It was a dry, warm late summer’s day in Sydney and the bankers, lawyers and corporate executives were crowded into the Whiteley Ballroom at the Amora Hotel in the CBD for their annual business pilgrimage.
The besuited crew attending the perfectly functional, but fantastically dull, business hotel were there to hear competition watchdog boss Rod Sims’ yearly speech to the Centre for Economic Development in Australia.
Sims, the "golden boy" of Australian regulation was about to drop a bomb that would send shockwaves through a corporate regulator that was still bruised and battered from the findings of the Hayne banking royal commission released only three weeks earlier.
The ACCC chairman has made it clear he wants more work in the financial services area.
The ACCC chairman has made it clear he wants more work in the financial services area.
It was a moment that those who read the tea leaves of the regulatory landscape saw as a clear statement that Sims was intent on expanding his organisation's remit into territory that formerly belonged to the Australian Securities and Investments Commission (ASIC) - a move that could increase the rivalry between the corporate watchdog and the competition regulator.
Things started innocuously enough. Sims was taking the audience through the Australian Competition and Consumer Commission’s regulatory focus for the upcoming year.
Near the top of his list was financial services, an area where the ACCC has been expanding its remit. Sims was doing a skit about his financial services team hitting the ground running after receiving an additional $35.6 million in funding in the pre-Christmas budget update for cartel investigations, including into foreign exchange and banking.
It was not the ACCC's only financial services work. In December, the regulator completed a major inquiry into mortgage pricing which found the banks were engaging in synchronised pricing behaviour.
It was now moving onto the foreign exchange fees charged by banks, and following a Treasury requested review by King & Wood Mallesons lawyer Scott Farrell into open banking, the ACCC was charged with setting up the regime where customer data would be shared between institutions.
Now Sims was flagging more financial services work for the ACCC.
"We are expecting that team to complete a number of in-depth investigations potentially resulting in court proceedings, as well as providing support for the Commonwealth Department of Public Prosecutions (CDPP) prosecution of ANZ, Citigroup, Deutsche Bank and six senior officers," he said.
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According to an official list of invitees, there was only one person in the room from the Australian Securities and Investments Commission (ASIC), new deputy chair Karen Chester - the woman who helmed a scathing capability review into the corporate cop while at the Productivity Commission and is now part of the team of new commissioners led by chairman James Shipton who are charged with inspiring ASIC into regulatory greatness. She is also a former colleague of Sims'.
The Age and Herald are not suggesting Sims’ old friend and ASIC realist Chester was irked, but for other ASIC insiders it was a choke on your sandwich moment - the ACCC is pushing too far into ASIC’s territory.
The push comes as the ACCC faces criticism over its handling of key competition matters, including its blocking of the merger between TPG and Vodafone and its recent court drubbing over its opposition to a rail merger (which it announced on Thursday it would appeal).
The ACCC’s inability to inspire competition in the banking sector has also come under fire from business leaders and bureaucrats. But that criticism means that the ACCC, which has no official remit to protect consumers from poor conduct in financial services, had to improve its efforts in financial services. It didn’t take them long.
Eight months earlier, the ACCC announced the CDPP had charged ANZ, Citigroup, Deutsche Bank and a cohort of senior brass from each bank with criminal cartel offences following an ACCC investigation into ANZ’s $2.5 billion share sale in 2015.
ASIC too had been investigating the share raising for different alleged breaches by ANZ. But the ACCC beat it to court.
Three months later, ASIC would file its own case against ANZ alleging it breached its continuous disclosure requirements over the same share sale.
This month, during a short hearing in the Federal Court, Justice Michael O’Bryan approved ANZ’s request for a stay of the ASIC proceedings until after the cartel case was completed.
ASIC deputy chairman Karen Chester is a an ex-colleague of Rod Sims.
