It’s federal election time again and time to consider the respective policy positions of each of the major parties. The key area of differentiation to date has been in relation to the introduction of an effects test for misuse of market power. This has been supported by the Government and the Greens but is opposed by the Labor Party. More recently the Labor party has indicated it would ‘ensure that competition policy does more to ameliorate the growing economic gap in our society’.
The Coalition set up the Harper Review has formally supported the Harper Recommendations. The full Government response to the Report can be found here: http://treasury.gov.au/harperreview. See also my Government response page. In addition, the Government conducted a further review into the ‘effects test’ for misuse of market power, recommended by the Harper Panel and subsequently (in March), the Prime Minister indicated the Government would adopt an effects test for section 46 (media release).
In relation to competition laws, the key recommendations supported are:
- Cartels: cartel laws to be simplified and joint venture exemption amended
- Price signalling: separate industry-specific price signalling laws to be repealed and section 45 (anti-competitive agreements) to be amended to include a prohibition on concerted practices which substantially lessen competition
- Primary boycotts: repeal separate provision in s 45/4D and amend cartel laws to address any resulting gap in the law
- Exclusive dealing and third line forcing: formal government response indicated this would be considered as part of misuse of market power consultation; given support of the effects test for misuse of market power, it is likely the government would support repeal of these separate prohibitions in accordance with the recommendations of the Harper Panel.
- Misuse of market power: introduction of effects test for misuse of market power. A corporation with substantial market power would be prohibited form engaging in conduct having the purpose, or which would have or be likely to have the effect, of substantially lessening competition in a market.
- Resale Price Maintenance: per se prohibition on minimum RPM to be retained, but notification to become an option.
- Mergers: no change to substantive law, but formal merger clearance process to be combined with authorisation process.
- Access: deviates a bit from Harper – adopts Productivity Commission recommendations, including that criteria (b) include a ‘natural monopoly’ test rather than ‘private profitability’ test
- Authorisation/notification: Process to be simplified (single application per transaction) – ACCC to be able to consider both competition and public benefit issues
- Block exemption: Block exemption power to be introduced
- Ministerial consent: remove need for private parties to seek ministerial consent before relying on extraterritorial conduct
In relation to Governance, the government also supports the following Harper Recommendations (among others):
- ACCC: Competition and consumer functions to be retained by the ACCC; may lose access and pricing powers; Government remains open to recommendation that access and pricing functions be transferred to a single National Access and Pricing Regulator. Also supports in part Harper recommendations regarding governance of ACCC; did not support recommendation that half of the ACCC commissioners should be appointed part-time.
- National Competition Council: to be dissolved
- Australian Council for Competition Policy (ACCP): to be established with mandate to provide leadership and drive implementation for competition policy agenda. Design and mandate subject to further discussion with states and territories
- Market studies power: Harper Panel recommended that ACCP be given power to undertake competition studies of markets and make recommendations, supported by mandatory information-gathering powers. Government response was general, noting that ACCC should continue to have existing market studies power (only available as a result of Ministerial direction), but not clearly stating whether it would support further powers – would be part of discussion re: design and mandate of ACCP
On broader policy issues, the Government supported the removal of parallel import restrictions on books (but will ‘progress this recommendation’ following the Productivity Commission’s current IP inquiry. In relation to the issue of restrictions on pharmacy ownership and location, the Government ‘noted’ the recommendation of the Panel and stated that ‘the Government and the Pharmacy Guild have agreed that an independent public review of pharmacy remuneration and regulation’ will be conducted, including consideration of the location rules, and will report by March 2017.
For more detail see my overview of the Government response to all Harper Panel recommendations.
The Labor Party has now published a ‘Reforming Competition Policy for Fairer Markets Fact Sheet‘ setting out its proposed policy suit for competition and consumer law. It focusses on increasing penalties, increasing the ACCC’s litigation budget and introducing a market studies power for the ACCC.
On 19 May 2016 Andrew Leigh MP, outlined Labor’s competition policy plans should it win office.
Noting Labor’s support for the majority of the Harper recommendations, Leigh indicated that Labor did not believe the government had focused enough on inequality.
A future Labor government will ensure that competition policy does more to ameliorate the growing economic gap in our society. This work complements what we are doing to tackle inequality in other policy areas. In social policy, Jenny Macklin has released a seminal report, titled Growing Together – Labor’s Agenda for Tackling Inequality.
First, we will amend Section 76 of the Competition and Consumer Act to allow the Court to apply higher penalties for conduct that targets or disproportionately impacts disadvantaged Australians, or apply lower penalties when firms have provided adequate compensation to those affected.
Second, we will include a requirement in the Competition and Consumer Act that the ACCC prioritise investigations of conduct that targets or disproportionately impacts disadvantaged Australians.
Third, we will task government to investigate the impacts of increased market concentration on income inequality in Australia and produce policy recommendations on how the negative effects of market concentration can be mitigated.
