The House of Representatives Standing Committee on Economics today tabled a report on the implications of common ownership and capital concentration in Australia.

Media release issue date: Friday, 18 March 2022

The House of Representatives Standing Committee on Economics today tabled a report on the implications of common ownership and capital concentration in Australia. Committee Chair Jason Falinski said that ‘the magic source of free markets is competition. It is the element above all else that promotes and provokes innovation, invention and delight in customers. There is a misconception that free markets are efficient, but this is less than half the story, what they are really good at is being dynamic, and competition is the key to that dynamism. ‘The problem is that as capital markets become more concentrated, especially in Australia, that owners of capital have conflicting interests with consumers. There is an emerging field of study that is providing compelling evidence that concentrated capital is driving out competition.’ Capital concentration can occur when large institutional investors dominate equity markets and influence how firms behave in the marketplace. Common ownership refers to a situation in which an investor simultaneously owns shares in competing firms. ‘If financial markets are dominated by a small number of large investors, or if the same investor owns a significant stake in competing businesses, the evidence is piling up that competition suffers,’ Mr Falinski said. ‘That can lead to higher prices, lower quality goods and services, and lower relative wages—all of which are serious concerns. ‘Further, the concerns of capital are not necessarily the same as the concerns of people, it is not just as consumers that we suffer, but also as employees, investors, voters, citizens and human beings.’ The committee has recommended that measures be introduced to increase transparency in respect of the holdings and behaviours of institutional investors. The report also calls for Australia’s financial regulators to actively monitor capital concentration and common ownership. Mr Falinski said that ‘this is an emerging issue, and some of the world’s top economic thinkers supported the committee in its inquiry. By taking steps now to empower our regulators to be proactive in monitoring and potentially responding to these phenomena, we can avoid having to deal with a larger issue in the future.’ A full copy of the committee’s report is available on the committee’s website. For media comment Mr Jason Falinski MP Electorate: (02) 8484 0300 Parliament: (02) 6277 2324 For background information Please contact the committee secretariat Phone: (02) 6277 4587 Email: economics.reps@aph.gov.au

The House of Representatives Standing Committee on Economics will hear from the multinational investment firm BlackRock, institutional investor proxy adviser Ownership Matters, industry peak body the Financial Services Council and the Australian Treasury, about common ownership and capital concentration at a public hearing on Monday 11 October 2021.

Media release issue date: Friday, 8 October 2021

The House of Representatives Standing Committee on Economics will hear from the multinational investment firm BlackRock, institutional investor proxy adviser Ownership Matters, industry peak body the Financial Services Council and the Australian Treasury, about common ownership and capital concentration at a public hearing on Monday 11 October 2021. Acting Committee Chair Hon Dr Andrew Leigh MP, said that ‘to date, the committee has heard evidence from academic experts and the ACCC that common ownership has the potential to threaten competition within the Australian market.’ ‘My own research with Dr Adam Triggs shows that Vanguard and BlackRock are the largest shareholders in Australia, and that these two index funds are often the largest shareholders for competing companies. Our research reveals that among firms where we can identify at least one substantial owner, 31 per cent share a substantial owner with a rival company. Across the Australian economy, common ownership increases effective market concentration by 21 per cent. ‘In the United States, common ownership has been shown to dampen competitive pressures, and produce worse outcomes for consumers in the airline and banking sectors. The committee is concerned to understand the extent of common ownership in Australia, the channels through which it may harm consumers, and how transparency reforms might help’ Dr Leigh said. ‘As well as investment firm BlackRock, the committee will hear from proxy advice service Ownership Matters and industry peak body the Financial Services Council to garner the views of industry insiders on this issue. We will also hear from Treasury about how the Australian Government sees this potential threat to vigorous competition between firms.’ Later in the day, the committee will also hear from the Energy Industries Superannuation Scheme (EISS Super) as part of the committee’s review of the Four Major Banks and Other Financial Institutions.  The full Terms of Reference for the inquiry into common ownership and capital concentration and the review of the four major banks and other financial institutions are available on the committee’s website. Public hearing details Date: Monday, 11 October 2021 9.30am to 12.45pm     Common ownership and capital concentration 2.00pm to 3.00pm       Superannuation sector review A program for the hearing is available on the committee’s website. Due to health and safety concerns relating to the COVID-19 pandemic, this hearing is not currently scheduled to be open for public attendance. Interested members of the public will be able to view proceedings via the live webcast at aph.gov.au/live. Media inquiries Hon Dr Andrew Leigh MP Media adviser: Tony Hodges 0435 594 552 For background information Committee Secretariat 02 6277 4587 economics.reps@aph.gov.au

Three of Australia’s key economic regulators – the Australian Prudential Regulatory Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Australian Competition and Consumer Commission (ACCC) – will appear before the House of Representatives Standing Committee on Economics at a public hearing on Friday 10 September 2021.

