Wednesday, 15 September 2021

One never knows, do one

Yesterday the Economic Development, Science and Innovation Select Committee reported back on the Commerce Amendment Bill, and there was (at least from my perspective) one pleasant surprise.

First the big stuff. The proposed change to s36 of the Commerce Act, which deals with abuse of market power, has got the tick. We'll be shifting to Australia's "effects based" test and getting away from our current "take advantage" wording. 

For those whose eyes have just glazed over, it means that when a company with market power is brought before the courts for throwing its weight around in an anti-competitive way, the judges will stop asking, "Would a company otherwise just like this one, but without the market power, have done this? It would? No case to answer, get outta here". 

The problem with that line of reasoning, which follows on from the current s36 wording, is that it misses the essential point: when something is done by a company with market power, it may have different consequences compared to when a non-powerful company does it. To fix this, the new formulation will just look at the effects, or likely effects, and will stop speculating about what non-powerful companies might have done.

Under both the current s36 and the proposed new s36, clear anti-competitive purpose will also land you in court, as it should: if the e-mail trail shows "Hah! Competitors will never get a look in if we cunningly tweak the software", you'll still be bang to rights. In practice, the big bunfights in court over abuse of market power tend not to feature obviously incriminatory evidence of purpose, and tend to range over the effects battlefield, so the law change fixes up the important aspect.

As well as being the intellectually correct thing to do, the new s36 will harmonise our law with Australia's, which is helpful given the presence of so many companies on both sides of the ditch.

The National members on the Committee didn't agree: they felt that "firms with market power risk liability for unforeseeable future consequences, leading to overly-conservative decision making on their part". That's fair enough: reasonable people across many jurisdictions have struggled with finding the right definition. But for mine (and it's been the Commerce Commission's view, too), the current law was broken, and couldn't do what it was meant to. 

That's a bit of a worry in an economy with its fair share of concentrated industries, where there is scope for the 600 pound gorillas to drive the smaller apes away from the bananas. That said, big companies generally play fair, and stand-over corporate bullying doesn't come along all that often, but when it does, you want to be able to deal with it. The new s36 is well worth trying.

And that pleasant surprise?

I'd made a submission to the Committee and somewhat cheekily, I'd included an off-topic idea that while they were looking at other changes to the Commerce Act

One not included, but worth adopting, would be to reinstate the former section 63 of the Commerce Act (repealed in 1990) which had allowed the Commission to issue provisional authorisations. The value of this ability has been shown in Covid circumstances in Australia, where the Australian Consumer and Competition Commission (ACCC) has made excellent use of its ability to respond quickly to authorisation requests. The Commerce Commission under recent NZ Covid legislation temporarily had this power: it should be made permanent

And blow me down if the Committee didn't run with it and agree:

there may be situations where the need for authorisation is time sensitive. Recognising this, the COVID-19 Response (Further Management Measures) Legislation Act 2020 created a temporary ability for the Commerce Commission to issue “provisional authorisation” to an applicant ... We believe that the changes made by the COVID-19 legislation should be made permanent. COVID-19 has demonstrated that there may be compelling public interest reasons to authorise conduct before the full procedure for deciding an application can be completed. Making this permanent would improve the Act’s administration (p3)

Which (despite my simultaneous complete failure to convince the Committee to put better bounds around the Commerce Commission's proposed information-sharing powers) is a good example of why people should put in submissions. You may be tempted to think, what's the point: don't. A good Select Committee will genuinely kick the tyres, as this one did, and in the background the Committee will have expert policy assistance from the relevant Ministry (in this case, MBIE), and if your idea has legs, there's a fighting chance it'll get a decent hearing.

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