Price-wise warrior back in the saddle

Posted on 12 Sep 2023

By Greg Thom, journalist, Institute of Community Directors Australia

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Amid an unprecedented cost of living crisis, the charity and NFP sector are expected to play an important role in Professor Allan Fels inquiry into potential price gouging by big business.

If there’s one thing that riles Professor Allan Fels above all else, its powerful companies preying on vulnerable and disadvantaged Australians.

As the former head of regulatory bodies including the Prices Surveillance Authority and Australian Competition and Consumer Commission, the quietly spoken Fels has spent much of his career shining a light on predatory pricing behaviour toward consumers.

Now, the 81-year-old economist, lawyer and Melbourne University academic has once more been recalled into the fray, this time to chair an inquiry into potential price gouging amid an unprecedented cost of living crisis.

The ACTU inspired Inquiry into price gouging and unfair pricing practices will investigate the pricing strategies of big business and their potential negative impact on working Australians struggling to afford essential items.

The inquiry is open to submissions from the public, subject matter experts and organisations – including not-for-profits and charities - and will hold public hearings across the nation before submitting a final report by the end of the year.

While not due not due to hand in his final report until the end of the year, Professor Fels already has a few ideas on what he thinks needs to be done.

“It’s time to take a serious look at what is a serious problem - does Australia have a price gouging problem and if so to what extent?” said Professor Fels.

“In a cost-of-living crisis, price gouging has real consequences. Those affected by this deserve an opportunity to express themselves alongside debate on potential policy solutions.”

Speaking to the Community Advocate in his home office overlooking Melbourne’s Botanical Gardens, Professor Fels doesn’t hesitate when asked what market segments he has in his sights when it comes to questionable pricing practices.

“Big retail for food and groceries. Banks and energy suppliers,” he said.

“Obviously some of the candidates we will look at will include airlines. International airfares have gone up 50% since covid.”

Professor Fels said he personally shared the palpable frustration in the community around rising prices.

“In day-to-day purchases, you can feel that you are being ripped off and there’s not much you can do about it,” he said.

“There have been quite a few cases (of excessive pricing) and we saw quite a lot of that in covid especially. It’s human nature sometimes to exploit supply shortages by charging high prices.”

The charity and NFP sector have consistently raised the alarm about the impact of the cost-of-living crisis on disadvantaged Australians who are struggling to make ends meet.

This advocacy has increasingly been backed up by hard research, with organisations such as the Brotherhood of St Laurence, Mission Australia, the Salvation Army and ACOSS releasing reports highlighting issues ranging from rental crisis to soaring electricity prices and increasing demand on food relief services.

Professor Fels said he expects the for-purpose sector to play an important role in his inquiry.

“In fact, there have been quite a few responses already,” he said.

Professor Fels said he empathised with the strong stand taken by the charitable sector in going into bat for Australians struggling to make ends meet due to high inflation – a situation made worse when firms engage in profiteering.

“The fact that there is high inflation in itself makes price exploitation possible because there’s confusion in the public mind about what’s general inflation and what else may be influencing pricing behaviour,” he said.

A long-time mental health advocate and chair of not-for-profit health organisation Mind Australia, Professor Fels said he saw first-hand how susceptible vulnerable and disadvantaged people are to exploitation, particularly those with mental illness.

“I’m not happy when I see it happening.”

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“It’s time to take a serious look at what is a serious problem - does Australia have a price gouging problem and if so to what extent?”

From an economic point of view, Professor Fels said most discussions of competition policy and its role in combatting inflation leave out the idea that there should be any price monitoring or surveillance mechanisms in place.

“I have long believed that discussions of inflation fail to adequately emphasise the role of prices,” he said.

“To the person in the street, inflation reflects high prices … but most expert discussion is about the role of monetary policy, government fiscal policy, exchange rates and wages in generating inflation and overlooks the most obvious area and immediate variable.”

While a supporter of competition law, Professor Fels said its shortcomings are well known.

“As regards firms co-operating with price rises anti-competitively it’s only an offence legally if they actually communicate with one another about their prices.

“Now, if you have a concentrated industry where the main two or three players know all about each other without having to communicate, it’s easy to put up prices co-operatively without breaking the law.”

Professor Fels hopes his inquiry will help change this for the better.

While several months away from submitting his final report there are several outcomes he hopes it will help achieve.

“I’ve been studying this topic for many years, and I’ve got some ideas already,” he said with a glint in his eye.

They include:

  • A better understanding of the impact of inflation on the cost of living.
  • The possible exposure of cases of excessive pricing.
  • Serious consideration given to the reintroduction of price surveillance mechanisms.
  • The strengthening of competition law.

“I’d like to emphasis that I’m particularly interested in the impact on disadvantaged and vulnerable people,” said Professor Fels.

“That’s quite a high priority. Always has been in my mind.”

More information

Inquiry into price gouging and unfair pricing practices

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