Parker, Christine; Nielsen, Vibeke Lehmann --- "What do Australian Businesses Really Think of the ACCC, and Does it Matter?" [2007] FedLawRw 8; (2007) 35(2) Federal Law Review 187
[*] Australian Research Fellow, Faculty of Law, The University of Melbourne.
[†] Associate Professor, Department of Political Science, University of Aarhus. The authors wish to thank John Braithwaite and DataCol International (especially Malcolm Mearns) for helping set up and administer the empirical research on which this article is based. Thanks also to Natalie Stepanenko for assisting with most of the qualitative interviews for this research and other research assistance, and also to Zoe Jackson for research assistance and to Julia Black and John Braithwaite for comments on an earlier draft. We also thank the ACCC (through its support for the Centre for Competition and Consumer Policy, Australian National University), the Australian Research Council and the Regulatory Institutions Network, Australian National University for funding this research. Substantial parts of the original research for this article were completed while both authors were on secondment at the Regulatory Institutions Network, Australian National University and later while Dr Christine Parker was a Visiting Fellow at the Centre for Socio-Legal Studies, University of Oxford.
[1] The business complaints resulted in the federal government commissioning an extensive independent review of the Trade Practices Act 1974 (Cth) ('TPA') and the way it had been administered by the ACCC: Trade Practices Act Review Committee, Review of the Competition Provisions of the Trade Practices Act (2003) ('Dawson Review'). It also may have led to the federal government offering Professor Fels a shorter second term as Chair of the ACCC: see Fred Brenchley, Allan Fels: A Portrait of Power (2003) 214–15. Professor Fels himself, however, commented that, given the amount of business lobbying against him, he was surprised that he had lasted as long as he did: 'Allan Fels Surprised He Lasted So Long at the ACCC', Australian Associated Press Financial News Wire (Sydney), 29 June 2003.
[2] Quotations from Dick Warburton, Chairman of Caltex, and Roger Corbett, CEO of Woolworths, respectively: reported in Ross Gittins, 'Perhaps This is Why Big Business is Ganging Up on Allan Fels', The Age (Melbourne), 10 July 2002, 13. See also Brenchley, above n 1, 22, 143, 211–36 for further instances of private and public business lobbying of government against Professor Fels and the ACCC. For allegations by business leaders that the ACCC used 'its position of strength to "bully" business into complying with its directives without necessarily sticking to the formal legal process', see House of Representatives Standing Committee on Economics, Finance and Public Administration, Parliament of Australia, Competing Interests: Is There Balance? Review of the Australian Competition and Consumer Commission Annual Report 1999–2000 (2001) 41.
[3] David Murray, CEO of the Commonwealth Bank, and Geoff Dixon, CEO of Qantas, reported in Gittins, above n 2.
[4] Damon Kitney and Katharine Murphy, 'Big Business Steps Up Attack on ACCC', The Australian Financial Review (Sydney), 13 May 2002, 1, quoting a 'leading Australian chief executive, who declined to be named'.
[5] Gerry Harvey, CEO of the Harvey Norman chain of retailers, quoted in Christian Catalano, 'Gloves Off as Retailer Hits Out', The Age (Melbourne), 30 June 2003, 2. Harvey went on to say: 'I think he is egotistical, I think he is a megalomaniac … I think that he is the most powerful man in Australia … In the years to come he will be judged, and others that are intimidated at the moment will speak out and say what they really think.'
See also Richard Gluyas, 'A Last Mauling for Retiring Watchdog Fels', The Australian (Sydney), 30 June 2003, 29.
[1] Cameron Stewart, 'Making Markets Add Up', The Weekend Australian (Sydney), 8–9 June 2002, 21.
[2] Brenchley, above n 1, 220. See criticisms of the ACCC's approach to mergers at 220–9; Trade Practices Act Review Committee, above n 1, 43–71; Toni O'Loughlin, 'Process Slow But Not Too Tough', The Australian Financial Review (Sydney), 17 April 2003, 5. Cf Alan Dignam, 'The Role of Competition in Determining Corporate Governance Outcomes: Lessons from Australia's Corporate Governance System' (2005) 68 Modern Law Review 765.
