Competition policy 'root and branch' review final terms of reference released

In brief

The Federal Government has released the final Terms of Reference for the 'root and branch' review of Australia's competition law and policy and announced the members of the expert panel who will lead the review over the next 12 months. Partner Jacqueline Downes and Lawyer Lauren John look at the final Terms of Reference and the review process.

'Root and branch' review

Late last year, the Federal Government announced a review of competition policy and law, known as the 'Root and Branch' review. For further background on the review, please see our Focus: Clear out the dead wood: a 'root and branch' review of competition law.

On 27 March 2014, the Federal Government announced the final Terms of Reference for the review. The final Terms of Reference are the same as the draft Terms of Reference released in December last year and make clear that the review will be comprehensive and broad reaching.

The overarching purpose of the review is for the panel to recommend reforms to achieve competitive and productive markets in Australia's economy by identifying and removing impediments to competition. The final Terms of Reference require the review panel to consider a range of matters, including:

• the responsiveness of Australia's highly codified competition laws to economic policy objectives;
• whether current legislative provisions, such as the misuse of market power provisions, are functioning as intended;
• the effectiveness and efficiency of regulatory agencies such as the Australian Competition and Consumer Commission (the ACCC);
• the competitiveness of key markets such as utilities, groceries and automotive fuel; and
• whether government business activities and service providers serve the public interest and promote competition and productivity.

Minister for Small Business Bruce Billson has appointed the following individuals to the Review Panel:

• Professor Ian Harper, Chair of the Review Panel and a Partner at Deloitte Touche Tohmatsu, a Director of Deloitte Access Economics Pty Ltd and an Emeritus Professor of the University of Melbourne;
• Mr Peter Anderson, a national business leader and public policy specialist in national and international affairs who recently stepped down as Chief Executive of the Australian Chamber of Commerce and Industry;
• Ms Su McCluskey, the Chief Executive Officer of the Regional Australia Institute and a beef cattle farmer, with significant private sector experience; and
• Mr Michael O'Bryan SC, a barrister at the Victorian Bar who has practised extensively in the area of competition law.

The Review Panel will release an Issues Paper shortly, outlining the scope of the review and inviting written submissions from stakeholders and other interested parties. The Review Panel will consult widely and extensively following the release of the Issues Paper and will report its findings to the Federal Government within 12 months.

Likely areas of focus

The Review Panel has been given a broad mandate and it is not yet known what key areas will be the focus of the review. Areas that the Review Panel are likely to examine include:

• Unfair contracts. Currently, the unfair contract terms regime in the Australian Consumer Law (ACL) applies only to standard form 'consumer contracts'.¹ Terms of standard form consumer contracts that are 'unfair' within the meaning of the regime are void. A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract, is not reasonably necessary to protect the legitimate interests of the party advantaged by the term and would cause financial or other detriment to a consumer if it were relied on.² It is likely that the Review Panel will consider whether the unfair contracts regime should be extended so that it applies to standard form contracts with small businesses as well as consumers. The Coalition committed to put forward these amendments last year to ensure that 'big and small businesses get a "fair go" and do the right thing by each other in their respective marketplaces'.³
• Misuse of market power and unconscionable conduct provisions. The review panel is likely to look at the provisions prohibiting misuse of market power and unconscionable conduct and whether those provisions require clarification.⁴ In particular, ACCC Chairman Rod Sims has indicated that he is 'looking forward to a wide ranging debate' regarding the misuse of market power provisions. In particular, the Review Panel is likely to consider whether it is appropriate to change the statutory test from a 'purpose' test to an 'effects' test, although claims of misuse of market power have generally failed not because the applicant failed to prove that the respondent had the requisite proscribed purpose but because it could not be shown that the respondent's conduct amounted to a 'use' of its market power. Recent amendments⁵ to section 46 designed to make it easier to prove the 'use' of market power have not yet been tested in court.
• Merger processes. The Review Panel may look at the current processes for review of a proposed merger by the ACCC or by the Australian Competition Tribunal. In particular, the Panel may consider the formal merger clearance process introduced in 2007, which has not been utilised to date, and whether changes could be made to make it a more attractive option for industry. The Panel may also consider whether the informal merger clearance process is sufficiently timely and transparent.

It is also worth noting that amendments to the misuse of market power provisions were recently proposed by Senator Nick Xenophon on 6 March 2014⁶, and have separately been referred to the Senate Economics Legislation Committee for inquiry and report.⁷ The proposed amendments would allow the ACCC or any other person to apply to the court for orders that a company who has breached the misuse of market power provisions be required to reduce its market share within two years.

We will keep you informed

We will keep you closely informed of developments in relation to the review. Businesses should consider the Terms of Reference for the review, what any changes may mean for them and what submissions they would like to make once the Issues Paper has been released.