Statement on the Introduction of an Effects Test

04 August 2015

"Good public policy requires absolute clarity of the problem we are trying to solve. Right now, a high risk proposal to change ‘misuse of market power’ legislation is under consideration that would have significant unintended consequences for the economy and consumers, and would undermine rather than improve the competitive process," BCA President Catherine Livingstone said.

"The competition law framework is absolutely critical for our economy and section 46 is settled, well understood by business and works to protect the competitive process as intended. In considering whether to change it, we need to be cautious, especially when we are looking at a contentious proposal that multiple reviews have rejected in the past and at a time when businesses are in dire need of policy certainty.

"At the very least, Cabinet needs plenty of time to consider a thorough, independent assessment of the costs and benefits of the proposal through the Productivity Commission before proceeding.

"Small business needs to understand they will not be quarantined from the impact of this change which will apply equally to all business, for example, in regional towns or markets where a small business’ product or service is dominant.

"In these circumstances, small businesses could be the instigator of actions against other small businesses, who would bear the unintended consequences of additional cost and uncertainty.

"The business community supports competition policy reform but is deeply concerned about proposed changes to section 46 of the Competition and Consumer Act - which we understand to be under active consideration by the government.

"Changing the 'misuse of market power' provision by introducing an effects test and removing the 'take advantage' clause will create major regulatory uncertainty for business.

"It will expose our business to the risk of investigation and prosecution due to effects on competition that we cannot foresee.

"It will deter legitimate innovative pricing, product development or business expansion that would be good for consumers." Ms Livingstone said. 

Some examples of behaviour now at risk include:

•  strong discounting from economies of scale that competitors are not able to match

•  investments in new technology and equipment to reduce prices, if it impacts on competition

•  a significant business in one industry moves into new markets or offers innovative new products that impacts competition in another market

•  Australian businesses’ ability to compete will be constrained by the need to continually get legal advice or, worse, authorisation by the ACCC.

"It will put Australian business at a competitive disadvantage to foreign businesses and work against growth and jobs. The current section 46 is stable, well understood and works. It should not be changed," Ms Livingstone said.



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