Markets, Monopolies and Moguls: The Relationship between ... · Markets, Monopolies and Moguls: The...

Markets, Monopolies and Moguls: The Relationship betweenInequality and Competition

Andrew Leigh and Adam Triggs*

Abstract

Analysing private market research data, weestimate the degree of market concentrationacross 481 industries in the Australian econ-omy. On average, the largest four firms control36 per cent of the market. Some industries areconsiderably more concentrated. In departmentstores, newspapers, banking, health insurance,supermarkets, domestic airlines, Internet ser-vice providers, baby food and beer, the biggestfour firms control more than 80 per cent ofthe market. We suggest ways in which highmarket concentration may increase inequalityand discuss some policy ideas to address theproblem.

1. Introduction

In 1992, packaging businessman EdZac startedcardboard box manufacturer, Zacpac, with aleased factory in Caringbah and then apermanent factory in Ingleburn in Sydney.He had just one cutting machine and onefolding–glueing machine (Zacpac 2016). Afamily-run operation, Zacpac hoped—likemany small businesses—to grow large enoughto employmore staff and expand its operations.

The cardboard box manufacturing industryis significant because such a large share ofconsumer products come packed in cardboard.Indeed, some have even suggested that if youwant to see how the output of the overalleconomy is doing, you should look at theoutput of cardboard box manufacturers (Obel2009). If people are not buying boxes, thetheory goes, they are not buying products.

At the time when Zacpac began, theAustralian cardboard box market was wortharound $2 billion. Not surprisingly, the firm’smanagement wanted a share of the action. Theydid not expect to become billionaires, but theyfigured if they worked hard and played by therules, they would be able to expand theiroperations.

Unfortunately for Zacpac, others had differ-ent ideas. Between them, two companies—Visy and Amcor—controlled over 90 per centof the cardboard box market and they were notmerely large—they were actively colluding.Over a 5 year period from 2000 to 2005, seniorrepresentatives of the two firms began a seriesof clandestine meetings (see Beaton-Wells andBrydges 2008).

In scenes reminiscent of spy thrillers, theymet in hotels and motels, including the Rock-man’s Regency Hotel in centralMelbourne and

* Leigh: Shadow Assistant Treasurer, ShadowMinister forCompetition and Federal Member for Fenner, AustralianCapital Territory 2600 Australia; Triggs: Crawford Schoolof Public Policy, Australian National University, Austra-lian Capital Territory 0200 Australia. Correspondingauthor: Leigh, email <[email protected]>.This is an edited and extended version of the JohnFreebairn Lecture in Public Policy, delivered by the first-named author in Melbourne on 19 May 2016. The first-named author is grateful to Bill Griffiths for the invitationto deliver the lecture. Our thanks to several people—including John Asker, Chris Bowen, Jim Chalmers, JohnDaley, Craig Emerson and Nick Green—for valuablefeedback on earlier drafts. Responsibility for any error lieswith us alone.

The Australian Economic Review, vol. 49, no. 4, pp. 389–412

�C 2016 The University of Melbourne, Melbourne Institute of Applied Economic and Social ResearchPublished by John Wiley & Sons Australia, Ltd

the Tudor Motel in Box Hill, Melbourne. Theymade phone calls from public phones andprepaid mobiles and met up in parks, includingWesterfolds Park in Templestowe and MyrtlePark in North Balwyn, Melbourne (see Beaton-Wells and Brydges 2008).

The collusion went to the highest level inthe firm and included a 2001 meeting at theAll Nations Hotel in Richmond, Melbourne,between the firms’ two chief executives:Amcor’sRussell Jones andVisy’sRichardPratt.

Eventually, as sadly happens in so manyclandestine affairs, things broke down. Sincethe start of their collusion, Visy’s market sharehad grown from 47 per cent to 55 per centof the market, but Amcor’s had shrunk from45 per cent to 36 per cent. At the end of 2004(Beaton-Wells and Brydges 2008), Amcorwentto the Australian Competition and ConsumerCommission (ACCC) and announced it waswilling to confess its role in the collusion inexchange for immunity from prosecution.

TheACCC took action, ultimately leading toa court judgement which imposed a $36millionfine on Visy for price-fixing, the largest finein Australian history at that time, and $2millionworth of fines for the individuals involved(ACCC 2016). The ACCC also sought acriminal conviction against Richard Pratt forproviding false evidence. This charge wasultimately abandoned on account of his poorhealth (Pratt died in 2009). A few years later, aclass action brought by Maurice Blackburn onbehalf of more than 1,000 businesses affectedby the price-fixing led to Amcor and Visypaying out $95 million (Maurice BlackburnLawyers 2011).

In 2009, Australia criminalised cartel con-duct with a jail term of up to 10 years. This putAustralia in line with the United States, UnitedKingdom, Germany, Ireland and Canada.1

Those involved in the cardboard box cartelwere fortunate that their cartel did not operatea few years later or they might have foundthemselves behind bars for serious cartelconduct.

The combined market share of Amcor andVisy is still large—at 84 per cent—butsignificantly down from the 91 per cent that itwas at the peak of their duopoly (Beaton-Wells

and Brydges 2008; IBISWorld 2016). Andwhat about Zacpac? Their Sydney factory hasnow expanded to five cutting machines andfour folding–glueing machines—far morecomputerised than when it began (Zacpac2016). Zacpac recently opened a secondfactory in Stapylton, on the Gold Coast.In the past few years, their business hasgrown at an annual rate of over 30 per cent(Hoy 2014).

Like a large tree that overshadows thesaplings around it, firms that abuse their marketpower prevent newer competitors from grow-ing. They hurt entrepreneurs and often reducethe scope for innovation. Consumers sufferthrough higher prices, lower quality and lesschoice.

But, some of the benefits of market powerinvariably go to the people who run the firms.At the time of his secret meeting at the AllNations Hotel, Richard Pratt was the third-richest person in Australia (Beaton-Wells andBrydges 2008).

But, are not moguls who made their moneythrough wielding market power the exception?What about the story of ingenious entrepre-neurs creating value for the community? Suchexamples do exist—think of Boost Juicefounder, Janine Allis, Red Balloon founder,Naomi Simson, or Atlassian founders, MikeCannon-Brookes and Scott Farquhar.

Alas, when it comes to the wealthiestAustralians, breakthrough innovators are notthe norm.Analysing how the richestAustraliansmade their money, Frijters and Foster (2015)estimated that just five out of 200 had becomerich primarily by inventing a new product orservice. Far more commonly, the most affluentoperated in industries with limited competitionor with significant reliance on governmentdecisions.

One analysis from the 1990s looked at theindustries in which the rich-listers made theirfortunes. It concluded that about one-quartergrew wealthy in an industry that was uncom-petitive at the time (Siegfried and Round 1994).Since then, the problem may have becomeworse. As Stensholt (2012, p. 50) noted, ‘Thereis a dearth of new, young and entrepreneurialpeople on the latest BRW rich list.’

390 The Australian Economic Review December 2016

�C 2016 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

The remainder of this article is structured asfollows. We begin by looking at the extent towhich the largest players dominate markets inAustralia and how this has changed overtime. Next, we discuss the relationship betweenuncompetitive markets and the rising inequalityAustralia has experienced in the past generation.We conclude by suggesting some ways inwhich competition laws might be amended inorder to reduce inequality.

2. New Estimates of Market Concentrationin Australia

Like us, we expect you are always lookingfor economic games to play at your nextdinner party. So, here is one that we learnedfrom John Daley, head of the Grattan Institute.Try seeing how many industries your guestscan name that are not dominated by a fewlarge players. We can guarantee you, this is agame that will not tie up the conversation allnight.

