On Monday, Australia’s Federal Government released new draft legislation after a panel conducted a review of Australia’s competition laws last year.  The proposed revisions consolidate power and discretion with the Australian Competition and Consumer Commission (the “Commission”) and harmonize some laws with EU competition laws.

Background

In 2013, the Liberal Party in Australia proposed a review of Australia’s competition policy as part of its election campaign in order “to raise Australia’s productivity levels and living standards and meet the economic challenges and opportunities” of today and the future.  After success in the election, the Australian government commissioned a report reviewing Australia’s competition policy (the “Harper Report”).  The panel charged with drafting the report analyzed whether Australia’s current competition policy was addressing the goals of that policy by answering the following questions, among others:

•  Does it focus on making markets work in the long term interests of consumers?

•  Does it foster diversity, choice & responsiveness in government services?

•  Does it encourage innovation, entrepreneurship and the entry of new players?

After reviewing Australia’s current guidelines, the report made 56 detailed recommendations addressing regulations restricting competition and reforming Australia’s competition laws to enhance their effectiveness by refocusing them on protecting and promoting competition.

The Proposal

On Monday, Australia’s Federal Government released draft legislation in response to the Harper Report and its 56 recommendations that includes the following proposed reforms:

•  Adding an effects test to Australia’s misuse of market power provision, such that it prohibits corporations with a “substantial degree of power in the market” from engaging in conduct that has the purpose or “is likely to have the effect” of substantially lessening competition in that or any other market. This addition is intended to make clear that this provision will address harm to the competitive process, rather than to individual competitors.  Some commentators are skeptical that the Commission charged with bringing these cases will be able to prove “effects” because of its “poor track record in proving contested cases about effects.”

•  Introducing a new prohibition on concerted practices, such that a corporation cannot engage with another “in a concerted practice” that has the purpose or effect of lessening competition. This addition is an important change because no agreement or understanding by the competitors will be required.  Furthermore, this addition brings Australia in line with EU law.

•  Making the Commission the initial decision maker in the merger approval process. Currently, a Tribunal assesses and approves all mergers, and the Commission independently assesses the merger and may choose, but is not required, to oppose it before the Tribunal.  The proposed changes would allow the Commission to assess the proposed merger in the first instance, but would leave the Tribunal with appeals oversight.

•  Creating a “class exemption power” whereby the Commission can exempt categories of conduct from antitrust scrutiny. Before granting an exemption, the Commission must be satisfied that either “the conduct would not have the effect or be likely to have the effect of substantially lessening competition or the conduct must result or be likely to result in a benefit to the public outweighing the detriment that would or would be likely to result from the conduct.”

The release of this draft legislation initiates a four week consultation period with States, territories, experts, and the public.  Thereafter, the Government may seek to introduce the legislation in Parliament later this year, though there is speculation that because of its “slender majority,” the Government may need to make trade-offs in order to pass this reform.