tag:theconversation.com,2011:/es/topics/harper-review-11473/articlesHarper Review – The Conversation2019-05-01T01:36:35Ztag:theconversation.com,2011:article/1153782019-05-01T01:36:35Z2019-05-01T01:36:35ZAre mergers harming consumers? We won’t know if we don’t check<figure><img src="https://images.theconversation.com/files/271709/original/file-20190430-136781-140mewe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia has an unusually high degree of market concentration. Many industry sectors are dominated by a handful of large companies. </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Compared with the grand cause of climate change or the pointed self-interest of income tax, competition policy is a decidedly unsexy election issue. So it’s hardly surprising that no party is running hot on the issue – not even the Labor Party, although it has put <a href="https://www.smh.com.au/business/the-economy/accc-to-review-mergers-under-alp-plan-to-aid-competition-20190224-p50zus.html">some notable reforms</a> on the election slate.</p>
<p>But competition policy matters to all of us.</p>
<p>It’s what stands between being able to pick and choose goods and services with a range of prices and quality on the one hand, and on the other being dictated to by one or a handful of sellers charging as much and offering as little possible.</p>
<p>Keeping markets competitive necessitates a debate about economics, law and regulation. It may be technical but we pay dearly if we don’t have it. </p>
<p>Existing policies to protect competition in Australia are not in bad shape. The Australian Competition and Consumer Commission (ACCC) is regarded as <a href="https://www.accc.gov.au/media-release/accc-global-competition-agency-of-the-year">one of the world’s best</a> competition regulators. But there is always more that can be done. </p>
<p>Most of all, the commission needs more empirical evidence to know if it is doing enough to prevent competitive markets being distorted by a few dominant companies.</p>
<h2>Highly concentrated</h2>
<p>Many Australian markets <a href="https://adamtriggs.files.wordpress.com/2017/01/aere12185.pdf">are concentrated</a> – dominated by a few big players. Think of banks, energy retailers, telecommunications, supermarkets and petrol sellers. </p>
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<img alt="" src="https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=443&fit=crop&dpr=1 600w, https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=443&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=443&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=557&fit=crop&dpr=1 754w, https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=557&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/271349/original/file-20190429-194637-n99w7m.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=557&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Market concentration in the 20 largest Australian industries based on industry revenues, calculated by Andrew Leigh and Adam Triggs using IBISWorld data in 2016.</span>
<span class="attribution"><a class="source" href="https://adamtriggs.files.wordpress.com/2017/01/aere12185.pdf">The Australian Economic Review</a>, <a class="license" href="http://artlibre.org/licence/lal/en">FAL</a></span>
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<p>Each year the ACCC considers hundreds of mergers or acquisitions that add to concentration. </p>
<p>The competition watchdog has the power to begin formal proceedings to block a merger if it is judged to give the merged entity too much market power. In reality, however, the regulator opposes very few acquisitions.</p>
<p>In <a href="https://www.accc.gov.au/system/files/ACCC-%26-AER-Annual-Report-2017-18_0.pdf">2017-18</a>, for example, the ACCC examined 281 mergers. It “pre-assessed” 252 as not requiring a review. Of the 29 reviewed, 17 (61%) were cleared unconditionally. This means just 4% of all examined mergers were opposed. The previous year <a href="https://www.accc.gov.au/publications/accc-aer-annual-report/accc-aer-annual-report-2016-17/accc-aer-annual-report-2016-17/part-3-program-11-accc/strategy-1-maintain-and-promote-competition/analysis-of-performance-assessing-mergers">it was also just 4%</a>.</p>
<p>Whether Australia’s high concentration levels are due to lax merger control standards is open for debate. So too is whether concentration necessarily harms competition. </p>
<p>The Grattan Institute has <a href="https://grattan.edu.au/report/competition-in-the-australian-economy/">pointed the finger at other factors</a>: too much regulation in some sectors, creating barriers to entry (such as zoning laws for grocery retailers), and too little regulation in others (such as access conditions for ports). </p>
<p>It is generally accepted that a higher degree of industrial consolidation may be justified to enable efficiencies of scale in an economy that is relatively small and geographically dispersed. Enhanced efficiency should mean lower prices for consumers. </p>
<p>At least, that’s what the economic theory tells us. But is that what has been happening in practice? </p>
<h2>Merger retrospectives</h2>
<p>In other countries, economists and policy makers have the benefit of empirical studies that measure what effect mergers or acquisitions have had on prices and other aspects of market performance. The studies look at merger deals not blocked by competition authorities. They examine whether acquisitions live up to the claims made by the merging parties at the time of the deal. </p>
<p>These “merger retrospectives” have shown that mergers, in reducing the number of competitors, do indeed raise prices. A <a href="https://mitpress.mit.edu/books/mergers-merger-control-and-remedies">comprehensive review of merger retrospectives </a> in the US found prices rose by 4.3% in nearly 95% of cases where mergers led to six or fewer significant competitors in a market. This finding is not unique to the US. A <a href="https://publications.europa.eu/en/publication-detail/-/publication/7c4f0300-f7cc-11e5-b1f9-01aa75ed71a1/language-en">2016 study in Europe</a> had similar results. </p>
<p>Retrospective analyses are regularly done by agencies overseas, including in Canada and Britain. But not in Australia.</p>
<p>Doing so would tell us if the ACCC’s system for making merger assessments is working. Depending on their scope, merger retrospectives might also provide valuable data for other important policy debates, such as whether concentration levels suppress investment, innovation and wage growth, or <a href="https://www.oecd.org/competition/inequality-a-hidden-cost-of-market-power.htm">increase inequality</a>.</p>
<h2>Labor proposals</h2>
<p>In 2013 the Abbott government initiated a <a href="http://competitionpolicyreview.gov.au/">major independent review</a> of Australia’s competition policy framework and laws. Known as the Harper review, it was completed in 2015. Several significant amendments were made as a result. The most prominent was introducing an “effects test” – to determine if unilateral conduct has the purpose or likely effect of substantially lessening competition.</p>
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Read more:
<a href="https://theconversation.com/explainer-what-is-the-competition-effects-test-39424">Explainer: what is the competition 'effects test'?</a>
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<p>Now federal Labor is supporting further reforms, including <a href="http://www.andrewleigh.com/labor_will_make_merger_analysis_smarter_media_release">retrospective analysis</a> of mergers. </p>
<p>These reviews may be complex and expensive, but Labor is also proposing an increase in the ACCC budget. </p>
<p>It is also proposing higher fines for companies breaking competition laws. This is based on Australia being an <a href="http://www.oecd.org/daf/competition/pecuniary-penalties-competition-law-infringements-australia-2018.htm">outlier on the international stage</a> in terms of the <a href="https://pursuit.unimelb.edu.au/articles/why-are-corporate-penalties-for-cartels-so-low-in-australia">relatively low fines</a> it imposes to punish and deter breaches of competition laws.</p>
<p>The proposal is to increase the maximum penalty for a breach of consumer and competition laws from A$10 million to A$50 million, or 30% of the annual sales of the product or service relating to the breach, multiplied by the duration of the infringement. This emulates the European approach to calculating fines. It would mean the starting point for the fine imposed in the notorious Visy price-fixing case would have been more than <a href="https://theconversation.com/cartels-caught-ripping-off-australian-consumers-should-be-hit-with-bigger-fines-78750">A$200 million</a>, instead of A$36 million. </p>
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Read more:
<a href="https://theconversation.com/cartels-caught-ripping-off-consumers-should-be-hit-with-bigger-fines-78750">Cartels caught ripping off consumers should be hit with bigger fines</a>
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<p>The ACCC supports <a href="https://www.accc.gov.au/speech/address-to-the-law-council-of-australia-annual-general-meeting">increasing corporate fines</a>, so this proposal should be taken seriously.</p>
<p>But reforms should not just be concerned with anti-competitive conduct after it happens. That won’t undo the damage to businesses, workers and consumers. </p>
<p>What matters as much, if not more, is having a legal framework to ensure markets do not become overly concentrated, affording undue power to just a handful of firms, in the first place.</p><img src="https://counter.theconversation.com/content/115378/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Caron Beaton-Wells has received funding from the Australian Research Council.</span></em></p>Competition policy in Australia is undermined by not knowing if it is right to let the vast majority of corporate mergers go ahead.Caron Beaton-Wells, Professor, Melbourne Law School, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/615172016-07-11T19:39:03Z2016-07-11T19:39:03ZWhat the government should do now: economic growth<p><em>With a federal election outcome, it’s time to take stock of how Australia is doing, where it’s going, and what governments can do about it. In partnership with the Grattan Institute, we explore the pressing policy challenges facing Australia in terms of tax and budgets, cities, transport, energy, school education, higher education and health.</em></p>
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<p>The Coalition has scraped into a second term. How credible is its economic growth program, and what else should it do to strengthen growth?</p>
<p>The good news is that the transition from the mining boom is proceeding about as well as <a href="http://grattan.edu.au/report/the-mining-boom-impacts-and-prospects/">should have been expected</a>. It is true that national income per person is lower than five years ago (see figure below) and that wages are also stagnating. But these changes are mostly due to falling resource prices. GDP growth, while subdued in recent years, has been fast enough to <a href="http://abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6202.0Main+Features1May%202016?OpenDocument">keep unemployment in check</a> (though average hours per worker have declined), and it even <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Mar%202016?OpenDocument">shows signs of picking up</a>. And while non-mining investment has remained flat despite record low interest rates, it’s not unrealistic to hope that Australia will, for the first time in our history, complete a mining cycle without ending in recession. </p>
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<img alt="" src="https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=415&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=415&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=415&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=522&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=522&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=522&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>But deeper economic challenges persist. Global growth remains weak, with China’s economy likely to slow, and the European Union more fragile since the UK’s Brexit vote. Slow growth and rising inequality helped drive the populist anger and political instability we now see in the EU and US.</p>
<h2>The first term leaves a mixed legacy</h2>
<p>The Coalition’s first term economic policy achievements were a mixed bag. The <a href="https://theconversation.com/turnbull-seeks-ideas-boom-with-innovation-agenda-experts-react-51892">2015 innovation package</a> and the decision to <a href="https://theconversation.com/harper-response-is-good-economics-and-smart-politics-51191">implement most of the Harper Review competition policy recommendations</a> were standout initiatives. <a href="http://dfat.gov.au/about-us/publications/Documents/economic-modelling-of-australias-north-asia-ftas.pdf">Free trade agreements</a> with China, Japan and South Korea will offer <a href="http://dfat.gov.au/about-us/publications/Documents/economic-modelling-of-australias-north-asia-ftas.pdf">real, if modest, benefits</a>. Others, such as signing the Trans-Pacific Partnership (TPP) and <a href="https://theconversation.com/greg-hunt-approves-adanis-carmichael-coal-mine-again-experts-respond-49227">accelerated environmental project approvals</a>, carry risks and costs that could outweigh their benefits. </p>
<p>And some initiatives, such as <a href="https://theconversation.com/direct-action-not-giving-us-bang-for-our-buck-on-climate-change-59308">scrapping a broad-based carbon price</a>, were outright mistakes. Critically, in its first term the Coalition <a href="https://theconversation.com/three-critical-tests-for-budget-2016-how-does-it-fare-58144">failed to get the budget under control</a>. </p>
<h2>Growth plans leave many good ideas off the table</h2>
<p>The coalition campaigned on jobs and growth, but in reality its growth program is patchy. The signature policy – phased cuts in the company tax rate – would ultimately <a href="http://www.treasury.gov.au/%7E/media/Treasury/Publications%20and%20Media/Publications/2016/TWP2/Downloads/PDF/Treasury-Working-Paper-2016-02.ashx">increase national income by about 0.6%</a>. But business tax cuts could drag on national income for up to a decade, as foreign investors pay less tax from the beginning, while benefits from greater investment take time. </p>
<p>Other parts of the coalition plan are far from being fleshed out. The government will seek to implement its already announced innovation and competition policy agendas. It plans to ratify the TPP, though the TPP itself may now be doomed to fail, as neither of the likely US presidential candidates supports it. </p>
<p>The Turnbull government also plans to pursue further trade agreements with the European Union, India, and Indonesia. On the downside, its Smart Cities Plan, which aims to finance improvements in urban transport and housing, lacks detail. And its plan to slowly reduce the budget deficit relies mostly on revenue increases that may not materialise. </p>
<p>Overall, the plan for jobs and growth is far from complete. The government should consider five further options to increase economic growth. </p>
<h2>Taxes and work</h2>
<p>First, the government should shift the tax base towards taxes that do less to discourage investment and work. For example, cutting the capital gains discount to 25%, and limiting negative gearing, would create space to reduce other more distorting taxes. So would <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">broadening the GST base and/or increasing the GST rate</a> (while cutting income tax and adjusting welfare payments), though benefits may be modest. </p>
<p>General property taxes should replace stamp duties, which deter people from moving to a home that suits their current needs. A 0.5% levy on unimproved land values could raise enough to replace stamp duties nationwide, would provide a more stable tax base for states, spread the tax burden more fairly, and <a href="https://grattan.edu.au/report/property-taxes/">add up to $9 billion a year to GDP</a>. While these are state matters, the Commonwealth could consider providing incentive payments to states to make the switch, since its revenues will ultimately rise as the reforms increase incomes.</p>
<p>Second, government should help people stay in work, or get back to work. Female labour force participation in Australia is below that of many high-income economies. Low rates of take-home pay deter some women from <a href="http://grattan.edu.au/wp-content/uploads/2015/12/melbourne-economic-forum-size-of-gvt-CORRECTED.pptx.pdf">joining the labour force or working full-time</a>. The system of family payments and childcare support needs an overhaul to encourage greater female labour force participation.</p>
<p>Older Australians, too, are less likely to work than in many comparable economies. The age at which people can access superannuation or the age pension <a href="https://grattan.edu.au/report/game-changers-economic-reform-priorities-for-australia/">affects when some workers decide to retire</a>. Australia is already increasing the pension eligibility age from 65 to 67, and phasing up from 55 to 60 the age at which people can begin to draw down their superannuation. Government should further increase pension and superannuation access ages.</p>
<h2>Flexibility and innovation</h2>
<p>Third, government should remove remaining impediments to flexibility in the economy. <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">Reforms over the past 30 years</a> (including a floating exchange rate, low barriers to trade and capital flows, and the shift to enterprise bargaining) have helped the economy adjust through the mining boom. But many policies, including a <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">wide array of regulation</a>, <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">occupational licensing</a>, and industry support such as <a href="http://www.pc.gov.au/research/completed/antidumping-developments">anti-dumping tariffs that delay the exit of less efficient firms</a>, still limit flexibility. </p>
<p>Fourth, government should remove barriers to innovation, while only funding programs that are supported by evidence that they actually help innovators at a reasonable cost. The National Innovation and Science Agenda will cut barriers to new business creation and improve research-business collaboration. </p>
<p>The vast majority of innovations used in Australia are produced elsewhere. Government should remove barriers to the local spread of global innovations such as cloud computing and <a href="https://grattan.edu.au/report/peer-to-peer/">peer-to-peer business models</a> such as Uber and Airbnb. States are responsible for barriers such as taxi regulation, while labour regulation and tax are largely Commonwealth responsibilities. Intellectual property rules <a href="http://www.pc.gov.au/inquiries/current/intellectual-property#report">can also impede the spread of productive ideas</a>. </p>
<h2>Sector-specific reforms</h2>
<p>Fifth, if much of the low-hanging fruit of economy-wide reform has been picked, many opportunities in individual sectors remain. The superannuation industry charges fees of more than $16 billion a year, or about 1% of GDP. Government should <a href="http://grattan.edu.au/wp-content/uploads/2015/04/821-super-savings2.pdf">introduce tougher competition, close excess accounts, and push subscale funds to close</a>. </p>
<p>More generally, <a href="http://www.ppge.ufrgs.br/giacomo/arquivos/regulacao2/stigler-1971.pdf">regulated industries can “capture” the government agencies that regulate them</a>, so it can be valuable to bolster institutions that provide countervailing pressure. The Harper <a href="http://competitionpolicyreview.gov.au/files/2015/03/Competition-policy-review-report_online.pdf">Competition Policy Review</a> recommended creating a new national competition body, the Australian Council for Competition Policy, to advocate policy reform to increase competition. </p>
<p>Finally, investment in high quality infrastructure (along with rules such as user charging to encourage efficient use) promotes growth. Yet governments have already spent large amounts of money, <a href="http://grattan.edu.au/wp-content/uploads/2015/07/824-Fiscal-challenges-for-Australia2.pdf">not always wisely</a>, on new public infrastructure over the past decade. </p>
<h2>Political realities</h2>
<p>To enact any of these policies, the coalition will likely first seek support in the Senate from Labor or the Greens, rather than from the 10 or so independent and small party senators. Some policies are very unlikely to pass the Senate: for example, the proposed broad corporate tax cut is probably dead (though an alternative like an investment allowance might get up). </p>
<p>But some policies have a fighting chance, such as the City Deals, <a href="https://theconversation.com/will-budget-2016-deliver-a-new-deal-for-australian-cities-58581">borrowed from the UK</a> and new initiatives to cut superannuation costs. If many other policies (including family payments reform and the flexibility initiatives) are to have a chance of making it into law, the Coalition will first have to make a case for them and win public support. </p>
<p>The Coalition campaigned on its ability to provide jobs and growth. But its campaign platform for jobs and growth was far too narrow. To turn talk into action, it will need to win support for a much more expansive and ambitious agenda.</p><img src="https://counter.theconversation.com/content/61517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jim Minifie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government should consider five options to increase economic growth.Jim Minifie, Productivity Growth Program Director, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563642016-03-17T04:12:11Z2016-03-17T04:12:11ZChanges to competition laws may hurt consumers<figure><img src="https://images.theconversation.com/files/115401/original/image-20160317-30203-1ywqkd5.jpg?ixlib=rb-1.1.0&rect=3%2C6%2C2079%2C1593&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Answering what is considered a substantial lessening of competition is not easy.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>The government has gone the “<a href="http://sjm.ministers.treasury.gov.au/media-release/030-2016/?utm_source=wysija&utm_medium=email&utm_campaign=Media+Release+-+Fixing+competition+policy+to+drive+economic+growth+and+jobs">full Harper</a>” on the misuse of market power laws. This means that the law will no longer be about “misuse” of market power. It also means consumers may be the losers.</p>
<p>If the government accepts the <a href="http://competitionpolicyreview.gov.au/final-report/">exact wording</a> from the Review, the new law will state that:</p>
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<p>“A corporation that has a substantial degree of power in a market shall not engage in conduct if the conduct has the purpose, or would have or be likely to have the effect, of substantially lessening competition in that or any other market.”</p>
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<p>There are three key changes compared to the current law.</p>
<p>First, the new law will replace the existing three (complex) “competition tests” with one simple test. Does the conduct substantially lessen competition? This is a useful change and in line with the other parts of the competition laws.</p>
<p>Second, the current law requires that the business’ “purpose” is proved. The new law only requires that a business act with either the purpose or effect or likely effect of substantially lessening competition. This is a clarifying change. The current law already allows the court to infer “purpose” from conduct. The change does away with the need for this inference. </p>
<p>Third, and most importantly, the new law removes any connection between conduct and market power. The current law only makes illegal conduct that is a misuse of market power. The firm must “take advantage” of its market power when engaging in illegal behaviour. It must behave in a way that is inconsistent with the behaviour of a competitive business.</p>
<p>The new law removes this connection. So any behaviour by a big business that substantially lessens competition may be illegal. This means that the entire test of what is legal or illegal for a big business will now rest on a simple question: What is a substantial lessening of competition?</p>
<p>That is not an easy question!</p>
<p>To see this, take the most recent misuse of market power case <a href="https://www.accc.gov.au/media-release/visa-ordered-to-pay-18-million-penalty-for-anti-competitive-conduct-following-accc-action">settled between Visa and the Australian Competition and Consumer Commission (ACCC)</a> last year. Visa was fined A$18 million for limiting the ability of “dynamic currency conversion” (DCC) competitors to compete when overseas consumers chose to use a Visa card at a store in Australia. </p>
<p>(If you have travelled overseas, used a credit card and been asked if you want to pay in Australian dollars, this is an example of DCC.)</p>
<p>Firstly, I should state that I helped Visa on this matter. Why? Because I do not think there was any substantial lessening of competition. </p>
<p>Why not? Visa’s actions certainly harmed those businesses who wanted to provide DCC to consumers. But the <a href="http://www.smh.com.au/business/banking-and-finance/dynamic-currency-conversion--robbery-by-choice-20150329-1ma77q.html">Sydney Morning Herald</a> labelled DCC a “scam” last year. So too did <a href="http://www.thetimes.co.uk/tto/money/consumeraffairs/article4534411.ece">the Times</a>. <a href="http://money.usnews.com/money/blogs/my-money/2015/06/15/the-strong-dollar-is-causing-travelers-to-make-a-big-credit-card-mistake">US News and World Report</a> calls DCC a “trap”. As part of its 100 travel tips, <a href="https://au.news.yahoo.com/thewest/travel/a/30937298/100-tips-for-a-perfect-trip-away/">The West Australian</a> advises against using DCC. Travel website <a href="https://www.ricksteves.com/travel-tips/money/card-fees#dcc">Rick Steve’s Europe</a> states that </p>
<blockquote>
<p>“Dynamic currency conversion may seem like a nice perk, but you’ll actually end up paying more. The dollar price is usually based on a lousy exchange rate set by the merchant …”.</p>
</blockquote>
<p>And if you are worried that I have a bias, please just do your own search or look up the <a href="https://en.wikipedia.org/wiki/Dynamic_currency_conversion">Wikipedia entry on DCC</a>. </p>
<p>There is a strong argument that Visa’s conduct, while harming DCC suppliers (such as banks) was helping consumers. This is not because Visa is “nice”. It is because having a “scam” occur when you use a Visa card is bad for Visa’s reputation and long term profits. </p>
