Sid Sidebottom (Braddon, Australian Labor Party) Share this | Hansard source

It is nice to have rare times in parliament when you have a bit of rhyme whereby the member for Braddon follows the member for Fadden—which is very good. I notice we have a number of primary schools represented in the galleries. We say hello and welcome them to the parliament; they can see us in our dry activities today—but on very important legislation. I might add that students from Table Cape Primary School, from my electorate, are in the building at the moment. Unfortunately, I was not able to meet with them just now. It is a wonderful school and they come from a beautiful part of the north-west coast of Tassie. They have beautifully rich soil there, and I have always mentioned to you, Madam Deputy Speaker Burke, that you can drop a toenail in the ground on Table Cape and grow a foot. It is a brilliant area and a brilliant school.

Hence to the legislation before us, the Trade Practices Legislation Amendment Bill 2008. This is a bill to amend the Trade Practices Act 1974 to improve its ability to promote competition and fair trading in Australian markets and to crack down on anticompetitive behaviour. The member for Fadden mentioned history, and the parliamentary secretary at the table, the honourable member for Maribyrnong, is very much a student of Australian political history. He well knows that the Australian Labor Party has a strong legacy of competition reforms, having been responsible for the introduction of the Trade Practices Act in 1974 to enhance the welfare of Australians through the promotion of competition, fair trading and consumer protection. Labor made improvements to the act in 1986 and also instigated National Competition Policy and led on into the 1990s with it.

Part IV of the Trade Practices Act promotes competition by prohibiting anticompetitive conduct. Section 46 of part IV prohibits unilateral anticompetitive conduct, most notably by prohibiting corporations from misusing substantial market power to harm or eliminate competitors or competition generally. Part IVA of the Trade Practices Act promotes fair trading by prohibiting unconscionable conduct. In particular, section 51AC of part IVA prohibits unconscionable conduct in connection with the supply of goods or services to, or the acquisition of goods or services from, a corporation. However, it is the government’s belief—and this is mirrored in the legislation—that a series of court decisions have undermined the operation of the act, in particular section 46. You may well remember, Madam Deputy Speaker Burke, that in opposition we indicated that we would strengthen the Trade Practices Act to restore its original 1986 intention.

Schedules 1 and 2 of this legislation promote competition in Australian markets by enhancing the prohibitions against anticompetitive unilateral conduct contained in the Trade Practices Act 1974 and the competition code. Schedule 3 makes additional amendments to the Trade Practices Act and to the Australian Securities and Investments Commission Act 2001. Schedule 1 of the bill amends section 46—misuse of market power—to: address predatory pricing, clarify the role of recoupment in predatory pricing cases, clarify the meaning of the term ‘take advantage’, and confer jurisdiction on the Federal Magistrates Court for section 46 matters. Schedule 2 of the bill makes corresponding amendments to the version of section 46 found in the competition code, which is the version of section 46 that applies to all persons in the states and territories by virtue of application legislation in those jurisdictions.

Schedule 3 of the bill amends the Trade Practices Act and the Australian Securities and Investments Commission Act 2001 to require that one of the Australian Competition and Consumer Commission’s deputy chairpersons have knowledge of or experience in small business matters to repeal the thresholds for unconscionable conduct cases under section 51AC of the Trade Practices Act and section 12CC of the ASIC Act and, finally, to clarify the ACCC’s information gathering powers under section 155.

I would like to concentrate on some sections of those schedule amendments. I mentioned that the bill strengthens sections 46 and 51AC as part of the government’s ongoing commitment to improve Australia’s trade practices laws. As mentioned, it also includes several amendments that improve the ability of the Trade Practices Act to be effectively enforced. By making these amendments, the bill implements the government’s announcements of 28 April 2008 to strengthen the laws to promote fair competition. The measures contained in the bill were foreshadowed as opposition amendments to the Trade Practices Legislation Bill 2007. The amendments, however, were not adopted in the final version of that bill which was passed on 19 September 2007, despite many of them being recommended by the government’s own Senate inquiry into the effectiveness of the Trade Practices Act, particularly in protecting small business. At the time, the government, then in opposition, noted that the amendments would be pursued following a change of government.

Small business and consumers demand nothing less than an effective trade practices regime. Reforming the Trade Practices Act to bring it into the 21st century has been an article of faith for this government. The package which I mentioned and on which I would like to elaborate will ensure genuine competition for the benefit of consumers and small businesses. Predatory pricing hurts small businesses with the consumer paying the ultimate price. The previous government’s changes to the Trade Practices Act—to which the previous speaker, the member for Fadden, certainly alluded—most notably the Birdsville amendment, were a rushed job, put through without consultation in September 2007. Those changes have introduced confusion into the act. The government’s reforms will clarify this section of the act and, contrary to comments by members opposite, particularly the member for Pearce, strengthen its powers to identify anticompetitive behaviour.

On advice from the ACCC, we have replaced the share of market test with the market power test because market power is a broader term which will capture anticompetitive behaviour from powerful businesses, whether that power comes from a high market share or any other source. The coalition have indicated they will be voting to keep the Birdsville amendment. The Birdsville amendment is not supported by the ACCC, Professor Allan Fels, the former ACCC chair, or Mr Bob Baxt, who is a former chairman of the Trade Practices Commission. I would like to refer to some comments made by Bob Baxt in the Australian Financial Review on Wednesday, 19 September 2007. His opening comments were:

It is a great pity that the government—

the then Howard government—

has chosen to ‘ride on the tail of political opportunism’ in agreeing to the self-styled ‘Birdsville amendment’ to section 46 of the Trade Practices Act.