Moving from anecdote to data, it turnsout that an empirical analysis of marketconcentration in Australia is harder than onemight think. Unlike the US Census Bureau, theAustralian Bureau of Statistics (ABS) does notcompile data on the market share of the largestfirms. So instead, we are left to rely on privatemarket research. In what follows, we presentdata drawn from IBISWorld Industry Reports,from which we were able to compile compara-ble market share data for 481 industries. Allestimates are for 2016 and represent theshares of industry revenues. Appendix 1 liststhe four-firm concentration ratios for all 481sub-industries.

To take a few industry-specific examples, indepartment stores, newspapers, banking, healthinsurance, supermarkets, domestic airlines,Internet service providers, baby food andbeer and soft drinks, the biggest four firmscontrol more than four-fifths of the market. Inpetrol retailing, telecommunications, creditunions, cinemas, liquor retailing, bottled waterand fruit juice, the largest four companiescontrol more than two-thirds of the market.In pharmacies, pharmaceuticals, hardware,gyms, snack foods, magazines, newsagents

and international airlines, the big four accountfor more than half of the market.

The data also give a few answers for thatdinner party game. Car dealers, hairdressers,dentists and law firms are all industries wherethe top four firms account for less thanone-tenth of the market. Since it would beunwieldy to show a chart with all theseindustries, Figure 1 depicts market concentra-tion for the 20 largest industries in Australiabased on industry revenues.

Although there is no set rule, a market witha four-firm concentration ratio of more thanone-third is often considered to be concen-trated. On this measure, almost half of the481 IBISWorld industries are concentratedmarkets. Market concentration in Australia isa cradle-to-grave affair, running from babyfood to funeral services. In the 481 industriescovered, the weighted average market shareof the largest four firms is 36 per cent (theunweighted four-firm concentration ratio is38 per cent).

To see how market concentration differsacross different sectors of the economy, weaggregate these 481 industries into the 19sectoral classifications used by the Australianand New Zealand Standard Industrial Classifi-cation system.2 In aggregating concentrationestimates within each sector, we weight thedata according to the share of total sectoralrevenues that each industry comprises.

Figure 2 shows the four-firm concentrationratios for each of the 19 sectors that make up theAustralian economy. The most concentratedsector is Information, media and telecommuni-cations, followed by Arts and recreationservices and Mining. The least concentratedsectors are Construction and Education andtraining. We return later in the article to look atpossible correlates of market concentrationacross sectors.

While international comparisons of marketsare complicated by definitional differences, itis worth noting that a recent analysis lookedat 893 industries in the United States (TheEconomist 2016). On average, the largest fourfirms controlled 33 per cent of the USmarket—slightly less market concentration than our36 per cent estimate for Australia. While it is


Leigh and Triggs: Markets, Monopolies and Moguls 391

possible that theUS analysis is definingmarketsmore broadly, this does suggest that largeAustralian firms are more dominant in ourmarkets than large US firms are in that country.

By way of comparison, Figure 3 looks at 12markets for which we were able to obtainfour-firm concentration ratios for both coun-tries. In three cases (pharmacies, bottledwater and beer), Australia has equally orless concentrated markets than the UnitedStates. But in the remaining nine markets,Australia has more concentrated markets thanthe United States. The differences are largestfor liquor retailing (where the top fourUS firms have 10 per cent, while the topfour Australian firms have 78 per cent),commercial banking (US 26 per cent, Australia94 per cent), supermarkets (US 31 per cent,Australia 91 per cent), health insurance (US35per cent,Australia 93per cent) and cardboardmanufacturing (US 36 per cent, Australia88 per cent).

Admittedly, the United States is an imperfectcompetition benchmark for Australia, giventhat its population is 13-fold larger than ours.However, analyses focused on particular sectorshave sometimes suggested that Australia hashighly concentrated markets in specific sectors.The Finkelstein (2012) media inquiry foundthat, across 26 countries, Australia was the onlyone in which the leading press companyaccounted formore than half of daily newspapercirculation.

The ACCC’s (2008b, p. xvi) grocery inquiryfound that:

The lack of incentives for Coles and Woolworths tocompete strongly across the board on prices reflectsthe high levels of concentration in the industry andfrequent monitoring of competitors’ prices. Evidenceindicates that if one player attempts to lead pricesdown, the other will follow, making it extremelydifficult for either to win significant numbers ofcustomers from the other through an aggressivepricing strategy.

Figure 1 Market Concentration in the 20 Largest Australian Industries Based on Industry Revenues

0 0.2 0.4 0.6 0.8 1

Education and trainingResidential property operators in Australia

Community servicesHouse construction

Motor vehicle dealersEngineering consulting in Australia

Superannuation fundsComputer system design services in Australia

Consumer goods retail in AustraliaHeavy industry and other non-building construction

Motor vehicle wholesaling in AustraliaElectricity retailing

Coal miningGeneral insurance

Life insuranceTelecommunications services in Australia

Iron ore miningSupermarkets and grocery stores

BankingPetroleum wholesaling

Four-firm concentration ratioTwo-firm concentration ratio

Combined market share (%)

Source: Authors’ calculations, based on IBISWorld (2016).



Comparing our market with other countries,it noted that:

International comparisons show that market structuresvary widely between countries. In some [Organisationfor Economic Co-operation and Development] OECDmember nations, including New Zealand and Austria, thegrocery industry is dominated by two participants. TheUnited Kingdom and Canada have a larger number ofretailers, although there is one clear leader in each country.[ACCC 2008b, p. 41]

While recent years have seen a significantdegree of price competition among supermar-kets, the Australian majors have been amongthe most profitable supermarkets in the world(Evans 2015).

In the case of banking, Figure 4 shows acomparison across advanced nations, coveringthe period from 2009 to 2013. This suggests

that in these years, our banking sector wasslightly more concentrated than the OECDaverage, with Australia ranking the 15th most-concentrated out of 33 nations (World Bank2013).3 Charles Littrel from the AustralianPrudential and Regulation Authority recentlynoted that the combined market share of the bigfour banks has doubled from 1990 to 2016. Asreported by Whalley (2016, p. 76), Littrelwarned of systemic risks, on the basis thatbecause all four Australian lenders are ‘in thesame business model they’re all hugelyexposed to each other’.

Looking across countries, the World Eco-nomic Forum’s 2015–16 Global Competitive-ness Report has similarly found that Australiarankspoorly on anumberof indicators relating tocompetition. On ‘intensity of local competition’,

Figure 2 Market Concentration across Sectors

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Construction

Education and training

Agriculture, forestry and fishing

Personal services

Professional, scientific and technical services

Accommodation and food services

Administrative and support services

Rental, hiring and real estate services

Health care and social assistance

Wholesale trade

Retail trade

Public administration and support services

Electricity, gas, water and waste services

Financial and insurance services

Transport, postal and warehousing

Manufacturing

Mining

Arts and recreation services

Information media and telecommunications

Combined market share (%)

Four-firm concentration ratioTwo-firm concentration ratio

Source: Authors’ calculations, based on IBISWorld (2016).



Australia ranks nineth. But, on ‘effectiveness ofanti-monopoly policy’,Australia is back at 32nd.When asked to rate ‘the extent of marketdominance’ in Australia, the World EconomicForum’s experts put Australia still further back,at 47th (World Economic Forum 2015).

Another piece of evidence about Australianmarket concentration can be seen from lookingat the largest firms’ share of the Australianeconomy. In Figure 5, we analyse the 10, 50and 100 largest firms in Australia, both in termsof stocks (revenues) and flows (market capital-isation). To look at revenues, we combineIBISWorld Industry Reports with nationalaccounts data from the ABS, which giveseach firm’s gross value added to the Australianeconomy. To look at market capitalisation, weanalyse firms that are listed on the AustralianSecurities Exchange (ASX), using data fromthe MorningStar DATAnalysis database.

