Rod Sims

Rod Sims, the new chairman of the Australian Competition and Consumer Commission, has been on a steep learning curve since taking on one of Australia’s most important and controversial regulatory positions in August.

The economist, former business adviser and fan of market economies is happy to admit that he has plenty to learn when it comes to SMEs, but says his family’s history in small business and his open ear will hold him in good stead.

Sims also shares his thoughts on franchising agreements, the regulation of online sales from offshore sites, retail tenancy disputes between retailers and their landlords, and reveals what scares him more than continued sharemarket volatility.

Rod, congratulations on your appointment. What was your motivation for accepting the job?

I’ve always thought the ACCC was just a fundamentally important institution for the Australian economy. I mean, I’m someone who thinks market economies work really well provided they’re effectively regulated.

It’s that old thing with the profit motive: it just gets people to do wonderful, innovative things, but they’ve got to be playing within certain rules. And it’s the ACCC that does that, so to be part of such an important institution I was delighted to accept.

But it’s a controversial post. Are you ready for that?

Look, I’m at an age where I don’t much… I mean, I’ll just call them as I see them and if controversy comes, it comes. I’ve got a reasonably thick skin.

I’ve heard a quite bit about your areas of focus. We’re wondering how SMEs fit into your remit?

Look, they fit in very strongly, I’d have to say.

I mean, it’s not an area that my background has led me to understand a lot about, so I’m quite happy to admit I don’t come to the post with a deep knowledge of SMEs although there’s a rider I’ll put on that and come back to later if I may.

But I do think small business is absolutely fundamental to the future of the Australian economy, and so what I want to do is engage very closely with the sector and do a lot of listening and learning because I’ve got a lot of that to do.

The only rider I’ll put on it – and this is perhaps going to sound a little bit silly – is that my entire family, by which I mean father, grandparents, uncles and aunts, were just all in small business. So I understand it from that point of view and by small, I mean one-person businesses, all of that.

What fields were they in?

Well, in Apollo Bay in Victoria at one stage the Sims owned the drapery shop, the hardware store, they ran the pub and they owned the bus company. My father, I was brought up in Lorne, he first of all owned a general store and then he went on to run the local service station. My aunt was a long-term real estate agent and other relatives were farmers, just family farm.

So most of the people I grew up with as uncles and aunts and grandparents, were pretty much all in small business rather than working for somebody else. So I guess that just gives you an understanding that small business is bloody hard, it’s really a bit of a high-wire act I think, and you don’t have much time to get on top of the latest bit of regulation or whatever. I mean, you’re just on your own doing it all yourself, working amazing hours. So I sort of understand all that, but that said, the most important thing I’ve got to do is I think listen and learn.

It’s interesting: some of the areas that you spoke of before – hardware and pubs and general stores – these are less the domain of SMEs than they were in decades past. Obviously there are benefits of scale there, so how do you balance facilitating the growth of the economy with supporting SMEs and their ability to grow in a competitive economy?

Look, I think that is the great tension here, Madeleine. But I guess the dominant response I have to that is I very much understand that.

The beauty of a market economy is that you’ve got a lot of competition, sometimes that leads to completely reinventing a value chain in an industry and of course when you do that a lot of very efficient good businesses can be on the receiving end.

So I guess the job of the ACCC is really working out, what is the normal competitive activity and what is anti-competitive activity? What is misuse of market power?

And I think that is something that is a tricky distinction and something I’ll want to get the views of small business on.

What have you heard so far in terms of SME competition concerns?

Look to be honest, I mean I’ve heard quite a number with Michael Schaper [deputy chairman] who I’ve had a few discussions with and the contact I’ve had with small business so far has been pretty high level.

We want people to understand what we can and can’t do, what we’re capable of doing. We want people to understand the circumstance we’re in, and I’d like to think that I do do that, but I haven’t engaged with them yet on detailed issues and that’s what I’m looking forward to doing.

I’ve been in the office six weeks and I’ve had to deal with a few issues coming over the hill but I intend to start engaging on these issues.

Franchising disputes is something that we hear quite a lot about. Is it your view that the current dispute resolution for franchising is working?

Madeleine, if I gave you a view on that it would be based on not enough knowledge. I am just being honest here.

I’m intending to attend the consultative committees we have with small business and that we have on franchising. And that’s where I’ll start to engage on those issues.

We have got more powers in terms of being about to audit franchising arrangements; whether that will help us deal with that or not, I don’t yet have a considered view.

So again, I’ll go into this with an open mind.

I do understand how widespread franchising is because believe it or not, I hadn’t actually realised this, but I have got quite a lot of friends who have been involved in these sort of things and taken on various franchises.

