Supermarket lobby rejects key finding in Federal Government's Harper competition review

The body representing Australia's big two supermarkets, Coles and Woolworths, has rejected a key part of the Federal Government's competition review.

The Harper Review's final report, released on Tuesday, recommended changes to extend shopping hours, allow cheaper books and cars to be brought into Australia, and loosen the regulation around ride-sharing services such as Uber.

One of the most controversial proposals was for a so-called "effects test" for assessing abuse of market power and anti-competitive conduct.

That would change current laws to ban "conduct by firms with substantial market power that has the purpose, effect or likely effect of substantially lessening competition".

But the body representing major retailers including Woolworths and Coles, the Australian National Retail Association (ANRA), has rejected the new test, saying it would have a "chilling effect on competition" and "dampen pro-competitive behaviour".

"Consultation in the weeks ahead will be important in setting the right balance for a healthy competitive environment that may be fierce at times, but should always be fair," ANRA chief executive Anna McPhee said in a statement.

"We would urge the Government to focus on tangible changes that are possible and put an end to the politicisation of barriers that chills investment and has a negative impact on the economy, like removing restrictions on parallel imports, retail trading hours and pharmacy ownership."

Smaller retailers give guarded welcome

The Australian Retail Association (ARA), which represents 5,000 independent and national retailers, said the review provided "good opportunities".

But executive director Russell Zimmerman said he wanted to see more detail about the "effects test".

"We certainly want to see the smaller independent retailers protected," he said.

"But I guess the devil is in the detail, and we would like to see more of the detail on this.

"I think we just need to make sure for those independent retailers that we do not see a big supermarket come down the other end of town and see a whole town wiped out.

"What we have seen in the past is words around ensuring good competition and I do not think we have seen good, strong competition for the small independent retail sector."

Mr Zimmerman said he generally supported the review's suggested removal of trading-hour restrictions, but said penalty rates would need to be looked at if opening times were extended.

Coles and Bunnings' parent company Wesfarmers said it welcomed the "broad direction" of the review's recommendations but said the "effects test" could leave customers worse off.

"There is no compelling evidence of a deficiency in the current law in a competitive economy," managing director Richard Goyder said in a statement.

"There is, however, significant risk that the uncertainty that will arise from the proposed changes may actually stifle, rather than promote, competitive conduct and leave consumers worse off."

Big business should be careful says Fels

A former chairman of the Australian Competition and Consumer Commission (ACCC), Allan Fels, said big business should be careful in its response to the review.

"Supposing big business succeeds in getting the effects test rejected, I think that would sink the whole report – including the broad national competition policies big business desperately want," he said.

Professor Fels said the effects test would "modernise the competition law by simplifying it and by strengthening the protection of small business from economically harmful, anti-competitive behaviour by big business".

He also warned many proposed changes, including targeting taxis, book prices or trading hours, would be politically challenging for the Government to achieve.

"In that area, the reforms are much more difficult in a policy sense, they are more complex, they may be more politically difficult, a bit like deregulation of university fees and medical co-payments," he said.

"But we need to move forward. There is a vast amount of anti-competitive behaviour established by government laws that need to be changed."

Small Business Minister Bruce Bilson said his focus was on protecting the economy and consumers.

"The question of chilling effects is quite amusing because the whole point of the competition law is to put some bumper rails either side of dominant businesses and other conduct in our market that is damaging to the economy and to consumers," he told RN.

 "So it is designed to encourage people to be more circumspect particularly where they've got a very dominant market position."

The Government is set to respond by the end of the year.

Independent senator Nick Xenophon said the new measures would "entrench the dominance of players like Coles and Woolworths".

"Big businesses will continue to get bigger and small businesses will struggle against unfair competition," Senator Xenophon said.

"[The effects test] is completely unworkable, it is complex, convoluted, and will effectively mean business as usual."

Senator Xenophon said he would move amendments to Section 46 based on a simplified effects test after the budget session of Parliament.

ABC News    Dan Conifer   March 31st 2015