Earlier this year, the Federal Government appointed a panel of experts to undertake a major review of Australian competition laws and underlying competition policy. On 22 September 2014, the panel, headed by economist, Professor Ian Harper, released its draft report and recommendations.
The focus of the review is to examine whether Australia's competition policies, laws and institutions remain "fit for purpose" in light of changes to the Australian economy in the past 20 years, including as a result of increasing globalisation and new technologies.
In this eBulletin, we set out the key findings and recommendations in the draft report. In further eBulletins, we will examine a number of specific aspects and comment on their relevance to business.
The Federal Government announced its "root and branch" review of Australia's competition laws and policy in December 2013 to deliver on a key election commitment and help identify ways to build the Australian economy and promote investment, growth and job creation.
A Competition Policy Review Panel was constituted in March this year and an Issues Paper was released in April. The Review Panel has now released its Draft Report (on 22 September 2014) following extensive consultation and the receipt of almost 350 submissions.
The Draft Report's recommendations address three main areas of reform: competition policy, competition laws and competition institutions. Each of those areas is addressed below. A series of infographics that provide an outline of the components of the Draft Report and videos of statements made by members of the Review Panel on the Draft Report are available here.
The Review Panel recommends that Australia's competition policy be re-invigorated by applying a revised set of competition principles to all activities of the Commonwealth, state, territory and local governments, and reviewing regulations in all Australian jurisdictions to remove unnecessary restrictions on competition, taking into account the public interest and the objectives of the regulation.
The Review Panel identified the following priority areas for reform:
- Human services
- Infrastructure and transport
- Intellectual property
- Planning and zoning
- Competitive neutrality
- Electricity, gas and water
- Parallel imports
- Small business
- Retail markets
Specific recommendations include a complete review of intellectual property rights (to be undertaken by an independent body, such as the Productivity Commission); removing the remaining restrictions on parallel imports; introducing an alternative dispute resolution scheme for small businesses and introducing greater flexibility in the notification process for collective bargaining by small business; removing remaining restrictions on retail trading hours; removing pharmacy ownership and location rules and reforming liquor licensing rules.
While acknowledging that Australia's competition laws have served Australia well, the Review Panel recommends that specific reforms are required to enhance their effectiveness.
The recommendations include:
- simplifying the cartel conduct provisions and increasing exemptions for joint ventures and other forms of business collaboration;
- amending the misuse of market power provisions by removing the 'take advantage of market power' requirement, and introducing a 'substantial lessening of competition' test (with a defence for 'rational business decisions' which are in the long term interests of consumers);
- removing the price signalling provisions and extending section 45 to concerted practices that are anti-competitive;
- streamlining the merger clearance process by introducing a new formal clearance process that combines the existing formal merger clearance and merger authorisation processes, making the ACCC the first decision maker on all merger decisions (reviewable by the Australian Competition Tribunal) and making the clearance process subject to strict timelines that cannot be extended without the consent of the merger parties; and
- simplifying the authorisation and notification provisions.
The Review Panel has also assessed Australia’s competition institutions and identified a gap. It recommends the creation of a new joint Commonwealth-State agency, the Australian Council for Competition Policy (ACCP), which would be tasked with providing leadership and driving implementation of the evolving competition policy agenda.
The Review Panel also recommends that the current institutional framework be strengthened and streamlined by transferring all pricing and access functions from the ACCC, the National Competition Council and the Australian Energy Regulator to a new national access and pricing regulator.
It is also recommends that the ACCC’s governance structure be enhanced with the addition of a Board to bring an “outsider’s view” and, in particular, to allow business, consumer and academic perspectives to inform the ACCC’s decision making.
Of some interest is that the panel looked at the ACCC's use of the media and has repeated the recommendation from the Dawson Inquiry that the Commission be subject to a Media Code of Conduct. This should, it is believed, counter perceptions of partiality in some of its enforcement actions.
The Draft Report contains both recommendations and questions posed to stakeholders for their further input. Submissions on the Draft Report are encouraged and must be made by 17 November 2014, prior to the planned release of the Final Report by March 2015.