Introduction

The Harper Review concluded on 31 March 2015. The panel reported comprehensively on the current standing of competition law and policy in Australia, and made 56 recommendations to the Federal Government for reform.

Quick snapshot

In this update, we outline the potential implications of the Harper Review recommendations for the retail sector.

Recomendation

Implications for retailers (if adopted)
Reforms to planning and zoning laws
  • more competitive land use
  • fewer barriers to market entry
  • local government discretion decreased
  • potential for more larger format retailers in areas where previously prohibited
Removal of retail trading hour restrictions
  • impediments for bricks-and-mortar retailers removed, particularly important in the face of growing online retail competition
"Reframing" of the misuse of market power prohibition
  • catches more conduct- "taking advantage" not required to be demonstrated, move to an "effects test"
  • may be a positive for smaller businesses, but may also discourage legitimate rivalry
Improved clarity in the competition law and enhancements to exemption processes
  • will make compliance easier, remove uncertainty and facilitate engagement in legitimate collaborations
  • improved proportionality of legal regime to conduct and easier to obtain comfort from the ACCC for certain activities

Igniting retail competition

Harper considered issues relating to how competition is operating in grocery and fuel retailing, and regulations on planning, zoning and trading hours. It also examined regulations specific to some industries, such as those affecting pharmacy and liquor retailing.

In good news for retailers, Harper advocates for the removal of regulations that limit where and when retailing (and hence competition) can occur. In particular:

  • reforms to planning and zoning laws (some of which are already under way at state and territory and local government levels) were championed and encouraged as important to promoting market entry. It was recommended that these reforms should take account of the following principles:
    • Arrangements that explicitly or implicitly favour particular operators are anti competitive.
    • Competition between individual businesses is not in itself a relevant planning consideration.
    • Restrictions on the number of a particular type of retail store contained in any local area are not a relevant planning consideration.
    • The impact on the viability of existing businesses is not a relevant planning consideration.
    • Proximity restrictions on particular types of retail stores are not a relevant planning consideration.
    • Business zones should be as broad as possible.
    • Development permit processes should be simplified.
    • Planning systems should be consistent and transparent to avoid creating incentives for the gaming of appeals processes.
  • the removal of remaining restrictions on retail trading hours (subject to very limited exceptions) is strongly recommended. The remaining restrictions are seen as creating a regulatory impediment to competition by raising barriers to expansion and distorting market signals, and as putting' bricks and mortar' retailers at a disadvantage compared to internet retailers.

Slated as a positive for smaller businesses complaining of being at the mercy of larger players, is the proposed "reframing" of the misuse of market power prohibition. It is recommended that the focus of the prohibition be upon the anti-competitive effect of unilateral conduct, not just its purpose. Also, "taking advantage" (which requires there to be a connection between market power and conduct) would not need to be demonstrated.

Couched in this way, the prohibition would capture far more conduct than at present. However, it is not clear whether this is necessary given the breadth of other prohibitions, or effective given its potential to manifest a high degree of conservativism in competitive behaviour. Also, an effects test may weaken the practical protections to very small business that are inherent within the current formulation.

Nonetheless if the reforms come off, this will be good news overall for the sector.

  • Retailers can have more confidence when collaborating with their competitors and dealing with upstream suppliers and customers, provided that their conduct does not have an anti-competitive purpose or effect. However, any conduct that may have an anti-competitive purpose or effect is potentially in the firing line - whether this is formal collaboration, tacit coordination or unilateral conduct with market power.
  • Where there is a risk that conduct could fall foul of the law, enhancements to ACCC exemption processes and alternatives should often permit retailers to more readily obtain comfort.

Taking the temperature of the Harper Review recommendations

See our attached graphic for an overview of potential implications for Australian competition following the Harper Review recommendations.

We're only getting warmed up

Stay tuned for future in-depth commentary on specific issues or contact us if you would like to understand any aspect of Harper in more detail.

There is an opportunity to make submissions to the Commonwealth Treasury on the Harper report. This may influence the Government's response to its recommendations. Submissions close on 26 May 2015.