Big business blasts competition review

Jared Lynch
September 23, 2014
The Age

Sweeping changes proposed to protect small players.
Big business has hit out at proposed changes to competition laws that will make them more responsible for the financial woes of their smaller rivals.
The Abbott government’s landmark competition review has recommended an “effects test” to stop companies with substantial market power using tactics aimed at lessening competition.
Sweeping changes to retail trading hours and liquor sales, pharmacy ownership and government services are among the 52 recommendations listed in the review.
Industry has attacked the effects test, saying it is unclear how it will work and will ultimately lead to higher prices for consumers.
But the inquiry’s chairman, economist Ian Harper, said that recommendation was aimed at protecting competition, not competitors.
He said such a test would stop big companies using their market power to hurt their smaller rivals.
“We don’t want the law to discourage genuine innovation, genuine improvements in the way things are done,” Professor Harper said. “But we clearly want the law to discourage the abuse of market power, which substantially lessens competition and is clearly not in the long-run interests of consumers.”
He said companies would be able to use two defences: that their competitive tactics could also be used by a company that had no market power and that it was in the best interests of consumers.
But Richard Goyder, the boss of Coles’ owner Wesfarmers, said the defences were weak.
“The panel acknowledges an effects test could have unintended impacts, including inadvertently capturing pro-competitive conduct, and in our view the proposed introduction of a defence would do little to address these issues and would introduce its own uncertainties,” Mr Goyder said.
Patrick Gay, a partner at law firm Herbert Smith Freehills, also said the test was murky. “It’s unclear how this proposed test would work or how it would provide businesses with the certainty that is seen as a critical element of any provision dealing with misuse of market power,” he said.
But the Business Council of Australia said the review had merit. The chairman of the BCA’s competition policy review working group, Danny Gilbert, said while he was concerned the effects test could have “unintended consequences”, the review provided “clear directions for governments to lift competition” throughout the economy.
Mr Gilbert particularly praised the recommendation to introduce competition principles in planning and land-zoning decisions, saying it would help generate “investment that grows the economy, create jobs and provides local choices for consumers”.
The review said existing planning laws gave too much weight to incumbent businesses in certain locations. It accepted arguments from German supermarket chain Aldi that current planning laws limited free and open competition in the sector and should be removed.
The review also suggested supermarkets be able to sell alcohol to boost competition and that the rule that only pharmacies should own chemists be abolished.
Professor Harper said pharmacies needed no special protections, considering anybody could own a medical clinic.
But Pharmacy Guild executive director David Quilty said Australia’s pharmacies were struggling under new price-disclosure rules and needed “certainty and stability – not a constant push to abolish a system that’s working and replace it with an economic theory”.
The review also suggested congestion pricing for roads.
“Roads are the only piece of infrastructure where the government effectively buys and owns all the assets, setting aside the number of toll roads, funds through the general tax system and then gives away the services,” Professor Harper said.
However, Australian Automobile Association chief executive Andrew McKellar said while the current approach to road funding was broken, congestion pricing should be a long-term goal.
“If we were to move to a system of road pricing, then it would not be expected that motorists end up paying more,” he said. “We would have to cut other taxes and charges, such as the fuel excise, as we move to that sort of system. It would be essential that there should not be a higher overall cost to motorists.”
Small Business Minister Bruce Billson welcomed the draft review, saying it focused on making markets work in the long-term interests of consumers. “It will help identify ways to build the economy and promote investment, growth, job creation and durable benefits to consumers,” he said.
Read more: http://www.smh.com.au/business/big-business-blasts-competition-review-20140922-10k651.html#ixzz3E56f6liw