Why Labor thinks the effects test won’t create a level playing field for small business

Small businesses need to be better protected from large companies but introducing an effects test is not the way forward, according to Labor’s small business spokesperson Michelle Rowland.

Speaking to SmartCompany this morning, Rowland said there is no denying a “power imbalance” between big business and small business.

However the Sydney MP is against  the introduction of an effects test because she says changing a few words in the  Competition and Consumer Act will actually do very little to help the day-today operations of sole traders and small business people.

“There’s no denying we have an issue between big and small between certain markets,” Rowland says.

“But I’m much more focused on how we facilitate cases and how the law can be used effectively. It doesn’t matter what the law says, if a small business doesn’t have the capacity to bring a case, those words just remain words in a statute. I try to approach this from a practical perspective.”

Labor has concerns of a potential ‘lawyer’s picnic’

Rowland previously worked as a competition lawyer, and says she has seen firsthand how big companies would take each other to court for years over Section 46 – the part of the Competition and Consumer Act that deals with misuse of market power.

She says these sorts of cases are very expensive and unless the Australian Competition and Consumer Commission is bringing the action, small businesses are unlikely to receive a remedy following unconscionable conduct.

“This will end up being a lawyers’ picnic,” Rowland says.

“It will result in a lot of billable hours for these big law firms. And in light of that, you’d think it’d be the big law firms saying change it. But they’re the ones arguing against it… I think you have to question that.”

Labor to release its competition policies shortly

While Labor is opposed to the effects test  just like Woolworths and Wesfarmers, Rowland’s comments stand in contrast to the big supermarkets  because she believes the current competition  landscape  still needs to be tweaked.

Labor is currently costing its competition policies, which it will present in part as an alternative to the effects test, and will reveal  them in the next few months.

Asked whether it will be difficult to sell an alternative to the effects test to voters when business groups such as COSBOA and the Australian Chamber  are advocating strongly for change, Rowland says small business people have their heads screwed on and know a good policy when they see it.

“I think small businesses are much more interested in practical elements of policy,” she says.

“I think they [the Government] are having a hard enough time selling it amongst themselves. I’m very concerned we’ll end up with some half-pregnant amendments that will try to appease everyone.

“We want to have some genuine assistance where the misuse of market power has occurred.”