A lack of clarity from the competition watchdog and government on the proposed crackdown on startup acquisitions could lead to an “investment freeze” in Australia, Shadow Minister for the Digital Economy Ed Husic said.
ACCC Chairman Rod Sims signalled in October last year that legislative changes may be needed in order to widen the watchdog’s scope to crackdown on the acquisition of local tech startups by bigger businesses.
At the time, Mr Sims said that these startups could potentially be future competitors to the incumbent firms, and the mergers and acquisitions could risk entrenching the control “superstar firms” have over markets.
“The more we get into the tech startup world, the more we may need to broaden our horizons a bit in our thinking, and others may need to as well, like the courts and commentators,” Mr Sims said at the time.
“We need to take a view on whether this sort of activity is taking out future competition and entrenching the incumbent.
The announcement led to shockwaves among the local tech and startup communities. A number of Australian tech and startup leaders spoke out against the proposal last year, with StartupAUS founding director Peter Bradd claiming the changes would put open innovation at risk, and “stymie the competitiveness of Australian companies of any size.”
There has been no announcement from the ACCC or government on this proposed crackdown since that time, leaving the innovation community in a state of uncertainty, Mr Husic said.
“There’s been a vacuum. There’s been no detail or direction given by the ACCC as to where it intends to head, which I think is wrong given that it may have an influence on investment decisions to support startups that may be likely to be bought out,” Mr Husic told InnovationAus.com.
“The other glorious sound of silence is from the government. They’ve not indicated whether or not they actually subscribe to or support what the ACCC is doing in this regard.”
“I know there has to be a degree of independence for the ACCC, but I would be interested to know what the government’s views are as to whether or not this is a big issue,” Mr Husic said.
The ACCC and Federal Treasury have been contacted for comment.
Mr Husic addressed the issue in Parliament late last month, claiming it was a “disaster in the making”.
“We already have a relatively low rate of startup formation compared to other parts of the world. If this interrupts or inhibits the flow of capital to startups, this is disastrous, because these small enterprises have a capacity to grow much faster than other small businesses and that growth equates to a growth in employment,” Mr Husic told the Parliament.
He said he was trying to draw attention to the issue in order to force the ACCC and government to clarify their positions.
“I’m worried that it’ll lead to an investment freeze or a cooling of support as some investors ponder whether or not supporting a startup that’s likely to be acquired down the track is worth doing.
“The best thing the ACCC could do right now is provide clarity. If it’s a serious issue then tell us why it is and if it’s a serious issue that merits action then start outlining where you think this action should occur. But don’t leave people in the lurch,” he said.
The ACCC must provide evidence of how bigger businesses acquiring startups may impact competition in Australia and change its position, he said.
“When I first raised concerns about this ages ago I was not making any partisan point. I didn’t make any criticism of the government, but a number of months have gone past and we’ve heard nothing from the ACCC or government to clarify, and that’s not good enough,” he said.
“I’m not for one minute saying that this has pulled the handbrake on investment, but I would be concerned if the absence of clarity has led to that.”
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