Government response on Harper ‘effects-test’ recommendation

In its initial response to the Harper Report the Government ‘noted’ the Harper Panel’s recommendation to introduce an effects test into the misuse of market power laws.

They indicated that there would be ‘further consultation’ which took the form of consultation on a Treasury discussion paper over late 2015/early 2016.

Today the Government has announced that the Government will amend s 46 in line with the Harper Recommendations.  Prime Minister, Malcolm Turnbull, stated:

“… Last night, the Cabinet has agreed that we will move to amend s.46 in line with the recommendations of the Harper review.”

“What this will do is ensure that our competition law works better to enable competition, to enable smaller businesses, emerging businesses, to be better able to compete. We know that while larger firms are often very innovative and very often very competitive, they are more innovative if the hot breath of competition is coming down their neck.”

“It is subtly different from the existing one because it seeks to protect competition. When you protect the competitive process, when you protect competition, you are not protecting one firm or another, you’re protecting consumers overall.”

This has been the most controversial of the Harper recommendations and earlier consideration of the issue had split the coalition.  There was little expectation that the change would be endorsed by the Government with the result that today’s announcement came as a surprise to many.

Full details are not yet available, but the reference to any amendment being ‘in line with’ the Harper recommendations suggests that, at the very least, the substance of those recommendations will form part of any reform bill.  However, it is not expected that any changes will be introduced prior to the election.

For more information on the existing law and how it compares to the proposed law, see my misuse of market power reform page.

 

Harper response

The Government has published its much anticipated response to the Harper Report. It has deferred consideration of the controversial ‘effects test’ for misuse of market power which has enabled it to sensibly and positively respond to the myriad of other recommendations made by the Harper Committee without distraction.

Most (39) of the Harper Review’s recommendations were supported in full or in principle; a further five were supported in part. The Government has noted or indicated that it ‘remains open’ to the remaining 12 recommendations, including the misuse of market power recommendation which will now be subjected to further consultation.

In relation to the competition laws, the following government reposes were received:

• Cartels
Agreed with recommendation 27 that cartel laws required simplification and to amend the joint venture exemption

• Price signalling
Agreed with rec 29 that separate price signalling laws should be repealed and s 45 amended to include prohibition of concerted practices which SLC

• Exclusionary conduct (primary boycotts)
Agreed the separate exclusionary conduct provision should be repealed in accordance with rec 28

• Exclusive dealing and third line forcing
Agreed third line forcing should be subject to a competition test (rec 32). Recommendations on repeal of exclusive dealing prohibition in s 47 noted and to be considered as part of misuse of market power consultation and general proposal to simplify the laws.

• Resale price maintenance
Agreed per se prohibition should be retained but notification should be allowed (rec 34).

• Mergers
Supported recommendation 35 to combine formal merger clearance and authorisation; exposure draft legislation will be produced.

• Ministerial consent
Agreed with recommendation 26 to remove need for private parties to seek ministerial consent before relying on extraterritorial conduct in private actions

• Authorisation and notification
Supported rec 38 – will be simplified so only single application required per transaction and ACCC can consider both competition and public benefit considerations.

• Block exemption
Supported rec 39 to introduce block exemption power; exposure draft legislation will be produced.

• Admissions of fact
Supported rec 41 that s 83 be amended to extend to admissions of fact.

Julie

Conference announcement: St.Gallen International Competition Law Forum

22nd St.Gallen International Competition Law Forum ICF: 23 and 24 April 2015 

The St.Gallen ICF has a history of attracting reputable speakers and interested participants from European competition authorities, the advocacy, academia, public offices as well as major international companies. They not only hail from Switzerland and Europe, but some travel to St.Gallen from North America and Asia to share their experience and to discuss the current topics of the field.

Cornerstones of each St.Gallen ICF iteration are the ‘Keynote by the Advocate General’ and the ‘Presidents’ breakfast’. The conference is very proud to have some of the most distinguished speakers in the field, including Vincent Martenet(President, Swiss Competition Authority), Agnete Gersing (Director General, Danish Competition and Consumer Authority), Bruno Lasserre(President, French Competition Authority) and Giovanni Pitruzzella (Chairman, Italian Competition Authority).

