A key regulator has called for sweeping reforms of the nation's merger laws, saying they allow for anti-competitive takeovers that benefit large corporations but cost consumers, small business and the economy as a whole.

Speaking at a Law Council of Australia event, Australian Competition and Consumer Commission chair Rod Sims attached Australia's "flawed" merger laws that are "out of step" internationally.

Mr Sims said the laws strongly favoured companies seeking merger or takeover deals to be waived through, making it difficult for the regulator to challenge anti-competitive proposals through the courts.

"Our lack of success in merger cases has resulted in some problematic acquisitions going ahead," he argued.

"For example, we have seen the number of competitors in rail container freight go from two to one. The threat from the entry of a fourth mobile network operator has been extinguished as a result of the Vodafone/TPG merger, and AGL's acquisition of Macquarie Generation saw higher power prices."

Mr Sims said the combination of existing large players and weak merger laws has resulted in Australia having some of the most heavily concentrated industries in the world.

"Many markets are dominated by a small number of providers, including banking, supermarkets, mobile telecommunications, internet service provision, energy retailing, gas supply and transport, insurance, pathology services, domestic air travel, internet search and social networking services," he rattled off.

"Without action, market power in Australia will become further entrenched; and will certainly not reduce."

Why does market power matter?

Mr Sims said the dominance of a few large firms across key industries should be a real concern to most Australians.

"Market power is hurting Australians across many walks of life," he observed.

"Market power is squeezing the incomes of farmers. For example, chicken growers and dairy farmers have little option but to sell their produce to large buyers with substantial bargaining power. Farmers purchase many of their rural supplies from highly concentrated sellers.

"Small businesses generally are becoming increasingly reliant on a few buyers to access markets for their products and a few sellers for their key inputs. This can damage their innovation and their productivity.

"Many small businesses and farmers are largely reliant on Coles and Woolworths to access grocery shoppers. As recent history has shown us, this power imbalance places small businesses and farmers in particularly precarious positions with consequent damage to our economy.

Moreover, Mr Sims said the concentration of market power in the hands of a few large companies appeared to be reducing economic growth by hurting productivity and wages.

"Market power can contribute to economic inequality by promoting the interests of the few with power over the interests of many. It also undermines trust in the operation of markets, and encourages wasteful rent-seeking activities to protect monopoly profits."

What is going wrong?

Mr Sims said the current legal test for mergers and acquisitions, and its interpretation by the courts, was "skewed towards clearance".

One reason for that is a narrow focus on whether a deal will reduce competition in specific markets, rather than whether it will reduce the overall competitive environment in that sector.

Another is that the ACCC must prove to the court that future anti-competitive effects of a merger are "likely", and it is obviously hard to prove what is likely to happen in the future, especially when some suppliers and customers affected by a proposed merger are unwilling to give evidence for fear of retribution.

"Instead of asking the question of 'why not allow this acquisition', our merger control system should be requiring merger parties to convince us or an appeal or review body 'why the acquisition should be allowed on competition grounds'," he argued.

Mr Sims also highlighted the difficulty in preventing creeping acquisitions of much smaller rivals, particularly in the tech sector, which are often used to snap up potential competitors before they pose a threat to big players.

"While this shortcoming is not limited to acquisitions in digital markets, it certainly has been amplified by the growth of digital platforms where a strategy of acquiring nascent rivals can, and likely is, being used to protect positions of very substantial and long-lasting market power," he warned.

"For example, between 2010 and 2020 Google, Amazon, Facebook, Apple and Microsoft acquired nearly 500 business – approximately 4 per month."

One of Mr Sims's predecessors, the founding chair of the ACCC Professor Allan Fels, pointed out that Australia's regulator lacks a divestiture power equivalent to its US counterpart, which would allow for the potential break-up of businesses with too much market dominance.

He said Australia's anti-collusion laws were also difficult to enforce.

"That makes it all the more important to prevent the accumulation of market power in the first place," he told ABC News.

Mr Fels said he is "broadly supportive" of the proposals canvassed by the current ACCC boss and "optimistic they would go through".

Mr Fels noted that the Commonwealth Parliament passed significant legislative reforms around the legal tests for mergers and acquisitions during his tenure leading the competition watchdog and "the atmosphere is no different now to then."