Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

I am pleased to speak on the Competition and Consumer Amendment Bill (No. 1) 2011. On this side of the House we believe that this is a deeply flawed bill. We do not disagree that there is an issue which needs to be add­ressed, which is why the coalition brought forward our own bill, the Competition and Consumer (Price Signalling) Amendment Bill 2010. But we believe that the approach taken in the bill that the government has put before the House raises some very serious issues.

The stated purpose of the bill is to give powers to the ACCC to deal with the issue of price signalling, and it does this in both a public and a private context. In the private context it creates a so-called per se prohib­ition on the private disclosure of pricing information to competitors. 'Per se' means that the disclosure does not need to be for the purpose of substantially lessening compet­ition, nor does it need to have that effect. In both the private and the public contexts, the bill contains a general disclosure prohibition of the disclosure of pricing information. That is also, we will argue, a prohibition that raises significant policy issues.

The stated approach in this bill is to strike a balance. The explanatory note from Treasury states:

… it is recognised that any proposal to address anti-competitive price signalling and other information disclosures will need to carefully balance the potential anti-competitive impacts of particular information disclosures, with the benign and pro-competitive effects of other information disclosures.

On this side of the House we argue that this bill does not strike the right balance, and that argument is supported in the arguments made by many parties that made submissions in relation to this bill, including the Business Council of Australia and the Law Council of Australia. Unfortunately, the question of whether the balance has been properly struck is not the one which appears to be principally motivating the government in its approach to this piece of legislation. This legislation ultimately is being driven by political considerations and the desire of the Treasu­rer to be seen to be doing something. The result, unfortunately, is a piecemeal measure with, in its current form, many unintended consequences.

It is true, as has been noted, that some amendments are proposed, and to some extent that advances the position. But there remain many fundamentally troubling aspec­ts of this piece of legislation, and the basis upon which the legislation has been developed is also extremely troubling. The consultation process that was employed in arriving at the introduction of this bill was seriously flawed. A draft exposure bill, for example, was provided for comment on 12 December last year, with comments due by 14 January. It really is very far from good practice in consultation with industry to require very detailed consideration of wide-ranging reforms to be provided in the middle of the Christmas holiday period.

Let me make a number of specific points in the brief time available to me. The first point is that one of the central provisions of this bill, the so-called per se prohibition, is bad policy. I secondly want to argue that a measure which is specific to one sector—in this case, the banking sector—is also bad policy. I thirdly want to argue that to give the Treasurer the capacity to extend, by regulation, the measures contained in this bill to other sectors without needing to come back to the parliament is also bad policy. I fourthly want to highlight the poor policy consequences of the inconsistency between the regime set out in this bill and the well-established continuous disclosure rules which apply to listed companies, including of course the major banks which are listed.

Let me turn firstly, therefore, to the question of the per se prohibition to remind the House what this means. It means that if the specified conduct is found to have occurred then it becomes irrelevant as to whether there was any anticompetitive purpose in carrying out that conduct. Indeed it is also irrelevant whether there was any anticompetitive effect. In other words, if the conduct occurs then it matters not whether there was any intention, any purpose, to lessen competition. Nor does it matter whether there was actually the effect of lessening competition. There is simply a blanket prohibition on private disclosure of the relevant pricing information.

The arguments that can be made that circumstances in which one bank or executives of one bank meet privately with another to discuss pricing information and the arguments that can be made about the anticompetitive consequences of that are clearly forceful. But if you say, 'We do not really care whether the conduct actually has an anticompetitive effect. We do not really care whether there was an intention, a purpose, of reducing competition in meeting to have these private discussions,' then you are missing the whole point of what policy ought to do in the case of seeking to maintain and strengthen competition. Policy ought to focus on conduct which has an effect of reducing competition; policy also ought to focus on conduct which is intended to reduce competition—that is to say, which has the purpose of reducing competition—even if, for reasons that are beyond the capacity of those who have joined together to have the conversation, it does not result ultimately in the anticompetitive effect. But there is another even more fundamental point, which is this: there are often circumstances in which private disclosures can be procom­petitive, and there are certainly an extensive range of situations in which private disclosures can be necessary and desirable in the carrying on of business and are not harmful to competition. When you look at the provisions in the bill before the House, you will see that the scope of what is caught by this provision is very wide. It includes historic, aggregated and non-confidential data.

