The ACCC Wants To Make Big Business Responsible For Smaller Rivals' Performance

Getty/Lintao Zhang

In what appears to be a remarkable admission that its competition regime isn’t working as effectively as it should, the ACCC wants to make big business responsible for the performance of smaller rivals.

The AFR reports this morning that at issue is the proposed introduction of an “effects test” which a business must consider when making decisions.

According to Gilbert + Tobin managing director Danny Gilbert, who is also the Business Council of Australia’s competition inquiry taskforce chair, the impact of such a test could even affect everyday business decisions, including product discounts which would need to be referred back up to senior management and executives for approval before being instituted.

The notion that a business, big or small, mustn’t institute a strategy that will harm a competitor seems ridiculous in the extreme. It simply entrenches the current status quo without measuring if that is optimal in the first place and without recognising competition drives innovation or that some businesses may be poorly run.

Indeed, former treasurer Peter Costello told the AFR that he’d considered such a law “probably every year for 12 years as treasurer” but he highlighted that it tended to protect less efficient competitors from a competitive challenge.

What the law seems aimed at is an abuse of market power which seems entirely appropriate at all levels of the economy and in all sectors.

Worryingly, in an economy in search of an economic transition, the BCA’s Gilbert told the AFR that:

“This sort of legislation causes uncertainty, inefficiency and discourages innovation.”

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