Wednesday, 7 September 2016

The Aussies are moving ahead. Meanwhile, in New Zealand....

On Monday the Aussie Treasury came out with the draft legislation to reform their equivalent of our Commerce Act. The announcement is here, and includes the draft legislation itself (pdf) and an explanatory paper (pdf). The Aussies plan to finish consulting on the draft at the end of this month.

The big item is the change to the treatment of misuse of market power. Both Australia and New Zealand currently have very similar laws (our s36, their s46): as the Aussies put it in the explanatory paper (p35), the current approach is that
Section 46 prohibits a corporation with a substantial degree of power in a market from taking advantage of that power in any market for one of three specific purposes. These purposes focus on damaging an actual or potential competitor
where I've italicised three elements we currently share, and the Aussies are changing (p38) to
The rewritten section 46 prohibits a corporation that has a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in a market.
Their italics this time, showing that 'take advantage' has gone, it's no longer 'purpose' alone but 'purpose or effect or likely effect', and it's competition they're concerned about, rather than damage to a particular competitor. They've also added a provision allowing for authorisation of a practice where there is damage to competition, but the company involved can show there are other benefits to the public that make it worthwhile to allow it.

While they're at it, the Aussies have also done some other useful tidying up.

They've made it easier for companies to engage in retail price maintenance: as the paper says (p45), "In recent years, more support has been expressed for the view that RPM is not always anti-competitive...In particular, a number of online business models now use distribution arrangements that may constitute RPM conduct. These businesses are an increasingly significant part of the economy, and provide benefits in many ways".

They've made it less likely that benign cartel provisions as part of a joint venture will fall foul of competition law by widening the exemptions for joint ventures - "The joint venture exception applies to cartel provisions that are for the purposes of a joint venture or reasonably necessary for undertaking a joint venture" (p11) - which is language lifted from our own proposed legislation on cartels. Annoyingly, the Aussies are getting on with progressing our idea, whereas our own proposed legislation on cartels has been stalled since 2014 in a Select Committee.

And they've got rid of a bit of populist nonsense. Currently, only the Aussie banks (the Aussies have a thing about banks) are covered by 'price signalling' provisions - the concern being that one bank announcing to all and sundry that it is changing (say) its mortgage rates will be taken as a nudge, nudge, wink, wink signal to its mates to change theirs too. It's daft - why just the banks? and how on earth are price changes going to be communicated in the normal commercial course of events? - so the Aussies have binned the thing and replaced it with an economy-wide provision on "concerted practices", which will catch any real you-show-me-yours-and-I'll change-mine rorts but let everyday business life carry on.

Good on them. They've ended up with proposed legislation that will catch real misbehaviour more effectively, and at the same time will have less chance of accidentally pinging legitimate business activity. As the paper says, time has moved on since the last time they had a big look at competition policy (in 1993); they've had the major Harper Review in 2014-15; they've gone with most of the Harper recommendations (pdf); and now they're legislating. I don't know enough about the party politics in Australia to take a punt on the legislation's chances, but you can't fault the process thus far.

By comparison, we're faffing around and losing ground, and our dithering has been obvious for some time. Eighteen month ago I asked, 'Australia's got the competition gospel. Have we?', and six months ago I argued that 'The Aussies are winning the competition policy game'.

We haven't had any major review of competition policy, even though we've faced exactly the same changes over the years (such as the rise of online commerce) that the Aussies have. Instead we've had two piecemeal ideas.

One is the Commerce (Cartels and Other Matters) Amendment Bill. As noted earlier, it's stuck. It had its first reading back in July 2012, and its second reading back in November 2014; there's currently no indication when, if ever, it will get moving again.

What modest moves the Bill had in mind are also being chipped away. One of the proposed measures (criminalisation of cartels, as in Australia since 2009) has been dropped. And other bits may go, too. My spies tell me, for example, that the shipping companies are making a very good fist of lobbying for ongoing exemption from the Commerce Act, even though the Commerce Committee in its May 2013 report on the Bill had said, completely correctly, "We do not believe there is good reason for treating international shipping differently from other sectors regulated by the Commerce Act" (p7).

The other is MBIE's targeted review of the Commerce Act, which has been directed to examine only three topics (misuse of market power, market studies, cease and desist orders). It's been a good though distinctly limited process, but we have yet to see the outcome, and even then there's no guarantee that it will lead to reform or modernisation.

In sum, the Aussies have recognised that they needed "to identify impediments across the economy that restrict competition and reduce productivity, which are not in the broader public interest", so that "Australia continues to experience long-term productivity growth".

We haven't.

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