In terms of revenues, the 10 largest firmscollectively account for 5 per cent of theAustralian economy. The 50 largest firms

collectively account for 11 per cent and the100 largest firms account for 14 per cent of theeconomy.4 In terms of market capitalisation,the 10 largest firms account for 62 per cent ofthe ASX. The 50 largest firms account for 89per cent of the share market and the 100 largestlisted firms account for 95 per cent of the sharemarket.5

Is market concentration increasing? In theUnited States, economic Census data showthat since the late 1990s, two-thirds of marketshave experienced an increase in concentration.Across nearly 900 markets, the share of thelargest four firms rose from 26 per cent in 1997to 33 per cent in 2012 (The Economist 2016).

While the available data do not allowa parallelanalysis for Australia, particular industries havebecome more concentrated. For example:

� In supermarkets, Australia has benefitedfrom the entry of Aldi and Costco. But since2008, the combined market share of Colesand Woolworths has risen from 60 per cent

Figure 3 Four-Firm Market Concentration in Australia and the United States

0 10 20 30 40 50 60 70 80 90 100

Pharmacies

Bottled water

Beer manufacturing

Department stores

Domestic air travel

Soft drink manufacturing

Petrol retailing

Cardboard manufacturing

Health insurance

Supermarkets

Commercial banking

Liquor retailing

Australia United States

%

Sources: Authors’ calculations, based on The Economist (2016); IBISWorld (2016).



to 73 per cent (ACCC 2008b; IBISWorld2016).

� In banking, the 2008 acquisition of StGeorge by Westpac constituted a mergerbetween the third- and fifth-largest banks inAustralia. Depending on market definition,Westpac’s market share went from between12 per cent and 17 per cent to between19 per cent and 25 per cent, according tothe ACCC’s (2008a) public competitionassessment.

� In 2013, a joint venture saw Virgin airlinesacquire 60 per cent of Tiger Airlines.Virgin’s market share was 30 per cent andTiger’s was 2 per cent (ACCC 2013).

� In meat processing, the 2011 mergerbetween Teys Bros (Holdings) Pty Ltd andCargill Beef Australia led to increasedmarket concentration (though the complex-ity of defining this market makes it difficultto quantify) (see ACCC 2011).

� In bottled drinks, the acquisition by Asahi(which owns Schweppes) of P&N beveragesremoved a competitor (P&N), which was

well known for supplying beverages at thelower end of the price spectrum. In bottledwater, Schweppes went from 9 per cent to19 per cent, and in fruit juice, Schweppeswent from 5 per cent to 16 per cent (ACCC2010).

� Among Internet service providers, the TPGmerger with iiNet increased iiNet’s share offixed broadband services from 15 per centto 27 per cent (ACCC 2015).

However, it is worth noting that the highdegree of concentration on the ASX (shown inFigure 5) does not appear to have increasedover the period 2000–2015.

Another approach to looking at changesin market concentration is to count theminnows, rather than measuring the whales.In Figure 6, we use ABS figures to look atthe number of firms in the industry, compa-red to that industry’s gross value added.From 2011–12 to 2014–15, the number offirms operating across all industries fell by1 per cent, while gross value added increasedby 11 per cent.

In some industries, the drop was particularlypronounced:

Figure 4 Three-Firm Concentration Ratios in Banking across OECD Countries (average from 2009 to 2013)

0

10

20

30

40

50

60

70

80

90

100

Icela

ndGr

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Esto

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Neth

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Japa

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Turk

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land

Slov

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ael

Austr

alia

Slov

enia

Portu

gal

Cana

daBe

lgiu

mCz

ech

Repu

blic

Austr

iaGe

rman

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exico

Sout

h Ko

rea

Polan

dSw

itzer

land

Luxe

mbo

urg

Unite

d Kin

gdom

Swed

enDe

nmar

kUn

ited S

tates

Fran

ce Italy

%

Country

Source: World Bank, Global Financial Development Database, 2013.



� In mining, the number of firms fell by 2 percent, while gross value added increased by38 per cent.

� In rental, hiring and real estate services, thenumber of firms increased by 3 per cent butgross value added increased by 37 per cent.

� In retail trade, the number of firms fell by8 per cent, while gross value added increasedby 13 per cent.

� In information, media and telecommunica-tions, the number of firms increased by2 per cent, while gross value added increasedby 19 per cent.

� In public administration and safety, the numberof firms fell by 7 per cent, while gross valueadded increased by 14 per cent.

� In arts and recreation services, the number offirms fell by 6 per cent, while gross valueadded increased by 8 per cent.

The ‘long tail’ of small- and medium-sizedbusinesses has shortened somewhat in recentyears.

What might explain the observed degreeof market concentration in Australia? Themost obvious is market size and proximityto larger markets. As ACCC chair, Rod Sims,has observed: ‘Australia has many markets thatare highly concentrated, which is perhaps notsurprising given the relative size of ourpopulation’ (Sims 2013).

However, this does not explain why marketsshould have become more concentrated. Sincethe turn of the century, Australian populationgrowth has been among the fastest in theadvanced world and incomes per personhave also risen (though not in recent years)(Infrastructure Australia 2015). If all thatmattered was market size, there should be lessmarket concentration in Australia, not more.

Yet a range of factors has pushed inthe opposite direction. As the US Councilof Economic Advisors (2016, p. 1) recentlynoted:

The causes underlying a possible decrease in competi-tion and corresponding increase inmarket power are notclear, but candidate explanations include efficienciesassociated with scale, increases in merger and acquisi-tion activity, firms’ crowding out existing or potentialcompetitors either deliberately or through innovation,

Figure 5 Shares of the Australian Economy Represented by the Largest Firms

0

10

20

30

40

50

60

70

80

90

100

0

2

4

6

8

10

12

14

16

Top 10 firms Top 50 firms Top 100 firms

Share of Australian GDP (LHS)Share of total market

% %

capitalisation (RHS)

Note: GDP denotes gross domestic product, LHS denotes left hand side and RHS denotes right hand side.

Sources: Authors’ calculations, based on MorningStar DATAnalysis database, 2000–2015; ABS (2016); IBISWorld (2016).



and regulatory barriers to entry such as occupationallicensing that have reduced the entry of new firms into avariety of markets.

The Institute for Mergers, Acquisitions andAlliances tracks merger activity in Australiaback to 1992. Over this period, the Institutereports that the number of mergers has risenfrom 394 (with a combined value of US$12billion) to 1,460 in 2015 (with a value ofUS$117 billion). Merger activity peaked inAustralia in 2007. In that year, Australiasaw 3,094 mergers, valued at US$344 billion(Institute for Mergers, Acquisitions andAlliances 2015).

Worldwide, the Institute for Mergers,Acquisitions and Alliances (2015) estimatesthat in the past three decades there has beenalmost a 10-fold increase in the number andvalue of mergers. Admittedly, not all mergeractivity will result in increased market concen-tration. In some cases, the counterfactual mightbe that one of the firms fails altogether.In other cases, merging companies may notbe competitors. But in general, mergers tendto increase market concentration.

A similar pattern can be seen in newbusiness formation. As we noted earlier, thetotal number of businesses in Australia fell by

Figure 6 Changes in Number of Firms and Industry Value Added

50403020100 10 20

Agriculture, forestry and fishing

Mining

Manufacturing

Electricity, gas, water and waste services

Construction

Wholesale trade

Retail trade

Accommodation and food services

Transport, postal and warehousing

Information media and telecommunications

Financial and insurance services

Rental, hiring and real estate services

Professional, scientific and technical services

Administrative and support services

Public administration and safety

Education and training

Health care and social assistance

Arts and recreation services

Other services

All industries

Change in industry gross value added from 2011 12 to 2014 15

Change in number of firms from 2011 12 to 2014 15

%

__

_

_ _

_

Sources: Authors’ calculations, based on ABS (2015); IBISWorld (2016).



1 per cent between 2011–12 and 2014–15(Figure 6). As you might imagine, there isconsiderable churn in the business sector.Australia has around 2 million businesses.Each year, about 10–15 per cent of them shutdown, while another 10–15 per cent start up(Figure 6).

