Brett Raguse (Forde, Australian Labor Party) Share this | Hansard source

It is interesting to hear the views of the member for Mackellar. I understand her concerns but I suggest that some of her accusations are unfounded. A number of the members this morning, including the member for Barker and the member for Fadden, talked about this debate as being something to do with the government’s economic stimulus package. It is not. The member for Fadden in fact tried to make it a debate about neoliberalism. It is not. The member for Mackellar seems to think there is some conspiracy with the ACCC. It is not about that at all.

In fact, this debate is about behaviour that we have known about for a long time and that in business circles and the community has always been of concern. The member for Mackellar herself suggested that there are a range of activities that should be outlawed. With regard to the issue of whether there should be civil or criminal penalties, in the debate today I will talk about some of the penalties that exist for individuals who knowingly—though perhaps unwillingly sometimes—make arrangements to take money, remembering that many representatives of large companies are on some sort of bonus payment system but that unlawfully getting money from other people is stealing. When bank robbers steal money they face criminal charges; it should be likewise for what we are talking about here today.

Just to bring us back to the amendments as they stand, the now Rudd government committed to introducing legislation that would criminalise cartels. The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 will make changes to the Trade Practices Act 1974 and will operate to deter cartel conduct by widening the range of regulatory responses available. The bill will also bring Australia into line with our major trading partners such as the United States and the United Kingdom. Much of this bill has its origins in the 2003 review of the competition provisions of the Trade Practices Act that was chaired by Sir Daryl Dawson. The review acknowledged the growing international experience that showed that having criminal sanctions in place is an effective deterrent against serious cartel conduct. The Dawson review also recommended the introduction of penalties.

A cartel is an arrangement or understanding between parties that restricts dealings and competition. There does not need to be a formal written agreement between the competitors—there rarely is—there only needs to be an understanding. In some cases, as the member for Page recently said, it can be no more than a wink and a nod. Cartels undermine the forces of the market economy and divide markets, rig tender bids, and deprive other businesses and essentially consumers. Companies that collude in fixing prices are robbing business. We are in a free market and cartels do not subscribe to the ethos of business and competitive markets.

Competition is essential in ensuring that consumers can get the best product or service for the lowest possible price. Competition also enhances our productivity, which in turn enhances our standard of living. At the Cracking Cartels: International and Australian Developments convention held in November 2004, Graeme Samuel, Chairman of Australian Competition and Consumer Commission, the ACCC, described cartels as a cancer on our economy and as insidious and damaging behaviour. It is generally accepted that cartels in Australia cost businesses, taxpayers and consumers billions of dollars in higher prices. Cartels also have the effect of constraining innovation through their support of inefficient production processes.

A number of cartels have been exposed in Australia in markets generating billions of dollars each year. If you consider this information in light of recent international studies which have found that the average life of a cartel is about six years, a cartel increases the prices of affected goods or services by an average of 10 per cent. Essentially a cartel is an agreement not to compete. Cartels only benefit those involved in the cartel. This affects consumers, businesses and the economy at a time when we least need it. We are all affected by cartels through a lack of freedom to choose and the increasing prices that ensue.

I am proud to say that the Rudd government has taken a strong stance on cartels and will not stand for them. The government and the ACCC need these laws in place to tackle cartels, a serious crime. But we also need the right prevention strategy in place. The minister in fact highlighted that cartels have been an issue for some time. The previous government committed to introducing this legislation but later reneged on this essential reform. While the rest of the world re-evaluated and updated their laws against anticompetitive behaviour the former government did not. Hearing the speech of the member for Mackellar, I maybe understand some of the reasoning behind that—but it was unfounded and untrue. The Rudd government is now delivering. The ACCC gave 15 separate warnings to the previous government, and unfortunately it was ignored. The ACCC gave warnings about the need for reform, and in particular the need for jail terms to be introduced for company executives who were involved in cartel conduct. I would like to commend the Minister for Competition Policy and Consumer Affairs for bringing forward this important legislation. I would also like to commend the minister for his extensive consultation process with stakeholders.

