforcement of the cartel law. It should
also apply the criminal sanctions available for unlawful price fixing and other cartel agreements.
Recommendation 3.5: Treasury should conduct a public consultation to determine the need for improvement
in the drafting of the criminal elements of the cartel law in view of recent difficulties in the bank cartel case.

RECOMMENDATIONS RELATING TO SPECIFIC INDUSTRIES

AVIATION

Recommendation 4.1: Airport prices should be regulated in the same way as other utility prices.
Recommendation 4.2: The Australian Government should use the opportunity of its current aviation review
to remove international and domestic restrictions on competition. Any remaining restrictions should be
reviewed by the Treasury led Competition Policy Review.

EARLY CHILDHOOD EDUCATION AND CARE

Recommendation 4.3: The ACCC should be empowered to investigate pricing decisions made by for-profit
providers to ensure gaming is not occurring.
Recommendation 4.4: Prices in relation to disability care and support and aged care should be kept under
continuous review by the ACCC.

BANKING AND FINANCIAL SERVICES

Recommendation 4.5: The ACCC should be provided with a standing Ministerial Direction to monitor prices
and competitiveness in the retail banking sector.
Recommendation 4.6: The ACCC should be issued with a Ministerial Direction to undertake a further inquiry
into pricing practices in foreign exchange markets to develop mechanisms for a fairer transmission of cost
information to consumers as well as to provide specific assistance to prevent exploitation of those with low
English language proficiency.

ENERGY

Recommendation 4.7: There should be a review of the design and operation of the wholesale market as
to whether it requires refinements or a fundamental change in the form of a ‘capacity market’ as in North
America and in Western Australia. This review should be chaired by an independent expert with input and
resources from the AER, AEMO, and ASIC. The level of electricity generation concentration should be kept
under review, and there should be close scrutiny of the impact on competition, positive or negative, that could
occur in the transition to a re-designed energy market.
Recommendation 4.8: ASIC should be provided with a Ministerial Direction to investigate the energy
derivatives market to ensure that participants in both the National Electricity Market and the markets for
derivatives are not misusing their position in either to gain an unfair advantage or influence the price of energy
to meet derivatives conditions.
Recommendation 4.9: Network prices should continue to require close regulatory scrutiny with the long-term
interests of consumers put first.
Recommendation 4.10: There should be a regulatory review of the high degree of price discrimination in the
retail electricity and gas markets.
Recommendation 4.11: State Governments and regulators should continue to introduce initiatives to
improve retail outcomes brought about by current market imperfections.

FOOD AND GROCERIES

Recommendation 4.12: It is recommended that there should be a comprehensive ACCC inquiry into
competition and prices in the retail food and grocery industry.
Recommendation 4.13: The Food and Grocery Code Review should be fully mandatory.
Recommendation 4.14: The Food and Grocery Code Review should investigate creating a price register for
farmers to assist them in understanding market prices across primary industries.

SHIPPING COSTS IMPACTING FNQ AND NT

Recommendation 4.15: The ACCC should once again have an ability to challenge and overturn
unreasonable prices charged by Sea Swift to ensure the service is not exploiting its market position.

ELECTRIC VEHICLES

Recommendation 4.16: Regulations in the Road Vehicle Safety Act 2018 which block parallel imports of
electric vehicles be immediately lifted.
Recommendation 4.17: Regulations under the Road Vehicle Safety Act 2018 which block parallel imports of
cars into Australia should also be repealed in coming months.

OUT OF POCKET CHARGES BY MEDICAL SPECIALISTS

Recommendation 4.18: The National Competition policy review should conduct or commission a
contemporary study of specialist fees backed by an analysis of restrictions on competition and of the role of
information imbalances between patients and specialists.
Recommendation 4.19: The ACCC or the Productivity Commission or another appropriate body should,
separately, review specialist fees and the policy steps that could be taken to make them more transparent or
to reduce them.

PHARMACEUTICALS

Recommendation 4.20: A mandatory reporting scheme should be implemented in relation to originator
and generic agreements to improve the detectability of pay for delay agreements similar to the reporting
arrangements in the United States."

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31

And the Fels report, into unfair pricing and price ‘gouging’, found


Drum roll


Nothing. Just businesses doing what they do during times of inflation. But they should be monitored more. The Gov should give the ACCC more power, and presumably money, so they can investigate more, and find as they always do


Another drum roll


Nothing.

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Your reading of the report is the opposite of mine. Some businesses and sectors were named in the report. How consumers were paying a differential on many things was also exposed e.g. gas and electricity costs. There was also a request to look at in regards to “Section 46 of the Australian Competition and Consumer Act [such that it] should be amended to make it an offence to charge excessive prices in terms similar to the European Union provisions.”. More than the “nothing” you have seen in it in my opinion, so I will disagree with your assessment and you certainly have the right to disagree with mine.

Two tables from the report that may interest consumers (from AGL 2023 Annual report) that shows the extra difference that consumers pay on their energy purchases compared to big business.

Screenshot 2024-02-07 130305

Screenshot 2024-02-07 130951

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33

I haven’t gone back to check the context of the tables, but, the main difference for electricity lies with network charges. These aren’t set by AGL (viz. nothing to do with AGL), but through the Australian Energy Regulator or network operator (particularly for customer connections).

I question some recommendations for the Energy market as they are pointed at retailers like AGL.