In principle, a decline in the number of firmscould be driven either by more exits or fewerentrants. In practice, the main trend has notbeen business collapse—indeed, the numberof business exits has fallen slightly—but aslowing in new business formation. From 2011to 2015, the rate of new business formation inAustralia declined by 2 per cent. Over time,fewer new businesses are likely to lead to moremarket concentration.

Since the 1950s, services have steadilyincreased their share of the economy. As ahigher proportion of the economy becomesweightless, the challenge of concentratedmarkets becomes harder still. In informationtechnology industries, some early commen-tators had speculated that market concentra-tion might be lower because barriers to entryand switching costs were lower. In manysectors, this now looks to be a forlorn hope.Google dominates search. Apple dominatessmart phones. Facebook and Twitter domi-nate social media. Amazon and Alibaba arekey players in online retailing (Team 2015).In the sharing economy, Uber and AirBNBhave a significant share of their respectivemarkets. Competitors struggle to makeinroads due to a combination of intellectualproperty, network effects and merger activ-ity. Ironically, the best hope for consumers isthe prospect that the steady expansion ofonline platforms, such as Facebook and Google,will bring them into competition with oneanother.

3. Competition and Inequality

Analyses of inequality have tended to ignorethe prospect that a lack of competition mightbe a significant driver of inequality. Forexample, work by Leigh (2013) sketched outthe evidence that inequality has risen since thelate 1970s. Over that period, Australia has seen

greater inequality in wages, household income,top income shares and top wealth shares. Forexample, Figure 7 depicts the divergence inreal earnings over the period 1975–2014. Overfour decades, earnings rose by 23 per cent at the10th percentile, 44 per cent at the median and72 per cent at the 90th percentile. For otheranalyses of long-run inequality in Australia,see Atkinson and Leigh (2007), Burkhauser,Hahn and Wilkins (2015), Wilkins (2015) andKatic and Leigh (2016).

As measured by top income shares, inequal-ity in Australia today is as high as it has been inthree-quarters of a century. However, when itcame to analysing the drivers of inequality,Leigh (2013) focused on union membership,top tax rates, technology, globalisation andeducation—making only passing mention ofuncompetitive markets.

By contrast, Atkinson (2015) is an excellentanalysis of competition and inequality whichlooks at the interplay between competition andinequality. That work discusses how concen-trated markets can lead to a more concentrateddistribution of income and how competitionpolicy should be different in a high-inequalitysociety than in a low-inequality society.

As we teach undergraduates, increasedmarket power leads to more producer surplus.In an era of high unionisation, some of thissurplus would have been shared with shop flooremployees, but as the power of organisedlabour has waned, this becomes less prevalent(Baker and Salop 2015). Instead, modern-daymarket power tends to benefit shareholders andtop executives at the expense of consumers.Because both capital owners and senior exec-utives are wealthier than the median consumer,market power tends to increase inequality.

Two Australian studies which look at therelationship between competition and inequal-ity are Creedy and Dixon (1998, 1999). Theyfound that monopoly power has a larger impacton lower income groups and increases inequal-ity. The 1998 study used Australian HouseholdExpenditure Survey data to generate demandelasticities for 14 commodity groups to obtainestimates of the relative welfare loss forhouseholds with different income levels. Theyfound that the welfare loss associated with



monopoly power is largest for poor households,which depend on government pensions andbenefits for their principal source of income.The 1999 study extended this analysis withmore detailed measures of welfare (throughequivalent variations) and inequality (using alarger number of households in the HouseholdExpenditure Survey) and confirmed theirfindings that reduced competition can havesubstantial effects on the distribution ofwelfare.

Surveying the literature in both developedand developing nations, Begazo and Nyman(2016) from the World Bank similarly con-cluded that a lack of competition tends to hurtthe poorest households the most. Comanor andSmiley (1975) found that past and currentmonopoly have had a major impact on thecurrent degree of inequality in the UnitedStates. They found that possibly one-halfof existing wealth holdings by the richest2.4 per cent of American households was dueentirely to capitalised monopoly gains. Impor-tantly in terms of policy responses, Dutt (1984)found that policies that reduce monopolypower can have positive effects on both growthand income distribution.

A similar conclusion flows from Piketty’s(2014) model of inequality, in which inequality

is said to rise when the rate of return to capital(r) exceeds the rate of economic growth (g). Asis well known, the market equilibrium undermonopoly is one in which prices are higher,output is lower and profits are higher than underperfect competition. Therefore, an increase inmarket power is likely to both increase the rateof return on capital and slow the rate ofeconomic growth.

In an analysis of competition in the USeconomy, Dayen (2015) notes that since the1980s, greater numbers of mergers have beenapproved by antitrust agencies, leading him tosuggest the existence of an easier regulatoryburden in recent decades. (One way in whichthis might occur is if the number of regulatorystaff did not rise to match the number ofmergers.) As a result, Dayen (2015, pp. 50–1)contends:

... monopolies drive inequality. Executives and WallStreet traders make astronomical incomes, whilewages are squeezed. Post-merger price increases,from health care to cable TV service to airline tickets,translate into a decline in real wages. Big mergers alsoencourage reduction in actual wages, when consol-idations produce layoffs and limit avenues foremployment. And though high skills are supposedlya defense against wage cuts, cartel behavior bySilicon Valley firms to prevent raiding each other’sworkers kept wages for coders and engineers low.

Figure 7 Inequality in Earnings in Australia (2014 dollars)

0

20,000

40,000

60,000

80,000

100,000

120,000

20102005200019951990198519801975

10th percentile

50th percentile

90th percentile

$

Year

Source: ABS (2014).



Suppliers to platform monopolies experience a pricecrunch across the spectrum, reducing their own profitsand funnelling them to the biggest firms, where theypass to executives.6

Dayen (2015, p. 51) quotes Joseph Stiglitz:‘High concentration in the [personal computer]PC platform market with Microsoft gives riseto the richest person in the country. Monopolyincreases wealth at the top, and for averageAmericans real wages decrease.’ Similarly, ananalysis of American markets in The Econo-mist magazine notes the lack of competition inmany sectors and points out: ‘High profits candeepen inequality in various ways. The pool ofincome to be split among employees could besqueezed. Consumers might pay too much forgoods’ (The Economist 2016).

It is sometimes suggested that monopolypower ultimately benefits consumers by spur-ring innovation.7 While this is theoreticallypossible, it is easy to think of examples inwhich market power reduces social welfare ininnovative industries; for example, by exclu-sive contracts that lock in inferior technologies.Moreover, this argument does not apply to allindustries. In the example of the cardboard boxcartel that we opened with, it is difficult to seeany evidence that the duopoly’s market powerencouraged greater innovation.

At a macroeconomic level, others havesuggested that the US economy is exhibitingthe hallmarks of excessive market power.Krugman (2016, p. A21) observes that:

Profits are at near-record highs, thanks to a substantialdecline in the percentage of GDP going to workers. Youmight think that these high profits imply high rates ofreturn to investment. But corporations themselvesclearly do not see it that way: their investment in plant,equipment, and technology (as opposed to mergers andacquisitions) hasn’t taken off, even though they canraise money, whether by issuing bonds or by sellingstocks, more cheaply than ever before.

As Krugman points out, if high corporateprofits reflect growing monopoly power, then‘the result would be what we see: an economywith high profits but low investment, even inthe face of very low interest rates and highstock prices’ (Krugman 2016, p. A21).

Similarly, Summers (2016a) has suggestedthat his theory of ‘secular stagnation’ may bepartially driven by rising market power. LikeKrugman, Summers (2016b) notes that:

The rate of profitability in the United States is at a near-record high level, as is the share of corporate revenuegoing to capital. The stock market is valued very highby historical standards, as measured by Tobin’s q ratioof the market value of the nonfinancial corporations tothe value of their tangible capital. And the ratio of themarket value of equities in the corporate sector to itsGDP is also unusually high.

