New predatory pricing laws no silver bullet for small business

New laws to make it cheaper and easier for small business to defend themselves against predatory pricing won’t provide a quick-fix for business bullying, experts and business groups say.

Competition Minister Chris Bowen introduced amendments to the Trade Practices Act into Federal Parliament late last week that:

Clarifies what it means for a company to take advantage of its market power, an element in proving predatory pricing.
Makes it clear that it is not necessary to prove how a company would recoup losses sustained by engaging in below-cost predatory pricing.
Introduces changes to allow businesses to commence actions for predatory pricing in the Federal Magistrates Court as well as the Federal Court.
Remove a $10 million limit on the value of transactions that can be pursued for unconscionable conduct.

The laws also create a new deputy chair position within the Australian Competition and Consumer Commission with special responsibility for small business, a role SmartCompany revealed on Friday will go to current Murdoch University Business School head Michael Schaper.

The new laws have been welcomed by small business groups since they were announced earlier this year, but question marks still remain over just how much assistance they will provide to small business.

Australian Retailers Association chief executive Richard Evans cautions that most small retailers will continue to face intense competition from big business, even after the laws have been introduced.

“Small retailers may have legitimate concerns about unfair competition and what we don’t need is people breaking the law, but business owners also have to realise it is a tough, competitive world and there are no guarantees – business is hard work,” Evans says.

He says allowing predatory pricing cases to be run in the Federal Magistrates Court will help small business defend themselves against big business bullies.

“There will a cost saving by going through the Magistrates,” Evans says. “The person with the deeper pockets tends to have the advantage in these matters in the current legal structures, and anything that improves that we support.”

But Slater & Gordon trade practices expert Van Moulis says while filing fees may be slightly lower and proceedings less formal in the Federal Magistrates Court, costs will still remain prohibitive for most small businesses.

“The complexities of this kind of legal action remain, you will still need to have a senior barrister and have very expensive expert evidence; so the cost factor, although it will come down, will still be huge,” Moulis says.

He says increased funding for the ACCC to help it bring more actions on behalf of small business would be more effective in providing protection for predatory pricing.

More broadly, Moulis says the changes are welcome but they will not fundamentally improve an area of law that remains immensely complex and costly.

“They are grafting changes to a legal tree that is far too gnarled and broken down – maybe they need to go back to the drawing board and start again to make substantial improvements to this area,” Moulis says.