Media release issue date: Wednesday, 8 September 2021

Three of Australia’s key economic regulators – the Australian Prudential Regulatory Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Australian Competition and Consumer Commission (ACCC) – will appear before the House of Representatives Standing Committee on Economics at a public hearing on Friday 10 September 2021. In the first part of the hearing, the Committee will take evidence from all three regulators in support of its inquiry into the implications of capital concentration and common ownership in Australia. This will be one of the first public hearings in support of this new inquiry. Common ownership refers to when institutional investors simultaneously own shares in competing firms, which can pose a risk to competition. The Committee will investigate the extent of common ownership of publicly listed companies and the impact on investment decisions, competition, consumer harm and market behaviour. Committee Chair Mr Tim Wilson MP said that ‘common ownership has implications for investors and competition’. ‘We need to be sure we are empowering citizens as investors and customers, and not organised capital. The Committee is looking forward to hearing the views of the ACCC, ASIC and APRA on this important topic.’ The Committee will use the second part of the hearing to continue its public review of the 2020 Annual Reports of both APRA and ASIC, following a similar hearing on 29 March 2021. ‘When ASIC and APRA appeared before the Committee earlier this year, we were keen to understand how they had responded to the COVID-19 pandemic, and to the associated economic stimulus measures taken by government,’ Mr Wilson said. ‘The Committee is looking forward to following-up on some of these questions. It is important that the Australian people have insight into the steps that our regulators are taking to promote resilience within the Australian economy during this time of uncertainty.’ The full terms of reference for the inquiry into common ownership and capital concentration are available on the Committee’s website. Public hearing details Date: Friday, 10 September 2021 Time: 9.00am to 4.30pm Witnesses: ASIC, APRA, ACCC Due to health and safety concerns relating to the COVID-19 pandemic, this hearing is not currently scheduled to be open for public attendance. Interested members of the public will be able to view proceedings via the live webcast at aph.gov.au/live. Media inquiries Mr Tim Wilson MP Electorate: 03 9557 4644 Parliament: 02 6277 2392 For background information Committee Secretariat 02 6277 4587 economics.reps@aph.gov.au

The House of Representatives Standing Committee on Economics is commencing a new inquiry into the implications of capital concentration and common ownership in Australia.

Media release issue date: Monday, 2 August 2021

The House of Representatives Standing Committee on Economics is commencing a new inquiry into the implications of capital concentration and common ownership in Australia. Committee Chair, Tim Wilson MP, said ‘This inquiry is urgent - there is already high concentration of ownership of ASX listed companies by an increasingly small number of ‘mega funds’ and that trajectory will increase’. ‘The House Economics Committee has been asking regulators about these risks for nearly a year. Recently the Chair of the ACCC informed the Committee common ownership posed threats to competition when it hits 10 per cent, yet some have already hit 30 per cent’. ‘We don’t want a stock exchange where a hand full of ‘mega funds’ make all the decisions, and ordinary investors are locked out and higher costs are paid by Australians. Some ‘mega funds’ have already said that has their ownership increases they’d de-list public companies’. ‘Common ownership’s flow-on risks higher prices and collusion, corporates imposing public policy agendas while bypassing democracy, and disempowering ordinary investors. The law shouldn’t empower capital over citizens and that’s what we’ll be inquiring into’. Common ownership refers to when a fund or collaborative funds simultaneously own shares in competing firms. The Committee will investigate the impact of common ownership by institutional investors (e.g. banks, super funds, investment funds, hedge funds, etc.). ‘This inquiry will shine a bright light ‘under the hood’ of the ownership of the ASX today, and ensure that we update the law, regulations and regulators to address the challenges of the future so we empower citizens, not organised capital’, Mr Wilson said. The committee invites submissions from stakeholders and interested parties. The full terms of reference are available on the committee’s website. Submissions are being sought by Monday, 13 September 2021. Submissions can be made online or by emailing economics.reps@aph.gov.au. For media comment: Please contact the Committee Chair Mr Tim Wilson MP: Electorate: (03) 9557 4644     Parliament: (02) 6277 2392 For background information: Please contact the committee secretariat:" Phone: (02) 6277 4587          Email: economics.reps@aph.gov.au Website: www.aph.gov.au/economics