One of the most controversial recommendations of the root and branch review of Australia’s competition laws (the Harper Review1) was the proposed amendment of the Australian misuse of market power prohibition2 to include an effects test (the “effects test recommendation”). The effects test recommendation would see Australia’s misuse of market power provision, which is currently essentially the same as New Zealand’s, extended to cover not only acts that have the purpose of harming competition, but also those which have the effect of substantially lessening competition.
Since the Harper Review’s final report was published on 31 March 2015, the Minister for Small Business, Bruce Billson, has been considering and consulting on the full suite of recommendations. Minister Billson put the effects test recommendation before Cabinet last week, but reportedly encountered strong opposition from key members of Cabinet. That led to the Australian Government taking the decision to defer indefinitely assessment of the effects test recommendation.
The Australian Government’s decision to postpone assessment of the effects test recommendation has been met with mixed responses, which is unsurprising given how controversial the proposal has been. However, concerns have been raised by some commentators that postponement of the effects test recommendation will hold up, or even “sink”, other of the Harper Review’s final 56 recommendations, many of which are far less controversial.3
Implications for NZ’s ‘bonsai review’ of competition law
Like Australia, New Zealand’s misuse of market power prohibition (section 36 of the Commerce Act) does not include an effects test. However, following a recommendation from the Productivity Commission that an “effects test” be considered,4 the New Zealand Government had confirmed that the Ministry of Business Innovation and Employment (MBIE) would undertake a review of competition law, focussed on New Zealand’s current misuse of market power prohibition.5
With MBIE’s review likely waiting on the Australian Government’s response to the Harper Review’s effects test recommendation, the postponement of that response raises questions about both the timing and focus of MBIE’s bonsai review of New Zealand’s misuse of market power provision. In particular, we would anticipate MBIE being reluctant to propose material changes to our misuse of market power prohibition (such as the addition of an effects test), which would place it at odds with its Australian counterpart.
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