ASIC deputy chairman Karen Chester is a an ex-colleague of Rod Sims.Credit:James Alcock
Now ASIC will have to wait and see if ACCC’s cartel case (which the banks and executives are vigorously defending) is successful and if so, the ACCC will be the first regulator to have bankers in handcuffs after the royal commission.
Such an outcome will firm the ACCC as the favourite regulator, the one that gets results where others like ASIC and the banking regulator the Australian Prudential Regulatory Authority flounder.
Of course the ACCC doesn’t see any friction between it and ASIC. When asked if there was tension, a spokeswoman for the ACCC says: "ACCC and ASIC have a long history of working well together and regularly share information and staff."
ASIC was given an opportunity to comment for this story, but ignored requests for comment from The Age and Sydney Morning Herald.
The ACCC’s foray into financial services is in part because it is seen as the can-do regulator.
One political insider says there is no doubt which regulator is in the box seat with the nation's policymakers.
"Rod gets whatever he wants. More money? Sure. Full control of consumer law? Sure," the insider says.
ASIC, on the other hand, was in the "dog box" and had been given a "good slapping" on its way there.
This is not a new thing. The ACCC has long been the girlie swot of Australian regulators when held up to its peers.
"The ACCC used to be called the North Sea," says a former staffer, explaining: "In England whenever there was a problem, nuclear waste, tonnes of rubbish they dumped it in the North Sea."
It doesn’t mean the ACCC is picking through issues that are rubbish or inquiries that are not worthwhile, more so that when all other regulators fail, the ACCC is seen as the regulator that will step up.
Rod gets whatever he wants. More money? Sure. Full control of consumer law? Sure.
Former ACCC chairman, Professor Allan Fels, says the ACCC is often seen as the regulator of last resort.
"When other regulators fall over it’s often the ACCC’s job to pick up.
Full interview: ACCC's Rod Sims
Full interview: ACCC's Rod Sims
Bitcoin reaches 18-month high
Full interview: ACCC's Rod Sims
Full interview: ACCC's Rod Sims
ACCC chairman Rod Sims is stepping up his campaign against the supermarket giants, which he says is in the long-term interest of consumers.
"The ACCC is trusted because it does the job properly and is unequivocally committed to the public interest and it’s reliable and it’s practical. It typically has a good knowledge of industry and both parties support it," he says.
Fels points out that the rub between ASIC and the ACCC is not a recent development and has instead been running on and off for more than 20 years ago.
"In 1997 the Wallis Inquiry said that they were very disillusioned with [ASIC predecessor] the ASC [Australian Securities Commission]. There was effectively an exemption of financial services from the act and it said the exemption should go and that the ACCC should have concurrent powers as a kind of back-up and that would make it far more effective because ASC was not doing the job.
"There was massive pressure on Treasury from the powerful financial institutions and Treasury supported them and that recommendation did not go through.
"To this day that exemption should be removed."
But not all in government or industry want the ACCC’s remit expanded.
ACCC sources say it already has a massive workload. Sims, when asked at the CEDA lunch about the ACCC’s remit, said: "Despite some commentary that says 'why doesn’t the ACCC have concurrent powers under consumer law in the financial sector', we said 'no, no, let’s just keep it clear which person (is doing what)'.
"You want to hold regulators accountable, and if there are two regulators with responsibility then it gets harder to do. Karen [Chester] at ASIC may have a different view."
Recently promoted Assistant Financial Services Minister Jane Hume does not appear to be focused on expanding the ACCC’s workload.
When asked directly last week whether the ACCC or ASIC is the better regulator, Hume focused on ASIC’s improvements, making no comment on the ACCC at all - perhaps revealing where she believes the consumer watchdog sits in terms of financial services.
Assistant Minister for Superannuation and Financial Services Jane Hume wouldn't be drawn to comment on the ACCC.
Assistant Minister for Superannuation and Financial Services Jane Hume wouldn't be drawn to comment on the ACCC.Credit:James Alcock
"I think there are very clever people at all of the regulators and they all perform a really important function in the sector," Hume tells the Age and the Herald.
