Peter Hendy (Eden-Monaro, Liberal Party) Share this | Link to this | Hansard source

I rise today in support of the many small businesses and consumers in my electorate of Eden-Monaro. Members would be aware that the final report of the Competition Policy Review, known as the Harper review—after the chairman, Professor Ian Harper—was released on 31 March of this year. Conducting the review was a major small business policy promise that the coalition made before the last election. One of the many sensible and workable recommendations of this review was a change to the provisions on the misuse of market power. Section 46 of the Competition and Consumer Act currently prohibits corporations that have a substantial degree of market power from taking advantage of that power by eliminating or substantially damaging a competitor, preventing the entry of that person into the market or deterring or preventing a person from engaging in competitive conduct.

It is designed, in part, to protect small businesses from such things as predatory behaviour by large businesses. For example, in a generic sense, it would ideally protect those companies in a supply-chain—such as farmers selling to large retailers—from large businesses who might otherwise use their commercial muscle to squeeze out all the profitability of the farmer. The big issue here is that an imbalance in market power is not, in itself, something that is offensive. It is, in fact, a normal feature of commercial transactions. What should concern and engage us as policymakers is when strong market power is exploited through the imposition of unreasonable obligations on suppliers and business customers.

For twenty years there has been a debate in Australia, especially within the small business community, about the failure of section 46 to fulfil its purpose. The most commonly proposed reform is that the aforementioned prohibition should be revised or expanded to include what is called an effects test. Very simply put, the test would not simply ask whether the big business had the purpose of reducing competition through its actions but whether it actually had the effect of doing so. I have followed the debate closely; indeed, I have been an active participant.

As many would know, I was the chief executive of the Australian Chamber of Commerce and Industry for around six years. ACCI is the nation's largest and most representative business group. It represents both the big end of town and the small end. It represents all the big businesses that are members of the Business Council of Australia and it also represents tens of thousands of small businesses. I have always thought of competition laws as being a bit like a children's see-saw in a playground. If it is weighted too much on one side it does not work properly, and many small business people think it is weighted too much in the favour of big business.

When I was at ACCI we opposed the effects test. However, what is being proposed by Professor Harper and his committee is a very different option to what has been talked about for 20 years. They are proposing a complete revamp of section 46, which concentrates on the public interest issue of diminishing competition in a market as opposed to proving the compartmentalised tests that are a lawyer's feast in the existing section 46, which is why today I support Professor Harper's proposal even though the usual suspects at the Business Council of Australia oppose it. Importantly, my old organisation, ACCI, which cares about the balance between big and small business, also supports the Harper review recommendations. I have always believed that a more effective mechanism to combat the abuse of market power is an important measure to safeguard the norms of acceptable commercial behaviour and to protect efficient market outcomes.

The most common argument against the section 46 Harper reform is that it would act to chill competitive behaviour by players in the market, resulting in outcomes that would be harmful to the consumer. However, I agree with Rod Sims, the chairman of the ACCC, when he supports the new effects test. A former ACCC chairman, Alan Fels, also supports the change. The Harper proposal shifts the test away from the purpose of a firm's actions to the effect of a firm's actions regardless of intent. This is an entirely sensible approach. As I said earlier, under the current provision, the ACCC can only intervene if it can prove two things—that a firm took advantage of market power and that it intended to do so. This makes enforceability of the provision extremely difficult.

By adopting an effects test, the ACCC could act if a company's actions were proven to have resulted in a decrease in competition. Not only will it provide clarity and improve enforceability but it will also bring Australia into line with other countries including the United States and Canada.

I support the recommendation of Harper with respect to section 46 and I encourage my colleagues to do likewise.