Media & Speeches

Proposed "Effects Test" Puts Pressure On Household Bills

“The Turnbull government seems intent on putting pressure on the household bills of every Australian,” Business Council president Grant King said as parliament prepares to debate the Competition and Consumer Amendment (Misuse of Market Power) Bill.

“The proposed ‘effects test’ is so broad and ambiguous that companies risk being sued by their competitors merely for offering discount prices for consumers.

“The government’s latest amendment removing ‘mandatory factors’ completely disregards Ian Harper’s recommendation that safeguards are needed to protect against legitimate competitive conduct being captured.

"The mandatory factors didn't provide nearly enough protection for legitimate business conduct, but the answer should have been to improve them, not to remove them altogether.

“Under the government’s plan, a judge wouldn’t even need to consider the interests of consumers receiving more efficient, innovative, better or cheaper products and services before cracking down on a competitive business.

“This is an astonishing amendment from a supposed free-market government. It’s now clear that this law is designed to protect inefficient small businesses from their more efficient rivals, rather than providing better outcomes for consumers.

“To suggest these changes will prevent a lawyers’ picnic is laughable. Companies will be tied up obtaining legal advice every time they plan to reduce prices, improve service or expand their business.

“When law is so broad and vague, no amount of legal advice can give a business the certainty it needs to compete vigorously. Many businesses will simply give up on innovating, cutting prices or opening a new store because they fear being dragged to court.

“It’s not hard to imagine a big retailer deciding not to move into a regional town out of fear of being sued by a smaller competitor, costing that community hundreds of jobs.

“This new law would prohibit any kind of conduct that has the effect of ‘substantially lessening competition’, but fails to define what that actually means. It could be triggered whenever a business decision results in another firm exiting the market, or even choosing not to enter a market, irrespective of whether the conduct is good for consumers.

“Rather than encouraging competition, the government seems intent on putting a handbrake on it.

“Healthy competition requires that businesses of all sizes are able to compete vigorously on merit, because this is in the best interests of consumers. The law should encourage not deter this type of competitive behaviour,” Mr King said.