David Jacobson's External Insights

ACCC spells out its business competition and consumer protection enforcement policy

At a lunch hosted by the Australia-Israel Chamber of Commerce last week (Disclosure: I'm a Committee member), ACCC Chairman Graeme Samuel delivered a clear no-nonsense summary of the ACCC's enforcement policy:  co-operate (and fix the systems or compliance failure) and we won't litigate against you,  but if you adopt a confrontationist approach we'll fight you all the way and seek a criminal penalty where available.

He was equally frank in saying that whilst the ACCC will protect businesses and consumers from fraud and misleading conduct it could not protect them from apathy or their own stupidity.

The official ACCC Media Release focussed on issues relating to Australia's $80 billion a year franchising industry :

"Those who blatantly deceive potential small business owners with offers of bogus or unworkable small business 'opportunities' are effectively criminals and can expect no leniency from the Australian Competition and Consumer Commission. "

But before he spoke about franchising he spoke about some current topics:

1. The settlement with Telstra over its broadband pricing: he was adamant that the penalty was fair taking into account  the ACCC's difficulty in getting actual evidence of loss caused by Telstra dropping its DSL broadband retail price below its wholesale price. He was equally adamant that while Telstra's dropping of its retail price helped the dramatic take up in broadband, Telstra had acknowledged that its wholesale price was too high by dropping it twice in the last 12 months.

He said the telecommunications industry took up about 15-20% of his time. It is currently the greatest area of complaints. He identified provision of content for 3G telephony as a possible future competition issue.

2. Cartels: he said cartels were invisible but cost the community a fortune.  Curently more than 25 cartels are being investigated, half of which have been identified by whistleblowers.

3. Small business protection: ACCC will protect small business from thuggish behaviour and bullying but won't protect small business from vigorous competition. Collective negotiating by small businesses is OK  (if first authorised by the ACCC).

4.Mergers: The ACCC approves 196 out of 200 mergers each year. Their concern is that whilst they want an informal process it must be transparent so the public is not mislead.

Fundraising

ASIC has announced a Small Caps Campaign aimed at improving the disclosure in fundraising documents issued by small capitalisation companies.

'The Small Caps Campaign will be aimed at fundraisings of up to around $5 million by existing listed companies and initial public offerings (IPOs) seeking listing on the Australian Stock Exchange, Bendigo Stock Exchange, Newcastle Stock Exchange, or Australia Pacific Exchange', ASIC's Director of Corporate Finance, Mr Richard Cockburn said.

The campaign will focus on getting disclosure right the first time in six areas of disclosure. ASIC has identified that the quality of information and levels of disclosure in these six areas have, historically, not been sufficient to allow investors to make informed investment decisions about the merits of the offer.

The six areas that ASIC will focus on are:

• use of funds and consequences of not raising the full amount sought;
• use of terms from the Australasian Code for Reporting Mineral Resources and Ore Reserves (JORC) and Valmin Codes by resource sector companies;
• prospective financial information;
• related party underwritten fundraisings;
• material contracts; and
• directors' track record.

Business Advertising

After having given the marketers a hard time last week over compliance, I have to make amends by linking to this article by The Raw Prawn on the best of the ads shown during America's Super Bowl telecast.

I haven't seen all the ads discussed, but I liked the 2 financial services ads by Ameriquest.

I know that creative ads don't always result in sales, but Australian ads are a good reason for TiVo. Why isn't it here?

Difficult Negotiations

From time to time I have to deal with someone who appears to be completely irrational. Or are they just playing tough?

What's the best approach for someone like that?

In this article,  Lawrence Susskind suggests the following possibilities:

1. Your negotiating partner is perfectly rational; it's just that you don't understand how the world looks to him. Try asking directly what problem your new partner is trying to solve.

2. Your partner is perfectly rational but has adopted a seemingly irrational stance as part of his hard bargaining strategy. He may just be pushing to see what he can get away with. If you don't push back, he'll keep "claiming" even more.

3. Your partner really is irrational. All rules of normal discourse go out the window. You're convinced that you are dealing with a truly irrational negotiating partner, someone willing to risk everything to make sure you get nothing. What can you do?

The article discusses a hypothetical situation and suggests a solution.

Advertising and Direct Marketing Clearance

The recent undertaking by Flight Centre not to use the "Lowest Airfares Guaranteed" slogan is a reminder that the ACCC does not accept that advertising "puffery" is harmless.

