This is an edited speech given by Ed Husic, the shadow minister for the digital economy, during parliamentary debate last week about competition law reform and the introduction of the federal government’s new effects test.
I cannot overlook another recent foray by the Australian Competition and Consumer Commission in an area that simply staggers me, and that is their announcement last year that they will now consider the acquisition of startups by big businesses.
The acquisition of startups by big business has been a valid and accepted objective of a lot of startups. You can either list on the stock exchange, go public or you can be acquired. This has operated for quite some time.
In a country where the rate of startup formation is relatively low, it is unbelievable that we would now have a further level of uncertainty being injected by ACCC chairman Rod Sims, who last year mused publicly that they would now consider whether the acquisition of startups by big business was against the interests of the market.
As I said, what it would potentially do is put a chilling effect on activity in this space. It also flies in the face of the reality of a lot of startups; where they have found a market niche, done the R&D, found the investment, and developed a proposition that could actually deliver value to consumers or other businesses, it is not necessarily the case that their acquisition would prevent the emergence of a large-scale competitor to established businesses.
Rod Sims mentioned the examples of Telstra and Optus in startup acquisition. Telstra and Optus have very large venture capital funds that are backing this innovation. They are not backing this because they believe that they need to acquire competitors; they are backing this because some of the innovative thinking that is being championed by some of these smaller startups will actually add to the strength and security of Australian corporates, our businesses.
Here I am, as a Labor politician, championing that we want to see smaller businesses go and become bigger ones. The issue is not about size; it is about behaviour. If bigger businesses are working and collaborating with startups to see an idea grow, take hold and potentially be of benefit to the startups, the founders, their employees and the bigger corporate, that has got to be a good thing for the country.
I have not heard Rod Sims, the ACCC chairman, come out and clarify exactly what is behind his thinking. What are the examples that are driving his view that he now needs to disrupt, in his own way, the investment flows towards startups by suggesting that he will now put the regulatory blowtorch into this sector? I have not seen it.
The other thing that we have not seen is the government come out and say whether or not they back this. The government have been noticeably silent on whether or not the ACCC is on the right path by looking at whether bigger businesses can acquire startups, and they need to step up and explain exactly what their thoughts are on what the ACCC is doing.
This is a disaster in the making. We already have a relatively low rate of startup formation compared to other parts of the world. If this interrupts or inhibits the flow of capital to startups, this is disastrous, because these small enterprises have a capacity to grow much faster than other small businesses and that growth equates to a growth in employment.
And so I am certainly calling on the ACCC to spell out very clearly what the business case is for this suggestion that they would intervene in this way to interrupt the flow of capital to capital-demanding startups in this country by some sort of regulatory threat.
It is unacceptable that the ACCC has left startups hanging, wondering what is going on.
Those startups themselves have not welcomed this imposition. In fact, some of them have said that there is a better thing to do. For example, the co-founder of Vinomofo, Andre Eikmeier, has said instead of blanket restrictions on what big companies can or can’t acquire, the ACCC should focus its efforts on regulating what big companies do after they’ve acquired startups.”
This is smart advice. After all, that is what we are trying to prevent through restricting anti-competitive behaviour. That is a good point.
We cannot afford to have investment flows interrupted by regulators that are overreaching and impacting on the growth of valuable sectors to the Australian economy into the future.