'Super profits' show more competition is needed in key Australian industries
Several Australian markets are monopolised by companies making ‘super profits’, a state of play created by a lack of competition and potentially leaving consumers short-changed.
A report titled ‘Competition in Australia: Too little of a good thing?’, compiled by the Grattan Institute, highlights how sectors including finance, food retail, telecoms and private health insurance could be opened up to competition for the benefit of consumers.
Despite this, the study says that the widely held belief that powerful firms control the Australian economy is a myth. Indeed, it is not dissimilar to the situations seen in other developed economies.
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Grattan Institute Productivity Growth Program Director Jim Minifie said: “There’s nothing wrong with profits – they play an important and legitimate role in the economy and society.”
However, up to half the total profits in the supermarket sector (dominated by Coles and Woolworths) are ‘super-normal’, i.e. profits that exceed the cost of compensating shareholders. Amazon’s arrival into the retail space could shake this scenario up, especially given its pledge to undercut other retailers. In the banking sector (dominated by the big four), super-normal profits account for 17% of total profits.
Other companies and sectors with substantial super profits include Telstra, some major city airports, liquor retailers, internet service providers, sports betting agencies, and private health insurers.
Minifie added: “Where profits become super profits because firms face little competition, they can come at the expense of customers or suppliers. There are no policy silver bullets here, but governments can do more to improve competition in the private economy.”
Recommendations in the report include making it easier for consumers to switch banks and relaxing zoning restrictions that limit the entry of new competitors into the supermarket sector, which now sprawls into liquor and fuel retail.
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.