The Institute of Public Accountants (IPA) has voiced its support for the passing of the proposed Misuse of Market Power Bill.

“To date, the misuse of market power provision has not adequately protected small business, and by extension consumers, from the predatory actions of companies with substantial market power,” said IPA chief executive officer, Andrew Conway.

“Australia’s concentrated market structure means that some markets are not competitive and, where collective bargaining is not possible or sufficiently expeditious, small or medium sized businesses are especially vulnerable to exploitation or exclusion by firms with substantial market power.

“The IPA has continued to advocate for an ‘effects test’ to be introduced. So we are pleased that the Bill is consistent with the Harper Review in relation to misuse of market power and importantly, provides that a corporation with substantial market power must not engage in conduct having the purpose or likely effect of substantially lessening competition in that or any other market.

“The most significant deficiency with the current test is that, through narrow judicial interpretation of the phrase ‘take advantage’, it does not catch conduct by firms with market power, when the same conduct could have been carried out by a firm without market power.

“This fails to recognise that conduct capable of being engaged in by firms without market power has a greater propensity to foreclose the market and produce economic harm when it is engaged in by firms with market power.

“The proposed s46(1) in the Misuse of Market Power Bill is significantly more convoluted than that proposed in the Harper Report. This has resulted from attempts to define, in some detail, the market or markets in which the substantial lessening of competition must occur.

“In particular, it specifies that the substantial lessening of competition must occur in the market in which substantial market power is held, or any other market in which it, or a related body corporate, supplies or acquires goods or services.

“The IPA believes this amendment to be unfortunate and that it unnecessarily complicates the law. However, as it is not envisaged that this change will significantly diminish the scope of the provision, it does not alter the IPA’s support for the Bill.

“The Harper Report recommendation corrects the two key deficiencies in the existing legislation by removing the ‘take advantage’ element; and, expanding the focus of the provision to capture conduct having the effect of substantially lessening competition in a market.

“The proposed changes to section 46 as reflected in the Bill, represent a sensible and long overdue improvement to Australia’s misuse of market power laws. Importantly, the shift of the focus to competition rather than competitors will help ensure that unilateral conduct by firms with market power cannot be permitted whether its design or effect is to substantially lessen competition,” said Mr Conway.