September 6, 2016 By FTI Consulting
More than two years after commissioning the Harper Competition Policy Review, the Federal Government has released an exposure draft of the Competition and Consumer Amendment (Competition Policy Review) Bill 2016. The Bill introduces provisions that reflect the Harper recommendations accepted by the Government in March 2016.
On 5 September 2016, Treasurer Scott Morrison released an exposure draft of the Competition and Consumer Amendment (Competition Policy Review) Bill 2016 (the Bill). The Bill amends the Competition and Consumer Act 2010.
Treasurer Morrison explained that the Government’s decision to adopt the Harper Review recommendations will give Australia “commercially and legally robust laws, preventing firms with substantial market power engaging in conduct that harms the competitive process”. Additionally, by enabling emerging and smaller businesses to compete, the Government hopes to drive innovation between market players, which will in turn benefit consumers.
Key amendments in the Bill are:
Under the proposed amendment, businesses with a substantial degree of market power will have more stringent obligations imposed on them with regards to their “conduct”, should their conduct be deemed to have the purpose or effect of substantially lessening competition.
Businesses, legal experts and politicians alike have expressed concerns over inherent uncertainty in the proposed “effects test”.
A key concern highlighted is uncertainty of the stand-alone term “conduct”, without any qualifying noun, and the possibility that the term may be construed too broadly. It has been argued that without any qualifiers on “conduct”, businesses may be hesitant to exercise company strategy that would otherwise be ‘normal’ competitive behaviour in the course of conducting business.
The Government’s consultation on the draft exposure Bill is open until 5pm, Friday 30 September, and affords stakeholders the opportunity to consult through an online survey with specific q questions, or by providing a written submission.
The Labor Party is opposed to the Government’s proposed changes, calling the potential effects test a “lawyers picnic.”
In a move that has been described as “uncommon”, the ALP has backed major supermarket giants in arguing that consumers may be worse off.
Treasurer Scott Morrison has expressed his surprise over Labor’s opposition to the Bill, stating that the “Labor Party is not supporting legislation that actually would give arms to the ACCC, whether it’s in relation to banks or retailers or petrol companies or anyone of that nature, to ensure that competition was strong”.
The Greens have voiced their support for the tightened competition regulation proposed in the Bill, for its potential benefits to consumers and its opportunity to drive innovation.
Following consideration by Cabinet, the legislation will be introduced to Parliament in either the Spring or Autumn session, and given the divergent views on the core issue of the effects test, is likely to be referred to a Senate Committee for further inquiry.
Big business is viewed as having the most to lose from the proposed amendments, given increased competition in the marketplace, the cost of complying with more stringent regulatory obligations and the lack of clarity surrounding what constitutes “conduct”.
The Business Council of Australia, the lobby for big business, has labelled the Government’s decision as “poor policy”, arguing that it is counter-productive to creating an innovation-driven economy in Australia.
BCA President Catherine Livingstone said
“We participated in good faith throughout the consultation process and will continue to work with the Government to minimise the risks and unintended consequences from changes to the law”.
Brad Banducci, CEO of supermarket giant Woolworths expressed his disappointment with the Government’s decision to introduce the “effects test”, for the detrimental impact it may have on consumers and customer-led innovation. Mr. Banducci argues that the proposed changes “have the potential to create uncertainty for business and so reduce investment and negatively impact the economy and jobs.”
Wesfarmers CEO , Richard Goyder, called the Government’s decision to introduce the “effects test” “very disappointing” and “bad policy”, citing the possibility of increased prices and inability to open new stores as potential impacts arising from the test. ACCC Chairman Rod Sims refuted these claims, saying that Mr Goyder had been “very badly advised” in this area.
Goyder’s sentiment was echoed by John Durkan, the managing director of Wesfarmers subsidiary, Coles. Mr Durkan expressed his concern that the effects test would prohibit big businesses selling below cost if it undercuts competition in the market, which could see Coles struggle to keep city and regional prices consistent.
In stark comparison, chief executive of the Small Business Council, Peter Strong, supports the introduction of additional measures to enhance competition and increase protections available to small businesses. Labelling possible price increases as “untrue, Mr Strong has said “this has been a point of conflict between a couple of big businesses who don’t want competition and the rest of the business community”.
Consumer advocacy group, Choice, has also praised the Government’s move to introduce the “effects test”, arguing that it will give consumers more choice and access to fairer prices. Choice CEO, Alan Kirkland, branded the potential price increase for consumers a “scare campaign”, stating that “The only people who oppose this change are big business, and you’ve got to be suspicious of that. This will make it easier for the ACCC to crack down on big players misusing their market power.”
Should Parliament successfully pass the proposed Bill, the ACCC will be responsible for enforcement and governance of its heightened provisions. As part of its responsibilities as the competition regulator, the ACCC is required to publish guidance on the framework and how it proposes to approach breaches of the new prohibitions.
The ACCC has provided draft guidance on the proposed misuse of market power and concerted practices, with the view to help the broader community interpret the legislative provisions and apply it to the commercial context.
The ACCC’s consultation process is concurrent with the Government’s consultation on the draft exposure Bill, and focuses on the draft framework relating to two key areas of the proposed amendments:
ACCC Chairman, Rod Sims, has invited feedback from consumers, businesses and other stakeholders on issues and topics that “the ACCC can provide guidance on to assist them to understand how the amended misuse of market power prohibition, and the prohibition on anti-competition concerted practice are likely to operate and how (the ACCC) will approach those provisions”.
While he has been careful not to prescribe the test to the banking industry, Mr Sims has praised the opportunity for increased regulatory scrutiny, stating that the proposed test will allow the ACCC to more closely examine sectors that were otherwise inaccessible as the alleged misbehaviour meant that “you couldn’t get at because the current misuse of market power law is ineffective”.
Submissions for the ACCC consultations are due by 5pm on Monday 3 October 2016.