Effects test to give SMEs a fairer go

The effects test will mean Australia’s two million small businesses will have greater access to remedies which do not involve the courts

Small business will be better protected against the misuse of market power by bigger players under new changes to competition law.

The so-called ‘effects test’ means a small firm no longer has to prove a bigger rival is deliberately trying to force it out of business, only that it has been affected by its presence.

‘What this will do is enable smaller businesses, emerging businesses, to be better able to compete,’ Prime Minister Malcolm Turnbull told reporters in Canberra on Wednesday.

The change emerged out of Ian Harper’s review of competition laws, but was rejected by former prime minister Tony Abbott.

Mr Turnbull said he had taken it out of the ‘too hard basket’, just as he did with media reform and changing the way in which senators are elected.

Nationals leader Barnaby Joyce said it fulfilled part of the coalition agreement signed with Mr Turnbull in September.

‘We were fighting for a more just process for small business,’ Mr Joyce told reporters in Canberra.

Section 46 of the Competition and Consumer Act will be amended with a new provision preventing firms with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition.

Australia’s two million small businesses will have greater access to remedies which do not involve the courts, such as alternative dispute resolution and an ombudsman.

State and territories will be encouraged to cut red tape for small business, taking a fresh look at standards and licensing.

And collective bargaining will be made simpler for small businesses.

Greens spokesman Nick McKim said it would not only benefit business but consumers, and was a credit to groups which lobbied Mr Turnbull for the change of heart.

Labor says it will lead to a ‘lawyers’ picnic’ as big businesses bring action before the courts and small businesses are left to cover legal costs.

The opposition has instead proposed to allow Federal Court justices to waive a small business’ liability of costs in cases brought by big business.

The new laws are expected to go to parliament in late 2016.

The Business Council of Australia said it was a disappointing decision.

‘If Australia wants to have an innovation-driven economy, this is poor policy,’ BCA president Catherine Livingstone said in a statement.

The BCA would work with the government to ‘minimise the risk and unintended consequences’ from changes to the law.


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