<p>If Visa’s actions helped its profits but also protected customers, even though harming some individual businesses who arguably wanted to rip off those customers, is this a substantial lessening of competition? </p>
<p>The ACCC clearly thought so. But our misuse of market power laws should be about protecting consumers, not protecting the profits of particular private businesses. Our courts have recognised this in the past.</p>
<p>Unfortunately the term “substantial lessening of competition” does not make this clear. And if future courts follow the same path as the ACCC did in the Visa case, then the amendments to our competition laws will hurt consumers.</p>
<p>Hopefully our courts will get it right. Hopefully our judges will understand that the aim of competition is not to protect businesses that are inefficient or who wish to rip off consumers. Hopefully in a few years we will have a series of judgements under the new law that clarify that a business with market power substantially lessens competition when consumers, rather than individual competitors, are harmed.</p>
<p>But good law is not made on “hope”. It is clear and precise. And that is why the government has made a mistake in accepting the changes to our misuse of market power laws.</p><img src="https://counter.theconversation.com/content/56364/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>As noted in the article, Stephen King provided advice to Visa in relation to its misuse of market power case. </span></em></p>A recent legal case illustrates why the government has made a mistake in changing its market misuse law.Stephen King, Professor, Department of Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/562772016-03-16T19:19:06Z2016-03-16T19:19:06ZThe government goes the full Harper on competition – now for sanctions<p>The government’s announcement that <a href="http://sjm.ministers.treasury.gov.au/media-release/030-2016/?utm_source=wysija&utm_medium=email&utm_campaign=Media+Release+-+Fixing+competition+policy+to+drive+economic+growth+and+jobs">it will support in full the recommendations of the Harper Review </a> on misuse of market power, is a victory for good competition law. </p>
<p>Ultimately it is a win for competition and consumers (as distinct from small businesses, contrary to some of the spin accompanying the announcement); and for principle over politics, although some may suspect a behind-the-scenes deal done with stakeholders who actively opposed the reform, particularly representatives of the big business community. </p>
<p>In what came as a surprise to some, after protracted debate and political manoeuvring, the government announced it would repeal the current section 46 of the Competition and Consumer Act. In its place there will be a prohibition on businesses with substantial market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition.</p>
<p>The government cannot be criticised for not consulting extensively or <a href="https://theconversation.com/weve-already-had-consultation-on-the-effects-test-more-is-just-a-political-smoke-screen-51246">for failing to consider alternatives</a> (so-called “part-Harper” approaches).</p>
<p>This has not stopped reform opponents from responding to the announcement by warning of chilling effects, including <a href="https://theconversation.com/big-win-for-small-business-in-government-embrace-of-competition-effects-test-56359">dampening of innovation and investment</a>. </p>
<p>However, this is a cry routinely heard when competition law reforms likely to affect big business are advocated. Such claims may generate noise but evidence supporting them is thin on the ground. </p>
<p>Those with a more pragmatic (or perhaps opportunistic) mind-set will be starting work on what the reform means for advising on and enforcing the law. However it will be some time before the announcement translates into legislation. An exposure draft bill will be released and consulted on, and then there is (again) a political process, not least involving a difficult Senate and a possible election, to be navigated. </p>
<h2>Time to address sanctions and compensation</h2>
<p>During this pause then, the issue of penalties and remedies should be considered. Getting the law right is essential. But so is ensuring that law-breakers are deterred and punished, and that victims are compensated. Our system is wanting in these respects.</p>
<p>Financial penalties fall way below the statutory maximum – the greater of $10 million, three times the gain from the breach, or 10% of 12 months of corporate turnover, and are woefully out of step with international benchmarks. </p>
<p>Our highest penalty for misuse of market power to date is $14 million (against Cabcharge). The highest imposed by the European Commission is €1.06 billion (against Intel). Even accounting for the disparity in market size, the comparison is stark.</p>
<p>Part of the reason for this is that our judges are reticent to penalise close to the maximum – a worse case is always imaginable. Part of the reason is that the Australian Competition and Consumer Commission settles a large proportion of these cases, following an arduous negotiation in which there is often considerable asymmetry in resources and hence bargaining power between the enforcement agency and its generally more richly endowed “opponent”. </p>
<p>In this negotiating environment, compromises are inevitably struck – not only on the extent of liability admitted, but also the size of penalties recommended for judicial endorsement. What is more, the question of compensation rarely rates a mention.</p>
<h2>What should be done?</h2>
<p>A useful start would be the approach taken to calculating penalties - a legislated base fine that is an eye-opening percentage (say, up to 30%) of the revenue derived from the sales affected by the anti-competitive conduct, would be a useful start. </p>
<p>The base fine could then be adjusted to accommodate either aggravating (recividism) or mitigating (cooperation) factors. The European Commission applies this method and imposes fines in the hundreds of millions.</p>
<p>While on the question of penalties, urgent attention also needs to be given to the maximum for unconscionable B2B conduct – a figure of $1.1million, which is really no more than a slap on the corporate wrist. </p>
<p>We know from the ACCC’s recent action against Coles that small businesses are damaged not just by anti-competitive behaviour, but also by commercial schemes and tactics that offend any basic measure of business conscience. </p>
<p>The Food and Grocery Code of Conduct introduced last year is intended to address much of this behaviour, at least in the grocery sector. The ACCC has signalled that it will closely monitor compliance and will not hesitate to take action against breaches of the code. But such breaches do not attract penalties. Yet another opportunity for reform!</p>
<h2>ACCC resources</h2>
<p>The enforcement budget of the ACCC could also do with an uplift. The ALP’s recently released small business policy proposed measures designed to facilitate more private litigation by the victims of anti-competitive behaviour. </p>
<p>The policy proposes allowing the Federal Court to exempt small businesses from adverse costs orders, and providing resources for the Small Business and Family Enterprise Ombudsman to advise on the merits of litigation.</p>
<p>Labor is right - the financial risk of an adverse costs order is a major disincentive for small businesses. However, removing this risk and funding the Small Business Ombudsman to advise on legal proceedings are unlikely to help overcome fears of commercial retribution (including the spectre of refusal to stock or supply). </p>
<p>The idea of the Ombudsman advising on success prospects in any such venture is similarly questionable. Even the best legal minds, commanding premium-end fees, frequently diverge on the tricky technical issues that beset this area of the law.</p>
<p>What is needed is a potent sanctions regime and a well-funded enforcement agency on stand-by to apply it. That will do more to deter powerful companies from misusing their market muscle in the first place. Prevention is always better than cure.</p>
<p>Greater funding for the ACCC could be sourced through increased revenues from higher penalties. This would shore up the watchdog’s negotiating position, not just on penalties but also on compensation, and ultimately its capacity to bring more cases against big businesses. </p>
<p>ACCC chairman Rod Sims has shown he has the appetite for this. Soon he will have a coherent law. Now all he needs is the arsenal to enforce it.</p><img src="https://counter.theconversation.com/content/56277/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Caron Beaton-Wells receives funding from the Australian Research Council.</span></em></p>The government will adopt an “effects” test to combat anti-competitive behaviour. It should ensure meaningful penalties are attached.Caron Beaton-Wells, Professor, Melbourne Law School, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/512492015-11-25T03:40:30Z2015-11-25T03:40:30ZParallel importation and Australian book publishing: here we go again<figure><img src="https://images.theconversation.com/files/103128/original/image-20151125-18257-1wnk8aa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Publishers need to stop indulging in apocalyptic fantasies of doom and destruction.</span> <span class="attribution"><span class="source">Kevin O'Mara</span></span></figcaption></figure><p>You may have seen news, or read commentary on Twitter and Facebook, about the likely repeal of “parallel importation restrictions” and what that means for publishers, writers and readers in Australia. My own view is that we are in for a fight and that the repeal is far from guaranteed – more’s the pity. </p>
<p>For those who don’t know, parallel importation restrictions (PIRs) are part of our <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/ca1968133/">Copyright Act</a> and prohibit importing by booksellers for resale where an Australian publisher who has acquired exclusive rights and publishes the title within 30 days of original overseas publication. The bookseller can import an overseas edition from then on, but only if the book is unavailable from the local publisher for longer than 90 days.</p>
<p>The <a href="http://competitionpolicyreview.gov.au/final-report/">Final Report</a> of the <a href="http://competitionpolicyreview.gov.au/">Competition Policy Review</a> led by Professor Ian Harper was released in April this year. Its draft report last year had recommended the abolition of all the remaining PIRs, including those in the Copyright Act applying to books. </p>
<p>The government <a href="http://www.smh.com.au/federal-politics/political-news/turnbull-government-responds-to-harper-review-into-competition-laws-accepts-majority-of-recommendations-20151124-gl6fh9.html">yesterday announced</a> it had accepted that recommendation, subject to a review by the Productivity Commission (PC) into Australia’s intellectual property regime generally, and particularly any recommendations it may have regarding transitional arrangements.</p>
<p>In a lengthy discussion about parallel importation generally, and what previous reviews have recommended over the years, and after assessing all the submissions on the issue from publishers and others, Harper’s conclusion was this:</p>
<blockquote>
<p>On the basis that the PC [Productivity Commission] has already reviewed parallel import restrictions on books […] and concluded that removing such restrictions would be in the public interest, the Australian Government should, within six months of accepting the recommendation, announce that [..] parallel import restrictions on books will be repealed.</p>
</blockquote>
<h2>An old story</h2>
<p>Harper’s reference to the hated PC and particularly its analysis of book prices in Australia compared to the US and the UK once again inflamed the local debate, but it’s a debate that’s by now tiresome in the extreme. The PC looked at industry practices in 2008/9, a long time ago in this internet age.</p>
<p>Harper seems unaware that things have changed rather dramatically in pricing and importation practices since then. In response to a surge in online ordering by consumers from Amazon and The Book Depository given the strong Australian dollar, publishers finally reacted and the high markups on imported titles have been virtually eliminated. (I wrote in detail about this on The Conversation <a href="https://theconversation.com/cover-story-why-are-books-so-expensive-in-australia-27928">last year</a>.) </p>
<p>The real question today is: should we be at all bothered about this issue any more? The Australian Booksellers Association <a href="http://www.afr.com/business/retail/parallel-imports-miss-point-say-book-retailers-20140924-jg1ku">thinks not</a>. It’s completely moved on. It considers other competition issues, such as GST on low value imports and high Australian postal rates, far more significant.</p>
<p>Even the <a href="http://competitionpolicyreview.gov.au/files/2014/12/APA.pdf">Australian Publishers Association submission</a> (APA) considers the PIRs today “low impact”. Their removal would provide “no benefits to consumers”. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=350&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=350&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=350&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=439&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=439&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103123/original/image-20151125-18261-11fi18f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=439&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Nathan O'Nions</span></span>
</figcaption>
</figure>
<p>My view is we definitely should be bothered. The PIRs should finally be abolished, buried and cremated so they don’t rise like zombies in a quite different future. Many individual publishers operating in the Australian market are adamant they play a vital role and need to be retained.</p>
<p>Their basic argument is this: the PIRs construct Australia as a separate rights territory, and this reality is absolutely critical in enabling the purchase of Australian rights to overseas titles and the sale of rights to original locally published titles into export markets. </p>
<p>The PIRs grant exclusivity both ways, and therefore rights trading can be done with full confidence. </p>
<p>The problem with this argument has always been its profound conceptual confusion. The PIRs don’t make Australia a rights territory at all (referred to as “territorial copyright”). All they do is disallow importation for commercial purposes by booksellers. </p>
<h2>Buying around</h2>
<p>The territorial rights are granted by contract with an overseas agent or publisher, and it makes sense to buy separate Australian rights because our population size is big enough to support local printings; our borderless, distant continent inhibits “buying around” by booksellers; and our mature book trade infrastructure (distributors, retailers, freight systems, publicity channels, etc.) facilitates immediate availability and sales. </p>
<p>Protection and exclusivity can be guaranteed commercially, in other words. An arcane importation provision shoved into our Copyright Act 100 years ago under pressure from panicky British publishers is not at all necessary, and for decades now, in its anti-consumer bias, has done way more harm than good. </p>
<p>Publishers should have been forced to gain protection by operational excellence, not by a trade protectionist law guaranteeing over-pricing and under-servicing.</p>
<p>The PIRs have always protected the weak and uncompetitive publishers, and hence disadvantaged those who wanted to play the game fairly and professionally and with a sure customer focus.</p>
<p>But surely, publishers argue, without the PIRs booksellers will be free to import cheaper overseas editions, or even remainders, thus severely undercutting local rights holders. How can that not do enormous damage to local publishing and authors and eventually readers? </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103122/original/image-20151125-18261-rm88tv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Pimthida</span></span>
</figcaption>
</figure>
<p>Publishers can quite easily make buying around an unprofitable thing for a bookseller to indulge in. They need to watch their pricing far more actively than they’ve been in the habit of doing. Maintaining a high Australian RRP when a standard US edition is significantly cheaper is no longer viable. </p>
<p>Individual consumers are already able to buy direct via Amazon, and retailers should also be able to exploit opportunities to compete if the local supplier remains unresponsive to overseas prices and exchange rate fluctuations. Retailers have to do everything they can to attract that consumer into their stores. </p>
<p>But they also have to pay freight, absorb currency losses and can’t return overstocks, so importation is never going to be the usual method of supply unless the local offer is simply not competitive.</p>
<p>Under the current regime the “policing” of local retailers, chastising them and threatening them with possible litigation is no way to build and maintain their loyalty. Australian booksellers universally want to support local publishers and the thriving literary and cultural scene on which their livelihood depends.</p>
<p>Unresponsive pricing and stocking, and miserable trading terms, are the culprits, not the retailers who are simply trying to offer a fair deal to their customers.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=903&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=903&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=903&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1135&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1135&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103130/original/image-20151125-18255-1eo7fdj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1135&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Peter Miller</span></span>
</figcaption>
</figure>
<p>The natural protection available to responsive publishers will more than guarantee that their local edition will dominate the market. There will inevitably be leakage at times, but it will be minimal in impact. </p>
<p>Publishers need to stop indulging in apocalyptic fantasies of doom and destruction. They are the common argot of industry associations across the board who feel threatened by increased competition, and they do the industry no good at all in terms of public image. </p>
<p>Expressions such as “a radical instrument of cultural engineering” have no empirical basis whatsoever and are simply absurd.</p>
<p>They are also illogical. The APA, for example, proclaims that there will be minimal advantage to consumers from abolishing the PIRs, yet such reform will cause Australian publishing to suffer immense damage. Both can’t be true. </p>
<p>As for the claim that foreign publishers will likely “take over” the Australian territory absent the PIRs (because, you know, no Australian Territorial Copyright!) by demanding Australia be deemed a non-exclusive territory in rights contracts so the foreign edition can compete, I doubt there’s a more insulting interpretation of how a PIR-absent market would work. </p>
<p>Rather than cower toward ignorant UK or US publishers and their insistence on non-exclusivity, Australian publishers will need to muscle up and clearly explain the facts of the Australian market to their colleagues.</p>
<p>In truth, it would surprise me if we see the abolition of these outmoded, unwarranted and completely unnecessary PIRs any time in the near or even distant future, despite Scott Morrison’s embracing of that idea yesterday.</p>
<p>The political battle is still to come and remember that the author community, egged on by their publishers, will vigorously engage as they have on every previous occasion. Authors are the most articulate and powerful lobby group in the country – beloved public figures with ready access to every media platform.</p>
<p>It’s once again going to be ugly, and that’s a real shame.</p>
<p><br>
<em>An earlier version of this article appeared on Peter Donoughue’s blog <a href="http://peterdonoughue.blogspot.com.au/2015/04/australian-publishers-reactions-to.html">Pub Date Critical</a></em>.</p><img src="https://counter.theconversation.com/content/51249/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Donoughue does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Australian government yesterday announced it intends to repeal parallel importation restrictions on books, which has again caused concern in the publishing industry. But, really, what’s the problem?Peter Donoughue, Sessional lecturer in the Master of Communication , The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/511942015-11-25T00:11:54Z2015-11-25T00:11:54ZCheaper books are on the way, but IP policy still favours big business<figure><img src="https://images.theconversation.com/files/103089/original/image-20151124-18230-nncuaw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's never made sense that Australians pay more for books that those in the US.</span> <span class="attribution"><span class="source">Image sourced from Shutterstock.com</span></span></figcaption></figure><p>Cheaper content, but not just yet. That’s the message in the federal government’s <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/CPR-response">response</a> to the parallel import recommendations by the Harper Review on competition policy.</p>
<p>Australians have long sought quick and cheap access to intellectual property, particularly copyright works such as books and recordings, by importing that content from legitimate sources located overseas. Copyright law has a territorial basis, potentially restricting cross-border movement of commercial quantities of books, videos, sound recordings, computer software, maps and other works. Licensing regimes give copyright owners exclusive rights in a particular territory such as Australia. </p>
<p>One result, highlighted by the Productivity Commission, <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_committees?url=ic/itpricing/index.htm">Parliament</a> and scholars such as <a href="https://theconversation.com/clash-of-the-titans-apple-adobe-and-microsoft-under-fire-at-it-pricing-inquiry-12878">Matthew Rimmer</a>, is that copyright owners in the northern hemisphere have been able to charge Australian consumers a premium on products for sale in their own jurisdictions. Think of it as a form of copyright colonialism – the Australian student, mum, dad or academic pays 50% more than their counterparts in the USA. The premium isn’t justified by the cost of shipping the paper and plastic from Los Angeles and London, or from distribution centres in Singapore and Hong Kong.</p>
<p><a href="http://www.ipaustralia.gov.au/understanding-intellectual-property/ip-for-business/doing-business-overseas/ip-and-importing/">Australian law</a> currently allows consumers to import “non-commercial” (i.e. personal) copies of books and other content from overseas. The law however restricts importation by retailers. That typically benefits copyright owners and their licensees rather than consumers. That restriction is anti-competitive. It has accordingly been criticised by the <a href="http://www.pc.gov.au">Productivity Commission</a> over the past two decades. It is axiomatic that timely and cheap access to content is a social good, irrespective of whether it’s a Justin Bieber clip or the latest tract from Giorgio Agamben. </p>
<p>In conducting a “root & branch” review of competition policy the Harper Committee <a href="https://theconversation.com/harper-makes-case-for-competition-overhaul-experts-react-39582">recommended</a> removal of the parallel import restrictions. By implication, retailers could source legitimate stock of books and other material overseas (i.e. not from pirates) and sell the products in Australia. The expectation is that supply would often be <a href="https://theconversation.com/cover-story-why-are-books-so-expensive-in-australia-27928">quicker and cheaper</a> than current arrangements. Licensees would have an incentive to get their version of the product into the shops rather than delaying or engaging in egregious rent-seeking.</p>
<p>The Harper recommendations have been <a href="http://www.theguardian.com/books/australia-books-blog/2015/apr/07/removing-import-restrictions-would-impact-australian-authors-say-publishers">criticised</a> by some publishers and authors, typically because changes will affect the profitability of local publishers (either overseas owned or relying on licensed sales of overseas material to fund local creators). </p>
<h2>The bigger picture</h2>
<p>The recommendations sit alongside ongoing structural change to Australian markets for content, with for example accessing software online and uptake of video services such as <a href="https://theconversation.com/netflix-arrival-will-be-a-tipping-point-for-tv-in-australia-38386">Netflix</a> that operate on a global basis.</p>
<p>In responding to Harper the government has indicated it will remove the parallel import restrictions on books … but not just yet. </p>
<p>Removal will be “progressed” once the Productivity Commission’s <a href="https://theconversation.com/hockeys-ip-inquiry-another-opportunity-likely-to-be-missed-46266">inquiry</a> into intellectual property is completed and there has been “consultation with the sector on transitional arrangements”. The Commission’s report is due in mid 2016, with action presumably taking place after a general election and potentially accompanied by industry support funding to local publishers. </p>
<p>Overseas car makers and Australian suppliers, pending the imminent demise of Australian production, have been comforted by retention of restrictions on parallel imports of second-hand cars.</p>
<p>The response needs to be read in context, with the government rejecting Harper’s recommendation for a “separate independent review” of “processes for establishing negotiating mandates” to incorporate intellectual property provisions in international trade agreements. </p>
<p>In other words, the government is relying on unsubstantiated claims that there are “robust arrangements in place to ensure appropriate levels of transparency” in agreements such as the <a href="https://theconversation.com/five-things-you-need-to-know-about-the-trans-pacific-partnership-48653">TransPacific Partnership Agreement</a> that favour overseas “<a href="http://www.abc.net.au/news/2015-10-06/rimmer-tpp-favours-old-ip-industries/6830884">old industries</a>”. </p>
