The new effects test – and banks financing of distressed businesses

The government has introduced the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 into parliament which would implement the Harper recommendations on section 46, including the introduction of an ‘effects test’.

The Bill has now been referred to the Senate Economics Committee for review, with submissions due by 9 January 2017. The Committee is to report by 16 February 2017.

As I have explained, the law removes the rather misguided price signaling provisions in the Competition and Consumer Act 2010. These provisions, introduced in 2012, potentially impacted bank syndicates working on the restructure of a failing or insolvent business, by way of proscribing collective discussions between the various financiers – see s 44ZZW. A complex carve-out, in s 44ZZZ, and exemptions available from the ACCC under s 93, were offered to protect the banks. As I said, the regime was over-regulatory and never looked like working. 

The new section 46, and section 45, serve to broadly proscribe anti-competitive price signaling, but a genuine work-out involving banks and financiers should not fall within the new law.

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