On 31 March 2015 the Harper Panel released its final report following its year-long review of Australian Competition laws and policy. The final report makes 56 recommendations for reforms across three key themes: competition policy, laws and institutions.

This update will provide a brief overview of some of the more important recommendations provided by Professor Harper and his team of experts.

Simplification of the cartel provisions

In our last publication on the draft Harper Review, we examined the Harper Panel’s draft recommendations for reform of the cartel provisions. The Harper Panel has stood by these recommendations citing that a simplification of the cartel provisions will result in greater efficiencies in both compliance and enforcement activities.

This is not at odds with its general statement that the Competition and Consumer Act 2010(Cth) (Act) is ‘unnecessarily complex’. Removing this complexity ought to result in reduced direct costs arising from legal advice and prolonged legal disputes, and indirect costs arising from business and regulatory uncertainty.

Recommendations of this simplification in the cartel provisions include:

  • reducing the scope of the provision to conduct involving actual or likely competitors (on the balance of probabilities) rather than parties which are a mere possibility of being competitors;
  • a broader exemption for joint venture firms to remove uncertainty about whether their conduct will be subject to anti-competitive provisions; and
  • removing some of the exclusionary provisions and broadening the definition of ‘cartel conduct’ to address the gap in the law by doing so.

Contrary to the ACCC’s concerns that adoption of the Harper Panel’s draft recommendations would ‘significantly weaken Australia’s cartel laws’, the Harper Panel has, in its final report, maintained that simplification of the cartel laws will maintain the policy intent of the provisions.

Misuse of Market power

The most controversial of the recommendations brought forward by the Harper Panel is the market power provisions under section 46. The ACCC, through its chairman Rod Sims, believes that as the law currently stands, it is too difficult to establish a misuse of market power under the current ‘take advantage of’ test. The Harper Panel has suggested redefining ‘take advantage’ to better understand the ‘causal link between the substantial degree of market power and anti-competitive purpose’.

Along with this change, the controversial ‘effects test’ is recommended to replace the ‘dominant purpose test’. This is not a new concept having already been applied to section 45 (anti-competitive agreements), section 47 (exclusive dealing) and section 50 (mergers).  As the review panel has noted:

‘The primary prohibition in section 46 of the CCA should be re-framed to prohibit a corporation that has a substantial degree of power in a market from engaging in conduct if the proposed conduct has the purpose, or would have or be likely to have the effect, of substantially lessening competition in that or any other market.’

This would result in a much broader application of the misuse of market power provisions than currently is the case.

The obvious concern by lobbyists for big business is that it will be far too expansive and will likely capture conduct that is inherent in operating a large company or, in the alternative, is not intended to be anti-competitive. Specifically, there are concerns that the legislation won’t strike the right balance in addressing conduct that is anti-competitive while also being in the public benefit through innovation, entrepreneurship and job creation.

In response to these concerns, the Harper Panel recommends providing legislative guidance to distinguish between permissible and impermissible conduct by having consideration as to whether these actions increase efficiency, innovation, product quality or price competitiveness.

The Harper Panel believes that implementing such a reform will better align Australia’s laws with international standards and remove the misdirection of policy currently seen under the ‘purpose test’.

Consultation

Upon release of the Harper Panel’s final report, the Government launched a public consultation process seeking feedback from industry, consumers and all levels of government on the Harper Panel’s final recommendations. Submissions are due by 26 May 2015.