The Australian Government is currently undertaking the most significant review of the nation's competition laws in more than 20 years.
In this Alert, Special Counsel Brett Bolton and Solicitor Borcsa Vass discuss the proposed changes and, if adopted, how these will impact all Australians and force many businesses to rethink their strategies.
The Report
The recently released Competition Policy Review Draft Report (Report) aims to address the major changes to our society and economy that have taken place since the Hilmer Report in 1993.
The flavour of the report is more deregulation. It proposes a number of changes to policies and laws that are designed to improve competition in the marketplace and that will have significant and far-reaching impacts on businesses and consumers if implemented. Many recommendations are politically difficult for the federal government and, if accepted, will require skilful negotiation with state governments and other stakeholders.
Competition Policy
Retail trading hours
Trading hours have been progressively deregulated in New South Wales, Victoria, Tasmania, the ACT and the Northern Territory. However, they remain regulated in Queensland, Western Australia and South Australia.
The Report asserts that full deregulation of retail trading hours is overdue and that any remaining restrictions should be limited to Christmas Day, Good Friday and the morning of ANZAC Day.
The current restrictions on small retailers have arguably reduced their competitiveness due to consumers' ability to shop online around the clock. Many small businesses do not have the resources to create an online presence or compete with the businesses that do. However, the Report also notes that concerns have been raised that more deregulation will actually harm competition and may not be in the interests of all small businesses or consumers.
Liquor and gambling
Liquor retailing and gambling are two heavily regulated sectors of the economy. The Report notes some of the concerns about the social impacts of problem drinking and gambling but also acknowledges that the regulation of alcohol sales restricts competition and consumer choice.
The Report recommends that the impact of the current regulations and restrictions on the ability of small businesses to compete in the liquor retailing and gambling markets be considered in more detail.
Intellectual property
The Report acknowledges the influence that Australia's intellectual property rights have on facilitating or inhibiting innovation, competition and trade. Given the constant and rapid progress in technology and how people share ideas and information (from newspapers to the internet and #selfies), the law must keep up with these changes and ensure that an appropriate balance is struck between fostering innovation through sharing ideas and giving businesses an incentive to do so through the ability to protect and exploit their innovations.
Currently, the law does not prohibit most of the anti-competitive conduct in Part IV of the Competition and Consumer Act 2010 (Cth) (CCA) if the contravention happens because of the creation or transfer of intellectual property rights. The Report recommends that this protection be removed.
This would mean that if a company creates a new product or improves an existing product and, in the course of that process, creates copyright works or registers a patent, and this prevents others from competing with that product, the company may breach the CCA. In turn, this can put companies off attempting to create new products or improve existing products which would ultimately benefit consumers.
It will be interesting to see what responses the panel receives in relation to this recommendation.
Competition Laws
Cartels
The Report asserts that the current cartel laws are too complex and recommends that their scope be modified. If accepted, these recommendations would narrow the application of the cartel prohibitions.
Misuse of market power
The Report's recommendation on changing the misuse of market power prohibition has received significant publicity. The current prohibition is complex and difficult to understand or apply.
The prohibition as it currently stands stops a company with substantial market power from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a person into the market or deterring or preventing a person from engaging in competitive conduct in the market. The Report suggests that the prohibition be re-framed so that it focuses on the effect of particular conduct rather than its purpose. The Report endeavours to address the concerns expressed by business groups and the large supermarket chains about moving to an "effects-based" test by suggesting it be a defence to any claim if the defendant could prove that the relevant conduct was a rational business decision and that the effect of the conduct would benefit the long-term interests of consumers.
There is considerable doubt though about whether such a defence will be any easier to interpret or apply given the potential difficulties in determining what a "rational business decision" is, what factors will be taken into account in determining this, and how the "long-term interests of consumers" will be assessed.
Conclusion
Submissions in response to the Report are due by 17 November 2014. We will keep you informed of important developments in this key area.
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