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

I acknowledge the contribution of the member for Wright, the previous speaker. I thank him for that contribution. The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 amends the Australian Securities and Investments Commission Act 2001 and the Australian consumer law, which is set out in the Competition and Consumer Act 2010, to extend the unfair contract term protections currently available to consumers to cover businesses with fewer than 20 employees agreeing to standard form contracts valued at less than a prescribed threshold. I also acknowledge the work of the Minister for Small Business, who is a tireless worker in this space.

In many cases, as we know, small businesses have no more market power or ability to vary the take it or leave it standard form contracts than an individual consumer does. However, they actually lack the consumer style protections that provide for unfair terms to be struck out of such contracts by courts. Consumers have been protected from unfair contract terms since 2010. The ASIC Act and the ACL currently contain mirror consumer unfair contract term protections; however, existing laws for small business largely only address unfair behaviour in business dealings rather than unfair contract terms. It is time under this minister and this government that small businesses, which often face the same vulnerabilities as consumers, also receive protections when offered take it or leave it contracts. This legislation will extend the consumer unfair contract terms protections to cover standard form small business consumer-like contracts that are valued below a prescribed threshold.

This is a long sought after and very much welcomed new protection for small business and one that the coalition has long supported. Extensive consultations have indicated that small businesses across a wide range of industries do have concerns and issues with unfair contracts. The consultation has included the general public, businesses, industry groups including farmer organisations, the Commonwealth state and territory consumer agencies, regulators and small business commissioners.

Unfair contract terms can come in a variety of forms and can be used to unfairly shift risks to another party who may not be well placed to manage them. For example, they may permit one party to unilaterally vary terms, limit their obligations, terminate or renew the contract, levy excessive fees on outstanding moneys or affect the availability of redress. This might, for example, include a large firm requiring payments from producers or processors in order to stock or sell their products—a practice that should in reality be called a kickback. This is not uncommon in some sectors of the Australian economy.

Under the new protections, a court will be able to strike out a term of a small business contract that it considers unfair. This will reduce the incentive to include and enforce unfair terms in contracts with small business. The requirements of the ASIC Act apply to financial services and products, and the ACL applies to the supply of goods or services other than financial services or products and the sale or grant of an interest in land. The bill extends the consumer unfair contract term protections in the ASIC Act and the ACL to small business contracts that meet the prescribed criteria and makes provision for exempting small business contracts that are subject to prescribed laws that are deemed equivalent to the unfair contract term protections in the ASIC Act or the ACL and which are enforceable. Under the new protections, a contract will be a small business contract if at least one party has fewer than 20 employees and the value of the prescribed threshold is $100,000 or $250,000 for a multiyear contract. Small businesses also often lack in-house legal expertise. The cost of obtaining legal advice, particularly for low-value contracts, can be disproportionate to the potential benefits of entering into such contracts. Where small businesses decide to not enter into contracts due to their lack of confidence in understanding and negotiating terms or due to the cost of obtaining legal advice, they may miss out on market opportunities.

Why is this sort of action necessary? I want to look at the actions of those who might seek to misuse market power in contract negotiations. As far back as 2009, the Financial Review reported that the Australian Competition and Consumer Commission had recognised the power that Coles and Woolworths have in shopping centres and sought to broker a deal to stop them abusing this power. I want to talk about the court case in 2011 and the judgement made by Justice Gordon in relation to the case between the Australian Competition and Consumer Commission and Coles Supermarkets Australia. In the reasons for judgement, I notice that Justice Gordon stated in her introduction that Coles 'is the second largest retailer of grocery products in Australia'. She said that Coles engaged in unconscionable conduct in its dealings with a number of suppliers of products that it sold. She said:

Coles' misconduct was serious, deliberate and repeated. Coles misused its bargaining power. Its conduct was 'not done in good conscience'. It was contrary to conscience. Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings. Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand. Coles withheld money from suppliers it had no right to withhold.

That is was in the introduction.

