Eli Greenblat, 16 March 2016

Wesfarmers boss Richard Goyder has joined with other industry leaders to hit out at the proposed introduction of an effects test, ­attacking the move to lower the threshold to competition challenges as “bad policy” peddled by people trying to drag Australia back to the protectionism of the 1960s.

Mr Goyder’s frustration was echoed by Telstra chairwoman Catherine Livingstone, who labelled the government’s policy “misguided”, while Woolworths chief executive Brad Banducci warned it would hurt innovation, constrict competition and ultimately threaten jobs.

In a barrage aimed at the federal government, the Nationals and sectional interests within the small-business community, Mr Goyder said he was “disappointed and to a degree disillusioned” with Malcolm Turnbull’s surprise announcement to add an “effects test” to Australia’s competition law to ensure big business would feel — in the Prime Minister’s words — the “hot breath of competition” on its neck.

But in a clear warning to Wesfarmers’ competitors across the supermarket, hardware, department store and office supplies sectors, Mr Goyder said that the conglomerate’s Coles or Bunnings chains would not step back from competition. And if the company was dragged to court, so be it, he said.

“We would be doing the wrong thing by our shareholders if we just said we will stop investing, we will stop reducing prices — we will keep on doing that and if someone wants to take us to court in due course then we will deal with that,” Mr Goyder told a business conference in Melbourne.

The proposed introduction of an effects test into competition rules to curb anti-competitive behaviour puts Mr Turnbull in the direct firing line from the very top end of corporate Australia. Not only the major retailers, but the Business Council of Australia had warned against the planned changes to the rules.

Under the proposal, it would no longer be necessary to prove a business with market power acted with the “purpose” of substantially lessening competition — only that it engaged in behaviour “likely to have the effect” of substantially lessening competition.

The promised introduction of an effects test was welcomed by small business groups and other industry players yesterday.

Rod Sims, the chairman of the Australian Competition & Consumer Commission, said the changes announced to section 46 were good for competition, and hence consumers. He said companies that wanted to compete on their merits had nothing to fear.

“Only those who wish to exclude their competitors and damage the competitive process will need to re-examine their conduct,” Mr Sims said.

“This change brings Australia’s law into line with countries overseas. It also uses a test of substantially lessening competition which is in most other provisions of Australia’s competition laws, and so is a test Australian companies are already familiar with.”

Mr Sims said many clearly exaggerated claims had been made about this change.

“Prices cannot rise when companies are prevented from substantially lessening competition; this is nonsense,” he said. “Likewise, pro-competitive actions by companies will not be prevented; quite the reverse.”

Business Council president and Telstra chairwoman Ms Livingstone told a business audience she was “extremely disappointed” with Mr Turnbull’s announcement and that the BCA would work with the government on the drafting of the effects test legislation to try to kill off any unintended consequences.

“It is in our view anti-competitive, and not just for large business but for small business and I think this is the point, that the effects test will affect the whole economy. It is not just a ‘big business only’ issue,” Ms Livingstone said.

“In regional markets it will be involving small business so we are very disappointed, but we will work with the government … to try to pre-empt any unintended consequences.”

Mr Goyder also lashed out at those lobbying for the effects test, whom he said were dreaming of a world long since gone. “The reason they want an effects test is because they want to lessen competition, they want less competition from Coles and they want less competition from Bunnings, they want less competition from Coca-Cola, Amazon and everyone else,” Mr Goyder said.

“They want the corner store and things back in the 1960s, the protectionism of the 1960s to come back and I think it is totally misguided. “I just think it is bad policy … the winners will be lawyers.”

Wesfarmers, Woolworths, the Business Council of Australia and other corporate giants have been fighting a pitched battle for years to stop the effects test being injected into competition law, arguing it will have affect competition, reduce investment and hurt the economy.

Danny Gilbert, the managing partner of law firm Gilbert & Tobin who chairs the BCA’s efficient regulation committee, said he was worried about unintended consequences. An effects test could create uncertainty and slow down decision-making processes “when business can ill afford to have these kinds of obstacles in its way”, he said.

Mr Goyder laid the blame for the government’s decision squarely at the feet of the Nationals, describing it as a win of politics over good policy.

“It has been a strong drive from the National Party and that’s why I think it’s misguided. People assume as a consequence of this they won’t have to compete against us, that we will all of sudden pay farmers more — it’s so misguided,” he said.

The Council of Small Business Australia yesterday said it backed the decision by Cabinet to adopt changes to Section 46 of the competition regulations in line with recommendations by the Harper Review. “They have followed proper policy development process through consultation and consideration for the consumer and the entire business community,” the council said in a statement.

It said it was aware “that the Business Council of Australia and big businesses such as Wesfarmers have been placing undue pressure, indeed threatening, the government on this issue. However, the government has stood firm.”

Extracted in full from The Australian.

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