On 24 November 2015, the Australian Government released its much anticipated response to the Harper Competition Policy Review, supporting or partly-supporting 44 of 56 recommendations. Through the implementation of the Government's response it aims to reinvigorate Australia's competition reform and deliver improved markets for the benefit of consumers and the Australian economy. The package of changes will be the first major reform to Australia's competition policy since the National Competition Policy was introduced following the Hilmer Review in 1993.

Background

In 2013, the Government commissioned Professor Ian Harper (and a Competition Policy Review Panel) to carry out an independent 'root and branch' review of Australia's competition laws and identify reforms to boost Australia's long-term productivity and growth. The Harper Report was released in March 2015 with 56 recommendations for competition policy.

In its response, the Government has announced that it supports 39 of the 56 recommendations in full (or in principle), with a further five recommendations partly supported. A number of the remaining recommendations have been noted and may yet be supported after further consultation with key stakeholders.

This update provides an overview of the Australian Government's response to the recommendations and likely legislative changes that will follow.

Modification of Competition Laws

On competition law generally, the Government has supported a recommendation to adopt a new set of overarching principles to guide competition law-making across all levels of government. The guiding principles seek to promote the long term interests of consumers and stipulate that the development of legislation and government policy should not restrict competition unless:

  • the benefit of the restriction to the community as a whole outweighs the costs; and
  • the objectives of the legislation or government policy can only be achieved by restricting competition.

This means that prospective legislation and policy relating to competition law will be subject to a public interest test.  The Regulatory Reform Agenda will also be specifically expanded to include review of competition regulations across all levels of government.

In response to various specific recommendations, there will be a number of changes to theCompetition and Consumer Act 2010 (Cth) (CCA) including in respect of price signalling, concerted practices, exclusionary conduct provisions and cartel laws.

Given the exposure of the Australian economy to global competition, the definition of competition under Australian law will be expanded to take into account competition from goods imported or capable of being imported, or services rendered or capable of being rendered by persons outside Australia.

Merger process

During the Harper Review, concerns were raised about the transparency and timeliness of existing merger review processes. The recommendation to retain the informal clearance process and introduce a new formal process (with strict timelines) has been supported by the Government and an express request has been made for the Australian Competition and Consumer Commission (ACCC) to improve its engagement with stakeholders during the merger process and deliver more transparent and timely decisions.

Misuse of Market Power (s46) and the 'Effects Test'

One of the most controversial recommendations proposed by the Harper Review was to introduce an "effects test" into section 46 of the CCA which prohibits the misuse of market power.

The recommended 'effects test' would lower the bar for establishing an anti-competitive contravention of the CCA as the section would prohibit companies from engaging in conduct that has 'the purpose of substantially lessening competition'. Reframing the section would substantially lower the standard of liability, such that businesses may be inadvertently held liable for anti-competitive conduct.

Given the debate which has already ensued in respect of this recommendation, the Government has undertaken to consult further regarding the operation of the provision and plans to release a discussion paper in the future.

Infrastructure

The Government's response sets out their intention to work with state and territory governments to promote the better use of, and investment in, road infrastructure. In its response the Government has restated its commitment to promoting the application of national energylegislation and is awaiting the outcome of the review into the Eastern Australia gas market currently being undertaken by the ACCC. In the water sector, the Federal Government has indicated its willingness to consider payments to states and territories for reforms undertaken in the water market that improve productivity and lead to economic growth.

Next Steps

Although the real impact of the reforms will not be known until draft legislation is formulated and released for public consultation, the implementation of many of the Harper Review recommendations will inevitably reshape competition across a number of markets.

Twelve recommendations from the Harper Review remain under consideration by the Government, pending further consultation with state and territory governments and industry bodies. It remains to be seen how the Government will address those recommendations and the extent to which they will be supported. Some tough decisions lie ahead, particularly around the misuse of market power provision, the extraterritorial application of the CCA and the manner in which the enforcement powers of the ACCC will be modified to reflect the burden of production notices in the digital age.