Judi Moylan (Pearce, Liberal Party) Share this | Hansard source

I am pleased to have the opportunity to speak on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. It is an important piece of legislation. It is legislation that has evolved over a long period of time, it has been the subject of much debate and academic interest and yet it is legislation that remains vexed and problematic.

This legislation is aimed at criminalising serious cartel conduct; it is aimed at protecting the consumer. That is a commendable goal and, indeed, the overarching concern to protect the consumer should lie at the centre of all debates surrounding this bill. But a commendable goal is not enough to make inherently worthy legislation. This bill should be supported on the grounds that it has the potential to reduce consumer harm, but it is also necessary that it be subject to stringent review and further debate.

Having perused some of the submissions to the Senate Standing Committee on Economics regarding this bill, I can say that it is clear that there are still stakeholders with considerable reservations, and these reservations warrant discussion. In one such submission, it was stated:

The need to introduce cartel offences does not justify amendments to the TPA that are ill-designed and bound to produce unsatisfactory and counterproductive results.

That said, those who set out to deliberately manipulate the market to disadvantage their consumers and to make dishonest personal gain should be punished—businesses that practice anticompetitive conduct contrary to the central notions of our economy. However, the process of criminalising cartel conduct is not straightforward. It is extremely complicated and requires not just a deep understanding of the law and the Trade Practices Act but also innate awareness of Australian business practices and needs. It is the complexity of this reform that prevented its earlier introduction.

Despite the lengthy consultation period in government deliberations, this bill continues to have significant flaws. The bill that is before us is of a lesser standard than should be expected with such an important and far-reaching change to the existing law. It has been rushed and it shows the government’s neglect in failing to properly consider the issues and opinions surrounding the criminalisation of cartel conduct.

There is a host of issues concerning this bill—issues that I am sure will be discussed further within the Senate committee review relating to the technicalities of this law. I am not a lawyer, but I do have significant experience in business—and, indeed, in business law—so I will focus on those issues which I believe are going to affect the Australian business community. Firstly, the broad and ambiguous drafting of this bill will surely create uncertainty for businesses currently conducting legitimate, procompetitive transactions that will, under this bill, expose them to criminal liability. Secondly, the penalty regime that has been amended in the version of the bill before us poses serious questions of inconsistency.

The process to criminalise cartel conduct began in 1998 with the OECD recommendation that members ‘ensure that their laws adequately prohibit such cartels and that they provide for effective sanctions, enforcement procedures and investigative tools with which to combat them’. In this respect the OECD was referring to ‘hard-core’ or serious cartel conduct, which includes such practices as price-fixing, bid-rigging, output restriction and horizontal market sharing. In the case of ACCC v Visy Industry Holdings Pty Ltd No. 3, Justice Heerey noted:

The whole point of price fixing and market sharing is to obtain the benefit of prices greater than those which would be obtained in a competitive market. It must follow that customers pay more than they would in a competitive market, and so suffer loss.

The coalition strongly believes that protection of the consumer should be the driving consideration behind this amendment to the Trade Practices Act. I believe that there is bipartisan support to pursue criminal sanctions for those involved in serious cartel conduct. It is important to remember that this bill was targeted at criminalising only serious anticompetitive behaviour. However, there has been much commentary on the fact that the government has now taken an overzealous and, in some cases, a hurried approach.

The approach taken within this bill to broadly define offences and then provide specific defences poses a number of problems. Having been involved in business and having previously been the shadow minister for small business, I am acutely aware of the risk that legitimate, innocuous commercial transactions that have not been foreseen in the drafting of this bill will become illegal. I am also aware that the broad drafting style is a contravention of good legislative practice and will open up an extremely wide discretion for the ACCC. With so many commercial transactions at risk of prosecution under this bill, the ACCC will be forced to decide which transactions to pursue. Of those that are pursued, the ACCC will then need to decide which are so serious as to attract criminal liability and those that are worth pursuing for civil remedy. One does not need to contemplate too hard to see that this wide level of discretion has the potential to create enormous uncertainty within the Australian business community. We cannot attempt to map out new offences and not clearly delineate where the proper boundaries lie.

In response to the draft legislation, the American Bar Association noted:

In a world of ever-increasing regulatory complexity, the distinction between criminal and civil matters is not always as clear as it should be, and that lack of clarity creates unnecessary risks and can lead to potentially devastating costs.