This week the ACCC announced its concern that the use by cigarette companies of "light" and "mild" may suggest they are less harmful than standard cigarettes.

The ACCC takes misleading ads and slogans seriously.

Marketing departments continue to have difficulty in understanding compliance issues both in terms of the contents of ads and to whom marketing material can be  sent (which may vary depending on the way it is sent). 

The issues include the content of the ad, its layout, the conduct of the marketer and the use of personal data .

Sometimes the overlay of special rules for particular industries, requiring mandatory content or format,  causes marketers to forget first principles: is the message accurate?

This checklist (PDF) is a quick refresher and can be used for developing your own clearance process template with the assistance of your own lawyer.

The secret to the next big thing: how to get to the tipping point

In  The Tipping Point Malcolm Gladwell looks for a reason why things as diverse as television programs, shoes and anti-crime campaigns were successful.

He develops a theory based on different personality types ("connectors" and "mavens") and the viral nature of health and crime epidemics to explain why fashion (such as Hush Puppies), educational (Sesame Street) and other business trends succeeded. All of these "trends" built up until a point (the "tipping point") where they took off with a momentum of their own.

He examines businesses which monitor trends and tell corporates how best to market their products.

Interested? Read excerpts from his website.

Malcolm Gladwell is currently doing publicity for his new book Blink. But it won't be released in Australia until later this month.

Future Australian Workplace Trends

Australia's demographics reflect an ageing baby boomer population and a falling birth rate.

The Treasurer has already commented on the need to retain mature workers in the workforce.

There is a shortage of aged care places and accommodation to reflect this change.

But will workplaces then need to provide places for elderly parents rather than children as suggested by this US report?

Co-operatives

I have been involved with, and observed, co-operatives in one form or another for over 25 years. Ranging from primary producers co-operatives to financial and housing co-operatives, they are diverse and attract many more people than you would expect.

Maleny in the Queensland Sunshine Coast hinterland (north of Brisbane) has become a geographical focus for many co-operatives.

The Australian Centre for Co-operative Research and Development (ACCORD) has done a lot of work on mutuals and co-operatives and produces an excellent newsletter. The February 2005 newsletter carries a range of fascinating stories including stories on the co-operative response to the Boxing Day Tsunami.

Other highlights include:

• a link to a new geographic search database of Australian co-operatives;
• a link to a management case study of The Co-operative Bank, UK;
• a spirited discussion of whether the need for capital is a good reason for co-operatives to demutualise.

Taking Risks

The modern corporate structure was devised to encourage entrepreneurs to take risks. Today someone who does not effectively manage those risks could end up in jail.

In Running with risk in The McKinsey Quarterly (free registration required) the authors explain:

"It is the taking of risks that ultimately creates shareholder value. The right response, therefore, is to strike a balance that protects the company from the costs of financial distress while allowing space for entrepreneurship. Management should have the freedom to work in an environment where the potential rewards of any business decision are consciously weighed against the risks and where the company is happy with the level of risk-adjusted returns resulting from that decision...

To manage risk properly, companies must first understand what risks they are taking. To do so, they need to make all of their major risks transparent and to define the types and amounts of risk they are willing to take—goals often facilitated by the creation of a high-performing risk-management organization that accurately identifies and measures risk and provides an independent assessment of it to the CEO and the board.

The article gives examples from a range of industries including the financial services and telecom industries.

Words of Wisdom

A 23 year old enrepreneur gets to interview investor Warren Buffet. What lessons does he learn?

This post shows that not everyone is Donald Trump!

The first lesson is

"1.  Be Grateful -

There are roughly 6 Billion people in the world. Imagine the worlds biggest lottery where every one of those 6 Billion people was required to draw a ticket. Printed on each ticket were the circumstances in which they would be required to live for the rest of their lives.

Printed on each ticket were the following items:

- Sex
- Race
- Place of Birth (Country, State, City, etc.)
- Type of Government
- Parents names, income levels & occupations
- IQ (a normal distribution, with a 66% chance of your IQ being 100 & a standard deviation of 20)
- Weight, height, eye color, hair color, etc.
- Personality traits, temperment, wit, sense of humor
- Health risks

If you are reading this blog right now, I'm guessing the ticket you drew when you were born wasn't too bad."