Harper review: Competitors get hurt for the consumer’s sake

The sole purpose of competition policy and law is to get a better deal for consumers — better prices, better services, new products. It is not about protecting particular businesses, something Small Business Minister Bruce Billson seems not to understand.

He floridly and disingenuously tells us that “small business and family enterprises are the engine room of our economy.” So, we don’t care about big business? Are they the spare wheel?

What Billson doesn’t seem to appreciate is that competition is tough; competitors get hurt. This doesn’t mean the actions of businesses are anti-competitive. Rather, it means that businesses will rationally compete fiercely for market share by providing better and more keenly priced products and services. Protective concessions to small businesses are not good for consumers.

Don’t get me wrong: I think it’s tough running a small business in Australia. But this is mainly because of the enormous amount of regulatory claptrap with which small businesses have to comply and the rigid labour laws that undermine the profitability of many firms run by extremely hardworking owners.

The competition principles set out by the Harper Competition Policy Review Final Report are underwhelming. Take the first one: competition policies, laws and institutions should promote the long-term interests of consumers. Why the long-term? How do we define long-term?

And the right to third-party access is more a case of expropriating some of the assets which have been funded by one set of investors by another set, rather than promoting competition. Should the right to third-party access really be a central competition principle?

There has been a great deal of focus placed on the misuse of market power provisions that sits in the legislation and whether we should have an “effects test” rather than a purpose test. Apart from changing the sloppy drafting in the current legislation — harm to competitors should be changed to harm to competition — there is a very strong case for leaving the test essentially unchanged.

But Billson fervently believes section 46 must be amended to reduce the power of Coles and Woolworths, even though their market share is now being eroded, particularly by Aldi. And the Harper Review panel has obliged, recommending some sort of hodgepodge of purpose, effects or likely effects tests, with some sort of legislative guidance for firms (which sounds particularly unconvincing). Expect the government to act on this one.

The interesting disjunction occurring at the moment is the emphasis being placed by Joe Hockey on the changing nature of the economy and the importance of digital transactions and the Small Business Minister who, McEwen-like, wants to protect small suppliers and family businesses from the forces of competition. The really interesting development in thinking about competition policy is whether we really need all this regulatory competition policy apparatus in the new globalised, digital economy. We really only should be looking at the barriers to entry into markets and junk all those legal prohibitions of specific kinds of firm behaviour, such as exclusive dealing.

It’s hard to see how we get value for our money from the ACCC when its staff worries about online restaurant reviews while delaying for months taking any action against a blatant and financially damaging secondary boycott against Boral imposed by the CFMEU.

There are all the usual suspect in Harper’s final report for opening up sectors and activities to more competition: pharmacies, taxis, retail trading hours, parallel import restrictions, planning and zoning. Incidentally, most of these areas are not controlled by the federal government. And I wouldn’t hold your breath on any action on pharmacies.

It’s not as though most politicians don’t know what to do; it is just that the vested interested are too powerful to make the cost-benefit equation stack up for them — politically speaking — even though consumers and the economy would benefit.