<p>The claims are deeply problematic. ALP and Coalition ministers have strongly resisted <a href="http://itsourfuture.org.nz/nz-governments-tppa-secrecy-put-to-the-test/">disclosure</a> of information about those agreements. The Productivity Commission has condemned the “black box” approach to negotiation. There are perceptions that Foreign Affairs reads “best outcome” as announcement of a deal rather than lower cost to consumers/taxpayers through a tougher stance on patents, trademarks and copyright.</p>
<p>The parallel import reforms <strong>are</strong> a good thing for consumers and the overall economy. We need however to move to a more progressive IP regime, one where the temper is democratic and bias is Australian rather than privileging Unilever, Microsoft, Disney and Pfizer. The government’s other responses to Harper’s intellectual property recommendations are weak. That might be through lack of understanding or unwillingness to provoke key stakeholders such as Foxtel. </p>
<p>While cheering the prospect of cheaper books, let’s ask some hard questions about incentives for innovation in key sectors such as <a href="https://theconversation.com/patent-applications-are-down-in-australia-thanks-to-tougher-rules-41424">biotechnology</a> and <a href="https://theconversation.com/patent-wars-on-the-pacific-rim-starring-apple-and-samsung-16951">software</a>. Are our policy-settings appropriate as we move into a borderless world where people consume bits rather than atoms?</p>
<hr>
<p><em>Bruce will be on hand for an Author Q&A between 10 and 11am AEST on Thursday, November 26, 2015. Post your questions in the comments section below.</em></p><img src="https://counter.theconversation.com/content/51194/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Baer Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government has agreed to the Harper competition review recommendation on parallel imports on books, but there’s still a long way to go on IP reform.Bruce Baer Arnold, Assistant Professor, School of Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/511912015-11-25T00:02:15Z2015-11-25T00:02:15ZHarper response is good economics and smart politics<p>The adults are back in charge in Canberra.</p>
<p>Don’t believe me? </p>
<p>Then look at the federal government’s response to the recommendations of the Competition Policy Review, chaired by Professor Ian Harper. It is measured and thoughtful. It avoids unnecessary fights but keeps pushing forward the reform agenda. It may not impress the “reform junkies”. But it is very smart politics.</p>
<h2>Getting the states on board</h2>
<p>Many of the Harper recommendations focus on areas like human services, trading hours regulation, or uber and taxi regulations, that are outside the direct control of the federal government. So the big benefits from the Harper reforms will come through engagement with the states. The federal government will use two elements from Professor Fred Hilmer’s 1990s reform process to gain state support. </p>
<p>The first is a new Competition Principles Agreement (CPA). Harper recommends this. The original CPA between the federal and state governments underpinned the Hilmer reforms. A new CPA will underpin the Harper reforms. The federal government hopes to have this in place within a year. </p>
<p>A new CPA will include elements of the original Hilmer version. For example, it is likely to include a review process to test if legislative restrictions on competition serve the public interest. </p>
<h2>Incentive payments</h2>
<p>The second way the federal government will gain state support is through a new system of incentive payments. In the 1990s, the National Competition Council administered the Hilmer incentive payments. But when the payments ran out in the early 2000s, the reform process slowed and, in many areas, stopped. </p>
<p>The payments were not large but they were politically important. However, the Harper report missed the political element of the payments, focusing only on their economic basis. As a result, recommendation 48 of the Harper review based any new payments on a vague bureaucratic process. </p>
<p>In contrast, the federal government’s response to Harper recognises the need for clear incentives. Thus “[t]he Government is willing to consider payments to states and territories for regulatory reviews where subsequent reforms improve productivity and lead to economic growth” (p.10). The government accepts recommendation 48 but its response deliberately refers back to the earlier reforms. </p>
<p>This approach underpins the acceptance by the government of most of the Harper recommendations in areas such as human services reform, road transport, and both water and energy reform.</p>
<h2>Avoiding unnecessarily fights</h2>
<p>The government has not accepted all the Harper recommendations. It has side-stepped some of the hard fights. While this may upset free-market advocates, it reflects a government that knows what fights to pick and when. </p>
<p>For example, it simply “notes” recommendations on air and sea transport restrictions (called “cabotage”). It notes the recommendation to extend competition rules to intellectual property. But it avoids both fights.</p>
<p>Similarly, the response notes the recommendation that has caused most public contention - on the “misuse of market power” test (section 46)- but “will consult further”. It will also “continue discussions” on whether or not the access and pricing regulator should be separated from the Australian Competition and Consumer Commission. </p>
<p>It is smart politics to know which fights are not worth the effort. The debate on section 46 seemed destined to derail the entire reform process. But it is a second order issue compared to the potential reform gains from the other Harper recommendations. The response recognises this. </p>
<h2>Competition laws and small business</h2>
<p>The federal government has accepted almost all of the other Harper recommendations on competition laws. This will lead to simpler, better laws. It will remove politically inspired additions to the legislation that were unworkable or potentially harmful. It will also streamline areas such as the convoluted and complex cartel laws. </p>
<p>The government has taken a balanced approach to small business. The response was released on the same day that the former small business minister, Bruce Billson, announced that he would <a href="http://www.abc.net.au/news/2015-11-24/former-small-business-minister-bruce-billson-quits-politics/6968382">retire from politics at the next election</a>. While Billson put a lot of effort into the argument on section 46, the real gains for small business are elsewhere in Harper. </p>
<p>In particular, the government has supported the collective bargaining recommendations that re-enliven collective boycotts by small business. These have been missing in action since a decision by the Competition Tribunal to not allow chicken growers to collectively boycott in the mid 2000s. If small business can effectively collectively bargain and collectively boycott, they will gain significant countervailing power when dealing with large buyers or suppliers. </p>
<p>The government was faced with differing recommendations on infrastructure access laws – one set from Harper and one set from an earlier Productivity Commission (PC) inquiry. The government chose the PC version. This was the right call and reflects the original intent of the laws. </p>
<p>The rebooted reform process will need oversight. Harper recommended a new Australian Council for Competition Policy (ACCP). The government’s response recognises “the need for a body to oversee progress on competition reform”. However, it also recognises that both the federal and state governments must design any new institution. Working out exactly what the ACCP will be and how it will function is a key part of the work for the next 12 months. </p>
<h2>The next 20 years</h2>
<p>The response is mature and thoughtful. It reflects the recent changes in Canberra. It should be welcomed by both the opposition and the states. The Hilmer reforms underpinned the last 20 years of Australia’s economic growth. This response to Harper should underpin the next 20.</p><img src="https://counter.theconversation.com/content/51191/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen King is a member of the National Competition Council, the body with oversight of the infrastructure access laws.</span></em></p>The response to the Harper recommendations on competition policy reform was mature and wisely sidestepped the issue that could derail debate on it.Stephen King, Professor, Department of Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/505942015-11-17T00:14:07Z2015-11-17T00:14:07ZSmall business can’t afford to overlook the little things in the Harper Review<p>Another day, another article about why an effects test will change the world, for better or for worse (depending on who’s writing). Regardless of who’s right, an effects test is unlikely to change much in the day-to-day operations of most Australian businesses, large or small. </p>
<p>But while the controversy over just one section of the Competition and Consumer Act sucks up all available airtime, there are several other changes recommended by the <a href="http://competitionpolicyreview.gov.au/final-report/">Harper Review into competition policy</a> that are receiving almost no attention at all.</p>
<p>There seems to be two basic reasons for this. First, competition law specialists are virtually unanimous in agreeing that the recommended changes are necessary. On the other hand, however, the business community doesn’t appear to recognise the potential impact of these much less sexy proposals. </p>
<p>Both viewpoints reflect the extreme complexity of the current legal framework: this complexity creates compliance costs that even the lawyers agree are unnecessary, but leaves business unable to appreciate how some apparently minor tinkering could be extremely useful.</p>
<h2>What else did Harper recommend?</h2>
<p>An effects test was just one of 56 recommendations made by the Harper Panel, spanning institutional arrangements, deregulation, specific industries, intellectual property and Australia’s competition laws. Some were very high level recommendations, but a number were extremely detailed. If one looks at only those recommendations relating to Australia’s “competition laws”, there were around a dozen suggestions. </p>
<h2>Some background first</h2>
<p>Australia’s main competition laws are contained in Part IV of the Competition and Consumer Act, and fine-tuned via Part VII. Part IV contains a series of prohibitions which all thematically relate to market power (“competition”) problems, while Part VII allows for individual exemptions from these prohibitions via various types of “statutory immunity”.</p>
<p>Our prohibitions tend to be drafted quite broadly, because there are many ways to get out of them: anti-overlap provisions, exemptions, defences and, where applicable, statutory immunity. The detailed architecture of the legislation is in fact extremely impressive.</p>
<p>But the interrelationship between the prohibitions and these various exceptions is ridiculously complicated, and can take years to master. Thus, we have a regime so complex there are very few who can ably navigate it. </p>
<p>This creates enormous systemic inequity: those who can afford expert advice have a broad range of competitive strategies available to them; but, for those who can’t afford such advice, their best compliance strategy is to operate within very tight confines.</p>
<h2>The recommendations</h2>
<p><strong>Simplify</strong></p>
<p>You know a law is way too complex when even the lawyers agree it should be simplified. To the general approval (relief?) of competition lawyers around Australia, Harper has a strong focus on simplification. There is a general recommendation that the competition laws be reviewed as a whole, as well as some specific suggestions (such as redrafting our labyrinthine cartel provisions).</p>
<p><strong>Reduce over-reach</strong></p>
<p>Within our prohibitions, we distinguish conduct that is “per se illegal” (that is, regardless of the size and strength of the parties involved) from conduct which is “competition-tested” (only illegal if it has an adverse effect on competition).</p>
<p>Our per se prohibitions are quite broadly drafted and, for years, there has been debate over their scope - particularly whether <a href="https://www.accc.gov.au/business/anti-competitive-behaviour/exclusive-dealing">third line forcing</a> and <a href="https://www.accc.gov.au/business/anti-competitive-behaviour/imposing-minimum-resale-prices">resale price maintenance</a> should be deemed per se illegal. </p>
<p>The law against third line forcing essentially limits a business’s capacity to make joint offerings with other businesses, while the law against resale price maintenance limits the restrictions that can be placed on a retailer’s pricing strategies.</p>
<p>It’s nigh impossible to explain these laws succinctly (for instance, a whole Part of the legislation is devoted to defining resale price maintenance). But third line forcing in particular is a triumph of form over substance: it is very easy to “draft around” or to use an exception to render the specified conduct legal. </p>
<p>This in turn means that the only businesses likely to engage in <em>illegal</em> third line forcing are those who cannot afford expert advice: in other words, small business. Fortunately, the Australian Competition and Consumer Commission (ACCC) rarely prosecutes this sort of conduct, effectively rendering the prohibition a dead letter. Unsurprisingly Harper recommends it be changed to a “competition-tested” provision.</p>
<p>Harper is not as bold in relation to resale price maintenance. Retaining its status as per se conduct, resale price maintenance would however be allowed upon notification (a pretty straightforward immunity process). This would make it more accessible than the current system which requires authorisation (long-winded, complex and expensive).</p>
<p><strong>Improve immunity processes</strong></p>
<p>Harper wants to reduce complexity in the various statutory immunity processes: authorisation, notification and collective bargaining. The panel also suggests tidying up the merger processes. </p>
<p>Most significantly, it calls for “block exemptions”, an idea borrowed from Europe. This would enable the ACCC to determine that certain types of conduct are generally okay, meaning that individuals would no longer have to initiate their own specific immunity process. The potential impact of block exemptions for small and even medium-sized businesses is enormous.</p>
<p><strong>Clean up the dead wood</strong></p>
<p>The report also calls for some less-than-stellar laws to be removed, including the unused price signalling laws, the confusing “Birdsville” amendment, and the now redundant prohibition on exclusionary provisions. </p>
<h2>We can’t afford to overlook the little things</h2>
<p>Looking at Harper’s proposed changes to Australia’s competition laws, the vast majority are essential and, in some cases, well overdue. Competition law experts aren’t talking about these recommendations because - fundamentally - they do not excite debate (and you know how lawyers love to argue). And, I fear, business does not understand just how useful the recommended changes may be. </p>
<p><em>All</em> Australian businesses will benefit from the amendments outlined above. But those who suffer the most from the systemic disadvantage caused by the law’s current complexity - that is, small business - will absolutely benefit the most from these recommendations. </p>
<p>Let’s hope they are not forgotten in all the excitement that surrounds the effects test. There’s certainly no need to wait while we sort out that debate to fix these little, but oh so important, things.</p><img src="https://counter.theconversation.com/content/50594/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexandra Merrett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ian Harper made a bunch of less glamourous but very useful recommendations in his competition review, that deserve not to be overshadowed.Alexandra Merrett, Competition Lawyer; Senior Fellow, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/493542015-10-21T00:01:45Z2015-10-21T00:01:45ZWhy Labor should come to the party on the competition review<p>The Harper <a href="http://competitionpolicyreview.gov.au/final-report/">competition review</a>, published in March, provided a large number of recommendations that may seem small in isolation but that collectively can help facilitate Australia’s transition from mining dependence.</p>
<p>Australia has a small, resource-rich and open economy. This means US and European monetary policies, and what happens to the Chinese economy, are likely to have a much larger influence than pursuing further microeconomic reform or industrial relations changes. </p>
<p>But there is a role for reform that increases the economy’s flexibility – facilitating the transition to lower terms of trade and reducing the cost to society, such as temporary unemployment, as much as possible. The competition review ought to be seen in this context. </p>
<p>The Abbott government seemed to be ignoring the report after debate focused on only one of its recommendations. <a href="http://www.afr.com/news/politics/cabinet-to-endorse-crackdown-on-big-business-power-20150831-gjbkf6">Discussion</a> has centred on Section 46 of the Competition and Consumer Act (CCA), which aims to prevent businesses that have market power from misusing it. </p>
<p>Media <a href="http://www.smh.com.au/federal-politics/political-news/turnbull-government-revives-harper-review-that-was-iced-under-tony-abbott-20151016-gkavsy.html#ixzz3onqACaeV">reports</a> suggest the Turnbull government is ready to tackle the substantial opposition to the proposed changes by big business but also by the Labor party. </p>
<p>Section 46 currently states that a corporation with a substantial degree of power in a market cannot take advantage of that power for the purpose of eliminating or substantially damaging a competitor. As explained in the Harper Review, and also in the ACCC’s submissions to the review, there are several issues with this section. </p>
<p>First, the courts and legislators have found it difficult to come to terms with what it means to “take advantage”. The challenge is determining whether specific business conduct – for example, predatory pricing (pricing below cost) – involves taking advantage of market power. This challenge makes it difficult, if not impossible, for the ACCC to prosecute cases under Section 46. </p>
<p>Second, the focus on the damage to a competitor is unusual and inconsistent with modern competition economics. The focus should instead be on the competition process itself. </p>
<p>Finally, Section 46 requires a purpose rather than an <a href="https://theconversation.com/explainer-what-is-the-competition-effects-test-39424">effects test</a>. Once again, this is inconsistent with international practice and with other sections of the CCA. </p>
<p>The Harper review proposes reframing Sections 46 to prohibit a corporation with a substantial degree of market power from engaging in conduct if the conduct has the “purpose, effect or likely effect” of substantially lessening competition in that or any other market. This proposal addresses the three concerns raised above. It eliminates the “take advantage” test, replaces the concerns with damages to a competitor with an appropriate concern about the competition process, and it adds an effect test, which is consistent with other parts of the CCA. </p>
<p>There has been vocal opposition. The Business Council of Australia, representing big business, opposes the proposed change, arguing it will create uncertainty and discourage competition. It <a href="http://www.bca.com.au/newsroom/statement-on-the-introduction-of-an-effects-test">says</a> businesses (with substantial market power) will be cautious about pursuing conduct that enhances competition for fear of being prosecuted by the ACCC. This view has also been expressed by, among others, some <a href="https://www.accc.gov.au/system/files/Harper%20Review%20-%20supplementary%20submission%20-%20Letter%20from%20Mr%20Rod%20Sims%20to%20Pr....pdf">former ACCC commissioners</a> and the <a href="http://www.theaustralian.com.au/national-affairs/acccs-reform-plan-will-chill-market-forces-chris-bowen-warns/story-fn59niix-1227055835451">Labor party</a>. </p>
<p>While it is undoubtedly the case that the change would increase uncertainty, the real issue is that there may be too little uncertainty now. Given the current difficulties with Section 46, businesses with substantial market power may face very little prospect of being caught when misusing this market power. While it is understandable that businesses with substantial market power may oppose this change – after all greater uncertainty typically translates into smaller expected profits, it is difficult to understand why the Labor party would oppose the proposed change.</p>
<p>The argument that it will chill competition is difficult to reconcile with the operation of the other sections of the CCA that have relied for many years on the substantial lessening of competition test. It’s difficult to conceive that a business with substantive market power would be hesitant to pursue R&D or economies of scale, which would give it a business edge over competitors, for fear that it would be investigated under the proposed Section 46. </p>
<p>While such activities may indeed lead to rivals exiting the market, the competitive process is unlikely to be adversely affected as long as there are not artificial restrictions to other firms pursuing similar strategies. In any event, the Harper review also recommended two additional safeguards. First, as with other Sections of the CCA, the Harper review recommends authorisation be available to exempt conduct from the prohibition in Section 46. It also recommends the ACCC issue guidelines for enforcing Section 46 in a similar fashion to the <a href="https://www.accc.gov.au/publications/informal-merger-review-process-guidelines-2013">merger guidelines</a>. </p>
<p>The proposed changes to Section 46 make a great deal of sense. While it’s clear why big business would oppose such changes, the rationale for Labor’s opposition is less clear. Its concern with chilling competition seems misplaced especially given the two additional safeguards proposed in the Harper review.</p><img src="https://counter.theconversation.com/content/49354/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Flavio Menezes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The proposed changes to Australia’s competition regime make sense, and deserve bipartisan support.Flavio Menezes, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/477022015-09-18T05:47:27Z2015-09-18T05:47:27ZThe competition test attracts odd political bedfellows, but isn’t going away<figure><img src="https://images.theconversation.com/files/95294/original/image-20150918-15850-13uv096.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How did the so-called 'effects test' on market power become such a polarising topic for business and politicians?</span> </figcaption></figure><p>The same day prime minister Malcolm Turnbull cemented a deal with the Nationals for a continuing Coalition partnership, the misuse of <a href="https://theconversation.com/explainer-what-is-the-competition-effects-test-39424">market power ‘effects test’</a> issue lit up the Senate. Greens Senator Peter Whish-Wilson called on the Liberal government to introduce an effects test to “better protect farmers and small business from anti-competitive conduct”. </p>
<p>The motion was lost, but interestingly, the Nationals voted with the Greens for the motion while Labor voted with the Liberals to defeat it. This unfolded on the very day that the deal to continue the Coalition was concluded, including, according to the Nationals, a commitment to reform the misuse of market power law.</p>
<p>At its national conference the previous weekend, the Nationals had voted unanimously to introduce an effects test; an outcome the Business Council of Australia is trenchantly opposing and the small business sector is fighting equally as hard to secure. </p>
<p>How did this become such a polarising issue for the business community and such a political hot button issue? Tensions between big and small business are nothing new, but it was the Competition Policy review, led by Professor Ian Harper, that enlivened the debate. </p>
<p>Since 1974 the law has focused on whether or not a company with market power had taken advantage of that power for the purpose of damaging a competitor or preventing a competitor entering a market. </p>
<p>The Harper Committee thought that, in our modern and sophisticated economy, the law should focus on the impact of conduct on competition, rather than on purpose. They thought, quite rightly, that protecting the competitive process is what is important for the Australian economy and for consumers. After all, if conduct is actually anti-competitive, should not that be the basis on which the law intervenes?</p>
<p>If this is good public policy, why is big business so opposed to a change? They argue that an effects test would chill competition and be detrimental to consumers. Neither logic nor experience supports that view. </p>
<p>There is nothing remarkable about competition laws focusing on anti-competitive conduct. Many other countries with robust economies and good records in protecting consumers have such a law. Closer to home, since 1974 the law has prohibited conduct (in the form of understandings) that has the effect of substantially lessening competition. Is it really suggested that companies can tell when their conduct is anti-competitive when reaching understandings, but not when they conduct themselves otherwise? </p>
<p>Possibly the concern is in the detail and whether the law would be amended in precisely the terms Harper has suggested. First, Harper recommended that purpose be retained, but that only confuses the issue and should be reconsidered. Companies work to defeat their competitors by competing wholeheartedly. That is the essence of competition and companies with market power should not be penalised for having that purpose.</p>
<p>Secondly, there seems to be a concern that the suggested draft does not provide sufficient protection for large companies that compete on the merits. There may be some validity in that, but the concern is vastly overstated. The parliamentary process will sort out the drafting. It is the policy principles Harper has enunciated that are important now, not suggested legislation. </p>
<p>We need to make sure that legitimate competition on the merits is protected. The principles are these:</p>
<ul>
<li>The prohibition should only apply to companies with a substantial degree of market power. On this there seems to be universal consensus.</li>
<li>The object should be to prohibit anti-competitive conduct. Purpose or intent should only be relevant in cases of unfulfilled attempts to misuse market power. </li>
