05 September 2016

Draft Harper legislation to redefine competition law in Australia

Australia’s Federal Government today released Exposure Draft legislation in response to the Harper Panel's Review of Australia’s Competition Laws.

After a four week consultation period which ends on Friday 30 September and liaison with the various States and territories, the Government may seek to introduce the legislation to Parliament in the Spring sittings later in 2016. 

As the Government holds power with a slender majority, there may be trade-offs as the draft legislation is debated in Australia’s Parliament.  It is too early to predict what the trade-offs might be.

These reforms are important for all business as they will give greater power and discretion to the Australian Competition and Consumer Commission (ACCC).

The main reforms contained in the draft legislation are:

  • Adding an effects test to Australia’s misuse of market power provision. This change has been controversial and is supported by the ACCC, although many commentators predict it may not achieve the outcomes sought having regard to the ACCC’s poor track record in proving contested cases about effects.
  • Introducing a new civil prohibition on concerted practices to bring Australia into line with the law in the European Union. This will prohibit competitors from engaging in concerted practices where that conduct has a purpose of effect of substantially lessening competition.  This will be an important change for concentrated industries as no agreement or understanding by the competitors will be required.  In addition, the changes simplify the Competition and Consumer Act 2010 (Cth) (CCA) by repealing the prohibitions on price signalling and exclusionary provisions.
  • Creating a new formal merger clearance process to replace the current, unused, rules for formal merger clearance and the existing process which allow mergers to be authorised based on net public benefits.  The changes will result in the ACCC becoming the first port of call for all merger clearances in Australia, leaving the Australian Competition Tribunal with appeals oversight only.  These changes are proposed at a time when around 90% of all merger clearances are assessed by the ACCC off the public record and when every application to the Tribunal for authorisation of a merger based on public benefits has succeeded in the face of opposition from the ACCC. Leaving the requirements of the application form to the ACCC also leaves open the possibility that it will require a significant amount of information upfront before an application is accepted as valid.
  • Making changes to the cartel provisions to better target conduct affecting Australian markets.  The changes will also remove some uncertainty about the meaning of “competitor”, expand the joint venture exception, reframe the exception for vertical trading (exclusive dealing conduct) and simplify by renumbering the provisions. These changes are very welcome.
  • Allowing for class exemptions. The ACCC will have the power to grant class exemptions for conduct that could give rise to issues under the competition provisions of the CCA, which will be similar to class orders issued by ASIC and the block exemption power in Europe.  This will supplement the existing authorisation and notification frameworks to provide greater certainty for businesses about their ability to engage in types of commercial activity.
  • Amending the access regime including to ensure that third-party access is only provided for where it is in the national interest. These changes should create more certainty around the criteria for declaring services for third party access under Part IIIA of the CCA and will allow decision makers to better focus on business realities, rather than hypothetical possibilities. 

The draft legislation does not address all of the Harper Panel’s recommendations that had previously been accepted by Government. For example, there is no proposed legislative change regarding market studies. We will need to wait and see whether these are addressed in the future.

Submissions on the Exposure Draft are due by 5pm on Friday 30 September 2016.

If you would like to discuss the implications of these changes or require assistance with preparing a submission, please contact us.

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