Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Hansard source

Our big banks are the Beatles of the Australian economy. Like the Fab 4 lads from Liverpool, our banks are fabulously successful, globally significant and likely to touch the lives of most of us in some way. Just like each of the four Beatles, any one of the big four banks can lead with the lyrics. For a live performance, the band members recognise the cue or opening note, know the tunes spontaneously and quickly catch on to play with perfect tempo and rhythm and sing with marvelous harmony, particularly for the chorus. While this kind of planning, synchronicity and performance may well be remarkable in a Beatles concert, it is untenable between competitors in a market economy. Concert performance in an entertainment context for the joy of audiences becomes concerted practice in the economy to the detriment of consumers and workably competitive markets.

Concerted practices have been recognised by the European Commission in order to deal with collusive situations where firms have not explicitly agreed with each other but embark on practices which have the effect or the object of distorting competition. The European Court in the sugar cartel case defined the concept of ‘concerted practice’ as ‘a form of coordination between undertakings which, without having been taken to the stage where an agreement properly so-called has been concluded, knowingly substitutes for the risks of competition’. The court found this kind of practical cooperation particularly repugnant if it enabled the businesses concerned to consolidate established positions to the detriment of effective freedom of movement of the products in the market and of the freedom of consumers to choose their suppliers. We have no such equivalent law in Australia.

Currently, price signalling is not covered by the existing cartel prohibitions of the Trade Practices Act in the absence of an understanding between the parties. This means that the courts in Australia need to find some form of commitment to act in a particular way with the purpose or effect of substantially lessening competition for illegality to be found. The ACCC has previously recommended changes to the law to redefine what amounts to an understanding to address the requirements of commitment demanded by the courts. The ACCC’s2007 report into the price of unleaded petrol identified how the current trade practices law was unable to deal with the coordination of pricing between competitors in the absence of an arrangement or understanding to act on this information. The commission recommended changes to the law to redefine ‘understanding’ and in its March 2008 response the Labor government said that it would give careful consideration to the ACCC’s proposed amendments to the Trade Practices Act.

In early 2009, Treasury produced a discussion paper on the meaning of ‘understanding’, and more than a dozen submissions were received. Inadequate powers to tackle price coordination and the absence of US or EU style competition tools which treat price signalling as cartel style behaviour were again identified by the ACCC as a concern when it opposed Caltex’s mid-2009 plan to purchase more than 300 Mobil retail outlets.

There have been lots of calls from the ACCC for action over many years, but no sign of any kind of substantive, considered and constructive policy response from the Labor government. As recently as August this year the ACCC Commissioner Dr Jill Walker was making the case about this ‘gap in the law’ and how it needed to be addressed by:

… a European type prohibition against facilitating or concerted practices to directly target the practices of concern.

This ‘gap in the law’ has taken on a particular salience given the current vigorous debate about the state of competition in the banking sector and interest rate movements.

In an article from the 4 November 2009 edition of the Australian headed ‘ANZ shift on plan to stick with RBA’, the widely reported comments by ANZ chief executive, Mike Smith, that he would be ‘reluctant’ to increase home loan rates over and above the RBA’s rate increases, were reiterated. What was more significant, in the context of this bill, was the article’s report of Mr Smith’s subsequent clarifying remarks at the bank’s annual profit announcement that if other banks moved their rates outside moves by the RBA he would not be, and I quote: ‘stuck on my own.’ These remarks were extraordinary. Earlier in the same month, the Treasurer, Wayne Swan, argued that there was ‘absolutely no justification’ for any move beyond the Reserve Bank’s in his now notorious and famously ineffective Captain Feathersword warnings to banks about gouging customers.

More significant though, were the reported remarks from the ACCC chairman, Graeme Samuel that he was worried that too many of the banks are out there signalling to each other and to the world at large that they are going to increase rates. Mr Samuel went on to characterise the kind of price signalling he was concerned about, as banks were:

… saying to their competitors, hey guys, if you lift your rates, we’re going to lift them too, so you don’t have to worry about it.

