On 24 November 2015, the Federal Government released its response to the Harper Competition Policy Review.  Of the 56 recommendations made by the Harper Review Panel (the Panel), 39 are supported by the Government either in full or in principle, with a further 5 supported in part.  The Government has also noted that it remains open to 12 recommendations in areas where implementation will be considered following further review and consultation, including with the states and territories.

In this alert, we have summarised the Federal Government's response to the key recommendations of the Harper Review for the reform of Australian competition law, the Competition and Consumer Act 2010 (CCA). 

In terms of next steps, the Government will be releasing exposure draft legislation for consultation with the public and states and territories for the proposed reforms to the CCA (indicating that the Government will not simply be adopting the draft legislation included in the Harper Report).  No date has yet been released for this further consultation process.

Misuse of market power

The Government has acknowledged the wide ranging concerns that have been expressed in the submissions to the Panel in relation to the operation of the misuse of power provision and the Panel's recommendation that the current prohibition against misuse of power be subject to an "effects" test.  As expected, the Government intends to consult further on options to review the provision and has indicated that it will release a further discussion paper on this issue.

Cartel conduct

The Government supports the Panel's recommendation to simplify the prohibitions on cartel conduct and has confirmed that it intends to develop draft legislation for consultation with the public, states and territories to:

  • simplify the cartel conduct definitions in order to improve clarity and certainty while retaining specificity and meaning; and
  • broaden the exemption for joint ventures so that it does not limit legitimate commercial transactions such as vertical supply arrangements.

Price signalling and concerted practices

The Government supports the Panel's recommendation to repeal the price signalling provisions of the CCA (which apply only to the banking sector) and accepts that other provisions of the law are capable of addressing the issue.  It intends to develop draft legislation to repeal the provisions and to extend section 45 of the CCA to capture concerted practices that substantially lessen competition.

Exclusive dealing and third line forcing

The Government supports the Panel's recommendation to subject the prohibition against third line forcing to a competition test so that it would be prohibited only where it has the purpose, effect or likely effect of substantially lessening competition.   The Government notes that this will bring the provision into line with comparable international jurisdictions and with other provisions of the CCA.

In relation to exclusive dealing, the Government has noted the recommendation that section 47 of the CCA should be repealed and that vertical restrictions and associated refusals to supply be addressed by other provisions of the CCA.  The Government has indicated that it will consider simplification of this provision as part of the general proposal to simplify the competition provisions of the CCA and in light of the outcome of the further consultation on misuse of market power.

Resale price maintenance

The Government supports the Panel's recommendation to maintain the prohibition on resale price maintenance in its current form as a per se prohibition and to introduce a notification process.  The Government intends to introduce draft legislation for consultation, to permit notification of RPM conduct, the imposition of conditions by the ACCC and to include an exemption for such conduct between related companies.

Merger review process

The Government supports the Panel's recommendation to retain the current informal merger clearance process and for there to be further consultation between the ACCC and business representatives with the aim of delivering more timely decisions in the process.  The Government has noted that the informal merger process works quickly and efficiently for the majority of mergers but has also stated an expectation that the ACCC will take into account the recommendation for further consultation with  business, in performing its role and meeting its responsibilities, particularly in relation to delivering more timely and transparent decisions. 

The Government also supports the Panel's recommendation that a new formal process be introduced to replace both the current formal merger clearance and authorisation processes.  It intends to develop draft legislation for public consultation on this topic.

Other significant responses

The Government has confirmed that it supports the Panel's recommendations to:

  • introduce a 'block exemption' power to enable the ACCC to create safe harbours for certain types of business conduct that are unlikely to raise competition concerns;
  • empower the ACCC to grant an authorisation or notification if satisfied that the conduct would not be likely to substantially lessen competition or would be likely to result in a public benefit that outweighs any detriment; and
  • retain the prohibitions against secondary boycotts and increase the penalties to bring them in line with other competition law breaches.

The Government has indicated partial support for the Panel's recommendations in the following areas:

  • Extra-territorial reach of Australian competition law: the Government does not support the recommendation to amend the CCA to remove the requirement that an overseas corporation must carry on business in Australia for its conduct outside Australia to be subject to the CCA.  However, the Government has noted that the Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015 gives effect to the recommendation that the Government remove the requirement for private parties to seek Ministerial consent before relying on extraterritorial conduct in private competition matters.
  • Intellectual Property: the Government has indicated its support for the Productivity Commission to undertake an overarching review of Intellectual Property in Australia.
  • Application of the CCA to Government Activities: the Government supports in principle the recommendation that the prohibitions against anti-competitive conduct and the Australian Consumer Law should apply to the Commonwealth, States, Territories and local government insofar as they undertake activity in trade or commerce.  The Government intends to consult further with the states and territories on the implications of this proposal.

Australia’s competition institutions

In relation to the Panel's significant recommended changes to Australia's competition institutions:

  • ACCC:  the Government supports the Panel recommendation that the ACCC retain its competition and consumer functions.  The Government does not however support the Panel's recommendation that half the Commissioners be appointed on a part-time basis and further considers that it is important that the ACCC have a specific small business commissioner as well as a specialist agricultural commissioner.
  • Creation of an independent access and pricing regulator: the Government has indicated that it is open to the creation of a new independent regulator to have responsibility for third party access and infrastructure regulation in place of the infrastructure functions currently held by the ACCC, AER and NCC.  The Government intends to continue discussions with states and territories including in relation to the appropriate architecture for reform.
  • Australian Council for Competition Policy:  the Government has stated that it supports the need for a body to oversee progress on competition reform and will discuss its design, role and mandate with the states and territories.