[3] Professor Fels in Malcolm Maiden, 'The Bell Tolls for Fels at ACCC Kennel', Business and Money, The Age (Melbourne), 21 June 2003, 1. Elsewhere Professor Fels was reported as having commented about Gerry Harvey's criticisms of him (quoted above): 'Professor Fels said Mr Harvey had been "totally uncooperative" during every step of the ACCC's proceedings against his company, and had dragged the inquiry to exhaustive lengths': Catalano, above n 5.
[4] Allan Fels, 'ACCC Needs Support From the Top', The Australian Financial Review (Sydney), 30 June 2003, 55. Professor Fels was also quoted as saying: 'Some business people are throwing a trial-by-media slogan at practices that are quite normal in the field of law enforcement': Kitney and Murphy, above n 4.
[5] See, eg, Robert Baxt, 'Thinking About Regulatory Mix — Companies and Securities, Tax and Trade Practices' in Peter Grabosky and John Braithwaite (eds), Business Regulation and Australia's Future (1993) 117, 118; Peter Grabosky and John Braithwaite, Of Manners Gentle: Enforcement Strategies of Australian Business Regulatory Agencies (1986) 91; Stuart Simpson, 'Keeping Business Honest: Trade Practices Commission Runs Lame', The National Times (Sydney), 17–23 October 1982, 41; V G Venturini, Malpractice: The Administration of the Murphy Trade Practices Act (1980).
[6] Miranda McLachlan, 'Section 46 to be Samuel's Big Test', The Australian Financial Review (Sydney), 4 July 2003, 15. See also 'Use it Properly', The Newcastle Herald (Newcastle), 2 July 2003, 8. One of our survey respondents commented in their answer to an open-ended question at the end of the survey (see below n 60):
With the appointment of a new head of the ACCC, I believe businesses are reassured that the approach of the ACCC is more reasonable and less media hungry or keen to grab headlines. A more considered and conciliatory approach seems to be evident which in turn encourages openness by business.
This sentiment was repeated in several other comments.
[7] Laura Tingle and Mark Skulley, 'ACCC Posting Signals Policy Shake-Up', The Australian Financial Review (Sydney), 11 October 2002, 10.
[8] Toni O'Loughlin, 'Competition Regulator Has Lost its Hard Edge: Dossier', The Australian Financial Review (Sydney), 4 June 2004, 29.
[9] But he also pointed out that the ACCC was investigating up to 40 cartels, among other things: Toni O'Loughlin, 'ACCC Boss Backs Away from Litigation', The Australian Financial Review (Sydney), 4 June 2004, 1. See also Graeme Samuel, 'Heal Thyself: Voluntary Compliance is Much Better than Prosecution', BRW (Melbourne), 9 October 2003, 50.
[10] Adele Ferguson and Kristen Le Mesurier, 'The Red-Tape Stranglers', BRW (Melbourne), 7 September 2006, 42, 44. Chair Graeme Samuel was reported as saying that 'he is litigating less but with "sharper" force': at 44.
[11] For example, their behaviour should be authorised by law, certain and stable, accountable and transparent, procedurally fair, and proportionate, consistent and rational: Karen Yeung, Securing Compliance: A Principled Approach (2004) 36–43.
[12] As we shall see, businesses' normative assessments of the ACCC are also relevant to this compliance-oriented approach.
[13] See Søren Winter and Peter May, 'Motivation for Compliance with Environmental Regulations' (2001) 20 Journal of Policy Analysis and Management 675 for a helpful typology of 'normative', 'social' and 'calculative' motivations as explanations for compliance. Our summary of the literature in the text is based on this typology. Like Winter and May, most researchers of regulatory compliance now find that motivations for compliance are plural with different types of explanations being true in different circumstances and interacting in complex ways: see Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (1992); Joseph Dimento, 'Can Social Science Explain Organizational Non-Compliance with Environmental Law?' (1989) 45 Journal of Social Issues 109; Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (1998); Jon Sutinen and Karen Kuperan, 'A Socio-Economic Theory of Regulatory Compliance' (1999) 26 International Journal of Social Economics 174. Certain 'extended' deterrence theories also end up taking into account most of these plural factors within the umbrella of deterrence theory: see Henk Elffers, Peter van der Heijden and Merlijn Hezemans, 'Explaining Regulatory Non-Compliance: A Survey Study of Rule Transgression for Two Dutch Instrumental Laws, Applying the Randomized Response Method' (2003) 19 Journal of Quantitative Criminology 409; Harold G Grasmick and Robert J Bursik Jr, 'Conscience, Significant Others, and Rational Choice: Extending the Deterrence Model' (1990) 24 Law and Society Review 837.
