Go8s shouldn’t be GoM8s

Christina White is a bit worried that USyd is part of a cartel.

If eight businesses set up an exclusive organisation, collaborated on projects and shared information about pricing arrangements, the Australia Competition and Consumer Commission (ACCC) should come knocking.

The Group of Eight (Go8) calls itself “a coalition of Australia’s leading research Universities”. Right now, the collaborative practices of this group make the Go8 look a lot like a cartel (aside from the obvious fact that undergraduate fees are set by the government – for now). If deregulation happens and this behaviour continues, then the Go8 could be at risk of breaching competition laws.

Cartel conduct occurs when businesses agree to act together, instead of competing, to drive up profits. It includes price fixing, market sharing, and controlling output , or otherwise cooperating to shape the market in a way that benefits businesses at the expense of consumers.

The ACCC normally takes notice when competitors start sharing information. Medical professionals aren’t allowed to talk about their fee structures at conferences, for example. But the Go8 boasts about “offering a trusted network through which the leaders and administrators of Go8 universities share ideas and expertise”. De-wanked, this means that the Go8 acts as an exclusive information-sharing network to the mutual advantage of its members.

Arguably, the cooperation of tertiary institutions is vital for research. It might even get them an exemption from the ACCC in the name of the national interest if they bothered to apply. But if they share data – or anything else they use to set prices –then it could look like they weren’t setting their prices independently.

Joint marketing can also draw ire from the ACCC because it distorts the way competitive options are presented to consumers. All their glossy brochures and the planned joint PhD program could lessen competition. Similarly, Go8’s agreement with China’s top universities (the China 9) could be seen as anticompetitive in the domestic market.

When the Go8 formed, USyd’s then Vice-Chancellor Gavin Brown said “it is far more important to ensure that Australia has universities which are world class, than any petty competition between individual institutions”. When the Go8 speaks of collaboration, they don’t mean facilitating a community of scholars; they mean exclusive collaboration to become internationally competitive.

In a deregulated market, the Go8 could grossly inflate degree costs. Believers in neoliberal providence might argue that a real cartel wouldn’t last because there is always an incentive to undercut others’ prices to attract more students. According to game theory, cartels are inherently unstable because each cartel member is in a prisoner’s dilemma; each member could boost their profit by breaking the agreement, by lowering their price or increasing output.

The problem comes when universities play this prisoner’s dilemma game an indefinite number of times. With information sharing, they can credibly threaten that if any other university deviates from the cartel’s mutual best interest they’ll be punished. Such a threat could be levied against a university that wants to lower fees or one deciding whether to accept NTEU demands.

Go8 universities won’t need more students if they can squeeze more money out of their current ones. Go8 degrees have inelastic demand – students with the highest ATARs will always want to go there. The high cost of living in Australian cities means students rarely move interstate. Hence, USyd has a group of Mosman kids who will want to come here for its reputation alone, and Spence is ready to cash in. All Go8 universities have a communal interest in safeguarding their collective reputation (or as they put it, “sustaining quality brand recognition”) because that’s what they’re trading on.

The ACCC has a section on its website called ‘How to avoid joining a cartel’. Have a look, Spence.