Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I rise to speak on the Competition and Consumer Legislation Amendment Bill 2011. There are four main parts to this bill. Chapter 1 deals with mergers and acquisitions, chapter 2 deals with unconscionable conduct, chapter 3 is merely a few minor technical amendments and chapter 4 deals with what is known as creeping acquisitions. In the time permitted I would like to discuss each part separately. However, firstly, sadly, in totality this bill is nothing other than window-dressing—a meaningless nothing. It demonstrates that Labor, after all the sound bites when in opposition, have given up on competition policy. They have simply hoisted the white flag.

Competition policy is arguably one of the most crucial portfolios for any government. But, sadly, after the failed tenures of the current Minister for Trade and the current Minister for Immigration and Citizenship, when the single highlight was the farce of GroceryWatch and Fuelwatch, this Labor-Greens government has, appallingly, downgraded the competition portfolio to that of a parliamentary secretary. So it is of little surprise that we end up with a bill like this.

The first chapter of the bill is on the subject of mergers and acquisitions. Our current merger law provides:

A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate where the acquisition is likely to have the effect of substantially lessening competition in a market for goods or services.

Let us be clear: when two firms merge, what happens is that firms that have previously been in competition with each other get together to coordinate and fix prices and divide markets. What mergers actually do is take conduct that we find so detrimental to competition and consumers—and our laws make such conduct illegal, with penalties including jail—and make that same conduct legal. The first change proposed by this bill in affecting mergers is purely academic. It changes the words 'substantially lessening competition in a market for goods or services' to the words 'substantially lessening competition in any market for goods or services'. It simply replaces the words 'a market' for the words 'any market'—a change that creates the impression of doing something without doing anything.

The second change is to remove the word 'substantial' as it applies to restrict the application for section 50 to substantial markets. The problem with this bill is that it takes out the wrong 'substantial'. The 'substantial' that should be deleted from the act is in respect of the word 'substantial' as it relates to 'substantially lessening of competition'. Under our current laws we have the absurdity that a merger that results in a mere lessening of competition to the detriment of consumers and to the detriment of our national interest is acceptable provided that such lessening of competition is not deemed as 'substantial'. We are productivity-growth stalled, with problems throughout our economy and hyper-concentration in many of our markets. How can we permit any further concentration occurring through mergers that result in further lessening of competition? If we have the proviso, we can only prevent it if that lessening of competition is 'substantial'.

Considering why this bill proposes to take out the wrong 'substantial' it is important to consider the historical context of the current wording of the bill. The text of Australia's merger laws were inherited from America's antitrust laws—the Clayton act of 1914, a law written almost a century ago. America's Clayton act makes various anticompetitive practices illegal when they might 'substantially lessen competition or tend to create a monopoly in any line of commerce'. The problem with the word 'substantial' is that it is capable of meaning many different things and is open to wide interpretation. By way of example, is 25 per cent a substantial proportion? Twenty-five per cent of our nation's exports are sold to China, and I am sure everyone would agree with the statement that a substantial proportion of Australia's exports are sold to China. In that context, 25 per cent is a substantial number. Yet, at the last New South Wales state election, the flyblown New South Wales Labor government achieved a primary vote of 25.5 per cent. So the statement: 'A substantial number of electors voted for the New South Wales Labor Party at the last New South Wales state election' is a complete absurdity. In that context, 25 per cent is not a substantial number.

Further, for the majority of the last century during America's golden years America's antitrust laws were interpreted as meaning that competition was a process that required numerous participants and a deconcentration of market power and that any lessening of competition was equated with a decrease in the number of participants. However, in the 1970s and 1980s the long-held view that increased concentration means less competition was challenged by a group known as the Chicago school. If you want to mark the time when America started its decline you can circle the time when a small minority who theorised that a lessening of competition is not equated with a decrease in the number of participants in a market took control of the economic leaders of American policy.

One of the greatest supporters of the theories of the Chicago school was Alan Greenspan. But, in 2008, following the collapse of the US economy, Greenspan gave the mea culpa when he said of this theory:

I have found a flaw … I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.

Pressed to clarify his words, Greenspan was asked, 'In other words, you have found that your view of the world—your ideology—was not right; it was not working'. 'Absolutely, precisely,' Greenspan replied.

If anyone wants an example of how these misguided theories of market concentration mean less competition and higher prices for consumers, they only need to study what has happened in the Australian supermarket sector. Over the last 30 years we have seen an ever-increasing concentration in the Australian supermarket sector, where the market share of our two largest retailers has increased from around 30 per cent of the market to where it stands today at around 80 per cent, leaving Australia with one of the most concentrated markets in world economic history outside that of former Eastern Bloc countries.