[14] See Sally Simpson, Corporate Crime, Law and Social Control (2002) 22–44 for a thorough review of the literature and empirical evidence on deterrence. See also Paul Robinson and John Darley, 'Does Criminal Law Deter? A Behavioural Science Investigation' (2004) 24 Oxford Journal of Legal Studies 173; John Scholz, 'Enforcement Policy and Corporate Misconduct: The Changing Perspectives of Deterrence Theory' (1997) 60 Law and Contemporary Problems 253; Winter and May, 'Motivation for Compliance with Environmental Regulations', above n 18, 676–7.
[15] Simpson, above n 19, 41 concludes from her survey of the literature testing the power of perceptual deterrence to explain crime by corporations that 'most corporate decision makers, even though they share many characteristics thought to maximize deterrent effects, are unaffected by formal punishment risks and outcomes.' For other empirical evidence of failure of deterrence see John Braithwaite and Toni Makkai, 'Testing an Expected Utility Model of Corporate Deterrence' (1991) 25 Law and Society Review 7; John Braithwaite and Toni Makkai, 'The Dialectics of Corporate Deterrence' (1994) 31 Journal of Research in Crime and Delinquency 347; Dorothy Thornton, Neil Gunningham and Robert Kagan, 'General Deterrence and Corporate Environmental Behavior' (2005) 27 Law and Policy 262.
[16] Simpson, above n 19, 28, 40–2.
[17] On the importance of awareness for compliance, see Søren Winter and Peter May, 'Information, Interests, and Environmental Regulation' (2002) 4 Journal of Comparative Policy Analysis: Research and Practice 115. See also Dimento, above n 18; cf Elffers, van der Heijden and Hezemans, above n 18 (finding no effect of knowledge of and clarity of rules on compliance).
[18] Winter and May, 'Motivation for Compliance with Environmental Regulations', above n 18, 677–8. See also Tom R Tyler and John M Darley, 'Building a Law-Abiding Society: Taking Public Views About Morality and the Legitimacy of Legal Authorities into Account when Formulating Substantive Law' (2000) 28 Hofstra Law Review 707; Sutinen and Kuperan, 'A Socio-Economic Theory of Regulatory Compliance', above n 18, 182; K Kuperan and Jon G Sutinen, 'Blue Water Crime: Deterrence, Legitimacy, and Compliance in Fisheries' (1998) 32 Law and Society Review 309 (significance of moral development).
[19] See Tom Tyler, Why People Obey the Law (2nd ed, 2006) especially 269–76 for a succinct summary of the theory and empirical evidence supporting it; Tyler himself and co-authors have adduced much empirical evidence supporting procedural justice theory at least in relation to individual regulatees: see Tom R Tyler, 'Trust and Law Abidingness: A Proactive Model of Social Regulation' (2001) 81 Boston University Law Review 361. See also Kristina Murphy, 'Procedural Justice and Tax Compliance' (2003) 38 Australian Journal of Social Issues 379; Kristina Murphy, 'The Role of Trust in Nurturing Compliance: A Study of Accused Tax Avoiders' (2004) 28 Law and Human Behavior 187.
[20] Tyler, Why People Obey the Law, above n 24, 276.
[21] Winter and May, 'Motivation for Compliance with Environmental Regulations', above n 18, 678. For empirical studies supporting the significance of social influence on compliance, see Neil Gunningham, Robert A Kagan and Dorothy Thornton, Shades of Green: Business, Regulation, and Environment (2003); Joseph Rees, 'Development of Communitarian Regulation in the Chemical Industry' (1997) 19 Law and Policy 477.
