Competition law, enforcement and the Australian small business sector

This paper examines the treatment of small enterprises in the context of competition law and its enforcement, with a special focus on Australia. Whilst most nations have a developed body of laws to regulate the behaviour of private firms in relation to competition and fair trading, the position of smaller firms in such a legal regime is often overlooked, even though small businesses represent over 90% of all trading enterprises in most jurisdictions. The ability of SMEs to conform to competition laws, and the impact that such rules have on their (b)ehaviour, is different to that of larger firms. In comparison to large corporations, most small firms tend to operate in geographically restricted markets, possess a limited product and service range, have a restricted market share, suffer from both information asymmetry and knowledge imperfections, are less likely to access established suppliers, and have limited access to specialised legal and economic advice on competition matters. Competition in Australia is principally regulated by the Competition & Consumer Act 2010 (previously known as the Trade Practices Act 1974). The Act includes a number of specific measures designed to deal with small business issues, including the provision of collective bargaining arrangements, prohibitions on unconscionable conduct, and the capacity for governments to introduce mandatory industry-wide codes. Enforcement of competition laws amongst the small business sector often raises a number of issues. Awareness about competition matters is often lower amongst SMEs, and it can be more difficult to detect breaches and non-compliance of competition laws by small firms. It is also harder to develop effective education and outreach strategies for the sector, and difficult to rely on self-regulation as an effective compliance tool. Finally, regulators also need to consider the proportionality of fines and penalties that they impose on SMEs for breaches of such laws, and their capacity to deal effectively with regulatory agencies. The level of knowledge about small firm responses to competition regulation is also limited, and the paper concludes by identifying some areas in which more research is currently required.