News

Agents react to ACCC recommendations

James Nason, 14/11/2016

Livestock agents say they see no benefits in the introduction of a mandatory buyers register as proposed by the Australian Competition and Consumer Commission.

Two weeks ago the ACCC completed a six-month investigation of competition issues in the Australian cattle and beef market, and released an interim report with 14 initial recommendations.

The ACCC is now seeking industry comment and feedback until November 23.

The competition regulator said its study identified a lack of transparency and concerns about cartel and anti-competitive conduct in saleyard auctions.

It sees one potential solution to improve transparency as being the introduction of a mandatory buyers register to be made public before each livestock auction.

The register, as proposed by the ACCC, would require commission buyers and livestock agents to declare prior to each sale who they buying for.

On face value, commission buying could be considered anti-competitive and in breach of competition law, ACCC agricultural commissioner Mick Keogh told Beef Central.

“We were told in the meetings we had that a commission buyer would never have an order book that would include potentially competing clients potentially bidding on the same on the type of animal,” he said.

“When we said, alright, let’s test that, it didn’t appear to be the case.

“It appeared the advice we were given was not correct, that in fact commission buyers quite frequently held very much overlapping order books, where there was obviously potential to minimise the price paid by those clients on the actions of the commission buyer.

“So it is a thorny problem.”

However, Mr Keogh said it was also clear that removing commission buyers from the market would also have significant downsides.

Commission buyers provided an important source of competition at smaller saleyards in particular, and removing them would reduce competition at those auctions.

“But similarly we recognise that producers are concerned that in certain situations there seems to be a process going on that potentially minimises the competition for their particular animals,” Mr Keogh sad.

“So it is trying to find a path through that tangle that might help the situation that led to this recommendation (for a mandatory buyers register).”

“Sunlight is a great disinfectant”

Mr Keogh said a mandatory buyers register would provide transparency, adding that “sunlight is a great disinfectant”.

“And if that information (on the mandatory buyers register) then subsequently indicated that things were happening that shouldn’t be happening, then I guess it is a starting point to understanding how to address that.”

The ACCC believes the Australian Livestock and Property Agents Association (ALPA) should help to implement the register by working with its members to incorporate the register in auction terms and conditions at saleyards.

Agents reject register – ‘buyers are already identified’

However agents say they see no value in the mandatory buyers register as proposed by the ACCC.

ALPA says the buyer of livestock is already announced at the fall of the hammer.

“This is in the terms and conditions now,” ALPA CEO Andy Madigan told Beef Central.

“We question what difference or any benefit it makes to competition by having a list of “possible” buyers for public display.

“We are unaware of any other auction type that has a public register. Surely someone’s privacy must be respected.”

“Real Estate auctions requiring people to register is always confidential.

“We would like the ACCC to explain the benefits of this recommendation.”

Another key point in relation to a mandatory buyer’s register is that the legislation required to implement this resides at state level.

In order to be adopted it would require every State Government to support the recommendation, and then to follow through with changes to their State legislation to that effect. That is certainly no easy or straight forward task, and one key hurdle that would stand in the way of a mandatory buyer’s register being achieved.

National licensing system for livestock agents

A national licensing system for livestock agents and professional buyers, to lift compliance and general professionalism in the industry, was a further recommendation by the ACCC.

This recommendation is supported by ALPA, which believes a uniform national licensing system for agents of all types, including real estate agents, is needed.

Mr Madigan said work to implement the idea had been attempted by the National Occupational Licensing Authority (NOLA) under the direction of the Council of Australian Governments (COAG) a number of year ago, but the idea was ultimately abandoned.

He said a level of uniformity between the states was clearly beneficial.

“NSW, ACT, WA, NT and Qld already require auctioneers to be licensed in those states.

“How successful was the train lines between states?”

Lessons for beef from wool

The ACCC also believes the livestock sector could benefit from something the wool industry has been doing for 20 years.

At the conclusion of each wool auction the “buy side” of the transaction is reported which allows public analysis of who has bought wool, how much and for whom.

Mr Keogh said the livestock industry had differences to the wool industry such as an over the hooks channel which was not reported and small and large saleyards, which created more variation.

“But to us it seemed that more of that information around may prevent the temptation of behaving in ways that are anti-competitive and also provides a bit more visibility to producers about who is buying what and how,” Mr Keogh said.

Mr Keogh said agents already had this information readily available.

It believes ALPA could, with the agreement of its members, decide to make that buying information public, and coordinate the reporting in cooperation with MLA.

“There is nothing to stop that happening at the moment if the agents were encouraged enough to do that.”

Reporting buy side not agent’s role: ALPA

However ALPA says it is an association and does not collect any sales data or information.

“We believe that MLA has now very comprehensive standardised market reports,” Mr Madigan said.

“For MLA to report on who the buyers were and what proportion of stock they purchased makes no sense at all.

“This list would be exhaustive to say the least.

“It does not give anyone anything more about price trends and marketing their cattle.

“The cost to collect this information alone would be prohibitive.

“We would like the ACCC to explain the benefits of this recommendation.”

Mandatory price reporting not necessary… provided industry improves existing reporting

Mr Keogh told Beef Central that the ACCC saw arguments both for and against mandatory price reporting.

It has taken the position that it would prefer to see industry improve its existing reporting systems and fill in current gaps in reporting, such as in direct to processor sales, voluntarily, rather than have the Government impose regulation.

But he warned that the pressure to improve existing reporting would not go away if industry failed to act.

“I would hope the recommendation we have put forward would encourage the industry to try a bit harder and do a bit more,” he said.

“And certainly there is a always a caveat there that if things don’t improve as more and more prime stock in particular go over the hooks and aren’t reported in a transparent way, the argument gets stronger and stronger for some sort of mandatory system.”

Investigations underway

Asked if the study had revealed any ‘hard evidence’ of cartel or anti-competitive behaviour, Mr Keogh said the ACCC could not foreshadow the detail of evidence gathered.

The interim report noted that various allegations had been raised with the ACCC through the course of the market study and it was currently assessing specific allegations of:

  • An agreement between vertically integrated livestock agency and saleyard business which is alleged to have the purpose and/or the effect of foreclosing rival livestock agents from a saleyard
  • Bid-rigging in saleyard auctions at an east coast saleyard.

 

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Comments

  1. Peter Vincent, 14/11/2016

    It’s obviously a blue moon as I’m in agreement with ALPA CEO Andy Madigan that a register of buyers, to be published prior to a sale as proposed by ACCC is a complete waste of time and associated cost. It’s just wishful thinking for Mick Keogh, for whom rural Australians have the greatest respect, to say it adds transparency to a transaction. All it will do is add another charge to the vendor’s sale deductions.
    However, Andy Madigan’s statement that ALPA does not collect and collate data from livestock sales beggars disbelief. Seriously!

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