Key Issues for the Competition Policy Review Professor Ian Harper Chair, Competition Policy Review Panel UNSW, 6 August 2014

Competition Policy Review 27 March 2014:Panel appointed, TOR issued for 12 month review 14 April 2014:Issues Paper released, submissions sought September 2014:Draft Report to be issued, followed by further submissions March 2015:Report to Australian government

Why is competition important? Competition drives choice, efficiency and innovation These are important contributors to productivity growth, and to improved wellbeing of Australians Competition policy facilitates and protects competition in markets, to enhance consumer welfare

Why review competition policy now? First comprehensive review of Australia’s competition laws and policy in over 20 years View that reform momentum begun under National Competition Policy (NCP) has flagged – For example, submissions pointed to the re-emergence of regulatory barriers with little/no consideration of impact on competition

The Australian economy has changed Considerable change in the Australian economy since implementation of NCP in the 1990s and early 2000s Then, the economy had only recently been opened to global competition Focus of competition policy was on ensuring that the benefits of competition flowed into non-tradeable sectors, such as infrastructure

The Australian economy now Technological change and disruption – lowers (or avoids) barriers to entry – new digital products with very low marginal cost – consumer empowerment, greater information and choice – rapidly expanding network of connections and applications for business and consumers – information abundance rather than scarcity is the norm Competition policy and law will need to: – be flexible to new products and modes of delivery – not impede new sources of competition

How is the Review approaching its task? Panel is focused on three main themes – unfinished NCP reforms (what are the remaining priorities, what have we learned and where can competition be applied further?) – institutional and governance arrangements, to drive reform for the next two decades – competition law (is it fit for purpose?)

Where to now? Priorities – what areas should be focus for competition policy reform? Submissions point to a wide range of potentially anticompetitive regulation and activity – Regulatory barriers in licensing, planning, adoption of standards – Competitive neutrality issues: provision of goods and services by local government

Competition in the supermarket sector Many submissions raised concerns about the supermarket sector, including: – market dominance of Coles and Woolworths – impacts of conduct and acquisitions on small business and suppliers Larger supermarkets and some peak bodies noted: – falling grocery prices, expanding choice, competitors (Aldi) – planning restrictions – restrictions on trading hours – inconsistent liquor licensing rules

Extending previous reforms We have specifically sought comment on extending competition principles to new areas, such as health and education Demographic changes will mean: – shifts in demand, increased spending on health and aged care – greater need for choice and innovation in these sectors But we are alert to the capacity of consumers to exercise effective choice in these markets

Institutional and governance arrangements The Panel is focussed not only on ‘what to do’ but also the best way to get it to happen That is, considering institutional issues that can help sustain competition policy, and retain it as a key ongoing priority for future reform

Competition regulators We are also looking at the regulators – Competition is crucial to the effective operation of markets, and hence to the economy – Regulators therefore play a very important role in the Australian economy – Do the current competition law institutions work effectively? Are the roles and responsibilities set appropriately?

Competition law Submissions broadly support the competition law regime Issues raised about: – Balancing complexity and certainty (cartel offences) – Over-capture: is pro-competitive conduct being deterred through the operation of the law? (current joint venture exception) – Under-capture: is the law capable of attacking all forms of anti-competitive conduct? (facilitating practices) – Mergers (s.50): in particular, the approvals process used by the ACCC and the Tribunal – Misuse of market power (s.46): including whether an ‘effects test’ should be introduced – Exceptions from the competition law: including licensing of intellectual property, employment, liner shipping, etc

Next steps Panel will work through the issues raised, but will not adjudicate them – Panel is looking at broad principles and institutional frameworks Draft Report expected end of September 2014 Final report to Australian Government in March 2015