A lawyer’s picnic or …

Proposed changes to Section 46 of the Competition and Consumer Act

The announcement came out yesterday that the Federal Government will implement the recommendation of the Harper Report to change the test for misuse of market power to the ‘effects test’ currently in use in other areas. This has resulted in declarations from big business and the Opposition that the changes will only result in an anti-competitive outcomes or a ‘lawyers’ picnic’.

Before I pack my picnic basket, let’s have a closer look at what’s proposed.

The Harper Review Panel made recommendations to change section 46 of the Competition and Consumer Act (‘the Act’), which prohibits the misuse of market power.

Prosecuting breaches of section 46 the Act as it stands has been very difficult for the ACCC.

The existing section prohibits a corporation taking advantage of its substantial market power to eliminate or substantially damage a competitor, prevent the entry of another person into a market or deter another person from engaging in competitive conduct.

The proposed change would prohibit a corporation with a substantial degree of market power from engaging in conduct that has the purpose or would have the likely effect of substantially lessening competition in any market.

The argument that the change would have anti-competitive outcomes makes little sense: the purpose of the amendment is to ensure that consumers and competition are protected by making all participants act competitively rather than allowing a dominant player to use its power dictate market conditions.

It is equally difficult to understand the lawyers’ picnic argument.

The ‘effects test’ has operated effectively for many years. The ACCC, lawyers and the Courts are very familiar with it, and there is already substantial case law on its operation and interpretation. The ‘effects test’ does not introduce new law or require substantial interpretation; the only work for lawyers arising out of this change will be defending prosecutions that the ACCC would not have previously brought due to the uncertainty of the Act.

The end result is a section of the Act that was nearly inoperative will now be enforceable.

So, unfortunately, it looks like no picnic for us lawyers, but I’m happy to lend my rug to the small businesses who should be celebrating the proposed change.

For further information contact Rebecca Halkett, Head of the Food & Agribusiness team.