The submission from the Australian Bankers Association lists a range of situa­tions in which the bill will create great difficulties. They cite syndicated lending, which of necessity involves more than one bank. Typically in a syndicate there are many banks. They talk about loan switching, where a customer switches a loan from one bank to another, or a situation where two or more lenders are dealing with a financially distressed business—perhaps a business which has received loans from a syndicate and some time later it transpires that the business is in financial distress and the banks need to engage in consultations to work out how they are to deal with this business. The approach which the government has taken to this problem is to set out a specific range of exemptions in which the per se prohibition will not apply. But that is poor policy. It would be much more sensible not to start with a per se prohibition in the first place. It would be much more likely to produce a rational policy outcome.

Let me turn to the next point I want to make, which is that policy which is specific to one sector is bad policy. It is a very curious approach indeed to competition policy to say that certain conduct, if carried out by bankers, is anticompetitive; but, if carried out by airline executives or pharmac­eutical industry executives or telecomm­unications sector executives or agricultural industry executives, is not anticompetitive. Under the provisions contained in this bill conduct in one industry will attract potentially criminal penalties, whereas cond­uct of exactly the same kind carried out by executives in different industries, carried out by companies in different industries, will not attract a penalty. It is impossible to see the policy rationale for such inconsistent treat­ment. The Swanson, Hilmer and Dawson reviews all found that competition law prohibitions as a general principal ought to apply across the board.

Let me quote from the submission by the Law Council:

Any prohibition on price signalling should apply universally and not just to selected business sectors. Selective application of the proposed prohibitions and undermines the general application of the Competition and Consumer Act 2010 across all industries on an equal basis.

It is interesting that the Australian Compet­ition and Consumer Commission, the ACCC, also noted its scepticism of the approach of industry-specific competition prohibitions. The ACCC had the following to say:

… we would hope signalling laws would be of a general application rather than focusing on a particular sector, because we do not see that there is a reason for signalling out one sector as opposed to another.

Even Choice, the consumer advocacy group—they do very important work but are not known to be a friend of the big end of town—had this to say:

It is Choice's submission that legislation should be, to the extent possible, uniform in its approach to all industries across Australia.

So from first principles and in the submiss­ion of a wide range of parties the approach in this bill of establishing specific restrictions on price-signalling behaviour which apply only to the banking sector is extremely poor policy.

While it is poor policy to restrict this approach to one sector, another aspect of the bill which raises equally serious concerns is the fact that as a legal matter the bill emp­owers the Treasurer to extend this regulation to other sectors. This grants excessive disc­retion to the executive government. The perception, based upon what has been stated publicly by this government in seeking to justify the measures in this bill, is that this is a bill directed towards the banking sector. It is true that in its initial application it will apply only to the banking sector, but it also provides for other sectors to be specified by regulation and so the prohibitions in the bill will apply to them.

It is very hard to understand the policy rationale here. The preferred approach, as I have indicated, would be to have a legal regime in this area which applied uniformly. But if you are going to, as this government appears to be doing, introduce measures directed to one sector, it is then very hard to understand why you retain the flexibility, why you retain the discretion, to extend this to other sectors without coming back to the parliament. The imposition of the prohib­itions contained in this bill is a substantial policy matter and it is one which ought to be considered by the parliament rather than imposed by regulation.

The fourth point I wish to make in the brief time available to me is that there is a tension between the provisions contained in this bill and the obligations imposed upon the major banks which are listed to meet their continuous disclosure obligations under the ASX listing rules. It is one of the many aspects of this bill which does not appear to have been very well thought through, no doubt because the bill has been rushed through largely to achieve a set of political objectives.

This is a poor piece of legislation which is based upon bad policy, selective policy, and driven largely by political motives. We on this side of the House certainly think that very substantial amendment is needed before it can be supported.

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