Coalition sides with small firms against big business

David Crowe
December 11, 2013
The Australian

STRONGER powers could be legislated to protect consumers and small business from the muscle of big companies, under Abbott government plans to reshape competition laws in a bid to spur economic growth.
The move will target the misuse of market power to sharpen competition in groceries, petrol and electricity, amid fears that unfair tactics will push up prices if left unchecked.

The scale of the reform is made clear in a draft document obtained by The Australian that canvasses new penalties for companies that use their dominance to harm consumers and suppliers.

Included in the paper are suggestions that are likely to encounter strong objections from Coles and Woolworths, electricity utilities and other big companies that are facing new scrutiny in an impending government inquiry.

The document sets out the draft terms of reference for the major competition review announced by Tony Abbott last week with a vow to ensure a “level playing field” that would keep prices down for customers.

Help for small business is a key part of the draft terms, which raise the idea of new “enforcement and redress mechanisms” for small employers to enforce their rights. The document also suggests new “enforcement powers, remedies or enhanced penalties” to prohibit business conduct that harms competition, signalling more authority for the Australian Competition and Consumer Commission.

Small Business Minister Bruce Billson is likely to release the draft terms of reference within days, setting out the battlelines for an inquiry that will last a year.

The draft terms highlight three key sectors – groceries, utilities and automotive fuel – but give the review wide scope to examine any industry and propose any changes to the law.

Cabinet has endorsed the breadth of the review to address “choke points” in the economy that prevent full competition and hurt productivity.

The Prime Minister likened the new review to the economic overhaul from an inquiry in the 1990s by Fred Hilmer, noting it added about 2.5 per cent to national growth when its competition reforms were put in place.

The draft document concedes that some market behaviour is “outside the scope” of the current consumer laws, giving the review panel an opportunity to recommend wider laws.

“No participant in the market should be able to engage in anti-competitive conduct within that market and its broader value chain,” the terms state.

The review panel, which is yet to be named, will have to consider whether the current laws work as intended “in light of actual experience” and the precedents set in court cases in which the ACCC has suffered a series of setbacks over the past decade.

It will also consider whether the “misuse of market power” provisions in the law do an effective job of prohibiting big companies from using their market share to limit competition, such as preventing others from entering the market.

One idea behind the review is to make it easier for small companies to challenge bigger rivals without needing deep pockets or years of waiting time to gain an outcome from the federal courts.
Hearing disputes in tribunals might speed up the process and give small business a better chance of a result, The Australian was told.

The competition regulator might be given a better “toolkit” as well to act on complaints.

A broader concern is that the highly codified nature of the Australian Consumer Law has enabled companies to find ways around some of the provisions,

The government plan clears the way for examining new powers to crack down on predatory pricing, where a big company prices its goods below cost to drive a smaller rival out of business.

The government has also devised the terms of reference to allow the review panel to consider more stringent tests on merger deals that create large companies with substantial market share.

In the next big test for the current regime, ACCC chairman Rod Sims is expected to decide in March on whether to take legal action against the retailers after warning last month that some retail conduct “does not conform” to acceptable business practice.

Farmers and other grocery suppliers see the new review as their best chance in more than a decade to restrain the supermarket giants from charging fees to put products on shelves or creating home brands that drive others out of business.

Some in the federal government believe the inquiry has already had an impact on behaviour, with Coles and Woolworths striking a deal with the ACCC last week to limit the petrol discounts they offer to entice customers into their stores.

The two retailers promised not to offer shopper dockets worth more than 4c a litre at their petrol stations, highlighting the risk that consumers can lose if some market tactics are stopped.

Economists and the big retailers insist that consumers win from the rise of home brands and other measures that drive down the cost of food and groceries, with Coles releasing research last year that its price cuts saved consumers $1.1bn a year.

The inquiry will begin with a discussion paper and proceed to public consultation before and after a draft report, leading to a final report about one year from now.