Effects test on the way, but it could be years before small business sees change

Australia is one step closer to seeing an effects test introduced into competition law, with the government today releasing a draft bill to tighten section 46 of the Competition and Consumer Act.

But even if the legislation does eventually go through, small business will have to wait to see it put into action.

As reported by Fairfax, the Turnbull Government will today release draft legislation, which will propose to change the Competition and Consumer Act to prevent businesses with a substantial degree of power from acting with the “purpose, effect or likely effect of lessening competition”.

While the small business community has been calling for an effects test for years, debate has raged since the Harper Review into competition law recommended a change be made to section 46 of the act in its March 2015 report.

In September 2015 then small business minister Bruce Billson brought the effects test to cabinet, but it was shelved by Prime Minister Tony Abbott before Malcolm Turnbull claimed the leadership of the Liberal Party. Turnbull then brought the proposal back into cabinet discussions, before it was put on hold again in November. Cabinet announced its support for the reform in March.

Chief executive of Master Grocers Australia Jos de Bruin says it’s been a long journey but the introduction of the test would be an incredibly important step for strengthening Australia’s economy.

“This legislation will really make businesses think twice about wielding their power,” de Bruin told SmartCompany.

“If it doesn’t go ahead then family businesses will continue to be stifled”.

The Council of Small Business Australia have also been lobbying for the change for years and chief executive Peter Strong is confident the bill will eventually make its way through the Federal Parliament.

“If anything, people are going to want it to go harder,” he says.

But Rohan Harris, principal in corporate and commercial practice at Russell Kennedy Lawyers, says the results of any effects test are some way off, even if the legislation does get a smooth ride.

“The dynamics in Canberra have changed, and will continue to change,” Harris told SmartCompany.

“But assuming it does get passed, it’s really going to be up to the Australian Competition and Consumer Commission to take action in test cases before we get any definitive action on case law around the section.”

The results of these test cases could be years into the future, Harris says.

“I suppose what the regulator will also be looking at is the new laws’ ability to have an impact on the way in which businesses conduct themselves – and this will be some way off,” he adds.

Last year SmartCompany asked small business owners what an effects test would mean to them, with hundreds signing on to a petition to implement a change to the act.

“Small business is just about dead,” one business owner said at the time, with several others highlighting the need for more bargaining power when negotiating with big businesses.

The Labor Party oppose the implementation of an effects test, having previously said it would create a “lawyer’s picnic” that would not have a substantial impact on the ability of small operators to defend themselves against corporate entities.

De Bruin says he is cynical about Labor’s opposition to the change.

“It’s our firm belief that the SDA [Shop, Distributive and Allied Employees’ Association] is driving it,” he told SmartCompany.

While the small business community is expressing relief this morning at the possibility of seeing a draft bill, they are also aware that there have been many twists and turns to the process.

“I think they are definitely going to do it, but it’s like anything – the cheque is only good once it’s banked,” says de Bruin.

This morning the ACCC has put out a call for feedback on the its framework for guidance on reforms to the competition laws, asking consumers and businesses to indicate the areas and topics they would like the commission to provide guidance on if the effects test were to come into law. Submissions are open until October 3 and can be lodged here.


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