Professor Allan Fels 

Professor Allan Fels has been Chairman of the Australian Competition and Consumer Commission since November 1995.  Professor Fels was Chairman of the former Trade Practices Commission from July 1991 until November 1995.  He was also Chairman of the Prices Surveillance Authority from March 1989 until October 1992.  Professor Fels was formerly the Director of the Graduate School of Management, Monash University from 1985 until 1990 and is now an Honorary Professor in the Faculty of Business and Economics at Monash University. Professor Fels is the Co-Chairman of the Joint Group on Trade and Competition at the OECD. 

(Photo by David Reid)

Interview with Professor Fels

Do you see yourself as a Leader? What is the vision that you are working towards?

As Chairman of an organisation with 450 employees I see my contribution as being leadership rather than detailed implementation of policies.  We have a skilled, able and conscientious staff and there are fellow Commissioners as well.  Hence I see myself as having a crucial role in helping set the general direction of the Commission, in communicating it externally and internally, and keeping an eye on the appointments we make to ensure that they are broadly compatible with the overall aim. 

I believe that the Trade Practices Act is a good, sound, important piece of legislation which contributes to an efficient, competitive and fair Australia.  My vision is that the ACCC plays a key role in bringing about the best possible compliance with the Act by the business community for the benefit of Australian consumers.  

What qualities and strengths would you identify as being essential in your position as Chairman of ACCC?

First, a clear understanding of what our governing legislation is and what our role is in implementing it.  Second, an ability to communicate this internally and externally.

Third, I also seek to influence decisions to ensure that they are generally heading in the right direction and I sometimes propose initiatives for new areas of activity.  Generally I don’t believe in interfering too much with decisions by staff even though mistakes at staff level can damage the Commission.  However, just to complicate the picture, there are occasions when you want to see some habits change in your organisation and it’s the matter of involving yourself in quite a bit of detail in some cases to demonstrate what should be done in those and other comparable cases.

Fourth, the Commission comes under a lot of pressure from different interest groups.  It is quite important to be prepared to stand up to it in the public interest even if there is some criticism from time to time.

What has determined the choices you have made in your career in its evolution from Academic to being a leading Public Servant?

I have always been interested in doing public service.  It is a fairly natural evolution from serving the public as an academic to working in the government.  There are of course quite big differences with the government role involving far more action and fast decision making.  However the ideas that I formed as an academic have been extremely helpful at the ACCC.  As an academic, I developed a good technical knowledge of the relevant law and economics and a broad view of what the ACCC was meant to do.

What have been the highlights of your leadership of the ACCC?

Initially putting the Trade Practices Act and the ACCC on the map by winning some early big cases against cartels and making the Act both more effective and more visible;  having the merger law changed from an unduly soft “dominance” to a more logical “substantial lessening of competition” test;  having a role in the “Hilmer” reforms which greatly widened the scope of the Trade Practices Act;  overseeing the price effects of the GST.

What have been some of the frustrations?

There have not been many.  The ACCC has been on something of a roll most of the time I have been here.  The climate of public opinion is essentially sympathetic to the vigorous application of the Trade Practices Act.

I don't often think of the frustrations.  Rather for better or worse I tend to accept many of them as given and do my very best to bring about the best possible results.  For example court processes are somewhat slow and legalistic.  This at times is a frustration.  However it is a matter for the Commission of accepting most of these as given and then achieving the best outcomes in this situation.

The biggest area of frustration is the rather slow pace of reform in some of the public utility areas, such as gas, rail and to a degree electricity and telecommunications.  Very often governments are involved and they have strong revenue interests and don’t really want them compromised in the interests of consumers.  Also one is dealing with powerful incumbent monopolies who are resisting change.  A lot of the pressure has gone off on some of these areas of competition policy and the Commission has to battle on, often on its own.

Having to make and execute decisions that are not always welcomed by the business community, how do you manage to be resilient in the face of criticism and innuendo?

When I was much younger I found some of the criticism hard to take but as time has passed I have got used to it and now believe that some of it is simply a sign that I am doing my job properly.  Criticism is inevitable in this job.  It is also inevitable that criticism takes a personal turn.  Critics will often not attack you on the points of core concern to them but rather build up criticism on fringe points or on your personal characteristics.