A high rate of return to old capital wouldimply that there is a high payoff to investmentin new capital. Yet, as Summers (2016b) pointsout, ‘business investment is either in line withcyclical conditions or a little weaker thanwould be predicted by cyclical conditions’. Hesuggests one way of reconciling this:

It could be that higher profits do not reflect increasedproductivity of capital but instead reflect an increase inmonopoly power. If monopoly power increased onewould expect to see higher profits, lower investment asfirms restricted output, and lower interest rates as thedemand for capital was reduced. This is exactly whatwe have seen in recent years!

Although most of the theories about compe-tition and inequality posit economy-wideeffects, it is nonetheless worth looking at theavailable industry-level data to see whetherthere is any relationship between the degree ofmarket concentration in a sector and the wageshare of total factor income. As Figure 8depicts, the relationship ismodestly negative—suggesting that the wage share is lower in moreconcentrated industries—but does not approachstatistical significance.

4. Possible Policy Responses

The speech version of this article (Leigh 2016)was delivered during the federal electioncampaign. As Shadow Minister for Competi-tion, Leigh announced four policies that Laborintended to pursue if elected. Sadly (from ourperspective), Labor narrowly lost the 2016election.



Nonetheless, even the world of the second-best can be made better. So in the interests ofimproving policy development, we set outbelow four ideas that might be implemented bya future government seeking to help tilt theplaying field towards the most disadvantaged.

First, amend section 76 of the Competitionand Consumer Act 2010 (Cwlth) to allow thecourt to apply higher penalties for conduct thattargets or disproportionately impacts disadvan-taged Australians or apply lower penaltieswhen firms have provided adequate compen-sation to those affected. Consumer rip-offs arealways reprehensible, but they have a differentimpact on the most affluent, compared with themost vulnerable. To a high income consumer,losing a few thousand dollars might be anannoyance. To a low income consumer, losinga few thousand dollars might be life-changing.

Second, include a requirement in the Com-petition and Consumer Act that the ACCCprioritise investigations of conduct that targetsor disproportionately impacts disadvantagedAustralians.Thegrowth of inequalitymaymakeit desirable to enact an explicit legislativerequirement for the competition regulator toput the most vulnerable first.8

Third, task government to investigate theimpacts of increased market concentration onincome inequality in Australia and producepolicy recommendations on how the negative

effects of market concentration can be miti-gated. This kind of high-level exercise couldexplore ways in which highly concentratedmarkets widen the gap, as well as suggestingpractical ways in which competition andconsumer laws can reduce inequality.

Fourth, encourage states and territoriesto include competition principles in planningand zoning legislation, as recommended bythe Harper Review, with a specific focus onshortfalls of appropriately zoned land forkey services in disadvantaged communities.Traditionally, inner-city zoning issues haveattracted a disproportionate share of publicattention, leaving zoning in outer suburbs to beneglected. Ensuring that states and territoriesprovide proper attention to outer suburbs andapply competition principles might improvethe sustainability of these communities.

5. Conclusion

The past generation has been very kind to thoseat the top of the income distribution. The top1 per cent share has doubled. The top 0.1 per centshare has tripled. Never in Australian historyhas such a large share of the population ownedprivate jets, private helicopters, Porsches andMaseratis.

Yet, at the same time, a significant shareof the population is doing it tough. Nearly

Figure 8 Market Concentration and the Wage Share

0

10

20

30

40

50

60

70

80

90

100

806040200

egatnecrep a sa noitasnepmoc e eyol p

mEof

tota

l fac

tor i

ncom

e

Four-firm weighted concentration ratio (%)

Sources: IBISWorld (2016); ABS (2016).



one-quarter of Australians say that they couldnot raise $3,000 in an emergency without doingsomething drastic (Melbourne Institute ofApplied Economic and Social Research,University of Melbourne 2014). One in fivefamilies says that they cannot afford a week’sholiday away from home once per year. One ineight cannot afford dental care. One in 20cannot afford Christmas presents for familyand friends (Leigh 2013).

Looking at industry data for 481 markets,Australia’s product markets appear highlyconcentrated. Applying the rule of thumbthat a market is concentrated if the largestfour firms control one-third or more, over halfof the industries in the Australian economy areconcentrated markets.

Concentrated markets are not solely respon-sible for rising inequality, but it seems likelythat they have played a part in the steady risein inequality over the course of the pastgeneration. Engendering more competition inAustralia would not only have efficiencybenefits, but most likely equity impacts as well.

Similarly, on the policy side, competitionand consumer laws will never be the only wayin which governments seek to fight inequality,but they should be enjoined in the battle. Bytilting competition and consumer laws towardsthe most disadvantaged, it might be possible tohelp ameliorate the rising gap between the richand the rest.

July 2016

Appendix 1: Four-Firm ConcentrationRatios across Industries

Table A1 lists the four-firm concentrationratios for all 481 sub-industries.

Table A1 Four-Firm Concentration Ratios

No. Industry

Market shareof the top fourfirms (%)

Accommodation and food services1 Pubs, bars and nightclubs 13.902 Fast food services 42.70

Continued

Table A1 Continued

No. Industry


3 Restaurants 4.004 Social clubs 4.005 Catering services 53.306 Hotels and resorts 18.907 Cafes and coffee shops 12.608 Serviced apartments 4.009 Motels 4.0010 Caravan parks and camping 4.0011 Holiday houses 4.00Administrative and support services12 Temporary staff services 22.1013 Employment and recruitment

services 14.0014 Commercial cleaning 15.6015 Travel agents 39.2016 Packaging services 4.8017 Event promotion 10.8018 Payroll and other administration

services 9.0019 Call centres 13.6020 Building pest control 4.0021 Debt collection 36.1022 Credit agencies 75.70Agriculture, forestry and fishing23 Grain growing in Australia 4.0024 Beef cattle farming 4.0025 Grain sheep or grain beef cattle

farming 5.4026 Shearing, cropping and agriculture

support services 4.0027 Dairy cattle farming 4.0028 Forestry and logging 20.0029 Sheep–beef cattle farming 4.0030 Beef cattle feedlots 21.1031 Outdoor vegetable growing 5.0032 Sheep farming 20.0033 Citrus, banana and other fruit 19.3034 Cotton ginning 51.7035 Fishing in Australia 5.8036 Hay and other crop growing 4.0037 Pig farming 35.6038 Aquaculture 39.7039 Sugar cane growing 6.0040 Grape growing 4.0041 Horse farming 13.5042 Apple, pear and stone fruit

growing 4.0043 Cotton growing 12.3044 Egg farming 74.3045 Nursery production 4.0046 Forestry support services 16.7047 Rice growing 93.4048 Poultry meat farming 13.70

Continued



Table A1 Continued

No. Industry


49 Undercover vegetable growing 36.9050 Floriculture production 25.1051 Turf growing 4.00Arts and recreation services52 Lotteries 85.5053 Casinos 97.4054 Sports administrative services 42.0055 Horse and sports betting 85.4056 Sports and physical recreation clubs 10.9057 Music and theatre 19.3058 Art galleries and museums 20.6059 Horse and dog racing 37.2060 Gyms and fitness services 63.5061 Sports and physical recreation

facilities 35.7062 Nature reserves 22.8063 Zoological and botanical gardens 46.7064 Amusement parks 59.8065 Performing arts venues 39.90Construction66 Heavy industry and other non-

building construction 27.2067 House construction 8.5068 Commercial and industrial

building construction 9.5069 Site preparation services 6.0070 Multi-unit apartment and

townhouse construction 17.2071 Electrical services 8.8072 Road and bridge construction 28.0073 Institutional building construction 18.2074 Plumbing services 2.0075 Land development and

sub-division 13.0076 Carpentry services 4.0077 Metal cladding, water-proofing and

scaffolding services 4.0078 Concreting services 3.0079 Air conditioning and heating

services 8.0080 Painting and decorating services 9.8081 Landscaping services 8.0082 Plastering and ceiling services 2.0083 Structural steel erection services 6.0084 Tiling and carpeting services 3.5085 Fire and security alarm installation 20.8086 Roofing services 6.0087 Bricklaying services 4.0088 Construction machinery and

