Turnbull government sides with small business, agrees to implement controversial 'effects test'

Gareth Hutchens
March 16, 2016
The Age
The Turnbull government has adopted the most controversial recommendation from the Harper review of Australia’s competition laws.
It has approved the implementation of a so-called ‘effects test’.
Prime Minister Malcolm Turnbull has hailed the decision as “a vital economic reform.”
“This is yet again a case of my government taking long overdue reforms out of the too-hard basket and getting on with the job,” he said on Wednesday.
An “effects test” will prohibit big businesses with substantial market power from behaving in such a way that has the “purpose, effect or likely effect” of substantially reducing competition without any economic justification.
The decision will alter competition law in Australia.
Small business has been calling for the Coalition to adopt the recommendation ever since the final Harper review was handed to the Abbott government in March 2015 but the decision caught them by surprise.
One small business representative, when told of the decision on Wednesday, responded thus: “Well f— me. We weren’t expecting this. This is fantastic.”
With just weeks to go until the budget, the decision will pit the Turnbull government squarely against the Business Council of Australia, and powerful supermarket groups such as Coles and Woolworths, who have bitterly opposed the recommendation.
It will also pit the government against Labor, who has also opposed it.
Just this week, Labor shadow treasurer Chris Bowen warned that an effects test, if adopted, would be a “multibillion-dollar disaster waiting to happen” that would create a “lawyers’ picnic”.
Business Council chief executive Jennifer Westacott also warned this week that an effects test would “damage the economy.”
But Peter Strong, chief executive of the Small Business Council of Australia, says the Turnbull government ought to be congratulated for its decision.
“The government has obviously resisted lots of phone calls, pressure and threats from the BCA and Wesfarmers,” Mr Strong told Fairfax Media.
“We’re now going to assess it over the next couple of years for its impact.”
Treasurer Scott Morrison, in a joint press conference with Prime Minister Turnbull and Assistant Treasurer Kelly O’Dwyer on Wednesday, said the decision put the government on the side of competition and consumers, and ultimately the economy, and should not be seen as the government picking sides.
“This is about supporting the competitive process,” Mr Morrison said.
“It’s about competition. It’s not about whether one is taking the view of larger businesses or smaller businesses or medium-sized businesses. It’s about taking the view that competition benefits the consumer,” he said.
The Business Council was contacted for comment but said it would release a statement once a formal announcement had been made.
The Greens have applauded the decision, calling it a win for small business and consumers.
“Today is a great step forward, but what we need now is a commitment from Mr Turnbull to legislate for an effects test in this term of government,” Greens spokesperson for Competition Policy and Small Business Nick McKim says
“The Greens stand ready to make this happen.”
The “effects test” recommendation from the Harper review will require a change to Section 46 of the Competition and Consumer Act, which addresses the misuse of market power.
When Professor Ian Harper handed his final report to the Abbott government in 2015, the controversy surrounding his effects test recommendation led Mr Abbott to put the whole report on ice.
But when Mr Turnbull became leader last year he revived the report, saying he would like to make a decision on the recommendation by March this year.
On Wednesday, he said the decision was the result of good cabinet process – a veiled criticism of the workings of the former Abbott government.
“We had a very good and informed discussion in the Cabinet. We run a traditional Cabinet government,” Mr Turnbull said.
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