Amazon entry to Australia 'will be good for consumers': ACCC

While recognising that the entry of Amazon will not be good for incumbent retailers, ACCC Chair Rod Sims has said it will be good for competition and therefore consumers.
Written by Corinne Reichert, Contributor
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The entry of Amazon into the Australian retail market will benefit consumers, Australian Competition and Consumer Commission (ACCC) Chair Rod Sims has said.

In a speech on Thursday, Sims said arguments from incumbent retailers that rely on Section 46 of the Competition and Consumer Act -- which deals with the misuse of market power and was recently revised due to recommendations from the Harper Review -- about Amazon undercutting competition with lower prices have been misguided.

"Some of the loudest opponents of the Harper Section 46 changes have suggested that the arrival of Amazon, a new entrant to the Australian market, could be anti-competitive. To me, this shows how much of the recent debate about Section 46 was misplaced," Sims said.

"In terms of misuse of market power, if you open a store in a new town and you set a common price point, you are going to lose money initially if you don't have scale. Eventually, if you get your business plan right, you will make money at that price point. Even if it damages incumbent firms and puts some out of business, this is in no way illegal.

"It is hard to see otherwise than that Amazon's entry into Australia will be good for consumers, despite it not being good for incumbent retailers."

The ACCC has even been asked to "act against Amazon's business model" by some of Australia's retail incumbents, Sims said.

According to Sims, though, the regulator encourages "vigorous competition on its merits -- and this will see many firms fail".

The Harper Review, published in early 2015, had highlighted that the laws surrounding competition policy in Australia needed to be updated because "priorities will change as technology changes".

Under the revised Section 46 -- which also affected telecommunications competition laws -- corporations with a "substantial degree of power in a market" should not take advantage of that power for the purposes of eliminating or substantially damaging a competitor; preventing the entry of a company into that market; or deterring or preventing another company from engaging in competitive conduct.

The section adds: "A corporation that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services, for the purpose of: Eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; or preventing the entry of a person into that or any other market; or deterring or preventing a person from engaging in competitive conduct in that or any other market."

"The old Section 46 saw us powerless to deal with a range of behaviour by powerful firms in many parts of the value chain who were stopping their competitors competing on their merits," Sims explained.

"We now, post-Harper, have a workable Section 46 provision to deal with misuse of market power ... our message is that consumers are now empowered to choose to avoid purchasing from retailers who are price gouging or otherwise offering uncompetitive prices."

Also on Thursday, Amazon announced that it will be bringing Alexa and Echo to Australia and New Zealand in early 2018, as well as allowing developers to "build voice experiences" with the Alexa Skills Kit (ASK) and Alexa Voice Service (AVS) for customers in those nations.

Amazon Echo, a smart home voice-recognition device that provides information and plays music when requested, is powered by cloud-based artificial intelligence (AI) assistant Alexa.

"ASK is a collection of self-service APIs and tools that make it fast and easy for developers to create new voice-driven capabilities for Alexa," Amazon explained.

Australian developers including Sky News Australia, Qantas, Fox Sports, Dimmi, and Taste.com.au, and New Zealand developers such as Air New Zealand, TVNZ, Newstalk ZB, New Zealand Herald, Sky TV, and ZM Radio were given an early preview of ASK and are building their capabilities ahead of launch.

This is in addition to existing tie-ins with Uber, Spotify, Philips Hue, and others, Amazon said.

"Through AVS, hardware manufacturers will be able to build Alexa-enabled products and offer customers in Australia and New Zealand access to a growing number of Alexa features, smart home integrations, and skills," the company added.

"AVS provides developers with access to a suite of resources to quickly and easily build Alexa-enabled products, including APIs, hardware development kits, software development kits, and documentation."

Sonos and Harman Kardon have both said they will be releasing AVS products.

Amazon -- which this week said it sold "millions" of devices during Thanksgiving weekend in the US -- in October announced that Alexa is now capable of recognising different voices and personalising the Echo's services for multiple users.

Amazon has yet to announce Australian pricing, but its recently unveiled 2017 edition Amazon Echo retails for $99.99 in the US, while the Echo Plus sells for $149.99.

Rival product Google Home launched in Australia earlier this year, costing AU$199 outright or AU$124 per month on a plan with Telstra that includes 1TB of data, a Telstra TV, a Smart Home Starter Kit, and a smart plug.

Google Home is also available from Optus' smart home offerings.

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