Mr Sims has cautioned against the trend for state governments to allow monopoly privatisations of Australian ports, and followed this with comments in which he referred to analysis showing the revenue of Australia’s largest 100 listed companies increasing from 15% of GDP in 1993 to 47% of GDP in 2015.
He said many markets are concentrated or are likely to become concentrated as firms pursue efficiencies from scale.
“In some markets there may not be room for more than a few efficiently-sized firms given the size of demand. From a competition perspective, what we need to understand is whether smaller rivals or new entrants can readily contest the position of larger, more established firms.”
He said conventional wisdom was that mergers resulting in high levels of concentration in markets with substantial barriers to entry will usually reduce competition.
Mr Sims also argued that government preferences for price monitoring regimes at Australian ports is failing to constrain monopoly pricing, an example being the Port of Newcastle, which was privatised in 2014. Less than a year later, the new owner revalued its port assets and increased navigation charges by over 40%.