<li>The focus should be on harm to the competitive process rather than harm to competitors.</li>
<li>The law should encourage pro-competitive conduct, while dealing appropriately with anti-competitive conduct explicitly. It should do so by:</li>
<li>allowing companies to raise pro-competitive business justifications (eg efficiency, innovation, product quality or price competitiveness); and </li>
<li>if pro-competitive business justifications are raised, require the ACCC (or private litigant) to establish that the anti-competitive harm outweighs pro-competitive business justifications. </li>
<li>The law should only apply if the ACCC or private litigant proves that the anti-competitive harm outweighs pro-competitive business justifications.</li>
<li>The law should include attempted anti-competitive conduct, in which case proof of intent should be required.</li>
</ul>
<p>If the government were to adopt these principles and then move on to legislate in accordance with them, then our law would align closely with that of the United States and many other countries that have had a so-called effects test for many years. </p>
<p>In reality the change Harper proposes, encompassing the principles set out above, will not chill competition or be bad for consumers. Nor will it be the panacea small business seeks. It will provide a logical, coherent law in a very contentions area – a law aligned to enhancing a competitive Australian economy and benefiting consumers. In short, it will be good public policy.</p><img src="https://counter.theconversation.com/content/47702/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Russell Miller AM is affiliated with the Centre for Strategy and Governance and a member of the Minter Ellison Australasian Competition Group. </span></em></p>The new Turnbull government should follow the lead of the Harper Review and introduce an ‘effects’ test on market power.Russell Miller, Adjunct Professor, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/411592015-05-05T00:31:12Z2015-05-05T00:31:12ZCompetition law fix could seriously harm competition<p>The current debate about potential changes to Australia’s competition laws against the “misuse of market power” has been clouded by many myths. </p>
<p>The proposed changes recommended by the <a href="http://competitionpolicyreview.gov.au/">Harper report</a> have three elements:</p>
<ul>
<li><p>Clarifying that the anti-competitive outcome is a “substantial lessening of competition”</p></li>
<li><p>Adding the word “effect” so an abuse can have an anti-competitive purpose or effect; and</p></li>
<li><p>Removing the words “take advantage” that link “market power” with the conduct.</p></li>
</ul>
<p>The first two changes are superficial. The last one is key. It takes “misuse” out of the “misuse of market power” test.</p>
<p>If you listen to the proponents of the changes, you would think the debate is all about adding the word “effect”. This is a myth. Unfortunately myths are hard to kill.</p>
<p>This “effect” myth was included in Russell Miller’s <a href="https://theconversation.com/competition-debate-must-move-beyond-effects-test-battle-41030">recent article</a> for The Conversation. But it is also being widely broadcast by ACCC Chairman Rod Sims.</p>
<p>For the record, we have no issue with the adoption of an effects test. But that is not the issue.</p>
<p>The problem is the proposal to remove the concept of “misuse”. Rather, it is proposed that any conduct engaged in by a business that has market power will be prima facie prohibited if it is likely to substantially lessen competition. That is an extraordinary proposition and is not, as claimed by proponents of this amendment, mirrored elsewhere in the developed world. Other jurisdictions focus on the “misuse” of market power, usually by dominant businesses. This is much narrower than the Harper recommendation.</p>
<p>The problem with the Harper recommendation is that it could capture competitive behaviour.</p>
<p>As the High Court has stated:</p>
<blockquote>
<p>“Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to ‘injure’ each other in this way. This competition has never been a tort and these injuries are the inevitable consequences of the competition s 46 is designed to foster.”</p>
</blockquote>
<p>This position was reaffirmed in the Boral predatory pricing case:</p>
<blockquote>
<p>“Competition damages competitors. If the damage is sufficiently serious, competition may eliminate a competitor.”</p>
</blockquote>
<h2>Competition as usual</h2>
<p>Under the Harper amendment, a business with significant market power that engages in vigorous competitive behaviour runs a risk. Its behaviour may be completely consistent with the behaviour of any competitive business. But the harsh discipline of competition means that better businesses will thrive and the poor performers will wither and possibly fail. In the extreme, an effective competitor could eliminate its rivals. In some cases, that very process may result in a “substantial lessening of competition”, with an efficient big business surviving and potentially becoming dominant in a market. But that will have been the result of poor business performance by others, not a misuse of market power by the big business.</p>
<p>The risk for the business, however, is that with the benefit of hindsight, the ACCC or a private party will take the business to court. Even if it has done nothing that depends on or relates to its market power the business could find itself on the wrong side of the law.</p>
<p>Proponents of the change claim that our concerns are ill-founded. “Don’t worry”, they cry. “The courts will be able to sort it out.” Or, they argue, if you are worried about being submitted to a lengthy, costly and uncertain process of litigation by the ACCC, submit yourself to an equally lengthy, costly and uncertain process of seeking authorisation from the ACCC, where your competitive strategies will be laid out in full public view for your competitors to examine, criticise and complain about.</p>
<p>Perhaps. But in the meantime, businesses will curb their competitive behaviour because of the legal risk.</p>
<p>And neither the ACCC nor the courts may “sort it out”. For example, does a highly efficient business that can profitably out-compete its rivals by offering better products at a lower price have an obligation not to compete too hard in order to ensure its competitors survive? Such an obligation would be the antithesis of competition, but has seriously been suggested by some leading US scholars in competition law and economics. Under the Harper recommendation, this obligation could become mandatory for a business with substantial market power.</p>
<h2>Taking advantage of power</h2>
<p>The fundamental problem with the Harper proposal is it removes the need to demonstrate that big business has misused its market power to bring about a substantial lessening of competition. That occurs as a result of Harper removing the need to demonstrate that big business has “taken advantage” of its market power.</p>
<p>Proponents of the reform argue that it is too hard to prove that a business has taken advantage of its market power. But so it should be, because we should be focusing on the narrow range of activities that constitute a misuse of market power, not on every act undertaken by a big business.</p>
<p>Further, if there is a need to clarify what constitutes the “taking advantage” of market power, then let’s focus on that issue.</p>
<p>Strengthening this section of the act could include a clarification on how a corporation shall be deemed to have taken advantage of its power. Specifically, it would be deemed to have done so if the conduct was inconsistent with conduct that would be engaged in by a corporation that does not have a substantial degree of power in that market.</p>
<p>It is essential the law has a true “misuse” test. We must also ensure we do not so broaden the law that it can capture “any” conduct by big business, because such a law will undermine the very competition it is meant to protect.</p><img src="https://counter.theconversation.com/content/41159/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Unless key words are clarified proposed changes to Australian competition law could actually harm competition.Stephen King, Professor, Department of Economics, Monash UniversityGraeme Samuel, Vice-Chancellor's Professorial Fellow, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/400902015-05-04T04:43:27Z2015-05-04T04:43:27ZIt’s time for Australians to rewind the media policy machine<p>As Australia drifts between national elections it is time, once again, to ask some hard questions about media policy. Those questions should be asked and answered by all Australians rather than just by Malcolm Turnbull, Rupert Murdoch, Bill Shorten, Kerry Stokes, Bruce Gyngell and Tony Abbott.</p>
<p>A guide is provided by the <a href="https://theconversation.com/the-finkelstein-inquiry-into-media-regulation-experts-respond-5675">Finkelstein Report</a>, a victim of political opportunism and ALP infighting. </p>
<p>Another guide is provided by a poll in the UK, which suggests that non-specialists <em>are</em> interested in media policy, in particular the development of policy that reinforces integrity through accountability. </p>
<p>Responsiveness by politicians to that interest will go some way to overcoming the disengagement that is recurrently lamented by the major parties and that fosters micro-parties that rely on personality rather than policy.</p>
<h2>What do the people think?</h2>
<p>The <a href="http://www.mediareform.org.uk/get-involved/poll-shows-strong-support-for-action-on-media-ownership">UK poll</a> is specifically concerned with media regulation. It is an expression of attitudes by ordinary people. We don’t have a local counterpart - an independent study is needed - but we can draw some conclusions. </p>
<p>One conclusion is that we need to rewind the policy machine, with another viewing of the Finkelstein Report. </p>
<p>The UK poll was run by <a href="https://yougov.co.uk/">YouGov</a> for the <a href="http://www.mediareform.org.uk/">Media Reform Coalition</a>, an advocacy group that reflects concerns regarding competition policy, editorial interference and scandals such as <a href="https://theconversation.com/press-needs-a-regulator-to-protect-itself-and-the-rest-of-us-35114">Hackergate</a>.</p>
<p>The group reports that 74% believe that ownership of a UK television channel, radio station or newspaper should be dependent on the company being based in the UK. No more <a href="https://theconversation.com/google-tax-debate-pits-corporate-thieves-against-state-sovereignty-39681">dutch sandwiches</a> – companies should pay full UK tax. </p>
<p>The poll found 61% of respondents favour compulsory governance mechanisms, such as truly independent editorial boards, to reduce editorial interference. And 41% want strengthening of media ownership rules to restrict the market dominance of any one organisation. </p>
<p>It is likely that Australian voters, so disillusioned by the theatrics in Canberra that you’d have to drag them away from <em>Game of Thrones</em>, have much the same attitude. They haven’t been soured by Hackergate but are disquieted by media bias, perceived inequity in corporate <a href="http://www.abc.net.au/news/2015-04-08/tax-chief-under-pressure-to-name-corporate-evaders/6377882">taxation</a>, inconsistencies in competition law and ongoing attacks on the ABC. </p>
<h2>Why we should rethink the rules</h2>
<p>The <a href="http://theconversation.com/self-regulation-and-a-media-we-can-trust-6466">Finkelstein Report</a> highlighted questions about media concentration and self-regulation. These are questions that we need to consider because ownership, governance and editorial decisions affect informed policy-making and community disengagement in an era where traditional demarcations between print and broadcast are no longer relevant. </p>
<p>We need to think about media concentration in general, something elided in the recent <a href="http://theconversation.com/harper-makes-case-for-competition-overhaul-experts-react-39582">Harper Review</a> of Australia’s competition framework. Does it matter who owns the dominant channels, as long as the content is diverse and fair? Why do we have a nationality requirement, or a character requirement regarding broadcast ownership? </p>
<p>Should we be regulating Google and Facebook alongside Channel Nine, given that many people now rely on “new media” for current affairs information rather than just entertainment? Why are the broadcasters dealt with by <a href="http://acma.gov.au/theACMA/About/The-ACMA-story/Regulating">ACMA</a>, a government agency, when regulation of newspapers and magazines is done by print magnates for print magnates in the form of the <a href="http://www.presscouncil.org.au/">Australian Press Council</a>? Should we disregard the ineffectiveness of the Press Council, in the expectation that newspapers will either wither or go online? </p>
<p>Does the national government have the ability to restrict media corporations from structuring the operation to avoid the sort of tax obligations faced by most people? Do the ALP and LP/NP have the will to restrict that restructuring? Should we regard Google and Apple as media groups, rather than focusing on the Herald Sun and SevenWest?</p>
<p>The unhappiness evident in the UK poll is romantic, because there is no sign that any of the UK parties will take meaningful action. We don’t, however, need to despair. We need instead an informed national discussion about the shape of the Australian media and the nature of any regulation. We should expect politicians to lead that discussion, articulate issues and offer proposals. </p>
<p>A basis for that discussion would be to do a rerun of Finkelstein, in the same way that a classic television series is well worth another viewing. Ask some hard questions. Find out what people want. Give them a sense of why particular solutions might be ineffective. </p>
<p>Trust the people, rather than reinforcing disengagement by failing to inform them and restricting policy-making to Canberra insiders. That is, after all, what we want from a liberal democratic state.</p><img src="https://counter.theconversation.com/content/40090/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Baer Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Current regulations are a complete mismatch for today’s media practices and structures. While politicians shy from the debate, it’s time to heed public opinion and revisit the Finkelstein Report.Bruce Baer Arnold, Assistant Professor, School of Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/410302015-04-30T20:45:56Z2015-04-30T20:45:56ZCompetition debate must move beyond effects test battle<p>This week leaders of the world’s competition agencies are <a href="http://www.icn2015.com.au/">meeting</a> in Sydney. Their agenda includes grappling with inconsistent tests for dealing with unacceptable market conduct by big business. Abuse of dominance or misuse of market power is at the centre of the debate.</p>
<p>In Australia, the battle lines in this fraught area were drawn well before Small Business Minister Bruce Billson released the Harper <a href="http://competitionpolicyreview.gov.au/">Competition Review</a> panel’s final report last month.</p>
<p>On one side, commissioners from the Competition and Consumer Commission (ACCC), a former ACCC chair, Allan Fels and small business interests lead a growing contingent of those advocating a so-called <a href="https://theconversation.com/explainer-what-is-the-competition-effects-test-39424">“effects test”</a> to determine whether market power has been misused.</p>
<p>On the other side, well-resourced large business interests, foremost the Australian National Retail Association, and others including the Law Council of Australia, former ACCC chair Graeme Samuel and former consumer affairs minister Craig Emerson, argue for no change. They believe a “purpose” based test is the right answer because it provides more certainty than the alternative.</p>
<p>The essential difference is between those who think specific intent - a “purpose test” - is the standard that should be applied, and those who think a consumer welfare standard – an “effects test” - is to be preferred. International experience shows that each has its positives and negatives. Neither is entirely right or wrong.</p>
<p>Those preferring a consumer welfare standard point out that the current law does not apply in circumstances that it should, primarily because of the need to establish that the perpetrator has a prohibited purpose. They also argue that in focusing on competitors rather than the competitive process, some types of anti-competitive abuse are not caught at all.</p>
<p>Those opposing change argue that an “effects test” would have a chilling effect on competition, be detrimental to consumers and increase the risk of false positives. As Professor Michael Porter has observed, if we rely too heavily on narrowly conceived consumer welfare theory, competition analysis may overlook some important benefits of competition for society.</p>
<p>This is not a new battle. It has been raging since Australia first adopted a modern competition law. It is not likely to subside any time soon, regardless of what the government does with the Harper panel’s recommendation.</p>
<h2>A middle road</h2>
<p>What did the Harper panel do? Given the genesis of the Inquiry, they had the sense to know that no change was not a politically acceptable option. They set about trying to better align our market power law with economic principle and international experience. The result is a proposed new misuse of market power test that focuses, not on competitors (or on consumer welfare directly), but on the effect on competition of conduct by corporations that have market power.</p>
<p>That change will not be the panacea small business seeks. Nor will it have the chilling effect on competition some big business interests predict.</p>
<p>As to small business expectations, the reality is that market power laws are mainly resorted to in fights between big business and bigger business, although there is an occasional exception. These laws are regarded universally as a last resort for regulators, to be used where those with market power attempt to foreclose a market or charge exorbitant prices. Small business will benefit more from the unconscionable conduct law, the recently announced extension to unfair contract terms protections and enforceable codes of conduct, than they will from a misuse of power prohibition, even if the panel’s recommendation is adopted.</p>
<p>As to big business, the claim that the panel’s recommended change will chill competition is not borne out in international experience. Competition remains robust and tough in countries that have adopted a so-called “effects test”. And in Australia, since 1997 an “effects test” has applied for misuse of market power in telecommunications markets, but the ACCC as never found the need to take a case through the court.</p>
<p>No doubt, if the government accepts the Harper panel’s solution, some will think twice before adopting unacceptably aggressive market-foreclosing business strategies, but that is likely to be positive for consumers and for the competitive process. Court proceedings by the ACCC will be few and far between, and that is as it should be.</p>
<p>Australia is not alone in seeking the Holy Grail in this area. Controversy surrounds misuse of market power laws in every country that has one. Whatever the government decides, the controversy and criticism will continue. We should recognise that reality, move on from entrenched positions and give the Harper panel’s recommendation serious consideration.</p><img src="https://counter.theconversation.com/content/41030/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Russell Miller is affiliated with Minter Ellison where he advises governments and companies on competition issues</span></em></p>Both big and small business have much at stake in competition policy reform, but they need to move on from simplistic arguments about misuse of market power.Russell Miller, Adjunct Professor, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/397002015-04-09T20:40:33Z2015-04-09T20:40:33ZWhy it’s time for companies to give us back our data<figure><img src="https://images.theconversation.com/files/77420/original/image-20150409-18083-e43pcf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's personal: why shouldn't consumers reclaim the rich data trail they create?</span> <span class="attribution"><span class="source">Image sourced from Shutterstock.com</span></span></figcaption></figure><p>For large corporations with access to large tracts of consumer data, the challenge remains using it to be helpful, without being creepy. For a retail store, it means making sure customers know their favourite products are on special rather than bringing the <a href="http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html">news of a pregnancy</a> to an unsuspecting father of a teenage daughter. </p>
<p>Why shouldn’t we decide how our own data is used?</p>
<p>The rich data trail we create as consumers is already used by businesses to improve the offers they make to us. Our bank, utility provider, telco operator and video streamer have a detailed set of information with which to tailor their products and services.</p>
<p>But why does this data belong to the service provider, rather than the consumer? It might be really handy to be able to use that data to find the best offering from a range of providers, not just the one that is currently used. </p>
<p>In the UK, the new “<a href="https://www.gov.uk/government/policies/providing-better-information-and-protection-for-consumers/supporting-pages/personal-data">midata</a>” service allows consumers to download the data trail they have left and which each of the service providers has collected. App developers have been encouraged to start offering software enabling people to use their own data to find the best product offering for them across the sector. midata has been rolled out on a mainly voluntary basis and is still in the early stages. In combination with consumer friendly switching regulations, such as bank account number portability, midata offers consumers a way of using their own data to make product and services choices.</p>
<p>This approach has been taken up in the <a href="http://competitionpolicyreview.gov.au/final-report/">Harper report on competition policy</a>. In its submission to the Harper review, consumer group CHOICE argued such a scheme would support “robust demand-side competition by enabling consumers to make better informed decisions” and would encourage innovation. </p>
<p>The ACCC put the case that:</p>
<blockquote>
<p>“initiatives to allow consumers to effectively use their information … have the potential to assist consumers to make better choices and drive competition.”</p>
</blockquote>
<p>The Harper panel also noted that the UK government believe that:</p>
<blockquote>
<p>“being able to base decisions on their previous behaviour will mean individuals can choose products and services which better reflect their needs and offer them the best value” </p>
</blockquote>
<p>and that this would also encourage innovation.</p>
<p>The report references the submissions of both CHOICE and the ACCC in coming to the view that:</p>
<blockquote>
<p>“Markets work best when consumers are engaged, empowering them to make informed decisions.”</p>
<p>“The Panel sees scope for Australian consumers to improve their access to data to better inform their decisions.”</p>
</blockquote>
<p>This led to a recommendation on informed choice that governments (at all levels) should “allow consumers to access information in an efficient format to improve informed consumer choice”. The Harper review recommended that a working group should be set up to implement the recommendation. It then went further. It recommended:</p>
<blockquote>
<p>“governments … should draw on lessons from behavioural economics to present information and choices in ways that allow consumers to access, assess and act on them”.</p>
</blockquote>
<p>The consumer group peak body, the consumer law regulator and the competition policy review all agree that consumer access to their own data should proceed. What could go wrong? Well the data formatting needs to be agreed in order to make the system useful. The midata approach and similar systems in the US can provide a model, but this needs to be standardised in Australia. In order for the approach to work, a reasonable number of major service provider businesses have to volunteer. In effect, at least the Australian Bankers’ Association and one of Communications Alliance or the Australian Mobile Telecommunications Association need to be on board.</p>
<p>Comments on the Harper report are due on May 26, 2015. Most of the submissions will be public and this will be the first opportunity to see whether the corporations that hold our big data will allow us to use it to make informed choices in a competitive environment. </p>
<p>Perhaps the challenge will be those other elements of non-price stickiness such a account number portability. Mobile number portability is merely an assumption in Australia. Perhaps the same should be true for bank account number portability if consumers are to get their hands on their own big data.</p><img src="https://counter.theconversation.com/content/39700/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rob Nicholls receives funding from the Australian Research Council and the Centre for International Finance and Regulation. He is a member of the Australian Labor Party.</span></em></p>The competition review could help shed light on whether Australian companies are willing to share the data they hold on us as consumers.Rob Nicholls, Postdoctoral research fellow, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/374742015-04-08T00:41:46Z2015-04-08T00:41:46ZAustralian politics’ Kodak moment spells trouble for the major parties<p>When people talk about disruption, they mostly tell the stories of what has happened to big businesses such as Kodak, Blockbuster, Barnes and Noble, and most of the world’s newspapers.</p>
<p>Consumers have stood by and watched the near destruction of the company that created Kodak moments. As I saw as a newspaper editor, people have also increasingly stopped picking up the newspapers that once recorded their own births and marriages, instead gleaning their news from digital and social media. Jobs have vanished with the businesses that funded them; jobs have changed or been created in ways we might not have imagined.</p>
<p>Senior Australian politicians are increasingly recognising those <a href="http://www.joehockey.com/media/speeches/details.aspx?s=164">disruptive forces</a> and the need to adapt by rethinking everything from <a href="http://theconversation.com/government-calls-for-tax-rethink-but-reform-answers-abound-39436">the way we’re taxed</a> to how <a href="http://theconversation.com/harper-makes-case-for-competition-overhaul-experts-react-39582">businesses compete</a> in a fast-changing global economy.</p>