The result is the crabwalk of interest rate movements that leave borrowers and consumers wondering where the competition is, rate rises that seem to defy independent analysis of their justification and bewilderment at record profits results.

Anticompetitive comments like those from the ANZ chief are unwise and unbecoming, and may well be unlawful in the future if this bill is passed. The Shadow Treasurer, Joe Hockey, has outlined a nine-point plan to boost banking competition. This bill is a very clear and demonstrable example of action to back up that commitment. The anticompetitive facilitating, or concerted practice, that this bill addresses is known as price signalling. Anticompetitive price signalling is a facilitating practice by which corporations inform their rivals about price actions and intentions, so as to eliminate uncertainty about the price of their goods or services, thus reducing the inherent risks of competition which would normally be a feature of workably competitive markets.

Anticompetitive price signalling is engaged in with the hope, or even expectation, that competitors will reciprocate on the setting of the price and terms and conditions for their goods or services, although it does not require any commitment from them to do so. The effect of such behaviour will often be the same as prohibited conduct but is said by the ACCC to currently not be captured by existing provisions. The parliament needs to act, not with words that are easily ignored, but with deeds.

This coalition private member’s bill seeks to establish a new head of power under which the ACCC would be able to investigate and seek penalties for price signalling that produces anticompetitive effects in the Australian market to the detriment of Australian consumers. The government has failed to address the price-signalling risk to consumers and the Australian economy where the current trade practices laws have been said time and time again by the ACCC to be unable to deal with this kind of conduct.

The bill creates new provisions to make anticompetitive price signalling unlawful and is designed to operate within the existing framework of the Trade Practices Act and to respond to those repeated calls from the ACCC for the parliament to address this gap in the Australian competition law toolkit. This conduct is unilateral and therefore cannot be dealt with under existing price-fixing prohibitions, where an understanding to exchange information that has the purpose, effect or likely effect of fixing, maintaining or controlling prices is required.

Importantly, the bill also recognises that some communication of price related information can at times be pro-competitive and beneficial for consumers. The ability to compare prices, to be aware of discounting or to be readily able to undertake market research to support purchasing decisions and to compare rival offers; all of this preserved by the provisions of this bill and protected because these are advantageous to consumers and are not anticompetitive.

As a result, unlawful price-signalling conduct is defined in the bill as needing to contain three elements specifically designed to ensure that pro-competitive and pro-consumer price related communication is not impeded by this bill. It seeks to ensure that the bill has key elements to focus on the anticompetitive conduct. It requires price related information to be communicated to a competitor for the purpose of inducing the competitor to vary its price, with the effect or likely effect of substantially lessening competition. The bill makes it possible for a court to infer purpose on the basis of the conduct. This is the ‘if it looks like, walks like, squawks like and hangs out with ducks, it is fair enough for the court to infer that it is a duck’ reasoning. The substantially lessening competition test is a recognised threshold in the Trade Practices Act and has been selected to ensure that the anticompetitive effects manifested in identical prices or parallel price movements in competitive markets are captured. But for oligopolistic markets, those interdependent markets where there is a small number of big players and there are already competition deficits, it is open for the court to conclude that even a more modest anticompetitive infringement does amount to a substantial lessening of competition.

We have broadly defined communication, and the details are set out in the explanatory memorandum. But we have also explained that there are legitimate purposes, and in some cases lawful obligations, for companies to share information that might otherwise be captured by this bill. This is where we are talking about information that is already in the public domain, where that has been repackaged or rebroadcast, where it is relating to internal discussions, where customers might also be competitors and also where there is a lawful obligation to provide that information.

The bill is responsive to the gap in the law the ACCC has consistently identified and the government has failed to address. I call on the government to pick up this bill in the interest of consumers. It actually gives the Treasurer a practical example of what he should be doing and what he has failed to do. He should pick up this bill. It would look like he has some authority and some commitment to tackle anticompetitive price signalling in Australia.

Bill read a first time.

Ordered that the second reading be made an order of the day for the next sitting.

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