Daily Bulletin


The Conversation

  • Written by The Conversation Contributor
imageIs further consultation on section 46 really likely to reveal something the already extensive input has not? AAP/Lukas Coch

Big business continues to hold the government to ransom over the Harper review’s proposed reform of the misuse of market power prohibition in Australia’s competition legislation.

In the government’s response to the review panel’s recommendations announced yesterday – on section 46, more consultation is proposed.

More consultation needed – really? The Harper review received 950 submissions and held countless public and private workshops, forums and meetings, including with big business groups, and the lawyers that typically represent them. Once the final report was in, “consultation” between the former Abbott-led government and the Business Council of Australia continued over the issue.

The prohibition in section 46 has been the subject of reviews, inquiries and reform proposals on more than 10 previous occasions, spanning 1976 to 2004.

The proposed further consultation is said to be for the purpose of exploring “further options to strengthen” the prohibition. In Treasurer Scott Morrison’s words, it will examine whether there is a “part Harper” option available. Is this meant to imply that all the possible options have not been explored already? Given the extensive and protracted consultation to date, that proposition lacks credibility.

The more convincing explanation for prolonging the section 46 agony is that it will enable the government to negotiate big business support for other reforms – particularly in the area of tax. In such negotiations, section 46 may well feature as a bargaining chip.

The principal assertion made by objectors is that an effects test will produce uncertainty that will “chill” competition.

The many compelling arguments in favour of reform of section 46, and an effects test specifically, need not be rehashed but it is worth pointing out that such a test is not some novel invention of the Harper panel. It replicates the test which has applied in the Australian competition rules dealing with mergers and exclusive dealing for years and is aligned with international approaches.

Similar claims - that uncertainty would deter discounting - were made about the notorious “Birdsville amendment” to section 46 (an amendment aimed specifically at predatory pricing) some years ago. In the end, no such effect was discernible.

Ironically Harper has recommended that the Birdsville amendment should be repealed. Not because it created uncertainty, but because it was misguided and unnecessary - a result of the politics of big versus small business that plagues competition law and other fields of regulation in this country.

The Birdsville saga is a neat illustration of the most likely outcome of the political compromises that Morrison’s proposed “consultation” necessarily involve. A probable outcome is incoherent and/or unworkable law. There are also often unforeseen spill-over effects.

What the reform opponents may not fully appreciate is that if section 46 remains in its current condition, or if an unworkable alternative “option” is introduced, there is every likelihood that the Australian Competition and Consumer Commission (ACCC) will ramp up its enforcement of the prohibition on unconscionability (unfair trading) as a proxy for enforcement of section 46. And, in some respects, this will make the enforcement task easier.

The unconscionability prohibition does not require proof of substantial power in a market, or taking advantage of such power for a proscribed purpose. The “substantial power” and “taking advantage” elements are what have foiled the ACCC’s attempts to punish and deter anti-competitive conduct by powerful firms for years.

What is more, the unconscionability prohibition invokes moral rather than economic judgments about commercial conduct. In the words of judges who have interpreted the provision, the standard is whether the conduct is “against conscience” or contrary to “moral and normative standards, broadly cast”. What could be more uncertain than that?

Under the competition rules, businesses are free to conduct themselves unfairly as long as they are competing. That is seen as in the interests of consumers. Competition is inherently unfair. Under the unconscionability rules, by comparison, the test for liability is in essence about whether the business has acted fairly, ethically even.

Perhaps big business takes comfort in the fact that the penalties for unconscionability (maximum $1.1 million) are lower than for misuse of market power (maximum $10 million or higher if the alternative formulae of 10% of corporate turnover or three times the gain from the contravention, are employed).

But the reputational damage from an unconscionability suit is at least as great. And it is this fall-out, in the eyes of customers and suppliers, that arguably keeps business leaders up at night. The rapid fire settlement by Coles of the unconscionability cases brought against it by the ACCC last year, including a public apology by its CEO, is a case in point.

Aside from the hard-to-avoid conclusion of capture, what the government’s continued dithering and deferral on section 46 reveal is that it failed to foster a constituency for reform in this foreseeably controversial corner before the Harper Review was started or reported on. The only constituency that was garnered was with the small business sector. That is not surprising given that the review was initiated and led by Small Business Minister, Bruce Billson, who has since exited left stage.

However, in the tally of winners and losers from this unfortunate episode in competition law history, it will not just be a story of big business triumphing (yet again) over small. The broader narrative will be one of good politics triumphing over good law.

Caron Beaton-Wells receives funding from the Australian Research Council.

Authors: The Conversation Contributor

Read more http://theconversation.com/weve-already-had-consultation-on-the-effects-test-more-is-just-a-political-smoke-screen-51246

Writers Wanted

Vital Signs: yes, we need to make things in Australia, but not like in the past

arrow_forward

How a university can embed Indigenous knowledge into the curriculum and why it matters

arrow_forward

Do criminals freely decide to commit offences? How the courts decide

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Scott Morrison: the right man at the right time

Australia is not at war with another nation or ideology in August 2020 but the nation is in conflict. There are serious threats from China and there are many challenges flowing from the pandemic tha...

Greg Rogers - avatar Greg Rogers

Business News

Expert Tips on How to Create a Digital Product to Sell on Your Blog

As the managing director of a growing talent agency, I use the company blog to not only promote my business but as a way to establish ourselves as an authority in our industry. You see, blogs a...

Adam Jacobs - avatar Adam Jacobs

How to Find A company with Tijuana manufacturing

If you have decided to launch a business in Tijuana, there is a need to know about the manufacturing companies. The decision to choose a manufacturing company is not so easy as it looks.   The rig...

News Company - avatar News Company

Tradies are actually getting on well. ServiceSeeking's data surprises

Across the Top 20 Industry Categories for Household Trades and Home Improvement  3 Industries are showing massive growth in jobs listed: Rubbish Removal, Carpet Cleaning, and Door Installation 4...

Jeremy Levitt - avatar Jeremy Levitt



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion