Nola Marino (Forrest, Liberal Party) Share this | Hansard source

I rise to speak on the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill will give the Australian Competition and Consumer Commission new powers, but not powers to assist small business in business-to-business contracts. The coalition supports a move toward a single, national consumer law, replacing the 10 or so separate laws currently operating in each state and territory. It is intended that this legislation will bring benefits for both businesses and consumers by reducing costs and providing greater clarity about rights and obligations, wherever the goods are bought or sold. However, the coalition has specific concerns relating to this bill which we will seek to have addressed in the Senate.

The use of standard-form contracts in Australia is widespread. A majority of constituents in my electorate of Forrest have a mobile phone, a bank account, gym membership or one of any number of other standard-form contracts—often contracts that consumers do not think about too much, other than when they want a particular product and sign the contract to access the product. These contracts, which are presented to consumers on a take-it-or-leave-it basis, are non-negotiable. If the consumer wants the good or service, he or she must accept the contract as it stands. Many constituents in my electorate have told me they have tried in certain circumstances to shop around for a better or a less onerous contract; however, there is often a reasonably standard type of contract with very little flexibility and, in real terms, no choice or no better contract on offer. This demonstrates the consumer’s diminished ability to source actual alternatives, which highlights the weak position of consumers when confronted with standard-form contracts.

The Financial Review reported on 19 September that the Australian Competition and Consumer Council has recognised the power Coles and Woolworths have in shopping centres and have brokered a deal to stop them abusing these powers. The deal between the two supermarket giants and the ACCC will see the restrictive clauses in 750 existing leases being phased out over five years in an attempt to encourage competition and lower prices. In the same article the Chief Executive Officer of the National Association of Retail Grocers of Australia, Ken Henrick, stated that creeping acquisitions laws were needed in Australia as we have the most concentrated supermarket industry in the world.

In its submission to the Senate Economics Legislation Committee, the Law Council of Australia raised the question of the definition of a ‘consumer contract’. The Law Council favoured using a definition which hinges on whether the good or service being supplied is ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’. The coalition believes the benefit of this definition would be that it would remove the need for an additional and potentially difficult inquiry into the purpose for which the good or service was acquired, therefore removing some of the burden and limiting the potential unintended consequences of this bill. It would also provide some protection to businesses when the goods or services were not being acquired for sale to a consumer.

Another part of this bill is about the issue of insurance contracts. The coalition does not support the imposition of a further legislative layer on the insurance industry. However, we support the Senate Economics Legislation Committee’s view that a review of the Insurance Contracts Act would be timely, taking into account the new measure on other standard-form contracts. In general, this bill aims to assist in alleviating these contract issues by providing increased protection for consumers through voiding unfair terms in standard-form contracts between businesses and consumers—for example, the unfair contracts component of this bill, where a new provision will be incorporated in the new national generic consumer law that voids unfair terms in standard-form contracts. This legislation will prevent the use of unfair terms in a very broad range of circumstances. The bill also extends the enforcement options for ACCC and the Australian Securities and Investments Commission for specified consumer protection matters, effectively increasing the powers of the ACCC.

The coalition has concerns with the new enforcement powers and potential unintended consequences of this bill. I understand that the lack of availability of civil financial penalties and disqualification orders for the enforcement of consumer law represents a significant gap in the range of enforcement options available to the ACCC and ASIC. The enforcement provisions of this bill greatly increase the powers of both of those agencies. I have been unimpressed with the recent performance of the ACCC and will watch the operation of these new enforcement powers very carefully. Having directly been through a process with the ACCC, I have a sound reason for this lack of confidence.

Another area that affects my electorate of Forrest, which was originally linked to this legislation, is the business-to-business as well as business-to-consumer contracts. The government originally agreed to include small business and consulted on the application of unfair-contract provisions of this bill on both business-to-business contracts and business-to-consumer contracts. However, it was only after the majority of stakeholders had made their submissions that the government removed the business-to-business provisions. Why? This is just another example of the devil in the detail, with the Labor government and a minister being unwilling or unable to deal with the tough issue of small business and their capacity to challenge what they believe to be unfair contracts. Small businesses need an affordable, effective process to use to deal with market concentration and market power issues.

