[© Gerard Brody, Consumers Federation of Australia chair]Congress - panel session
Regulating for Real People: Understanding Consumer
Behaviour to Drive Effective Markets
Thank you for the introduction.
Regulating for real people. I think this topic has a very funny title.
It reminds me of a joke from the comedian Jimeoin when hetalked about his mother who, like my mother, regularly tells him
to take care when using the 'good room' in the front of the house.
It made him wonder, if there is a good room, is there an evil room?
So, surely it follows, if we're going to start regulating for real
people - who have we been regulating for before? Imaginary
people?
Unfortunately, I think there is some truth to this joke - and that too
often we continue to regulate for imaginary people, particularly
when it comes to consumer empowerment and regulating in a
way that prompts consumers to make 'so called' good or better
decisions.
Before I get in to that, I do want to begin with the proposition that
consumer policy and effective competition are two sides of thesame coin. I think this has been recognised for many years.
In fact, in preparing my remarks today, I went back through someprevious speeches to this congress. In 2007, eighteen years ago,then Secretary of the Treasury Ken Henry gave a speech where hesaid "competitive markets drive consumer welfare, andconsumers drive competitive markets".

1Just two years after that, in 2009, Dr Stephen Kennedy who is now
the Secretary of the Treasury but at that stage was a generalmanager in Treasury, gave a very interesting speech building uponthis theme. He talked about how government policy, consumer
policy, has an important role to play in preserving competitionand empowering consumers as much as possible.
Dr Kennedy talked about the lessons from psychology andbehavioural economics, that we're all familiar with - includingthat consumer choice can be overwhelming, and the choiceoverload can lead to poor market outcomes. He talked about therole of empowerment and helping people make choices that arein their own best interests.
He also talked about the lessons from 'nudge', made famous by
Cass Sunstein and Richard Thaler in their book. They promote therole of 'choice architecture', framing the way that information isprovided and to help people make more optimal choices while
not restraining or restricting them.
This all came back to my mind following the Treasurer's
announcement a few weekends ago where he revealed newbanking reforms to help us get a good deal. Some of thesereforms follow reports undertaken by the ACCC on home loans
and retail deposit accounts.
I won't go through all the reforms - but they include requiring
banks to tell customers when their interest rate changes on theirtransaction or savings account and also asking Treasury toinvestigate how behavioural economics and prompts could beused in the banking sector to encourage consumers to switch tocheaper home loans and retail banking products.
Now these reforms sound great - who doesn't want a better
deal?!
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However, I don't think these sort of reforms are regulating for real
people, and may in fact they may exacerbate inequities. Let metell you why.
First, unfortunately there appears to be little evidence from othermarkets that prompts are the most effective intervention.
To take one example, in Victoria since 2019, there has been arequirement on energy retailers to tell customers whether they
are on the best offer possible. This requirement is throughinformation on bills, at least once every four months. Around thistime this was introduced, the Victorian Government even paid
people a $250 power saving bonus if they went to the state
government energy comparison website.
Despite these policies, the regulator recently reported that
Victorians are paying more than $270m more than they would beif everyone was on the best offer. Let that sink in, Victorians arepaying $270m each year more because they are on a poor deal, atthe same time the Government was paying everyone $250 toswitch to a better offer.
No doubt some businesses intentionally make nudge messages
less effective. ASIC's 2019 report on why disclosure should not
be the default explains that firms can undermine disclosure
requirements by carefully timing when they provide theinformation and making small design changes. These tactics
significantly impact how we access, understand, and use theinformation.
Second, these sort of nudges risk exacerbating inequity. This isbecause they may work for those already advantaged, those thathave the educational levels and digital capability which enables
them to take action based on the information. To put it blunt the3

white, ably bodied, middle classes. Unfortunately, research has
shown that individuals with fewer cognitive resources or who
have less experience in navigating complex systems are far lesslikely to take action.
So I ask: Which group are the real people?
This is not to say that behavioural nudges never work. In fact,
defaults are far more likely to be effective than nudges that justgive us more information. We might come back to the difference
between structural or default nudges, and nudges that seek tosimplify or highlight information in the panel session.
But if we're to talk of regulating for real people - I think we should
be asking ourselves: what to real people expect from businesses
and the market?
I think real people expect competitive deals and pricing, quality
services that meet their needs, and fair treatment throughout.
They want businesses to act in a way that maintains their trustand confidence.
If a business tells you that you've been on a bad deal for a longtime - do you think that enhances trust or makes people more
distrustful? Would a real person ask why they haven't just put meon the better deal before now?
Most here would be aware that I'm a big fan of the proposal toenact an unfair trading prohibition into Australia's consumer law.
This, in my view, would enhance effective competition and be agood example of regulating for real people.
Rather than having to 'empower' consumers, this reform would
help create a business norm that requires firms to meet theircustomer expectations - to not do so, to distort customer choice4

or not meet customer needs, would be unfair. To place barriers infront of consumers getting on good deals would be unlawful.
And norms around fairness and quality, in turn, would enhancecompetition and market effectiveness.
After all, if businesses are not incentivised to provide superior
customer care and quality service, or if the market forgets about
the needs of the most vulnerable, consumers are far less likely toplay their part in ‘activating’ competition. They'll give up, they'll
disengage - and the market won't be able to play its role inspurring innovation, efficiency and good community outcomes.
There are some regulatory standards that lean this way already. In
financial services, for example, firms must provide services
efficiently, honestly and fairly.
I ask - is it efficient, honest, and fair to leave your customer on apaltry 0.01 % savings rate, when you have other accounts offering
5% or more?
So, in summary, we have some questions before us. Will realpeople react to nudges and prompts in the way we expect? Or doreal people simply expect fair pricing, quality services, andtrustworthiness from businesses.
Let's delve deeper into these issues with our panel of experts,
please welcome:••••

Gina Cass-Gotlieb, Chair, ACCC
Katharine Kemp, Associate Professor of Law, UNSWJon Duffy, Chief Executive, at Consumer NZ
Susan Calvert, Managing Director, Behavioural Economics
Team at PM&C5Questions•Gina: How do you think consumer policy and effective
competition are interlinked, and what are some practicalways to ensure that they complement each other in today's
market and the work of the ACCC?

•Susan: In my remarks, I suggested that nudges anddisclosure requirements often fall short. Can you shareexamples where these approaches have been successful or
unsuccessful in your experience?

•Katharine: In your view, if nudges result in some people, let's
say the more advantaged, taking action; can that help themarket generally? I'm thinking about the role of data andpersonalisation in today's economic transactions? [e.g.
motor vehicle data and privacy]•Jon: I understand that Consumer NZ has run an energy
switching service. Can you tell us about your service, andexperience in helping people switch? What have been thesuccesses and barriers?

•Earlier I suggested that businesses should be required toautomatically offer better deals to consumers. What are
your thoughts on this, and how can it be practicallyimplemented?

•Gina: We've talked a bit about an unfair trading prohibition.
Where is this up to, and do you think this can make adifference in meeting "real people's" regulatory
expectations? In what sorts of matters would this law makea difference to the ACCC?

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Katharine: There is a similar proposal in privacy law reform,around a duty to use data fairly and reasonably. Can you tell
us where this is up to, and what difference it might make?

•Susan: What role should government and policymakers playin regulating for real people, and how can they ensure that
regulations keep pace with the evolving market dynamics?

•

Jon: There has been some concern that more direct
regulatory approaches that drive quality or fairness or
sustainability can cost more. I think this debate has playedout in relation to a 'right to repair' in NZ - can you tell us
about that?

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