Federal Senate Passes the Effects Test

Posted on Friday, August 25, 2017 - Category: In the News

On August 14, legislation passed in the Federal Senate that will help level the playing field for small businesses, including farm businesses.

Included in section 46 of the Competition and Consumer Act 2010, the misuse of market power provision will help address the current unequal distribution of market power and encourage transparency to the benefit of producers, consumers, and retailers.

This tool will make available to regulators the capacity to judge whether a company is acting to unfairly reduce competition, regardless of intent. It allows them to look at both the actual and likely impact on a market.

Small Business Minister, Michael McCormack said a fairer playing field is a big issue raised by small business people.

“From farmers to small supermarkets, from consumers to suppliers, many Australians tell me how these changes will stop firms with substantial market power from engaging in conduct which reduces competition”, said Mr McCormack.

The effects test, as an additional tool for the ACCC, will address issues where a company with a considerable degree of power may be engaging in conduct that pushes out smaller businesses or forces them into devaluing their product with lower prices.

With the potential for use in examining the business practices of the large supermarkets in Australia, the effects test could determine their impact on a market and influence the development and marketing of products such as $1 per litre milk, and $6 kg cheese for example. Milk products at these prices are unsustainable for all involved and the predatory pricing tactic has seen hundreds of millions of dollars lost from the dairy value chain.

Australian Dairy Farmers (ADF) has advocated strongly for this change since 2011. We believe the effects test will assist in preventing damaging practices, including predatory pricing in future.

The introduction of an effects test is in line with competition policy around the world – Australia will be joining the clear majority of nations in the Organization for Economic Cooperation and Development (OECD) who already have established effects tests.

The effects test is another tool to help provide integrity and transparency regarding the impact of retailer actions on suppliers.

These reforms will support consumers’ interests as well as dairy farmers by moving towards a more objective measure to assess the impact of anti-competitive behaviour.

ADF would like to thank the Government and in particular the National Party, the Prime Minister, Deputy Prime Minister, the Treasurer, the Minister for Small Business for their support and action on this important reform.

We also want to thank the Queensland Dairy Farmers Organisation and other state dairy farmer organisations for their tireless work in highlighting the issues within the industry and working with us on this important reform.

David Inall




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