Effects test remains priority

Posted on Wednesday, February 24, 2016 - Category: In the News

Competition law has been the focus of a Government overhaul over the past fiver years, with the intention of preventing situations such as the $1 per litre milk campaign – a damaging state of affairs for dairy farmers which highlighted the significant imbalance of market power between retailers and suppliers in the grocery supply chain.

In its discussion paper on the Options to Strengthen the Misuse of Market Power Law, Australian Dairy Farmers (ADF) once again emphasised the need for an ‘effects test’ to be inserted into Australia’s Competition Law.

Without an effects test the current tactics and actions of the major retailers will continue to result in substantial lessening of competition in the market place. This means a significant impact on the viability of proprietary branded dairy products, less product variety on supermarket shelves, less choice and in the long term, higher prices for consumers.

The Australian Competition and Consumer Commission (ACCC) must be given the ability to examine the effect of such strategies, with particular emphasis on the impact on competition (including small businesses like corner stores and regional supply chains), consumer choice, farmer viability and future prices.

Of the six options proposed to amend the current misuse of market power provisions, ADF believes the most practical option proposes that the existing provision be amended by removing the words ‘take advantage’. The law would be amended with the wording, ‘purpose, effect or likely effect of substantially lessening competition’ test.

However, ADF does not agree with the inclusion of the ‘purpose’ element due to the practical difficulties of proving purpose. Inclusion of the purpose element and defence as outlined in the Harper Review recommendation 30 may make the effects test unworkable in reality.

An effects test is in line with competition policy around the world – almost all western nations, except for Australia and New Zealand have an effects test.

There is strong support for the proposed changes to the effects test, from competition experts, including the Harper Review Panel, the ACCC, former Chairmen of the ACCC, Rod Sims as well as small businesses, suppliers and farmers across Australia.

ADF will continue to advocate for stronger misuse of market power laws to foster a more competitive business environment. To view ADF’s submission to the discussion paper, click here.


 

 

 

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