Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

The aim of the Trade Practices Act 1974 is to improve the welfare of Australians through the promotion of competition, fair trading and consumer protection in relation to unfair pricing, abuse of market power and violation of consumer rights. The role of the Australian Competition and Consumer Commission is to apply the act for the benefit of consumers everywhere in Australia, both urban and rural. The role of the ACCC is to administer and enforce particularly part IVA, anticompetitive behaviour; part V, consumer protection; and part IVA, unconscionable conduct in relation to commercial transactions and consumer dealings.

I speak in support of the Trade Practices Legislation Amendment Bill 2008. The Trade Practices Act 1974 was a wonderful groundbreaking law, an initiative of the Whitlam Labor government in the 1970s, after decades of inaction by conservative coalition governments. I am a bit less charitable to former Attorney-General Garfield Barwick, the then member for Blaxland. Certainly, there were plenty of opportunities during 23 years of coalition rule, from 1949 to 1972, to do something about this. But it took a Labor government, in 1974, to bring in the Trade Practices Act, which has made such a difference to the lives of individuals, small businesses and large corporations in this country, particularly in the areas of competition, fair trading and consumer protection.

When I listen to speakers opposite, they often parade themselves as champions of free enterprise and a free market. I just do not think they get it when it comes to this sort of legislation. Their record seems always to socialise losses and privatise profits, and it is left to Labor governments to do the hard yakka when it comes to providing pro-market and pro-competition reform in the economy. It is Labor which has a proven record when it comes to these areas.

All too often those opposite seem to side with big business—big oil companies, big tobacco companies, big liquor companies and big supermarkets. They seem to worship at the feet of oligopoly. They always side with big producers and forget consumers. In contrast, Labor governments strengthen the trade practices legislation. We did it in 1986; and we were the architects of National Competition Policy, which set the parameters for policy to enhance the economic performance of Australia in the last few decades. It was National Competition Policy which contributed to the strong economic experience that we have enjoyed.

This bill is long overdue and is probably the most substantive legislative change in more than 20 years. The bill amends by schedule. It makes amendments to section 46 of the act, to enhance anticompetitive unilateral conduct. There will be a requirement that at least one of the deputy chairs of the ACCC has knowledge and experience in the area of small business. There is a significant amendment to section 51AC to extend protection against unconscionable conduct in business arrangements.

Schedule 1 relates to the misuse by corporations of their power in the market. Section 46 amendments to the Trade Practices Act focus on promoting business competition and reducing anticompetitive behaviour of big business. It is a fact that competition reduces prices and that helps consumers—and it helps those people in my electorate. Oligopolies, even monopolies, allow big business to set prices, and consumers have to take it or leave it. Schedule 1 of the legislation deals with predatory pricing, the role of recoupment in predatory pricing litigation under section 46—and, in particular, clarifies the meaning of ‘take advantage’ for the purposes of section 46—and makes a wonderful reform in conferring jurisdiction on the Federal Magistrates Court in relation to matters under section 46.

I am surprised that the member for Forrest opposes that conferral of jurisdiction, because it was the Howard coalition government which established the Federal Magistrates Court and kept on conferring jurisdiction after jurisdiction and enhancing, in an imperialistic way, the jurisdiction of the Federal Magistrates Court. And now, when they sit opposite, they oppose the extension of the jurisdiction. I cannot get it, because the Federal Magistrates Court has simpler procedures—justice can be done for people more expeditiously and the court proceedings themselves are less formal. Everything about that court is more user-friendly than lots of other courts in this country—certainly the supreme courts and the federal courts—so I just do not get why the coalition is opposed to the deferral of jurisdiction.

What is the background to this legislation? The Senate referred to its Economics References Committee the issue of whether the Trade Practices Act adequately dealt with small business and protection from unconscionable conduct and the misuse of market power. The committee tabled its report on 1 March 2004. The report made 17 recommendations, including nine in relation to prohibitions against the misuse of market power. It was not about market share; it was about the misuse of market power.

