Chris Hayes (Werriwa, Australian Labor Party) Share this | Hansard source

For so long the government has laid claim to being the great defender of small business, yet the introduction of the Trade Practices Legislation Amendment Bill (No. 1) 2007 would certainly come as a disappointment particularly to those in small business, whom this government claims to defend. This bill has taken far too long to come to this parliament, and many would be left wondering why it has taken so long and yet does so little.

There are few who would question the importance of the Trade Practices Act, as it is a key plank in consumer protection and the prevention of restrictive trade practices by companies. It is essential for providing consumers and small businesses with confidence so that they can adequately participate in competition within markets. As such, it is important that from time to time the act be amended to reflect contemporary business practices or to improve upon its operations. Amendments that strengthen competition should be welcomed and are certainly welcomed by this side of the chamber.

Strong and effective competition laws provide the environment that allows businesses to compete effectively in open markets, which is ultimately to the benefit of consumers. To allow competition laws to diminish or to have their value eroded through time only acts to the detriment of business and consumers. It is important that the Australian competition laws remain at a level comparable to those of world’s best practice. As with any legislation of this nature, there is a range of views on how that should best be achieved and how it should best operate. I will make further comments on this a little later on. The important thing to remember is that the application of the Trade Practices Act, and regular maintenance and improvement of it, is not the means through which uncompetitive businesses or industries can be saved. The Trade Practices Act protects and preserves the value of competition first and foremost. Accordingly, the Trade Practices Act should provide a sound basis for fair and reasonable competition to occur in the markets.

As I mentioned earlier, this bill has taken some time in coming. It has been some time, primarily because this government has been far too willing to have the Trade Practices Act near wither on the vine. It is interesting that this bill has been introduced in the lead-up to another election. I say that in the context of the government’s approach to the ongoing maintenance and improvement of the act. Members will recall that, in the lead-up to the 2001 election, the government responded to the growing concerns of the small business community about the operation of this act and it promised a review. In 2003 that review concluded in the handing down of the Dawson report. The government provided a detailed response to the report and signalled its intention to legislate in the future.

Following the release of the Dawson report, the High Court handed down a decision in the Boral case, which has been well cited so far during this debate. The Boral case involved the abuse of market power and was significant in terms of the operation of section 46 of the act. The Senate economics references committee conducted an inquiry into wide-ranging aspects of this application of the Trade Practices Act. The Labor senators recommended that the act be strengthened, and, unsurprisingly, the government senators recommended something less. Despite the fact that the bill mirrors the recommendation of government senators, it has nevertheless taken since 2004 to get this far. As I said at the outset, from the perspective of many small business operators this bill is disappointing both in its context and its timeliness.

The provisions of section 46 relating to the misuse of market power are always cause for debate. They are also subject to varying interpretations about how this provision should properly operate. People have diverse expectations when it comes to section 46, and diverse expectations about the relative ease of action under section 46.

The bill that we have before us today does a range of things. In summary, firstly, it clarifies that a substantial degree of power in a market is a lower threshold than a substantial degree of control; secondly, it clarifies that a corporation can have a substantial degree of market power even if it does not have freedom of constraint; thirdly, it makes clear that more than one corporation can have a substantial degree of power in the market; and finally, it clarifies that the court may take into account a substantial period of below-cost pricing when considering whether a firm has abused its market power, and that a court can consider the company’s reasons for engaging in below-cost pricing.

The amendments fall short of the preferred position which was recommended by the ACCC. While the amendments in the bill go some way to dealing with the recommendations of the ACCC to the Senate inquiry, they certainly fall short. Bear in mind that the ACCC also recommended:

Section 46 requires amendment to provide that in cases involving allegations of predatory pricing, a finding of expectation or likely ability to recoup losses is not required to establish a contravention of section 46. Such amendment would ensure the application of section 46 is consistent with parliament’s stated intention.

Labor’s view is simple: that the strengthening of section 46 can be more effective by dealing with recoupment and ascribing a legal definition to the words ‘take advantage’. I will be supporting Labor’s proposals to strengthen section 46 as such proposals are an important improvement to the act.

The improvement to the unconscionable conduct provisions of the act is important but, again, the changes stop well short of what many believe they should be. Unconscionable conduct allows legally binding transactions to be disallowed or set aside when one party is at a special disadvantage in dealing with another party to a transaction because of a range of circumstances that affect their ability to look after their own interests and the other party to the transaction unconscionably takes advantage of the opportunity.

The section of the Trade Practices Act dealing with unconscionable behaviour applies to goods and services. Limitations exist on the operation of this relevant section of the act, and the bill before us seeks to change that limit. Currently, the act limits the application of the unconscionable conduct provisions where services involved are less than $3 million. This limit was primarily designed to protect small business.

