Small business concerns central to new competition law review, says Andrew Leigh

Australia’s competition policies will face a fresh federal government review, as market concentration and falling business formation rates set off alarm bells in Canberra.

Treasurer Jim Chalmers and Assistant Minister for Competition, Charities and Treasury Andrew Leigh on Wednesday announced the formation of a new Treasury taskforce, entasked with a two-year review of competition laws, policy settings, and institutions.

It will initially cover proposed reforms to merger laws, the coordination of competition settings across states and territories, whether non-compete clauses are stifling wages, and how new technological and green energy developments are shaping the competition landscape.

The review will produce its findings on a rolling basis, with public consultations set for the months ahead.

Speaking to SmartCompany, Leigh said the review is backdropped by evidence of big businesses dominating their markets.

“We know that market concentration has risen, price markups have increased,” Leigh said.

At the same time, sluggish business formation rates point to the difficulties of building a competing business from scratch, leading to poor outcomes for entrepreneurs and workers alike.

“We know the rate of employing small businesses being created has declined, and job switching has gone down.”

“We’re very keen to see small businesses starting up”: Andrew Leigh

News of the review comes just before the release of the next Intergenerational Report, which is slated to show Australia’s population will both grow, and age, over the next 40 years.

Boosting productivity through new and innovative businesses will be “critical” to provide for that population, Leigh said, underscoring the need for competition settings that allow new entrants to flourish.

“The risk is that people don’t set up a new business because they don’t think they can compete with the incumbents,” he said.

“We’re very keen to see small businesses starting up because that’s a primary source of productivity growth for the economy.

“It’s a chance for workers to have more options.

“And historically, new business formation has been critical to the health of the Australian economy.

“So it’s not just good for those who have started a business, it’s good for the whole ecosystem.”

ACCC merger rule proposal under consideration

The taskforce will initially consider reforms proposed by the Australian Competition and Consumer Commission (ACCC), whose chair, Gina Cass-Gottlieb, in April declared Australia’s merger laws are no longer fit for purpose and leave some markets vulnerable to anti-competitive conduct.

Cass-Gottlieb suggested the merger approval process should be flipped — instead of the ACCC launching federal court challenges to mergers it deems anti-competitive, businesses would have to prove the merits of their proposed merger before it takes place.

Notably, her predecessor in the role, Rod Sims, will sit on an expert panel advising the taskforce.

“The ACCC, under [former chair] Rod Sims and Gina Cass-Gottlieb, has suggested to governments that reforms should be made in the merger space,” Leigh said.

“We’re not announcing specifics on the merger changes today, but we’re certainly open to to making changes if the evidence backs it up.”

Non-competes and renewables on the agenda

Since the Albanese government took office in 2022, it has made unfair contract terms a focal point of its competition agenda.

Those reforms have been largely contained to unfair contract terms between businesses, but the taskforce will consider if non-compete clauses are unfairly stopping workers from taking more productive and higher-paying roles.

“The issue is that one in five workers today are impeded from moving to a better job by non-compete clause, and that’s not just affecting tech executives,” Leigh said.

“It’s also affecting early childcare workers.

“So we’re gonna have a careful look at non-compete clauses, and make sure that they’re not stifling productivity and wage growth in the Australian economy.”

Another key development from the Albanese government is the National Reconstruction Fund, a $15 billion investment pool targeted towards high-tech manufacturing in areas like clean energy, agriculture, forestry and fisheries, and mining.

Ensuring fair competition settings now will help up-and-coming businesses compete in those priority areas, Leigh said.

“We know the energy sector has traditionally been quite concentrated particularly in the generation side, and we’re keen to ensure that as we make the renewables transition, that there is thriving competition there.”

After a year largely defined by soaring energy costs, Leigh flagged the benefits of strong competition rules for both businesses and energy consumers.

“It’s in the interest of the business sector more broadly to have a competitive electricity generation sector,” he said.