In this time of unprecedented uncertainty for business, we cannot allow any confusion surrounding new legislation to cause businesses to stop conducting legitimate commercial transactions for fear that they will be found outside the blurred boundaries that the ACCC will, in time, decide. There is a real risk that businesses will cease worthwhile trading and err on the conservative side of caution, losing out at the hands of the government’s hastily designed and poorly articulated legislation. The government, which was democratically elected, has a responsibility to make laws, to determine what constitutes criminal behaviour and not to abdicate such powers to a body such as the ACCC.

The issue with drafting has been described well in a quote in the Australian newspaper by a partner at Mallesons Stephen Jaques:

The attempt to cover all cartel conduct means we’ve ended up with a fairly complex and prescriptive bill, which may catch some things that shouldn’t be caught …

There are legitimate business practices that are going to be put into doubt by the very breadth of these provisions.

Australia needs to have laws which can effectively deter serious cartel conduct. As businesses continue to spread their operations outside of national boundaries, it is more important than ever that our laws do not provide a safe haven for international cartel conduct or tempt businesses into such conduct with soft, lackadaisical prosecution. The penalties for such conduct must serve as a punishment but, more importantly, as a deterrent, and Australia must present itself on an international stage as a country which will not tolerate serious cartel conduct.

In the draft exposure bill and discussion paper released on 11 January 2008, the maximum jail term envisaged for individuals found guilty of serious cartel conduct was five years. This has since been increased to a 10-year jail term. The Assistant Treasurer and the Minister for Competition Policy and Consumer Affairs stated that this increase was to ‘send a clear message about cartel conduct’. I find it somewhat misleading that the government can purport that ‘together with the United States, that 10-year jail term puts Australia at the forefront in fighting illegal cartels’. While it may be true on paper that the United States is the only other jurisdiction with a maximum jail term of 10 years, one cannot assume that the practical application of these penalties will be comparable. The Dawson review noted that in the United States plea bargaining is used to settle the majority of cartel cases. Plea bargaining is uncommon in Australia and indemnities against prosecution are rarely issued as they are in the United States. The Dawson review noted that in 2000, 18 individuals were imprisoned under the United States anti-cartel laws for an average of just eight months—some deterrent!

Most other OECD members have a maximum penalty ranging from three to five years imprisonment. The government’s attempts to legitimise the criminal penalty of 10 years imprisonment for individuals—double what was recommended by the Dawson review—on the back of a United States precedent is wholly misguided, not to mention misleading. Imprisonment is used as a penalty in this context to be a deterrent. It would seem that the ACCC submission to the Dawson review recommending that the term of imprisonment be seven years maximum is quite fitting for this offence. The penalty should also ensure that the proposed amendment to the Telecommunications (Interception and Access) Act would remain viable, as the penalty will still be serious enough to warrant the additional investigatory powers.

I support the prosecution of those individuals and companies involved in serious cartel conduct. Their behaviour is designed to create a benefit for themselves at the expense of the consumer and the market. But I cannot withhold my reservations about a bill that will have the practical effect of exposing Australian businesses that are legitimately conducting their affairs with no ill intention, dishonest motives or desire to manipulate the market in an unconscionable manner to the risk of criminal liability. That is my concern, and I think it is a legitimate concern. This bill has been a long time in the making. The coalition, when in government, spent a number of years ensuring that, when legislation to criminalise cartel conduct was introduced, it would be legislation that would appropriately address the distinction between criminal and civil conduct and do so with minimal impact on the majority Australian businesses that operate within full compliance of the law.

On the other hand, this bill shows clear signs of having been rushed. Criminalising cartel conduct is not as easy as the Labor Party may have envisaged when they promised to do it within the first year of being elected to government. This promise was populist—made in the heady wave of momentum less than 24 hours after Visy’s Richard Pratt made a guilty plea in by far the biggest cartel case ever conducted in Australia. Having been swept away in the excitement of this high profile case, the government have since found themselves struggling to uphold unrealistic and empty promises. The promise to introduce legislation of this nature within 12 months of election is surely a promise that could only be made by a party with little understanding of the concerns of the Australian business community and with little understanding of the reality of legislating on such complex matters.

On the same day that the Labor Party condemned themselves to a year of rushing through complex and important legislation, the former Treasurer, the member for Higgins, said:

… the Government has been consulting very carefully. But you have to be careful here, to make sure that when conduct passes from civil to criminal the lines of demarcation are quite clear. And it’s quite technical and it’s very, very important to get the consultation right and to draw the statute accordingly.

The member for Higgins’ appreciation of the complexities of this legislation is a testament to his experience and his deep understanding of the needs—

Debate interrupted.

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