WHEN big business comes to regional Australia, many assume the purpose of our competition law is to protect the little guys and it surprises many when smaller competitors end up sacrificed on the altar of competition.
The tension between protecting competition and protecting small business is evident in the policy debate surrounding proposals to change section 46 of the Competition and Consumer Act.
Section 46 currently addresses misuse of market power by focusing on a connection between that power and the entity’s ability to engage in the activity in question (the take advantage test) coupled with one of three defined anti-competitive purposes (the purpose test).
The community’s main beef with the take advantage test is that it permits big business to undertake conduct that small business could, even if the effect on the market might be substantially different.
The purpose test has been slammed for its focus on an organisation’s intent and purpose, which can be very tricky to prove.
The Harper Review into Competition Policy made numerous recommendations to reform the Act, most of which have been adopted by the government. However, those relating to section 46 remained controversial and are the subject of further consultation.
Recommendations include removing the take advantage test, and placing greater emphasis on the outcome of the relevant activity, instead of the purpose of the entity undertaking it.
This would involve introducing effects tests to look at whether the activity has the purpose, effect or likely effect of reducing competition.
Commentators have said vigorous competition almost always involves harm to competitors, and warn that removing the causal connection required by the take advantage test might stifle innovation in the business sector.
Others caution the proposals may introduce uncertainties that will stifle competitive behaviour.
Submissions in response to the government’s discussion paper are due on Friday.
- Scott Sloan is a partner at DibbsBarker. Email Scott.Sloan@dibbsbarker.com. This article contains general commentary only. It is not legal advice and must not be relied upon as such. Readers should obtain specific advice relating to their particular circumstances.