Competition review recommends 'effects test'

A competition effects test has been recommended in a draft review of Australia's competition law and policy led by economist Ian Harper.

The draft report, which makes over 50 draft recommendations aimed at improving the workings of the national economy, is the first comprehensive review of Australia’s competition framework since the Hilmer report in 1993.

One of its recommendations is that Australia adopt a competition effects test, which would provide an added layer protection against moves by large companies to reduce competition.

This would in particular affect the major retailers such as Coles and Woolworths, which are both currently under regulatory scrutiny for using their market power to extract better prices from their suppliers.

"We recommend that the provision be reformulated so that it targets anti-competitive conduct that has the purpose, effect or likely effect of substantially lessening competition," the report says.

"The panel recognises that a business might be deterred from undertaking a business strategy that enhances its competitiveness and creates durable consumer benefit for fear that, if the strategy is successful, it might be assessed as having the effect of substantially lessening competition."

The panel has also recommended that state and federal governments be required to review regulations in their jurisdictions to ensure that unnecessary restrictions on competition are removed.