The Effects Test

  • June 2nd, 2016 at 6:09 am

The Effects Test – A Positive Step In The Right Direction
On 16 March, 2016, the Prime Minister announced that the government would introduce an effects test. Consumers, small business and economic productivity more generally will all benefit from this strengthening of competition laws.

An effective misuse of market power provision is an important and necessary part of competition law, particularly for Australia’s more than two million small businesses which make up more than 97 per cent of all businesses.

The problem with the legislation was that the wording of Section 46 leaves the Australian Competition and Consumer Commission (ACCC) with limited power when it comes to issues of anti-competitive activities and the misuse of market power. Under an effects test, rather than having to prove the intent behind anti-competitive actions, proof of an impact of such an action is needed instead – which is a less difficult hurdle to meet.

The changes the Government has announced will more effectively focus on the long-term interests of both small businesses and consumers, improving the law’s clarity, effectiveness and force.
The Government’s response will directly benefit small businesses through:

  • access to remedies, with the Government supporting the Australian Competition and Consumer Commission to take steps to improve its communications with small business and to more actively connect small businesses to alternative dispute resolution schemes;
  • improving the collective bargaining regime under the competition law, to provide more flexibility and increased information for small businesses, to help improve their bargaining position;
  • encouraging state, territory and local governments to review their competitive neutrality guidelines, to ensure that their commercial operation do not negatively affect commercial businesses; and
    reviewing the anti-competitive impact of regulations, including standards and licensing, freeing up trading restrictions that apply to many businesses.

The change to Section 46 will protect the competitive process and is just one of the many actions the Government is taking to support small businesses, including by extending protections against unfair contract terms to small businesses and introducing Australia’s first Small Business and Family Enterprise Ombudsman.

See below for Media release by Senator Canavan on need for effects test and examples about how an effects test would help small businesses

“Effect Test” Needed for Supermarket Competition –  posted by Matthew Canavan |  December 11, 2015