The big retailers are screaming over the recent Federal Government changes to the Trade Practices Act, which constitute the first serious measures to protect small businesses from unfair competition. Patrick J. Byrne reports.
To put the nation’s competition laws in context, Australia has fallen behind the rest of the developed world in trade practices legislation.
These inadequate laws have allowed increasing concentration of market power in the hands of a few retailers.
For example, the two major supermarkets now control 75-80 per cent of the grocery market and a considerable proportion of the fuel market. There is no effective anti-trust legislation to break up such concentrated market power, and, until now, no protection for small retailers from predatory pricing.
Advocates of a stronger Trade Practices Act (TPA), such as the University of NSW’s Associate Professor Frank Zumbo, have argued that Australia should toughen its laws and draw on the experiences of Canada and Europe in protecting small business and ensuring genuine competition.
The recent amendment to the TPA, which passed in the last sitting of parliament, is the first significant step in this direction. Associate Professor Zumbo drafted the legislation, which was promoted to the government by Queensland Nationals Senator Barnaby Joyce.
Known as the “Birdsville amendment” (to section 46 of the Trade Practices Act), it will stop a company with a substantial market share from selling, or offering to sell, goods or services below cost for a sustained period of time for the purpose of:
a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; or
b) preventing the entry of a person into that or any other market; or
c) deterring or preventing a person from engaging in competitive conduct in that or any other market.
This amendment is aimed to stop anti-competitive below-cost pricing by large companies aimed at destroying competition by putting their competitors out of business.
Importantly, the amendment only targets conduct that is clearly detrimental to competition and consumers.
Major retailers are fuming. They claim that the new law will stop discount, Christmas and end-of-year sales, and force up prices.
However, proponents of the changes argue that this is just mischief-making propaganda. The law won’t stop sales or cause prices to rise.
The new law specifically refers to below-cost pricing for prolonged periods of time, aimed at destroying competition. This has long been recognised as detrimental to consumers. Such conduct is designed to remove vigorous and independent competitors from the market, thereby enabling large companies to dominate markets and then raise prices.
Defending the new arrangements, Senator Joyce said: “The Birdsville amendment will not stop pro-competitive discounting. It will not stop any company from matching a competitor’s price. It will not stop Christmas or any other sales. It will not stop clearance sales or specials.
“The Birdsville amendment will not in any way stop legitimate and pro-competitive discounting. The amendment will only be triggered by below-cost pricing where that occurs over an extended period of time for an anti-competitive purpose.
“For too long such conduct has gone unchallenged as the existing section 46 of the Trade Practices Act has been rendered ineffective by a number of High Court decisions. The Birdsville amendment will change all that for the benefit of small business and consumers,” Senator Joyce said.