On 27 March 2014 the Minister for Small Business, Bruce Billson MP, announced the appointment of the Review Panel that will oversee what had been referred to as the ‘root and branch’ competition review, but will be known to history as the Harper Review.
As predicted, the Review Panel will be chaired by Professor Ian Harper, an economist and currently a partner at Deloitte Access Economics. Professor Harper served on the 1996-1997 Financial Systems Inquiry (the “Wallis Inquiry”) and was chairman of the Fair Pay Commission from 2006 to 2009. He has written extensively on financial and banking deregulation, payment systems, the minimum wage, superannuation, economic rationalism, and morality.
Mr Peter Anderson recently stepped down as Chief Executive of the Australian Chamber of Commerce and Industry after six years, prior to which he was the ACCI’s Director of Workplace Policy. He has spoken frequently on industrial relations and is seen as a strong advocate for small to medium business. However, the ACCI also represents large businesses, giving it experience in balancing the competing arguments of large and small businesses.
Ms Su McCluskey is currently the CEO of the Regional Australia Institute. She has been Executive Director at the Office of Best Practice Regulation and a Consultant Specialist Advisor for the Office of Small Business. She has held senior policy positions with the Business Council of Australia, the National Farmers’ Federation and the Australian Taxation Office, where she helped sell the GST to agriculture and small business. She will be seen to represent regional, agricultural and small business constituents but has extensive experience with regulation and policy generally.
Mr Michael O’Bryan SC is a barrister with substantial experience in trade practices law, corporate and securities law and administrative law. He has acted on significant cases on cartel behaviour and price-fixing, access to essential services, misuse of market power and mergers. He has written on misuse of market power and access to essential services. He has also been chair and is still a member of the Competition and Consumer Committee of the Law Council of Australia. The Competition and Consumer Committee has been particularly involved in the price signalling regulations and has also made detailed submissions on the informal merger clearance process. As the Trade Practices Committee it previously made submissions on the cartel provisions and the Australian Consumer Law.
As Bruce Billson had previously indicated, the final Terms of Reference for the Harper Review are almost identical to the Draft Terms of Reference circulated in December 2013. The only differences are:
1 New Introductory Materials
The Draft Terms of Reference were distributed with the following background:
The National Competition Policy (NCP) contributed significantly to Australia’s welfare over the past two decades. In 2005, the Productivity Commission found that the NCP and related
reforms contributed to productivity and price changes in key sectors, which increased Australia’s GDP by 2.5 per cent.
The last thorough review of competition policy was led in 1993 by Professor Fred Hilmer which established the framework largely in place today. However, since then the Australian economy has grown and changed substantially. It is timely to examine whether these earlier reforms continue to be ‘fit for purpose’ for the current and emerging economy.
Effective reforms achieve long-term competitiveness, promote investment, increase productivity, support higher real wage growth and increase Australian living standards.
With this in mind, the Government is looking to further engage the engine of competition to broaden durable benefits for Australians, foster economic prosperity and enterprise that enables efficient business – including small businesses – to grow and prosper, promote Australian businesses, attract investment, and establish a footing for exports.
The final Terms of Reference replace this background with the following overview:
An effective competition framework is a vital element of a strong economy that drives continued growth in productivity and living standards. It promotes a strong and innovative business sector and better outcomes for consumers.
The Government has commissioned an independent ‘root and branch’ review of Australia’s competition laws and policy in recognition of the fact that the Australian economy has changed markedly since the last major review of competition policy in 1993.
The key areas of focus for the review are to:
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This new overview makes explicit the areas of focus that were somewhat buried in the language of the draft Terms of Reference, and also reflects some of the public discussion that has taken place since the Review was first announced.
The overarching principle is to identify all impediments to competition and productivity that are against the public interest. Within this ambit, the Review is to examine the provision of the competition law, including special protections for small business; the performance and efficiency of the regulators who administer the law; and the opportunities for further privatisation.
The Review Panel is repeatedly directed to consider the recent changes to the economy, increasing global engagement, and the need to compete in rapidly evolving markets.
2 Minor Amendments to Scope
The Scope of the Review has been very slightly changed to:
- refer specifically to the “policy priorities”, which are presumably the “key areas of focus” introduced in the new Overview;
- make clear that anticompetitive conduct that is “against the public interest” is to be targeted, aligning this principle with the corresponding principle set out in the Hilmer Review; and
- direct the Review Panel specifically to consider “developments in international markets” in assessing the competition law and institutions.
