Government to crack down on misuse of market power

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have announced that an effects test will be included in Section 46 of the Competition and Consumer Act 2010 (CCA), as recommended by the Harper Review.

The Harper Review recommended that Section 46 – the misuse of market power provision – be replaced by a new provision, which is better able to deal with harm to competition in Australian markets.

Following the review, the Government undertook extensive consultation with stakeholders before deciding to repeal the current Section 46 and adopt the recommended changes.

A joint statement from Mr Turnbull and Mr Morrison said the amendment of Section 46 to deal with unilateral anti-competitive conduct is an important step to ensure Australia has the best possible competition framework to support innovation and boost economic growth and jobs.

“Conscious of the needs of business, the change is deliberately designed to reduce the uncertainty associated with amending a law,” the statement said. “It uses existing legal concepts from within the competition law – such as ‘substantially lessening competition’ – and ensures the focus of the provision remains only on those firms that have substantial market power.

“This reform represents a commercially and legally robust law, preventing firms with market power engaging in behaviour that harms the competitive process. It places Australia’s competition law on the right footing to encourage economic growth and innovation.”

Master Grocers Australia CEO Jos de Bruin said the Government’s decision “represents a truly historic advance for thousands of independent supermarket owners”.

“As an industry, we have been working for years to have the competition laws strengthened and to rein in abuses of market power by the two big chains that dominate the market,” he said.

“This will be a huge boost to all our members and, indeed, to the wider community of small, medium and even large business owners. We are more than happy to compete. It is in our blood. The market can now operate on merit, not just muscle.”

Council of Small Business of Australia (COSBOA) also congratulated the Government on its decision, despite having called for stronger measures during the review.

“COSBOA considers that the measures are not strong enough, but due process has been followed and we will work within the system and assess the impacts of the changes over the next few years,” CEO Peter Strong said.

National Farmers’ Federation CEO Tony Mahar says this shift towards examining the effects of behaviour will mean a more objective measure to assess the impacts of misuse of market power and anti-competitive behaviour within the supply chain.

“While we do not view this as a silver bullet solution, we do see it as an important tool to not only improve competitiveness, but also to drive innovation, productivity and profitability across the sector,” he said.

Vegetable industry body AUSVEG said the introduction of an effects test will go a long way to ensuring growers can operate in a more open and competitive marketplace that treats all supply chain participants fairly.

“In an environment where growers are struggling to remain profitable due to rising production costs and tighter profit margins, it is important that they can operate their businesses without any extra and unfair pressure that comes from the misuse of market power by other operators in the supply chain,” AUSVEG Deputy CEO Andrew White said.

“The introduction of an effects test will deliver a pro-competitive marketplace and will even the playing field across the fresh product supply chain,” Fresh Markets Australia Chairman Shane Schnitzler said.

On behalf of consumers, Choice CEO Alan Kirkland welcomed the changes and thanked the Government for “staring down the scare campaign from big business” and proceeding with the reform.

“The only people who oppose these changes are big businesses and their lobby groups, and that has got to make you suspicious,” he said.

Speaking at the Australian Financial Review Business Summit on Wednesday, Wesfarmers MD Richard Goyder said he was “disappointed” and “disillusioned” by the Government’s announcement.

“I just think it’s bad policy, and I think the winners will be lawyers,” he said.

Mr Goyder said Coles will not be changing the way it does things and would be doing the wrong thing by its shareholders if it decided to stop investing and stop reducing prices.

“If someone wants to take us to court in due course, then we’ll deal with that,” he said.

The Government will consult on Exposure Draft legislation before introducing it to Parliament later in 2016.