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On 22 September 2014, the Harper Review Panel released its Draft Report of the "root and branch" review of Australia's competition laws and policy.
The report contains a number of key recommendations that may impact your business. These include:
Submissions on the Draft Report are due by 17 November 2014 and the Panel's final report is due to be released in March 2015.
The Panel considers that the primary prohibition in s 46 of the Competition and Consumer Act 2010 (CCA) should be "re-framed" to prohibit a corporation that has a substantial degree of power in a market from engaging in conduct if the proposed conduct has the purpose, or would have or be likely to have the effect, of substantially lessening competition in that or any other market.
The Panel proposes that a defence be introduced so that the primary prohibition would not apply if the conduct in question:
a) would be a rational business decision or strategy by a corporation without a substantial degree of power in the market; and
b) the effect or likely effect of the conduct is to benefit the long-term interests of consumers.
While the ACCC has welcomed the proposal, it is not clear that the reformulated prohibition will make the ACCC's job any easier in respect of prosecuting s 46 cases. The limbs of the potential defence as presently worded appear narrower in respect of (a) and unclear in respect of (b). The advantage of the proposed new test is that it focuses on protecting competition (and not individual competitors) which is more consistent with the overriding policy objectives of the CCA and the other prohibitions.
The Panel recommends a number of changes to simplify the cartel provisions in the CCA. These are likely to be positive for most businesses. Two changes which are of particular note include:
The Panel has recommended repeal of the current prohibitions against price signalling in the CCA, which are currently confined in their operation to the banking industry, to be replaced by a general prohibition on concerted practices which have the purpose or effect of substantially lessening competition.
The Draft Report states that a concerted practice is a regular practice undertaken by two or more firms and that it would include a regular disclosure or exchange of price information between two firms, whether or not it is possible to show that the firms had reached an understanding about the disclosure of exchange. The recommendation is designed to prohibit anti-competitive disclosures of information regardless of the sector of the economy in which they occur.
This is a material and significant amendment, which may have unintended consequences. It will be a real challenge in concentrated, interdependent industries to confidently deploy and implement compliance and risk minimisation strategies.
The Draft Report contains several proposals that seek to shift the balance between protection of intellectual property (IP) rights and competition policy.
The Panel recommends removal the exemption for intellectual property right holders in s 51(3) of the CCA. Currently, s 51(3) provides a limited exception from most competition law prohibitions for certain types of transactions involving IP.
In the Panel's view, IP rights can potentially be used in a manner than harms competition. Accordingly, they consider that it is appropriate that the use of IP rights be subject to the CCA. This is especially so given the influence that Australia's IP rights can have on facilitating (or inhibiting) innovation, competition and trade.
The Draft Report also contains a proposal to remove the remaining restrictions on parallel imports unless it can be shown that:
In the Panel's view, parallel imports provide an alternative source of supply which promotes competition and can provide consumers with products at lower prices.
Finally, the Panel has recommended a separate overarching review of intellectual property arrangements to be undertaken by an independent body such as the Productivity Commission.
If so, you may benefit from significant proposals to simplify and streamline the prohibitions in the CCA. These include:
The Panel has recommended that the CCA be amended to introduce greater flexibility into the notification process for collective bargaining by small business. This includes a recommendation for a single authorisation application for a single business transaction or arrangement and empowering the ACCC to grant block exemptions for certain types of business conduct that are unlikely to raise competition concerns. The panel has also noted that the collective bargaining notification process could better facilitate efficiency-enhancing collective boycott activity.
Other than noting that timely decisions, transparency and consultation are key aspects of the ACCC's informal merger clearance process, the Panel has not recommended any changes to this process since it operates outside any formal legal framework.
However, the Panel has proposed a more streamlined formal exemption process as follows:
Given the widespread use of the informal merger clearance process, it remains to be seen whether a new formal clearance process would garner much use - however, the availability of review by the Tribunal may be attractive feature for some merger arrangements requiring clearance.
The Panel has recommended adoption of the Productivity Commission's recommendation on criteria (a) and (f) and the alternate recommendation on criteria (b).
The Draft Report contains numerous other recommendations in areas of human services, road and marine transport, taxis, retail trading hours, pharmacy ownership and location. If you require more information on what the review will mean for you, please let us know.
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