Small businesses aren’t muppets. They’re a BIG deal.
We always hear about how important small business is to the economy, but we don’t often hear about governments standing up for small businesses when it comes to effective competition and consumer laws. Why? Quite simply because small businesses are all too often the ignored members of our society.
The small business sector is a big employer and small business people put in some of the longest working hours operating their businesses. They can be super efficient because it’s their money on the line. There are no corporate overheads or bloated performance bonuses because the money they make is generally put back into the business.
Small businesses survive on their excellent customer service and help drive innovation and product choice in their chosen areas of the economy. While they keep the big players honest, they can be victims of abuses of market or contractual power by those big players.
With the considerable contribution that small businesses make to the competition, consumers and the economy generally, you would think that governments would be doing their best to stand up for small business.
Sadly, that’s not the case as the big end of town are politically very well organised and will stop at nothing to prevent any law reforms that may weed out abuses of market or contractual power.
Here the big of end of town is aided and abetted by their legal advisers and the free market theorists. No doubt the lawyers know who pays their fees, while the free market theorists have convinced themselves that big business is always better and more efficient than small business.
Such free market theorists have lost sight of the fact that a diverse market place with both efficient small and big players is the most effective way to promote a competitive market place that delivers consistently lower prices and wider product choices for consumers.
Here free market theorists need to remind themselves that highly concentrated markets represent a dangerous threat to competition and consumers. That threat remains the key reason why the United States enacted its antitrust laws and why we should have effective competition laws.
Highly concentrated markets generally deliver higher prices and fewer product choices than more diverse and sustainable markets with both big and small players.
Fewer market players push up prices and reduce product choices as that pushes up profit margins and delivers higher performance bonuses for the remaining CEOs.
We need to have a diversity of market players and that’s why it’s essential that small players are not driven out of the market by abuses of market or contractual power. That’s also why it’s important for governments to stand up for small businesses.
The harsh reality is that we have a mixed bag from governments around Australia in relation to law reform on small business issues. Some governments have been great in standing up for small business on fair trading laws, while others have been letting down small businesses.
Two standout governments at the moment are South Australia and New South Wales. Interestingly, it’s a Labor Government in South Australia and Liberal Coalition Government in New South Wales.
The point is simply that small business can and should always be a bipartisan issue. Standing up for small business should not be about politics, but rather about good and sound policy initiatives.
In South Australia the Small Business Minister, Tom Koutsantonis, is pursuing a package of small business reforms that includes setting up an SA Small Business Commissioner, as well as providing for a revamped legislative framework for prescribing mandatory industry codes of conduct under the SA Fair Trading Act.
The SA Small Business Commissioner is based on the very successful Victorian Small Business Commissioner model. The Victorian Government, whether Labor or Liberal, has long supported the Victorian Small Business Commissioner and that model has been highly successful.
The success of the Victorian Small Business Commissioner lies in the ability of the Commissioner to assist in resolving disputes between small and larger businesses.
Mediation is the key mechanism used by the Victorian Commissioner to assist parties to resolve disputes. Such disputes can involve abuses of contractual power by larger businesses and mediation is successful in upwards of 80% of cases.
The Victorian Commissioner also has the ability to carry out investigations and its role has expanded into other areas including retail leasing. A key strength of the Victorian Commissioner is to deal with individual business disputes, something the ACCC is not well placed to do.
The failure of the ACCC to get involved in individual business disputes has undoubtedly created a vacuum in the small business area and this is rightly being filled by state-based Small Business Commissioners.
The South Australian Small Business Commissioner will also be able to enforce any mandatory industry codes of conduct under the SA Fair Trading Act in relation to small businesses.
Industry codes of conduct set out standards of behaviour in a specific industry and have long been part of the SA Fair Trading Act, as well as the federal Competition and Consumer Act and in other State Fair Trading Acts.
The success of the Victorian Small Business Commissioner, as well as the success of the mandatory industry codes of conduct, means that supporting such a model in South Australia should be straightforward.
Sadly, it’s not. The SA State Liberals are opposing the reforms. That’s at the same time when the Liberal Coalition Governments in both New South Wales and Western Australia have or are in the process of establishing Small Business Commissioners in their respective states.
It’s hardly surprising that a broad and vocal group of small business and farming associations are being critical of the SA State Liberals for not supporting a reform that is so obviously beneficial for small business and which is being supported by the NSW and WA State Liberal Governments. These groups include COSBOA, MTA-SA, Independent Contractors Australia, and the South Australian Farmers Federation.
For its part the New South Wales Government needs to be commended for appointing a NSW Small Business Commissioner within 100 days of coming to office.
The new Commissioner is off to a very promising start by engaging in wide-ranging consultations with industry and other small business stakeholders. Clearly, the NSW Small Business Minister Katrina Hodgkinson and the NSW Coalition Government are showing their commitment to the Small Business Commissioner model.
While it’s great to see some real action on behalf of small business at the State level, it’s clear that we still need effective competition laws and that’s where the Federal Labor Government needs to implement meaningful law reforms rather than their usual window dressing gimmicks.
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