Australian vegetable and potato grower body Ausveg has welcomed Prime Minister Malcolm Turnbull's decision to amend the Competition and Consumer Act by introducing an "effects test" to address the misuse of market power.

Turnbull said he would repeal the current Section 46 of the act - which regulates unilateral conduct - and he would adopt the changes recommended by the Harper Review in full.

Australian Prime Minister Malcolm Turnbull

"This will result in a new provision that prevents firms with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition," Turnbull said.

Speaking with the local press, the Prime Minister claimed companies would be more innovative if the "hot breath of competition" was coming down their necks.

"This is a long-overdue reform for Australia’s vegetable and potato growers. Many of these growers are small business owners that will now be better protected by rules that take into account the conduct of those with market power," Ausveg deputy CEO Andrew White said in a release.

"The introduction of an “effects test” is a vital development for the Australian vegetable and potato industries and will go a long way to ensuring growers can operate in a more open and competitive marketplace that treats all supply chain participants fairly.

"It is essential that our growers are protected against anti-competitive behaviour and that there are adequate provisions in place for them to operate their businesses profitably so that the local industry can remain economically viable in the future."

Following the announcement, the Australian Competition and Consumer Commission (ACCC) will have meaningful provisions to protect businesses that have been subject to the misuse of market power.

"In an environment where growers are struggling to remain profitable due to rising production costs and tighter profit margins, it is important that they can operate their businesses without any extra and unfair pressure that comes from the misuse of market power by other operators in the supply chain," White said.

"Giving the ACCC the authority to take action against those who are found to be abusing market power is reassuring news for our growers.

"Considering the Australian vegetable and potato industries contribute significantly to the national economy and employ tens of thousands of workers across the country, it is vital to ensure that our growers can conduct their businesses in a fair environment and are protected from those who participate in anti-competitive behaviour."

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