Harper Review Competition Policy Draft Report RELEASED

Australia’s first comprehensive review of competition laws and policy in 20 years is well underway and will have serious implications for auto dealers.

Earlier this year Automotive Dealer reported the Government’s intention to conduct the most substantial review of Australian competition laws and policy since the 1993 Hilmer Review.

On September 22, the Review Panel released its Draft Report – a detailed 307 page review of the country’s policies, laws and institutions. These were closely examined against a set of questions which have helped highlight the relevancy of current legislation in today’s rapidly changing marketplace.

The Panel received almost 350 submissions from around Australia, including the AADA, as well as consultation meetings with stakeholders to help form its 52 Draft Recommendations, including the controversial ‘effects test’ designed to toughen competition law.

According to Professor Ian Harper, Chair of the Panel, the Draft Report is a necessary step in modernising Australia’s competition policy:

‘Australia’s competition policy needs to be fit for purpose, and updated for the economic opportunities and challenges Australia will face in coming decades. We face forces for change from increased globalisation, population ageing and new technologies, which are rapidly changing the way our markets operate’ Professor Harper said.

The Draft Report covers an extensive range of issues including the digital revolution and examines policies that impact many areas, such as intellectual property, transport, electricity, water, gas, human services, parallel imports, planning and zoning, ecommerce and more.

The Draft Review – Questions And Answers

What questions guided the Competition Policy Review Panel and what are their overriding objectives for change?

Whilst it’s not possible to list every question used by the Panel to assess Australia’s competition policies, these are some of the key questions which helped determine how ‘fit for purpose’ our current laws are:

  • Does it focus on making markets work in the long term interests of consumers?
  • Does it foster diversity, choice and responsiveness in government services?
  • Does it secure necessary standards of access and equity?
  • Does it encourage innovation, entrepreneurship and the entry of new players?

Professor Harper said that changes are necessary to help Australia deal with changing times and could also grow the economy by 2.5 percent a year over the longer term.

There are three main areas where the Panel has identified the need for change. The first is a reinvigoration of competition policy, including seven priority reform areas covering new and unfinished business.

The Panel has also highlighted the need to reform, enhance and streamline a number of competition laws – whilst in relation to competition institutions, restructuring of the ACCC and the formation of a new national competition reform body have been recommended.

Parallel Imports

A prominent focus of the Draft Report is parallel imports. In recent times the AADA has passionately advocated that laws restricting mass motor vehicle used and parallel importation be retained. At the very least, AADA has argued that if laws are relaxed, strict regulations should be in place to ensure an even playing field for all Australian motor vehicle sellers.

The findings of the Draft Report have highlighted that ‘the removal of remaining parallel import restrictions would promote competition and potentially deliver lower prices for many consumer goods.’

Despite numerous concerns raised by the AADA (and other industry bodies) about the risk to consumer safety and protection as well as the potential for substandard product quality in parallel imported products, the Draft Report is in favour of relaxed parallel import rules and makes particular reference to purchasing books online.

It contends that ‘relaxing parallel import restrictions is expected to deliver net benefits to the community, provided appropriate regulatory and compliance frameworks and consumer education programs are in place.’

The Draft Review’s official recommendation is that remaining restrictions on parallel imports should be removed unless it can be shown that:

  • They are in the public interest; and
  • The objectives of the restrictions can only be achieved by restricting competition

In the case of the retail motor vehicle industry, the AADA believes that restrictions on parallel imports are indeed protecting the interests of the community, consumers and environment especially in a new-car market that is amongst the most competitive in the world. AADA’s views on these issues are contained in its October 2014 submission to Government on its review of the Motor Vehicle Standards Act 1989 – see aada.asn.au.

Industry Codes

The Panel recognises that industry Codes such as the Franchising Code of Conduct (Franchising Code) play an important role by regulating the conduct of participants in the industry. Reference was made to AADA’s submission which supported the use of codes of conduct and noted concerns with the coverage and/or the effectiveness of dispute resolution processes.

The proposed new draft Franchising Code to come into effect on 1 January 2015 contains new civil  penalties, a breach of which will expose a franchisor or franchisee to an infringement notice penalty of $8,500 issued by the ACCC or a pecuniary penalty of up to $51,000 imposed by the court. The Government may also introduce an ‘obligation to act in good faith’ where acting in a way that undermines or denies the other party the benefits of the contract are examples of conduct that may qualify as ‘bad faith’.

Unfair and Unconscionable Conduct in Business Transactions

A number of submissions raised concerns that the unconscionable conduct provisions were deficient because of the ‘lack of specific definition or the difficulty in proving that the conduct meets the standard of judicially defined unconscionable conduct.’ The panel has left the evolution of the meaning of ‘unconscionable conduct’ in the hands of the courts but suggested that active and ongoing review of the provisions be undertaken. The Panel noted the present litigation concerning the ACCC’s allegations of unconscionable conduct in the supermarket sector against suppliers. AADA is monitoring this case on behalf of members.

Planning and Zoning

Planning and zoning issues were raised in a number of submissions and there was clear dissatisfaction with current arrangements including inflexible restrictions placed on retailers in relation to land use and costly approval procedures.
The Panel formed a view that planning and zoning requirements are a significant source of barriers to entry, particularly in the retail sector. The Panel recommended that all Governments include competition principles in the objectives of planning and zoning legislation. Many Dealers who want to expand or diversify their business have experienced the frustration, delays and costs in dealing with local government.

Trading Hours

Another area of particular interest to Dealers; the Draft Report has considered the impact of trading hour regulations on Australian businesses.

The Draft Report contends that ‘consumers have continued to demand greater diversity in how and when they shop’. It goes on to highlight that ‘the growing use of the internet for retail purchases is… disadvantaging [many] “bricks and mortar” retailers.’

As such, it recommends that all remaining restrictions on retail trading hours be lifted, except for the limitations set out on Christmas Day, Good Friday and the morning of ANZAC Day.
This is a welcome recommendation and one that may benefit Dealers looking to attract consumers into their dealerships on days they’d normally be required to close.

Promoting Dealer Interests

Consultation on the Draft Report is open until November 17 and the AADA will make a new submission based on the Panel’s Draft Report recommendations.

After the close of consultation, the Panel will make its final recommendations to the Australian Government by March 2015. The results of the Final Report will be incredibly important to all Australian businesses, including automotive dealerships.

In the meantime, the AADA will continue to work solidly to help ensure as positive an outcome as possible for our industry.

To see a copy of the Draft Report go to http://competitionpolicyreview.gov.au/draft-report/

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