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

I am pleased tonight to speak on the Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018, which makes 11 rather detailed changes in relation to our competition laws. I would like to raise a few issues in relation to our competition laws and how these proposed amendments may affect some practical circumstance.

I will start with comments by Professor Judith Sloan written in The Australian about AGL, one of Australia's largest providers of electricity. Professor Sloan wrote:

… AGL is the biggest provider of coal-fired electricity in the country and more than 90 per cent of its (rising) profits is sourced from fossil fuels.

But we are still told to believe that the company is changing by moving into that rent-seeking space: renewables. But if you look at AGL’s profile of production, renewables are small beer and will remain so for a considerable period of time.

Now some might think hypocrisy by having to put up with the company’s marketing messages, egged on by a bunch of staffers some of whom have been trained by none other than Mr Inconvenient Truth himself, Al Gore.

But where you think hypocrisy, I think misleading and deceptive. I can’t believe that the Australian Competition & Consumer Commission hasn’t launched a case against AGL for using false information to attract customers. Surely a company that derives over 90 per cent of its profits from coal and gas can’t portray itself as green as grass.

She continues:

Its recent behaviour, its stated intentions to close Liddell (all 2000 megawatts) and comments from the Yank have all belled the cat for the public by exposing the distorted Australian electricity market as an expensive and unreliable racket. It is now clear that the government must act and this does not involve doling out even more favours to the unreliable renewables sector.

That is Professor Judith Sloan. In another article she also talks about AGL's plan to close down the Liddell coal-fired power station. Professor Sloan writes:

…when a company is planning to short the market and drive up prices, why would it accept a bid from a competitor to keep the Liddell plant in operation?

…   …   …

It's simply following the money trail, even if there are profoundly anti-competitive aspects to the way the company operates – its ownership of a dominant retail operation, for instance.

…   …   …

Most of the board wouldn't know the difference between a megawatt and a Gucci handbag.

…   …   …

Something doesn't ring true here. Liddell is so valuable that Alinta's bid of $250m is too low but it's too expensive to keep going. Politicians and consumers should smell a rat.

…   …   …

As events panned out, the ACCC was completely on the money and AGL is simply exercising its full market power to take low-cost coal electricity out of the market and partially replace it with unreliable renewable energy and a small amount of very expensive gas.

That brings me to a case a decade ago about how competition law can deal with such anticompetitive conduct. This was in Germany back in 2008. I'm reading from the European Commission's Competition policy newsletter about how German authorities acted with a large electricity generator that had shorted the market:

On 26 November 2008 the Commission adopted a commitment decision addressed to E.ON …

E.ON is the large electricity generator in Germany, with very equivalent circumstances to AGL's market, market share and control here. It goes on:

For the first time in the Commission's decision-making practice, the decision requires the company concerned to dispose of very significant assets: E.ON will have to divest 5,000 MW of generation capacity

…   …   …

The first case relates to the German electricity wholesale market and the concern that E.ON may have carried out a strategy of short-term capacity withdrawal and deterrence of investments in electricity generation by third parties.

That seems to ring a bell with exactly what is happening here in Australia. It goes on about their case:

Both reports identified the issue of capacity withholding as being the lowering of production capacity offered on the short-term market …

How did European competition law deal with such withdrawal of capacity? They go on:

The withdrawal of generation capacity on the electricity market by a dominant operator is considered an abuse of a dominant position and therefore contrary to Article 82—

of the European competition law. Further:

Such action causes serious harm to all groups of consumers by increasing the prevailing price on the spot market.

What does European competition law actually state? It says exactly this:

Any abuse by one or more undertakings of a dominant position within the internal market … shall be prohibited …

It goes on:

Such abuse may, in particular, consists in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

Critically, paragraph (b) reads:

(b) limiting production, markets or technical development to the prejudice of consumers;

So, under European competition law, it is illegal, it is prohibited, for a company with a dominant position to limit production to the prejudice of consumers.

We have seen from the comments of Professor Sloan that closing the Liddell Power Station will limit production to the prejudice of consumers. How will this work under Australian Competition Law? Previously, our competition law provided that a company with a substantial degree of market power could not take advantage of that power to eliminate or substantially damage a competitor, to prevent the entry of a person into that market, or to deter or prevent a person from engaging in competitive behaviour in that market or another market. Perhaps, under those terms, there could be a case made out that a company with a substantial degree of market power cannot limit production to the prejudice of consumers. However, we actually changed that law and now it provides:

A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or is likely to have the effect, of substantially lessening competition …

So the test in Australia is: does the conduct that we're looking at result in a substantial lessening of competition? Under European competition law, the test is limiting production to the prejudice of consumers.

I have had extensive discussions with the ACCC. They do not believe that they can prove the case that AGL closing Liddell, not selling it to a competitor and withdrawing that production capacity from the market would be a substantial lessening of competition. But if we had the provision in our competition law that the Europeans have, which says that, if you have a dominant position in the market, you cannot limit production to the prejudice of consumers, we would have a clear-cut case against AGL's conduct with Liddell. Make no mistake: what they are preparing to do will short the market. Yesterday they put out a replacement plan. But how can you equate the extra capacity they are putting into the market to the closing of Liddell and not the closing of the Northern Power Station or the closing of the Hazelwood Power Station? They've already exited from the market. How they can equate that to Liddell specifically is quite beyond me. If we look at the details of their replacement plan, yes, there may be an argument that they are replacing the same dispatchable capacity. But when you look at what they are planning to replace in dispatchable megawatt hours to the grid, their replacement plan will limit production by about 50 per cent.

We are not saying that AGL as a company should be forced to keep that plant open against their wishes, but if they have competitors in the market that are willing, able and prepared to buy that plant from them, I say they are actually engaging in conduct that will limit production, and it will be to the prejudice of consumers. If our existing competition laws are not strong enough to find that conduct anticompetitive, we need to have a close look at our competition laws and make a laser-like amendment to those laws, especially in the area of essential services. We cannot have companies that supply essential services—electricity is one of those—limiting production. We cannot run our factories, we cannot heat our homes, we cannot have the lights on, we cannot have our trains and our communications systems all running and we cannot have our hospitals running without reliable electricity being delivered to the grid. There is no other market where we have a provision in our competition law that provides that a company that is in a dominant position, or has a substantial degree of market power, can limit production to the prejudice of consumers. That is the plan that AGL have.

I say to this parliament that we have an obligation to Australian consumers. We have an obligation to Australian industry to make sure they remain internationally competitive. If AGL are continuing down this track, we should adopt those principles of European competition law. We can apply them specifically to essential services. We can give them a very clear message that this parliament and this country will not accept the anticompetitive conduct that they are engaged in.

This bill makes 11 amendments to our competition laws. I could go through them all, but for brevity I commend them and I commend this bill to the House.

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