operator hire 18.2089 Glazing services 9.1090 Elevator installation and

maintenance 71.70

Continued

Table A1 Continued

No. Industry


91 Insulation services 17.60Education and training92 Education and training 3.5093 Universities 27.5094 Technical and vocational education

and training 9.1095 Art and non-vocational education 9.0096 Sports instructors 4.80Electricity, gas, water and waste services97 Electricity retailing 38.7098 Electricity distribution 50.8099 Water supply 41.50100 Gas supply 43.00101 Sewerage and waste services 40.60102 Solid waste collection services 34.10103 Waste remediation 19.20104 Electricity transmission 84.40105 Waste treatment and disposal

services 45.90106 Hydro-electricity generation 88.00107 Liquid waste collection services 49.40108 Wind and other electricity

generation 43.00Financial and insurance services109 Superannuation funds 15.30110 Banking 93.50111 Life insurance 60.20112 General insurance 56.10113 Health insurance 72.40114 Foreign banks in Australia 35.30115 Custody, trustee and stock exchange

services 25.00116 Financial asset investing 8.60117 Insurance brokerage 79.80118 Superannuation funds management

services 18.30119 Non-depository financing 22.00120 Fund management services 65.60121 Investment banking and securities

brokerage 32.40122 Financial planning and investment

advice 43.40123 Money market dealers 72.10124 Mortgage brokers 50.80125 Credit unions 67.10126 Building societies 88.80Health care and social assistance127 General hospitals 66.40128 Community services 6.70129 Aged care residential services 11.80130 Personal welfare services 8.20131 General practitioner medical

services 9.50

Continued



Table A1 Continued

No. Industry


132 Specialist medical services 5.10133 Child care services 20.00134 Dental services 9.90135 Other health services 12.10136 Diagnostic imaging 46.00137 Crisis and care accommodation 12.00138 Pathology health services 88.90139 Ambulance services 87.50140 Optometry services 45.90141 Physiotherapy services 9.00142 Chiropractic services 4.00143 Psychiatric hospitals 68.50Information media and telecommunications144 Telecommunications services in

Australia 72.90145 Wireless telecommunications

carriers in Australia 97.80146 Wired telecommunications

network operation in Australia 87.00147 Telecommunications resellers in

Australia 8.70148 Free-to-air television broadcasting

in Australia 67.30149 Pay television in Australia 78.20150 Internet service providers in

Australia 89.60151 Newspaper publishing in Australia 86.10152 Magazine and directory publishing

in Australia 68.20153 Motion picture and video

production in Australia 14.00154 Software publishing in Australia 51.20155 Motion picture and video

distribution in Australia 46.30156 Internet publishing and

broadcasting in Australia 73.60157 Cinemas in Australia 69.10158 Radio broadcasting in Australia 65.90159 Book publishing 30.30160 Libraries and archives in Australia 14.90161 Data processing and web hosting

services in Australia 37.20162 Data storage services in Australia 51.60163 Music publishing and sound

recording in Australia 57.60164 Video post-production services in

Australia 34.60Manufacturing165 Meat processing 52.20166 Petroleum refining and petroleum

fuel manufacturing in Australia 90.60167 Gold and other non-ferrous metal

processing in Australia 43.40

Continued

Table A1 Continued

No. Industry


168 Iron smelting and steelmanufacturing in Australia 45.40

169 Motor vehicle manufacturing 63.90170 Printing in Australia 14.30171 Pharmaceutical products

manufacturing 57.60172 Aluminium smelting in Australia 67.10173 Poultry processing in Australia 67.80174 Structural steel fabricating in

Australia 41.20175 Chocolate and confectionery

manufacturing in Australia 48.80176 Butter and dairy product

manufacturing in Australia 53.50177 Alumina production in Australia 97.70178 Fruit and vegetable processing in

Australia 30.70179 Ready-mixed concrete

manufacturing in Australia 70.80180 Wine production in Australia 39.60181 Tea, coffee and other food

manufacturing in Australia 27.20182 Wooden structural component

manufacturing in Australia 25.50183 Fabricated metal product

manufacturing in Australia 16.40184 Aluminium door and window

manufacturing in Australia 11.70185 Mining and construction machinery

manufacturing in Australia 42.60186 Soft drink manufacturing 83.60187 Beer manufacturing 89.90188 Prepared animal and bird feed

manufacturing in Australia 69.40189 Cured meat and smallgoods

manufacturing in Australia 47.80190 Power automation products and

other electrical equipmentmanufacturing in Australia 49.00

191 Motor vehicle parts and accessoriesmanufacturing in Australia 16.70

192 Aircraft manufacturing and repairservices in Australia 62.40

193 Motor vehicle body and trailermanufacturing in Australia 23.10

194 Industrial gas manufacturing inAustralia 47.10

195 Artisanal bakery productmanufacturing in Australia 21.40

196 Fertiliser manufacturing inAustralia 69.90

197 Flour and grain mill productmanufacturing in Australia 67.20

Continued



Table A1 Continued

No. Industry


198 Medical and surgical equipmentmanufacturing in Australia 62.70

199 Glass and glass productmanufacturing in Australia 45.00

200 Pulp, paper and paperboardmanufacturing in Australia 64.40

201 Paint and coatings manufacturingin Australia 56.50

202 Plastic injection-moulded productmanufacturing in Australia 24.40

203 Sugar manufacturing in Australia 78.50204 Explosives manufacturing in

Australia 76.30205 Shipbuilding 71.10206 Bread production in Australia 55.70207 Synthetic resin and synthetic rubber

manufacturing in Australia 30.20208 Cheese manufacturing in Australia 58.80209 Cooking oil and margarine

