Misuse of Market Power Headlines in Harper Competition Policy Review's Final Report
Wednesday 1 April 2015 @ 11.11 a.m. | Corporate & Regulatory | Trade & Commerce
Yesterday (31 March 2015), the Small Business, Competition and Consumer Policy Division of the Treasury posted on its website that the Government had released the Final Report of the Competition Policy Review (known as the Harper Review). While we have posted before on the Harper Review, the Final Report makes recommendations worthy of some further discussion. Key among these are that the Harper Review has rejected:
". . . the case made by big business lobbies that the adoption of a controversial 'effects test' will chill competition in Australia, recommending the government instead adopt the test to protect small business against the misuse of market power".
Background to the Harper Review
The Harper Review was initiated by the government who asked Professor Ian Harper and an expert panel to undertake what the government described as an independent "root and branch" review of competition policy. The Harper Review was described by the government as the first "... comprehensive review of Australia’s competition framework in more than 20 years" and was said by the government to deliver on a key election commitment to conduct such a review.
To date the Harper Review has produced a Draft Report delivered on 22 September 2014 (see our article Harper Competition Review Draft Report Released for details). After the Draft Review was released further submissions were taken and the process closed out in November 2014 (see our article The Harper Review in Closing).
Effects v Purposes: Competition and Consumer Act - Section 46
Among all the proposed changes, the changes to section 46 and the way an abuse of market power is to be dealt with in the future remains the headline item. At the time of the Draft Report, the issue had been raised in as many 300 submissions. The Harper Review at that time proposed to change section 46 of the Competition and Consumer Act 2010 (Cth) (the C&C Act), to an "effects test", indicating that it favoured changing section 46 to prohibit large businesses with a significant degree of market power from ". . . behaving in a way that is designed to substantially reduce competition".
As already indicated, the final report has adopted such an approach, with proposed changes ". . . seeing companies with substantial market power having to prove to the courts the pro-competitive and anti-competitive impact of their conduct".
As SmartCompany reports, the Minister for Small Business Mr Bruce Billson has indicated that the current " . . . purpose-based test for the misuse of market power" was “. . . the hunting dog that won’t leave the porch”. In other words a measure that has “. . . fallen short” of preventing misuse of market power by big business and worked against small business.
From the Draft Report, the expectation had been for the move to a new test but one that would include a more extensively defined set of defences for larger businesses defending themselves against such an effects test. The Harper Review, however, appears to have followed a number of submissions, and opted to remove the notion of a defence in favour of ". . . a list of factors courts must consider in determining whether there is a substantial lessening of competition".
The ACCC's Response to The Final Report
In its own Media Release, the ACCC has responded to the final report saying:
“The ACCC also supports proposals to make the misuse of market power provision workable, to introduce a prohibition on concerted practices (to tackle cartel-like conduct that may otherwise be permitted), and to improve merger assessment processes.”
It also indicated its broad support for the Harper review's recommendations seeking to simplify the C&C Act to ". . . make it easier for businesses to understand their obligations . . .".
One area where the ACCC signaled some potential for disagreement with the Harper Review was its proposal ". . . to break up the ACCC" into several organisations - saying in its Media Release:
“The ACCC considers there are considerable synergies between competition law enforcement and economic regulation, which would be lost. Apart from the increased overheads from having to run two organisations rather than one, there would be very real costs for businesses in having to deal with two regulators, who may have conflicting views. . . . Breaking up the ACCC would also go against the international trend, which is towards agency consolidation. . . . That said, we recognise that these are issues for government to consider . . . The ACCC looks forward to working constructively with the Government as it considers its response to the Competition Policy Review Panel’s final report".
Other Changes Recommended
Changes to and the deregulating of retail trading hours are also among key changes in the final report of The Harper Review, such are said to be based on the need for conventional retailers to be able to respond to growing online shopping which is now undermining the intent of the existing restrictions on retail trading hours and placing conventional retailers at a disadvantage. The report is also said to help small business and retail by seeking more flexibility in collective bargaining and faster access to remedies.
What Next for the Harper Review
The Harper Review’s Final Report makes 56 recommendations for reforms across three key areas:
- competition policy;
- competition laws; and
- institutions dealing with these.
The government has indicated its support for ". . . the broad direction of the Competition Policy Review’s Final Report"; namely, to promote more dynamic, competitive and well-functioning markets and following it’s response to the report, it plans to prepare ". . . appropriate legislative changes" for further consultation (see here for submissions).
As to the future of any resulting amending legislation, the Minister Mr Billson is reported as saying he was optimistic the draft legislation would pass through the Senate despite the government’s past difficulties in getting its policies passed.
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