The government’s decision, to be announced later today, to reverse its position on competition law changes and establish an “effects test” is a welcome one.

The proposal for an effects test — in which anti-competitive conduct would be judged not on the intention of the business involved, but on its effect on the market — infuriated big business when Professor Ian Harper recommended it as part of his review of competition law commissioned by the Abbott government.

At the time, the proposal created a peculiar alliance between the right of the Liberal Party, Labor and the Business Council of Australia on the one hand and then-small business minister Bruce Billson, the Australian Competition and Consumer Commission, the Nationals and small business on the other.

But the current requirement to establish intent is virtually unworkable as it needs the ACCC to provide evidence that a business with a substantial degree of market power intended to engage in anti-competitive conduct, even if the impact of its conduct is demonstrably damaging to a market and consumers.

Big business claims an “effects test” will create uncertainty, undermine competition and discourage investment. But it will do none of those things — it will merely apply the approach that is used successfully in other areas of competition law, and in many other countries. Like many apocalyptic warnings of the business sector, the railing at an effects test has little solid basis. Today’s decision is a win for small business and consumers.

Peter Fray

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