Thursday, 17 March 2016

The Aussies are winning the competition policy game

Yesterday the Australian government announced that it is going to follow the recommendations of the Harper review of competition policy, and change the bit of the Aussie competition law - section 46 - that aims to prevent anti-competitive abuse of market power. It's going to change to being based on an "effects" test - did the powerful firm's behaviour have the effect of damaging the competitive process? The current system, which focusses on the purpose of the powerful's firm's action, will be junked, and with it will go the whole legal palaver over whether a firm "took advantage" of its market power, and which has required going through a fanciful "counterfactual" exercise of whether a firm without market power would have done the same thing. Now, all that will matter is whether the opportunity to compete has been compromised - the effect. As it should be.

The Aussies have made exactly the right call. They're right when they say that
Australia’s current misuse of market power provision is not reliably enforceable and permits anti-competitive conduct. This slows the entry and expansion of new and innovative firms, delays the entry of new technologies into Australia and impedes economic growth in the long term
and right again when they say
this reform represents a commercially and legally robust law, preventing firms with market power engaging in behaviour that harms the competitive process. It places Australia’s competition law on the right footing to encourage economic growth and innovation
and I wouldn't mind if more governments came out and said
Protecting the competitive process is unashamedly pro-competition and allows everyone to have a go.
This has a variety of implications for New Zealand.

As I've argued before (here or here), I think the Aussie have got their act together on competition policy - commissioning a wide-ranging review, finishing it quickly, and adopting most of the decisions including (as we've just seen with their s46) some of the politically trickier ones. Earlier, the Aussie government had said it wasn't immediately going to change s46 as Harper had recommended, which was widely interpreted as fear of the big business lobby's reaction: the big end of the town was against the change, for a variety of principled and self-interested reasons. But the Turnbull government has correctly and (in defiance of the Sir Humphrey Applebys of Canberra) courageously faced down the political opposition. The Aussies are no shining angels on everything - they've been wusses about proper liberalisation of second-hand car imports, for example - but they've stolen a march on us here.

At home, we have run a much less comprehensive 'targeted review of the Commerce Act' which, to be fair, did include a review of options for changing section 36 of our Commerce Act, our equivalent of the Aussies' s46 (and yes, I did make a submission saying we should go the way the Aussies have just gone). As for timeliness, the targeted review is still in the bowels of MBIE somewhere, and we don't know what it will recommend or when, or whether our government will go with whatever it comes up with.

You'd think our government would be daft to leave us as the only jurisdiction in the English-speaking world still hanging onto the economic and legal make-believe world of the "counterfactual", let alone - given that they're been banging the drum about harmonising trans-Tasman institutional arrangements - allowing a large gap to develop between our competition law and the Aussies'. But on the other hand I'm not fully sure our government is ready to take on potential big business opposition in the way the Aussies just have. Ours has, for example, flagged away criminalisation of cartels: yes, you can make a principled (though wrong) case for doing that, but it could as equally be symptomatic of paying close attention to whatever big business had been whispering in your shell-like. We'll see.

The only thing that slightly irks me about what the Aussies have done is the way they've represented it as a small business versus big business policy. It's been widely represented the same way in the media (here or here, for example). Now, I understand the politics of it - if you're going to brass off big business, then you'd better court the compensating small business vote, and anyway it plays to the long-standing "Aussie battler" meme. But it's not the best way to think about it: a better way is to recognise that anti-competitive rorts are as likely to rip off a big business as they are you or me. A business can be very big indeed, and still get ripped off when, for example, the fix is in (as it was) on the cardboard boxes it needs. Effective competition benefits us all - big and small.

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