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Competition catch-22

Consumers get lost in a busy marketplace.

May 2015

In the 12 months we've been producing our quarterly Consumer Pulse survey, electricity bills have consistently ranked as the top cost-of-living concern for Australian households.

This is not surprising: from 2010 to 2013, electricity bills increased by an average of 50% across Australia. This left many people bewildered because they weren't doing anything differently – in fact, many households reduced their energy consumption. It also left people fearful of future price rises.

The response of many consumers has been to shop around for a better deal – but our research shows their experience has been far from satisfactory. Our 2012 survey of people who had recently changed electricity providers found that about half were not confident they'd found the best deal. Around a third had tried to compare deals but found it to be too hard.

Governments, however, seem to have a very different view on how consumers have experienced this increased competition in electricity markets. In fact, one of the major themes of the federal government's recent Energy White Paper is the need to focus on more competition along the energy supply chain.

CHOICE believes that competition can deliver benefits for consumers but only if it's designed with the needs of consumers in mind – otherwise you end up with a confusing mess like we have in electricity.

Unfortunately, this is not the only example where competition reform has failed consumers.

In the vocational education and training sector, students enrolling in private colleges have been given access to government-backed loans to cover the cost of fees.

This rapid change has seen vulnerable consumers exposed to predatory marketing techniques like offers of free iPads for enrolling in courses with no up-front fees. Some students have ended up with thousands of dollars of fee debt for courses of questionable value.

Consumer regulators are now investigating the problems in the training industry but for many people who have lost money, it's too late. These problems would not have happened if somebody had sat down and thought about how these reforms would work from a consumer perspective.

Right now, the federal government is considering the Competition Policy Review recommendations that competition be rolled out through many more areas of government service delivery, like health and social services.

There's no doubt there are some areas where consumers would love more choice, but we should not assume that simply introducing more service providers will mean consumers get better services.

Competition is not a goal in itself. It must deliver benefits for consumers, and reforms need to be carefully designed with that in mind.

Alan Kirkland, CEO
Twitter: @AlanKirkland