Supermarkets and due process

I hate election years. 

The Commerce Act sets out penalties and remedies for various types of anticompetitive conduct. Do the anticompetitive thing, get caught, be shown to have undertaken the unlawful conduct, face a penalty and possibly a remedy. 

National wants to break up one of the large grocery chains, splitting its banners and requiring duplication of a pile of infrastructure. 

Divestment is a remedy under the Commerce Act for unlawful acquisition. And it can be required as part of a merger authorisation. There have been no such cases. 

ComCom has brought cases against one of the grocers, with things still in process. But you just can't reasonably go from "ComCom is investigating an allegation of anticompetitive conduct" to "we will impose a remedy that isn't in the Commerce Act regardless of how those cases go, based largely on whether a cost-benefit assessment figures it's a good idea."

It's my column in this week's Post (and Press and Times etc). I also had a quick first-cut assessment of the CBA that they want to hang this on. 

The Post column was mainly a thought experiment: what would have to have happened for it to be non-crazy for ComCom to ask for a breakup power in retail grocery? I think it would be something like the following, under competition process as I understand it. 

Unlawful conduct aimed at thwarting competition would not be enough. Not on its own. The Commerce Act has meaningful penalties for that, as well as remedies. The courts can apply injunctions against continuing the unlawful behaviour too.

That would normally be the end of things. Injunctions and penalties work. Break-ups are not a potential remedy in this kind of thing because it is entirely disproportionate.

Something else would have to happen.

Imagine that, after the injunctions, rather than really abide by the decisions, a firm that has engaged in unlawful conduct kept finding new ways of achieving the same anticompetitive outcome.

Monitoring and interim relief provisions could normally prevent this. So there still would be no case for adding a break-up power.

But suppose that unlawful conduct could happen faster than the commission could ever act, and potential entrants would lose financing before the commission could act to stop behaviours aimed at killing off a new entrant.

In that kind of scenario, it is possible to imagine the commission asking Parliament to provide a break-up option. It is still a stretch: Commerce Act penalties can extend to three times the commercial gain.

But even if that option were made available, invoking it would only be possible after court determinations of unlawful behaviour that could not be remedied more normally.

And I would hope that it would also require cost-benefit assessment demonstrating that separation is more effective than the full range of less intrusive remedies, and provides benefits that exceed the costs – along with a chance to test and challenge the workings.

I hate election years. 

But there is one bright spot: ACT's supermarket policy is good, and so was Seymour's speech on it.