[22] As Winter and May ('Motivation for Compliance with Environmental Regulations', above n 18, 678) point out, social influence 'may over time have a socializing effect on regulated parties leading to normative commitment'. This is also a central claim of institutional theories: see, eg, Andrew Hoffman, From Heresy to Dogma: An Institutional History of Corporate Environmentalism (1997); W Richard Scott, Institutions and Organizations (1995).
[23] Winter and May, 'Motivation for Compliance with Environmental Regulation', above n 18, 678. Tyler's procedural justice theory also sees social influence between regulator and regulated as important since '[i]t has been shown that people care more strongly about procedural justice when their identities are linked to a social relationship with a group or person': Tyler, Why People Obey the Law, above n 24, 276.
[24] John Braithwaite has also argued, on the basis of empirical evidence, that 'the proffering of trust, praise, and the nurturing of pride in corporate social responsibilities' by the regulator might be part of an effective dialogic approach to regulation: John Braithwaite, Restorative Justice and Responsive Regulation (2002) 112.
[25] Eugene Bardach and Robert A Kagan, Going by the Book: The Problem of Regulatory Unreasonableness (1982) 123–51; Raymond J Burby and Robert G Paterson, 'Improving Compliance with State Environmental Regulations' (1993) 12 Journal of Policy Analysis and Management 753, 756, 766; Kathryn Harrison, 'Is Cooperation the Answer? Canadian Environmental Enforcement in Comparative Context' (1995) 14 Journal of Policy Analysis and Management 221, 222–3; Peter J May and Søren Winter, 'Regulatory Enforcement and Compliance: Examining Danish Agro-Environmental Policy' (1999) 18 Journal of Policy Analysis and Management 625. Note that most of these empirical studies find that it is actually a mix of cooperation and deterrence that is effective.
[26] Valerie Braithwaite, 'Dancing with Tax Authorities: Motivational Postures and Non-Compliant Actions' in Valerie Braithwaite (ed), Taxing Democracy: Understanding Tax Avoidance and Evasion (2003) 15.
[27] Motivational postures theory comes from Valerie Braithwaite's analyses of survey data about regulatees' experiences of nursing home and tax regulation and compliance: 'Motivational postures are conglomerates of beliefs, attitudes, preferences, interests, and feelings that together communicate the degree to which an individual accepts the agenda of the regulator, in principle, and endorses the way in which the regulator functions and carries out duties on a daily basis': Valerie Braithwaite, Kristina Murphy and Monica Reinhart, 'Taxation Threat, Motivational Postures, and Responsive Regulation' (2007) 29 Law and Policy 137, 138. See also Valerie Braithwaite, John Braithwaite, Diane Gibson and Toni Makkai, 'Regulatory Styles, Motivational Postures and Nursing Home Compliance' (1994) 16 Law and Policy 363; Valerie Braithwaite, 'Games of Engagement: Postures within the Regulatory Community' (1995) 17 Law and Policy 225; Valerie Braithwaite, 'Tensions Between the Citizen Taxpaying Role and Compliance Practices' (Working Paper No 13, Centre for Tax System Integrity, Australian National University, 2001); Braithwaite, 'Dancing with Tax Authorities', above n 31. Note that motivational postures theory has so far been developed primarily in relation to individuals. While we would expect similar phenomenon to apply to firms, the social psychological dynamics are likely to be more difficult to measure in organisations.
[28] Braithwaite, Murphy and Reinhart, 'Taxation Threat, Motivational Postures, and Responsive Regulation', above n 32.
[29] Braithwaite, 'Dancing with Tax Authorities', above n 31, 33.
[30] Braithwaite, 'Tensions Between the Citizen Taxpaying Role and Compliance Practices', above n 32, 9.
[31] Braithwaite, 'Dancing with Tax Authorities', above n 31, 35. See also Winter and May, 'Motivation for Compliance with Environmental Regulations', above n 18, 679 for a description of the complex mix of formalism and flexibility, coercion and negotiation that they hypothesise would best promote compliance.
