Woolies decision weakens watchdog the ACCC

The Australian, January 14, 2017:

Small business and the competition law mafia have warned that last month’s decision to clear Woolworths of claims of unconscionable conduct have left a gap in the ACCC’s powers to help small business.

The warnings came in submissions published yesterday by the Senate Economics Committee that is examining proposed changes to section 46, which outlaws abuse of market power.

The 28 submissions released so far have been predictable, with big business from the BCA down opposing changes to section 46 of the Competition and Consumer Act and small business, with some misgivings, supporting the changes.

The committee is due to report in the middle of next month as the Senate considers the government’s proposed amendments.

Crossbenchers such as senator Nick Xenophon support the government’s changes but the Labor Party opposes them.

Last month, Woolworths had a big victory against the ACCC, which failed to prove the retailer was guilty of unconscionable conduct in its “mind the gap” campaign to raise $60 million from suppliers when its profits were down in 2015.

In its submission to the committee, the Law Council, which is comprised of big business lawyers and known in the game as the competition law mafia, warned the Woolworths decision was potentially damaging to the ACCC.

It said: “The utility of unconscionable conduct provisions to help small business from undue conduct by larger businesses is less clear.”

Small business lawyer Hank Spier noted: “Some commentators were a little relaxed with the Harper (Review) changes as the use by the ACCC of the unconscionability provisions assisted unacceptable action by big business against small business. However the recent decision in the ACCC v Woolworths may mean that such comfort is now misplaced.” The Council of Small Business Association said: “Of deeper concern is the decision late last year by the Federal Court that exonerated Woolworths from charges of unconscionable conduct. We are concerned that Woolworths and other big businesses will now have free rein to potentially mistreat their suppliers, many of whom are hard-working Australian small business people.”

It added: “The real potential for a large and dominant company to force suppliers to provide them with funds at short notice, without any real return to the supplier, will inhibit innovation by creating uncertainty.”

The ACCC has decided not to appeal the case.

Some lawyers argue the case was mishandled because it was argued more on conceptual terms without the detailed evidence gathered in an earlier successful case against Coles.

Woolworths for its part made no mention of the case in its submission to the Senate in which it strongly opposed the proposed changes to section 46, arguing the bill “lacks sufficient clarity to facilitate efficient competition”. It urged the Senate to “reject the bill in its current nebulous form”.

In its submission opposing the changes, BlueScope Steel complained the ACCC did not “fully appreciate the strong and potential impact of import competition”.

The monopoly flat steel producer has long used dumping complaints to restrict import competition but ironically has also fallen foul of US dumping complaints over its exports to America.

In its submission, the ACCC backed the proposed changes but urged the Senate to drop the mandatory factors included in the section to guide the courts.

It noted the factors included “increasing competition by enhancing efficiency, innovation, product quality” which the ACCC argued were factors to be considered in a public benefit analysis, not a competition test.

But it backed the main changes, saying the present law was “deeply deficient”.

In its submission, Optus backed the changes to section 46 but warned the restrictions in the present law should not be repealed until the changes to section 46 become law.

The government has already said it would repeal the telecommunications-specific competition rules and Telstra, not surprisingly, backed the move. It noted the new section 46 tests set a significantly lower enforcement threshold than the ­existing telecommunications provisions.

At the same time, the telecom behemoth noted that it didn’t support the proposed changes to section 46, which “risk over capturing pro-competitive conduct”.

The BCA and Bankers Association, as big business lobbies, both opposed the changes but urged that if the Senate approved them there should be a 12-month moratorium on any penalties under the law until such time as everyone sees how the law is being interpreted by the courts.

The stage is now set for the Senate to work its magic on the provision but the real game lies elsewhere. The government has promised to proceed with haste on the other Harper reforms and it seems the section 46 changes only came in early at the urgings of the Nationals.

Scott Morrison had promised to lay down an agenda for the other, more structural Harper reforms from the last COAG meeting but little has emerged from the meeting.

The fear is that Productivity Commission chair Peter Harris was right when he warned being noted by COAG was as good as a policy death warrant.

Power struggle

AGL has emerged with significant new bargaining power over the CFMEU and its 570 workers at the Loy Yang power station after the Fair Work Commission cancelled the existing agreements.

This means they will be potentially subject to the so-called modern award which means pay cuts and superannuation cuts of up to 65 per cent.

AGL has promised not to cut entitlements and the CFMEU will appeal the decision, but the future of the talks now rests with how AGL plans to use its significant new powers.