Trade Practices Act Submission Released

The Business Council of Australia today outlined a package of responsible accountability measures to restore business confidence in the Trade Practices Act and its administration.

Releasing its submission to the Review of the Trade Practices Act, the President of the BCA, Dr John Schubert, called for the introduction of a Charter of Competition Regulation and a Board of Competition and Inspector-General of Competition.

The submission is titled Towards Prosperity: Submission to the Dawson Review of the Trade Practices Act 1974 and its Administration.

Dr Schubert said the review was critical for Australia.

“In a global environment, Australia’s future depends on achieving world-class performance and competitiveness. We should not be distracted – this is all about the big issues that really matter for the future of competition policy in Australia,” he said.

Dr Schubert said the costs of misuse of regulatory power and of regulatory failure were significant and damaging to the Australian economy.

“It is almost a decade since the Trade Practices Act underwent its last comprehensive review. In that time, on-going trade liberalisation, technological advance and globalisation have fundamentally changed markets and competition,” he said.

“It is therefore timely the Act and its administration are reviewed to ensure they act in Australia’s best interests, promoting lower prices, greater convenience, more choice and a strong, competitive business community.

“Strong competition law helps promote an efficient and competitive economy. Strong competition law is important to address significant market failures.

“While there is much that is positive about competition regulation in Australia, there is also a rising chorus of concern about certain elements of the Act and its administration.

“We are confident the proposals we have put forward today will help restore business confidence in the Act and its administration, and will ensure Australia benefits from a fair, competitive and accountable regulatory regime.”

Summary of key Business Council of Australia proposals

Australia’s rapidly changing and developing economy has two major implications for competition regulation:

1. It demands that competition regulation contribute to the productivity, efficiency and growth of an open, integrated Australian economy.
2. It multiplies many times the cost of regulatory misuse and regulatory abuse.

Great care must be taken to protect and foster legitimate, robust competition in Australia’s best interests. The BCA’s key concerns with the Act and its administration are:

1. Governance and accountability

The ACCC is the most powerful economic regulator in Australia. It intervenes deeply in the operation of the market and the legitimate commercial activities of all businesses. At the same time, it has few checks and balances. The courts and the Parliament have raised concerns about the administration of the Act. Specifically, there should be:

  • A Charter of Competition Regulation to guide the development and implementation of the competition provisions of the Trade Practices Act.
  • The Charter would be developed and overseen by a Board of Competition.
  • An Inspector-General of Competition would have the power to investigate complaints about the decisions and actions of the ACCC.

The proposed changes will not hinder the pursuit of the ACCC’s objectives and are designed to improve governance and accountability.

2. Mergers

Mergers will always be problematic in an economy Australia’s size. The Trade Practices Act and its administration should be reformed to allow Australian companies to achieve the scale and efficiency necessary in so many industries to compete on the world stage. This should not be at the cost of our vigorous domestic competition.

Specifically, the Act should:

  • Retain the ‘substantial lessening of competition’ test for mergers and acquisitions.
  • Broaden the public interest test to include broad community gains including jobs, and consider the public interest test at an earlier stage in the process.
  • Allow mergers to go direct to the Australian Competition Tribunal, which would be subject to strict timelines.
  • Require the ACCC to explain fully the decisions it makes.

3. Modernising the Trade Practices Act

A number of sections of the Act need to be upgraded for the new business environment. These include improvements in relation to collective boycotts, authorisation procedures, market definition, third line forcing, price fixing and legal professional privilege.

4. Section 46 (Misuse of market power)

There is no need for the introduction of an effects test. In the words of the ACCC Chairman: “There are dangers in taking section 46 too far because one always has the problem that it can deter genuinely pro-competitive behaviour … an effects test could take the edge off the incentive for firms to complete keenly on price and other dimensions. It is also likely to create greater uncertainty for business.” It has been rejected a number of times in the past, and should be again. Cease and desist orders present a quantum leap in the capacity of the ACCC to intervene in the legitimate behaviour of companies. Again, they have been considered often in the past and rejected.

Elsewhere, the BCA shares the concerns of small business about the authorisation process.

5. Criminal Sanctions

The Business Council of Australia is strongly opposed to hard core collusion. It harms consumers and it harms Australia.

Existing sanctions impose very heavy penalties on companies and executives for criminal behaviour. However, if the Review Panel determines that criminal sanctions are needed as a further deterrent to hard core collusion, the BCA will support their introduction provided:

  • Great care is taken to address the many clear conflicts between the civil code and the criminal code.
  • The criminal behaviour is clearly identified and is established before a judge and jury beyond reasonable doubt.
  • They apply to all those involved in culpable behaviour.
  • Everyone is treated equally before the law – the penalty should reflect the impact of the crime, not the size of the perpetrator.
  • Investigation is by the police and prosecution by the Director of Public Prosecutions.

Towards Prosperity: Submission to the Dawson Review of the Trade Practices Act 1974 and its Administration