As we know in the coalition, so many businesses are family owned and run, which means family members are taking on the cost, the risk and the majority of the work in the business, as well as employing nearly half of Australia’s workforce. They are physically engaged in that small business on a daily basis—for instance, the newsagent behind the counter, the franchisee in a bakery or in a kitchenware shop, the farmer milking the cows, the fruit grower picking and packing the fruit, the accountant with their practice and the home business operators. The majority are hands-on with their business on a daily basis. When they have a serious problem with a contract, how do they effectively and affordably manage it and who do they go to for help? Is there also incapacity on the part of the ACCC and the Labor government to deal with the issues faced by small business in Australia? Everyone but the government, it seems, is aware that small business has been struggling since the introduction of the government’s flawed bank guarantee terms—the terms of which did not consider the impact this measure would have on banking competition and, in particular, its flow-on impact on small business—and its support for the four major banks. A recent article in the Financial Review stated:

… the average cost of bank finance to small business before the rate rise earlier this month was 7.2 percentage points, a margin over the cash rate of 4.2 percentage points. The margin for large business was 2.4 percentage points while mortgage customers are borrowing at only 2.15 percentage points above the cash rate.

Later, the same article quotes a banker as saying:

There’s a sense that because of political pressure and because householders vote, much of the attention is on making sure the mortgage holder gets the best deal …

The lack of clarity in this complex bill before the House is a reminder of the rushed and impractical legislation such as the Youth Allowance, home birthing, Grocery Watch, Fuelwatch and the CPRS that the Labor Party continues to put forward. The CPRS legislation will significantly increase costs to small businesses, many of whom do not have the capacity to pass on increased costs.

A number of small businesses in my electorate have very serious issues with business-to-business contracts. As I said, this is an issue that the government originally agreed to include in this legislation but has now walked away from. Unfortunately for the nearly 14,000 diverse small businesses in my electorate of Forrest—many of whom are affected by business-to-business contracts —the Labor Party has failed them yet again in this legislation. I am referring to the small businesses that are dealing with and making contracts with major multinationals and other corporations. From my experience, the ACCC does not have the capability and it will certainly not have any increased capability through this bill to address these issues.

Effectively, the minister and the Labor government have walked away from the issues concerning small businesses. For instance, my electorate has a number of farmers—horticulturalists and winemakers—and other small businesses. The majority of them often enter into business-to-business contracts to sell their products. When many of these businesses are entering into these contracts with supermarkets and processors, they are presented with a ‘take it or leave it’ situation. In addition, for many items of stock and required inputs, growers have only one or a few limited business options to choose from when entering into a contract. The Western Australian Farmers Federation President, Mike Norton, said:

Farmers operate from a weak negotiating position which is often severely compromised when entering into contracts with other businesses. Furthermore when prices are increased or demand is low, the business these growers are supplying their product to can increase the price they sell the product for, to cover the additional costs. However, farmers and horticulturalists are unable to pass these costs on to anyone.

We have seen this clearly demonstrated in the dairy and horticultural industries—the fruit and vegetable growers find themselves in the same position.

An article in the Weekly Times on 30 September discussed the problems that farmers face with monopoly and oligopoly power. The article quoted farmers as saying ‘not only are our views not taken into account, we are not even part of the debate’. The article suggests that farmers, like other businesses, should use template contracts to help ensure that the power is more balanced and also to use processes that are already available to resolve disputes when they arise. So here we have farmers needing to be educated on the ways available to try to ensure that there is balance between themselves and those to whom they are selling their products. It is of concern that the writer of the article, who is a producer, states ‘when disputes arise’ not ‘if disputes arise’, therefore implying that this is a commonly occurring problem facing growers, such as those in my electorate. This has had and will continue to have a detrimental impact on the businesses in my electorate and throughout Australia. This is why I am encouraging all those in the dairy industry to make submissions to the Senate Economics References Committee inquiry into milk price contracts and the composition of the market in Australia.

As we all know, dairy farmers are price takers and, at times, they are forced to take prices close to or even below their costs of production, or to take prices that force them into greater and sometimes unsustainable debt levels and to lose equity in their businesses—as we saw for many years following deregulation. Very importantly, the Senate inquiry will look at the market concentration in Australia—the amount of retail share controlled by Coles and Woolworths, the generic milk tendering system and its impact on the prices paid to farmers. Market failure is where there are a few selective buyers and a multitude of sellers with limited or no options to sell their product or to supply to an alternative buyer.

Other small businesses, such as the newsagencies in my electorate, have serious problems with the legislation for business-to-business contracts. Like consumers and other small businesses, they do not have easy or affordable access to legal advice or representation and, even if they did have access, their market position would not allow them to negotiate a better deal. In the absence of a business-to-business provision in this bill, the government must release a clear and comprehensive strategy to address and manage the wide range of concerns of small businesses. These issues must be addressed in the government’s review of the unconscionable conduct provisions in the Trade Practices Act and the Franchising Code of Conduct with regard to fairness in business-to-business contracts.

The coalition supports this bill in its general aim of unifying Australian consumer law and its specific aim of strengthening the hand of the consumer when the ability to exercise choice is limited by the dominant use of standard contracts. I am concerned about the potential unintended consequences of this bill. Also, the coalition has very specific concerns, as I said, with the bill, which we will seek to address when the bill is debated in the Senate.

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