Competition watchdog Rod Sims has warned retailers that he will not protect them from Amazon if the e-commerce giant undercuts them on price when it enters Australia.
The Australian Competition and Consumer Commission chairman will tell a conference in Sydney on Thursday that Amazon’s impending entry into Australia will be good for consumers, even if it damages some incumbent businesses.
“Some of these incumbents have called on the ACCC to act against Amazon’s business model,” Mr Sims will say, according to a prepared speech.
Changes to the competition act passed into law on November 6 introduced an “effects test”, which prohibits large companies taking action that has the purpose, effect or likely effect of substantially reducing competition in a market. Previously, the ACCC had to show the company had taken advantage of its market power to muscle out competitors.
“What has been fascinating recently is that some of the loudest opponents of the recent Harper Section 46 changes [to the competition act] have suggested that the arrival of Amazon, a new entrant to the Australian market, could be anti-competitive.
“To me this shows how much of the recent debate about Section 46 was misplaced.”
The change, recommended by the Harper competition law review, was wildly unpopular with large retailers and the Business Council of Australia.
American e-commerce giant Amazon is expected to undercut local retailers on price when it starts trading here to attract shoppers as it builds up its customer base and logistics network. But Mr Sims says he would not stop Amazon running at a loss to do this.
“If you open a store in a new town and you set a common price point, you are going to lose money initially if you don’t have scale,” Mr Sims will say.
“Eventually if you get your business plan right you will make money at that price point; even if it damages incumbent firms and puts some out of business – this is in no way illegal.”
Retail watchers widely expected Amazon to launch its Australian operations last week or on “Cyber Monday”, but it is yet to go live. The company, through a local public relations agency, won’t comment on when it plans to open.
But local boss Rocco Braeuniger told a sellers conference earlier this month it would launch with both its third-party “marketplace” platform and its own retail offering, with products to be shipped from its warehouse in Melbourne’s outer-east.
Retail analysts say that electronics retailers such as JB Hi-Fi and department stores like Myer and David Jones are most vulnerable to Amazon’s arrival, an event that has been weighing on the share prices of retail stocks this year.
While Amazon is not expected to gain significant market share at first, its low prices will force incumbent retailers to drop their own prices and sacrifice profit margin to stay competitive.
The ACCC was due to hand down its decision in an eight-month review of BP’s acquisition of Woolworths’ 543 service stations on Thursday, but on Wednesday delayed that decision to December 14 so it could consider further information from the two parties.
The watchdog issued a draft determination conditionally authorising the sales in August.
BP Australia’s president Andy Holmes said he expected the review to be detailed and remained “confident that clearance will be granted in due course”.
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