Supermarkets’ claims that shoppers will be charged higher prices and be deprived of new stores under a proposed change to misuse of market power rules are false, the competition watchdog boss says.

Australian Competition and Consumer Commission chairman Rod Sims said claims by Woolworths and Coles, as well as the peak retailers body, that the adoption of the Harper review panel’s “effects test” would, ultimately, hurt consumers, were symbolic of the “very confused” and “strange” nature of the debate.

“I find it very hard to see how the [Australian National Retail Association] could think that bringing a new store into a new market could have a purpose or effect of substantially lessening competition,” Mr Sims said.

“Introducing a new business into a market doesn’t substantially lessen competition, it adds to competition. I think the law on that is very clear,” he said. “I don’t see how having an effective competition provision will raise prices. In fact, an effective competitive provision will lower prices.”


When Professor Ian Harper’s review on competition was released in March, the supermarket giants declared the effects test change to section 46 of the Competition and Consumer Act would also increase litigation and red tape, potentially leading to higher prices at the checkout.

The change would ban “conduct by firms with substantial market power that has the purpose, effect or likely effect of substantially lessening competition”. At present, small businesses have to prove a larger player took advantage of substantial market power.

“The problem with the words ‘take advantage’ is that companies with substantial market power can do whatever they like to exclude competition provided the action they take is something that a smaller company could have done. And there is no logic to that, it makes the law very hard to enforce,” Mr Sims told Fairfax Media, after delivering his welcome address at the International Chamber of Commerce’s roundtable on competition policy in Sydney on Monday.

He also said the change to section 46 would lift Australia to the world’s competition policy standards.

“Both [in] Europe and the United States. But in Europe the law pretty much says what Ian Harper said: Don’t have the purpose or effect of substantially lessening competition. It’s strange when international companies who are used to that law come here and say they don’t like the change,” he said.

“We’re getting rid of the words ‘take advantage’ [as it is currently in the act], which are unique. The only other country that has got them is New Zealand because they copied our law. It doesn’t apply anywhere else.”

Mr Sims described the effects test as “sensible” and stressed the recommendation in no way targeted supermarkets.

“It’s not about them. It effects every sector equally,” he said.

He said previous suggestions that the word “effect” would be added to section 46 were wrong and confusing some parties.

The ACCC would also be staunchly against such a recommendation.

“What Harper has done is to completely rewrite the current test, and people need to look at it as required and think about it anew.”

In November, Woolworths chief executive Grant O’Brien said an effects test could mean the supermarket might hesitate in passing supply chain savings to customers through lower prices, in case it had an impact on competitors.

He also added that a test could force big retailers to think twice before opening a new supermarket in a country town because of the potential effect of lower prices on local stores.

“These are hypotheticals, however, my point is that if there is not clarity on how these changes might work in practice, and to date that is the case, it automatically follows that it will create uncertainty for business,” he has said.

In April, Wesfarmers chief executive Richard Goyder criticised the proposed change, saying there was no compelling evidence of a deficiency in the current law in a competitive economy.

“There is significant risk, however, that the uncertainty that will arise from the proposed changes may actually stifle rather than promote competitive conduct and leave consumers worse off,” he said.

Extracted in full from the Sydney Morning Herald.