The majority of the report of the Senate committee recommended that the monetary limit be removed entirely as, by its very nature, it is arbitrary and that unconscionable conduct should be illegal in all circumstances. This is a position that has been supported by a range of small business groups and the ACCC but, notably, it was not supported by the government senators and, consequently, it has not found its way into the amendments which are contained in this bill. Instead, this bill seeks to raise the application level to $10 million—that is from $3 million to $10 million. While Labor supports this amendment because it makes sense, this level could just as easily be $12 million, $15 million or $50 million. The arbitrariness of the monetary value remains no matter what level is set and no matter what monetary value is finally determined. Through time it must be adjusted. It is patently obvious that establishing a monetary level for the threshold of illegal behaviour is unnecessary. That is why Labor takes the same view that was adopted by the majority recommendation of the Senate inquiry, and as was made in the recommendations of the ACCC—that is, that a monetary value for the purpose of assessing unconscionable conduct is not necessary and should not be part of the section of the act. For this reason I will be supporting the amendments forwarded by the shadow Assistant Treasurer to abolish that threshold.

While the bill puts forward a number of amendments that small business and others have been clamouring for for some time now, there are some notable omissions. I will not try to outline all of them here at this stage, but there are some notable ones which I would like to draw attention to. In the government’s response to the Dawson review released in April 2003, it indicated that it would introduce criminal sanctions for serious cartel behaviour. In his media release announcing the response the Treasurer said:

The Government has, in principle, accepted the proposal to introduce criminal sanctions for serious cartel behaviour, subject to further examination of the issue by a working party.

In a media release that followed in February 2005, entitled ‘Criminal penalties for serious cartel behaviour’, the Treasurer said:

I am announcing today that the Australian Government will amend the Trade Practices Act 1974 to introduce criminal penalties for serious cartel conduct.

In the same media release the Treasurer went on to say that the maximum penalty would be five years imprisonment and a fine of $220,000. The point I am making is that the government certainly emphasised that it was going to be strong on cartel conduct.

Despite this rather impressive media splash to describe how tough it was going to be on cartel conduct, absolutely nothing has eventuated in that respect. The government has not introduced legislation that would enact its announcements despite the fact that the case for a custodial sentence remains strong and remains consistent with the approach taken by similar jurisdictions. It applies in the US and other similar jurisdictions looking to have criminal sanctions where there is serious cartel conduct. This is not something that was just an afterthought; this was a recommendation that the government responded to and something it said it was going to do. Yet after all this time there has not been one word on that recommendation; in fact, the government has avoided it. The government has not introduced legislation that would enact its announcements in any way, shape or form.

Another notable omission in the bill is an amendment that would give the Federal Magistrates Court jurisdiction over section 46 and section 83 based cases. I support Labor’s amendment in this regard. I support Labor’s amendment because it is a serious attempt to bring legal action to a level that is reasonably accessible for those seeking redress. Currently the act requires that actions brought under section 46 and section 83 must be brought before the Federal Court. The fact that these actions are required to be brought before the Federal Court means that small businesses who seek to take an action are faced with substantial costs. If these actions were able to be brought before the Federal Magistrates Court, this would not only reduce costs but also open up the very real prospect of using that jurisdiction’s conciliation process to resolve matters without a full hearing—which I would have thought would be in everyone’s interest, particularly a small business operator trying to protect a business under section 46.

It should not be a surprise that the government has not taken action to place legal remedies within the reach of most people. Having legal remedies that, by virtue of the costs of the jurisdiction in which they are found, are out of the reach of those who might seek to use them, is akin to not having any legal remedy at all. The government, of course, neglects to provide the detail of the hurdles that are faced in seeking legal redress, but it certainly tries to perpetuate the myth. One only has to look at the WorkChoices legislation, where aggrieved employees face going to the Federal Court to pursue unlawful termination actions. Most recently, we had the fake fairness test. To have it reviewed, employees have to run the full gamut of the Federal Court jurisdiction and may in fact end up in the High Court.

If this is a reflection of the attitude of this government when it comes to legal redress, it should come as no surprise to the small business community that this government would take no action to make legal redress more accessible and more affordable. A move to allow small business to have access to legal action through the Federal Magistrates Court is reasonable. Members opposite who support small business, who truly believe that small business should have reasonable access to redress, and who truly understand and want to support the desires of small business should vote in support of Labor’s amendment. Not to do so will demonstrate how little they care about small business operators.

I also wanted to raise the issue of mergers and acquisitions—an issue that has been quite topical of late and is a concern for many small business operators. It is important that the government’s failure to act on creeping acquisitions is noted by the House today. The ACCC’s power to intervene in some mergers is not in question, but the fact that it is not able to consider creeping acquisitions that impact on national markets is in question. The cumulative impact of a number of acquisitions is something that the ACCC cannot examine; however, it is something that it wishes to examine—and why shouldn’t it be something that ACCC can examine? If you can examine one acquisition and make sure that there are not unfair practices emerging out of it, why would you be prevented from looking at a whole series or pattern of acquisitions that could have an accumulative effect on a national market? Quite frankly, these are things that the government has neglected in putting together this bill. The government has had since 2004 to deal with these things, but we are yet to see anything occur in that respect. Laws that facilitate competition, outlaw anticompetitive behaviour and act to exert downward pressure on prices to the benefit of consumers are essential. That is why I request that members consider voting for Labor’s amendments. (Time expired)

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