ACCC reportedly warns local retailers it won’t protect them from Amazon

Two freshly delivered Amazon boxes are seen on a counter in Golden, Colorado August 27, 2014. Reuters/Rick Wilking

The Australian Competition and Consumer Commission chairman has warned retailers that he would not provide protection from Amazon if it undercuts them on price. The competition watchdog boss is reportedly set to tell a conference in Sydney that Amazon’s full launch is good for Australia.

The ACCC chair Rod Sims will deliver a speech on Tuesday. "Some of these incumbents have called on the ACCC to act against Amazon's business model," he has prepared to say, according to Fairfax Media.

Amazon is tipped to open its full-scale retail operations in the country any day. Some industry analysts are predicting that the retail giant could undercut local businesses by up to 30 percent to gain market share.

Sims will tell a conference that Amazon’s full launch in Down Under will be a win for consumers even if that means local incumbents are collateral damage. IBISWorld forecasts that Amazon would considerably undercut Aussie retailers as it absorbed losses early to establish its market share. The industry research firm’s senior industry analyst Kim Do said that the company seeks to challenge domestic retail prices by offering items for 30 percent less than domestic retailers, Business Insider Australia reports.

Not a violation of law

Some firms, Sims said, prosper while others go out of business in competitive markets. He also pointed out that Amazon’s speculated undercutting move does not violate the Australian law.

“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,” Sims previously said. If a business eventually gets its plan right, it will make money at that price point. He maintained that even if it damages incumbent firms and puts some out of business, this is not illegal in any way.

Reform to the competition act passed into law earlier this month has seen an "effects test," which bans huge companies from taking action that has the purpose, effect or likely effect of substantially reducing competition in a market. The consumer watchdog previously had to show that the company took advantage of its market power.

The changes now make it easier for the ACCC to fight anti-competitive practices. Bigger Australian retailers resisted the change, and Sims found it ironic that those companies were the ones now calling to be saved from Amazon, which will start with 0 percent market share.