The Harper review panel has ignored pleas from the nation’s biggest supermarket chains to abandon an “effects test”, instead arguing current misuse of market power laws are deficient and out of step with international practices.

In its final report, released on Tuesday, the panel recommends changing section 46 of the Competition and Consumer Act to make it more workable by including an “effects test” to existing misuse of market power rules. The new measure would ban corporations with a substantial degree of market power from engaging in conduct if that conduct would or would likely have the effect of substantially lessening competition.

Under an effects test, small businesses would no longer be required to prove that a large company had acted with the “purpose” of damaging a competitor. The existing “purpose” test would be changed to assess whether the company had acted with the “purpose, effect or likely effect” of substantially lessening competition. Lawyers argue instead of the Australian Competition and Consumer Commission proving its case on a balance of probabilities, corporations would need to prove their innocence.

Coles and Woolworths strongly opposed the effects test, first mooted in the panel’s draft report last year. They warned consumers could face higher grocery prices as they face higher costs to administer increased compliance and defend rising legal action.


The recommendations that the competitive strength of the major retailers be curtailed came as a survey by independent grocery retailers found overwhelming public support for tougher laws to lift competition in grocery retailing.

The survey, on  behalf of Master Grocers Australia, found that 72 per cent of respondents believe the grocery market is too dominated by Coles and Woolworths and only 22 per cent believe the level of competition is “healthy”.

A clear majority of respondents – 75 per cent – said competition laws should be strengthened to deliver a range of benefits including lower prices and greater choice, with almost 80 per cent agreeing it was important for the Australian Competition and Consumer Commission to have the legal power and resources to fulfil its charter, including halting anti-competitive practices.

Master Grocers Australia (MGA) is a national industry association representing Australia’s $9 billion independent grocery sector. Its chief executive, Jos de Bruin, said existing competition laws had allowed Coles and Woolworths to dominate the grocery market by lifting their combined share to between 75 and 80 per cent of supermarket sales.

“This survey shows a large majority of people believe there is something wrong with this state of affairs,” said Mr de Bruin.

In its final report, the Harper review panel altered its original recommendation, removing a proposal to provide defences for companies if they could prove the measure was a rational business decision or was in the long-term benefit of consumers.

Instead the panel has recommended legislation should direct courts to have regard for the extent that the conduct increases competition in the market, including enhancing efficiency, innovation, product quality or price competitiveness. The courts should also weigh up the extent to which the conduct lessens competition in the market or restricts or deters potential competitive conduct or new entry to the market.

Lawyers had said the previous defences recommended in the draft review would be unworkable because they were uncertain and difficult to prove.

Extracted in full from the Sydney Morning Herald.