Release of the Harper Report on Competition Policy Review

On 31 March 2015, the Australian Government released the final report of the Competition Policy Review.

The Competition Policy Review was conducted by a panel consisting of Professor Ian Harper, Mr Peter Anderson, Ms Su McCluskey and Mr Michael O’Bryan QC.

Although the panel considers that Australia’s current competition laws have served the economy well, the final report recommends a number of specific reforms aimed at reinvigorating our competition laws and their effectiveness.

Below is a summary of the reforms as they relate to the Competition and Consumer Act 2010 (Cth) (CCA).

Cartel conduct (section 45)

The panel recommended a number of changes to the cartel provisions in section 45 of the CCA:

• The wording of the current excessively complex cartel provisions be simplified, and that the provisions apply as between actual rather than potential competitors.
• The Act be extended so that the cartel provisions apply to anyone who competes to supply goods or services to, or acquire goods or services from Australia. The current provisions do not apply unless the entity that contravenes the Act has a connection with Australia in the nature of residence, incorporation or business presence.
• Joint ventures and other similar forms of business collaboration be exempt from the cartel provisions unless they substantially lessen competition.

Misuse of market power (section 46)

The panel proposed a significant reform to section 46 of the CCA, which deals with misuse of market power.

The section currently targets conduct intended to damage a competitor, prevent the entry of a competitor into a market, or to prevent another person from engaging in competitive conduct. Conduct does not contravene section 46 if damage to a competitor is simply an unintended consequence of the conduct.

The panel recommended that this approach be scrapped in favour of provisions that focus on whether the conduct has either the intention or the effect of substantially lessening competition (as opposed to damaging a particular competitor).

Vertical restrictions (section 47)

The panel has also proposed significant reform to section 47 of the CCA, which deals with third line forcing and exclusive dealing.
Currently, third line forcing is prohibited regardless of the purpose or effect of the conduct. The proposed changes are focussed on moving towards the general principle that the CCA should not interfere with trading conditions that are agreed between buyers and sellers, unless those conditions have the purpose or likely effect of substantially lessening competition.

In particular, the panel recommended that:

• third line forcing should only be prohibited where it has the purpose, effect or likely effect of substantially lessening competition;
• the prohibition on exclusive dealing in section 47 should be repealed; and
• vertical restrictions and associated refusals to supply should instead be addressed by the recommended changes to section 45 and 46.

Resale price maintenance (section 48)

The panel has proposed minor, yet significant, reform to section 48 of the CCA, which deals with resale price maintenance (RPM).

While recognising there is significant argument for a move to a competition-based test, the panel recommended the current per se prohibition on RPM be retained.

However, the panel did acknowledge that it would be appropriate to make it easier for businesses to seek exemption and that the RPM exemption should be achievable through a notification process, rather than requiring that businesses seek an authorisation. Notification is quicker and more economical than obtaining an authorisation.

Additionally, the panel recommended that there should be an exemption for RPM conduct between related entities.

Mergers (section 50)

The panel concluded that there was no need to modify the current prohibition on mergers that are likely to substantially lessen competition, but that the administration of merger law could be improved.

Specifically, it recommended that there should be further consultation between the ACCC and industry representatives with a view to working out how to deliver more timely decisions as part of the informal merger review process.

It also recommended that the current formal merger exemption processes (that is, the formal merger clearances and the merger authorisations) be reformed so that unnecessary restrictions and requirements are removed and the process is more attractive to participants.

The panel did not attempt to prescribe all of the features that should be included in the review process, but did suggest that certain elements be adopted. For example, the panel recommended that the ACCC should always be the first-instance decision maker, with its decisions being subject to review by the Australian Competition Tribunal. If this recommendation is adopted, participants will no longer be able to apply directly to the Australian Competition Tribunal for authorisation of a proposed merger.

The panel also suggested that merger review processes could be improved by implementing a post merger evaluation system, aimed at reviewing the effectiveness of ACCC’s processes and the accuracy of its assessments.

Have your say

The Government is now calling for submissions and comments from industry participants to inform its response to the report, which will be released later in the year. Following that, the Government will release proposed legislative changes for further consultation.

If you would like further information about the recommendations in the Harper Report and how these could affect your business, please don’t hesitate to contact a member of our team.