Harper Review recommends effects test and retail trading deregulation

The Harper Review has rejected the case made by big business lobbies that the adoption of a controversial “effects test” will chill competition in Australia, recommending the government instead adopt the test  to protect small business against the misuse of market power.

A change to Section 46 of Australia’s competition law is one of 56 recommendations made in the final report of the ‘root and branch’ review, released yesterday in Melbourne by Small Business Minister Bruce Billson.

It is the most comprehensive overhaul of competition law since the Hilmer report in 1993, taking 12 months to compile, and hopes to boost economic growth by at least 2.5% of gross domestic product over a decade.

Speaking to SmartCompany, Billson says the recommendations will now go through an eight to 10 week consultation process, with many of the report’s suggestions requiring both state and federal cooperation.

If adopted, the proposed effects test will see companies with substantial market power having to prove to the courts the pro-competitive and anti-competitive impact of their conduct.

Billson says the current purpose-based test for the misuse of market power was “the hunting dog that won’t leave the porch” and said it had previously “fallen short” for small business.

It was expected the report would include a “more definitive defence” for big businesses against such an effects test, but a number of “critical” submissions swayed the panel to remove a defense in favour of a list of factors courts must consider in determining whether there is a substantial lessening of competition.

Billson says he is optimistic the draft legislation would pass through the Senate despite the government’s past difficulties in getting its policies across the line.

“I can’t understand scepticism,” he says. “Perhaps I’m more optimistic than some.”

“I’m optimistic that recommendations of the kind that the Harper Review has proposed would most likely be well supported.”

Retail trading hours

The Harper Review also recommends deregulating retail trading hours, saying the growth of online shopping is undermining the intent of restrictions on retail trading hours, while disadvantaging bricks-and-mortar retailers.

“This provides strong grounds for abandoning remaining limits on trading hours,” says the Harper report.

Pharmacies

Some of the other significant recommendations include a relaxing of the laws around who is able to own a pharmacy.

Currently, only pharmacists have been able to own a pharmacy, but the Harper Review recommends rules should be relaxed to allow supermarkets to operate pharmacies within two years.

The strict location rules as to where pharmacies can operate have also been flagged as unnecessary, with the rise of discount pharmacy groups and online prescriptions cited as an argument for removing the restrictions.

Taxis

The report also supported the doing away with laws that restrict taxi licences, encouraging the rise of ride-sharing businesses like Uber.

“Any regulation of such services should be consumer-focused, flexible enough to accommodate technical solutions to the problem being regulated and not inhibit innovation or protect existing business models,” said the report.

Billson says the Harper Review also helps small business by advocating for flexibility in collective bargaining and faster access to remedies for small business.

*This story was updated at 12pm on 1 April 2015 to include further details of the proposals in the Harper Review.