BCA Urges Federal Government to Stand Firm on Trade Practices Reform

The Business Council of Australia today urged the federal government to resist last-minute calls to reduce competition in Australia through ill-conceived amendments to the Trade Practices Act.

BCA President Mr Hugh Morgan said all Australians had benefited from increased competition brought about by the reforms of the past two decades.

“The average Australian is $83,000 better off today in real wealth terms than they would have been without reforms implemented over the last 20 years. The core of those reforms was National Competition Policy, which has driven a more productive economy through greater competition.

“We all benefit from the lower prices and better service that competition delivers. Some small business groups, however, are pushing the National Party to amend the Trade Practices Act in ways that will prevent larger businesses from competing effectively.

A number of small business groups are pushing for changes to section 46 of the Trade Practices Act, which deals with alleged misuses of market power. If implemented, these changes would make it very difficult for larger businesses to compete effectively with each other if there is a risk that a small business might be harmed by competition.

“In effect, consumers are being asked to shoulder higher prices to protect some smaller business from the full force of competition.

Research by Access Economics on behalf of the BCA showed that if the National Party adopted the changes – originally proposed by Labor and the Democrats – there would be a dampening of competition as larger corporations avoided robust competition for fear of an investigation by the ACCC.

The changes would significantly increase the uncertainty around what was considered robust but legitimate competition and what was considered anti-competitive use of market power.

Much of the pressure for changes to protect small business from competition comes from small businesses in the retail sector.

However inflation in Australia has dropped from 6.9 per cent in 1990 to 2.5 per cent due in large part to a highly competitive retail environment. Employment in the retail trade sector has increased by over 320,000 in the last decade. The market share of independent retailers has also grown in that time.

Mr Morgan said small business groups had already won major concessions from the government to toughen up section 46 of the Act, despite the independent Dawson Committee recommending that no change to section 46 was needed.

“Small business is a vital part of the Australian economy and we all benefit when small business thrives. Small business is also entitled to protection from anti competitive conduct.

“The government’s proposed amendments achieve that. But small business should not be thriving because it is being protected from competition by the Trade Practices Act, at the expense of consumers.