Economy

New laws won’t stop big business predators

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New laws to increase the competition watchdog’s powers to crack down on predatory pricing will not produce a quick fix to the problem for small and medium businesses, lawyers have warned.

Significantly, the new amendments announced by Competition Minister Chris Bowen today will do away with the controversial “Birdsville” amendments introduced by Senator Barnaby Joyce last year.

Bowen says Labor will introduce laws into Federal Parliament to:

  • Clarify that predatory pricing victims do not need to prove that big business bullies have been able to recoup losses sustained in the process of predatory pricing.
  • Allow predatory pricing cases to be run in the lower-cost Federal Magistrates Court instead of the Federal Court.
  • Give the Australian Competition and Consumer Commission broader powers to seek information or documents from companies being prosecuted.
  • Clarify what it means for a big business to “take advantage” of its superior market power, a key element in proving predatory pricing.
  • The concept of “market share” has been removed, leaving only the existing, narrower concept of “market power”.

The proposed changes have met with mixed views from business groups and trade practices experts.

Council of Small Business of Australia chief executive Tony Steven says the changes are a positive move and will assist small businesses suffering from predatory pricing.

“These measures do go further than the Howard government was ever going to go,” Steven says. “The courts will able to carry out their duties with more clarity when dealing with prosecutions for predatory pricing.”

But, Steven says, they should be seen as a first step in reform. “We need further changes to encourage small business to compete in markets where big businesses dominate, and we’ll be talking to the Government about that.”

ACCC chairman Graeme Samuel also welcomed the changes, which closely mirror reform recommendations previously made to the Government by the competition watchdog.

“We now have an appropriate suite of powers,” Samuel told The Australian. “We were always concerned about the ability to prosecute cases; we’ve had one success in 45 years, that’s not a very good record.”

Slater & Gordon trade practices lawyer Van Moulis believes allowing small and medium sized businesses to bring actions in the Federal Magistrates Court is a key improvement in the laws.

“It is a good move; there is less technicality and formality in the Federal Magistrates Court and therefore it should be less costly and more accessible,“ Moulis says.

But others are more sceptical about the impact of the laws.

Kathryn Edghill, a trade practices lawyer with Addisons Lawyers, says the proposals will not make it significantly easier for the ACCC to protect small and medium sized businesses from predatory pricing.

“The idea that this presents some sort of quick fix to predatory pricing is really illusory,” Edghill says. “The most difficult and expensive aspects of providing predatory pricing, such as getting experts to establish relevant costs of a larger businesses, have not be removed or changed.”

Edghill says there are some positive aspects to the changes, particularly further powers for the ACCC and the removal of the undefined notion of “market share”.

But it will not be clear if they make any difference to the legal protections available to small and medium sized business until they are tested in court.

“There will need to be some further litigation. These cases aren’t simple or that common, so we could be waiting several years to see a court consider these amendments,” Edghill says.

Frank Zumbo, an trade practices academic with the University of NSW and one of the drafters of the Birdsville amendment, also doubts the changes will substantially improve conditions for small business.

“This will make very little practical difference. The old problems with narrow market power test will remain, and it is a blow to small businesses that the concept of market share is being removed,” Zumbo says.

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