Andrew Leigh wants to make it easier for people to go work for a rival, or start a competing business, after they leave a job

This article is more than 3 years old

This article is more than 3 years old

Labor has flagged a plan to crack down on clauses in work contracts that make it hard for employees to work for competitors when they leave a job.

It has also renewed calls for large corporations to pay bigger financial penalties for abusing their market power, and for the competition regulator to be given greater powers to prevent market problems emerging.

Andrew Leigh, the shadow assistant treasurer, will warn in a speech on Wednesday that competition in Australia is getting worse, with too many industries dominated by three or four firms and fewer new businesses starting up as a consequence.

Minimum wage to rise by $22 a week after Fair Work Commission ruling Read more

The Turnbull government is pushing ahead with its 0.06% levy on the after-tax profits of Australia’s biggest banks, arguing their market dominance has made them some of the most profitable banks in the world.

Leigh says Australia is experiencing a rise in companies using their market power for anti-competitive reasons, with complaints to the competition watchdog, of misleading and deceptive conduct, up one third over the last three years.

He says despite the Coalition’s rhetoric about innovation and agility, the rate at which new businesses are being created in Australia has actually slowed, warning something needs to be done about our “growing competition problem”.

“Back in the 2000s we would typically see a 17% increase in the number of new businesses each year,” Leigh says, in notes seen by Guardian Australia.

“Since 2010, this has fallen to 13%. For all the talk of incubators, accelerators and innovation, our nation isn’t starting as many businesses as it used to.”

Leigh will make his comments when he delivers the Sir Walter Murdoch school policy seminar at Murdoch University.

He will also raise concerns about the growing number of non-compete clauses in employment contracts which prevent employees from working for a competitor, starting a competing firm, or poaching customers from old employers.

Citing work by academics from Melbourne University and Monash University, he will warn large Australian firms are using non-compete clauses more frequently, and suggests something may have to be done about it.

“Non-compete clauses make it harder for employees to switch to a better job and stifle start-ups,” Leigh will say.

“Since many new companies are created by employees who leave to start a competing company, non-compete clauses reduce innovation.

“We need to make it easier for more competitors to enter the market. It’s perfectly reasonable for firms to prevent ex-employees stealing confidential information, but non-compete clauses are a sledgehammer to crack a nut.

“Studies show that making these clauses unenforceable – as California has done – leads to an upsurge in innovation.”

Leigh will also say the government needs to give the Australian Competition and Consumer Commission a market studies function, to allow it to investigate concentrated sectors and propose solutions before competition problems emerge into public view.

“A market studies power would have allowed Australia’s competition watchdog to initiate its own inquiry into the energy sector without waiting for a specific reference from the federal government,” Leigh will say.

“Ian Harper’s 2015 competition review recommended a strong market studies power and the ACCC has repeatedly requested such a power.

Australia's too-big-to-fail banks cry crocodile tears over bank levy | Greg Jericho Read more

“[And] when it comes to deterring bad behaviour, our laws are only as powerful as the penalties courts can impose.

“To clearly signal that corporate wrongdoing doesn’t pay, we’ve advocated linking the penalty for anti-competitive conduct to total sales. Such a move would bring Australian penalties into line with jurisdictions such as the European Union.”

Joydeep Hor, the managing principal of law firm People & Culture Strategies, told Guardian Australia non-compete clauses were critical to many businesses, but they shouldn’t be allowed to deliver a competitive benefit to an employer.