Another highlight of the conference will be an interview of Carl Baudenbacher(President, EFTA Court; Director CC-EIL, University of St.Gallen HSG) on the EFTA Court´s contributions to European competition law. This very interactive panel will be lead by Lewis Crofts (Chief Correspondent Europe, MLex) and David Lawsky (Consultant, Fipra International).

Date: 23rd and 24th of April 2015
Location: St.Gallen, Switzerland
Programme: http://www.sg-icf.ch/schedule
Flyer: http://www.sg-icf.ch/flyer
Contact: contact@sg-icf.ch.

Harper Review in full swing

The Harper Review (Competition Policy Review) is in full swing.  The wide ranging Issues Paper has led to an equally wide ranging set of submissions (currently standing at 236 publicly released).  I have begun to summarise and collate them here (the Review site keeps changing the URL on the submissions page which is most unhelpful).  For the most part they are not an impressive bunch – plenty of self interest, industry-specific requests/recommendations and lots of supermarket bashing (sometimes thoughtful and measured; often not), but there are exceptions.  So far (and noting that I have not read all of the latest 74 submissions released last Friday) they can be classified into:

• broad policy submissions, often referencing particular industry-specific competition issues or excess regulatory
• submissions on secondary boycotts (many submissions arguing to retain exceptions relating to environmental issues and consumer welfare and several employee groups arguing that they should extend to protect secondary industrial action)
• shipping submissions (to retain Part X)
• consumer law submissions (mixed bunch; many to extend unfair terms laws to small business – several opposed to such a move as well as broader submissions on unconscionable conduct and other consumer laws)
• IP exemptions (lots of submissions with mixed bag for/against retaining s 51 exemption (eg CHOICE against and Australian Copyright Council for) and more discussing parallel imports and international price discrimination and a few arguing for a ‘fair use’ exemption to copyright laws)
• Part IV CCA discussion (relatively few submissions discuss Pt IV issues)
  • cartels (several calls for simplification and JV clarification; see, eg, Beaton-Wells and Fisse)
  • price signalling (mainly to repeal; some suggest expand industry wide (eg, ACCC))
  • misuse of market power (largely around effects test; some for (like ACCC); other opposed; some to scrap Birdsville (worth a try – but compare Aust Dairy Farmers Ltd); some for divestiture powers in cases of MMP contravention)
  • mergers (a few on creeping acquisition laws – grocery sector focus; a few on notification process.  See in particular Herbert Smith Freehills focusing exclusively on mergers)
  • exclusive dealing – third line forcing (for removal of per se ban – even the ACCC is seeking competition test)
  • price discrimination (some recommend re-introduce/some oppose – but not much here – main focus on international price discrimination)
  • RPM (some to remove per se ban; some to retain (eg ACCC); Minter Ellison goes further)
• Access (mixed bag)
• Powers and functions of ACCC (most want to keep ACCC in tact – no comp/consumer etc split; some call for more powers; some call for market studies and ex post review powers/obligations; some discussion of s 155 powers (ACCC want extended; others critical of breadth of s 155)
• Government and competitive neutrality (mixed bag)

Of those released so far the ACCC’s 145 page submission (view on ACCC website), which it released on 25 June, has probably received the most attention.  For a brief overview click here.

More detail will follow once I get a chance to review all the most recent submissions.  However, based on the scope and diversity of the submissions released so far, I don’t envy the Panel their task!

Thought piece on root and branch review

Dr Martyn Taylor and Josh Buckland at Norton Rose Fulbright have just published an excellent thought piece on the proposed ‘root and branch‘ competition review (still awaiting final terms of reference and panel!). Headed ‘The greatest Australian competition reforms in 20 years‘ the piece works through the political context to the Review, the ‘extraordinary’ breadth of the review, the panel and timing of the review, the ‘likely apetite for further deregulation’, possible agency reforms, possible ‘trimming’ of the laws, small business issues and more – it runs for eight pages and is well worth reading. It can be downloaded from CCH’s law chat page.

