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Competition reform blueprint will prove a hard task

A major new review has identified government education and health services as the new frontier for competition reform while proposing a shake-up of the rules governing pharmacies, taxi licences, trading hours and parallel imports.

In a blow for the big end of town, the four member competition review panel led by Professor Ian Harper recommended the inclusion of a contentious “effects test” in section 46 of the Competition and Consumer Act to stamp out anti-competitive behaviour.

The proposal for an effects test is the most contentious idea proposed in the draft review and is sure to be opposed by larger players particularly in the supermarket sector. Wesfarmers chief executive Richard Goyder told The Australian Financial Review he was disappointed in the recommendation and warned it would lead to higher prices and increased litigation.

The 52 recommendations in the draft review are designed to help bolster competition as Australia manages three trends including the rise of Asia, an ageing population and the disruptive potential of new technologies.

Review panel member Peter Anderson told Dynamic Business that he wanted to see more small companies engaged in the provision of human services particularly in the pressure areas of health and education.

“This is a new area where the Australian economy must develop strong capability and strength,” he said. “The government plays a very heavy hand in service delivery.”

“It’s not necessarily privatisation. We’re talking much more about actual service delivery, outsourcing, partnering with the private sector… these are areas where we need to become much more adept. Partly it’s also about encouraging more innovation in service delivery without compromising access.”

The review also proposes splitting up the ACCC by creating a new public advocacy body to debate competition law issues and a new access and pricing authority covering a range of sectors from water and energy to telecommunications. The changes would strip back the ACCC to playing a straight policing and enforcement role.

The review also takes aim at some heavily regulated and protected industries including the pharmacy sector where current rules prevent the establishment of a pharmacy close to an existing community pharmacy. Non-pharmacists are also prevented from owning pharmacies.

The review proposed that rules limiting taxi licences be overhauled with licence prices scaling $400,000 in Victoria and NSW. The restriction has resulted in higher prices for consumers. The panel also advocated scrapping barriers preventing new innovative rivals like Uber from competing effectively in the sector.

An extension of trading hours is proposed so as to allow merchants to compete more effectively with online retailers. “The growing use of the internet for retail purchases is undermining the original intent of restrictions on retail trading hours, while at the same time disadvantaging ‘bricks and mortar’ retailers,” the review finds. “This provides strong grounds for abandoning remaining limits on retail trading hours”.

It suggests that remaining restrictions on trading hours be removed as soon as possible, with restrictions to be confined to Christmas Day, Good Friday and the morning of ANZAC Day.

A proposal to scrap parallel import restrictions would also mean Australians are handed access to cheaper books. This would allow goods to be imported into Australia by more people than the authorized Australian manufacturer or distributor. Currently parallel importation of some copyrighted products, including books, is restricted under the Copyright Act.

Other recommendations in the review include the injection of competition principles into zoning and planning decisions, a tweaking of the public interest test allowing third-party access to vital bottle-neck infrastructure and easier facilitation of collective bargaining arrangements for small business.

The 307 page review comes more than 20 years after the last review into competition by Fred Hilmer and has already sparked pushback from a range of industry sectors concerned at its various proposals. The review will take submissions on its proposals until November 17 with a final report due by March next year.

Small Business Minister Bruce Billson has declined to comment and is not ruling in or out various measures. However, former competition tsar Graeme Samuel has conceded that some of the proposals are politically difficult and should have been dealt with years before.

Current head of the ACCC Rod Sims is more optimistic that serious reform can be achieved. “The Hilmer review greatly improved Australia’s prosperity,” he told The Australian Financial Review. “I think the Harper Review can do the same. The government has put a lot of focus on this review. I think the government will take it very seriously.”