Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Hansard source

Labor’s commitment to the principle of competition has played a very large part in the strong economic performance of our country over the last decade and more, and it is a commitment which is reflected not only in the Trade Practices Act introduced by Labor in 1974 and strengthened by Labor in 1986 but also in the many structural economic reforms of the Hawke and Keating governments.

This bill contains amendments which are very long overdue. That is a familiar theme that we have heard in this parliament all through this year, where we bring to the parliament legislation that has been overdue for several years because the former government simply did not do the jobs that it was meant to do, particularly the kind of overhaul that from time to time is needed for major pieces of legislation like the Trade Practices Act.

The amendments are intended to deal with an approach to section 46 of the Trade Practices Act taken by the High Court in several decisions which has produced a very narrow interpretation that has dramatically reduced the effectiveness of the section. I refer, of course, to the decisions of the court in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd, a 2001 decision; Boral Besser Masonry Ltd v Australian Competition and Consumer Commission, a February 2003 decision; and Rural Press Ltd v Australian Competition and Consumer Commission, a decision handed down by the High Court in December 2003.

Justice Kirby was in dissent in these decisions, and in characteristically clear language His Honour identified the problem with the approach of the majority. In the third of these cases, the Rural Press case, Justice Kirby said:

This is the third recent decision of this Court (Melway and Boral Besser Masonry … being the other two) in which a majority has adopted an unduly narrow view of s. 46 of the Act. In effect, it has held, in each case, that the established large degree of market power enjoyed by the impugned corporation was merely incidental or coincidental to the anti-competitive consequences found to have occurred. Notwithstanding the proof of market power, the Court has held that the impugned corporations did not directly or indirectly ‘take advantage’ of that power to the disadvantage of competition in the market.

In my view, the approach taken by the majority is insufficiently attentive to the object of the Act to protect and uphold market competition. It is unduly protective of the depredations of the corporations concerned. It is unrealistic, bordering on ethereal, when the corporate conduct is viewed in its commercial and practical setting. The outcome cripples the effectiveness of s. 46 of the Act. It undermines this Court’s earlier and more realistic decision in Queensland Wire. The victims are Australian consumers and the competitors who seek to engage in competitive conduct in a naive faith in the protection of the Act. Section 46 might just as well not have been enacted for cases like these where its operation is sorely needed to achieve the purposes of the Act. Judicial lightning strikes thrice. A novel doctrine of innocent coincidence prevails. Effective anti-competitive threats can be made without the redress which s. 46 appears to promise. Once again I dissent.

I am pleased that by these amendments the well-expressed and powerful dissent of Justice Kirby—a long time ago now, in 2003—is finally being acted on.

Following these three High Court decisions, the Senate Economics References Committee in 2004 conducted a review entitled The effectiveness of the Trade Practices Act 1974 in protecting small business. The review detailed several important concerns about the effectiveness of section 46. Relevantly to this bill, the review looked at whether the Trade Practices Act provides sufficient guidance as to what constitutes taking advantage of market power and whether the Trade Practices Act provides sufficient protection against so-called predatory pricing. The Senate committee received detailed submissions and recommendations from the ACCC and many business groups, who were all concerned about the narrowness of the approach of the High Court and how that had undermined what was intended to be the effect of section 46.

On the ‘taking advantage of market power’, the Senate committee expressed great concern about the High Court’s interpretation, particularly in the Rural Press decision, in which the High Court had defined ‘take advantage’ very narrowly, by holding that a test of whether the company had taken advantage of its market power was whether it could have acted in that way in the absence of market power. This ‘could’ test looks at physical or business capacity rather than rationale or intent. It seems to produce a situation where corporations may use their market power to engage in proscribed conduct with impunity as long as they could also undertake that conduct in the absence of such power.

It is worth recalling what the former government’s response to the Senate committee’s recommendations was. What was the response of the former Treasurer, the member for Higgins? The Senate committee recommended in no uncertain terms that there should be a declaratory provision outlining the elements of ‘take advantage’ for the purpose of section 46 and, at length, indicated what the contents of that declaratory provision might be. I will not take up the time of the House by going through it, but the Senate committee indicated that the provision should refer to such matters as whether the conduct of the corporation was materially facilitated by its substantial degree of market power, looking also at the intention of the corporation. The response of the government was this, in bald terms:

The government does not accept this recommendation. It is not accepted that the interpretation of ‘take advantage’ requires any statutory clarification.

On the other matter relevant to this bill, the Senate committee made some very clear recommendations about predatory pricing. The Senate committee recommended that the act be amended to provide that, without limiting section 46, in determining whether a corporation has breached section 46, the courts may have regard to the capacity of the corporation to sell a good or service below its variable cost. It also recommended that the act be amended so that, where the form of proscribed behaviour alleged under section 46 is predatory pricing, it is not necessary to demonstrate a capacity to subsequently recoup the losses experienced as a result of that predatory pricing strategy.

This question of the degree to which recoupment, or potential recoupment, is to be considered has been the subject of a great deal of comment in the last four or five years, but here again the former government and the former Treasurer said only this: ‘The government accepts this recommendation in part.’ Even this, regrettably, was an empty pretence because the former government and the former Treasurer, the do-nothing member for Higgins, did nothing at all until 2007 and even then did not in any real sense adopt the recommendation that I have just referred to.

In 2007, what we instead had produced by the former government and the former Treasurer was the so-called Birdsville amendment. This was some three years after the Senate Economics Reference Committee had reported in 2004. Really, this so-called Birdsville amendment should be called the Costello-Joyce amendment because it was introduced by the member for Higgins, the former Treasurer, apparently after being produced on the back of an envelope by Senator Joyce. The former government and the former Treasurer have never explained why they took so long to do so little in response to the Senate committee’s report and have also never explained why the government failed to consult with industry bodies or with the ACCC before introducing the amendments that they did in 2007.

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