Does big business inhibit innovation?

Published at Nov 25, 2015, in Features

Following the release of the Competition Policy Review (otherwise known as the Harper Review) in March, the Federal government has delayed the implementation of changes to section 46 regarding misuse of market power.

Headed up by respected Australian economist Ian Harper, the report makes recommendations for sweeping changes across the taxi, retail and transport industries.

Peter Strong, CEO of Council of Small Business Australia (COSBOA), stated, “We are very pleased to see the major recommendations from the Harper Review back in the limelight where they belong.

“It is pertinent that we focus on developing competition in aged care, human services, intellectual property, roads and other key areas. However, it is of course disappointing that several dominant companies have created enough confusion and fear that we have to delay the important changes needed to Section 46.

“The fact is that the biggest companies Australia has ever seen and their union, the Shop Distributive and Allied Employees’ Association (SDA), use their influence and resources to control competition policy to the detriment of productivity, retail diversity and innovation,” said Mr Strong.

The Turnbull government has in fact accepted most of the recommendations, however it has held back on Section 46, citing an inconclusive definition of the term ‘harmful competition’.

Instead a discussion paper will be released with comments due by 12 February and considered in Cabinet by March.

The sticking point seems to be the recommendation to remove restrictions on pharmacy ownership and location rules.

Speaking more broadly about Section 46 Mr Strong said, “When two major companies have such far reaching influence on producers and manufacturers, innovation is stifled. COSBOA knows this and this is why the changes in Section 46 are vital to ensure we do not develop similar damaging domination in other areas, such as aged care.

It is COSBOA’s job to fight for small business and they feel they have been railroaded by the Business Council of Australia.

“We know that the Business Council of Australia and several of its members, particularly WesFarmers, will now, to the detriment of Australia, attempt to ramp up their lobbying and secret manipulations to get their way. Fortunately we have been assured by the government that all discussions will be open and the decisions will be made with competition, innovation and choice in mind as the outcome,” Mr Strong said.

“COSBOA and its members have said for decades that the current state of competition is unfair and the dominant businesses are killing innovation. Ignored for years, we were finally proven right in 2014 when the ACCC successfully prosecuted Coles for unconscionable conduct towards its suppliers. This is why we need to be heard – to ensure the same thing does not ever happen again. Our innovators need space to do their stuff.”

Overall the changes have been welcomed.

Professor Harper told Fairfax Media that he was happy with the government’s response.

The Retail Council was pleased the government would pursue retail trading hour reform and remove parallel import restrictions and Infrastructure Partnerships Australia said it was the first public commitment by government to fix road and rail transport.

Meanwhile Jennifer Westacott, Business Council Chief Executive said, “The national competition reforms of the 1990s left Australia a more competitive and stronger economy, delivering robust real wages growth and a sustained lift in productivity. The comprehensive reform agenda announced by the Treasurer today has the potential to do the same.”

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