12 May 2017

Supporting small business growth has become a widely articulated agenda within the Australian political arena.  The government and opposition and some minor parties have recently maintained a robust stance on anti-competitive behaviour of large multinational corporations and their effect on small businesses. On 11 May 2017, Parliament commenced the second reading debate of the Labor Party initiated, and Xenophon supported Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017 (Bill). The Bill proposed to:


 


a)    Enable a small business to request a no adverse costs order at any stage of the small business’ 
     Court action seeking to prove that a large company had engaged in anti-competitive market action. 
     To obtain this order, the small business must prove that the:


i)             action has a reasonable prospect of success; and


ii)            respondent can use its stronger financial position to threaten a costs order against the small
           business and deter it from pursuing the action.



b)     Allowing the Small Business and Family Enterprise Ombudsman (Ombudsman) to provide 
      assistance to small businesses in preparing the application including the legal
      argument in support of the
no adverse costs order.


 


These provisions aim to reduce the disincentive for small businesses to bring proceedings because of the possibility of a crippling costs order against them should they be unsuccessful. The underlying legal philosophy has resonance in aspects of the United States’ civil procedure law; ie that there should be no barriers to citizens ‘accessing justice’ through private litigation.



The Argument


 


The government opposed the Bill in the Senate on the grounds that:


 


a)    it may encourage vexatious litigation or more speculative litigation;


b)    the party seeking the no adverse costs order must in any case incur significant legal costs to 
     establish the basis for the order under the proposed legislation;


c)    proving misuse of market power and anti-competitive conduct always involves extremely costly 
     litigation for any claimant, due to the inherent complexity of the law, and the legislation would not 
     make ‘access to justice’ in such a case any easier; and


d)    it would require the Australian Small Business and Family Enterprise Ombudsman to act outside of its 
     statutory function to provide complex and costly advice to a claimant.


 


The government maintained an alternative view; that Parliament ought to simplify the current ‘broken’ section 46 of the Competition and Consumer Act 2010 (Cth) allowing it to accurately  target and deter anti-competitive conduct.


 


HHG’s Comments


 


Any effort to remove unfair barriers on small business from being able to litigate legitimate cases against large, better resourced opponents should be taken seriously.  There are is a long history throughout the world of law reform bodies and productivity commission bodies criticising the cost and inefficiency of civil litigation, and making recommendations for change. Some of those changes have been implemented in the way some of the Australian Courts have been able to vastly improve the speed and efficiency of litigation.


 


This Bill ostensibly supports small businesses to stand up against anti-competitive behaviour of multinationals. The practical reality for litigants and their lawyers seeking to rely on the legislation would, however, be different. The Bill would not likely improve small business’ access to justice in the complex and highly contested area of competition law. Without the normal commercial risks involved in running litigation, including potential adverse costs orders, claimants have no incentive to properly make a case, and in fact certain parties will have some incentive to litigate weak or poorly prepared cases, increasing costs and Court delay. The concept of empowering an ombudsman to provide essentially legal advice and assistance to claimants is also unusual, and introduces further cost and complexity into the system. Law reform is better targeted at more strongly deterring larger businesses from breaching anti-competition laws, and funding the regulator to better investigate and prosecute appropriate cases. 

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