The key amendments in this bill are best explained in six categories. Firstly, the cartel provisions. The bill provides a definition of the term ‘cartel provision’ that will apply under the new criminal and civil prohibitions. In summary, a provision of contract arrangement or understanding can be a cartel provision if it concerns price-fixing, sharing or allocating a customer base, restricting supply or rigging a tender process. If at least two parties are involved or are likely to be in competition with each other then there may be a breach of the new provisions. Secondly, there are offences and civil penalties. The bill provides that a corporation commits an indictable offence if it makes or gives effect to an agreement that contains a cartel provision. The prosecution will be required to prove that the corporation knew or believed that the agreement contained a cartel provision. Individuals can be liable for a contravention of the new offence in one of two ways: they can be an accessory to the committing of an offence under the accessorial liability framework in the Trade Practices Act and they can also be held directly liable for the offences as provided for in the schedule to this act. The schedule offences mirror those in the act and are applied as a law of each state and territory through application legislation in those jurisdictions. The ACCC will be responsible for investigating suspected breaches of criminal cartel offences while the Commonwealth Director of Public Prosecutions will be responsible for their prosecution. A memorandum of understanding between the ACCC and the DPP will detail the responsibilities of each agency in criminal investigation and prosecution of serious cartel conduct cases.

Thirdly, the amendments detail penalties—jail terms, fines and pecuniary penalties. The maximum penalties that will apply for a breach of the government’s provision will be substantial. This reflects the government’s view of the serious harm caused to Australian consumers, businesses and markets by hardcore cartel conduct. Individuals face a maximum jail term on conviction of 10 years and a fine of 2,000 penalty points—currently $220,000. For corporations the maximum fine will be the greater of $10 million or three times the value of the benefit obtained as a result of committing the offence. Where that benefit cannot be determined, the maximum fine will be 10 per cent of the corporation’s annual turnover. A maximum 10-year prison sentence already exists for directors who wilfully defraud or deceive a body corporate or for directors who fraudulently appropriate the property of a body corporate. The proposed 10-year jail term will put Australia on par with the United States as having the world’s longest jail terms for this serious crime.

Under the civil penalty provisions there will be a maximum $500,000 penalty for individuals and a penalty consistent with the maximum criminal fine for corporations. Fourthly, the amendments list exceptions. The Trade Practices Act currently provides a number of exceptions and defences to the prohibitions against anticompetitive behaviour. I think the member for Mackellar should probably have read about the exceptions, because they certainly cover a number of the cases that she spoke about and had some concerns about.

Similarly, the bill provides for specific exceptions to new prohibitions and they fall into six categories: conduct notified under the collective bargaining regime in the act; contracts containing cartel provisions subject to the notification provisions or a grant of authorisation; contract arrangements or understandings between related bodies corporate; joint ventures contained in contracts; anti-overlap exceptions; and the price of goods or services collectively acquired and the joint advertising of the price for resupply. The exceptions are intended to ensure that the prohibitions do not prevent legitimate business activities that are beneficial to the economy or in the public interest.

Fifthly, there is enforcement. One issue the government consulted widely on was the application of telecommunications interception regimes to the new offences. Cartels pose particular problems for enforcement agencies because they often involve multiple parties operating in secret with limited documentary evidence and enhanced reliance on oral communication. In these circumstances the discovery and proof of a cartel can be difficult, with regulators often taking on proceedings without the benefit of direct evidence of cartel conduct. While we say that, I do understand the concerns of the member for Page about this type of monitoring. Essentially it is also the notion of a wink and a nod, and somewhere along the line interception to understand what conversations are taking place can be of some value.

After consideration of the issues involved, the government decided that applying the telecommunications interception regime was appropriate. In addition to the benefits this will provide for the detection and prosecution of illegal cartel conduct; the use of telecommunications interception powers can be a means of finding evidence of the directing minds behind corporate criminal behaviour. Further, the bill makes amendments to ensure that the search, seizure and information-gathering powers of the Trade Practices Act are better aligned with equivalent provisions in the Crimes Act.

