The government response to Harper: what's in it for small business?

The Harper Review into Australian competition policy was the product of competing interests: championed by former Small Business Minister, Bruce Billson, it was also said to be the "Son of Hilmer" which suggested a much broader focus.  Onlookers were curious to see which of these competing interests would prevail: at each stage of the process, however, the Hilmer heritage has been elevated over small business interests.  This trend continued when the Federal Government recently announced its response to the Harper Report.  Indeed, small business is not mentioned in the summary of the government's response, which rounds out by noting that "This package of reforms will strengthen Australia's long-term economic performance by promoting more dynamic, competitive and well-functioning markets for the benefit of all Australians".

This is not necessarily a bad thing.  It is hard to reconcile producing a Hilmer-like report (which resulted in sweeping reforms to the Australian economy) whilst simultaneously focusing on small business.  In any case, as a matter of principle, our competition policy should seek to promote efficiency and enhance welfare (the stated objective of the Competition and Consumer Act) agnostically.  That is, it should not favour certain types of business; nor should it disadvantage particular business models. Such preferencing is best achieved using other policies - the tax incentives for small business contained in the last budget being a good example.

But let's get down to the nitty-gritty: what does the government's response to the Harper Report do for small business (and what does it fail to do)?

What's good for small business?

A better written law - nothing to sneeze about!

For some time now, I have written about the systemic disadvantage imposed upon small business due to the complexity of our legal regime.  So it was great to see that Harper's recommendations regarding simplification have been endorsed by the government.  The government recognises that the various prohibitions and exemptions are "unnecessarily complex and impose undue costs on the economy" and will engage in additional stakeholder consultation (including with the ACCC, business groups and legal advisers) to further simplify the law.  

Small business - which is disproportionately disadvantaged by the current complexity - will conversely disproportionately benefit from a law that is written better.  Likewise, the change of third line forcing from per se prohibited (regardless of its impact on competition) to "competition-tested" (that is, only a problem if a sufficient proportion of the relevant market is adversely affected) is a Good Thing for small business. 

Improved exemptions

There are also going to be improvements to the exemptions process.  A new process - likely to be of particular use to small business - is the block exemption power (renamed by the government as "class exemptions").  Based on a similar European process, this will allow the ACCC to immunise classes of conduct, creating "safe harbours".  This will be in addition to the case-by-case immunity processes currently available.  Case-by-case immunity tends to be time-consuming and expensive and is frequently beyond the reach of small business.  Class exemptions are likely to make life a lot easier, although it will be very interesting to see how exactly they are initiated and then assessed.  

Third party merger consultation

In accepting various recommendations designed to improve the merger process, the government observed that the ACCC had recently committed to improve stakeholder engagement with, and understanding of, merger decisions.  In particular, it noted that there will be a trial of third party consultation conferences.  Currently, the ACCC does engage in third party consultation (almost invariably one-on-one and behind doors), so it will be interesting to see how such conferences play out.  One could be cynical, but I think it's likely to be a positive development for those concerned about mergers but perhaps unable to articulate their concerns in "competition language" - a conference format may allow for strength in numbers.

ACCC's processes

There was another small win. Harper didn't like the fact that the ACCC has a specific small business commissioner but the government rejected the recommended changes on this point, observing that the commissioner is "an important aspect of the Government's commitment to ensuring key regulatory bodies are enhanced by appointments with small business insights and experience".  Likewise, the government reaffirmed its commitment to a specialist agricultural commissioner.  While I agree that it is good for the commission to have access to a broad range of views, it is odd that the government's stance coincides with the loss of the ACCC's mergers commissioner (Dr Jill Walker) and the apparent intention not to appoint a successor.  Trust me, a specialist mergers commissioner is a pretty good idea too, and if you had to choose... 

Ambiguous outcomes

The Harper Report's strong deregulation agenda has largely been accepted by government.  The likely outcomes of this for small business are hard to predict: liberalisation of retail trading hours tends to disadvantage small business, and changes to planning and zoning laws may do likewise.  Will small bookstores win or lose if parallel imports are allowed?  The only clear winners, from a small business perspective, are pharmacies - the Pharmacy Guild has nicely "kicked the can down the road" when it comes to deregulation by extending the current arrangements for another five years at least.

It should be noted, however, that most regulatory reforms are matters for the States and Territories, not the Commonwealth.  As such, these form part of a broader "National Competition Policy" agenda, and require a high degree of co-operation for changes to occur.  Nonetheless, the government has certainly shown that it is open to the payment of incentives to States and Territories to co-operate with the reform agenda, a strategy that was very successful following Hilmer.

And then there's lip service

Occasionally, Harper and the government remember that competition reform was a pre-election promise which specifically targeted the small business sector.  But the disinterest is palpable.  The government is decidedly cool in responding to Harper's recommended changes to misuse of market power: while I personally have doubts as to the effectiveness of such changes, there is no doubt that they are valued highly within the small business sector.  But the government has decided more consultation is necessary before it can act - and it has just released a discussion paper to that end.

The only other point of interest (?) for small business is some "blah blah blah" on dispute resolution.  Harper made some half-hearted recommendations, primarily about improving communication by the ACCC as well as better access to advice and dispute resolution services.  The government was even less enthusiastic, whilst managing to pat itself on the back for creating a Small Business and Family Enterprise Ombudsman earlier this year.  I think the following just about sums it up: "The Government has asked the ACCC to consider introducing changes to improve transparency and clarity for small business on why it is unable to pursue certain complaints".  (Perhaps they didn't mean this the way it sounds, but goodness gracious!)

Conclusions

Make no mistake, competition law and policy is a favourite election trigger.  The Harper Report was framed in terms of election promises, but when the rubber hit the road, the target constituency was left well behind.  This need not be a bad thing: it probably is best if competition policy is agnostic as to business type.  But one can hardly be surprised if small business gets a little cynical - there are only so many times you can be hyped up with promises and then let down before you lose interest.

This is one of a series analysing the Government's response to Harper: links to my other pieces are listed at: https://www.dhirubhai.net/pulse/article/governments-response-harper-review-competition-policy-merrett/edit.  In the meantime, if you have any questions or comments, please email me at [email protected]