St Gallen International Competition Law Forum IFC

St.Gallen International Competition Law Forum ICF – May 15th and 16th 2014
The 21st St.Gallen International Competition Law Forum ICF will be held on May 15th and 16th 2014. Once more, it will feature a thrilling selection of hot topics in current competition law issues and some of the most distinguished speakers in the field, including Joaquín Almunia (Vice-President of the EU Commission and Commissioner for Competition), Nicholas J. Forwood (Judge, General Court EU) and Ingeborg Simonsson (Judge, Stockholm City Court). Taking place in one of Switzerland’s most beautiful cities, the St.Gallen ICF gives you the opportunity to meet, discuss and mingle with fellow competition lawyers and leading competition law experts from all over the world. Further information including a detailed programme are available on the conference website:http://www.sg-icf.ch/.

Topics: Current issues and developments in competition law
Programme: http://www.sg-icf.ch/programme/
Date: May 15th and 16th 2014
Location: St.Gallen, Switzerland
Registration: Registration is now open on our website (http://www.sg-icf.ch/conference-registration/)

Root and Branch Review

The draft terms of reference for the promised ‘root and branch’ review of Australian competition policy have been released (although they remain tough to find – I’ve reproduced them here).  They are very broad and the review will be held over a period of 12 months.  We are still waiting on details of the Review Panel.  More to follow …

Shopper docket undertakings

The ACCC has accepted s 87B undertakings from Coles and Woolworths to ‘cease making fuel saving offers which are wholly or partially funded by any part of their business other than their fuel retailing business’ and to ‘limit fuel discounts which are linked to supermarket purchase to a maximum of 4 cents per litre.’ The undertakings note (in part) that while ‘[Woolworths/Coles] does not accept that any of its fuel savings offers have adversely affected competition, [Woolworths/Coles] has voluntarily and without admissions offered to provide this Undertaking to address the matters raised by the ACCC’.The undertakings also contain a meeting competition exemption.

• ACCC press release
• Woolworths undertaking
• Coles Group undertaking

This has (rightly) attracted some criticism.  For example, the team at ‘The State of Competition‘ (Issue 15) refer to this as a ‘backdoor deal which has removed a clear benefit for Australian consumers’ and suggest that any such deal brokered by someone other than the ACCC would constitute a ‘straight-forward hub and spoke arrangement’.  Similarly, Blair Speedy over at the Australian believes ‘the ACCC’s decision to deny shoppers the opportunity to save a few dollars – and even at 45c a litre the savings on the average fill of 28 litres is just $12.60 – in the name of supposed competition seems bloody-minded at best.’ (Discount dockets no hurdle for rivals, 14 December 2013) and, more to the point, the Australian Financial Review points out that iIf the two big supermarket retailers had met secretly to jointly limit the amount of petrol discounts they offer shoppers, they could find themselves hauled before the courts for anti-competitive price fixing’ (Putting a brake on shopping competition, 11 December 2013, page 38) and notes that the ACCC has ‘not released evidence’ to back their claims that supermarkets are using market power to subsidise fuel discounts.  See also Simon Evans and Marianna Papadakis, ‘Seniors disadvantaged by fuel docket limit, says lobby group‘ (Australian Financial Review, 11 December 2013)

No competition minister in new Cabinet

Despite talk of a root and branch review of competition laws for more than a year, no competition minister appears in the new cabinet, outer ministry or among the various parliamentary secretaries in the new ministry announced today by PM-elect, Tony Abbott.

As expected, Bruce Billson is the new Minister for Small Business. He was the Shadow Minister for Small Business, Competition Policy and Consumer Affairs. Gone are the competition and consumer references.

The change cements some of the fears over a small business focus for competition policy that have arisen in recent months. The Coalition’s Policy for Small Business, released in August, reiterates the earlier promises of an independent root and branch review of competition policy to ‘ensure that both small and big business have a level playing field’.  Last week Peta Sevenson anmd Martine Phillips wrote (King&Wood Mallesons’ In Competition Blog – see ‘Coalition to Uproot Competition Laws?’ (9 September 2013)) that the ‘Coalition’s stated focus on the position of small business suggests a move away from the protection of the competitive process to the protection of the competitors.’

