House of Representatives

Thursday, 1 December 2016 HOUSE OF REPRESENTATIVES 17
In its final report, the Harper review concluded that the current section 46 fails to adequately prevent the misuse
of market power and is not reliably enforceable, for two key reasons.
Firstly, the current section 46 requires that a corporation 'take advantage' of its substantial market power. This
is a poor test for distinguishing competitive from anticompetitive conduct. It permits a corporation with
substantial market power to engage in highly anticompetitive conduct, merely because a corporation without
substantial market power could commercially engage in the same conduct. The test does not recognise that
conduct that is not anticompetitive when undertaken by a corporation that does not have market power can be
anticompetitive when undertaken by a firm that does. This leaves a significant loophole in section 46.
Secondly, the current section 46 only prohibits conduct if the corporation acted with the purpose of damaging
an actual or potential competitor. The Harper review found this focus to be inconsistent with the overriding policy
objective of the act, which is to protect competition and not individual competitors. The reforms in this bill
recognise that it is the competitive process that drives corporations to supply better goods and services and offer
lower prices to consumers, and it is the competitive process that our competition laws need to protect.
The failure of section 46 to adequately prevent the misuse of market power allows anticompetitive conduct to
slow the entry and expansion of new and innovative firms, delays the entry of new technologies into Australia and
impedes economic growth in the long term.
The Harper review recommended amending section 46 to address these problems and strengthen the misuse of
market power provision, by refocusing on conduct with the purpose, effect or likely effect of substantially
lessening competition. The government acknowledged the importance of this issue for businesses and consumers,
and conducted a lengthy consultation process on a range of alternatives before concluding that the
recommendation of the Harper review represented the best option to reform the law.
As amended, section 46 will prohibit corporations with substantial market power from engaging in conduct that
has the purpose, effect or likely effect of substantially lessening competition in markets in which they directly or
indirectly participate.
The amendment is specifically designed to minimise any uncertainty involved with changing the law, by using
existing competition law concepts such as 'substantially lessening competition' and by providing anticompetitive
and procompetitive factors to guide consideration of the purpose, effect or likely effect of conduct.
As a result of this reform, section 46 will better target anticompetitive conduct and better support
procompetitive conduct. Section 46 will be more reliably enforceable and promote strong competition in
Australian markets, benefiting both consumers and the economy.
This reform is an important step to ensure Australia has the best possible competition framework to support
innovation, enhance competition and boost economic growth and jobs. It is a key part of the government's
response to the Harper review, which is all about increasing choice and delivering better services for consumers.
An effective misuse of market power provision is an important and necessary part of competition law,
particularly for Australia's more than two million small businesses which make up more than 97 per cent of all
businesses.
While there are some in this chamber who would prefer to keep the current drafting of section 46 and not see
Australian businesses able to compete on a level playing field, this government recognises that reforming
competition law is one of the best options we have to lift long-term productivity growth and generate economic
benefits that can be shared by everyone.
The reforms in this bill will more effectively focus section 46 on the long-term interests of consumers,
improving the law's clarity, effectiveness and force. They will provide another tool for regulators to ensure
Australian businesses can flourish; new and innovative firms can enter new markets and expand; new
technologies can be introduced into Australia; and consumers can receive the best quality products at the lowest
price.
Most importantly, this reform will ensure the focus of the law is on protecting the competitive process to the
benefit of consumers; it is not about protecting individual competitors or a particular group of businesses.
These amendments will make markets work better for the benefit of all Australians and help to lift our longterm
productivity growth. They will ensure that all business can compete on a level playing field, rewarding
innovative and dynamic businesses that provide the best services at the lowest cost. This will benefit households
by giving them more choice and better value products and services.
Schedule 2 to this bill makes consequential amendments to repeal the telecommunications-specific anticompetitive
conduct laws in divisions 2 and 3 of the act. With the amendment of section 46 and the development
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