Surely It’s Time To Stop All Mergers!
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In Australia, we live in one of the most concentrated corporate markets in the world. In every sector duopolies and oligopolies control markets to the detriment of competition and consumers. Surely it’s time to stop all mergers. Mergers benefit companies and shareholders at the expense of the market. Productivity is not improved via this concentration of corporate control over markets. This can be observed via the evidence, as the concentration of market power into the hands of fewer businesses has accompanied years of falling productivity. If companies don’t need to compete for market share they do not innovate and improve productivity rates.
“Dec 11 (Reuters) – Australia’s Sigma Healthcare (SIG.AX), opens new tab on Monday said it would merge with privately owned pharmacy giant Chemist Warehouse Group to create a A$8.8 billion ($5.79 billion) entity.
Chemist Warehouse will own 85.8% of the merged company that will supply 1,000 Sigma-aligned pharmacies and own 600 Chemist Warehouse outlets, according to a statement.
Chemist Warehouse is a pharmacy and retail chain in Australia known for cheap prices, large stores and major advertising campaigns.”
Over Concentration Of Market Power In Too Few Corporate Hands
We live in a global rentier age, where businesses make their profits from fees and charges. The cost of doing business has never been more expensive. Banks make 70% of their profits from these fees, fines, and charges. The pay to use economy has flourished at the expense of innovation and productivity driven by competition. Huge corporations have arisen from merger after merger to strut their stuff dwarfing all other entities – including governments and their monitoring agencies. The big 4 banks are making tens of billions via their control of markets. Woolworths and Coles dominate the supermarket and liquor skylines. The big 4 consultancy firms reap billions from governments outsourcing their work to avoid scrutiny. A duopoly of airlines maintain high travel costs with fees and charges built in to every fare. The mainstream media is a cabal of News Corp, Nine Media, and Kerry Stoke’s Seven West Media. Gas companies come in fours too. The miners are the same, extracting huge tax write offs from governments. If governments weren’t in hock to these corporate political donors they would be dismantling the corporate concentration rather than entertaining thoughts of more mergers. We do not need any more mergers. What we need is greater diversity and competition within markets and sectors.
Mergers Produce Ever More Powerful Corporate Entities
Until we take all private donor moneys out of the political system we will continue to see vested interests controlling the policy decisions in government. The loudest voice in the room is the one with the deepest pockets. Flaky politicians making empty speeches like puppets undermine the public’s faith in our democratic governments. The ACCC has failed comprehensively to thwart the ever growing concentration of corporate power over markets. The ACCC is manifestly underfunded and is another toothless tiger unable to pick fights with these behemoth companies. The cost of living crisis is a result of corporate greed and Australian governments do little to attack this at its source. The RBA is another financial institution set up to keep big business happy at the expense of all other parties. There has been no criticism of the corporate profiteering happening throughout this cost of living crisis. This is despite the fact that in most sectors the companies can get away with price setting due to the lack of any real competition.
“Australia has an extremely concentrated economy, with one or a small number of companies dominant in many parts of our economy, and this has consequences. Overall, the evidence suggests it means higher prices and poorer service for consumers, reduced productivity and so less prosperity for Australians, and more pronounced income inequality.”
The Australian federal government is faced with the challenge of properly funding the ACCC. Unless the monitoring agencies are given teeth we will see the same old procession happening of mergers making our markets less competitive. It is a global problem and it will take a government with the guts to buck the trend. The evidence of what this concentration of corporate power is doing to markets is in plain view. Surely it’s time to stop all mergers until we begin to see competition return to our markets. Innovation and productivity are driven by competition. Captured markets in contrast leave us with rentier business models sucking the life out of our nation and GDP.
Robert Sudha Hamilton is the author of Money Matters: Navigating Credit, Debt, and Financial Freedom.
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