The former coalition government implemented some of those recommendations in relation to predatory pricing but failed on others. In 2007 the coalition government did not listen to and act upon the anxiety of business, nor of the ACCC, which expressed its views to the Senate inquiry concerning a range of matters—recruitment and predatory pricing litigation, the ‘take advantage’ term in section 46 and others. Instead, on 19 September 2007, the Howard government dropped the ball; they squibbed the issue. That is what they did when it comes to consumer protection—and still they do not get it. When we hear speeches by those opposite, it is clear that they still do not understand the difference. They just cannot get it. They just do not understand.

The Birdsville amendment—the ‘Howard-Joyce amendment’—threw out all the principles in relation to the ban that applied on predatory pricing. Still they focused on market share, which is just one factor alone, rather than on the misuse of market power. The Birdsville amendment was made without any consultation with the business community—and they say they have such a great relationship with the business community! They did not contact the Treasury, they did not contact the ACCC and they passed the legislation just to satisfy Senator Joyce. Thank you, Senator Joyce, for what you have done—and I say that in a very ironic way.

Let us have a look at what 2007 brought to us, and the folly of the Birdsville amendment. That section made an amendment to the legislation. This is what they did: section 46(1AA) purported to prohibit a corporation with a substantial share of the market from supplying, or offering to supply, goods and services for a sustained period at a price less than the relevant cost to the corporation of providing them. That is what it said: ‘market share’. It did not mention market power, despite the fact that the Senate report referred to it. So they looked at one aspect. They did not look at the fact that big corporations can take advantage of their power in the market.

The new section 46(1AA) contains significant improvements, and there are provisions which do not exist in the current legislation. The new section 46(1AA) states that a corporation may still be found to have contravened the legislation even if the corporation cannot, and might not ever be able to, recoup losses incurred by supplying goods and services at a price less than cost. I think everyone in this House would agree that it is wrong for corporations to engage in this type of behaviour to prevent market entry by a competitor or to rid the market of a competitor in this way. The amendment we are bringing in today gives the Federal Magistrates Court guidance as to the factors which must be taken into consideration when a court looks at whether a corporation has taken advantage of its substantial degree of market power. The court may have regard to whether a corporation’s conduct was materially facilitated by its substantial degree of market power; whether the corporation engaged in that conduct in reliance on its substantial degree of market power; whether the corporation was likely to have engaged in that conduct if it lacked a substantial degree of market power; and whether the conduct was otherwise related to the corporation’s substantial degree of market power.

Presently section 46 does not explicitly state whether it is necessary to prove recruitment in a case of predatory pricing. The amendment takes up the Senate inquiry recommendation to expressly state that it is not necessary to establish such a case. That Senate inquiry followed several cases which have been referred to. It also followed the Dawson review, which considered the use and scope of section 155 of the act. Soon after the Dawson review provided its report to the government, several important Trade Practices Act cases were considered by the courts. The High Court considered the application and interpretation of section 46 in Boral Besser Masonry Ltd v ACCC in 2003, commonly called the Boral case. There was also Rural Press Ltd v ACCC, commonly called the Rural Press case—and that was the 2003 decision. There were other cases discussed in the Federal Court. The full Federal Court considered the issue in Universal Music Australia Pty Ltd v ACCC in 2003 and in Australian Safeway Stores Pty Ltd v ACCC in 2003.

All these cases raised questions about the adequacy of the legislation to protect small business from anticompetitive behaviour and conduct, including the misuse of market power. And guess what? The Howard coalition government ignored it all and the Birdsville amendment was enacted. What did Peter Armitage, head of competition and consumer protection at Blake Dawson Waldron, have to say concerning the Birdsville amendment? On 28 September 2007 he said:

Make no mistake: this law is bad for consumers and bad for competition.

The fact that there is no equivalent law in any other country in the OECD reflects their understanding that it is highly undesirable to chill the flames of competition and is no basis for thinking that the amendment is progressive or beneficial. But we have heard from the member for Forrest that the opposition are going to support the Birdsville amendment.