Fourth, we will encourage states and territories to include competition principles in planning and zoning legislation, as recommended by the Harper Review, with a specific focus on shortfalls of appropriately zoned land for key services in disadvantaged communities.
Following release of the final report, Andrew Leigh MP, shadow minister for competition, issued a brief media release focussing on the ‘sharing economy’:
- Harper Report shares Labor’s focus on the sharing economy (Andrew Leigh MP, Media Release, 2 April 2015)
This followed also focussing an address by Andrew Leigh MP to the National Press Club on 24 March 2015 discussing competition policy in the context of the ‘sharing economy’
Effects test for misuse of market power
Following release of the final report, Chris Bowen MP published an opinion piece setting out the Labor Party’s opposition to an effects test for misuse of market power:
- Chris Bowen, ‘Effects test will hamper competitors’ (AFR, 10 April 2015)
(Also published as Chris Bowen, ‘Government must steer clear of effects test recommendation’ (AFR, 10 April 2015, p 39)
These followed commends made by the Shadow Treasurer, Chris Bowen MP (Chris Bowen speech (1 October 2014)) following release of the draft Harper Report, in which he stated he considered the proposed effects test ‘bad policy’.
Following the Government’s support for an effects test, Andrew Leigh MP published another media release setting out Labor’s opposition to an effects test:
Other Harper recommendations
Andrew Leigh MP and Chris Bowen MP, ‘Barney over effects test must not derail better competition reforms’ (Media release 1 October 2015) issued a joint-press release re-iterating Labor’s support for Harper Report recommendations relating to:
- improvements in competitive neutrality
- broader review of regulations from Government that may limit competition
- extraterritorial reach of the Act
- price signalling
- governance of the ACCC
- resale price maintenance
- … and ‘many others’
These had been listed by Shadow Treasurer, Chris Bowen MP, as recommendations Labor were ‘open to’ following the release of the draft report (Chris Bowen speech (1 October 2014)). In that speech, Chris Bowen MP also expressed about some of the recommendations. In particular:
- recommendations in relation to ‘cabotage’ restrictions on ‘shipping along coastal routes from port to port’ (considered current protections work well) [note: the Government’s response merely ‘noted’ this recommendation]
- improving competition in Human Services (indicated Labor remained open to ‘sensible detailed ideas about how choice for Australian citizens can be improved’ but indicated that the recommendation ‘should not be used as an excuse for outsourcing, privatisation or cuts’ and that reforms should be approached with caution) [note: the Government’s response indicated it supported Human Services policy recommendations contained in the Harper Report and would commission a Productivity Commission review into human services]
- pharmacies (indicated Labor would ‘not support proposals which could erode the role of community pharmacy within an integrated health care system or water down their focus on service delivery’)
- misuse of market power – effects test (opposes effects test for MMP, considering it ‘bad policy’)
See also opinion piece by Andrew Leigh MP following the release of the draft report:
On 15 June Andrew Leigh MP announced that it would (Media Release, 15 June 2016):
- increase civil penalties under the Australian Consumer Law from $1.1m to $10m;
- adopt the EU’s penalty system for anti-competitive conduct (‘based on 30 per cent of the annual sales of the relevant product or service, multiplied by the number of years the infringement took place, limited to the greater of 10 per cent of annual turnover, or $10 million’)
- use some revenue from increased penalties to increase the ACCC’s litigation budget
- amend the CCA to give the ACCC a market studies function ‘so that it can explore public interest issues such as pricing discrepancies and increased market competition’)
Independent from the Government response, the National Party has indicated very strong support for an effects test for misuse of market power.
Most commentary from The Greens around competition policy has focused on their support for an effects test for misuse of market power:
- ‘Greens are fighting for the small business without a voice’ (Senator Peter Whish-Wilson, Sydney Morning Herald, 4 September 2015)
- The Greens submission on ‘Options to strengthen the misuse of market power law Discussion Paper’ (2016) (PDF)
- ‘It’s time for an effects test’ (The Greens campaign on an effects test)
More broadly see The Greens policies on Innovation, Competition Policy and Small Business.
The Greens indicate that they wish to ‘enhance the power of the Australian Competition and Consumer Commission to prevent the formation of monopolies through “creeping acquisitions” and to divest monopolies and oligopolies of assets if they are abusing their market power’, making particular reference to grocery and media sectors.
Independent Senator, Nick Xenophon, has supported the introduction of an effects test but has proposed additional changes:
- Strengthening the effects test by “removing the ‘substantial lessening of competition’ caveat”
- Having a ‘fast track, low cost dispute resolution procedure for competition law cases’ – particularly abuse of power cases
- Giving the courts divestiture powers for cases involving abuse of market power
Senator Xenophon is planning to reintroduce his Divestiture Powers Bill (Competition and Consumer Amendment (Misuse of Market Power) Bill 2014)