Lib-ALP competition reforms undermine productivity

If the Liberal and Labor parties' recently announced small business policies are any guide, both parties are keen to undermine Australia's reputation for a stable, certain and predictable legal system. Both parties' competing reforms seem designed to encourage expensive and unpredictable litigation and to increase prices for basic necessities.

The flaw in the LNP plan to give the ACCC more powers to ban business activity that has the "effect" of reducing competition in the market is clear. It is a backdoor attempt to increase prices for basic goods and services in the market to keep failing groceries in business at the expense of the consumer.

The fair price is the price you are willing to pay. If you leave the supermarket with food you have chosen to buy, you have judged that you are better off with that food than with your hard earned cash. The supermarket has judged that it is better off with your cash than the stock of goods you purchased. Both parties are left better off. 

Simply put, nobody apart from the customer and the seller have any idea what a fair price for any goods or services are. There is no price at which a sale becomes "unfair" to competing small businesses. Asking the ACCC to do work out what that price is does not mean the ACCC can fix prices any better than the Soviet Union did when it fixed prices for goods or services in the market. The ACCC has no idea how many goods or services consumers "should" demand, nor what price they "should" pay. 

That means this law is simply arbitrary, uncertain and unpredictable. Its very introduction would undermine the rule of law.

If a local grocer can't compete on price with a supermarket, it's because the supermarket can deliver more goods at a better price. It can do that because it can deliver more, store more, sell more and give you more options at the store compared to the local grocer. In other words, it is more efficient. People save time and money as a result. The cost of living goes down. Poverty decreases. We should celebrate this. 

If competition laws were designed to give jobs to local grocers, one might fairly wonder whether construction laws should be designed to give more jobs to workers shovelling away with spoons as opposed to shovels, dynamite or demolition equipment. These laws are a recipe for more poverty, not less.

Asking the ACCC to fix prices in the market will mean increased litigation costs for business and increased prices for basic necessities. It is a stab in the back of the "forgotten people"--the lower and middle classes--that the Liberals claim to represent.

The ALP's proposal to allow small businesses to litigate against bigger competitors without facing the risk of paying legal costs if they lose is arbitrary, wasteful and unnecessary. The rule that the losing party in litigation pays the winning party's costs is designed to discourage needless litigation and to encourage parties to negotiate a private settlement of their dispute. If that is the effect then it is doing its job. Insulating parties from payment of legal costs encourages them to use the legal system as a tactical weapon. It also encourages the "lawfare" culture that Australians scornfully condemn when they look to the United States. That litigious culture helps no one. 

Moreover, the idea that there is a groundswell of justified litigation out there just waiting to be initiated by small businesses once the rules do change is just pure speculation. 

Nor is it at all clear why small businesses deserve to be immunised from legal costs against their larger competitors or where the cutoff point for the legal costs immunity should be. Indeed, any cutoff point would be arbitrary and unfair.

Creating one rule for small business and another rule for big business undermines the rule of law. Whether that rule benefits small businesses at the expense of big business or vice-versa is besides the point. Laws should not be designed to hand out special favours--we should all be equal before the law.

Unfortunately, the Liberals' and the ALP's small business law reforms will do nothing to boost productivity. Indeed, they are likely to increase litigation costs and prices for basic necessities.