<p>The same forces of disruption that are shaking up industries and economies around the world are now having a discernible effect on another area of established power: Australia’s major political parties. That means politicians and political activists alike should be rethinking how they work too.</p>
<h2>Snapshots of change</h2>
<p>Exhibit A of the rapidly changing political landscape was January’s Queensland election. A government that had been elected with Australia’s largest majority three years ago was voted out of office. </p>
<p>Exhibit B is Tony Abbott, leading a Coalition government with a near-record majority, who is still fighting for <a href="http://www.abc.net.au/news/2015-04-06/newpoll-shows-coalition-support-dips-west-australian-stronghold/6372240">his political life</a> ahead of next month’s crucial federal budget,</p>
<p>Whether in Queensland or in Canberra, each of those governments has lost favour more quickly than the Instamatic camera and film. Their time in the sun has proven to be as fleeting as a Kodak moment.</p>
<p>Exhibit C, perhaps surprisingly to some, is the March 28 New South Wales election. While popular Premier Mike Baird and his Liberal National government were re-elected, there were some extraordinary swings across the state, particularly in regional areas. As Sydney Morning Herald columnist <a href="http://www.smh.com.au/comment/violent-mood-swings-masked-in-the-nsw-election-result-20150401-1mcq9z.html">Paul Sheehan described it</a>:</p>
<blockquote>
<p>subsumed within the relatively bland overall numbers was a wave of violent voting shifts across the electorate.</p>
</blockquote>
<p>But this political shift didn’t just begin this year.</p>
<p>For Exhibit D, take a closer look at the 2013 federal election results. As ABC election analyst <a href="http://blogs.abc.net.au/antonygreen/2013/11/record-vote-for-minor-parties-at-2013-federal-election.html#more">Antony Green has shown</a>, there was record support for minor parties and independents in both the lower and upper houses of federal parliament. More than one in five (21.1%) votes in the House of Representatives and nearly a third (32.2%) of Senate votes were directed away from the major parties.</p>
<p>Yet just like many of the business leaders who didn’t want to admit the world was shifting beneath their feet, many in the political class appear to be deluded about the disruption they’re now experiencing. </p>
<p>It’s easier to blame your problems on an inattentive media and electorate, unable to digest complex issues, than admit that perhaps it’s time to rethink the political product you’re selling. This is the same mistake the victims of business disruption have made.</p>
<h2>Lessons from business for politicians</h2>
<p>Just consider what disruption has done to business. Kodak didn’t <a href="http://www.bloomberg.com/news/articles/2012-01-19/kodak-photography-pioneer-files-for-bankruptcy-protection-1-">go bankrupt in 2012</a> and <a href="http://blogs.ft.com/the-world/2015/01/uber-and-kodak-ghosts-at-disruption-feast/">lose its place</a> as a dominant global consumer brand because people lost interest in taking photographs; there have never been more photographs taken than today. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=778&fit=crop&dpr=1 600w, https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=778&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=778&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=978&fit=crop&dpr=1 754w, https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=978&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/72847/original/image-20150224-32235-10o85na.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=978&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">When Kodak was still king: a Kodak Instamatic camera advertisement, published in Ebony, August 1964.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/29069717@N02/14204084700/in/photolist-nDaDw5-9vwrK4-6KYxzd-9uj6kZ-yLEu3-37PXD7-4q7Ltr-mL9kLs-9j5AZz-bQeAVk-pRoRyR-cHG713-NrmAs-gmRHJ-67azCC-jQv8f-ppKWQB-nneoLi-64ndVm-e9Fmq5-9wZHrs-37Kqg2-37Q1MY-37KoyZ-37PZ7h-5NWNsc-6PTh13-56twgm-4pZ4Xz-cUaAsJ-cUaAo5-cUayFj-cUayCq-cUayyE-cUaAeL-cUaAim-bvWCG1-E8ch7-i2B3cD-fqsQLn-58ypR4-q2u74-J1krn-kmue6W-e6EBnH-jQv8h-kmrLuK-juPFMJ-dXeCKG-82mvgJ">Classic Film/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>Instead, consumers simply moved on, adopting new technologies, brands and devices. That left Kodak as a shadow of its old self, forced to <a href="http://www.forbes.com/sites/maggiemcgrath/2013/11/01/there-and-back-again-10-companies-that-returned-to-the-market-after-bankruptcy/">reinvent itself</a> mainly in <a href="http://www.kodak.com/ek/US/en/Our_Company/History_of_Kodak/Imaging-_the_basics.htm">corporate</a> rather than consumer markets.</p>
<p>Similarly, more news is being read and talked about than ever – but the source is increasingly not a newspaper. Again, changing technology has driven a shift to new devices and brands, and sparked a revolution in consumer behaviour that has left many established media businesses struggling to find <a href="http://www.forbes.com/sites/gregsatell/2014/01/10/old-media-can-still-thrive-but-business-models-need-to-adapt/">new business models</a>.</p>
<h2>Big political brands on the wane</h2>
<p>The story of politics over recent decades has been the story of greater and greater alignment to brands in the commercial sense, and less alignment to dogmatic positions that defined politics in the cold war era. This has practical and measurable benefits for the politicians, their party organisations and the industry of market researchers and advertising agencies that hang off them.</p>
<p>It made voting a similar decision to consumer choice. While the big brands are strong, the loyalty sticks. But it’s a very different story when the brand weakens and the loyalty loosens.</p>
<p>That’s what has happened to politics. Swings of <a href="https://theconversation.com/final-queensland-election-results-labors-stunning-revival-37616">10% or more</a> between elections are now frequent, as are one-term governments and leaders who struggle to make it halfway through an elected term, as the prime minister has discovered. None of this helps the brand, which only adds to the lack of loyalty (or promiscuity) of the voter.</p>
<p>So if we follow the patterns of digital disruption in business, where could this lead us in politics?</p>
<h2>New political solutions</h2>
<p>We can be confident that the business of government and politics will continue. After all, its survival is legislated. And the public kind of likes democracy.</p>
<p>So far, the politicians and party organisations have dabbled with some of the tools of disruption to protect their positions. Most politicians tweet, share stories on Facebook and line up for selfies with their true believers. But this is at the margins rather than the core of political practice. </p>
<p>Fundamentally, politics is still built around internal loyalties and a win-at-all-costs approach to a range of complex issues. Yet most of the choices they face involve the decisions we must make to share the available resources among a growing population on a finite planet. If the tensions those choices create isn’t disruptive, I don’t know what is.</p>
<p>The changed consumer needs, aligned with technology, must change the practice of politics; the only question is how.</p>
<p>One answer might lie in the latest manifestation of disruption, the evolution of the <a href="https://theconversation.com/search?q=sharing+economy">sharing economy</a>. This involves the use of digital tools to harness unused capacity and put it to productive use: for example, <a href="http://blogs.ft.com/the-world/2015/01/uber-and-kodak-ghosts-at-disruption-feast/">Uber</a> as a ride-sharing app and <a href="http://journalistsresource.org/studies/economics/business/airbnb-lyft-uber-bike-share-sharing-economy-research-roundup">AirBnB</a> as an accommodation service.</p>
<p>What might this look like in politics? Imagine a mobile app where a third-party provider can harness support for an issue and deliver it as a bloc to a group of politicians willing to make available their legislative capacity. </p>
<p>Fanciful? Well, in effect, that’s what has already happened to the transport industry and the accommodation industry. It will take just one balance-of-power crossbencher in an Australian parliament to take up the idea to give it traction. And isn’t the basis of politics to understand what the public wants and to deliver it efficiently?</p>
<p>If politics follows the pattern of disruption, it will do just that. But the old brands risk falling by the wayside unless they face the reality that hanging on to the old ways almost certainly guarantees oblivion. Just ask Kodak.</p><img src="https://counter.theconversation.com/content/37474/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Fagan was editor and editor-in-chief of Queensland’s major newspaper The Courier-Mail for a decade and was News Corp's editorial director in Queensland before joining QUT.</span></em></p>The same forces of disruption that are changing industries and economies around the world are now having a discernible effect on Australian politics – and that’s bad news for the major parties.David Fagan, Adjunct Professor, QUT Business School, and Director of Corporate Transition, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/396402015-04-02T03:53:48Z2015-04-02T03:53:48ZHarper Review: a mixed basket for Coles and Woolworths<p>The findings and recommendations of the Harper competition review are a mixed bag and likely to meet with a correspondingly mixed reaction from stakeholders in the retail grocery sector. </p>
<p>Consistent with concerns aired in a string of sector-related inquiries and investigations in recent years, submissions were made by independent grocery retailers alleging that the major supermarket chains, Coles and Woolworths, misuse their market power, including through “predatory pricing” and other anti-competitive tactics. </p>
<p>Suppliers too raised previously well ventilated concerns about misuse of market power and unconscionable conduct by the major chains, as well as about reduced innovation and consumer choice through the growth of private brands.</p>
<h2>An “effects” test for misuse of market power</h2>
<p>In a general recommendation - not specific to the retail grocery sector - the panel proposed amendments to the prohibition on misuse of market power (section 46 of the Competition and Consumer Act 2010). </p>
<p>The essence of the proposal is to replace the prohibition on a firm with substantial market power “taking advantage of that power for an anti-competitive purpose” with a prohibition on such a firm engaging in conduct “with the purpose, effect or likely effect of substantially lessening competition”. </p>
<p>Section 46 has a long chequered history and, as with previous reviews, debate over its efficacy occupied much of the panel’s time.</p>
<p>The arguments for and against adopting an “effects” test, and the form of panel’s recommended amendment, have been canvassed at length elsewhere (including on <a href="https://theconversation.com/explainer-what-is-the-competition-effects-test-39424">The Conversation</a>). Suffice it to say there are good reasons to regard the case against as overheated, particularly the charge that it will “chill” competition. More likely to have that effect is the structure of the market, characterised by high concentration and barriers to entry. </p>
<p>Properly interpreted and applied, the effects test should not capture pro-competitive or efficient conduct. As noted in the Harper report - and reflected in Australian and international competition law - just because conduct harms a competitor or competitors, will not mean that it substantially harms the competitive process.</p>
<p>The panel has usefully recommended that the amendment provide guidance to courts to weigh pro-competitive and anti-competitive aspects of the conduct in question. This is a task US courts have been undertaking for years and one that Australian judges are just as well equipped to perform.</p>
<p>Nor should the objection that the change will create uncertainty and raise compliance costs for big business hold much sway. At the risk of flippancy, it could be observed that any measure that increases costs for Coles and Woolworths can only assist in levelling the playing field in the sector. </p>
<p>More seriously, an effects test is not some novel invention of the review panel. It replicates the test which has applied in the Australian competition rules dealing with mergers and exclusive dealing for many years and is also aligned with international approaches.</p>
<p>It is worthwhile remembering that similar claims that uncertainty would deter discounting were made about the notorious “Birdsville amendment” to s46 (an amendment aimed specifically at predatory pricing) some years ago. In the end, no such effect was discernible. Ironically Harper has recommended repeal of the Birdsville amendment - not because it created uncertainty, but because it was misguided and unnecessary, a result of the politics of big versus small business in this country. </p>
<p>Coles and Woolworths will continue to lobby against the recommended change to s46, claiming higher prices for consumers as amongst the potential effects. The Business Council of Australia has expressed concern over the uncertainty for business and lawyers remain divided on the issue. Of the few economists who have had a say, there is also little common ground (see <a href="http://theconversation.com/harper-makes-case-for-competition-overhaul-experts-react-39582">here</a>, for example, the divergence between two former ACCC Chairmen on the issue).</p>
<p>Given this, and despite strong support by the ACCC and others, the likely adoption of the panel’s misuse of market power recommendation is at best uncertain. One possible outcome is a modified version of the proposed amendment that reflects a compromise between interest groups. Such a compromise risks distorting the law to make it economically incoherent and practically unworkable. Regrettably, there is no shortage of precedent for this type of outcome in Australian competition law history. </p>
<h2>Wait and see on unconscionable conduct</h2>
<p>On the prohibition on unconscionable conduct, the panel adopted a “wait and see” approach, pointing to the <a href="http://theconversation.com/accc-signals-strategic-change-in-battle-with-supermarkets-26288">ACCC’s recent successful litigation against Coles for unconscionable conduct</a> involving its suppliers as indicative of the prohibition working as intended. </p>
<p>At first glance, the $10 million penalty seems substantial. But it has to be looked at in the context of the maximum penalty for conduct of this kind being set $1.1 million per contravention. (The penalty for Coles reflecting the fact that there were so many contraventions.) In something of an understatement the judge in the case observed, this is “arguably inadequate for a corporation the size of Coles”. </p>
<p>Regrettably, the review panel did not address the question of maximum penalties for unconscionable conduct. </p>
<h2>Code of conduct</h2>
<p>The panel also noted that introducing a properly designed and effective industry code should protect suppliers. The Food and Grocery Code of Conduct was established in February 2015 and the ACCC has identified compliance as a top enforcement priority this year. </p>
<p>The Code has its fair share of sceptics but its introduction should be seen at least as a positive acknowledgement by the major chains that some change in their supply chain management strategies is necessary. </p>
<p>That said, industry codes under the Competition and Consumer Act lack teeth and it is disappointing that the panel shied away from recommending meaningful civil penalties for code breaches. </p>
<p>Even if the approach taken by Franchising Code in January this year were extended to other codes (a measure the panel neither supported nor opposed), the penalties are relatively light - a breach exposes a franchisor or franchisee to $8,500 penalty issued by the ACCC or a pecuniary penalty of up to $51,000 imposed by the court. These are likely to be meaningless in the retail grocery sector context.</p>
<h2>Regulatory reforms to remove entry barriers</h2>
<p>In preserving competition, the panel’s primary focus was on removing impediments to the entry and expansion of new players, including planning and zoning law reform, reviewing regulatory restrictions on liquor sales, and deregulating retail trading hours. As noted by the panel, these reforms will require significant political leadership and incentives at all levels of government.</p>
<p>The panel largely dismissed concerns about the domination of Coles and Woolworths stultifying competition. But it would be far-fetched to suggest that the sector is anything other than a duopoly, despite the continued growth by Aldi and Costco. </p>
<p>And while the panel focused on regulatory barriers to entry, it did not say much about strategic barriers – that is, the use of pricing and other commercial strategies designed to keep competition at bay. Perhaps the panel viewed any such strategies can be tackled under the re-energised section 46.</p>
<p>Predictions that such litigation will be brought by small business would be fanciful. Indeed the panel set out at length the hurdles that small businesses face in taking enforcement action in their own right. </p>
<p>Of course, the ACCC might well bring proceedings and under chairman Rod Sim, has demonstrated a commitment to litigating more under the Act. But the ACCC lacks the formidable resources of the large companies that it would be taking on and it will have to be strategic about the cases it chases.</p>
<h2>Expansion into other sectors</h2>
<p>The panel also gave fairly short shrift to concerns surrounding the expansion of chains into other retail sectors such as hardware, liquor, electronics, gambling. </p>
<p>It may well be right that such diversification creates efficiencies for the firms concerned and could increase competition in these sectors. </p>
<p>However, this view does not necessarily address the long term concerns that these sorts of growth strategies may lead ultimately to concentration and the creation of strategic entry barriers in other important retail sectors at the level currently in retail grocery.</p>
<h2>Social disruption</h2>
<p>The panel acknowledged submissions about adverse social changes, in particular the loss of community amenity caused by a move of supermarket chains into regional and rural areas. </p>
<p>But these “are not matters to be addressed by the competition law. They reflect broader economic and social changes that are often the outcome of competition.” Technically, this is correct. However, it raises the broader issue for government as to whether competition should trump other non-economic values and interests in our society (see my related comment <a href="http://theconversation.com/coles-v-accc-finding-the-balance-between-fair-trading-and-competition-33135">here</a>).</p>
<h2>Prediction?</h2>
<p>If any prediction can be confidently made concerning the retail grocery sector, it is that the review will do little to dampen the controversy that this sector has attracted and will continue to attract into the future.</p><img src="https://counter.theconversation.com/content/39640/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Caron Beaton-Wells is leading a research project on supermarket power funded by the Australian Research Council.</span></em></p>Supermarket giants are predictably opposed to
Harper Review’s effects test, but the report is a mixed bag when it comes to other retail competition issues.Caron Beaton-Wells, Professor, Melbourne Law School, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/396292015-04-02T01:57:41Z2015-04-02T01:57:41ZThe Harper Review – let’s focus on what will make a real difference<figure><img src="https://images.theconversation.com/files/76847/original/image-20150402-31302-1tj5dux.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Harper Review should focus attention on planning and zoning reform as a crucial way of improving competition. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/theenmoy/10483354033/in/photolist-gYnVVk-9vb9wV-bziG6r-afgdAv-hBGDh-8oRjr1-gfqhbb-ej9eDU-9wVQLA-dT5HSz-5Aoruo-2sHhs-bVEeGU-dS98sh-nibWzA-gYmV6j-gNnrUa-2LzFw9-6VEa4N-7fw2T9-8MCUGP-7EnFL3-7K14vS-dqM7sW-8uyKiB-9zS8Qe-2S5xRb-4NLz9a-5zjdzv-7LLavx-81JsAU-gLRQC4-6HtaHT-k2AgmE-9DJPBM-aSiqRX-3hupQx-dKSqd1-7LPM1s-9wo78V-dVnNPe-gCTyrj-fYLirv-cNSLao-Ge6F8-gRgdmx-mLJXjT-b4zNvV-8pqsiX-7EnFY1">Flickr/Theen Moy</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>A battleground is already forming over the Harper Report recommendations, especially the suggestion to change the misuse of market power prohibition and bring in an “effects test”. </p>
<p>But this debate is missing what is important about the Harper Review. At a time when economic conditions are deteriorating and both federal and state governments are facing narrowing funding options, there is a pressing need to look beyond piecemeal issues and focus on whether the review will help make a tangible difference to our economic prosperity.</p>
<p>Last year’s G20 Communiqué held in Brisbane acknowledged the close link between competition and prosperity:</p>
<blockquote>
<p>Competition is central to the operation of markets. Efficient and well-functioning markets are essential for catalysing private sector investment, ensuring an efficient allocation of resources and lifting economic growth. Fostering competition is critical for our economies. … Productivity is increased by stronger competition because a strong competition framework generates the incentives to attract the most efficient firms into markets.</p>
</blockquote>
<p>If our objective is to use the Harper recommendations to drive innovation, efficiency and consumer choice, there are bigger issues on which to focus community debate.</p>
<p>To achieve the outcomes Australia committed to in its G20 Comprehensive Growth Plan, we need a concerted effort on competition policy reform to “raise Australia’s economic growth potential, create one million new jobs over the next five years … and support continued improvements in national living standards”. </p>
<p>Our attention should be focused therefore be on the areas the Harper Review has identified as not serving our long-term interests. Improving health and education delivery, reforming retail planning and zoning rules, and removing unnecessary barriers to consumer choice, are just a few areas in which competition policy can deliver substantial and enduring benefit to the entire Australian community. </p>
<p>Of course, as Harper has already acknowledged,there has already been quite a deal of work and some achievements in these areas. </p>
<p>While not easy to reform, the likely gains will be significant. Furthermore, while there remains a need for varying degrees of regulation, it should not unnecessarily stifle competition, choice and innovation.</p>
<p>The Panel recommends that all Australian governments commit to a set of principles common to competition policy reforms, such as promoting consumer choice and their long-term interests, and committing to the separation of public monopolies. Such principles might seem self-evident, but are worth repeating given the increasingly complex challenges facing governments intent on economic or social reform.</p>
<p>Human services - health, education and community services – has not been an area at the forefront of competition policy reform. It is unfinished business following the transformational Hilmer reforms of the 1990s. </p>
<p>The Panel reintroduces some big difficult challenges. While acknowledging innovations in delivery, it echoes Productivity Commission views that even a small improvement in efficiency in the sector would make a large difference in the quality and quantity of services and in the level of government outlays. </p>
<p>The ultimate recommendation – that each Australian government should adopt choice and competition principles in delivery of human services - is underwhelming, but in carefully describing the advances made, the present challenges and the way other countries have tackled this issue, the report shines a light on this important area. It is a shame the Panel did not think it could venture further in this area than to recommend trials and pilot schemes.</p>
<p>Acknowledging prior reports from the National Competition Council, the Australian Competition and Consumer Commission (ACCC) and the Productivity Commission, the Panel issues a direct challenge for COAG – that within two years each government should implement reforms ensuring planning and zoning laws do not unnecessarily restrict competition.</p>
<p>There has been enough study of this issue - it is time for action. As the Productivity Commission reported last year, most state and territory governments have conducted major reviews in recent years, but change has been slow and patchy. An earlier study for NSW concluded that comprehensive planning and zoning reform could net benefits of up to $1.4 billion per annum for the state.</p>
<p>Overall, the Panel has produced a comprehensive critique of the competition policy issues Australia will need to address if we are to improve consumer welfare through economic efficiency and better consumer choice. Focusing on the issues most likely to pay the highest dividends for consumer and government efficiency is a sufficient enough challenge. Let’s not get distracted by debates over the narrower issues the report also canvasses.</p>
<p>Reports do not, of themselves, deliver change, but they can be a powerful catalyst if embraced and promoted. Unfortunately, recent experience suggests that worthwhile reports are often dispatched to the dust bin.</p>
<p>That occurs more often than not if there is no strong community, business or cross-party political will to debate, adopt and implement recommendations. Implementing the Harper recommendations, whatever their final form may be, will not be easy. Federal and state governments will need to put differences aside and deal with entrenched interests if positive outcomes are to result.</p>
<p>Opinion leaders within the community will need to debate those recommendations that provide the biggest gains, rather than focus on areas of legal drafting that might be emotive but are unlikely to contribute much to our national competitiveness or productivity.</p><img src="https://counter.theconversation.com/content/39629/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Russell Miller AM is Adjunct Professor, ANU College of Law sand a Member of the Minter Ellison Australasian Competition Group.
