GREG RAY: Big two face new test

GEOBLOCKING is the system used by multinational tech corporations to force Australians to pay higher prices for products than those paid by Americans and Europeans.
Nanjing Night Net

You strike it when you try to buy something on-line, only to learn that the really good price advertised isn’t available to Aussies.

It’s a bit like the ‘‘Newcastle tax’’ imposed by petrol retailers on our city’s motorists. There is no good reason we should pay more, but because the suppliers have the market sewn up they can charge us whatever they like.

For years Aussies have been fleeced by the geoblockers, who use software to detect what country visitors to their websites live in, before smashing some of them with higher prices or excluding some of them altogether.

Now a federal government competition review has decided that enough is enough and is proposing an education campaign to teach people how to get around the geoblocking software.

It’s a bold idea, and just part of a whole heap of reforms proposed in the newly released Harper Review.

The geoblockers aren’t the only targets: the review has the big supermarket duopoly in its sights too.

The review has backed plans by the Australian Competition and Consumer Commission to try to stop the big retailers from abusing their market power to the detriment of small businesses.

Not surprisingly, the big two are squealing.

If you believe what their critics have been saying for years, the dominant retailers have made a fair bit of their money by cannibalising many smaller Australian businesses.

If that’s true, any new law that stops them crushing other businesses could interfere with the part of their business model that involves pinching other people’s margins.

We’ve all heard the criticisms and the moaning from small businesses that complain about horrendous demands by the big retailers for ever-lower wholesale prices, for extra levies to support supermarket advertising and still more payments to get your products on the best shelves.

That’s if you can get your business on the preferred supplier list at all, and if you can survive the creation by the big retailers of their own generic brands, often packed and labelled just like yours and specially designed, you might think, to grind you out of business.

And of course we have heard similar stories from farmers, some of whom have complained of being forced to plough their crops into the ground because they couldn’t make the supermarkets happy enough.

From the point of view of the big retailers and the people who guide their decisions, they aren’t doing anything wrong by targeting the margins of their suppliers and by fighting fiercely to keep competing retailers off their turf. Their sole obligation is to maximise returns to their shareholders, and the way the system stands they would be criticised for failing to scoop up any stray cents that might be managing to fall into somebody else’s pockets, especially if it was mere kindness or a sense of fair play that held them back.

So, having been helplessly listening to the victims of retail duopoly power over a span of years, the review is proposing a new system that might actually offer some protection to complainants.

The idea is to replace the present hard-to-use law against the misuse of market power with a new ‘‘effects test’’ that will provide opportunities to punish big companies that deliberately adopt measures that harm competition.

Perhaps as sweeteners, the review is also proposing the deregulation of retail trading hours and letting supermarkets compete with the highly protected pharmacy industry. Oh, and making it easier for supermarkets around the country to sell liquor from their shelves.

Having cheerily accepted those concessions, the supermarket duopolists are squealing blue murder at the prospect of protection for smaller businesses.

Consumers will suffer, the big two have said, with straight faces, apparently.

My guess is that, if the proposal survives the furious lobbying the big two will probably mount against it, consumers will be better off in the long run. It will probably protect a lot of jobs too, I’d suggest.

Now let’s see if it survives.