What was substantial market share? In the current legislation there is no definition and there are no factors listed to give us guidance—as the amendments in relation to market power provide. It is just hopeless. It leaves it all up to the courts to decide—a complete abdication of legislative responsibility, courtesy of Senator Joyce. The new amendments rectify these omissions and clarify the ‘take advantage’ provision and recognise the reality of life for consumers and business—that it is market power, not market share, that counts. Market share is just the tool. It is just something that you can look at to identify whether or not corporations have market power. You have to look at a rigorous analysis of the economy, of the section, of the pricing policy and a host of other factors when you consider market power. To focus alone on market share is not good enough.

What do other people say about the Birdsville amendment? Professor Alan Fels, the former chair of the ACCC, has also been highly critical of the Birdsville amendment, as has Bob Baxt, who is a former chairman of the Trade Practices Commission and is a partner in the law firm Freehills—a well-known and well-respected law firm which has been engaged by governments to do legal work on the behalf of governments. Bob Baxt said:

The Birdsville amendment, which prohibits corporations with a substantial share of the market from engaging in predatory pricing for the purposes of damaging competition, is apparently based on a simplistic and unprincipled evaluation of how competition law should operate.

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As the government has been previously advised by many, this is an inadequate guide for corporations to assess whether they are engaged in anti-competitive behaviour.

He went on to say in his opinion piece in the Australian Financial Review of 19 September 2007:

The Australian Competition and Consumer Commission has recently consistently said that market share will no longer be regarded as the most important or relevant factor in evaluating anti-competitive mergers. The commission correctly notes that, in assessing whether competition is lessened, other important issues include barriers to entry, countervailing power and related matters.

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Far from protecting small businesses, this amendment—

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

A damning indictment indeed.

The amendment contained in the bill that we are dealing with today—conferring jurisdiction and dealing with the reality of business experience and experience with consumers—is really important. In one sector alone it is important. The report of the ACCC inquiry into the competitiveness of retail prices for standard groceries recommended a number of things, including unit pricing with a nationally consistent approach, changes to the zoning and planning laws to get rid of obstacles to supermarkets coming into shopping centres and changes to the horticultural code of conduct. The overview of that particular report said the bleeding obvious, that most Australians regularly visit supermarkets for their grocery needs, but then went on to say:

As the average Australian household spends around 12 to 14 per cent of its after tax income on standard groceries, increasing prices for these goods have been strongly felt.

The ACCC received 250 public submissions and a vast quantity of data, information and documents from supermarkets and other retailers, suppliers and groups for this inquiry. So, in one sector alone, consumers really feel the pinch when it comes to abuse of market power. When I do my grocery shopping, consumers talk to me about the fact that there are too few businesses in the market.

There are also changes in this amendment legislation in relation to unconscionable conduct. Currently under section 51AC of the Trade Practices Act, unconscionable conduct is proscribed in connection with the supply of goods or services to or the acquisition of the same from a corporation, and there are limits there when it comes to prices up to $10 million in terms of the supply of goods and services. The Senate inquiry recommended that the $10 million price limit be repealed. This bill abolishes the $10 million price threshold. This amendment will help to protect non-listed businesses engaged in business dealings exceeding $10 million.

This bill will have a big impact in helping the people in my electorate. I do not live in an electorate where people are rich; the people in my electorate battle and struggle. It is a rural and regional seat. I know from my experience growing up in Ipswich that anything to help consumers will help the average person in my electorate. The consumers in my electorate do not have much opportunity to express themselves in the market on a day-to-day basis. When it comes to supermarkets, big producers and big suppliers are the ones who tend, in an oligopolistic way, to dictate the prices. Any amendments that will enhance the rights and roles of consumers in our society and improve competition and fair trading will help the people of Blair, and I strongly support this bill. It is an indictment on the previous coalition government that it took this government, the Rudd Labor government, to make these amendments, which are long overdue.

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