These changes are marked up below.
Scope of the review
- The Review Panel is to inquire into and make recommendations on appropriate reforms to improve the Australian economy and the welfare of Australians, not limited to the legislation governing Australia’s competition policy, in regard to achieving competitive and productive markets throughout the economy, by identifying and removing impediments to competition that are not in the long-term interest of consumers or the public interest, having regard to the following principles and the policy priorities:
- no participant in the market should be able to engage in anti-competitive conduct
against the public interest within that market and its broader value chain;
- productivity boosting microeconomic reform should be identified, centred on the realisation of fair, transparent and open competition that drives productivity, stronger real wage growth and higher standards of living;
- government should not be a substitute for the private sector where markets are, or can, function effectively or where contestability can be realised; and
- the need to be mindful of removing wherever possible, the regulatory burden on business when assessing the costs and benefits of competition regulation.
- The Review Panel should also consider and make recommendations where appropriate, aimed at ensuring Australia’s competition regulation, policy, and regulatory agencies are effective in protecting and facilitating competition, provide incentives for innovation and creativity in business, and meet world’s best practice.
- The Review Panel should also consider whether the Competition and Consumer Act 2010 (CCA) and regulatory agencies are operating effectively, having regard to the regulatory balance between the Commonwealth and the States and Territories, increasing globalisation and developments in international markets, changing market and social structures, technological change, and the need to minimise business compliance costs, including:
- considering whether Australia’s highly codified competition law is responsive, effective and certain in its support of its economic policy objectives;
- examining whether the operations and processes of regulatory agencies are transparent, efficient, subject to appropriate external scrutiny and provide reasonable regulatory certainty;
- ensuring that the CCA appropriately protects the competitive process and facilitates competition, including by (but not limited to):
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- whether competition regulations, enforcement arrangements and appeal mechanisms are in line with international best practice and:
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- The Review Panel should inquire into and advise on appropriate changes to legislation, institutional arrangements and other measures in relation to the matters below, having regard to the impact on long-term consumer benefits in relation to value, innovation, choice and access to goods and services, and the capacity of Australian business to compete both domestically and internationally. In particular, the Review Panel should:
4.1 examine the structure and behaviour of markets with natural monopoly characteristics with a view to determining whether the existing regulatory frameworks are leading to efficient outcomes and whether there are opportunities to increase competition;
- examine whether key markets – including, but not limited to, groceries, utilities and automotive fuel – are competitive and whether changes to the scope of the CCA and related laws are necessary to enhance consumer, producer, supplier and retailer opportunities in those markets and their broader value chains;
- consider alternative means for addressing anti-competitive market structure, composition and behaviour currently outside the scope of the CCA;
- consider the impact of concentration and vertical integration in key Australian markets on the welfare of Australians ensuring that any changes to the coverage and nature of competition policy is consistent with national economic policy objectives; and
- identify opportunities for removing unnecessary and inefficient barriers to entry and competition, reducing complexity and eliminating administrative duplication.
- consider ways to ensure Australians can access goods and services at internationally competitive prices, including examining any remaining parallel import restrictions and international price discrimination.
- The Review Panel should also examine whether government business activities and services providers serve the public interest and promote competition and productivity, including consideration of separating government funding of services from service provision, privatisation, corporatisation, price regulation that improves price signals in non-competitive segments, and competitive neutrality policy.
- The Review Panel should consider and make recommendations on the most appropriate ways to enhance competition, by removing regulation and by working with stakeholders to put in place economic devices that ensure a fair balance between regulatory expectations of the community and self-regulation, free markets and the promotion of competition.
The Review Panel should consider overseas experience insofar as it may be useful for the review.
The Review Panel may, where appropriate, draw on (but should not duplicate or re-visit) the work of other recent or current comprehensive reviews, such as the Commission of Audit and the Cost-Benefit Analysis and Regulatory Review for the National Broadband Network.
The Review Panel should only consider the Australian Consumer Law (Schedule 2 of the CCA) and corresponding provisions in Part 2, Division 2 of the Australian Securities and Investments
Commission Act 2001, to the extent they relate to protections (such as from unfair and unconscionable conduct) for small businesses.
The Review Panel is to ensure thorough engagement with all interested stakeholders. At a minimum, the Review Panel should publish an issues paper, hold public hearings and receive written submissions from all interested parties.
The Review Panel should subsequently publish a draft report and hold further public consultations, before providing a final report to the Government within 12 months.