Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I move amendment (2) as circulated in my name:

(2)    Schedule 2, after item 3, page 6 (after line 12), insert:

3A  After subsection 46(4)

Insert:

      (4B)    A corporation can have a substantial degree of market power even though there is no proof that the corporation has the ability to or will have the ability to recoup losses from pricing below the relevant cost to the corporation supplying the goods or services.

This amendment makes clear the wish of the parliament that, in assessing the market power of a firm, it not be necessary to establish that the firm in question is able to raise prices to supracompetitive levels in the future to recoup losses sustained by predatory behaviour. I believe that this was clearly the wish of the parliament back in 1986 when it passed the Lionel Bowen reforms. On any objective reading, when the then Attorney-General introduced those amendments to lower the threshold from ‘control’ to ‘substantial power’ it was not the wish of the parliament to have the firm being able to recoup its losses as the test.

The need for this amendment rises primarily out of the Boral case. I will share with the House some excerpts from the judgement of one of the majority judges, who ruled that Boral did not abuse its market power because it did not have a substantial degree of market power. His Honour Mr Justice McHugh said:

Nor was it—

Boral—

in a position to recover the losses it made by pricing below relevant cost when and if the price-cutting finished. Accordingly, irrespective of the purpose of its pricing, it did not have a substantial degree of market power of which it could take advantage.

So in this case there was substantial evidence that Boral was acting with the specific purpose of damaging a competitor. There were, if you like, ‘smoking gun’ memos. It was trying to force a competitor out of business and yet the court found there was no breach of section 46 because it was impossible to abuse a market power that the firm did not have. The court ruled that the firm did not have that market power because it could not be proved that it was in a position to recoup its losses. It was a concentrated but still fairly competitive market. There were other players in the industry. Even if the target firm were forced out of business there would still be others—from memory I think it was Pioneer—in the industry. Therefore, it could not be proved that Boral would eventually be able to recoup their losses, even though it was clearly in their best interests to drive one of their competitors out of business.

More eminent commentators than me have commented on the unfortunate implications of the High Court’s decision in this case. Former ACCC chairman Professor Allan Fels said:

It should be made clear in the Act that the so-called ‘recoupment’ requirement is not necessary.

Alan Fels has called for the amendment that this side of the House has moved. The ACCC, under its current chair, Mr Samuel, who was appointed by this government, said:

The ACCC takes the view that s.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 s.46.

The eminent practitioners Smith and Trindade said:

The High Court has introduced what amounts to a threshold dominance test and failed to provide a proper framework for distinguishing between conduct which the act is designed to foster and that which the community expects it to prevent.

Indeed, as is pointed out by Justice Kirby in the dissenting judgement:

… the majority have effectively created a cogent case for reform of s 46.

So this amendment acts on those reforms. While it is of course entirely up to Their Honours how they interpret the law, it is incumbent on this parliament to make the law as clear as possible and this amendment not only makes it very clear to the courts that ‘substantial degree of power in the market’ is a lower test than the ‘dominance’ test but shows how. This is a key point of difference, and unless the government accepts this amendment its bill will be nothing but a sham.

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