manufacturing in Australia 49.40210 Railway equipment manufacturing

and repair in Australia 75.60211 Cereal, pasta and baking mix

manufacturing in Australia 49.60212 Basic inorganic chemical

manufacturing in Australia 42.80213 Corrugated paperboard container

manufacturing in Australia 89.30214 Metal coating and finishing in

Australia 21.40215 Structural metal product

manufacturing in Australia 20.70216 Copper, silver, lead and zinc

smelting and refining in Australia 90.00217 Cement and lime manufacturing in

Australia 78.80218 Concrete product manufacturing in

Australia 67.20219 Conveyor and crane manufacturing

in Australia 31.70220 Jewellery manufacturing in

Australia 14.40221 Plastic bag and film manufacturing

in Australia 40.30222 Measurement and other scientific

equipment manufacturing inAustralia 23.30

223 Wooden furniture and upholsteredseat manufacturing in Australia 19.00

224 Sanitary paper productmanufacturing in Australia 79.60

225 Plaster product manufacturing inAustralia 62.90

Continued

Table A1 Continued

No. Industry


226 Snack food manufacturing 53.50227 Prefabricated metal building

manufacturing in Australia 24.80228 Sheet metal product manufacturing

in Australia 8.90229 Agricultural machinery

manufacturing in Australia 6.30230 Household appliance

manufacturing in Australia 40.00231 Timber resawing and dressing in

Australia 25.50232 Industrial machinery

manufacturing in Australia 17.00233 Milk and cream processing in

Australia 96.10234 Cut and sewn textile product

manufacturing in Australia 13.60235 Electric cable and wire

manufacturing in Australia 61.20236 Soap and cleaning compound

manufacturing in Australia 46.40237 Glass wool, stone and non-metallic

mineral product manufacturing inAustralia 20.20

238 Lubricants and other petroleumproduct manufacturing inAustralia 72.90

239 Metal drum, can and binmanufacturing in Australia 62.40

240 Basic organic chemicalmanufacturing in Australia 13.50

241 Plastic blow-moulded productmanufacturing in Australia 79.70

242 Cake and pastry manufacturing inAustralia 31.20

243 Communication equipmentmanufacturing in Australia 16.00

244 Audio visual electronic equipmentmanufacturing in Australia 14.40

245 Fabricated wood manufacturing inAustralia 54.60

246 Heating, cooling and ventilationequipment manufacturing inAustralia 34.60

247 Tailoring and clothing accessoriesmanufacturing in Australia 16.00

248 Pump and compressormanufacturing in Australia 53.80

249 Seafood processing in Australia 32.20250 Ice cream manufacturing in

Australia 77.20251 Spring and wire product

manufacturing in Australia 60.30

Continued



Table A1 Continued

No. Industry


252 Copper tubes and wiremanufacturing in Australia 50.10

253 Boatbuilding and repair services inAustralia 15.60

254 Pesticide manufacturing inAustralia 99.90

255 Aluminium rolling, drawing andextruding in Australia 50.20

256 Machine tool and partsmanufacturing in Australia 32.90

257 Log sawmilling in Australia 24.30258 Milk powder manufacturing in

Australia 88.70259 Plastic flooring and other polymer

productmanufacturing inAustralia 16.90260 Clay brick manufacturing in

Australia 96.10261 Boiler and tank manufacturing in

Australia 18.80262 Cosmetics, perfume and toiletries

manufacturing in Australia 50.30263 Steel pipe and tube manufacturing

in Australia 63.40264 Food processing machinery

manufacturing in Australia 25.00265 Natural rubber product

manufacturing in Australia 7.00266 Biscuit manufacturing in Australia 86.80267 Computer and electronic office

equipment manufacturing inAustralia 12.40

268 Paper stationery manufacturing inAustralia 65.20

269 Fruit juice manufacturing 75.70270 Electric lighting equipment

manufacturing in Australia 32.10271 Metal roof and guttering

manufacturing in Australia 85.60272 Paper bag and other paper product

manufacturing in Australia 53.10273 Fibreglass product manufacturing

in Australia 4.40274 Wood chipping in Australia 73.50275 Adhesivemanufacturing inAustralia 42.30276 Pallets and other wood product

manufacturing in Australia 17.00277 Carpet and textile floor covering

manufacturing in Australia 58.90278 Bottled water manufacturing 75.80279 Automotive electrical component

manufacturing in Australia 28.40280 Nut, bolt, screw and rivet

manufacturing in Australia 38.80

Continued

Table A1 Continued

No. Industry


281 Iron and steel forging in Australia 66.40282 Plastic foam product manufacturing

in Australia 41.90283 Spirit manufacturing in Australia 61.70284 Mattress manufacturing 73.30285 Veterinary pharmaceutical

manufacturing in Australia 86.10286 Leather and leather substitute product

manufacturing in Australia 71.50287 Metal furniture manufacturing in

Australia 12.00288 Paperboard container manufacturing

in Australia 76.60289 Footwear manufacturing in

Australia 30.30290 Synthetic and natural textile

manufacturing in Australia 24.40291 Reproduction of recorded media in

Australia 43.30292 Ceramic product manufacturing in

Australia 23.50293 Women’s and girls’ wear

manufacturing in Australia 17.20294 Gaming and vending machines

manufacturing in Australia 78.50295 Photographic and optical good

manufacturing in Australia 24.50296 Toy and sporting good

manufacturing in Australia 9.90297 Wicker and fibreglass furniture

manufacturing in Australia 7.00298 Sleepwear, underwear and infant

clothing manufacturing inAustralia 7.00

299 Prefabricated wooden buildingmanufacturing in Australia 9.60

300 Printing support services inAustralia 29.30

301 Rope, cordage and twinemanufacturing in Australia 6.00

302 Men’s and boys’ wearmanufacturing in Australia 6.40

303 Wet baby food 95.00304 Knitted product manufacturing in

Australia 5.00305 Non-ferrous metal casting in

Australia 12.00306 Dry baby food 96.00Mining307 Iron ore mining 83.90308 Coal mining 40.20309 Oil and gas extraction in Australia 49.10310 Gold ore mining in Australia 47.70

Continued



Table A1 Continued

No. Industry


311 Mining support services inAustralia 7.70

312 Copper ore mining in Australia 65.50313 Silver, lead and zinc ore mining in

Australia 80.50314 Petroleum exploration in Australia 17.00315 Rock, limestone and clay mining in

Australia 31.40316 Nickel ore mining in Australia 77.10317 Bauxite mining 97.90318 Manganese and other mineral

mining in Australia 76.20319 Mineral sand mining in Australia 72.10320 Salt and other mineral mining in

Australia 47.70321 Mineral exploration in Australia 16.00322 Brown coal mining in Australia 98.60323 Uranium mining in Australia 100.00324 Gravel and sand quarrying in

Australia 59.00325 Diamond and gemstone mining in

Australia 89.40Personal services326 Motor vehicle engine and parts repair

and maintenance in Australia 8.00327 Community associations and other

interest groups in Australia 4.00328 Motor vehicle body, paint and

interior repair in Australia 9.00329 Heavy machinery repair and

maintenance in Australia 10.00330 Hairdressing and beauty services in

Australia 7.10331 Laundry and dry-cleaning services

in Australia 30.90332 Motor vehicle electrical services in

Australia 4.00333 Computer and electronic

equipment repair in Australia 5.00334 Parking services in Australia 52.30335 Babysitting and other personal

services in Australia 5.00336 Domestic appliance repair and

maintenance in Australia 4.00337 Funeral directors, crematoria and

cemeteries in Australia 44.80338 Weight loss services in Australia 38.00339 Photographic film processing in

Australia 25.00340 Clothing and footwear repair in

Australia 34.70341 Brothel keeping and sex worker

services in Australia 8.00

Continued

Table A1 Continued

No. Industry


Professional, scientific and technical services342 Computer system design services

in Australia 16.30343 Engineering consulting in Australia 15.20344 Legal services in Australia 8.60345 Accounting services in Australia 24.80346 Dental services 9.90347 Management consulting in

Australia 16.40348 Architectural services in Australia 3.60349 Scientific research services in

Australia 37.60350 Environmental science services in

Australia 31.80351 Specialised design services in

Australia 2.00352 Surveying and mapping services in

Australia 10.60353 Veterinary services in Australia 13.00354 Advertising agencies 32.20355 Advertising agencies in Australia 32.20356 Market research and statistical

services in Australia 27.80357 Media buying agencies in Australia 31.60358 Public relations services in

Australia 20.20Public administration and support services359 Police and firefighting services in

Australia 60.10360 Investigation and security services

in Australia 24.50361 Correctional and detention services

in Australia 84.00Rental, hiring and real estate services362 Residential property operators in

Australia 4.30363 Office property operators in

Australia 7.10364 Retail property operators in

Australia 20.20365 Real estate services in Australia 10.70366 Industrial and other property

operators in Australia 10.90367 Machinery and scaffolding rental

in Australia 27.00368 Furniture, appliance and equipment

rental in Australia 13.40369 Passenger car rental and hiring in

Australia 29.30370 Transport equipment and large

vehicle rental in Australia 38.40371 Video and DVD hire outlets in

Australia 67.70

Continued



Table A1 Continued

No. Industry


Retail trade372 Consumer goods retail in Australia 19.30373 Supermarkets and grocery stores 90.60374 Motor vehicle dealers 8.80375 Fuel retailing in Australia 71.20376 Department stores in Australia 94.30377 Clothing retailing 14.70378 Clothing retailing in Australia 13.20379 Hardware and building supplies

retailing in Australia 52.80380 Pharmacies 58.50381 Domestic appliance retailing in

Australia 46.70382 Liquor retailing 78.30383 Furniture retailing in Australia 35.60384 Fresh meat, fish and poultry

retailing in Australia 7.40385 Tobacconists and specialised

grocery retailing in Australia 25.50386 Computer and software retailing in

Australia 39.60387 Motor vehicle parts retailing in

Australia 36.40388 Tyre retailing in Australia 46.60389 Sport and camping equipment

retailing in Australia 36.90390 Convenience stores in Australia 22.90391 Fruit and vegetable retailing in