After a fairly lengthy discussion about what he believed were the flaws in the Birdsville amendment, and I think it is well worth noting and perhaps contemplating his closing comments, he said:

Far from protecting small business, this amendment is likely to prove unwelcome to them as well as to others, as increased complexity will lead to litigation and lengthy appeals. Not only will the small-business sector not enjoy any real success as a result of these amendments—

most notably, the Birdsville amendment—

but most importantly, consumers will suffer significantly as companies abandon any attempt to discount in situations where they have any degree of market share.

This legislation, introduced in haste and apparently as a result (among other things) of the criticisms made on a certain radio station, will not serve the Australian business community well (business, but most particularly consumers).

I would like to look at this Birdsville amendment, which was part of the former government’s legislation, and section 46(1AA). The present reference to market share has given rise to uncertainty and may reduce pro-competitive price competition in markets. The ACCC has publicly stated that section 46(1AA), as currently drafted, adds considerable confusion to the law and should be amended to clarify the protection it provides.

The bill achieves this by aligning the Birdsville amendment with a longstanding prohibition in section 46(1). In particular, the bill amends section 46(1AA) to focus it on a corporation’s market power as opposed to its market share. The size of a firm including its market share will, however, remain a relevant factor in establishing a corporation’s market power for the purposes of the revised prohibition. Section 46(1AA) presently operates in relation to firms with ‘a substantial share of a market’. This is inconsistent with a longstanding prohibition in section 46(1), which operates in relation to firms with a substantial degree of market power. The bill amends section 46(1AA) to align its operation with the longstanding prohibition in section 46(1). This includes focusing its operation on market power as opposed to market share.

The concept of market power allows the court to consider all the relevant characteristics of a market in determining whether a firm has acted anticompetitively. Such factors would include the size of a firm including its market share, as well as the size and number of its competitors. The concept of market power has been effective in targeting unilateral anticompetitive conduct. For example, in 2006 the Federal Court imposed penalties totalling $8.9 million on Safeway with respect to four breaches of section 46(1) and other anticompetitive conduct. This was despite Safeway having only around a 16 to 20 per cent share of the relevant market.

I refer, as mentioned earlier, to a couple of other sections of our amendment. The bill amends the Trade Practices Act to require that at least one of the ACCC’s deputy chairpersons have knowledge of, or experience in, small business matters. Why the requirement for small business experience? There are a number of trade practices issues that tend to confront small businesses in particular. These include issues relating to collective bargaining, retail tenancy, franchising, unconscionable conduct and the misuse of market power. The Trade Practices Legislation Amendment Bill (No. 1) 2007 amended the act to create a second deputy chairperson for the ACCC.

As noted in the second reading speech to the Trade Practices Legislation Amendment Bill (No. 1) 2007, it was intended that this position be filled by a candidate with experience in small business matters. However, the Trade Practices Legislation Amendment Bill (No. 1) 2007 strangely did not include any legislative requirement to that effect. The government’s amendments now include a legislative requirement that a deputy chair of the ACCC have small business experience. The amendment ensures that small business has a prominent and permanent voice at the ACCC.

The ability of parties to effectively pursue rightful claims is as important as having well-drafted laws. Concerns have been expressed about the costs and delays associated with bringing section 46 matters. If the costs associated with privately pursuing section 46 claims are prohibitively high, it will not be as effective in addressing anticompetitive conduct. This bill addresses these concerns by conferring jurisdiction over private matters arising under section 46 on the Federal Magistrates Court. By doing so, the bill improves access to justice for businesses in cases arising in appropriate circumstances under this important provision.

In the little time remaining to me I would like to look at the argument that we present regarding whether the Federal Magistrates Court is an appropriate court to hear section 46 matters. We believe it is. The 2003 Senate inquiry into the effectiveness of the Trade Practices Act in protecting small businesses considered that the Federal Magistrates Court had developed expertise in resolving issues without requiring the expense of a fully contested court case. It concluded that this expertise could resolve a substantial number of section 46 matters with cost savings to all sides. The Federal Magistrates Act 1999 permits the Federal Magistrates Court to transfer proceedings to the Federal Court when appropriate. Such a transfer may occur in complex and resource-demanding cases or where the amount being claimed is beyond the $750,000 jurisdictional limit of the Federal Magistrates Court.

The 2003 Senate inquiry recommended that the jurisdiction of the Federal Magistrates Court be extended to enable it to deal with misuse of market powers, which relies on section 83 of the act. Section 83 allows parties to rely on findings of certain previous proceedings as prima facie evidence in an action for loss or damage. While a section 46 matter relying on section 83 of the act may be an example of an appropriate matter to be heard by the Federal Magistrates Court, there is no justification for so limiting its jurisdiction.

In conclusion, the bill brought by the government to this House fulfils our commitments made in 2007, when this legislation was brought forward by the Howard government. The amendments we put forward strengthen the Trade Practices Act in its intentions to stop anticompetitive behaviour, to have fair trading and to have conscionable conduct. I recommend the government’s bill to the House.

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