Let us hope they are not too prophetic.  Although small business can certainly benefit (as can other business) from effective competition policy, the policy should not be directed toward the protection of any particular sector of the economy.  It is widely recognised internationally that competition policies ought to be directed toward protecting competition and not competitors or other objectives.  For example, the International Competition Network’s Recommended Practices For Merger Analysis include, as their first recommendation, the statement that

‘the purpose of competition law merger analysis is to identify and prevent or remedy only those mergers that are likely to harm competition significantly.’

Comments to the recommendation make clear that merger review law ‘should not be used to pursue other goals’.  The sentiment that protection of competition and not competitors should be the focus of competition policy has been re-affirmed many times in the Australian context.

When it comes to the ‘root and branch’ review of competition law this issue is likely to arise most acutely in relation to our misuse of market power provisions in s 46.  These have already been the subject of small business focussed reform – the ‘Birdsville Amendment‘ was clearly directed toward this small business objective, despite efforts to claim otherwise by some members as it progressed through Parliament (see earlier blog here).  Lest it be argued that a different approach is required in a small market economy, the issue has been addressed extensively by Michal S Gal in his work ‘Competition Policy for Small Market Economies’ (2003).  He writes:

‘In a small economy it is vital that the goals of competition policy be clearly, consiously, and unambiguously defined, and that economic efficiency be given primacy over other goals.’ (page 47)

and further

(at 48) ‘Undeviating pursuit of wealth dispersion and small size of firms at the expense of efficiency will be costly in small economies because inefficient firms will be preserved in the market, and thus the market will operate inefficiently. … In addition, such protection of small firms harms consumers who, on average, are likely to be less wealthy than the owners of small businesses, especially when such businesses are protected by competition law.’

‘Moreover, even if the protection of small businesses were our chosen goal, competition policy should not be chosen as the method to achieve it.  Competition law, as the name indicates, is aimed at facilitating competition among potential rivals.  It strives to achieve this goal (49) by reducing artifial barriers to competition and by allowing market participants to interact independently. … monopoly, or rather the incentive to become one, is an important “engine” that facilitates competitioon.  Limiting business size per se thus conflicts with the basic principles on which competition policy is based.

‘Although these arguments apply to any economy, regardless of its size, smallness intensifies the primacy of efficiency. …

We can only hope a thorough independent review will consider the broader impact of a small business focus for competition policy and reiterate, again, the importance of preservicing competition ahead of competitors; unfortunately, recent history does not give us much reason to be optimistic on that count.

Sims’ Law Council speech

ACCC Chairman, Rod Sims’ address to the Law Council of Australia’s Competition and Consumer Workshop is now available from the ACCC website. In it, he provides a tribute to Ron Bannerman, sets out regulatory issues for 2013, discusses the review of the Merger Review Process Guidelines, talks about compliance and enforcement, addresses some consumer issues and discusses ACCC engagement in the region.

Mergers

In relation to mergers Sims noted that the ACCC’s ‘main focus will be on a real world understanding of market structure and import competition, entry barriers, countervailing power and the overall competition process’ rather than ‘complex theories and detailed modelling’. He also noted that the ACCC was ‘close to finalising the revised Process Guidelines’, noting one of the key changes was to move away from the practice of setting 6-8 week standard review periods for all public merger reviews, noting that in complex cases reviews will often take longer than eight weeks and that in some cases review periods will be extended to coordinate reviews with other agencies. Sims also acknowledged concerns about the timeframes for publishing public competition assessments, noting that the ACCC has ‘undertaken steps internally to streamline our processes for preparing PCAs’ and will aim to publish within 30 days of announcing its final decision.

Compliance and enforcement

Sims noted that the ACCC wins around 80 per cent of cases it takes. Focus is consumer law, but Sims also focussed a lot on the ‘largest penalties for cartel conduct in the history of the ACCC’ – this is cumulatively and relates to the international air cargo cartel, for which many regulators can claim success. Sims also noted there had been five competition proceedings instituted in the 2011-2012 financial year (four alleging cartels and one (against Visa) alleging misuse of market power and exclusive dealing). Once again Sims promised more competition cases in the coming year. Sims also spoke about the ACCC’s review of its immunity policy for cartel conduct, which he anticipates will be finalised in the coming months, with a discussion paper to be released in September.

International engagement

Sims described the ACCC’s efforts to maximise engagement in the Asian region and noted that the ACCC will host the ICN annual conference in 2015.