[32] Braithwaite, Restorative Justice and Responsive Regulation, above n 29, 35. See also Ayres and Braithwaite, above n 18.
[33] Braithwaite, Restorative Justice and Responsive Regulation, above n 29, 119.
[34] Note that Braithwaite does not explicitly typify theories of compliance according to the three categories we have used. This is our interpretation of the attraction of responsive regulation theory. This paper is concerned with assessing how businesses perceive the ACCC in terms of all three of the sets of theories described above. We do not go on in this paper to assess whether it meets the specific requirements of a responsive regulator as set out by Braithwaite.
[35] For further information about the methodology for this part of the research and a general preliminary analysis of this data, see Christine Parker and Natalie Stepanenko, Compliance and Enforcement Project: Preliminary Research Report (2003). See also Christine Parker, 'Restorative Justice in Business Regulation? The Australian Competition and Consumer Commission's Use of Enforceable Undertakings' (2004) 67 Modern Law Review 209; Christine Parker, 'The "Compliance" Trap: The Moral Message in Responsive Regulatory Enforcement' (2006) 40 Law and Society Review 591; Michelle Sharpe and Christine Parker, 'A Bang or a Whimper? The Impact of ACCC Unconscionable Conduct Enforcement' (2007) Trade Practices Law Journal (forthcoming).
[36] The questionnaire was to be filled in by the most senior person in the organisation responsible for trade practices compliance, with a focus on contacting first the compliance manager, then the in-house counsel, the company secretary, the chief financial officer and, finally, the chief executive officer, in that order, as the people most likely to be able to fill out the questionnaire on behalf of the business. Forty-two percent of those who filled out a questionnaire were chief executive officers, company secretaries or chief financial officers, and a further 20 percent general counsel or compliance managers. For further information about this part of the project and its methodology, see Vibeke Nielsen and Christine Parker, The ACCC Enforcement and Compliance Survey: Report of Preliminary Findings (2005).
[37] In fact this underestimates the actual response rate — we cut 4.3 per cent of the responses actually received from the study because we discovered that the respondents were too small (less than 100 employees) to fit into our sample of large businesses. If we, quite reasonably, assume that similarly 4.3 per cent of the entire list of companies surveyed (including non-respondents) were 'too small', then we would have a response rate of 45 per cent.
[38] Yehuda Baruch, 'Response Rate in Academic Studies — A Comparative Analysis' (1999) 52 Human Relations 421 reports that the average response rate for questionnaire research where the targets for filling out the questionnaire were top managers or someone acting as a representative of a business in articles published in high quality management journals in 1975, 1985 and 1995 was 35.5 per cent. See also Michael Bednar and James Westphal, 'Surveying the Corporate Elite: Theoretical and Practical Guidance on Improving Response Rates and Response Quality in Top Management Survey Questionnaires' in David Ketchen and Donald Bergh (eds), Research Methodology in Strategy and Management (2007) (forthcoming).
[39] Nielsen and Parker, The ACCC Enforcement and Compliance Survey, above n 41, 12–13.
[40] Further details of this test are reported in ibid 279–82.
[41] The six indices have been arranged in order with the one that garnered the highest level of agreement from our respondents first, and so on, down to the sixth. The items within each index have been arranged from the ones that fit best in each index to the one that is least important to the index. The mean rating for each individual item is shown in brackets. The division into the six separate indices is supported by a factor analysis. The Cronbach's Alphas for each of the six indices are shown in Table 1. Cronbach's Alpha measures how reliably a set of items (for example, questions in a survey) measures a single uni-dimensional latent variable. An index with a Cronbach's Alpha score of 0.70 or higher is considered a strong index, but it is difficult to get a high score when the index contains few variables. The Cronbach's Alphas for 'accommodating behaviour', 'not biased in targeting', and 'undogmatic behaviour' shown in Table 1 are rather low: the main reason for this is that these indices contain only two to four variables each. In the case of 'undogmatic behaviour' (which has four items), it may also be that the items do not fit together as well as the items in some of the other measures.