Equal in the race

The Minister for Small Business, The Hon Bruce Billson, wants to redress that. He is flagging tougher penalties for dominant players who abuse their market power against small businesses, as part of the Government’s 2014 review of Australia’s competition laws.

And in a bid to stop large businesses gaming the rules, Billson is also considering changing Australia’s prescriptive and complex competition laws to a system governed more by codes and principles.

Billson wants the review to examine whether provisions in the law designed to correct the imbalances and market failure detrimental to small business are living up to expectations, and whether mechanisms for redress are genuinely accessible and of use to small business.

"I won’t prejudge the outcome," he says. "But what I’m hoping will happen is that small businesses will share with the panel their experiences of the competitive marketplace and of the laws that are in place, designed to ensure that businesses big and small that are efficient have a fair and legitimate opportunity to thrive and prosper."

Billson says he’s not trying to tilt the balance in favour of small business; he seeks to ensure that all businesses, regardless of size, have similar opportunities. "Most small business owners I speak with don’t want any special treatment – they just want a fair go," he says. "What that means is we need to recognise that in the economy, smaller businesses are in a different bargaining and negotiating position vis-à-vis the market power of big business, and that’s why the law seeks to deal with that."

The ‘root and branch’ review is scheduled to take all of this year, and promises to be the most far-reaching examination of the nation’s competition laws since 1993’s Hilmer Review.

The small business sector has long complained that SMEs suffer at the hands of large businesses – supermarkets and shopping centres, in particular – which use their size and market position to their advantage, to the detriment of smaller players.

The work on competition policy comes on top of planned reforms to franchising laws and a recently revamped code of conduct for supermarkets in their dealings with small business suppliers. And in recognition of the fact that, often, small businesses have no more market power than individuals when dealing with large businesses, the Government has also promised to extend to small businesses the unfair contracts laws that currently apply to consumer contracts.

The review has been welcomed by all those involved in the small business sector. "The challenge for the competition review is to achieve a level playing field between large business and small business, which will enhance Australia’s competitiveness and, ultimately, our productivity," says Andrew Conway, chief executive of the IPA.

It’s acknowledged in the industry that the terms of reference of the inquiry are sufficiently broad with respect to small businesses, covering issues such as productivity, as well as local and national markets. But major areas of concern are whether existing penalties for breaches are sufficient and how difficult it is for small businesses to seek redress.

These concerns are widely acknowledged by Minister Billson, who believes that penalties need to be strong enough to have a "chilling effect" on any enterprise that’s considering misusing its market power.

"Are those enforcement mechanisms and penalties calibrated to bring about the behaviour change and the conduct we’re looking for? How do you get people back to business? If they’re slow and cumbersome, then an aggrieved small business will run out of money before they get their day of justice," he says.

More minor breaches could be dealt with by redressing any harm the small business in contention has suffered and helping them get back to business.

Billson says Australia’s competition law is "very codified and quite cumbersome" compared with equivalent laws in other first-world jurisdictions, which typically allow large businesses to identify the provisions they need to step around to avoid prosecution while not complying with the spirit of the law. Replacing the current "black letter law" with principles could help us to overcome this problem.

Professor Caron Beaton- Wells, director of the University of Melbourne Competition Law & Economics Network, says Australia’s competition laws have "grown out of all proportion and perspective" since they were enacted in 1974.

Beaton-Wells believes the laws are now "so technical and so prescriptive, there would be very few, if any, business people who could comprehend its meaning for them in conducting their businesses".