Tony Zappia (Makin, Australian Labor Party) Share this | Hansard source

I have just listened to the member for Kennedy and, whilst I have to say that I agree with much of what he said—perhaps not all—I am not sure whether he supports the bill or not. But I rise to speak in support of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. This bill establishes criminal penalties for serious cartel conduct, with maximum criminal penalties for individuals of a 10-year jail term and/or a fine of $220,000. For corporations, the penalties will be fines mirroring the existing maximum pecuniary penalties for breaches of the civil penalty provision—that being the greater of $10 million, or three times the benefit obtained if this can be determined or, otherwise, 10 per cent of annual turnover.

Criminalisation of serious cartel conduct, along with other provisions in this bill, brings Australia into line with a number of other countries in curbing cartel behaviour. This legislation is long overdue and comes more than 10 years after the Organisation for Economic Cooperation and Development initiated an anticartel program. Whilst serious cartel conduct is already prohibited under existing provisions of the Trade Practices Act, criminal sanctions do not apply, despite the previous government having had nine years since the 1998 OECD anticartel program was initiated. I noticed earlier in the debate that both the member for Isaacs and the member for Blair made this point very eloquently.

Criminalising serious cartel conduct is an important deterrent in such actions. It is clear that the previous government had absolutely no intention to ever introduce such legislation, even though they went through the charade of having the Trade Practices Act review committee, chaired by Sir Daryl Dawson, conduct a review of the competition provisions of the Trade Practices Act.

That review, known as the Dawson report, was released in April 2003 and recommended, amongst other things, that criminal sanctions should be imposed for serious cartel behaviour. The responsible minister at the time was the member for Higgins, who, despite announcing on 2 February 2005 that the Trade Practices Act would be amended to include criminal penalties for serious cartel conduct, never followed through with his announcement. He was obviously overridden by the Prime Minister of the day. It is clear from listening to a number of opposition speakers on this matter that there would have been considerable opposition to the introduction of criminal penalties by other members of the previous government. So I am not surprised that the member for Higgins was never able to get the legislation up in this parliament. In fact, he never even got to the point of introducing it to parliament.

Cartel conduct transcends state and national borders. Globalisation and the dominance of powerful corporations and transnationals have made market manipulation much easier but far more difficult to prosecute. I note that the previous chairperson of the ACCC, Professor Allan Fels, made comments about that in publications that he put out. When markets are manipulated by powerful players, consumers are ripped off and less influential business competitors are often squeezed out of the market. In turn, that leads to an even greater dominance of the market by the larger entities, and ultimately greater consumer exploitation occurs, so much so that collusion can then occur without a word ever even being spoken, with dominant market players often having an unwritten understanding to not undercut each other. The member for Forde referred to that kind of behaviour as sometimes just a wink and a nod. He is absolutely right.

These are very difficult allegations to prove. Even with the new legislation, it will be very difficult to do so. I particularly therefore welcome the new provisions in the bill relating to the protection of whistleblowers and the ability to carry out phone tapping. It is highly likely that the exposure and successful prosecution of criminal cartel conduct will be reliant on one or both of these two provisions.

I also note that the government took on board concerns about the ‘dishonesty’ test in the draft legislation and has amended the bill accordingly. In view of the fact that many of the dominant market players are multinational companies, I also welcome the application of the Extradition Act to serious cartel conduct matters. There will no doubt be occasions on which extradition proceedings will be instigated.

Regrettably one of the key frustrations relating to this legislation is that, given the multinational nature of industry and business in Australia, serious cartel conduct may well result from activities in countries which either do not have criminal cartel conduct legislation in place or in which in any case it would be impossible for Australia to launch successful prosecutions.

The OECD definition of hardcore cartel conduct is:

… an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids … establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce …

This brings into focus many activities which will be the subject of ACCC scrutiny.

In recent years the major supermarket chains—and I note the member for Kennedy made a number of points about the major supermarket chains—the large oil companies and the major banks have all been the subject of considerable public disquiet and government scrutiny over their respective business practices. There is, however, as much likelihood that serious cartel conduct is occurring across many other business sectors and going unnoticed. There are so many examples of goods or services for which the supply chain is limited, where the prices charged are excessive and where collusion is highly likely.

I noted with interest that the Australian Competition and Consumer Commission, in the report of its inquiry into the price of unleaded petrol, proposed amendments to section 45 of the Trade Practices Act so as to clarify the interpretation of the term ‘understanding’. The ACCC expressed concerns that, over time, court decisions had narrowed the conduct that is caught by the term ‘understanding’, used in section 45 of the Trade Practices Act. The ACCC noted that, in many investigations, it will not have direct evidence of the making of an arrangement or understanding and must ask the court to infer the existence of an agreement from the factual circumstances surrounding it. I welcome the release, on 8 January 2009 by the Minister for Competition Policy and Consumer Affairs, of a discussion paper calling for submissions on the meaning and proof of the term ‘understanding’ in the Trade Practices Act. The review of the term ‘understanding’ complements this bill.