So I have seen how difficult it is in terms of understanding what you sign up for and how that actually works out in practice.

I have actually got a couple of very good friends who have been involved, and in a sense it probably hasn’t worked out that well. So I have got some second-hand experience, if I can put it that way. But to give you a detailed comment it is just too early days, I’m afraid. I’d be making it up otherwise.

One thing that you have commented on before is online retail. What concerns specifically have you seen about online sales?

Well, just the same things that you read in the press. What I was saying about online sales was more that the ACCC has got quite extensive powers under the Australian consumer law to watch out for misleading conduct, to watch out for people not providing what they said they would provide and all those sort of things, the contract terms.

The trick that we need to think about is how we apply all that to the online world, which is growing. That is more the point I was raising – that we the ACCC face a challenge, and that challenge is to work out how we are going to enforce the ACL, how we are going to enforce the consumer guarantees provisions, how we’re going to enforce the unfair contract terms in the online world.

And we have done a little bit of that but it’s just going to grow, and so we are going to give a lot of thought to how we deal with that inside Australia and how we cooperate with other regulators overseas.

I was more flagging it as something that we are going to have to deal with and give a lot of thought to because it is a growing source of doing business.

I assume that area of focus is those retailers offshore than those that are based here.

Correct. Otherwise we don’t have a level playing field. If we are enforcing the ACL against those retailers based here but we feel we aren’t able to enforce it with those offshore then that is just inappropriate.

Another issue raised by small business is the regulation of tenancy matters. Is that something that is on your radar?

I do want to talk to people about it. I am acutely aware of the issue. The classic, I suppose, is the tenant in the Westfield shopping centre, is that what you have got in mind, is that right?

That’s often what we hear about but I’m sure there’s elsewhere.

I am sure there is elsewhere, but that is a classic one. Look, I am aware of the issue, and I think it is fair to say that I will approach the issue with an open mind.

I would really like to hear from small business about that before starting to give much of a view, but I’m certainly aware of the issue.

I understand that you have been quite clear that the ACCC won’t be shying away from prosecution under your watch and indeed might pursue action where the result will be more uncertain that perhaps it was under [former ACCC boss] Graeme Samuel.

How do you get that balance right between making an example out of a company that has broken a law and ensuring that the rules are understood and companies aren’t being punished for honest mistakes?

I think the way out of that, Madeleine, is quite straightforward: the starting point for what I was saying is really inappropriate behaviour.

I mean, if we think someone has made an honest mistake, in any circumstance we would be in touch with them to get them to correct it, we might or may not seek an undertaking but we would deal with it in that sort of way.

It is where we see people doing things that it is just inappropriate behaviour. I can accept enthusiasm and that they may not have realised that they have broken the law, but I think if people are doing things to undermine a competitor, they may think it is legitimate, we may think it is against the law, but they are still doing things that I think most people, if they looked at the Act, would say, ‘well does this constitute misuse of market power?’ Most people would probably say, ‘yes’.

So I’m only interested in going after people where I think they have gone against the Act in a way that most people would understand. If you raised the behaviour with a taxi driver, he’s say, ‘oh that seems bad.’ You know, that sort of thing.

I’m not testing the law to make people guinea pigs when they haven’t really done anything wrong.

The premise is that I think they have actually gone against the Act. But the lawyers may tell me, ‘well, Rod you may say it is bad behaviour, you make think it bad behaviour but we’re not sure the law covers that.’ That’s when I am talking about stepping up.

I don’t ever want to make a company a guineapig, that’s not what I am about.

Okay. I know your most recent background was working in business advice rather than working as an economist, but with the market collapsing today [12 September], are you personally concerned about the prospects of another world recession?

Oh, look absolutely.

My bigger concern … as we know a recession is just two quarters of a downturn. I am more concerned about the long-term constraint on world growth that the sovereign debt issues and the overseas bank debt issues raise.

I think the constraint that could impose on long term growth is the worry that is bigger for me.

If we have a short-term double dip and then we get on with it, well who cares really? But the long-term ball and chain on growth is what worries me.

And if we are continue to see fragility in the local and the international markets, does that have any effect of your job at all or do you see the regulator as being not so respondent to those kinds of conditions?

I think it doesn’t effect what we do. I mean if people are engaging in inappropriate behaviour then that is when we act. I don’t think the external economic circumstances effect that judgement.

I was wondering in terms of perhaps some of the GFC decisions on mergers that were made…

It is a case by case issue, Madeleine. If a firm is visibly failing at any time that can affect merger decisions, but look, it’s case by case. Every merger is its own particular assessment, but I think you have got to be careful that you don’t agree to something because of a particular circumstance only to find it’s not an appropriate set of arrangements in the future.

Thank you very much.