The ACCC is always involved in a large number of matters and if criticism is building up on one matter we are usually able to take other actions in other areas which drown out some of the criticism.  It is more effective to respond to criticism with action rather than rhetoric but this is not always possible.

With the ACCC having a dual role, that is as a regulator and competition law enforcer, and with offices spread across Australia, what organisational challenges do you face in following a unified direction? How do you motivate and lead your team to excel and meet its mission?

There are growing challenges at the organisational levels.  Currently the Commission has three functions – traditional enforcement of the Trade Practices Act, regulation of public utilities, oversight of the GST pricing -–in place of the old traditional role of the former Trade Practices Commission in enforcing the traditional parts of the Act.  Moreover we are now something of a matrix organisation.  To a degree we have to organise along national/regional lines;  along general versus industry specific lines (for example we have traditionally been organised without having any industry specific sections but these days we have to have some industry specific sections relating for example to:  telecommunications, energy, transport and so on).  We also have to organise functionally with the result that the organisation is divided up in such areas as law enforcement;  mergers;  adjudication of authorisations;  regulation of utilities;  small business and so on.

Hence we find that certain issues may have a functional dimension, an industry dimension and a regional dimension.

To add to this the organisation has become a great deal larger in recent times.  There used to be about 200 staff not so long ago.  Now there is about 450 to 500 and it was greater than that during the height of the GST demands.  We are also experiencing higher staff turnover than in the past, partly because of demands from law firms and regulated industries for some of our staff.  We have difficulty matching the salaries that are offered.

This puts a premium on effective communication within the organisation.  We work quite hard on trying to have a unified culture. 

The morale and ambition for the organisation are both high at the ACCC at present.  One reason is that we all strive very hard to get good results.  We all try to think about the results we want rather than think of ourselves as simply performing bureaucratic and procedural functions made necessary by the law.

There is, I believe, quite a good informal set of relationships at all levels of the organisation including between the Chairman and Commissioners and members of the staff.  One particular reason why I believe that the Commission does a fairly good job is that it is actually under a great deal of pressure from business and from law firms in dealing with difficult matters.  The stakes are high in many of our decisions.  The pressure actually leads to good performance – it “keeps us on our toes”.

The Commission is under pressure to deliver and most of the staff live up to that very well.

How is the ACCC coping with its new tax role in relation to monitoring GST practices?

This role is essentially temporary until June 2002 and I hope that the worst and most difficult parts of the exercise are now behind us.  Our aims were twofold.  First, to do a good job on the GST and second, not to compromise in any way our traditional work.  The latter was basically achieved except that for a few weeks around July 1 we had to ease off on our traditional work.

At the beginning of the year 2000 we were all quite worried about our responsibilities in relation to the monitoring of the GST.  However the Commission was determined to apply the law vigorously from the start and perhaps success was due to our fierce determination being conveyed successfully to most businesses in Australia with the result that most of them complied very carefully with the requirements of the legislation.  In addition we consulted pretty heavily with business to make sure that our approach, even if unwelcome, was practical and we did make some modifications in the light of their views.

Do you believe that there needs to be international laws for the misuse of power and exploitation of consumers by E-Commerce businesses, given that their markets are global? What have been some areas of concern that have stemmed from this form of globalisation?

Yes there needs to be an international solution to e-commerce problems.  When consumers buy things by e-commerce means from abroad they are not as well protected as if they are buying in Australia.  Issues such as credit card fraud and misuse, privacy, protection against misleading and deceptive conduct and against faulty products and so on are difficult because there is no international legal framework.

We can make some progress by cooperation between regulators. 

There is also some onus on businesses who want to make a success of internet trading that they do something in the form of setting standards of trading if they want the reputation of internet trading to be a good one.

How are countries in the Asia Pacific responding to aims of building effective competition and consumer protection regimes that promote fairer international markets? Will the ACCC demonstrate leadership in the region to achieve this vision?

There is growing interest in the Asia Pacific area about competition policy.  A very large number of countries have been visiting the ACCC and/or inviting us there to learn about how to apply competition law.  We are actually spending quite a lot of time now on trying to give them help with the assistance of AusAid.

With respect to the Australian Airline Industry, how do you respond to critics who believe that the ACCC’s interference in decisions to allow the development of infrastructure in airports to accommodate the smaller players, has impeded competition and growth of the smaller players, whilst favouring the larger and dominant players.