Further in section 8, Justice Gordon also said that in claims proceeding the ACCC alleged that Coles by its conduct in relation to its dealings with the five named suppliers contravened section 22 of the then ACL. In general terms, that conduct involved Coles seeking payment from those suppliers outside of the terms of the arrangement negotiated between the supplier and Coles. The payments demanded by Coles were for so-called profit gaps, waste and markdowns, short or late deliveries and were deducted by Coles from moneys due to be paid to that supplier for products that it had already supplied to Coles. That was the conduct of Coles.

I am particularly concerned about the conduct of Coles in this matter and other matters. We cannot forget who actually owns Coles—and this is the thing that disappoints me the most and gives me the most grief. Since 2007, Coles has been owned by Wesfarmers. This cooperative of farmers was established by a group of WA farmers over 100 years ago. It has had its 100th anniversary. It has grown to be one of the biggest companies in Australia. I had a look at it, because what concerned me most was when I read about this sort of unconscionable conduct. When I thought about Wesfarmers, the Wesfarmers I knew, and the cooperative that it was, I was astounded that this sort of behaviour could happen in a company owned by Wesfarmers. I looked at the book to celebrate its 100th anniversary last year, in 2014, called 'A rural perspective'. When I was thinking about the treatment of Coles' suppliers, I thought I would look at what drives a company like Wesfarmers. I looked at the comments in the book by the chairman, because these are its historic values. Mr Every spoke well and long in the introduction to that book about the importance of Wesfarmers' culture. He said it was a culture 'underpinned by an operating style of integrity, honesty, openness, transparency and community involvement'. He also said, 'Our values today also trace to our origins patience, honesty, boldness, innovation, resilience and a long-term commitment to the communities in which we operate.' I find that those very, very essential parts of the Wesfarmers culture are inconsistent with the behaviour of Coles, as proved by the case taken by the ACCC, towards those suppliers.

I think it is a great tragedy that a company that had its foundations in the rural sector could condone this sort of behaviour by Coles in 2011—keeping in mind that Wesfarmers has owned Coles since 2007. Yes, it has restructured and it is a company, but this is not the only instance of such behaviour. We have seen in numerous ways the influence of these two major supermarkets, particularly in a state like Western Australia. I refer here to my own industry: the dairy industry, where the majority of milk that is produced in the state is sold in the domestic market and where the $1 dollar milk strategy has had a disproportionate effect on prices paid to farmers—and we are seeing that on a regular basis.

This type of legislation is particularly important for suppliers who are particularly vulnerable—and there are very few who are more vulnerable than those who produce a perishable product such as milk. Milk is not only produced on a daily basis; it has to be collected by a tanker on a daily basis. It has to be at a particular temperature. It has to meet a range of standards. It is then taken to a processor, processed and sold as quickly as possible. That means that the producer of a product is particularly vulnerable in the market. Often, in my state, they have very few buyers and very stringent conditions for the production of their product. That very vulnerability is exacerbated and then able to be taken advantage of.

I am particularly keen, through the bill before the House, to address some of the vulnerabilities that small businesses face. When we look at the bottlenecks for businesses throughout Australia, we can see there are those that can limit or restrict production. There can also be bottlenecks at the retail level in getting Australian food from the farm gate, from where it is grown, to the dinner tables around the nation. I looked at what Justice Gordon had to say. He mentioned in his remarks that Coles and Woolies between them control at least 60 to 70 per cent of the retail market. When you look at that avenue to market, the vulnerability of those that produce perishable product is even more apparent. That, of course, gave rise to the actions that Coles was able to take over a period in 2011. We know that in other countries, including the UK or the US, it is not as concentrated at all. This is a real concern. Historically, the Labor government chose not to act at all, so I am particularly pleased that we are starting the process here today.

We know that the ACCC is charged with keeping down costs and maintaining competition. We also know that often the income derived from food production in Australia does not reflect the effort or the risk involved, yet the drive to lower prices impacts on producers more than any other sector. We know that the income and profits for our food producers in Australia are lower than for other sectors and other industries. I know Australians value very much the produce that they have access to. We in this country know that our farmers produce some of the highest quality food in the world. They do it under sometimes very extreme conditions, given the nature of our climate. I will continue to represent them in every way that I can. I am particularly pleased that the government has chosen to assist small business through the legislation before the House.

See this speech in context