Access to Justice for Small Business

Small business owners and operators want an even playing field when they are competing in the market place. Feedback and surveys consistently show this is amongst the leading concerns of small businesses.

Anti-competitive behaviour damages the economy, jobs and future growth.

Small businesses know this better than most. A new idea to provide goods and services can disrupt a market, competing against established businesses. The constant change driven by small and growing businesses across Australia is one of the most important factors for productivity and growth. Research shows young, small businesses are one of the most important drivers of new net jobs in the labour market.

Small businesses play a central role in the economy. Over 2 million businesses – sole traders, partnerships, trusts and small employers – have helped underpin 25 years of economic growth. Practical support for competition policy is a priority for Labor.

What is the problem?

Unlike some other international jurisdictions, competition litigation in Australia is primarily by public in nature. In the United States, about 10 private cases are brought for each public case. In Australia, the ratio is about one private case for every three public cases.

There are a number of disincentives to bringing private litigation under the Competition and Consumer Act. The primary consideration is the potential liability of opposing costs, in the situation where an applicant loses a case. When the misuse of market power is considered, the opposing costs are likely to be large given the reliance on solicitors and barristers, as well as competition experts.

Further, defendants in these types of cases tend to be both wealthy and powerful. This is distinct from litigants who, given the nature of their grievance, tend to be less powerful. While successful, Queensland Wire’s private litigation against BHP, was costly and by the time remedies were to be assessed, had gone out of business.

Labor’s Policy

Labor will ensure a more even playing field for private litigants, so that small businesses and their industry representatives can better use existing legislation to prove the abuse of competition under Part IV of the Competition and Consumer Act.

Allowing judges in Federal Court to waive liability of adverse costs, private litigants under Part IV of the Competition and Consumer Act will be empowered to bring litigation without the crushing burden of enormous legal fees.

At an early stage of the court case, the private litigant will be able to request a ‘no adverse cost order’, preventing large legal fees of the defendant being transferred to the litigant. The judge will then weigh up the initial arguments and decide whether there is merit to the case. If merit is established, any liability for the defendant’s legal fees will be waived.

This will change the dynamics of small businesses and their representatives in the ability to bring private litigation. Those who misuse market power or seek to price fix amongst other uncompetitive practices will be subject to closer scrutiny. This will remove one of the biggest barriers to bringing litigation, the potential for adverse costs by powerful vested interests.

To assist in this process, a Labor Government will fund the Small Business Ombudsman to provide an initial assessment on whether a private litigant is likely to be granted a no adverse cost order. The representatives of small business private litigants will be able to submit their proposal to the Ombudsman and receive a professional opinion on the likelihood of success. While this will not be legally binding, the Ombudsman will assist small businesses better understand their prospects of successful action under the Competition and Consumer Act.

The Small Business Ombudsman is there to assist and stick up for smaller business interests. This role will help facilitate public good through private litigation.

This is practical change for small businesses and is in the public interest. By allowing private litigants to better bring action under the Competition and Consumer Act, anti-competitive behaviour by powerful interests will be better mitigated, helping to support Australia’s competition policy framework. This is a modest, sensible proposal to provide some support for small businesses without damaging competition in the process. Support from the Small Business Ombudsman has been costed by the Parliamentary Budget Office at $1 million over two years. Aside from this modest extra resourcing for the Small Business Ombudsman, this proposal will not have any other financial implications for the commonwealth.

This contrasts starkly with alternative options. Some in the small business community have called for an “effects test”, a broad change to the Competition and Consumer Act recommended in the Harper Review. This change would mean a business would have to consider the effect of their day to day business decisions on competition. A marketing manager should be not wondering if their latest sales campaign will ‘effect’ competition but how it will help the business grow and expand. A CEO needs to focus on strategic growth and look into the long-term, not fighting off litigation because a new multi-million investment in regional Australia threatens established businesses.

This is dangerous economic policy that will lead to uncertainty across the economy, potentially adding substantial costs to every single transaction of which millions occur each day.

The combination of allowing for ‘no adverse cost orders’ and supporting the Small Business Ombudsman to help businesses, reduces part of the financial impact and uncertainty of private litigation under the Competition and Consumer Act.

Next steps

There are several implementation questions that will inform how this policy will shape the use of private litigation under the Competition and Consumer Act. If elected, Labor will consult with the small business community on how best to implement this policy. For example, the appropriate thresholds for assistance and eligibility for no adverse cost orders. Labor will ensure the practical elements of how best to assist potential private litigants will be fully considered.

Financial Implications:

 

2015-16

2016-17

2017-18

2018-19

Total

Access to Justice for Small Business

0.0

0.0

-0.5

-0.5

-1.0


 You can access a printable PDF version of this fact sheet by clicking here.