</span></em></p>The main question to ask of the Harper report is: what will make a tangible difference to our economic prosperity?Russell Miller, Adjunct Professor, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/395902015-04-01T19:13:03Z2015-04-01T19:13:03ZGovernment writing reform cheques it’s unlikely to cash<p>Just a day after Joe Hockey kicked off a national conversation on tax, economist Ian Harper has brought the government into another difficult conversation, this time on competition policy reform. Both the tax and competition policy debates are about improving Australia’s productivity and growth. But both come with considerable political challenges for the government. </p>
<p>Tax reform is hard, particularly when governments don’t have money to compensate the losers, because many voters end up paying more. Competition reforms are hard for a different reason – the losers are fewer in number but tend to be well organised and vocal. Many of Harper’s priority reforms are likely to come up against this type of well-resourced opposition. </p>
<p>Removal of pharmacy ownership laws – one of the areas Harper nominated for immediate reform – is unfinished business from the National Competition Reforms of the 1990s. The current restrictions, which prevent new pharmacies opening within 1.5 kilometres of existing ones and stop anyone other than a pharmacist from owning a pharmacy, stifle competition and restrict consumer choice. As Harper’s review panel points out, there are far less restrictive ways to ensure the provision of quality advice and care to patients. But pharmacists are a formidable lobby group, even winning <a href="http://www.guild.org.au/news-events/forefront/volume-4-number-40/pharmacy-under-threat-triumphs">PR awards for their government scare campaigns</a>.</p>
<p>Less well funded, but with better scope to <a href="http://www.abc.net.au/lateline/content/2008/s2602438.htm">wheel out celebrated authors such as Tim Winton</a>, is the book publisher lobby. Parallel import restrictions on books (and second-hand cars) remain in place long after similar restrictions were removed for CDs and other products. These import restrictions protect local producers from overseas competition, allowing them to charge higher prices. The Harper review has joined the Productivity Commission in recommending these restrictions be removed, subject to transitional arrangements. </p>
<p>Perhaps more significantly the panel also recommended a review to make it easier for wholesalers to import branded products, such as <a href="https://theconversation.com/harper-competition-review-seeks-widespread-change-experts-react-31963">coffee and software,</a> to Australia from countries where they are being sold more cheaply. This would reduce opportunities for trade-mark owners to charge higher prices in Australia than in other countries. </p>
<p>The Harper panel also highlights the taxi industry as one where reform is “long overdue”. Licensing conditions restrict the number of taxis on the street, making it harder to get a cab in peak times. This artificial scarcity has created valuable property – taxi licences command almost A$400,000 in NSW and A$300,000 in Victoria. Licence owners have a strong interest in maintaining the status quo. </p>
<p>Despite more than two decades of reviews recommending changes to these arrangements, the biggest upset to incumbent operators has come not through legislation but technological disruption – ride-sharing apps such as Uber that directly connect passengers with private drivers. The Harper panel challenges state and territory regulators to ensure regulations respond to these new technologies in a way that puts consumers ahead of protection of existing business models.</p>
<p>The Harper review also recommends deregulating retail trading hours, cabotage (local crewing) restrictions on airlines and coastal shipping and more cost reflective road pricing. Yet all come with their own set of highly motivated losers. </p>
<h2>Picking fights everywhere</h2>
<p>Will governments dare to take on these powerful vested interests? The reform environment is very different to the one that existed in 1993, when Fred Hilmer handed down the last major review into competition policy. His report – which precipitated the successful National Competition Policy (NCP) reforms of the 1990s and early 2000s – sat squarely within the Keating government’s broader microeconomic reform agenda. In contrast, the Harper review was born from a subset of an election commitment to “<a href="http://www.liberal.org.au/latest-news/2012/11/15/small-businesses-grow-under-coalition">grow small business</a>” made by the then Opposition leader, Tony Abbott, and his Shadow Minister for Small Business, Bruce Bilson. A focus on protection of certain market segments is a very different mindset to the type of pro-consumer reforms advanced by Harper. </p>
<p>The NCP reforms succeeded because the states, territories and the Federal Government co-operated. State and territory governments <a href="http://archive.coag.gov.au/reports/docs/premiers_chief_ministers_meeting.pdf">endorsed the need for a national competition policy</a>. National competition payments from the Commonwealth encouraged state progress. </p>
<p>The Harper report comes at a low ebb in Commonwealth-State relations. The Commonwealth Government’s decision in the last budget to cut payments to the states for hospitals and schools has understandably been unpopular with state premiers. And the government’s ongoing budget woes make compensation payments to the states for reform highly unlikely. </p>
<p>When the government is already spending huge amounts of political capital trying to reform the Federation, tax, the welfare system, university funding and childcare, the prospect of the brave Harper proposals going anywhere soon is slim at best. Perhaps there is a lesson for governments here: don‘t start a difficult conversation you don’t have the will to finish.</p><img src="https://counter.theconversation.com/content/39590/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities</span></em></p>Big reforms in taxation and competition policy are on the table for the Abbott government, but has it spent too much political capital to get any of them across the line?Danielle Wood, Fellow, Australian Perspectives, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/395822015-03-31T19:10:00Z2015-03-31T19:10:00ZHarper makes case for competition overhaul: experts react<p>The removal of restrictions on retail trading hours, pharmacies and parallel imports, and a controversial “effects test” on existing misuse of market power rules are among the many recommendations contained in the <a href="http://competitionpolicyreview.gov.au/files/2015/03/Competition-policy-review-report_online.pdf">final report</a> of the Competition Policy Review released yesterday.</p>
<p>Boosting competition in the health, education and community sectors has been identified as a priority by the panel, which said even small improvements in these areas would have “profound impacts on people’s standard of living and quality of life”.</p>
<p>The panel has also named planning and zoning rules, taxi regulation and product standards as areas that require an immediate regulatory review.</p>
<p>It says state and territory governments should subject restrictions on competition in planning and zoning rules to the public interest test. It also said regulation limiting the number of taxi licences has raised costs for consumers, and hindered the emergence of innovative passenger transport services. </p>
<p>The review panel led by Emeritus Professor Ian Harper, says section 46, which deals with the misuse of market power, is deficient in its current form and out of step with international approaches.</p>
<p>Instead it wants to prohibit conduct by firms with substantial market power that has the “purpose, effect or likely effect” of substantially lessening competition.</p>
<p>The report also calls for cartel provisions to be simplified, and price signalling provisions, which have applied specifically to banks, to be removed and replaced with a similar effects test.</p>
<p>The panel has also called for a new national competition body to replace the National Competition Council, one that would be “an independent entity and truly ‘national’ in scope”, as well as the establishment of a pricing and utilities commission separate from the Australian Competition and Consumer Commission (ACCC).</p>
<p>It says collective bargaining and collective boycott arrangements should be made more flexible and easier for small business to use.</p>
<p>Road pricing should be made cost-reflective, according to the review, and regulations governing retail trading hours and parallel imports, and
pharmacy location and ownership rules should be removed.</p>
<p>It says the current exception to competition law for conditions of intellectual property licences in consumer law should be repealed.</p>
<p>The panel says the rise of Asia and other emerging economies, Australia’s ageing population and the emergence of new technologies all help make the case for competition policy reform. It says delaying policy action will make reform “more difficult and more sharply felt”. </p>
<p>The review panel received around 600 submissions in response to its draft report, 40% came from peak and advocacy bodies, around 30% from individuals, around 25% from business, and the remainder from governments.</p>
<p>We asked experts to respond.</p>
<hr>
<p><strong>Allan Fels, Professorial Fellow, Melbourne University</strong></p>
<p>The Harper review has addressed the two most pressing needs in competition policy. The first is to modernise competition law by strengthening the protection of small business from economically harmful illegitimate anti-competitive behaviour by big firms with market power, and at the same time by simplifying the law, which is far too long.</p>
<p>This is to be done through the introduction of an effects test in a simplified section 46. This conforms with standard international practice. </p>
<p>Harper has replaced a previous proposed defence under section 46 with an improved set of economic criteria that can be used to distinguish between pro competitive and anti-competitive behaviour and it is wrong to think that the line between competitive and anti-competitive behaviour should be drawn by a purpose test. What is needed is an economic test that Harper proposes.</p>
<p>The second change is to revise the national competition policy of Hilmer covering taxis, bookshop trading hours and pharmacies and to extend competition choice to areas such as education, health and the provision of public services. These are important but they are much more complicated than applying competition law to normal businesses. The difficulties that will be experienced are comparable to those experienced in regard to deregulation of university fees and to medical co-payments.</p>
<hr>
<p>*<em>Graeme Samuel, Vice-Chancellor’s Professorial Fellow at Monash University
*</em></p>
<p>The proposed competition policy reforms are a re-energisation of the National Competition Policy reform package commenced in 1995 but suspended by COAG in 2004. The fundamental philosophy underlying these reforms is that the disciplines of competition should apply to all sectors of the economy unless the public interest is better served by retaining anti-competitive restrictions. But the corollary is that governments must place the interests of the public above those of private vested interests. The difficulty of course is in the detail, which the review doesn’t examine.</p>
<p>Governments have previously shirked from implementing so many of the reforms recommended by the Harper panel because of some very strong vested interests, like the Pharmacy Guild, or in relation to restrictive retail trading hours, the pleadings of unions and small business interests in Western Australia, South Australia and Queensland. Other industries, such as taxis, are beset with financial and social complexities flowing from decades of arcane regulations that have placed the public interest at the bottom of the list of policy considerations. </p>
<p>In the end governments have to make up their minds – will they place the public interest first or continue to be beholden to loud and persistent vested interests? Competition should reign supreme and should be presumed to be in the public interest unless it can be demonstrated by objective independent analysis that the public interest is better served by competition restrictions.</p>
<p>We should also remember the technological revolution that is taking place with the digital economy. It’s going to make so many anti competitive regulations of the past simply inoperable. As consumers exercise their choice, using the options available to them in the ever expanding digital and sharing economy, the regulatory mechanisms developed in past decades will prove powerless in the face of overwhelming public preference for how and with whom it deals. Do we see consumers restricting themselves to arcane restrictive trading hours in the 24/7 environment of on line trading?</p>
<h2>Regulatory institutions</h2>
<p>The recommendations as to the structure of the regulatory institutions are very sensible. The separation of utility regulation from the ACCC into a specialist utilities regulator reflects the fundamentally different culture from that associated with pure competition and consumer protection enforcement. </p>
<p>The proposed Australian Council for Competition Policy is essential to provide a continuing process of competition policy reform education and advocacy. </p>
<h2>Amendments to law</h2>
<p>The repeal of the price signalling provisions is eminently sensible. The current provisions are a mutant, resulting from a patchwork of legislative amendments enacted in 2011 which should never have been confined to banks alone but, like the other competition provisions of the law, should have applied economy wide. </p>
<h2>Section 46 - Misuse of Market Power</h2>
<p>This section is titled in the Harper report as “Misuse of market power”. But the proposed amendments have nothing to do with “misuse” for they apply to all conduct by big business.The primary prohibition effectively threatens big business with substantial penalties if it engages in any conduct that has the purpose, effect or likely effect of substantially lessening competition. The section is a misconceived approach to satisfy the urgings of small business groups. </p>
<p>The suggested legislative guidance to the courts is bewildering - it asks the courts and big business to weigh the pro-competitive and anti-competitive impact of conduct, that is conduct which is subject to the charge that it is likely to substantially lessen competition. This is so stifling on the commercial activity of big business that one can only wonder how a committee that on the one hand recommends pro-competitive reforms to commerce, can then proceed to urge an significant intrusive constraint on the commercial activities of big business. It is such a fundamental contradiction in economic philosophy, that it leaves one wondering as to the motivations for this recommendation which, as the Harper panel tabulates, has been rejected in no less that ten reviews over the past four decades. </p>
<hr>
<h2>Separate pricing and utility regulator</h2>
<p><strong>Joe Dimasi, Professorial Fellow, Department of Economics, Monash University:</strong></p>
<p>The Harper Review has sometimes been described as Hilmer Mark2. However, the two reviews differ in at least one major respect. Hilmer’s focus was relatively tight and paid particular attention to the restructure and regulation of monopoly network facilities. It’s fair to say that it had a substantial impact in this area. Harper’s broad mandate has resulted in a report which traverses a wide range of issues with many useful recommendations.</p>
<p>Harper’s wide brief made it difficult to look at all the issues in detail. One area of significant current controversy which escapes attention is the application of regulation to bottleneck network facilities. </p>
<p>Harper’s recommendation to establish a multi-industry access and pricing regulator which is separate from the ACCC, is useful. Given the breadth of the ACCC’s remit and the differences in skills and culture required to undertake these very different roles, that recommendation makes a lot of sense.</p>
<p>However, the way these facilities are regulated is important and requires greater attention. The regulation of utilities and bottleneck facilities today does not look much the way it was envisaged by Hilmer, an issue we’ll be looking at in a forthcoming paper by the Monash Business Policy Forum.</p>
<p>Regulatory decisions can take up to two years and if appealed can take several more years to resolve. This soaks up large amounts of the regulator’s resources.</p>
<p>And most importantly it results in far from socially ideal outcomes. For example, there is a widely acknowledged over-investment in poles and wires in electricity which has been significantly affected by the regulatory system. The rules and regulatory approach rather than just the regulator are the issues here.</p>
<p>When independent utility regulation was introduced in Australia in the 1990s, the aim was to avoid the well-understood widespread pitfalls of cost-of-service seen in the United States, as well as to learn from UK reforms which introduced regulation that provided greater incentives for the regulated business to operate efficiently. </p>
<p>Despite these aims it appears that we have ended up with a system that has the negative features of cost-of-service regulation without some of the improvements that we see, for example, in the US regulatory systems. Perhaps in establishing a separate pricing and access regulator, we also need to look at how we regulate.</p>
<hr>
<h2>Intellectual property</h2>
<p><strong>Bruce Baer Arnold, Assistant Professor, School of Law, University of Canberra</strong></p>
<p>From a consumer, small business and education perspective the report lacks the courage of its intellectual property convictions. It notes sustained cogent criticisms of Australia’s regime by a diverse range of local and overseas stakeholders. It acknowledges some of the plethora of independent fact-based reviews of that regime, including studies on <a href="https://www.mja.com.au/journal/2015/202/6/costs-australian-taxpayers-pharmaceutical-monopolies-and-proposals-extend-them?0=ip_login_no_cache%3D9488441e0981fb1af103ddf8fb3378e4">pharmaceutical patents</a>, software and other IT pricing, and copyright in the digital environment. </p>
<p>The report endorses work by the Productivity Commission, the Australian Law Reform <a href="http://www.alrc.gov.au/inquiries/copyright-and-digital-economy">Commission</a>, the ACCC and parliamentary <a href="http://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=ic/itpricing/report/index.htm">committees</a>. It then squibs by calling for yet more inquiries. One will be an overarching Productivity Commission review over a 12 month period that will allow a nervous government to defer annoying media proprietor Rupert Murdoch, Big Pharma and <a href="https://theconversation.com/clash-of-the-titans-apple-adobe-and-microsoft-under-fire-at-it-pricing-inquiry-12878">Big IT</a> until after the election. </p>
<p>More disingenuously, the report calls for an independent review regarding “negotiating mandates to incorporate intellectual property provisions in international trade agreements”, recognising that trade negotiations require independent transparent analysis of costs and benefits to Australia rather than undue benefits for offshore rights-holders. </p>
<p>The report says “such an analysis should be undertaken and published before negotiations are concluded”, a polite way of saying that both the Coalition and ALP have been sleepwalking towards acceptance of the still-secret TransPacific Partnership Agreement that will punish Australian <a href="http://www.theage.com.au/comment/the-age-editorial/free-trade-not-a-licence-to-rip-off-australia-20131117-2xp5n.html">consumers</a> and the people who pay for the <a href="https://theconversation.com/how-trade-agreements-are-locking-in-a-broken-patent-system-32564">public health system</a>. </p>
<p>The report sensibly calls for ending parallel import restrictions, unlikely to be heeded by the Attorney-General. That common-sense pro-competition call is offset by recommending erosion of the consumer presence on the ACCC. Effective competition policy requires less protection for Pfizer, <a href="https://theconversation.com/apple-google-and-samsung-is-it-peacetime-in-the-patent-wars-26949">Apple</a> and Hollywood, more respect for consumers, and bravery on the part of Governments. Given the history of unimplemented IP reports, don’t hold your breath.</p>
<hr>
<h2>Pharmacy regulation & private health insurance</h2>
<p><strong>Ian McAuley, Lecturer, Public Sector Finance, University of Canberra</strong></p>
<p>In what should be an uncontentious suggestion the review calls for the removal of pharmacy and ownership rules. These regulations are certainly past their use-by date (if they ever had any justification in the first place). They’re one of the last redoubts of strong industry protection, but successive governments have been reluctant to remove these privileges.</p>
<p>The review members seem to have overlooked anti-competitive regulations on non-prescription pharmaceuticals. There are two restrictions protecting pharmacies: the “Schedule 2” list of drugs which can be sold only in a pharmacy, and the “Schedule 3” list of drugs which can be sold only by a pharmacist. </p>
<p>While there is justification for Schedule 3 regulations, it is hard to see how consumers gain any protection from Schedule 2. Pharmacists themselves generally do not operate their counters: taking a Schedule 2 drug to a checkout in a pharmacy is the same as taking any item to a supermarket checkout. </p>
<p>In relation to private health insurance, the review seeks “lighter touch” regulation, including the abolition of price regulation of premiums. This aligns with the general theme of the review.</p>
<p>It also suggests that “health funds could be allowed to expand their coverage to primary care settings.” That suggestion, coming from a body concerned with competition, is bizarre because insurance, by its very nature, is about suppressing price signals, even though price signals are the very mechanism that make competition work. When a service is free at the time of delivery there is an inevitable incentive for over-use and price escalation.</p>
<p>It appears that the review members have gone beyond considerations of competition, and into a general deregulationist ideology. Allowing private insurance into primary care would almost certainly see a steep rise in health care costs, further undermining Medicare’s capacity to keep control on the cost and availability of health care.</p>
<hr>
<h2>Alcohol</h2>
<p><strong>Robin Room, Professor of Population Health & Chair of Social Research in Alcohol at University of Melbourne</strong></p>
<p>The report acknowledges that there were about 40 submissions to it on liquor, most opposing “any change that would restrict the ability of governments to set trading hours or planning and zoning rules in order to address the risk of harm from alcohol”. It says “it is certainly not the Panel’s view that the promotion of competition should always trump other legitimate public policy considerations”, but it nevertheless holds to its principle that “all [such] regulations must be assessed to determine whether there are other ways to achieve the desired policy objectives that do not restrict competition”. </p>
<p>The onus of proof that there’s no other way is thus placed on those arguing for a public health interest. </p>
<p>This is not good enough. We have lived through an era of substantial deregulation in alcohol licensing, in considerable part driven by competition policies. The result has been <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1753-6405.2010.00568.x/full">substantial increases in rates of harm from alcohol</a>, mostly in the form of increased “harm per litre” of alcohol. It is rates of health and social harms due to drinking that have gone up, even where the per-capita alcohol consumption has remained fairly stable. </p>
<p>There’s <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1360-0443.2010.03333.x/abstract">research evidence</a> that the <a href="http://www.ncbi.nlm.nih.gov/pubmed/21896074">increase in the numbers of places</a> where alcohol is sold (in communities which now have little power to resist new licenses), and the <a href="http://onlinelibrary.wiley.com/doi/10.1111/dar.12123/abstract">extension of opening times</a> far into the night, are both implicated in this increase in harm. The increase in licenses has also meant the implicit bargain between the government and alcohol sellers has been broken – a bargain whereby they were given limited protection from all-out competition in return for acting as an agent of the government in minimising harm. </p>
