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”
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.
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.