The so-called experts have theorised that this period of ever-increasing market concentration would lead to efficiencies and greater synergies to the benefit of consumers. But if you look at the empirical evidence and not the computer generated models you will see the exact opposite has happened. The evidence, as clearly demonstrated by OECD figures, shows that during this period of increasing market concentration Australia consumers have been punished with the fastest accelerating supermarket prices in the developed world. Therefore, what we need to look at is removing the other 'substantial' in our merger laws and returning our laws to the original intent that a merger that results in a lessening of competition should not be permitted.

The second part of this bill deals with unconscionable conduct. Before addressing the provisions of the bill, it is worth noting why we need a statutory prohibition on unconscionable conduct rather than just relying on the common law. The history of our common law traces back to the legal principles that we inherited from decisions reaching back to the aftermath of the Norman invasion of the British Isles. Our common law developed in the age of the village market where both parties to a contract were of approximately equal power and were members of a keenly competitive society. They therefore were able to negotiate freely the terms of their contracts and, importantly, had equal access to the law. However, with today's growth of oligopolies and duopolies, with the special privileges handed out to many of our large corporations today to protect themselves from competition and with small business denied equal access to the courts due to the outrageous cost of litigation today, the conditions of a level playing field that existed when our common laws on unconscionable conduct were developed are simply not present today—especially in contractual relations between big and small business in today's economy. Therefore, to level the playing field it has been necessary to advance the existing common law on unconscionable conduct by having specific statutory provisions.

Sadly, the proposed amendments to this bill give the impression of doing something without doing anything. The insertion of a statement of interpretive principles into the unconscionable conduct provisions of Australian consumer law simply add nothing. They merely regurgitate what the courts have already stated. Let us look at these changes. The first provides that:

It is the intention of the Parliament that:

(a) this section is not limited by the unwritten law relating to unconscionable conduct …

This simply adds nothing. The courts have already made it very clear that existing statutory provisions are not limited by the unwritten law relating to unconscionable conduct. The problem which is not addressed by this bill is that without a statutory interpretation the courts have given a very narrow interpretation of what unconscionable conduct is. In doing so, they have hardly moved the law beyond the existing common law interpretation. The first part adds nothing; it simply regurgitates what the courts have already stated.

The other changes in this bill are, again, meaningless and add nothing. The existing statutory provisions under section 22 of the Australian Consumer Law state:

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of financial services to a person … engage in conduct that is, in all the circumstances, unconscionable.

The existing section continues:

(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to …

The section then goes on to list a long list of non-exhaustive factors which the court may have regard to. So our courts are already able to look at all the circumstances and the proposed amendments, again, are simply meaningless.

There is an alternative way to address the inadequacies of our statutory provisions on unconscionable conduct. Firstly, to move the law on from the narrow provisions of interpretation given by the courts we need a statutory definition of unconscionable conduct in the act. We need to look at the reasonableness of the conduct and whether it is harsh or oppressive.

Secondly, we need the existing provisions of the unfair contract terms in the Australian Consumer Law extended to small business. If you want an example of the anti-small business agenda of this current Labor government you need look no further than their shameful removal of small business from the unfair contract provisions of the Australian Consumer Law done by the current Minister for Trade during his term as Minister for Small Business, Independent Contractors and the Service Economy. Initially Labor proposed that the unfair contract terms legislation would apply to small business in their dealings with big business, and that they should have been congratulated on. But, instead, cuddling up to their mates at the big end of town, this government have shamefully sold small business down the river by excluding them from the unfair contract provisions. It is an absolute disgrace which every small business person in this country should never ever forget.

The third part of this bill merely makes a few minor technical amendments which are of no significance. The fourth part of the bill involves so-called creeping acquisitions. The theory behind the need for this legislation is that in a series of small acquisitions each individual acquisition when looked at separately may not result in a substantial lessening of competition. But when these single acquisitions are looked at together as a group they may lead to a substantial lessening of competition. This law would be an illusion. It would not have any effect. Just look at the Westpac takeover of St George Bank. St George has over 400 branches. If the ACCC considered that Westpac taking over more than 400 St George Bank branches in one single hit did not substantially reduce competition, how would changing the law to enable Westpac taking over a few at a time through creeping acquisitions make any difference? Again, this is a meaningless nothing.

In conclusion, this bill is a meaningless nothing. It creates the appearance of making changes. It creates the appearance of doing something to address problems with our nation's competition laws while doing absolutely nothing. We have real problems with competition policy in this country. Our productivity growth has stalled. Many of our markets have degenerated into states of hyperconcentration. Consumers are being punished by higher rates of inflation. We need a lot more than what this bill offers.

See this speech in context