No common ownership issues in Australia

A 30% shareholding in an organisation is not a common ownership problem and given the Australian Competition and Consumer Commission (ACCC) ‘uncharacteristically’ says there is not an issue, there is no common ownership issues, according to AustralianSuper.

At a parliamentary inquiry, AustralianSuper chief executive, Ian Silk, was asked whether there would be a common ownership emerging if the superannuation fund had a 30% shareholding in an organisation.

Silk said: “From AustralianSuper’s point of view? Certainly not. We want that organisation that we have your 30% stake in to maximise its profits in a long-term and sustainable fashion to benefit the members of this organisation”.

Silk noted that so far in the inquiry no bank or regulator had seen an issue of common ownership.

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“This committee has had two of the big four bank CEOs appear before it and they saw no issue in relation to any adverse competition effects. You've had the head of APRA [the Australian Prudential Regulation Authority], senior executives from ASIC [the Australian Securities and Investments Commission], and most importantly, the ACCC, say precisely the same thing,” he said.

“It's an interesting field and there are different views on it. When we looked for empirical data, that seek to substantiate the views of those who say, at least, a substantial lessening of competition, we do not see it.

“I am mindful that when the chair of the ACCC was asked by the chair of the Joint Standing Committee on trade and investment growth earlier this month, was invited to propose any changes to the law to deal with this issue rather uncharacteristically, he said, ‘I'm very happy with the law on this issue, I wouldn't propose any changes’.”

Silk said top reason the industry fund did not engage with activity that people were concerned with that involved negative implications of common ownership was that it was illegal.

“It's illegal for one or more partners to get together and to approach an organised company, it will be illegal for the company to participate in that, and directors of the company have their own obligations under the Corporations Act – to act in the best interests of the company for a proper purpose,” he said.

If it were not illegal, Silk said the fund would still not engage in that activity as it would be to the long-term financial detriment to its members.

“Our investment process is a largely bottom-up process. On that basis, we want high performing organisations that are going to return good dividends with capital appreciation for the members of the fund,” he said.

“If we were to engage them actively or passively to your [Labor’s Dr Andrew Leigh] point in activity that all competitors in an industry, not be aggressive with one another, not seek to perform as well as they might with it – that would have a number of downsides, it would stifle innovation and stifle entrepreneurialism.

“Ultimately, you would find that other parties outside that industry or within that industry would see an opportunity come in and take market share from these organisations that were performing sub optimally, that would not in the interest of those shareholders in those organisations. Now for organisations like Australiansuper that have a long-term horizon, that's not the smart thing to do.”