Timing remains the critical factor Early Warner

Monday, 01 April 2002


    Professor Bob Baxt is still eagerly awaiting the Trade Practices Act review

    I had hoped in this column to be able to canvass the issues to be covered in the review of the Trade Practices Act, announced by the Prime Minister before the 2001 election. However, for various reasons, these matters have not been progressed at this point of time. I will be on leave next month and may not be able to comment on the terms of review as soon as they come out. The Prime Minister indicated that the review would be focused on Part IV (the competition provisions) of the TPA and also the administrative regimes already in place. While some aspects of Part IV of the TPA need urgent reform (for example the prohibition against third line forcing which is now a per se breach - no competition effects have to be established) and are unwarranted, needing speedy review and reform - many provisions of the TPA work well. So, for example, I do not believe that the test in relation to mergers needs change at this point. Other areas do need careful consideration and I hope to comment on these in future months.

    I am, however, very concerned at the way in which certain parts of the TPA are being administered. In particular, I am concerned about the authorisation process. The authorisation process is a valuable part of the TPA. It enables parties which might otherwise be in breach of the TPA - for example progressing to a merger, a line of conduct that might raise competition concerns, or in pursuing policy of restricting entry into markets where education standards need to be established - to pursue these transactions. But they must persuade the Australian Competition and Consumer Commission to authorise the merger, etc, on the basis that public benefit may outweigh any anti-competitive detriments. Unfortunately, when the legislation was enacted, apart from some later changes made in dealing with mergers, no time frames were set for the regulator to deal with these authorisation applications. The ACCC itself sets a time frame of four months for more difficult authorisations. But what happens if the ACCC takes longer than four months? What if it takes a year, for example, in dealing with the matter?

    What are the "remedies" in those situations? Can the parties somehow get the matter dealt with more quickly? They do not wish to go to the court because this might upset the ACCC, with which they may have to deal in the future. In any event, even when the ACCC does deal with the matter, "an appeal" could drag the matter on for another six to 12 months. We need some new mechanisms to ensure that the ACCC and the Competition Tribunal deal with these matters more effectively, efficiently and speedily.

    There is also the question of the significant power that the ACCC has to deal with all kinds of issues. These range from investigations under the TPA, providing clearances (the go ahead as it were, in relation to mergers etc) and other issues. The extraordinary powers are clearly important if the regulator is to do its job properly, but is there an effective way to review its activities? In addition, the ACCC wants to have more powers. It wants to be able to issue cease and desist orders (in effect an injunction to prevent someone from engaging in certain activity). It may be argued that such a request may not be unreasonable where persons are engaging in shonky deals that may rip off consumers. But, there is always a danger that vesting too much power in a regulator might encourage it to go too far, creating further problems for the business community and for consumers.

    A balance needs to be struck in relation to these matters and clearly such a balance is not always easy to obtain. This review of the TPA should provide a great opportunity for persons to ensure that they can have a very important and perhaps final input into the work of the ACCC at a time when the regulator has received more and more accolades and brickbats from various sections of the community. This is coming at a time when there are suggestions that the ACCC be given greater powers over other areas (for example in relation to the media).

    More and more areas are being opened up to competition. The ACCC needs to have the expertise and the ability to deal with each of these areas. Unless there is an appropriate mechanism to police the way on which it operates, these extra powers may turn out to be disastrous. This review of the TPA is an important one and all organisations should carefully consider how they will respond to the terms when they are announced. This may be the last chance to deal with these issues in a proactive and sensible manner.


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