‘Birdsville’ predatory pricing laws set to stay

It is looking increasingly likely that the predatory pricing law known as the Birdsville Amendment will stay on the books, following a Coalition shadow cabinet decision to voye against changes that would see it removed.

It is looking increasingly likely that the predatory pricing law known as the Birdsville Amendment will stay on the books, following a Coalition shadow cabinet decision to vote against changes that would see it removed.

But while the fate of the Birdsville Amendment is firming, opinion remains divided on whether it is preferable to alternative laws already introduced into Federal Parliament by Labor and backed by the Australian Competition and Consumer Commission.

The key difference between the laws is the threshold test each applies to determine whether a big business has an inappropriately strong market position.

Under the Birdsville Amendment, a business must be deemed to hold a “substantial share of a market” before it can be deemed to have engaged in predatory pricing.

Labor’s proposal, by contrast, reintroduces the notion that predatory pricing involves taking advantage of “market power” that was at the heart of the pre-Birdsville laws.

Advocates for the Birdsville Amendment say it will provide greater protection for small businesses because it will be easier for them to prove.

Among them is University of New South Wales associate professor Frank Zumbo who, along with Senator Barnaby Joyce, played a key role in drafting the law.

“It’s a very strong provision and certainly stronger than the Federal Government’s proposal,” Zumbo says. “The concepts of market power and taking advantage are replaced with one straightforward test of market share, and there was no doubt replacing the hurdle with two was going to make it very difficult to prove predatory pricing.”

But the critics of the law say it is untested and uncertain by comparison with Labor’s laws, which have years of court interpretation behind them.

This was a key rationale cited by the ACCC when it backed the laws earlier this year. Chairman Graeme Samuel has said more prosecutions would flow under the Labor plan and described the Birdsville Amendment as “ill conceived”.

The Australian Retail Association, which represents both large and small retailers, also supports Labor’s legislation. Executive director Richard Evans says the Birdsville Amendment is not the panacea to predatory pricing that small business is looking for.

“It creates a bit of uncertainty and a false dawn for small business that in a legitimate competitive environment they think they are being predatory priced when they are not,” he says.

If the Birdsville Amendment does stay in place, Evans says it is important that it is given greater clarity by testing it in the courts as soon as an appropriate case presents itself.

“These things written on the back of a beer coaster out in Birdsville need to be tested,” Evans says. “If it stays then I think it is uncumbent on the ACCC to test it and see what the courts have to say.”

Zumbo, for his part, rejects arguments about uncertainty from the likes of Evans and Samuel.

“Market share has always been a determinant of market power. It is well understood, analysts look at it all the time, so it is understood and has always formed part of competition law analysis,” Zumbo says.

The Coalition shadow cabinet position in favour of the Birdsville Amendment is likely to be ratified by the Opposition party room today. With new Senator Nick Xenophon’s vote – he has already indicated his support for the law – Labor has little prospect of getting its reforms through the Senate.

Related stories:

• New laws will help ACCC win more predatory pricing cases: Samuel
• Big business predatory pricing scare campaign all hot air