The Federal government wants to make it harder for big companies to brutalise their smaller competitors by throwing their weight around the market.
To do this, Prime Minister Malcolm Turnbull has announced the government is accepting a recommendation of the Competition Policy Review completed last year by a team led by economist Ian Harper. It wants to replace the "misuse of market power" test in the Competition and Consumer Act with an "effects test". Sounds great, but what's in it for me?
What is an effects test?
As things stand, a large business can fall foul of the Competition and Consumer Act if it has substantial market power and takes advantage of that power to lessen competition. Predatory pricing is a classic example, where a big company sets prices so low that it forces its competition out of business.
The Australian Competition and Consumer Commission has long complained that it's too hard to prove that market power is "substantial" and that a company has "taken advantage" of that power. Cutting prices might be a misuse of market power, or it might just be vigorous competition, which is what the law is made to encourage in the first place.
Imposing an "effects test" would mean that the regulator will only have to prove that a company's market power is substantial and that its actions lessen competition. It sounds like a small change, but it has big implications.
Alan Kirkland, chief executive of consumer advocacy ground Choice, said the current law focussed on the impact of one business against another -- a big business against a smaller competitor.
Under the reform suggested in the Harper Review, a company is in the wrong if it does something that hurts competition in the marketplace as a whole. An activity by a big player taking advantage of its position only has to harm the market, not a some other particular company.
Why does it matter to me?
In theory, it should matter because competition effects prices.
"The reason that competition is important is that when you have a properly operating market, that means the consumers have more options at lower prices," Mr Kirkland said.
It seems like fairly basic economics: if you give smaller businesses a leg up against big businesses, there will be more companies vying in the marketplace, and the more people offering something to a set number of buyers, the cheaper that thing is likely to be.
Former competition chief Professor Graeme Samuel. Photo: Glenn Hunt
But just last month, former ACCC boss Graeme Samuel made an opposing argument, telling ABC News Radio that an effects test would give small businesses an unfair advantage, and that "we shouldn't have big businesses being penalised for engaging in pro-competitive behaviour".
In any case, Melbourne University competition law expert Alexandra Merrett, formerly a senior enforcement lawyer for the ACCC, said it will be a long time before any such effects wash through the legal system.
"This is a long endgame," Dr Merrett said. "Let's say that we get changes through this year. We then have to wait for conduct to occur. You then have to wait three to four years for the ACCC to investigate it and then three to four years for the case to get through the courts to a high enough level. This could take years."
In the meantime the change in the law would discourage companies from bullying their competition to avoid becoming a test case. But it would also discourage them from aggressively lowering prices in case they look like a bully to a legal system searching for one.
In any case, Dr Merrett said, there was still a long way to go before the new policy became law. Once it did, the onus would be on the ACCC to show the change was worth it by bringing substantial cases that were apparently too hard under the previous system.
"The ACCC has been calling for this for a long time," she said. "It will be time to put its money where its mouth is."