With respect to many essential goods and services, there is no price competition but only marketing competition. For consumers, choices are all too often made no longer on price differentiation but rather on marketing differentiation. In many other cases, there is no choice at all because there is only one supplier of the product because an arrangement is in place. The practice of having sole distribution rights for goods and services also raises questions about fairness in the marketplace.

Whatever form it takes, whatever goods or services are provided, abuse of market power is nothing less than theft and greed, with billions of dollars each year being ripped off from consumers around the world. Regrettably, some of the most obvious examples of cartel behaviour are beyond the reach of this legislation. The Organisation of the Petroleum Exporting Countries, otherwise known as OPEC, openly and unashamedly colludes to set oil prices and control the supply of crude oil. It is my understanding that the recent increase in the price of LPG has nothing to do with production costs or wholesale or retail margins but rather is to do with the oil producers bumping up LPG prices in order to push up crude oil prices, which, as we all know, have significantly fallen in recent months.

As a country that produces substantial quantities of oil and LPG, Australia needs to extricate itself from the Singapore Mogas prices and the Saudi Aramco price-selling regimes. But serious hardcore cartel behaviour is by no means confined to the oil industry. Over the years, investigations here in Australia by the ACCC and by its counterparts overseas have exposed serious market manipulation in the freight industry, the airline industry, building products, the pharmaceutical industry, the food industry, the agricultural industry, power generation and manufacturing—and there are probably others. This is only the tip of the iceberg. How many other sectors, including many of the professional service providers, collude through their legitimate professional or industry associations to set their fees and charges and to control entry into their profession? To quote Professor Allan Fels:

Sadly, the gains of cartel behaviour are so large and the likelihood of detention so small, some companies will still risk their hands—and their reputations and, perhaps, their livelihoods.

Given that since the OECD report of 1998 only 15 countries have criminalised serious cartel conduct, and of those only 11 countries apply a prison term, one can only speculate on the level of influence global corporations have on government policy. I would prefer to believe that the reluctance by other governments to act is because of the great difficulty in successfully prosecuting serious cartel conduct.

This legislation is another important step in stamping out serious cartel conduct and delivers on another Rudd government election commitment. It complements other amendments to the Trade Practices Act relating to the misuse of market power, unconscionable conduct and clarity in pricing. I also note that this bill has been the subject of considerable public consultation and that many constructive submissions were received from the legal, business and consumer sectors. The bill has also been referred to the Senate Standing Committee on Economics for report by 20 February 2009.

It was the Whitlam Labor government in 1974 that brought in the Trade Practices Act in its modern form in order to protect consumers and small business. I just want to stress that point on small business again. Other speakers have done so. As a person who operated a small business for a long time, I fully understand the competitive market that small business finds itself in. Time and time again, opposition members come into this chamber and would have you believe that theirs is the party that represents and supports small business in this country. Nothing is further from the truth. The member for Kennedy I believe quite eloquently exposed that very fact.

If you want to support small business, one of the most important things that you can do is enforce the provisions of the Trade Practices Act and consumer legislation in this country. It is only through enforcing those provisions that small business will survive. It is only through enforcing those provisions that small business will remain competitive. We can all refer to examples of where larger industries or larger businesses came into the marketplace for a while and undercut the small business operators to the point where they could not survive anymore. Once they were out of the market, we saw an escalation in the prices of the goods and services that they provide. We continue to see it today. That is how markets are manipulated.

It was the Whitlam Labor government in 1974 that brought in this legislation. It is 35 years later that the Rudd government is updating it and bringing it in line with the market of today. It is the Rudd government that is quite truly standing up for small business in this country. At the same time, whilst the government stands up for small business and supports not only the small businesses but the local communities that rely on those small businesses, it is also about standing up for the rights of the consumers.

Before being elected to this place and since having been elected to this place, time and time again I have been approached by both consumers and small business operators about their frustration with the manipulation of the retail market and sometimes the wholesale market. It is a frustrating position to be in when you know it is occurring but there is little that can be done about it. This legislation may not be the answer to the prayers of all of those people who want the government to act, but it is certainly an important step in the right direction, a step that will ensure that there is going to be more fairness in the market for both consumers and small businesses. It is legislation that is long, long overdue, and I commend it to the House.

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