Chris Bowen warns SMEs of “lawyers’ picnic” if effects test adopted but Bruce Billson says reform should go ahead

SMEs would be faced with a “lawyers picnic” if an effects test was introduced to Australian competition law, according to shadow treasurer Chris Bowen.

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Speaking at an Australian Food and Grocery Council event on Wednesday, Bowen said adopting the change to Section 46 of the Competition Act would pit small and medium size businesses against the big end of town, which can “afford to have the bigger picnic”.

“If an effects test were to be introduced, and you were unable to convince the ACCC to take your case, be prepared to be facing a conga line of silks and consultants, with a potential legal bill that could be multiples of a small firms’ turnover,” Bowen said.

While Bowen acknowledged that there were people in the room that do support introducing an effects test, he said the reform “has the potential to dramatically chill competition”.

“It must be said that the practicalities of an “effects test” are that only those with very deep pockets, or the ACCC, will have the resources to take on cases under this section,” he said.

Bowen’s comments come as Bruce Billson, former small business minister and proponent of an effects test, said publicly the federal government should push ahead with the reform.

Indicating to The Australian he may quit politics at the next election, Billson said he still believes the policy case for an effects test is “absolutely compelling”.

“For it not to change, it would be a triumph of politicking over sound public policy,” he said.

‘We can’t say we are an internationally orientated economy that’s open for business if we have some archaic law that actually allows established incumbents to fortify their position and block new entrants to our economy.”

Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany this morning Bowen’s argument against the effects test is “wrong” and “just a furphy from big unions”.

“There is already an effects test in three other sections of competition policy and in the telecommunications sector,” he says.

However, Strong congratulated Bowen for recognising the need to improve access to justice for small businesses.

In yesterday’s address Bowen said Labor is “happy” to examine and consult on ideas that would make it less costly for small businesses to initiate legal action against larger firms over misuse of market power claims.

“For example, small and medium sized businesses who are seeking to act as private litigants under the Competition and Consumer Act could be able to apply to the court at any early stage seeking relief from costs regardless of the outcome of the case,” Bowen said.

“This would immediately remove an insurmountable barrier for many small businesses who might be looking to take action against larger firms.”

“With appropriate measures to protect against vexatious litigation, it could be a solid way to improve the important operation of our competition laws.”

“This is a really good idea … and congratulations to him,” Strong says.

“This actually proves that [an effects test] is not a lawyers’ picnic because small business can’t afford it.”