A review on competition policy is set to progress over a two-year period by a Competition Taskforce comprised of an expert panel, including the former chair of the Australian Competition and Consumer Commission (ACCC), Rod Sims. This review will look at enhancing a dynamic market and economic productivity through competition policy.
The primary concerns of the review are said to include:
- proposed merger reform posed by the ACCC to tighten merger control;
- prospective co-ordinated policy reform between the Federal Government and the States and Territories; and
- non-compete clauses restricting employees from pursuing more favourable remuneration.
Proposed merger reform
As confirmed by the ACCC Chair, Gina Cass-Gottlieb, the ACCC continues to advocate for merger reform to ease the evidentiary burden in its attempts to block questionable transactions. The ACCC is concerned that the current regime, without the mandatory requirements to notify ACCC of proposed mergers, works in favour of potentially anti-competitive mergers and that a stricter merger clearance regime is necessary. The call for reform was sparked in 2021 by the former ACCC Chair and newly appointed Competition Taskforce panellist, Rod Sims. With Mr Sims' public, and continued, support for an overhaul of merger clearance policy, we could anticipate that the review may lean towards the affirmative.
If the review does endorse the suggestions posed by the ACCC we may see the implementation following the Review of a new, formal merger clearance process that requires mandatory notice and ACCC clearance of proposed mergers before they're finalised. The review may also discuss possible legislative changes to tighten the merger clearance test to reduce the number of transactions that may increase concentration in Australian markets.
A new National Competition Policy?
It is unclear what direction the Taskforce may take in reviewing the coordinated Federal/State reform of competition policy, but we might expect discussions focusing on moving towards a collaborative approach across the Federal Government, States, and Territories. The Council on Federal Financial Relations may act as facilitator of the discussions between governments on economic concerns, including how policies may likely affect competition. Depending on the direction the review takes, this coordinated approach may aim to ensure that competition policy is uniform across all regions, avoiding regulatory discrepancies that could hinder fair competition.
Employees' rights and non-compete clauses
The regulation of non-compete clauses in employment contracts will be subject to review by the Competition Taskforce. Currently, the Competition and Consumer Act 2010 (Cth) (CCA) explicitly excludes post-employment restraints on joining a competitor in employment contracts from its legislative scope. This gap will be the focus of the Taskforce's scrutiny. Non-compete clauses are currently regulated by common law under the test of "reasonableness" (is the restraint necessary for the reasonable protection of the legitimate interests of the employer, by reference to the interests of the parties and the public). Yet, outside of costly litigation through the courts, there is no mechanism for an employee to know with certainty whether a post-employment restraint is unlawful. Restricted employment opportunities caused by non-compete clauses, unsurprisingly, may limit opportunities for better remuneration.
For these restraints, the direction that the review will take is unclear, yet we may see discussion endorsing legislative regulation, by amending the CCA or more likely broadening the unfair contract terms provisions or the Fair Work Act.
One further issue is whether the Taskforce might also consider the introduction of penalties for employers found to have imposed unnecessarily harsh or unreasonable restraints on employees or contractors after they leave a business. The review of employee non-compete clauses is a new agenda and has the capacity to produce significant positive change for employees and the employment market, albeit with some risks to employers protecting their goodwill and confidential information. particularly with more senior employees, which should be considered in the review.