Chairman addresses the great divide on misuse of market power

1 June 2015

Proposed Harper reforms offer a way forward on the great divide surrounding section 46 of the Competition and Consumer Act 2010, ACCC Chairman Rod Sims said at the Annual Hodgekiss Competition Law Conference in Sydney on the weekend.

“The Harper Panel’s proposed substantially lessening competition test for section 46 will reduce unfortunate debates, align our law more with overseas law, and make our law logical and in line with the rest of the Act,” Mr Sims said.

As someone forced into the middle of strong and emotional debates about misuse of market power laws, Mr Sims said there are three divides.

The divide between what the words of section 46 mean to the wider public versus what they mean to competition insiders

“There is, on the one hand, an exclusive club, with members of the club knowing that section 46 means ‘avoid damage to the competitive process’. On the other hand, those not in the club, the vast majority of the population, aren’t privy to this insight.”

Mr Sims said the divide between common interpretation and true meaning is bad public policy.

“The ACCC sees much merit in the recommendation of the Harper Review to reframe section 46 towards the purpose or effect of substantially lessening competition.”

“This would directly align section 46 with the intent, which we all share, of protecting the competitive process rather than individual firms,” Mr Sims said.

The divide between Australia and the rest of the world

Mr Sims said section 46 could be brought more in line with the equivalent provision overseas, under three headings;

  • simplification including a minimalist approach to drafting, combined with a greater reliance on case law for interpretation
  • removing the disjointed nexus between market power and the conduct itself (the ‘taking advantage’)
  • re-focusing on effects on competition: the better lens.

“In essence, the proposed Harper recommendation on section 46 would move Australian law closer to international best practice on many fronts,” Mr Sims said.

The divide between the focus on ‘take advantage’ and commercial and economic logic

“Currently, the ‘take advantage’ element of section 46 attempts to provide a filter for sorting between pro-competitive conduct and anti-competitive conduct by a firm with substantial market power. As a filter, it is neither logical, effective or predictable.”

Mr Sims said there are three key problems with the ‘take advantage’ element of section 46 and the way it is implemented.

“First, we need to predict the behaviour of a firm in a hypothetical world that can be difficult to imagine and agree on.”

“…second, and fundamentally, it fails to address the key issue; the likely effect of the conduct on competition.

“…third, and most important, relying on the counterfactual test fails to recognise that the effects on competition of conduct by a firm with a substantial degree of market power can differ to the effects of the same conduct in a competitive market.”

Mr Sims said the ACCC disagrees with arguments that the proposed Harper Panel change will create uncertainty and ‘chill’ competition.

“First, removing the ‘take advantage’ element eliminates a substantial source of existing uncertainty…second, as these changes bring section 46 into line with other provisions of Australian competition law, they should, in my view, reduce uncertainty.”

See also: Section 46: The great divide

Release number: 
MR 95/15
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