"I don't need to repeat Hayne, who pointed out some of their deficiencies, but I think they have been addressed. They have been given additional funding and powers and I think that will play out over the next few years.
"I think James Shipton has done a terrific job at ASIC and has really given the regulator some teeth. Some of those changes were underway for some time. The ASIC capability review has been finalised, APRA is being finished, and I think we will see those regulators perform in a way that is far better in line with consumer and government expectations."
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(Despite the ALP being gung-ho on reforming ASIC prior to the election, the office of opposition financial services spokeswoman Katy Gallagher did not respond to requests for comment.)
The ASIC capability review found the financial regulator was severely lacking in its enforcement activities and was too internal looking, with a focus on its operation rather than its results.
The review also compared the corporate watchdog to the ACCC including its litigation record drawing on "pertinent stakeholder feedback".
I think James Shipton has done a terrific job at ASIC and has really given the regulator some teeth.
Jane Hume, Assistant Financial Services Minister
That was the report’s 'code' for a survey of judges which found the ACCC was the positive outlier of all the regulators. It was, in short, the most model litigant with it regularly presenting focused pleadings, narrowing of matters in issue, targeted evidence and a willingness to work with opposing parties to get the matter to trial.
"Some informed external stakeholders interviewed by the panel expressed concern that ASIC’s approach to litigation is lagging... relative to peer regulators, and that this gap is widening in some instances," the report found.
The capability review also praised the ACCC’s use of litigation as a way of communicating key messages to the regulated population.
"The ACCC does this effectively through targeted stakeholder consultation in establishing annual priorities and a concerted and strategic communications program delivered by the ACCC chair and commissioners.
"There is a persistent perception (including among informed stakeholders) that this is not being pursued by ASIC to the fullest extent possible and that the current strategy is not having the desired effect."
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Since the release of that report, ASIC, under the guidance of deputy chair Daniel Crennan, QC, has worked to fix the negative perception of it in legal circles and in the government.
As one well-placed government insider says: "The ACCC has been doing a great job, under Rod’s leadership. The ACCC governance model is the model that should and is going to be applied to ASIC."
But as the admiration for ACCC continues, and experienced professionals like Fels call for greater powers for the consumer and competition regulator, some believe the love has gone too far.
ASIC staffers who declined to be named for this report pointed to Commissioner Kenneth Hayne’s implied criticism of the ACCC in his final report when he found: "The ACCC has chief responsibility for competition questions in the Australian economy. Competition in parts of the Australian financial services industry is not always strong and has not prevented the misconduct considered by this Commission."
That comment came after the Productivity Commission in its June 2018 report into competition in the financial services sector found competition was not as strong as it should be.
As one senior regulatory insider says: "The Hayne report delivered an extraordinary slap in the face to the ACCC which has been missed by many people."
"Competition in banking is failing. They are not delivering on competition. They talk a good talk but they’ve got to get runs on the board. With all due respect, they took their eye off the ball."
Another sign of the rub between ASIC and the ACCC happened only a couple of years back when the ACCC knocked back a request by insurers to put a 20 per cent cap on commissions for add-on insurance products.
While the request was made by insurers it would have been no secret to the ACCC that ASIC had been pushing for the cap as part of a suite of reforms to improve customer outcomes. But the ACCC with its competition hat on would not budge, saying such a move would substantially lessen competition.
A senior staffer at ASIC blusters when asked about the ACCC’s response.
"We wanted product manufacturers to compete on better products but instead they were competing on paying higher commissions. We wanted to put a control on the price. Any attempts to do that was met with a philosophical rather than practical approach by the ACCC."
Competition in banking is failing. They are not delivering on competition. They talk a good talk but they’ve got to get runs on the board. With all due respect, they took their eye off the ball.
