Are there any wars between small and large businesses in Australia? Is it necessary for small businesses to have greater protection in the marketplace? Is this an area where our competition laws can play a role?
Monash Business Policy Forum just published a paper by Chris Jose, Graeme Samuel and myself that examines Australia’s current competition laws. This Review is a crucial component because it includes laws that affect small businesses. But, trying to harm big business is not the answer to small business problems. We need to reconsider the protections that small businesses require and understand that consumers are vulnerable in many cases.
Two broad sets of rules regulate competition. They the Part IV of Competition and Consumer Act 2010 and the Australian Consumer Law which found in Volume 3 of that Act. They serve very different purposes.
Competition laws are intend to promote competition in the consumer’s interests. The High Court state that competition laws are intend to promote competition and not protect the private interests or property of corporations. Competition damages competitors. Competition can lead to the extermination of a competitor if it is severe enough.
Competitorship is the result of business rivalry. Competition is about gaining customers Australia from business competitors through better products or lower prices. This is what competition laws attempt to limit. It must do so with care. The law must ensure that competition is in the consumer’s best interest. It must distinguish between fair and vigorous pro-competitive conduct and conduct that will cause harm to consumers over the long term. The law will be conservative because rivals who hurt by pro-competitive behavior have a strong interest to stop it. This will benefit the competitors, but it will also hurt consumers.
This objective of competition laws often forgotten, unfortunately. It is important to clearly state the Act’s objective: The objective of competition laws should be to protect the competitive process and not individual competitors.
The debate about the misuse of market power is a clear example of the failure to grasp the purpose of competition laws. Section 46 of the Act, which is the Act’s main section, makes it illegal for any firm that has substantial market power to use that power for anti-competitive purposes. This law often thought to a protection for small businesses.
Although small businesses (or large ones) can be victims of market power abuse, the true victim is the consumer. Section 46 seeks to protect consumers.
Section 46 being used as a’small business law will result in the protection of competitors and damage to consumers. In the last decade, there have been many suggested and actual amendments to section 46. Some of these were specifically designed to protect individual businesses by limiting competition or weakening the conduct of competitors. These are just wrongheaded.
Other actions, like altering section 46 in order to make illegal conduct with an anti-competitive impact, pose significant risk. An effects test, as we noted in the paper, risks making illegal strong but fair competition by efficient businesses that benefits consumers while harming competitors.
Realize that small businesses face different competition than large businesses and consumers. Small businesses that engage in anti-competitive practices, such as price fixing or price fixing, can cause as much harm to the local community as big business’s anti-competitive conduct. Our competition laws must include small businesses. Small businesses are often not as sophisticated or resourceful as large companies. Small businesses are more vulnerable to unfair and unconscionable conduct on the market. There are already rules in place to protect consumers against such conduct. The consumer laws are the best starting point to help small businesses, and not the competition laws.
The Australian Bureau of Statistics (ABS), estimated that around 7,000 indigenous Australians Aboriginal were self-employed and own a small business in 2006. This represented 6% of all indigenous Australians. It compares with the 17% who own small businesses in the non-indigenous population. According to reports, the number of Aboriginal people who are self-employed has increased to approximately 12,500 over the past seven year. This suggests that there is a growing spirit of entrepreneurship within the Aboriginal community.
The ABS estimates only the number of Australian indigenous entrepreneurs. It is hard to define who or what constitutes an indigenous business. Professor Dennis Foley, from the University of Newcastle, addresses this issue in an article published in the Indigenous Law Bulletin. Foley’s article, Jus Sanguinis The root contention in determining the Australian Aboriginal Business, examines how indigenous businesses are defined. It also explains why this definition is so important. It is actually inextricably linked to the whole issue of Aboriginal identity.
Foley says that the current focus in Australia is to define Aboriginal businesses as those with at least 51% of the share capital held by Aboriginal people. Foley notes that this definition was create to prevent non-Aboriginal businesses from claiming indigenous heritage to fraudulently gain commercial benefits. This is especially true in the areas of Aboriginal artistic products and tourism.
This definition is use by the Australian Government’s Indigenous Business Australia (IBA), to determine which applicants are eligible for assistance and business development. The Office of the Registrar of Indigenous Corporations reports that there are approximately 2,500 Aboriginal and Torres Strait Islander companies registered in Australia. They estimate that there may be twice as many indigenous corporations than have been officially register.
