The body representing Australia’s big two supermarkets has rejected a key part of the Federal Government’s competition review.

The Harper Review final report was released Tuesday after a wide-ranging examination of Australia’s competition policies.

One of the most controversial proposals was for a so-called “effects test” for assessing abuse of market power and anti-competitive conduct.

The review’s recommendation would change current laws to ban “conduct by firms with substantial market power that has the purpose, effect or likely effect of substantially lessening competition”.

But Independent Senator Nick Xenophon said that wording would “entrench the dominance of players like Coles and Woolworths”.

“Big businesses will continue to get bigger and small businesses will struggle against unfair competition,” Senator Xenophon said.

“[The effects test] is completely unworkable, it is complex, convoluted, and will effectively mean business as usual,” he said.

“The one beacon of hope in the draft Harper Review was to have an effects test for misuse of market power rather than having to prove an intent or purpose on the part of a large corporation.

“What the final Harper report has come up with is a mish mash, it is a mess and it will render it completely ineffective.”

Section 46 of the Competition and Consumer Act currently focuses on purpose, but the Harper Review found it “does not usefully distinguish between pro-competitive from anti-competitive conduct”.

Senator Xenophon said he would move amendments to Section 46 based on a simplified effects test after the budget session of Parliament.

Retail groups split on effects test recommendation of review

Coles and Woolworths

The body representing major retailers including Woolworths and Coles, the Australian National Retailers Association (ANRA), has rejected the effects test, saying it would have a “chilling effect on competition”.

“[Our members] believe the recommendations for Section 46 will dampen pro-competitive behaviour,” ANRA chief executive Anna McPhee said in a statement.

“Australia’s major retailers are committed to ensuring consumers continue to benefit from Australia’s strong and thriving competitive landscape,” Ms McPhee said.

The ANRA said the overall review opens the door for a new wave of reform.

“Consultation in the weeks ahead will be important in setting the right balance for a healthy competitive environment that may be fierce at times, but should always be fair,” she said.

“We would urge the Government to focus on tangible changes that are possible and put an end to the politicisation of barriers that chills investment and has a negative impact on the economy, like removing restrictions on parallel imports, retail trading hours and pharmacy ownership.”

I think we just need to make sure for those independent retailers that we do not see a big supermarket come down the other end of town and see a whole town wiped out.

ARA executive director Russell Zimmerman

The Australian Retailers Association (ARA) said the review provided “good opportunities for some change”, but it wanted more detail on the proposed effects test.

“We certainly want to see the smaller independent retailers protected but I guess the devil is in the detail and we would like to see more of the detail on this,” ARA executive director Russell Zimmerman said.

“Ensuring there is fair competition and that small retailers really are protected and this is not just a show of words,” Mr Zimmerman said.

“I think we just need to make sure for those independent retailers that we do not see a big supermarket come down the other end of town and see a whole town wiped out.

“What we have seen in the past is words around ensuring good competition and I do not think we have seen good, strong competition for the small independent retail sector.”

Mr Zimmerman said he generally supported the review’s suggested removal of trading-hour restrictions, but said penalty rates would need to be looked at if opening times are extended.

Former ACCC boss warns big business could ‘sink the whole report’

Former chairman of the Australian Competition and Consumer Commission Professor Allan Fels said big business should be careful in its response to the review.

“Supposing big business succeeds in getting the effects test rejected, I think that would sink the whole report including the broad national competition policies big business desperately want,” he said.

Professor Fels said the effects test would “modernise the competition law by simplifying it and by strengthening the protection of small business from economically harmfully, anti-competitive behaviour by big business.”

He also warned many proposed changes, including targeting taxis, books or trading hours, would be politically challenging for the Government to achieve.

“In that area, the reforms are much more difficult in a policy sense, they are more complex, they may be more politically difficult, a bit like deregulation of university fees and medical co-payments, but we need to move forward,” he said.

“There is a vast amount of anti-competitive behaviour established by government laws that need to be changed.”

Extracted in full from the ABC.