Retail Restrictions Holding Australian Businesses Back?

24 Oct 2014

The competition policy review draft report, released last month, has recommended deregulating retail trading hours as well as abolish restrictions on regulations governing the pharmacy and taxi sectors and limits on parallel imports.

The report has also suggested the National Competition Council (NCC) be terminated and replaced with a new independent national body, namely the Australian Council for Competition Policy (ACCP) that will be established and funded by the states.

Headed by economist and University of Queensland alumnus, Ian Harper, the review finds Australia has progressed well in improving regulation since the 1990s, when the last whole-economy competition review was completed. The competition review panel has proposed a body would advocate and educate in competition policy, and would be responsible for administering payments to areas where implemented competition reforms result in disproportionate effects.

The panel has also said full deregulation of retail trading hours was overdue and restrictions should be removed as soon as possible, adding that online shopping was undermining restrictions on retail trading hours and disadvantaging traditional bricks-and-mortar retailers.

Associate professor from the School of Economics at The University of Queensland, Dr Heiko Gerlach, believes scrapping the NCC and replacing it with the ACCP will be a “positive thing” and that Australia is one of the very few countries that can have an institution of this proportion.

“I think it will be very useful. It’s essentially going to be a body that reflects our competition policy and gives input into the practice of competition policy without being the authority to enforce it,” Dr Gerlach said.

“I think this is something very useful in times like these where there’s a lot of technological changes. Markets are very uncertain and there’s going to be huge demographic shifts in the Australian population – and having someone thinking about principles about competition policy that apply directly to Australia; I think that’s going to be a huge advantage and very useful.”

“As an institution, competition policy is very important and this is really an expression of that importance.”

Additionally, Dr Gerlach asserts that deregulating trading hours will negatively affect small businesses but will aid big retailers when it comes to competition against online sales.

“If you deregulate then the big retailers will benefit and the small retailers will probably anchor a loss. That’s probably going to be true in most settings and it should be something we’ll expect,” Dr Gerlach said.

“But one of the main reasons for this report is to adopt competition policies to new technologies and online competition. In that sense, deregulating allows the big retailers to compete better with online sales.”

“Australia’s still a bit behind in international comparison with respect to online shopping, so the effect of restricting the market power of these big retailers will not be as strong as it is in other countries. But I think we are going to get there and prices will come down in Australia given the increase in online market share.”

Furthermore, Dr Gerlach feels the case of deciding how far the deregulation of trading hours should go must be carefully considered.

“I think there is a strong case for deregulating markets opening hours; but how far we should go – I’m not sure,” Dr Gerlach said.

“I’m not sure if we need to go the full mile and have complete deregulation or whether we have a more moderate solution that would give all those benefits as well.”

“But I think that’s more of a political decision than something that should be decided by economic effects.”