Foley says that the current definition of Aboriginal businesses is not adequate. Foley says that there may be cases where Aboriginal owners own a large portion of the shares in a company. This prevents them from being recognize as indigenous businesses. He gives several examples of notable Aboriginal businesses that are not eligible for the official definition because of the distribution of share capital.
The ABS came up with two operational definitions of an indigenous business in response to these concerns. First, an Aboriginal or Torres Strait Islander-owned business is one where at least one owner identifies themselves as having indigenous heritage. This second definition refers to a business that has a majority of its capital owned by people of Aboriginal or Torres Strait Islander heritage.
Foley also notes that these firms must be privately-own small to medium enterprises (SMEs), with fewer 200 employees. This is due to the complexity of ownership that will likely emerge when a company grows in size and moves towards public listing. He also mentions the Australian Taxation Office’s (ATO) and Indigenous Business Council of Australia’s (IBCA). Use of at least 50% Indigenous ownership to define Aboriginals businesses.
This is because there is no clear definition of what constitutes majority ownership and it is not mandatory. For all Aboriginals and Torres Strait Islander owned businesses to be recognize. Believes this underrepresents the true number of indigenous businesses. Foley identifies the problems this creates for Aboriginals business owners. Who could become ineligible to access opportunities under Reconciliation Action Plan (RAPs) if their shareholding is too small.
The importance of definition is therefore very important. Legitimate Aboriginals businesses who miss out on lucrative opportunities may need to be aware of this. The operational definition of an indigenous business is important because the government’s. Policy on Aboriginals business development might be inappropriately target.
The Tax Institute and the Council of Small Business of Australia (COSBOA), will host a roundtable meeting in May to develop a better definition of small businesses for tax and legal purposes. Why is this important?
Academically, it is crucial to be able to classify and define subjects in order for future research. Taxonomy in the natural sciences is important because it allows for the identification, name and classification of organisms. This will allow for improved measurement in future research. The problem with small business research lies in the lack of consensus on how to classify and define this type of organization.
There are many ways to define small- to medium-sized businesses around the globe. In many regions of Asia, a small business means a company with fewer than 50 employees. It is a business that employs fewer than 50 people and has a turnover below EUR10million annually. In the United States, however, a small business is define as one with less than 500 employees.
Researchers trying to compare businesses from different countries face significant difficulties due to the wide range of small business classifications.
According to the Australian Bureau of Statistics, a small business is one that employs less than 20 people. The business will be operate and own by the owner. Owner-managers of the business will often be the main decision makers. They will contribute to and control all or most the company’s operating capital.
There are many types of small businesses. Micro-businesses with less than five employees are also recognize by the ABS. This allows us to separate them into those that employ or those that have only the owner-managers working for them. Medium-sized businesses can also have 20 to 200 employees.
The graph below shows an interesting pattern in the distribution of such businesses across the entire spectrum of Australian businesses. The first is that the percentage of large companies with over 200 employees is lower than 1%. However, they account for around 35% of all employment. The rest of businesses make up 99%. They split into 33% employing micros, 33% small, and 0.5% medium.
This means that 96% of our businesses employ fewer than five people, and that the majority do not employ any employees at all. These micro-firms are not business organizations. They are entrepreneurs who want to make a living from their entrepreneurial endeavors. There are approximately 1.2 million self-employ Australian business owners who aren’t sub-contractors. The majority of them (79%) support their families through this business activity.
You might wonder why COSBOA or The Tax Institute believe it is important to create a better definition, given that the ABS already defines and measures our small business sector https://qqonline.bet/.
This is because, despite the ABS’s work, the way that small businesses are defined by government to different purposes is not related to the statistical agency’s classification system. The Australian Taxation Office (ATO), for example, focuses on annual revenue and not employment. A small business is defined as one with a turnover of less than 2 million dollars (excluding GST). The ATO may use “aggregated turnover” to determine whether a business is part of a group, or has subsidiaries. It may also consider the firm’s total net assets, which must not exceed $6 million.
Fair Work Australia (FWA), defines a small business in the context of employment as one with less than 15 employees, whether they are full-time or part-time. This definition allows the owner-manager to simplify the process of dismissing employees. The 12-month limit for unfair dismissal claims is not applicable if the employee has been working less than six months.