Big business and Labor have ramped up their campaign against the Harper review’s proposed overhaul of the misuse of market power rules, while the peak business group is also cautioning against the recommendation to allow foreign airlines to work some domestic routes.

Labor Treasury spokesman Chris Bowen seized on a submission by the Business Council of Australia to Treasury, in which the group warns that the plan to adopt the Harper review panel’s “effects test” would damage competition and economic growth.

The Australian National Retailers’ Association, whose members include supermarket giants Woolworths and Coles, has also written to Treasury urging it to reject the plan.

Under the Harper panel’s recommendation to change section 46 of the Competition and Consumer Act, it targets conduct that has the “purpose, effect or likely effect” of lessening competition in a market.

“Labor is very concerned that the insertion of an effects test may see a chilling of competition with the Australian consumer bearing the cost through higher prices,” Mr Bowen said.

He added that the BCA had raised “legitimate concerns about the potential for an effects test to stifle investment, competition and increase costs”.

“Even Harper’s final report, which amended its own earlier proposed test, noted that the addition of an effects test to section 46 will ‘involve some uncertainty’ and that ‘uncertainty may lead to some cost’.”

Law firm Allens, which says it has been talking to clients about what they want to see from competition law reform, told Treasury it is worried about how companies could roll out internal compliance processes that would not deter competitive conduct.

But the change has the backing of small business.

The Australian Chamber of Commerce and Industry says the proposed changes would make section 46 more effective, while it also enjoys support from former competition tsar Allan Fels.

In its submission to Treasury on the Harper panel’s final report, the BCA says the arguments for changing the rules are “unfounded”.

It says that members of the legal profession would “struggle to understand, let alone most business people” the legal guidance from the review.

Meanwhile, the BCA also sounded a note of caution about Harper’s recommendation to change the restrictions on air cabotage.

The Harper panel said there would be “considerable benefits” from allowing foreign-flagged airlines to operate on remote and poorly served domestic routes.

“The review has not sought to provide evidence that removing air cabotage restrictions as proposed would lead to substantial efficiency gains,” the submission says.

“Nor has it considered the implications for the application of other Australian laws to foreign airlines operating domestically, or the costs or potential ­unintended consequences for ­investment certainty and consumer welfare.”

Debate has raged about whether to allow foreign airlines to carry passengers between domestic airports in northern Australia.

On Sunday, Labor’s infrastructure spokesman Anthony Albanese told the Sky NewsAustralian Agenda program that what the proponents of the change the Coalition wanted was “essentially uni­lateral economic disarmament”.

“What is the problem we’re trying to solve here?” Mr Albanese asked.

Extracted in full from The Australian.