Competition policy review shouldn’t focus on small business, Hilmer says

Yolanda Redrup
14 February 2014
SmartCompany

The man who was charged with heading Australia’s last competition review has spoken out, saying the current review shouldn’t focus on sectors such as small business.
In a speech yesterday at a forum in Sydney on the root and branch review of competition policy, Professor Fred Hilmer said the review needed to focus on policy, rather than solving the specific problems of small business, supermarkets or rural areas.
Hilmer also criticised the review for lacking focus and focusing too much on small business.
“I worry, as many people do, that small business is permeating this, and job growth in small business, it’s just not right, it’s not factual,” he says, as quoted by The Australian Financial Review.
“If this becomes political and non-fact based then it will go the way of most inquiries. My other fear is that they don’t rush it through.”
This will be the first review into competition policy since the Keating government initiated a review in 1993, which led to a national competition policy.
Hilmer’s speech was part of the same forum where Business Council of Australia chief executive Jennifer Westacott said yesterday the review shouldn’t attack big business, including Coles and Woolworths.
To adequately evaluate competition policy, Hilmer says more time is needed, as well as broader terms of reference.
Hilmer also says the review should lead to better policies on job creation and new business.
“This requires examining policies that create disincentives and barriers to entry, including licensing and registration, financing and employment restrictions and industrial relations as well as tax incentives,” he says, as quoted by The Australian Financial Review.
Hilmer says the review shouldn’t act to serve a single interest group, whether it was an “industry seeking to use the competition framework to implicitly support the industry, small business or social service areas”.
Hilmer, who is now the vice-chancellor of the University of NSW, has also called for the review to look into how competition policy impacts the health and education sectors, two areas which had not been part of the 1993 review.
The executive director of the Council of Small Business of Australia, Peter Strong, also spoke at the forum and says Hilmer’s comments in regards to small business were “old-fashioned”.
“It’s from last century. He’s very respected, as he should be, but the world has moved on in a major way. Innovation and productivity is now driven by small business,” he says.
“Productivity is currently under threat from competition policy. When there are lots of businesses, then there are lots of companies small business can supply to and this helps to boost innovation, driving new product development and processes.”
When the market is a monopoly or duopoly, these companies are able to dictate what the smaller businesses do, Strong says.
“Big businesses take advantage of the innovation of others, as they should, but when there are only a few companies they decide the product, the colour, when it turns up and its price. You don’t have a lot of options,” he says.
“Small business must permeate the root and branch review. Big business is always well represented and what we’re seeing is small business finally getting the representation we need.”
But Strong emphasises it’s not a war between big and small business.
“Big businesses have money, lobbyists and plenty of time, so they will be represented. We believe they must be represented because we have to work well together,” he says.
“We often have discussions with the BCA and we have been working with the banks.”