Harper: Promoting Economic Efficiency and Consumer Choice

The much anticipated Harper Report – the review of Australian competition policy and law – presents government with some challenging choices in pursuing economic efficiency and consumer choice.

The Report contains 56 recommendations directed at reinvigorating competition as a key driver to raise productivity and Australian standards of living.

The Panel recommends that all governments in Australia commit to a set of principles that have been a common theme in advocacy for competition policy reforms for many years – promotion of consumer choice, promotion of the long-term interests of consumers and separation of public monopolies, to name a few.

The Panel focused its attention on reforms that are likely to produce the greatest consumer benefit – high-quality health, education and community services – an area not often seen at the forefront of competition policy reform. In this area the Panel reintroduces some big challenges that are not new, but nevertheless important.

Debatable recommendations

When it comes to the Competition and Consumer Act the Panel has made a number of controversial, or at least debatable, recommendations. On changes to the institutional governance arrangements, the Panel has recommended that half of the ACCC Commissioners should be appointed on a part-time basis, a recommendation unlikely to find favour with the ACCC and one that, perhaps, is more theoretical than real in terms of benefits.

Another debatable recommendation not likely to produce much in terms of consumer benefits is that a separate regulator be established to take over jurisdiction in access and pricing jurisdiction.

Turning to the Competition and Consumer Act’s substantive provisions, while the recommended changes are likely to give rise to lively debate, none will have the positive economic impact of other Panel recommendations.

Section 46 – misuse of market power

One example is in the controversial and emotive area of section 46 – misuse of market power. The recommendation is that the section be reframed to prohibit corporations with a substantial degree of market power engaging in conduct that has the purpose or likely effect of substantially lessening competition, having regard to the effect in enhancing efficiency, innovation, product quality or price competitiveness. This recommendation is likely to be heatedly opposed by some, if the positions taken by various industry groups commenting on the Panel’s draft recommendations last year is anything to go by. But is seems clear that no change in this troubled area was not an option and the Panel has come up with a suggestion worthy of careful consideration.

Simplification of the indigestible cartel laws is proposed, including confining the provisions to actual or likely competitors and resolving some of the current ambiguities with the carve out for genuine joint ventures. The Panel also recommended that a measure of doubling up be resolved by removing the exclusionary provisions (boycotts) prohibition. All these recommendations are well made.

Turning to price signalling, the Panel has recommended that the current provisions, directed at the banking sector, should be repealed, because they are ‘not fit for purpose’ – a conclusion with which most will agree. But at the same time, the recommendation is that the general prohibition on anti competitive agreements, arrangements and understandings should be extended to cover concerted practices, a change that will no doubt raise another round of controversy.

Submissions that a prohibition on price discrimination should be reintroduced has understandably (and correctly) been rejected, with the Panel preferring market solutions to address international price discrimination. Turning to third line forcing, the Panel has accepted the long-held view of commentators that the practice should only be prohibited where is has an anti competitive purpose or likely effect.

Surprisingly, the Panel has recommended retention of the current per se prohibition on resale price maintenance, even though many, including me, think applying an effect on competition test to this long standing absolute prohibition is long overdue.

Welcome critique of competition law

Overall, the Panel has produced a welcome comprehensive critique of the competition law. Many of the issues covered are not new, but the Report is nevertheless an important contribution. The Minister, Bruce Billson, has promised careful consideration and consultation. Whether that results in changes to the law remains to be seen.

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