The competition review provides a blueprint for the next wave of deregulation and structural reform
Introduction
The Harper competition review provides a unique opportunity. The draft recommendations released in September 2014 are well reasoned, progressive and pragmatic. If implemented, they will position Australia well for the coming decades.
As head of the G20, Australia has a once-in-a-generation opportunity to 'walk the talk' and demonstrate real global economic leadership.
Australia leads the world's G20 economies at a critical stage in the evolution of the world economy. It has been the envy of the world, surviving the global financial crisis largely unscathed. Yet there are economic storm clouds on the horizon. If Australia is to maintain prosperity it must take immediate steps to bolster the flagging productivity. This is the critical context to the Harper review.
So what is so special about the review? It has been 20 years since Australia's competition policy was last reviewed. The Hilmer review had a profound impact on the Australian economy. In 2006, it was one of the most deregulated economies in the Western world. Competition policy reforms led the world and delivered some of the strongest growth rates in the OECD.
Harper review a blueprint
The Harper review provides a blueprint for the next wave of deregulation and structural reform. There are 52 recommendations touching on three general themes.
Firstly, it recommends institutional reforms. Australia's competition policy institutions need reinvigoration. The draft report proposes a high-powered policy review and development entity, the Australian council for competition policy, which could have real influence, overseeing a new regime of commonwealth-state competition payments.
It may also provide policy leadership, including via independent market studies and annual reviews. The review also recommends that competition access and pricing functions be migrated to a new specialist regulator that will subsume the National Competition Council. Fixes to important processes are recommended, including a merging of the much-criticised 'formal merger review' process with merger authorisations. The report also suggests refining governance of the Australian Competition and Consumer Commission (the ACCC) – although the commission structure works well and has been integral to the ACCC's independence.
Competition policy reforms
The review also recommends competition policy reforms. Several sectors are targeted, including health and education, road transport, shipping, taxis and pharmacies. Deregulating parallel importing and relaxing planning legislation are contemplated. The review proposes focusing on national harmonised regulation, including completing reforms of the electricity, gas and water sectors.
Finally, the review recommends refining competition laws. While some have joked that these rival Australia's tax legislation for their arcane complexity, they are some of the best in the world. The review rather focuses on reforming provisions that regularly attract criticism.
Some notable proposed amendments include repealing the Birdsville amendments, which relate to below-cost pricing, streamlining the treatment of joint ventures and relaxing the prohibitions against third-line forcing. The complexity of the criminal cartel provisions and exclusive dealing provisions may be simplified. The prohibition against exclusionary provisions could be repealed. Some more surprising recommendations include a more expansive approach to extra-territoriality, repealing an intellectual property exemption and adopting an 'effects test' for the misuse of market power prohibition (albeit qualified by a new defense, perhaps borrowed from Europe).
If these recommendations are not taken seriously by Canberra, Productivity Commission Chairman Peter Harris says the alternative is a 'low-growth scenario' for Australia.
