Samuel gives Abbott’s review some competition

In a new policy paper, Graeme Samuel and former ACCC colleague Stephen King warn proposals to protect small business may lessen competition in the Australian economy.

Former Australian Competition and Consumer Commission chairman, Graeme Samuel and his former ACCC colleague and co-director of the new Monash Business Policy Forum Stephen King have done their bit to help ensure  the Abbott Government’s promised ‘’root and branch’’ review of competition law doesn’t lead to less competition.

Samuel and King, with Herbert Smith Freehill’s Chris Jose, have co-authored their own agenda for the competition policy review under the banner of the forum, which was established earlier this year.

Having lived through the Dawson inquiry and endless Senate inquiries into supermarkets and fuel, the authors of the paper would be very aware that within the parliament and community – and indeed within the government – there are those who will see the review as a vehicle for ‘’protecting’’ small businesses from competition with big business.

One of the more contentious issues looked at by Dawson a decade ago was whether or not an ‘’effects’’ test should be added to Section 46 of what was then the Trade Practices Act, the section that dealt with misuses of market power. Dawson rejected what was seen as an attempt to hobble big businesses by focusing the law on the impact of their actions, rather than having to prove that they had acted with anti-competitive purpose.

The Monash forum’s starting point is to recommend that the review should consider whether there should be an addition to the current over-arching objective of the Competition and Consumer Act, adding an explicit statement that the objective of the law was the protection of competition, not the protection of specific competitors.

The Dawson inquiry, the High Court and most competition authorities recognise it is the competitive process and not individual competitors that the law should protect in the interests of consumers and the economy, even if lawful competition can be brutal and damaging for individual competitors.

In the current environment, the Monash paper is a useful reminder that, as the authors put it, any form of effects test would ‘’risk making unlawful strong but fair competitive conduct by efficient businesses that benefits consumers but harms competitors.’’

It is also a statement of their wider position.

The authors canvass some of the proposals that have been put forward to protect small businesses – market share caps for big businesses, divestiture powers, price discrimination prohibitions and the like –and say they exposed serious risks that legitimate competition would be undermined to the detriment of consumers and the objectives of the Act.

There is a range of recommendations in the paper, but the initial focus on the arguments against prospective amendments to the laws on misuse of market power that might shift the focus from consumer and economic benefit is by far the most significant and most politically sensitive. 

Competition can be brutal and often involves damage to competitors large and small, but laws that could lessen competitive intensity within the economy would damage the economy and reduce innovation – and living standards. An open economy operating within an increasingly global competitive environment can’t afford to freeze its competitive settings.

The paper’s other potentially controversial recommendation is that the ‘’price-signalling’’ laws legislated less than 18 months ago – laws specific to the banking sector which prohibit both public and private discussion about prices (interest rates) – should either be removed or extended to all businesses.

The repeal of those disclosure laws would be preferable. It is ludicrous and detracts from informed discussions about the economy and the condition and prospects of the banking sector, that senior bankers can’t openly discuss the outlook for interest rates without falling foul of those laws. It is even more bizarre that the banks are the only sector to which those laws apply.

The paper also looks at the institutional structure for competition policy and urges the review to consider the structure, roles and interactions of the ACCC, the Australian Competition Tribunal, the National Competition Council and the Australian Energy Regulator.

It queries whether the AER should remain within the ACCC or be separated with other similar functions of the ACCC into a specialised infrastructure regulator and also says the review should consider whether the NCC’s role should either be expanded or eliminated.

More broadly, it wants the review to look at what it regards as a stalled national competition policy reform process and the reinvigoration of the Hilmer reform process of the 1990s and early 2000s, which had very significant and positive impacts on government business enterprises and governments themselves.

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