Run For The Seals

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.

Let Me Explain

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.

Australia Wrong!

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.

How Australia Should The Law Protect Small Businesses?

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.