Concentration: The dominance of big companies in Australian Industries

“Australia has a competition problem – there is not enough of it. Our industries are concentrated. Anti-competitive conduct is rife. Our consumers are treated poorly”. Dr Andrew Leigh, MP

We read with interest this article in the Sydney Morning Herald discussing a speech on competition and ‘concentration’ in the Australian market by Dr Andrew Leigh.  He suggests; it’s hard to think of many Australian industries today that aren’t dominated by just a few behemoths, “whether it’s Coles or Woolworths, Lion or Carlton, Caltex or BP, Medibank Private or BUPA, Qantas or Virgin – it seems consumers don’t have a great deal of choice where they get their goods and services from.”

Dr Leigh is a Harvard trained, former economics Professor and now the Federal Opposition’s spokesman on competition.  Citing American evidence as well as a study gathered alongside ANU’s Dr Adam Triggs, Leigh suggests that the ‘concentration’ of our industries is leading to slower economic growth and productivity.  Leigh and Triggs found that over half of the 481 Australian industries measured could be defined as concentrated (a standard measure of concentration judges an industry to be concentrated if the top four players control more than a third of the market).

Leigh says our commercial banks; petrol retailers and liquor retailers are more than three times as concentrated as those in the US.  As a general rule, greater market concentration gives the small number of big firms increased “market power” – ability to influence the prices they charge. It may also give them power to extract lower-than-reasonable prices from their suppliers.

Interestingly Leigh also cites American evidence stating that big companies in concentrated markets were almost 20 per cent slower in paying their suppliers than small companies.

What does this mean for Australian SME’s working in this concentrated environment, dominated by a few large players?

For most, there is little choice but to accept the prices and payment terms dictated by larger corporates.  This can be very stressful – particularly when it comes to cash flow and while the situation is undoubtedly unfair, we believe there are measures that can be taken to remain in control.

Invoice finance is a great way to capitalise on what’s ‘coming into’ a business by accessing the funds from invoices (accounts receivables) immediately.  Invoice finance can help create a steady influx of cash allowing SME’s to sustain and even thrive in a concentrated market.

Talk to Apricity today about how invoice finance could help your business.