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Section 46 – ‘Game Changer’ for Small Business [UPDATE]

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Australian Competition and Consumer Commission

New laws, which the peak body for small business labels as a “game changer”, have taken a step closer.

The federal government says its competition reform package will further prevent big corporations from misusing market power, provide greater protections for small businesses and more choice for consumers.

To know how the changes will work, read on…

A chance for the small business owner

At the heart of changes to the Competition and Consumer Act is a new section 46 – and its “effects” test.

The new section, which was passed by both houses of federal parliament last month, prohibits companies with substantial market power from engaging in conduct that “has the purpose, or has or is likely to have the effect, of substantially lessening competition.” 

“This is a game changer for small business people,” says Peter Strong, chief executive of the Council of Small Business Australia (COSBOA).

“When a small business is more confident then we know the economy, jobs, and health has more chance. Well done as an effects test can only have a positive effect.”

The Small Business and Family Enterprise Ombudsman, Kate Carnell, supports COSBOA’s view.

“The introduction of an effects test that lowers the threshold for establishing misuse of market power enhances fairness and effective competition,” she says.

“It doesn’t stifle price discounting or loss-leading behaviour.

“It’s no secret that bigger players – whether it be in the retail, farm, manufacturing, construction, transport or grocery sector – have the ability to use their dominance to destabilise the marketplace.

“In these instances, smaller businesses – who are often already struggling to maintain market share – are ultimately squeezed out, which of course leads to less choice, less competition, and higher prices.”

However, the new section 46 will not come into effect until other competition reforms are passed by Parliament. Those amendments to the Competition and Consumer Act are currently in the House of Representatives, with the expectation they will be passed before the year is out.

A law firm, Ashurst, says there is likely to be initial uncertainty about the boundaries of the new section 46, which may result in legal action to deliver clarity.

In such action, Ashurst says “a corporation with substantial market power that is accused of misuse of market power will no longer be able to defend that accusation on the basis that it did not ‘take advantage’ of its market power because it ‘would have and/or could have’ engaged in the same conduct without the market power

“The focus of the prohibition on misuse of market power will shift to conduct that has the purpose or likely effect of substantially lessening competition in any market in which the corporation, or its related bodies corporate, operates.”

There are 3.2 million small businesses in Australia, representing 97 percent of all businesses.


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