<p>In the hands of the Competition Policy Review, competition has become fetishised as a consideration that can trump all others in setting public policy on markets and professions. Market efficiency and unbounded consumer choice and availability may have economic and ideological value, but they should not given such supreme priority over non-economic considerations. As Keynes put it, economists “are the trustees, not of civilization, but of the possibility of civilization.”</p><img src="https://counter.theconversation.com/content/39582/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joe Dimasi is a former Commissioner and Senior Executive of the ACCC.</span></em></p><p class="fine-print"><em><span>Allan Fels has chaired or co-chaired major inquiries into executive pay, government integrity, parliamentary entitlements, the Access Privacy card (a kind of national identity card), community organisations, the taxi industry, insurance company pricing, and health evaluation programs. </span></em></p><p class="fine-print"><em><span>Graeme Samuel is currently Chairman of the Victorian Taxi Services Commission, Co-director of the Monash Business Policy Forum, and Independent Reviewer to advise the Victorian Government on economic regulation, governance and the efficient operation of the Victorian urban water sector.</span></em></p><p class="fine-print"><em><span>Robin Room has a core research grant from the Foundation for Alcohol Research & Education, and funding from the NHMRC and ARC for alcohol policy-related research. He is a member of the Australian Professional Society on Alcohol and Other Drugs (APSAD), the main national professional society in the field. The policy committee sent a submission commenting on the Harper Committee draft report, as did Professor Room in his own name.</span></em></p><p class="fine-print"><em><span>Bruce Baer Arnold and Ian McAuley do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The removal of restrictions on retail trading hours, pharmacies and parallel imports, and a controversial “effects test” on existing misuse of market power rules are among the many recommendations contained…Joe Dimasi, Professorial Fellow, Department of Economics, Monash UniversityAllan Fels, Professorial Fellow, The University of MelbourneBruce Baer Arnold, Assistant Professor, School of Law, University of CanberraGraeme Samuel, Vice-Chancellor's Professorial Fellow, Monash UniversityIan McAuley, Lecturer, Public Sector Finance , University of CanberraRobin Room, Director, Centre for Alcohol Policy Research, Turning Point Alcohol & Drug Centre; Professor of Population Health & Chair of Social Research in Alcohol, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/394242015-03-31T19:09:33Z2015-03-31T19:09:33ZExplainer: what is the competition ‘effects test’?<figure><img src="https://images.theconversation.com/files/76518/original/image-20150331-1231-rzul1k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Harper competition policy review recommendations include changing the way misuse of market power can be prosecuted. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/cyron/60170135/in/photolist-5fHD3v-6dHoTm-pD7oJS-gkX79d-2ePTp-841x7o-6jou8-4dRD4V-eLoqgq-faBVQA-w3Dj-fP3tAJ-bkw7Jg-6gP4tW-aPDrSB-5QQhr-gpnsD7-oR3YY6-e817Us-epP3-8WNL9c-dXA6vq-68JLCH-nLsAsN-8hhWng-4DprSZ-5rzpwv-e9PuCS-e9PtxQ-e9HPhK-6xFUo-7nuZ7C-dp8h8t-5QQhL-5QQgE-6cZmzE-puNBKq-4GQfE1-6MuJSq-9w9S8w-71A2ww-5GGdGZ-6kc5iS-ospN3-zUhb-64JqKd-34df3o-5QQgZ-5QQgV-5QQhc">Image sourced from www.shutterstock.com</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Extensive lobbying by the Australian Competition and Consumer Commission (ACCC) and some interest groups appears to have brought an “effects test” one step closer, following <a href="http://competitionpolicyreview.gov.au/files/2015/03/Competition-policy-review-report_online.pdf">the recommendations of Ian Harper’s Competition Policy Review panel</a>. </p>
<p>But what is an effects test, and what would it mean?</p>
<p>All the fuss relates to section 46 of the Competition and Consumer Act: the provision of our competition laws which regulates unilateral conduct. There are numerous laws affecting arrangements between two or more parties, but only section 46 - which prohibits the misuse of market power - focuses on big business acting alone.</p>
<h2>How does section 46 work now?</h2>
<p>Section 46 has had several formulations. But for most of the last three decades, it has had the same basic structure. One must prove that the relevant party had substantial market power, that it took advantage of that power, and that it did so for a “proscribed purpose” (generally described as an anti-competitive purpose). </p>
<p>Section 46 as currently drafted is notoriously difficult to establish. The threshold of substantial market power is very high (more than half of the cases fail on this point alone). It is also extremely difficult to prove “taking advantage” - while the courts have said this means no more than to “use” market power, this element accounts for most of the other court failures. </p>
<p>Oddly, proving a company’s purpose does not seem to be a sticking point before the courts, although the ACCC tells us that there are many cases it would have pursued but for this issue.</p>
<h2>What do we mean by an effects test?</h2>
<p>The effects test as proposed by Professor Harper retains the first element of the current section 46 - substantial market power - but removes the other two. </p>
<p>In their place, an effects test has been inserted.</p>
<p>An effects test is a shorthand way of referring to whether conduct has the purpose or likely effect of substantially lessening of competition. This test appears in a number of other provisions of the Competition and Consumer Act, and is perhaps best known in the context of mergers.</p>
<p>Back in 2013, Small Business Minister, Bruce Billson, went on the record as a fan of the effects test, <a href="http://www.heraldsun.com.au/news/coalitions-bruce-billson-wants-to-rewrite-accc-misuse-of-market-power-laws/story-e6frf7jo-1226599639364">saying</a> that it would make it easier for the ACCC to win section 46 cases. </p>
<blockquote>
<p>We are just trying to make sure that the toolkit available to the Australian Competition and Consumer Commission is fit for purpose. In my mind, the toolkit needs to be revisited to deal with the modern and emerging economy. There are some deficiencies.</p>
</blockquote>
<h2>Why is an effects test controversial?</h2>
<p>Why then does the effects test strike fear in so many? The big end of town thinks it will prohibit good (“pro-competitive”) conduct. At the same time, others worry that it makes a difficult test even harder. </p>
<p>Confusingly, both points are valid.</p>
<h2>Could it catch too much? A: yes!</h2>
<p>By looking at effect, not purpose, attention is only focused on the outcome of conduct, not its rationale. But as the High Court said back in its first consideration of section 46: </p>
<blockquote>
<p>Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to “injure” each other in this way… and these injuries are the inevitable consequence of the competition s46 is designed to foster.</p>
</blockquote>
<p>The trouble is that “injuring” your competitors can result in a lessening of competition. So observing such injuries tells you nothing about whether they have occurred due to competition that ultimately benefits consumers or because of a misuse of market power that will harm consumers. </p>
<p>Traditionally, we have relied on the taking advantage element to resolve this dilemma: we have been comfortable with the cut and thrust of competition, so long as the company concerned isn’t taking advantage of its special position in the market. If it is only doing what everyone else is capable of doing, that’s fine. </p>
<p>But the Harper Panel says that taking advantage currently fails to do the job of distinguishing good from bad, as its interpretation by the courts is too unpredictable. It’s not clear, however, how an effects test will do any better. In its draft report, the Harper Panel proposed a defence to discern whether conduct was pro- or anti-competitive. But that defence was widely criticised and has been dropped from the final recommendation.</p>
<p>In its place, the panel has suggested that legislative guidance be provided to the courts in applying the new provision. It further recommends that companies be able to seek authorisation (never before allowed for section 46 conduct): this would allow parties to obtain statutory immunity in advance of engaging in conduct if it can prove that there is a sufficient benefit to the public. Finally, it calls for the ACCC to issue guidelines.</p>
<h2>Could an effects test catch too little? A: yes!</h2>
<p>Completely contrary to the position of big business, some are concerned that an effects test makes proving a contravention of section 46 even harder. Why? Well, there are numerous prohibitions in the legislation which already use the effects formulation, and such cases don’t get to court with any more frequency than do section 46 cases.</p>
<p>Furthermore, the ACCC’s long-term success rate in effects cases is not materially different to its success under section 46. Proving anything substantially lessens competition is extremely difficult.</p>
<p>It is also notable that we’ve had an effects test for misuse of market power for almost two decades with no result. In the telecommunications sector, there is a special effects test applied in addition to the standard section 46. This forms part of a suite of laws that were brought in to keep Telstra in line as the market was deregulated (these laws have also been slated for review). But, despite regular concerns with Telstra’s conduct over the years, the ACCC has never prosecuted an effects case under these provisions. </p>
<h2>Will an effects test mean more cases?</h2>
<p>The real proof will be in the pudding: if an effects test is introduced, will it mean more cases? Whatever the merits of the current test, it is clear that we have too few matters going to Court. </p>
<p>Competition cases are extremely complicated and expensive. Legal costs would start in the vicinity of $2-4 million with the risk of much more if the matter is appealed (as is often the case) or you lose (in which case, you need to pay a significant proportion of your opponent’s costs). </p>
<p>The ACCC’s budget is constrained and private litigants have been missing in action over recent years, so don’t hold your breath for more cases.</p>
<p>All that said, this is just a recommendation. Australian competition policy is a poster child for the saying, “many a slip twixt cup and lip”.</p><img src="https://counter.theconversation.com/content/39424/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexandra Merrett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The “effects test” aims to boost prosecutions for misuse of market power. But will it really make it easier for the ACCC to win cases?Alexandra Merrett, Competition Lawyer; Senior Fellow, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/322822014-10-08T03:43:37Z2014-10-08T03:43:37ZHarper review would reduce us from citizens to mere consumers<figure><img src="https://images.theconversation.com/files/60383/original/nrfcn3sj-1412053609.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The draft report of the Competition Policy Review elevates consumer choice above all other considerations</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Are we consumers or are we citizens? Clearly most of us are both. In a capitalist economy people get much of what they need through competitive markets. Yet we also live within a society and have reasonable expectations that governments will provide a range of services and regulations. </p>
<p>Yet upon reading the recently released draft report of the <a href="http://competitionpolicyreview.gov.au/files/2014/09/Competition-policy-review-draft-report.pdf">Competition Policy Review</a> one could be forgiven for thinking that governments should treat their citizens solely as individual consumers, and that all services should be provided through markets.</p>
<p>The review elevates consumer choice above all other public policy considerations. In doing so, it has potentially far-reaching implications for the way Australian governments provide services. These services include health care, education, child care and a range of others that most people take to be the basic rights of citizenship.</p>
<h2>Competition principles</h2>
<p>Guiding the review are the principles of the <a href="http://www.google.com.au/search?client=safari&rls=en&q=1995+National+Competition+Policy&ie=UTF-8&oe=UTF-8&gfe_rd=cr&ei=OUIqVJbQIMeN8QeB_oHoAw">1995 National Competition Policy</a>. This policy essentially mandates that government activity should be benchmarked against the principles of competitive neutrality and third-party access. </p>
<p>The argument is the public sector should not enjoy an advantage over the private sector in providing services simply because they are run by the government. They also advocate for the privatisation of public services. </p>
<p>To put it bluntly, competition policy codified neoliberalism as a central logic of government. It also institutionalised a government preference for deregulation, marketisation and corporatisation. Since 1995, around 2000 government regulations have been scrutinised for compliance with the principles of competition policy. </p>
<p>It is therefore little wonder that neoliberal theories, such as the inherent virtues of consumer choice and the desirability of profit-oriented corporations providing basic public services, are at the core of the review’s report. </p>
<p>The report is wide-ranging and covers topics from government procurement to anti-competitive conduct and parallel imports. Perhaps most concerning is its recommendations regarding “human services”. </p>
<h2>How the review promotes inequality</h2>
<p>The review recommends that:</p>
<blockquote>
<p>user choice should be placed at the heart of service delivery.</p>
</blockquote>
<p>This sounds good until one realises what this means - a fully marketised system of education, health care, child care, aged care and many other social services.</p>
<p>The problem here is equity. The review does not view access to high-quality public services as a right of citizenship. Rather, it wants to ration social services through the market, where access is determined by an individual’s ability to pay. </p>
<p>Of course, in the utopian vision of the review panel, marketising social services will force private providers to reflect consumer preferences better than government can. Yet markets depend upon inequality. </p>
<p>The reality of marketised service provision is that high-income earners enjoy the luxury of being able to pay for high-quality services. However, the majority of people must make do with lower-quality and cheaper or free services.</p>
<h2>The costs of privatisation</h2>
<p>There are also other costs associated with moving government services to the private sector. For example, choosing the appropriate provider involves significant search costs.</p>
<p>This is especially so in the area of child care where many parents are struggling to find places for their children. The privatisation of this service has also meant that many parents are forced to use centres that have vacancies rather than those closer to home.</p>
<p>Asymmetric information is another problem. For example, in the now-marketised electricity sector, it’s in the interest of the big corporations to make it very difficult for consumers to accurately compare the price of electricity between different companies.</p>
<p>To its credit, the review recognises some of these problems. Yet it largely dismisses them as “transitional”. </p>
<p>One is left wondering when the transition period will end. In Australia we have had three decades of deregulation, marketisation and privatisation. The problems inherent in devolving responsibility for services to the individual consumer haven’t gone away.</p>
<p>Nor does the review do a good job defending its utopian vision of competition and choice. The draft report states that competition “could have” or “may have” benefits. Indeed, the word “may” is used on no less than 302 occasions in the document. Principles so central to its recommendations should have much firmer foundations.</p>
<p>Unfortunately, the idea of “the public” is almost completely absent from the draft report. In its place is the ideology of individual choice. Public provision is relegated to a residual category - a safety net available for those who fall out of the market system.</p>
<p>Decent standards of health care, education, aged care and child care are fundamental to our society. There is <a href="https://theconversation.com/we-can-learn-a-lot-about-public-policy-from-the-nordic-nations-32204">a proven alternative approach</a>: fund these services to make them available to everyone, free of charge as a right of citizenship. Those who don’t want to use public services should also then be free to choose a private alternative.</p><img src="https://counter.theconversation.com/content/32282/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Damien Cahill does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Are we consumers or are we citizens? Clearly most of us are both. In a capitalist economy people get much of what they need through competitive markets. Yet we also live within a society and have reasonable…Damien Cahill, Senior Lecturer, Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/323882014-10-07T19:07:09Z2014-10-07T19:07:09ZWhy handing NBN oversight to a new regulator is a recipe for failure<p>Both the Harper <a href="https://theconversation.com/harper-competition-review-seeks-widespread-change-experts-react-31963">competition policy review</a>, and the more recent <a href="https://theconversation.com/turnbull-leaves-door-open-to-break-up-nbn-co-32376">Vertigan NBN market and regulatory review</a> have widespread implications for economic regulation.</p>
<p>The reports are different in scope and their respective analysis of the Australian marketplace, but both share a determination to see the regulatory role of the Australian Competition and Consumer Commission (ACCC) cut back.</p>
<h2>Harper review</h2>
<p>Despite acknowledging that there are synergies among the functions of competition, consumer protection and economic regulation that can assist the ACCC perform its role, Harper recommends a split.</p>
<p>Under his proposal the access and pricing functions currently exercised by the ACCC, including arbitration functions under the National Access Regime, declarations and access arbitration functions under the telecommunications access regime, and price monitoring functions under the Water Act 2007 would be handed over to a new specialist access regulatory body.</p>
<h2>Vertigan panel</h2>
<p>The ACCC is currently responsible for assessing and enforcing the terms and conditions of access to services on the NBN and for the Structural Separation Undertaking given by Telstra. It is also responsible for setting wholesale prices and terms and conditions of access for NBN services and investigating claims of anti‐competitive conduct by carriers.</p>
<p>The Vertigan report recommends the establishment of: </p>
<blockquote>
<p>“a ‘networks regulator’, which should be a specialised body with its own leadership and staff. This entity’s sole responsibility would be the economic regulation of network industries.”</p>
</blockquote>
<p>This recommendation is made despite the report’s authors acknowledging, with one exception, submissions were generally supportive of the ACCC and felt that it should remain the institution to regulate telecommunications competition and consumer policy. </p>
<p>In fact the report notes that “Most submitters either made no suggestions for change or sought marginal improvements”.</p>
<p>Vertigan provides a wholly inadequate rationale for stripping the ACCC of its telecommunications functions. The essence of his finding is that “the earlier rationale for vesting those arrangements in the ACCC – namely, the expected move to an approach primarily reliant on non‐industry‐specific competition policy instruments – is no longer valid”. </p>
<p>He also argues that “the sheer scale of the regulatory tasks that lie ahead and the high costs of regulatory error suggest a need for those tasks to be undertaken by an entity whose leadership is focused on regulatory functions”.</p>
<p>In my opinion, returning to industry-focused regulation for communications would be a disaster. In 1997 the government closed down Austel, an industry regulator tasked with protecting consumers and carriers from unfair competition and practices. At the time industry and policy makers convinced themselves that in a few short years, no special rules would be needed. Now it seems they have convinced themselves that communications is so complex the nation’s competition regulator can’t handle it.</p>
<h2>What’s the problem with setting up a new regulator?</h2>
<p>Apart from the inconsistency with the current government’s deregulatory and rationalisation thrust, there are some serious flaws in the access regulatory proposal.</p>
<p>The Harper review noted, without dispelling the concern expressed in submissions and consultations, that an industry-specific regulator might be susceptible to “capture” by the regulated industry. </p>
<p>In addition to the risk of industry capture, Harper is opening the door to appointees from state governments with parochial agendas controlling the new economic regulator as they influenced energy regulation for some years. </p>
<p>In circumstances where many billions of dollars of investment are being deployed and some of Australia’s most powerful business interests are looking for a slice of the action, the idea of establishing a new inexperienced and untested regulatory institution is inviting disaster.</p>
<h2>Does the ACCC need a new board?</h2>
<p>Splitting off the access regulatory function of the ACCC is not the only change the Harper panel has in mind. </p>
<p>Even though it acknowledges that “the ACCC is a well-regarded and effective body,” it proposes to replace the current Commission with “a Board, comprising a number of members akin to the current commissioners, who would work full-time in the operations of the ACCC, and a number of independent non-executive members with business, consumer and academic expertise, who would not be involved in the day-to-day functions of the ACCC”. </p>
<p>Having spent 13 years at the ACCC, and five as a non-executive director of the UK Office of Fair Trading, it is my strong view that non-executive board members simply cannot function with the level of knowledge and engagement required in a law enforcement or regulatory decision-making body.</p>
<p>The role of non-executive Board members is to establish clear organisational goals, challenge the executive in their achievement and secure good governance. So much of the work of a law enforcement and regulatory body demands full-time engagement in fast moving, complex and confidential matters. It is bad thinking to split the ACCC, it would be destructive to abolish the Commission.</p><img src="https://counter.theconversation.com/content/32388/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Allan Asher does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Both the Harper competition policy review, and the more recent Vertigan NBN market and regulatory review have widespread implications for economic regulation. The reports are different in scope and their…Allan Asher, Visitor, Regulatory Institutions Network (RegNet) & Chair of Foundation for Effective Markets and Governance, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/320922014-09-26T04:25:17Z2014-09-26T04:25:17ZHarper’s competition review is good news for Netflix consumers<figure><img src="https://images.theconversation.com/files/59987/original/5rrj7cfp-1411617942.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">House of Cards and geographical segmentation tend to get people a little hot under the collar.</span> <span class="attribution"><span class="source">Foxtel</span></span></figcaption></figure><p>It’s been an interesting month in Australian copyright law. </p>
<p>A couple of weeks ago, Communications Minister Malcolm Turnbull <a href="http://www.smh.com.au/federal-politics/political-news/turnbull-admits-unanimous-opposition-to-copyright-law-proposal-20140910-10ethp.html">announced</a> that the government’s proposed reforms to strengthen copyright were dead on arrival. </p>
