The Competition Amendment Bill proposes giving the Competition Commission broader powers, with more substantial remedies and the threshold for initiating a market inquiry has been lowered. Key changes include the expansion of the scope of market inquiries, the provision of a notification and consultation process with sector regulators and the granting of substantial powers to the minister in relation to market inquiries.
Since it obtained the power to conduct market inquiries, the Competition Commission has embarked on a number of inquiries including into grocery retail, public transport, private healthcare, liquid petroleum gas and most recently data pricing. Minister Patel has identified market inquiries as the primary tool through which the competition authorities will promote a more inclusive and transformed economy.
Expansion of the scope of market inquiries
The Bill expands the definition of ‘Market Inquiry’ to include an inquiry into the concentration levels and structure of the market, in addition to the current ‘general state of competition in the market’. This is in line with the intention to address economic concentration.
The Commission will be empowered to assess whether there is any structure or feature of the market that has an adverse effect on competition, for instance if any feature of a market for goods or services impedes, restricts or distorts competition. The Commission will consider, for example, the level and trends of concentration and ownership in the market; the barriers to entry in the market; the regulation of the market, including transformation; and past or current advantage that is not due to a firm’s own commercial efforts or investment, such as direct or indirect state support for a firm.
Market inquiries will also consider all market outcomes including employment, pricing, entry and exit of market participants and the ability of national industries to compete in international markets.
Sector regulator notification and consultation
The Bill introduces a notification and consultation process with other relevant sector regulators prior to undertaking a market inquiry to ensure coordination of processes. The concern raised by various stakeholders is that it may lead to a costly duplication of procedures and uncertainty.
In terms of the Bill, the Minister will have the power to prompt the Commission to conduct a market inquiry, as well as the power to appoint deputy commissioners to chair market inquiries. The key concern relates to the potential cost implications and capacity constraints which are likely to be suffered by the Commission as a result of this extensive executive power.
There are a number of other amendments introduced by the Bill which have raised concerns. These include the replacement of a fixed 6 month extension period for market inquiries with a more flexible ‘reasonable’ period, in addition to the initial 18 month period.
As regards confidential information, the Minister is now permitted access to confidential information, and the Commission is empowered to determine whether information is confidential (which is currently under the remit of the Tribunal). Although identifying and the use of confidential information is limited by the Competition Act, executive access to confidential information raises potential concerns.
The Bill proposes extensive remedial powers for the Commission to address the outcomes of market inquiries. Currently the Commission is empowered to make recommendations only, and whilst these recommendations have mostly been voluntarily implemented, they did not carry legal force. Under the Bill, the Commission has the power to enforce its recommendations.
The Commission may take actions to remedy, mitigate or prevent the adverse effect on competition which can include a pricing remedy; and a recommendation to the Competition Tribunal that a firm be required to divest part of its business.
In order to balance the impact of the new powers, the Commission is restricted by the fact that the Minister and any person who is permitted to participate in the market inquiry will now have a right of appeal to the Competition Tribunal. In addition, the Commission is required to ensure that its remedies are reasonable and practicable and must take into account the likely effect of the remedial action and the availability of less restrictive means.
Oral submissions on the Bill were made to parliament in August 2018 and we look forward to seeing whether, and how, the concerns of stakeholders in relation to the Bill will be addressed. The proposed amendments to the market inquiry provisions have not changed much between the two published versions of the Bill and it is unlikely that there will be a substantial deviation in the final act.