New Prime Minister reopens Effects Test discussion
The Australian Competition and Consumer Commission (ACCC) is more likely under the new Coalition deal struck by the new Australian Liberal Party leader Malcolm Turnbull with the National Party to put stronger controls of supermarket power back on the political agenda. Previously, the now-deposed PM Tony Abbott and Treasurer Joe Hockey opposed the broadened Effects Test being introduced into the Competition and Consumer Act.
The ACCC is currently empowered to approve or veto proposed acquisitions that might have a detrimental effect on competition. As an illustration on this existing power the ACCC is scrutinising a deal of Coles’ acquiring nine Supabarn supermarkets in the ACT and NSW.
If the legislative changes go ahead, the major supermarkets Woolworths and Coles may be made more vulnerable to legal action and prosecution by the ACCC and affected third-parties.
The Effects Test
The reform was recommended under the Harper Competition Review Final Report, released in April 2015. In August 2015, the Federal Cabinet gave the go ahead to Small Business Minister Bruce Billson to draft a proposal for changes, which was presented to cabinet on 1 September 2015.
If the test is introduced, section 46: Misuse of Market Power will be changed to consider the effect of a company’s actions, as opposed to that company’s intention. The test is said to offer greater protection for small businesses and consumers against bigger players such as large supermarket brands.
Currently, section 46 requires proof of an anti-competitive purpose or intent, a threshold which has proven a barrier to success in some instances of prosecution. The introduction of an “effects test” would lower the threshold to require only that the effect of the company’s action was to eliminate competition – even if this was unintended by the company.
Widening the scope of section 46 is suggested to enable easier investigation and prosecution of conduct that may otherwise fail the current “purpose” test.
The current test requires proof that the relevant party:
- Had substantial market power; and
- Took advantage of that power; and
- Did so for an anti-competitive purpose.
While many laws affect arrangements between two or more parties, section 46 is unique in its focus on big businesses acting alone.
The test proposed in the Harper Report recommends retention of the “substantial market power” requirement, but replaces the final two elements with a test considering if the conduct had the purpose of likely effect of substantially lessening competition.
The Harper Panel also suggested legislative guidance be provided to courts for the application of the new provision and recommended introducing permissions for authorisations, under which companies could obtain a statutory immunity in advance if it can be proven that the conduct offers a sufficient benefit to the public.
The government had previously stated that it would release a formal response to the Harper recommendations by the end of the year.
Coles’ acquisition of Supabarn supermarkets
The Australian Competition and Consumer Commission (ACCC) is closely monitoring a proposed acquisition by Coles of nine Supabarn supermarkets in NSW and the ACT, announcing on 11 September it had released a Statement of Issues regarding preliminary views on the proposal.
The Statement of Issues provides the ACCC’s preliminary views on the proposal and further lines of inquiry sought to be undertaken. Approximately 60 consumer submissions have been made to date and further submissions from interested parties are invited.
Supabarn is a privately-owned supermarket operator that owns and operates a number of stores in the ACT and NSW. Supabarn “has a differentiated offer to that of the other supermarkets and this is valued by consumers,” noted ACCC Chairman Rod Sims.
“The ACCC is closely examining the effect of removing a supermarket chain with a differentiated offer from the market. In particular, Supabarn is the only full-line supermarket chain in the ACT other than Coles and Woolworths. The ACCC is concerned that Supabarn’s removal may lead to significant competitive harm and loss of choice for consumers”.
Further submissions are due by 1 October 2015 and a final decision is anticipated to be released by 26 November 2015.
Coles is proposing to acquire the Supabarn stores located at:
- Canberra Centre, Crace, Kaleen, Wanniassa and a proposed supermarket site at Casey in the ACT
- Five Dock, Annandale, Sutherland and Sans Souci in NSW.
- Previous AFN article: ACCC attacks government’s Competition Review recommendations, while other sectors respond