ANZ on price-fixing: "We aren't competitors"
The Age online is carrying an article about the ACCC's price fixing action against ANZ bank, which I blogged about a few days ago. Quoting from the article:
ANZ is probably arguing that there are two separate markets: one for "loans direct from banks", in which ANZ competes; and a separate market for "loans via middlemen/brokers" in which Mortgage Refunds compete. Because they're not competitors, what ANZ is alleged to have done isn't price fixing.
Market definition in competition/antitrust cases is, as The Age's article notes, fraught with difficulty. However, I think that the ACCC's argument has a much better chance of success. In economic terms, home loans from banks and home loans via brokers are substitutable; if banks raise their prices, consumers will go to brokers, and if brokers raise their prices, consumers will go to banks. Substitutability is an important indicator that products/services comprise a single market.
ANZ will need to do some fast talking and have eminent economists on hand to support their world view that home loans from banks, and home loans via brokers, are two completely different services that don't compete with each other.
IMHO, the smart money is on the ACCC.
The ACCC's statement of claim and ANZ's response spell out a case that will turn on whether the court believes banks and their brokers operate as distinct and competing entities in a market for "loan arrangement services". ANZ in its only statement regarding the case said the assertion that banks and brokers were competitors was "ill-conceived and misplaced in law" because "ANZ as a lender and Mortgage Refunds as a broker are not competitors".Mortgage Refunds and the ACCC are probably arguing that there is only one market, let's call it "provision of home lending services", in which the ANZ bank and Mortgage Refunds compete with each other.
ANZ is probably arguing that there are two separate markets: one for "loans direct from banks", in which ANZ competes; and a separate market for "loans via middlemen/brokers" in which Mortgage Refunds compete. Because they're not competitors, what ANZ is alleged to have done isn't price fixing.
Market definition in competition/antitrust cases is, as The Age's article notes, fraught with difficulty. However, I think that the ACCC's argument has a much better chance of success. In economic terms, home loans from banks and home loans via brokers are substitutable; if banks raise their prices, consumers will go to brokers, and if brokers raise their prices, consumers will go to banks. Substitutability is an important indicator that products/services comprise a single market.
ANZ will need to do some fast talking and have eminent economists on hand to support their world view that home loans from banks, and home loans via brokers, are two completely different services that don't compete with each other.
IMHO, the smart money is on the ACCC.
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