Two years later, after tearful appearances from consumers at the banking royal commission, Commissioner Hayne recommended a cap be placed on add-on insurance products.
Facebook Inc. and Google Inc. logos are displayed on computer screens in this arranged photo in New York, U.S., on Monday Jan. 30, 2012. A Facebook IPO would provide funds to help the social-networking service maintain its expansion and fend off competition from Internet rivals such as Google Inc. and Twitter Inc. Photographer: Peter Foley/Bloomberg
Media & marketing
This inquiry into Facebook isn't the one we really need
It’s not the only criticism of the ACCC. In business circles, the ACCC’s reputation on how it approaches major mergers has caused angst at the big end of town. Sims and his team would say that’s a reflection of them doing their job and doing it well. Others are not so sure.
Major media companies have railed against the competition regulator’s inquiry into the influence of international tech groups on the Australian media landscape. The ACCC launched the inquiry in December 2017 on request from Treasury.
Social media giant Facebook has described the ACCC’s proposal for a new government body to scrutinise its business and algorithms as "unnecessary", "unprecedented", "unworkable".
"I am not aware of any other country seriously looking at this idea of an algorithm regulator," one of Facebook’s policy officers Andy O’Connell said earlier this year.
Some corporate lawyers also say the digital platforms inquiry, which is due with Treasurer Josh Frydenberg this weekend, has made the regulator step into an area in which it lacks expertise.
"You could argue that the digital platforms inquiry is beyond the ACCC’s remit and going into an area that the ACCC lacks experience in," says a partner at one of the big four law firms.
When asked about the criticism, the ACCC spokeswoman says "as the competition and consumer regulator, we are well placed to do this".
Yet other lawyers at top firms say the ACCC is taking a softly-softly approach on the digital platforms inquiry.
"I think there’s a fear of over-regulation. There’s not really a good precedent for them here from global regulators," the lawyer says. Others say the ACCC has not gone far enough in its preliminary report.
Arnold Bloch Leibler partners Matthew Lees says the ACCC did consider a competition law response for the protection and promotion of journalism.
"Don't read anything into the ACCC (not being mentioned). We work very closely with them," ASIC chairman James Shipton said.
"Don't read anything into the ACCC (not being mentioned). We work very closely with them," ASIC chairman James Shipton said.Credit:Eamon Gallagher
"It appears the ACCC's primary response to the market power of Google and Facebook is to propose that a regulatory authority be given the task óf monitoring their conduct," Lees says in a submission following the release of the ACCC’s preliminary report for the digital platforms inquiry.
"However, the ACCC already has the task of enforcing competition laws, including in relation to misuse of market power," Lees says.
Yet while the ACCC’s remit seems to some viewers as ever-expanding, there have been clear signs it is wary of its own turf being stepped on by ASIC
Keeping enemies close
Earlier this year at the CEDA lunch, Sims was asked a curly question by Westpac head of competition law compliance Michelle Coco about ASIC’s UK equivalent, the Financial Conduct Authority, taking action under the British Competition Act.
"Have you considered a UK-style model, where the sector-specific regulators have concurrent powers to enforce the competition legislation?" Coco asked.
Sims was firm in his response: "We think that separation is better. I think you end up tripping over each other that way."
Fast-forward to this week. ASIC boss Shipton was delivering his inaugural keynote address at a CEDA event, this time in the LaTrobe Ballroom at the Sofitel Hotel on Melbourne's Collins Street. It was during this speech that he reeled off a list of regulators working with ASIC on a range of issues.
"We are working closely with APRA... We are working closer than ever with AUSTRAC, AFCA, the New Zealand Financial Markets Authority and other international and domestic regulators," he said.
Asked after the speech whether he had deliberately left the ACCC off the list, Shipton replied: "I said other regulators. Don’t read anything into the ACCC (not being mentioned). We work very closely with them."
We don't doubt Shipton's sincerity. But there's that old saying about keeping your friends close and your enemies closer.
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