<p>Then, on Monday, the expert panel conducting the Competition Policy Review, led by <a href="http://competitionpolicyreview.gov.au/review-panel/">Professor Ian Harper</a>, released its <a href="http://competitionpolicyreview.gov.au/draft-report/">draft report</a>. The report recommends the Australian government investigate a range of ways to circumvent geoblocking – that is, overseas content companies using technology and copyright law to segment markets by country in order to extract the maximum value from each jurisdiction.</p>
<p>Harper’s report endorses ways to encourage consumers to bypass geoblocks — good news for the estimated <a href="https://getpocketbook.com/blog/netflix-australia-2-stats-scare-local-players/">200,000 Australians</a> who watch Netflix via a <a href="https://theconversation.com/explainer-what-is-a-virtual-private-network-vpn-12741">Virtual Private Network</a> (VPN) or a US Domain Name System (DNS) server that makes their home computer <a href="http://www.choice.com.au/reviews-and-tests/computers-and-online/networking-and-internet/shopping-online/navigating-online-geoblocks/page/how-to-circumvent-geoblocks.aspx">look like it’s sitting in the US</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59980/original/z7j7s6bc-1411616537.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Netflix offers internet video-on-demand streaming for a monthly subscription fee.</span>
<span class="attribution"><span class="source">EPA/Britta Pedersen</span></span>
</figcaption>
</figure>
<h2>Copyright v competition policy</h2>
<p>The proposals in the report are part of a larger battle between copyright and competition policy that’s been raging for years, and which has seen the gradual erosion of laws that forbade the “<a href="http://www.choice.com.au/reviews-and-tests/money/shopping-and-legal/shopping/parallel-imports.aspx">parallel importation</a>” of copyright works. </p>
<p>Until the 1980s the Copyright Act made it illegal to import genuine copies of copyright material without the permission of the Australian distributor. So, it was illegal to go to a country that had cheaper prices than Australia, buy up genuine-but-cheap books or movies or CDs, and ship them into Australia. </p>
<p>This principle is still part of copyright law, but over the last 30 years various competition policy enquiries have chipped away at the principle, and now it applies to a relatively small number of cases.</p>
<p>Content companies haven’t taken this lying down, and they’ve supplemented the law with numerous technologies that segment markets. That’s why DVDs of movies and videogames have regional coding and when you try to watch clips of The Daily Show or The Colbert Report you end up seeing a black screen and the notice:</p>
<blockquote>
<p>This content is not available in your location.</p>
</blockquote>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=889&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=889&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=889&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1117&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1117&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59990/original/693y4pb9-1411618715.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1117&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Arrested Development (2003)</span>
<span class="attribution"><span class="source">MoviePosterDB</span></span>
</figcaption>
</figure>
<p>It’s also why, until recently, you could go months before you saw hit US television shows and movies: the studios windowed the content to extract the maximum value from each geographical region.</p>
<p>Consumers fought back – geographical segmentation tends to get people hot under the collar – and various technologies of various levels of legality have emerged over time. Region-free DVD players, VPNs, and even illegal streaming sites can be seen as consumer responses to geographical segmentation. </p>
<p>The content industries have viewed each of these responses with both suspicion, <a href="http://en.wikipedia.org/wiki/Universal_City_Studios,_Inc._v._Reimerdes">and sometimes litigation</a>.</p>
<h2>The right to bypass geoblocks</h2>
<p>The proposals in the report by the Competition Policy Review are therefore extremely significant. </p>
<p>They are built around concerns that the law is used by copyright holders to <a href="http://www.choice.com.au/consumer-action/consumer-protection/digital-rights-copyright/have-you-been-locked-out.aspx">price gouge Australian consumers</a> as well as troubling evidence that <a href="http://theconversation.com/brandis-leaked-anti-piracy-proposal-is-unrealistic-29709">Australian consumers lack choice</a> in film and television, face delays in accessing content, and generally feel ripped off by distributors of international content.</p>
<p>Unlike the approach in Canada, where it seems <a href="http://www.budget.gc.ca/2014/docs/plan/ch3-4-eng.html">the law will be changed</a> to forbid copyright-based price discrimination, the Australian Competition Review’s preferred approach is to amend the Copyright Act to make clear that consumers have the right to bypass geoblocks, and also have the government allow and even educate consumers about how to bypass these geoblocks. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59983/original/37trx4f6-1411617119.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Dascha Polanco as Dayanara Diaz in Orange Is The New Black, another Netflix release.</span>
<span class="attribution"><span class="source">Foxtel</span></span>
</figcaption>
</figure>
<p>The report also endorsed the Australian Competition and Consumer Commission’s (ACCC) observation that the reality of consumers bypassing geoblocks has led to reduction in prices and to release of content at the same time as overseas markets. </p>
<p>The report also adopted much of the <a href="http://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=ic/itpricing/report.htm">July 2013 report</a> of the House of Representatives Standing Committee on Infrastructure and Communications into IT pricing in Australia, which recommended changes in the Copyright Act to improve competition. </p>
<h2>Government contradictions</h2>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=888&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=888&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=888&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1116&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1116&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59993/original/92qfcdhk-1411619871.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1116&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Lego Movie poster (2014).</span>
<span class="attribution"><span class="source">MoviePosterDB</span></span>
</figcaption>
</figure>
<p>There are a number of weird ironies here. The most obvious is that three agencies of the Australian government – the ACCC, the Competition Policy Review Panel, and the House of Reps Committee on Infrastructure and Communications – are recommending the exact opposite of the sort of copyright reform the government <a href="http://www.ag.gov.au/Consultations/Documents/Onlinecopyrightinfringement/FINAL%20-%20Online%20copyright%20infringement%20discussion%20paper%20-%20PDF.PDF">rushed into headlong just a few months ago</a>. </p>
<p>These groups argue for weaker, not stronger, copyright laws, in the interests of Australian consumers. </p>
<p>The more-subtle-but-more-important irony is that these government bodies are endorsing copyright infringement. They are careful not to say this directly, but nonetheless it’s true. </p>
<p>Bypassing geoblocks is probably a copyright infringement under the current law, and streaming content from a pirate site definitely is. But it’s these actions which have placed the pressure on content distributors and have made it hard for them to charge as much as they once did, and to continue delaying Australian releases. </p>
<p>Village Roadshow co-chairman Graham Burke noted that holding back the Australian showing of The Lego Movie (2014) was a disaster for them. “No more,” <a href="http://www.smh.com.au/federal-politics/political-news/turnbull-admits-unanimous-opposition-to-copyright-law-proposal-20140910-10ethp.html">he told</a> participants in a recent forum, promising to release on the same day and date as in the United States. Mr Burke was careful not to mention that this pressure came from illegal streaming of the movie.</p>
<p>Harper’s report casts a new light on how copyright costs Australian consumers. It is just the latest entry in a long list of attempts to reform a Copyright Act that no longer works for many Australians. </p>
<p>The government has said it will go back to the drawing board and work out a way to fix copyright, in a way that balances the interests of all stakeholders. </p>
<p>Good luck with that.</p><img src="https://counter.theconversation.com/content/32092/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dan Hunter does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s been an interesting month in Australian copyright law. A couple of weeks ago, Communications Minister Malcolm Turnbull announced that the government’s proposed reforms to strengthen copyright were…Dan Hunter, Dean, Swinburne Law School, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/320192014-09-24T01:30:23Z2014-09-24T01:30:23ZDose of competition can lift higher education productivity and quality<figure><img src="https://images.theconversation.com/files/59768/original/7mt99xng-1411452907.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A little competition would do universities some good. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/michaelmattiphotography/10197758956">Flickr/Michael Matti</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Higher education has barely been touched so far by national competition policy. It was almost invisible in the <a href="http://ncp.ncc.gov.au/docs/National%20Competition%20Policy%20Review%20report,%20The%20Hilmer%20Report,%20August%201993.pdf">original Hilmer Report</a> of the mid-1990s, but features in the <a href="http://www.australiancompetitionlaw.org/reports/2014harper.html">draft Competition Policy Review</a> led by Professor Ian Harper and released this week.</p>
<p>The Harper draft report recommends extending competition policy to human services, including higher education. It discusses access to the title of “Australian University” and suggests that discriminatory funding arrangements (such as the 70% funding of students at private providers) be subject to a stringent public benefit test.</p>
<p>This makes sense because higher education is one of the sectors with the largest potential for productivity gains. Here the government stands not just to save money in this highly subsidised industry, but better education enables workers to be productive over the long term in a complex and rapidly changing global economy. The long-term flow-on productivity effects from quality higher education make it such an important sector for the Harper review.</p>
<p>This is not about narrowing and dumbing down the university experience (we’ve had too much of this already – partly due to government policy) but is about producing flexible and critical minds. The humanities have an important role here. Competition tends to enhance choice and diversity.</p>
<p>Fred Hilmer, who led the original competition policy review and went on to become vice-chancellor of the University of New South Wales, <a href="http://www.afr.com/p/national/scope_of_competition_inquiry_welcomed_K7vVQ1zZr85ICG2Zr51XTM">has been calling</a> for a renewed commitment to the competition policy principles. As the Harper review was announced, he supported a wide scope for the review and called on the government to show the courage to take tough decisions on the basis of its recommendations.</p>
<p>University leaders need to look into their own backyard, because many of the most outrageous and damaging violations of competition policy principles are in higher education. For instance:</p>
<ul>
<li><p>A long-standing cartel of heavily government-subsidised providers called universities severely restricts the entry of new providers. In the past this has been defended on the basis of maintaining quality, but the new quality regulator, TEQSA, has rigorous procedures, which apply to all institutions delivering higher education, regardless of their history. Having an impartial quality regulator was a necessary step for the next stage of reform.
New providers also face unreasonably high hurdles and long delays to be able to use the title of “university”, which would enable them to compete on an equal basis with the incumbents, especially in the market for overseas students. Asking existing vice-chancellors to advise on processes for new universities is like asking Telstra executives to design the rules for new entrants like Optus when telecommunications was opened up. </p></li>
<li><p>Government subsidies are highly discriminatory, violating competitive neutrality. For instance, under the new demand-driven system of student funding, only students at the incumbent public universities are subsidised. </p></li>
<li><p>Government funding for research is restricted to universities. The Australian Research Council Act and associated documents quite sensibly restrict grants to institutions with the physical and intellectual infrastructure to support research. In practice, the list of the institutions that is eligible to apply for funding is (you guessed it!) the incumbent universities. Surely an institution like the Australian College of Theology, established in the 1890s well before most of the universities, with excellent library facilities, quality processes praised by TEQSA and a distinguished record of research and PhD supervision, is better able to support Australian Research Council projects than many of our universities? Why can academics in the small theology departments within our newer universities (such as Charles Sturt, Flinders, Murdoch) apply for Australian Research Council funding and not Australian College of Theology academics? Allowing all researchers an equal chance to apply would be budget-neutral as the available pot of money for which they are competing remains constant. </p></li>
<li><p>Government funding for the training of PhD students is also restricted to universities. If a well-qualified student is thinking of enrolling in a PhD then government support is available if the student enrols in a university, but not in one of the other higher education providers that are currently accredited by TEQSA to offer PhDs. Some have a superior research environment to universities. It says something about quality that some students enrol outside universities despite the crippling financial disadvantages. Surely funding for PhDs should follow TEQSA’s accreditation judgements. The impact on the government budget would be minimal as the existing policy mostly reallocates PhD students between institutions. </p></li>
</ul>
<p>The benefits of fixing these competition policy failures are not just for the approximately 10% of students, teachers and researchers outside the universities. The big benefits will come from the competitive discipline that a level playing field imposes on the incumbent university providers that are 90% of the system. A level playing field will mean that universities have to improve their teaching, trim some of the fat from their marketing and administrative budgets, improve their human resource management practices, and improve the quality and relevance of the research. </p>
<p>There are huge gains to be made from getting serious about competition policy in higher education. Do not doubt that entrenched interests in the universities and higher education unions are strong, well connected and will fight hard against reforms. The size of the gains at stake is indicated by the <a href="http://www.theaustralian.com.au/opinion/pitfalls-of-funds-for-private-unis/story-e6frg6zo-1226885540696">squealing and obfuscation</a> that followed suggestions of reform.</p>
<p>The vice-chancellors squealing loudest are identifying their institutions as most vulnerable to competition from private providers on anything like a level playing field. The louder they squeal the clearer is the need for a good dose of competition in teaching and research.</p><img src="https://counter.theconversation.com/content/32019/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Oslington works for Alphacrucis College, the national college of the Pentecostal Australian Christian Churches. He is also Visiting Professor at Australian Catholic University and Vice-President in NSW of the Economic Society of Australia. </span></em></p>Higher education has barely been touched so far by national competition policy. It was almost invisible in the original Hilmer Report of the mid-1990s, but features in the draft Competition Policy Review…Paul Oslington, Professor of Economics and Dean of Business at Alphacrucis College, Sydney; Adjunct Professor , Australian Catholic UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/319682014-09-22T20:28:44Z2014-09-22T20:28:44ZBig business, market power and why we need more test cases<figure><img src="https://images.theconversation.com/files/59693/original/w7zkn8xp-1411367037.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">When big business misuses its market power, proving it can prove a challenge.</span> <span class="attribution"><span class="source">Riccardo Cuppini/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>In advocating greater competition, less regulation and reduced red tape, the Harper Committee’s <a href="http://competitionpolicyreview.gov.au/draft-report/">300 page draft review</a> of competition policy largely colours between the lines of its <a href="https://theconversation.com/an-ambitious-agenda-for-harpers-competition-review-24947">extremely broad terms of reference</a>.</p>
<p>But in the area of market power, the Committee, led by Australian economist Ian Harper, has delivered some surprising - and somewhat inconsistent - recommendations, some of which will not be welcomed by big business.</p>
<p>For the most part, the Committee seems relaxed about apparent market power issues in various parts of the economy. On access to large infrastructure, for example, it recommends the current regime, which virtually never leads to increased competition, be tightened in favour of infrastructure owners. </p>
<p>Likewise, the Committee is comfortable with the approach to mergers of the Australian Competition and Consumer Commission (ACCC) - examining (and then dismissing) concerns that the competition regulator is too strict when considering mergers. Given the ACCC hardly ever blocks any, many may have thought the concern would have been the opposite.</p>
<p>In relation to misuse of market power, however, the Committee wants to blow up the current law and start again.</p>
<p>Australia’s prohibition against misuse of market power has three key elements (as discussed in <a href="https://theconversation.com/words-matter-thats-why-the-accc-has-got-it-wrong-31213">The Conversation recently by Stephen King</a>): substantial market power, “taking advantage” and the existence of an anti-competitive purpose.</p>
<h2>An “effects” test with a twist</h2>
<p>Over many years in Australia, we have had <a href="http://thestateofcompetition.com.au/wp-content/uploads/2013/11/TSoC-Issue-14-Effects-vs-purpose.pdf">an “effects vs purpose” debate</a>. Generally the suggested change involves removing the purpose element and inserting an effects test in its place. </p>
<p>This new proposal, however, is a little out of left field (although the ACCC did suggest it in its submission). The Committee recommends retaining the substantial market power element, but removing both the “take advantage” and “purpose” aspects in favour of an “effects” test which would be subject to a defence.</p>
<p>This means a corporation with substantial market power would not be able to engage in conduct which has the purpose or likely effect of substantially lessening competition. But if the corporation could show that the conduct reflected a “rational business strategy” by a party without substantial market power <em>and</em> that the conduct was likely to benefit the long-term interests of consumers, then a defence would be made out. </p>
<h2>Room for ambiguity</h2>
<p>Taking the various elements in turn, the Harper Committee considers that “take advantage”, as interpreted by our courts (read together with subsequent amendments to the statute), is “difficult to interpret and apply in practice”. </p>
<p>Opinions may differ as to whether this is true. The High Court has regularly stated that “taking advantage” of substantial market power simply means to use it. But the issue has certainly been a lively one before the courts. </p>
<p>The Committee itself provides some evidence for the claim “taking advantage” is confusing by failing to understand that its proposed defence contains a version of the very same test. Although it says that the meaning of “taking advantage” is “subtle and difficult to apply in practice”, the Committee has effectively used this test to reverse the onus of proof in including the “business rationale” defence. Thus, a potentially over-reaching law would be qualified only via a defence that - given it comprises two limbs, one of which the Committee thinks is difficult to interpret - will likely be very hard to establish. </p>
<p>In any case, the current application of the “effects test” - whether something has the likely effect of substantially lessening competition - is itself ambiguous. This was apparent in one of its more recent substantive considerations by a superior court (the Full Court’s decision in <a href="https://www.accc.gov.au/media-release/a-bundle-of-trouble-baxter-breaches-trade-practices-act">ACCC v Baxter Healthcare</a>). Any examination of the various judgements in that case would leave the reader with no clear understanding of what the law involves. </p>
<p>There is, however, genuine concern that the proposed law could capture pro-competitive conduct that - due to a company’s superior efficiency - results in lessened competition. Some would argue that the effects test, properly interpreted, should not lead to this result. But as the Baxter case demonstrates, there remains plenty of scope for confusion when it comes to the application of this test.</p>
<h2>Why get rid of purpose?</h2>
<p>The Committee also recommends the removal of the purpose element. For many years, the ACCC has argued that “purpose” makes misuse of market power cases too hard. More recently, it has been challenged on this point as the cases suggest otherwise. </p>
<p>The Harper Committee, however, doesn’t engage in that aspect of the debate. Rather, it considers purpose should be removed because it inappropriately focuses on individual competitors, not the process of competition as a whole. This assessment suggests a misunderstanding of the role of the proscribed purposes, which act as a safety net protecting a very limited range of conduct which does not itself harm the competitive process. </p>
<p>So while no-one likes monopoly pricing (other than a monopolist), the purpose element “saves” this conduct from being illegal. Why? To preserve the carrot that prompts companies to improve themselves and their offerings so they can be the best in the business. </p>
<p>While it would be disingenuous to argue that the current law against misuse of market power is perfect, it is relatively well-understood (being considered by the High Court on five occasions). The Harper proposal would throw that jurisprudence out, meaning we would need to start from close to scratch to understand the extent of the law. That may well have the impact of “chilling” competitive conduct, as big business tries to understand the new scope of legitimate activity.</p>
<h2>Either way, there should be more cases</h2>
<p>Arguably, the biggest failing in our competition law is <a href="http://thestateofcompetition.com.au/wp-content/uploads/2014/07/TSoC-Issue-19-private-litigation.pdf">a lack of cases</a>. Perhaps creating an “easier” prohibition might address this issue. But, while the effects test is a regular star of our various competition laws, the ACCC has brought no more effects cases than it has market power cases over the last decade. And its success rate for both types of matters is quite similar. </p>
<p>That said, many of the draft recommendations of the Harper Review should be welcomed. But there is definite room for improvement: to this end, we have further consultation, with submissions on the draft due by 17 November.</p><img src="https://counter.theconversation.com/content/31968/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexandra Merrett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In advocating greater competition, less regulation and reduced red tape, the Harper Committee’s 300 page draft review of competition policy largely colours between the lines of its extremely broad terms…Alexandra Merrett, Competition Lawyer; Senior Fellow, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.