I believe this question stems from a specific decision we made about the price which one of the new entrant airlines should pay for new facilities at one of Australia’s established airports.  Basically the small airline reached agreement with that airport that the airport should build some facilities that would enable it to use the airport effectively.  The price they had agreed was conveyed to the ACCC which thought it was far too high.  The ACCC intervened and insisted on a lower price.  Initially the small player was concerned about this because it thought that the investment might not occur.  In fact the investment did occur and the new player has ended up with much lower prices.  The investment was not delayed by our decision.

The ACCC has also been criticised for being too slow in eroding Telstra’s power.

a.     Are you satisfied with the rate of progress of deregulation in the Telecommunications Industry?

Telstra still has a great deal of market power.  On the other hand there has been a significant increase in the degree of competition in the telecommunications industry.  There are now about 50 carriers.  There have been very sharp price falls in most services.  The rate of progress in Australia has been quite good by international standards but it would be better if change could occur faster.                  

b.     What are some of the issues that have required a prolonged investment of time and consideration by the ACCC?

     The prolonged investment of time and consideration referred to in the question stems partly from the processes set up under the Act rather than just from the issues under consideration.  For example there are rights of appeal on quite a few of our decisions.  There is often a good deal of game playing by participants in this industry.  Having said that however the central issue is to strike a balance between making decisions that will promote competition by new players but not hinder investment and infrastructure by established operators such as Telstra.  The decisions are particularly challenging when one comes to setting prices which Telstra can charge its competitors for their use of its network facilities.  Too high a price means that they cannot compete and the consumer is damaged.  Too low a price discourages investment by Telstra in modernising its network.

c.    Does the ACCC need to adopt a stronger public relations strategy that enables the community to understand the fairness of its stance and the nature of its investigation to quell such criticism?

  Whilst the Commission is pretty active in regard to public relations the telecommunications industry is a bit of a special case.  This is because in this industry there is an extremely active public relations campaign adopted by the anti Telstra forces – the many new players wanting to compete with Telstra.  Their complaints that they are not getting sufficient access and so on are highly voluble but to some extent they should be discounted for self interest and for non objectivity.  It is worth noting incidentally that Telstra has greatly sharpened its public relations campaign in recent time and is managing to get articles in the press claiming that the regulatory regime is hindering its capacity to invest.  In short one should read the media on the telecommunications industry in a discerning fashion.

In terms of the future, you have said “What are the constants and the variables?  The constant factor stems from the unchanging nature of human beings seeking to advance their own private interests with little concerns about their effects on the economy and the community as a whole.” Do you believe that underlying this “constant factor” is a more fundamental problem of the absence of a commitment to the values of integrity and ethical leadership in humans and that more needs to be done to address the fundamental problem in addition to focusing on its symptoms as manifested in the business world?

     This is a profound question.  It’s worth recalling what Adam Smith, the founder of modern economics said in The Wealth of Nations, his seminal work in 1776.  Smith accepted that greed was part of human nature and that it would not change.  Given this situation he saw competition as being necessary to protect the public.  He actually believed that if individuals were left to pursue their own economic interests that this would work well and for the benefit of the public as a whole.  This however was subject to a giant qualification – that there should be competition.  Smith made it quite clear that a combination of monopoly and self interest was highly damaging to the public interest.  On the other hand harnessing the forces of greed to serve the public interest could occur in markets governed by effective competition.  I basically agree with this view.  It is not to say that we don’t need high values of integrity and ethical leadership in humans.  We would have a better society and a better economy if this happened.

My own experience has been however that the most effective way of improving business behaviour in terms of compliance with the law has been to take serious litigation action rather than to exhort people to have a higher standard of ethics.

What are you looking forward to in your second term in office?

Essentially more of the same – that is vigorous enforcement of the Trade Practices Act.  At the same time we have to adapt to a changing world where globalisation, new technology and liberalisation both of international trade and domestic business is occurring.  This calls for some changes in our approach to problems.

The changes I have referred to however raise new problems.  For example the new technology is generally good for competition and consumer choice but in some cases it creates new sources of market power as illustrated by the Microsoft case.  So adapting to the new world is quite challenging.  In some ways the new changing world is good for consumers, in other ways it raises new challenges for a competition agency.

What are your long term aspirations beyond the ACCC?

Having just been reappointed until June 2004 I don’t have to worry about this too much.  I do not have major career aspirations beyond the ACCC.