Major competition law reform recommended in Australia

Wednesday 1 April 2015

Authors: Torrin Crowther and Glenn Shewan

​A major review of Australian competition law has recommended fundamental changes to the key Australian legislation.

The highly anticipated final report of the Harper Review was released late Tuesday afternoon and its recommendations may well have ramifications for our own competition law.

Among the more substantive recommendations, the Harper Review recommends:

  • replacing the current misuse of market power test with a so-called “effects” test;

  • simplifying Australia’s overly complex cartel laws; and

  • removing the current price signalling prohibition, and introducing the concept of concerted practices.

Misuse of market power

In perhaps the most controversial of the recommendations, the Harper Review recommends replacing the current test – which requires that the firm take advantage of its substantial market power for an anti-competitive purpose – with a prohibition on firms with substantial market power engaging in conduct which has the purpose, effect or likely effect of substantially lessening competition in a market. The removal of the ‘taking advantage’ limb of the current test would be a fundamental change, all the more so because the final report has dispensed with the two-stage ‘procompetitive and rational business strategy’ defence which the draft report had proposed.

Simplifying cartel provisions

Australia’s cartel provisions have been criticised as being unduly complex; undermining compliance and enforcement. The panel recommends major simplification. Interestingly, the panel cites New Zealand’s proposed approach to the cartel provisions in the Commerce (Cartels and Other Matters) Amendment Bill as an illustration of how simplification might work in Australia.

Also recommended are changes which would make it easier for the Australian Competition and Consumer Commission (ACCC) to bring actions against companies engaging in global cartel conduct.

Price signalling and concerted practices

The Harper Review recommends repealing the current, somewhat awkward, prohibition on price signalling (which currently only applies to the banking sector). Instead, the panel wants the basic competition laws expanded to capture “concerted practices” between competitors, addressing instances of anti-competitive price disclosure. The prohibition will apply to the jointly arranged, carried out or co-ordinated disclosure or exchange of price information (“the concerted practice”) that has the purpose, effect or likely effect of substantially lessening competition. Unlike the price signalling prohibition which applies solely to the banking sector, the proposed concerted practices prohibition would apply generally throughout the economy. The concept of a “concerted practice” is not new: both the UK and EU competition law have used this concept for some time.

What does this mean for New Zealand?

Obviously, these recommendations are especially acute for New Zealand companies operating in Australian markets.

More generally, the final findings of the Harper Review are likely to be of considerable interest to practitioners and stakeholders in New Zealand in the context of a potential review of our own Commerce Act. In terms of the headline changes to the misuse of market power provisions, the New Zealand Government has confirmed that a major review of New Zealand’s competition laws will take place, following recommendations by the Productivity Commission. In the Business Growth Agenda Future Directions Report 2014 the Government said (at page 55):

    “We will also review the misuse of market power prohibition and related matters in response to the Productivity Commission’s recent inquiries. Because we are committed to better regulation and value for money, this review will also explore options for the removal or overhaul of regulatory provisions that may no longer be necessary or working effectively, including those for resale price maintenance and the cease and desist regime.”

The Commerce Commission has also stated on numerous occasions that it continues to support reform of our own misuse of market power provision. So watch this space.

A full copy of the final report can be viewed here.​


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Torrin Crowther

    Partner Auckland
  • Glenn Shewan

    Senior Associate Auckland
Related areas of expertise
  • Competition