Competition Policy 'Root and Branch' review draft report released

In brief

The panel tasked with the 'root and branch' review of competition law and policy has released its draft report. Some of the recommendations are far reaching and may have significant ramifications on competition law enforcement in Australia, including in relation to misuse of market power. Partner Kon Stellios, Associate Lisa Lucak and Knowledge Management Lawyer Julie Playfair report. 

Overview

Earlier this year, the Federal Government appointed an expert panel to lead the 'root and branch' review into Australia's competition laws to examine whether Australia's competition policies, laws and institutions remain 'fit for purpose'.

On 22 September 2014, following extensive consultation and receipt of more than 300 submissions, the review panel released its draft report and recommendations. It also published a series of infographics outlining the components of the draft report, along with videos from members of the review panel commenting on the draft report.

Key recommendations

The review panel's findings and specific recommendations cover three main areas: competition policy, competition laws and competition institutions. In a number of areas, the review panel has not reached a specific view and has sought further input from stakeholders.

Competition policy

The review panel has stated that competition policy should:

• make markets work in the long-term interests of consumers;
• foster diversity, choice and responsiveness in government services;
• encourage innovation, entrepreneurship and the entry of new players;
• promote efficient investment in, and use of, infrastructure and natural resources;
• establish competition laws and regulations that are clear, predictable and reliable; and
• secure necessary standards of access and equity.

The review panel recommends that regulations restricting competition should be reviewed and should only apply where they are in the public interest and where their objectives can only be achieved by restricting competition.

The review panel proposes that a revised set of competition principles be crafted, which is attuned to the challenges and opportunities likely to face the Australian economy in coming decades. The review panel's priority areas for competition reform are human services, transport, intellectual property, parallel imports, competitive neutrality, electricity, gas and water, planning and zoning, and retail.

In respect of intellectual property, the review panel recommends that:

• an independent body, such as the Productivity Commission, conduct an overarching review of the IP rights regime; and
• the IP licensing exception to the restrictive trade practices provisions be removed, but the IP licencing exception to the cartel provisions remain.

Competition laws

The review panel's recommendations include to:

• simplify the law (particularly the provisions relating to cartel conduct) and remove redundant provisions;
• amend the misuse of market power provisions (section 46 of the Competition and Consumer Act 2010 (Cth)) by removing the 'taking advantage of market power' limb and, instead, targeting anti-competitive conduct that has the purpose, effect or likely effect of substantially lessening competition. To mitigate concerns about over-capture, the review panel proposes that a defence be introduced so that the prohibition would not apply if:
  • the conduct involved a rational business decision or strategy by a corporation that did not have a substantial degree of power in the market; and
  • the effect or likely effect of the conduct is to benefit the long-term interests of consumers;
• remove the price signalling provisions and extend the provisions governing anti-competitive agreements to concerted practices that have the purpose, effect or likely effect of substantially lessening competition;
• streamline the merger clearance process as follows:
  • introduce a new formal merger clearance process that combines the formal merger clearance and merger authorisation processes;
  • ensure all merger decisions are to be made by the ACCC and are reviewable by the Australian Competition Tribunal; and
  • subject the clearance process to strict timelines that cannot be extended except with the consent of the merger parties;
• simplify the authorisation and notification provisions; and
• amend the national access regime to better address the overall economic objectives.

Competition institutions

The review panel has proposed that:

• the ACCC retains both competition and consumer functions, and that its governance structure be enhanced with the addition of a Board (which includes independent members);
• a separate access and pricing regulator be established with responsibility for existing regulatory functions undertaken by the ACCC, the National Competition Council, and the Australian Energy Regulator; and
• the Australian Council for Competition Policy be established, to replace the National Competition Council, with a remit to advocate for competition policy reform and oversee the implementation of the evolving competition policy agenda.

Small business

The review panel has made recommendations in response to concerns raised by small business.

The review panel:

• recommends that access to remedies for small business be improved;
• recommends that the collective bargaining framework be enhanced and made more flexible; and
• makes draft recommendations on competitive neutrality and regulations that can restrict the way small businesses operate.

It also considers that the current unconscionable conduct provisions appear to be working as intended to meet policy goals, but active and ongoing review of these provisions should occur as matters progress before the courts. The review panel also notes that the proposal to extend unfair contract terms laws to small business contracts is in the process of being implemented.

Retail markets

The review panel made recommendations in relation to competition in retail markets, including in relation to retail trading hours and the removal of the existing restrictions on the ownership and location of pharmacies.

Conclusion

Submissions on the draft report are due by 17 November 2014. If you would like to discuss what the review will mean for you, please let us know.

We will provide you with more detailed coverage of the panel's recommendations shortly.