Australia's largest retailers have trashed a report calling for changes to competition laws to prevent companies with market power from engaging in conduct that would damage competitors.
A report commissioned by the Australian National Retailers Association condemned a recommendation in the Harper competition review panel's draft report calling for an effects test to be introduced to existing misuse of market power rules, saying it could have a "chilling" effect on competition.
The Harper review's draft report, released last month after more than six months of submissions and enquiries, proposed that Section 46 of the Competition and Consumer Act be reframed to stop companies with substantial market power from engaging in conduct if it was likely to have the effect of substantially lessening competition.
The ANRA report, prepared by boutique economic consultancy Pegasus Economics, said the proposal "increased the likelihood of regulatory failure" and had been put forward without much evidence that a problem or a gap existed in existing provisions.
Pegasus said that no case nor evidence had been presented to the Harper review panel as to why the scope of section 46 should be fundamentally expanded. By seeking to insert a substantial lessening of competition clause into section 46, the panel appeared to be "addressing a problem that doesn't exist".
Increasing the scope of section 46 by applying a substantial lessening in competition test coupled with an effects test was a "dangerous combination" that could create all kinds of unintended consequences, the report said, and could be used to protect competitors rather than competition.
The Pegasus report came less than two weeks after the Australian Competition and Consumer Commission launched its second legal action against Coles in the space of five months, accusing Australia's second largest retailer of unconscionable conduct against five small and medium-sized grocery suppliers.
ANRA, which represents major retailers, including Wesfarmers, Woolworths, Bunnings and Harvey Norman, presented the paper to the Competition Policy Review Panel, the Minister for Small Business, Bruce Billson, Australian Competition and Consumer Commission chairman Rod Sims and Josh Frydenberg, the parliamentary secretary to Prime Minister Tony Abbott, during a series of meetings in Canberra on Monday.
The major retailers also pressed their case for other recommendations in the Harper review's draft report, including deregulation of trading hours and parallel import restrictions and further relaxation of restrictive zoning and planning rules.
ANRA chief executive Anna McPhee said it was important that the Harper review panel struck the right balance between prohibiting anti-competitive behaviour and not interfering in pro-competitive efficiency, innovation and entrepreneurship.
"Competition can be bruising [and] any change to competition law should be directed towards protecting the competitive process rather than individual competitors," Ms McPhee said.
"The [Harper] report found little or no evidence has been presented to demonstrate that the existing provision in section 46 is deficient in some way and there is not a strong case for new regulation."
Ms McPhee, who joined ANRA last month after a 20-year career in politics, retail and public advocacy, said the recommendation for an effects test was "an example of lawyers drafting reforms with no insight into the reality of business decision making".
"We had a good conversation today, as part of the consultation process the panel has been undertaking every day since they released the report," she said. ANRA would take into account the Pegasus report when drafting its formal submission to the Harper report.
Mr Billson met with ANRA on Monday and discussed the Harper review as well as online tax policy.
He said the competition review was focused on improving the performance of markets in the interests of consumers.
He encouraged ANRA and any other interested party to make submissions towards the review's final report.