Australia 4.00392 Newspaper and book retailing in

Australia 24.60393 Cosmetic and toiletry retailing in

Australia 13.40394 Watch and jewellery retailing in

Australia 46.90395 Floor coverings retailing in

Australia 45.00396 Footwear retailing 37.20397 Antique and used goods retailing in

Australia 26.30398 Garden suppliers retailing 8.50399 Garden supplies retailing in

Australia 8.50400 Manchester retailing in Australia 48.90401 Electrical and lighting stores in

Australia 17.80402 Trailer and caravan dealers in

Australia 6.00403 Motorcycle dealers 8.50404 Houseware retailing in Australia 9.00405 Marine equipment retailing in

Australia 11.10406 Duty free stores in Australia 57.00

Continued

Table A1 Continued

No. Industry


407 Video game and recorded musicretailing in Australia 84.40

408 Personal accessory retailing inAustralia 39.60

409 Toy and game retailing in Australia 48.90410 Stationery goods retailing in

Australia 65.60411 Bread and cake retailing in

Australia 31.40412 Flower retailing in Australia 4.00413 Photographic equipment retailing

in Australia 48.00Transport, postal and warehousing414 Road freight transport in Australia 16.90415 International airlines 61.00416 Domestic airlines 90.50417 Rail passenger transport in

Australia 92.70418 Rail, air and sea freight forwarding

in Australia 41.10419 Rail freight transport 72.40420 Rail freight transport in Australia 72.40421 Postal services in Australia 97.50422 Urban bus and tramway transport

in Australia 32.00423 Taxi and limousine transport in

Australia 7.00424 General warehousing and cold

storage in Australia 34.10425 Airport operations in Australia 72.20426 Courier pick-up and delivery

services in Australia 22.30427 Water transport terminals in

Australia 58.20428 Port operators in Australia 58.70429 Grain storage in Australia 49.10430 Road freight forwarding in

Australia 9.00431 Toll road operators in Australia 93.90432 Pipeline transport in Australia 70.60433 Stevedoring services in Australia 87.10434 Navigation, towage and services to

water transport in Australia 79.40435 Removalists in Australia 24.80436 Long distance bus transport in

Australia 15.60437 Water freight transport in Australia 92.70438 Scenic and sightseeing transport in

Australia 14.80439 Water passenger transport in

Australia 35.30440 Non-scheduled air transport in

Australia 15.40

Continued



Endnotes

1. For example, in 2015, the antitrust division of the U.S.Department of Justice brought criminal charges against 66individuals and 20 firms and collected a total of US$3.6billion in criminal fines and penalties (Gidley et al. 2016).

2. These are accommodation and food services; adminis-trative and support services; agriculture, forestry andfishing; arts and recreation services; construction; educa-tion and training; electricity, gas, water and waste services;financial and insurance services; health care and socialassistance; information media and telecommunications;manufacturing; mining; personal services; professional,scientific and technical services; public administration andsupport services; rental, hiring and real estate services;retail trade; transport, postal and warehousing; andwholesale trade.

3. Concentration is defined as: ‘assets of three largestcommercial banks as a share of total commercial bankingassets. Total assets include total earning assets, cash anddue from banks, foreclosed real estate, fixed assets,goodwill, other intangibles, current tax assets, deferredtax assets, discontinued operations and other assets’.

4. The gross value added of individual firms to theAustralian economy is obtained by identifying the largestfirms in Australia based on revenues, calculating eachfirm’s share of a sector’s total revenues and multiplying

Table A1 Continued

No. Industry


Wholesale trade441 Motor vehicle wholesaling in

Australia 29.10442 Petroleum product wholesaling in

Australia 93.60443 Telecommunications and other

electrical goods wholesaling inAustralia 17.70

444 Metal and mineral wholesaling inAustralia 31.10

445 General line grocery wholesalingin Australia 64.40

446 Computer and computer peripheralwholesaling in Australia 39.30

447 Farm and construction machinerywholesaling in Australia 12.00

448 Soft drink and pre-packaged foodwholesaling in Australia 4.00

449 Cereal grain wholesaling inAustralia 55.80

450 Medical and scientific equipmentwholesaling in Australia 9.00

451 Hardware wholesaling in Australia 30.00452 Livestock and other agricultural

supplies wholesaling in Australia 21.20453 Meat, poultry and smallgoods

wholesaling in Australia 7.00454 Industrial and agricultural chemical

product wholesaling in Australia 18.30455 Pharmaceuticals wholesaling in

Australia 77.90456 Motor vehicle new parts wholesaling

in Australia 14.30457 Fruit and vegetable wholesaling in

Australia 7.00458 Mining and industrial machinery

wholesaling in Australia 30.80459 Household appliance wholesaling 23.80460 Household appliance wholesaling

in Australia 23.80461 Clothing wholesaling in Australia 8.50462 Cosmetics and toiletry wholesaling

in Australia 20.20463 Paper product wholesaling in

Australia 19.00464 Commercial vehicle wholesaling in

Australia 50.90465 Plumbing goods wholesaling in

Australia 37.90466 Liquor wholesaling 77.00467 Liquor wholesaling in Australia 77.00468 Timber wholesaling 27.70469 Timber wholesaling in Australia 21.50

Continued

Table A1 Continued

No. Industry


470 Furniture and floor coveringwholesaling in Australia 9.10

471 Fish and seafood wholesaling inAustralia 5.70

472 Toy and sporting goodswholesaling in Australia 11.10

473 Dairy produce wholesaling inAustralia 4.00

474 Wool wholesaling in Australia 34.10475 Tobacco product wholesaling in

Australia 87.10476 Textile product wholesaling in

Australia 8.30477 Kitchen and diningware wholesaling

in Australia 6.40478 Footwear wholesaling in Australia 18.20479 Jewellery and watch wholesaling

in Australia 17.80480 Book and magazine wholesaling in

Australia 56.90481 Motor vehicle dismantling and

used parts wholesaling inAustralia 9.00



this share by the ABS’s calculation of that sector’s grossvalue added contribution to gross domestic product (GDP).

5. These figures are obtained by calculating the share oftotal market capitalisation of firms listed on the ASX heldby the largest 10, 50 and 100 firms.

6. Similarly, World Bank experts have recently arguedthat cartels in Latin America harm the poorest by raisingprices of milk, domestic gas, sugar, tortillas and passengertransport (see Licetti and Goodwin 2015).

7. This perspective was summed up by Justice Scalia inVerizon Communications Inc. v Law Offices of Curtis V.Trinko, LLP (2004) 540 U.S. 398: ‘The mere possession ofmonopoly power, and the concomitant charging ofmonopoly prices, is not only not unlawful; it is an importantelement of the free-market system. The opportunity tocharge monopoly prices–at least for a short period–is whatattracts “business acumen” in the first place; it induces risktaking that produces innovation and economic growth. Tosafeguard the incentive to innovate, the possession ofmonopoly power will not be found unlawful unless it isaccompanied by an element of anticompetitive conduct.’

8. At present, the ACCC’s compliance and enforcementpolicy lists 12 factors that will be taken into account whenconsideringwhether to give priority to amatter.One of theseis if the matter relates to ‘conduct detrimentally affectingdisadvantaged or vulnerable consumer groups’. However,the ACCC’s compliance and enforcement policy is simplyanACCCpolicy document, which could readily be changedwithout reference to the Parliament. On theACCC’s currentenforcement policy, including theway inwhich it prioritisesIndigenous consumers, see Sims (2016).

References

Atkinson, A. 2015, Inequality: What Can BeDone?,HarvardUniversity Press, Cambridge,Massachusetts.

Atkinson, A. and Leigh, A. 2007, ‘The distribu-tion of top incomes in Australia’, EconomicRecord, vol. 83, pp. 247–61.

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