Another major report urging a new wave of economic reform was handed to the Federal Government yesterday. This is the long awaited final report from the Harper Competition Review.
The first comprehensive assessment of Australia’s competition policies, laws and institutions in more than two decades.
Its 56 recommendations call for an overhaul of laws covering everything from who can own a pharmacy and where, who can drive a taxi and what hours our shops can open.
It also calls for parallel import restrictions to be scrapped and that would pave the way for cheaper books and second hand cars. But the proposal that has got big business worried is this call for a new effects test to be introduced into competition law and that would make it easier for small businesses to bring a complaint about misuse of market power.
The Federal Small Business Minister Bruce Billson joins us now. Minister, welcome to Breakfast.
Good morning to you Fran and your listeners.
This report on the face of it really does come down on the side of small business, essentially backing the little guy over the big Goliath in the market, whether it’s the big supermarkets, the book industry, the taxi monopoly, it goes on.
What difference would these changes – if they’re implemented – make to the economy, in your view?
Professor Harper was asked that question Fran and he thought the potential to do what the Hilmer review did – that was add about 2.5 per cent to GDP. It would also lay the foundations for efficient businesses, big and small to thrive and prosper and that will deliver better value, new offers, new opportunities and more competitive prices for consumers.
The potential is significant, but certainly the way forward is not without its challenges.
Yeah not without its challenges indeed, does the Government have the appetite for that right now, to embrace this far reaching microeconomic reform? The benefits are tangible and quantifiable as you have just said; do you have the ticker for it?
We have certainly got the appetite for the recommendations; we have got to work through each of them in consultation and collaboration. As your introduction alluded to Fran, some of the recommendations actually go to aspects of our economy that are not within the gift of the Commonwealth alone to tackle.
There is a need to engage with states and territories and local government. Moreover, we have had this discussion in the Intergenerational Report, how we need to lift our rate of productivity; getting out some of the roadblocks and constraints that gum up our economy and stand between our nation achieving its full economic potential.
That is what the report is about and that is what we need to do as a nation.
Well let’s look at how you do that, what’s fair and what’s unfair, let’s look at the recommendation to call for a new effects test to be introduced into competition law.
You have described the existing laws in this area as ‘the hunting dog that won’t leave the porch’ – in other words, they are not working, they have got no teeth.
Can I presume then you are going to back this change, which does seem to give that law real teeth, some say too many teeth?
Yes look I think the recommendation around Section 46, which has activated most of the commentary albeit just one of the actual case experience, it is not like we are coming in new to this topic.
The courts have sought to interpret section 46 – the misuse of market power provision – there is wide spread recognition that it has been very narrowly defined. It certainly does not behave in a way that the law makers anticipated.
In that light it sounds great but does not actually have the teeth and the cut through to bring about change that sees dominant players not using that dominance alone in an anti-competitive way that harms the competitive process and through that is detrimental to our economy and the interests of consumers.
Yeah but big business is warning you have got to get the balance right because you could go the other way. Others agree; the Shadow Treasurer Chris Bowen says that the new test as written by the Harper committee could shill competition, which is the last thing you want to do.
Yes it is interesting.
What do you think of that?
Well the draft report went down and actually nominated some potential defences and they were defined and what they sought to do was balance the pro-competitive impact (or pro-consumer impacts) of competition versus some of the detrimental aspects.
Feedback on that was that was going to not give the clarity that was required and therefore why not re-shape the recommendations.
So, Professor Harper and his eminent panel have taken on board that input and reframed that recommendation.
Interestingly, people are saying it creates uncertainly, well, that is kind of stating the obvious when you bring about change – that the new arrangement is different from one people are familiar with. And the question of shilling effects is quite amusing because the whole point of the competition law is to put some bumper rails either side of dominant businesses and other conduct in our market that is damaging to the economy and to consumers.
So it is designed to encourage people to be more circumspect, particularly where they have got a very dominant market position.
Some would say that we passed the time for that kind of regulation. Now I notice the economist Judith Sloan writing in The Oz says that in this digital age really we should be getting rid of all this regulatory apparatus in this globalised digital economy and should only be looking at the barriers to entry into markets.
That is what Section 46 is seeking to do. It characterised as exclusionary behaviour in a broad sense and it is purely about that Fran. That is what is saying ‘Are dominant businesses able to freeze out or impede or block or in some way inhibit the ability of other less dominant businesses to engage in the economy to make their offer to consumers and to compete for that business on the basis of merit, not pure economic muscle?’
And do you think they are currently? You have been the Small Business Minister and Shadow for a long time now, do you think that they are able to do that and are doing that – the big businesses?
We have seen some cases through the courts that demonstrate that even with the limitations of the law as it currently is, there has been conduct that has been brought to account.
In other areas we have seen cases that people were fairly confident would have met the legal challenges of a misuse of market power, but then found the interpretation the court has brought forward has not carried that through. That is the experience in the field.
What we are about is making sure our economy is supportive of efficient businesses, big and small, so that they can thrive and prosper and compete on the basis of merit.
It also recommended some fine tuning of the law where there is some really black-letter law Fran, that is very detailed, very specific, that seems to suggest parliamentarians have the perspicacity to be able to anticipate down to the minute detail what a dominant business might do in the marketplace.
The recommendations take a broader view and try and streamline and simplify that in the manner that I think Judith was alluding to.
Let’s look at a couple of the industries briefly that are tackled in this report. Changes to the taxi industry, control how taxi licences are issued; you talk about helping businesses that are efficient- well the taxi industry has seen the entry of a number of digital platforms like Uber, which has really disrupted the business model.
Do you agree that the taxi industry has been over controlled, over regulated, and needs to be opened up rather than have businesses like Uber shut out?
Yes I think it is about opening up to what consumers actually want Fran, I mean, what we have seen in the taxi industry – and a great credit to the taxi operators – they have stepped up and recognised that there is a new challenge on the block and that is with Uber and other providers that do not have an intermediary.
There is not a taxi company sitting between the passenger and the provider of the ride and they have really brought a new approach to meeting that transport need. And I have seen some evidence that even in traditional taxi services they have stepped up to meet that challenge.
Would you agree though that there needs to be some quality control around Uber if it is going to be there in the market or whatever the new entry is?
I do, I do think that is necessary, you want to make sure that the cars, the vehicles are fit for purpose, that there are proper insurances.
Those sorts of things are what Harper is alluding to that it can achieve the quality assurance and consumer protection through measures other than seeking to regulate an issue.
Licenses that actually limit the possibility of people meeting what customers want and I think the real [inaudible] is that customers will find what they want and if they need to work around to mould regulatory structures which then the evidence of that is exactly what they will do.
And just finally, the pharmacy industry, there is another recommendation that it should be opened up too, more people should be allowed to operate a pharmacy in different locations.
There is also a lot of commentary that says, well dream on, the Government will never let this happen the pharmacy lobby is too powerful.
It is also a reflection of what is in the Harper report that says when you have got, particularly, you might say, anti-competitive regulatory arrangements, make the case that there is a public policy justification for them, and if there is well that is fine as long as you are up front and clear about it.
The point that is often overlooked is pharmacy is not a regular retail business; it is actually a channel to the marketplace to deliver pharmaceuticals and other primary health care services.
We do not want all of them clustered around Manuka, for instance, in the nice part of Canberra and then have no capacity to meet that primary health need out in the regions.
So Harper has recognised that pharmacy is not just about retailing but broader public policy objectives need to be factored into the Government’s response.
Well Bruce Billson, thank you for joining us. We will keep in touch to see how you go in the implementing of all of these 56 recommendations. Thanks for joining us.
Small Business Minister Bruce Billson.