The Harper Review in Closing
Monday 17 November 2014 @ 10.37 a.m. | Legal Research | Trade & Commerce
One of the most significant reviews of Australian business practices since the Trade Practices Act of 1974 is set to close today, the 17 November 2014. The Draft Report reviewing Australian competition policy, chair by Professor Ian Harper and referred to as ‘The Harper Review” has recommended a series of significant changes to competition policy and laws relating to issues such as resale price maintenance, mergers, trading hours, parallel importing and regional price discriminations.
Changes to Section 46
Amongst all the proposed changes, one particular issue has garnered significant media coverage as well as being mentioned in many of the 300-plus submissions already received in response. The Harper Review’s proposal to change section 46 of the Competition and Consumer Act 2010, known as the ‘effects test’, has generated the most response and opposition. The Draft Report states that section 46 should be changed to prohibit large businesses with a significant degree of market power from behaving in such a way that is designed to substantially reduce competition.
The manner in which this effects test would be achieved or what sort of behaviour would be deemed illegal remains unclear. The most common outcome that has been suggested to Appliance Retailer is that the wholesale pricing advantages enjoyed by the large retail chains, realised both in face value dollar terms and rebates, could be considered anti-competitive and therefore illegal. This would mean that a supplier would be compelled to offer its products to all retailers at the same wholesale price and could no longer offer different rebates to different groups, depending on their size. Appliance Retailers have expressed their concerns that this could mean an end to current rebate system; a system that allows suppliers to pay rebates to retailers as a way of showing favouritism while retaining identical prima facie wholesale prices.
The argument has been formulated that the rebate system is tantamount to predatory pricing practices. Supporters of the effects test have argued that the rebate system unduly prejudices smaller retailers and effectively squeezes them from the market. However, opponents of the change insist that competition law should be made in the best interest of the consumer and not rival retailers.
The Future of Competition Law
Australian Competition and Consumer Chairman, Rod Sims, has described the future of Australian Competition law succinctly at the Australian Farm Institute Conference in Melbourne. Mr. Sims explains that Parliament has designed competition law to be not intrusive on market behaviour. Intrusive laws can stifle innovation and competition and many other benefits. However, he maintains that that there must be some limit on what powerful firms and businesses can do. He says:
“we do not want cartels, or agreements or mergers that substantially lessen competition, we do not want misleading or unconscionable conduct, and we do not want firms to misuse their market power.”
He concludes that Harper Review assesses current competition law to ensure that we have got the right balance.
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