Playing the monopoly game
Tuesday, January 17, 2012/
The week prior to Christmas is a fairly lethargic time for news and opinion makers. Many will be on holiday and, anyway, most of their audience won’t be bothered by issues more weighty than wrapping presents and the Boxing Day test.
Overall, if there is such a thing as a good time to be hit by a $2.5 million fine and publicly shamed, a couple of days before Christmas Day is probably it.
The ticketing giant was accused of denying promoters’ requests to create a special URL that would allow the offering of last minute ticket discounts, for shows including Liza Minnelli concerts, to consumers via Lasttix.
Breaking down the barriers
While the news failed to ignite much attention due its timing, the huge fine, imposed after court action taken by the Australian Competition and Consumer Commission, is a stark reminder of the tough landscape that many Australian start-ups have to operate in.
While Australia is considered an easy place to start a business by global standards, new ventures are regularly faced by near-monopolies that, by fair means or foul, will attempt to snuff out the threat they pose.
In Ticketek’s case, the business, along with Ticketmaster, controls around 70% of Australia’s major event ticketing market. It can use its clout with promoters and venues to shut out rivals, as it did with Lasttix, a service that advertises “last minute” available tickets for sought-after events.
According to Alistair Little, a partner at leading law firm TressCox, the problem of large incumbents crushing new market entrants is “not an uncommon” one.
“Australia is prone to oligopolies and the ACCC has become very concerned about cartel-like behaviour,” he tells StartupSmart.
“It can be hard to break into mature markets, unless you have a lot of financial backing. I think the ACCC is very alive to this.”
“The Ticketek case is a common example of what happens. You have a company who has control of a resource or facility and they don’t make it available to a competitor.”
“Another tactic is to discourage retailers from using other suppliers by threatening to withdraw your products. This is known as exclusive dealing.”
The ACC has drawn up a raft of guidelines on what constitutes anti-competitive behaviour, ranging from price fixing to exclusive dealing.
But when does healthy business competition cross the line to become something your new business shouldn’t have to tolerate?
“It’s perfectly okay to not deal with someone else, as long as you’re not misusing your market power to do it,” explains Little. “If you are doing it to completely shut someone else out of the market, that is illegal.”
The penalties for such anti-competitive behaviour are quite severe. It can be a fine of up to $10 million per offence or up to 10% of the company’s turnover for the year. Alternatively, it can be a percentage of the amount obtained by illegal conduct.
The time and cost of pursuing action against a large rival may put off many start-ups, as well as the not insignificant fact that any fine imposed will be paid to the Government, rather than the victim of the law breaking.