Gaining competitive edge

Professor Ian Harper explains why competition policy reform is critical to position Australia to take full advantage of the opportunities arising in rapidly changing markets.

In September 2014, the Competition Policy Review Panel released its draft report into competition policy in Australia. The Abbott Government commissioned this wide-ranging review and appointed an independent review panel, chaired by myself and including Peter Anderson, Su McCluskey MAICD and Michael O’Bryan QC as members.

The draft report includes 52 recommendations covering competition issues across the economy. Submissions on the draft report closed on 17 November 2014, and were accompanied by numerous public forums, consultations and an international conference. The panel has been encouraged by the constructive and detailed feedback which has helped us to improve, adjust and strengthen recommendations for the final report, due with Government in March 2015.

The review represents the first comprehensive assessment of Australia’s competition policy, law and institutions in more than 20 years, following the landmark Hilmer Review in the early 1990s. Much has changed in the intervening years, and my co-panellists and I see our challenge as designing competition policy settings that are fit-for-purpose for the new challenges and opportunities that face Australia.

Action is needed

Leaders of Australia’s business community understand that forces of change are rapidly altering the way our markets operate. Faced with increased globalisation, population ageing and new technologies, Australia cannot sit idly on the sidelines. Doing nothing is not a viable option if we are to meet the challenges and make the most of the opportunities we face. 

The rise of Asia and other emerging economies provides significant opportunities for Australian businesses and consumers. To take advantage of those opportunities we must be agile and flexible, and foster an environment that encourages innovation to match changing tastes and preferences, both domestically and in our key trading markets.

We must also recognise that our ageing population will give rise to a wider array of needs and preferences among older Australians and their families. This is a new horizon for competition policy.

The growing importance of the services sector, from the pressure of population ageing and increased global integration, suggests that there are significant opportunities that we can secure by driving choice, responsiveness and innovation into human services. Even small changes in these areas over time can deliver major improvements in the lives of ordinary Australians and the strength of the economy.

Fundamental changes are also occurring in the way we do business, from new technologies, which are “digitally disrupting” the way many markets operate, to the way business is done and the way consumers engage with markets.  The challenge for policymakers and regulators is to capture the benefits of digital disruption by ensuring that competition policies, laws and institutions do not unduly obstruct these changes, while still preserving traditional safeguards for consumers.

The draft report proposes a number of recommendations to drive further microeconomic reform in road transport and in water, planning and zoning regulations, and the treatment of intellectual property, and to push ahead with earlier reforms in electricity and gas. It also recommends completing unfinished business from earlier National Competition Policy reforms.

Market power

There is a draft recommendation to reformulate our misuse of market power provision, section 46 of the Competition and Consumer Act 2010.  This issue has been the subject of considerable debate over many years, and has been bogged down in narrow debates about an “effects” test. The draft report proposes a new way of approaching the issue, and the panel has received valuable feedback that we are taking on board as we prepare the final report. 

The draft report also proposes a more streamlined process for mergers, along with a number of other improvements to the law, including various simplifications, and better engagement between business and the Australian Competition and Consumer Commission.