Sixthly, there are the additional measures. Other arrangements supplement the cartel conduct measures contained in this bill. These include giving the Federal Court jurisdiction, together with the state and territory Supreme Courts, to deal with the new offences. This will be the first time the Federal Court has been given indictable criminal jurisdiction, recognising the expertise the Federal Court has developed in dealing with cartel conduct as a result of hearing civil cases under the existing provisions of the Trade Practices Act. The Director of Public Prosecutions and the ACCC will enter into a formal, publicly available memorandum of understanding to establish procedures for the investigation of a cartel offence and the circumstances in which the ACCC will refer the case to the DPP for prosecution.

If we take the issues surrounding cartel activity back to our own electorates and those people that we represent, I have spoken many times in this chamber about the diverse nature of the electorate of Forde but in this case I refer to the small business operators, many thousands of them who make up substantially the electorate of Forde. These are building contractors, retailers, service industry providers, who are all hurt by this sort of cartel activity that certainly puts an unnecessary burden on the way that they run their business. The nature of cartel activity means that many people do not know that it is actually occurring. Quite often we all get suspicious about certain price regimes and about how a certain type of marketing occurs. It is terrible for small business.

I should say that the opposition have always suggested that they are the party of business. In this case we on the government side support small business, as we do all business. This is an important piece of legislation simply because people who are in that vulnerable situation can be protected. The legislation proves that the Labor government will protect both small business and consumers, and that is why it is so important that we proceed with haste with this particular bill.

When we talk about productivity measures across industry, different governments at different times have imposed different legislation or processes on small business and the business sector, whether it is about increasing productivity, efficient business practice, structural adjustment or labour market reforms. When it comes to cartels, it is insidious because no-one follows the rules. It is very much about people making their own deals to the benefit of individuals. I make the point that there are a large number of companies who have been caught up in this type of activity where their representatives, without naming those major companies, have in recent times had certain convictions. Reputation affects everyone. It affects the customers and also executives and workers who work within certain companies. I should mention one notable case in Queensland that took almost 10 years to try and convict. It was to do with certain cartel activity amongst concrete providers in some dealings between 1989 and 1994, five years of activity that essentially fixed prices on concrete being provided to public works in Queensland. It was a major case with a lot of publicity and it took 10 years to get to a conviction, where the outcome was penalties of over $20 million shared between three major providers of concrete.

In South-East Queensland and certainly in my electorate this sort of activity does take away local business. Those contracts to government at the time were so insidious in the way that they had been arranged, involving public investment in infrastructure in Queensland between 1989 and 1994, and a lot of money went into cartel activities. The proof was very difficult. The evidence to put this into court proved that there were over 50 meetings. The individuals involved knew that this was cartel activity but they very much thumbed their noses at the authorities because they did not believe that they would be caught. Under our legislation, these sorts of convictions can occur very quickly. We can gather the information more readily and there are specific subsets now that will prove that the activities are illegal and we can take those to trial.

While the particular case in Queensland was successfully tried, there are very few considering the amount of cartel activity that we all suspect is occurring. I again remind the member for Mackellar that it comes to the point where the criminal component of this particular legislation is essential because we have not been able to convict those individuals who actually sit behind and drive this sort of activity, those who bring into disrepute not only the companies they work for but also other workers within those organisations. I remind the member for Mackellar that if an executive in a company makes a deal with an executive in another company and those people are on bonus payments or benefits, essentially they are stealing money; there is no other way to describe it. So I think the Criminal Code plays a part in how we deal with this sort of activity.

In my concluding remarks, I say that the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 honours an election commitment by what is now the Rudd government. Cartel conduct is theft and previously has not been treated as a severe crime. Adding a jail term for committing a cartel offence sends a clear message: commit the crime and do the time. This amendment is long overdue and also works on a prevention strategy with the ACCC and the Commonwealth DPP. At the end of the day, this is about protecting consumers, particularly in our current economic situation. It is important to provide and stimulate competition. For these reasons, I commend the bill to the House.

See this speech in context