It is disappointing that the report comes with some preconceived assumptions. Reading the report, one could think that price inflation is an Australian problem/phenomenon. There are however throw away comments such as:

The upsurge in global inflation following the COVID-19 pandemic and its aftershocks has resulted in significant economic and social disruption in Australia, like other countries.

which allude, there may be ‘cost of living’ problems elsewhere.

While the report focuses on how Australia’s approach is different to other countries, looking at the success of recommended measures should have been undertaken. And example being analysis of whether Australia’s food inflation is higher than comparable countries, which have greater competition or regulation. A simple analysis would have been useful to support the recommendations. I suggest that a simple analysis wasn’t undertaken as it doesn’t support arguments for Australia to adopt greater regulation or bureaucracy.

Food inflation has been a world wide phenomenon since 2020. Australia’s inflation isn’t dissimilar to peer countries, and not as bad as some others. Listening to the BBC the other night, there was discussion that food prices in Spain increased by about 30% in the past year or so, substantially higher than Australia and where EU regulations exist. Why wasn’t information like this analysed and reported?

34

So there is no significant market concentration and lack of competition anywhere in Oz. And there is no drip pricing or overly complex price structures or any other pricing practice that substantially disadvantages the buyer either. All our markets are working efficiently and require no interference at this time. That is very reassuring Greg but I am not sure many of the economists of this country would agree with you.

If that is not what you mean by “nothing” then what did you mean?

I noticed several sections in the report that refer to behaviour going back a long time before the current burst of inflation, such as the energy market.

Before we go on could you say if you believe in free market capitalism without government fetter? The answer will help simplify where we go.

35

Nope, for electricity some of it does but the revenue per MWh is far higher domestic Vs big business (78.45% difference). Margins are much higher domestic Vs big business per MWh.

For Gas, revenue is over 100% higher for domestic Vs big business in terms of per $/Gj. Wholesale costs for both big business and domestic are exactly the same, and the margin is similarly skewed against domestic purchases Vs big business as they are for electricity.

The Bibliography has many references to overseas experiences. While the report may not be replete with examples, the study obviously was undertaken and as such referenced.
.

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36

The revenue is the total of the network costs, other costs, wholesale costs and margin.

In the table, the main difference in the MWh is network charges.

The difference in network costs has nothing to do with AGL. As indicated above, this is set by the:

I intentionally didn’t comment on gas as I am not familiar with the industry nor it’s pricing structures. One would need to be familiar with such to comment on the noted differences.

I noted the reference list - an old habit being a scientist.

But, as indicated above, greater scrutiny, monitoring and regulation didn’t change the outcome in many other countries. I used the example that Australia’s food inflation isn’t dissimilar to other peer countries and in some cases, better as indicated by Spain which I am aware. I am sure that there will be examples of food inflation less than Australia and more than Australia - I don’t have the time to look at every countries economic data, but, this should have been important in the report to determine where difference lie and possibly find out why difference occur.

Why wasn’t this mentioned in the report? I can’t comment why, but one could draw conclusions to why this isn’t done. I drew one such conclusion in my earlier post. Another could be that this was excluded from the terms of reference/brief for the report.

A thorough assessment would have demonstrated why Australia has ‘problems’ compared to its peers, what measures other countries have implemented if there was a difference, and where they are differences, determined measures adopted elsewhere and their likely success to change the Australian economic environment.

It is the disappointing that the report didn’t provide such information as I hoped.

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Thus the margin for domestic electricity after all costs per MWh was far more than for the same MWh for business. Same for gas, thus domestic energy costs for a consumer are far higher than a business per MWh
 Not network costs, these do not make up the big difference, it is the price that consumers pay that makes the margin so big. I agree that network costs make the bill bigger but the margin is still 78% greater for domestic supply.

38

I totally agree with your points. There is a lack of real competition. Some markets run wild and need to be reigned in. Governments themselves are guilty of monopolistic price increases. Look at tarrifs, excises, fees and fines jacked up whenever they want.

But my response is confined to the question of have supermarkets been found to have been engaging in ‘price gouging’ and I see nothing in the Fels report that answers that as a definitive yes. Confined to that because that is the subject of this topic.

The supermarket’s own financial statements show they are not making extrordinary profits.

As for my position on unfettered capitalism. When it comes to essential social services, health, power, water, education, etc, I am a card-carrying socialist.

39

I placed the ACTU report in the Price Gouging topic as the heading was quite a broad one, Price Gouging
no specific business was informed in that topic heading. That heading of the topic has been amended to make it clear it is about supermarkets. Thank you for noting the issue you have with the subject of the topic. As such I have moved my post and the subsequent posts to another topic which has the topic heading amended to cover the subject of the report more completely.

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40

In that case, I retract my comment that nothing was found, to it is scathing on business practices and pricing over many areas. For many years.

But Fels, as once chair of the ACCC, was forever complaining about the lack of that organization’s ability to seriously investigate prices and unfair practices and monopolistic behaviour. So he is naturally coming from a direction dear to his heart.

41

Regarding price gouging by supermarkets, we have lots of showboating advising it is happening but little substance about the extent of the issue.

My view is that gouging at the retail level was eliminated, it would not significantly reduce my weekly spend. What percentage savings do others believe they would make if gouging was eliminated at the supermarket level?