Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Dickson has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Trade Practices Legislation Amendment Bill 2008. This bill is a very important and major piece of legislation. It will go a long way to creating a truly competitive economy and business sector. The reforms contained in the bill are long overdue. It has taken the election of a Rudd government and its strength and foresight to see these changes implemented. This attitude is contrary to that of the opposition, which always espouses that it is somehow the true friend of small business. But, historically, it always seems that Labor governments make the great reforms and do the work necessary to ensure that small businesses can thrive in this country. Once again, we are in that position. And, once again, that is why we are moving these legislative changes.

As members in the House have come to realise, it has only been Labor governments that have driven competition policy and that have sought to continuously reform, improve and clarify key components in the act so as to foster better promotion of competition, fair trading and consumer protection. These concepts work hand in hand and are important for the future of our economy, for the prosperity of small businesses and for the fair treatment of all consumers. This bill sends a clear message to the business community that the government is committed to providing them with a competitive and fair environment. It also provides business with an environment that works in the good economic times as well as in the more challenging and difficult economic times.

Let me put this commitment into some context. The Australian Labor Party was responsible for the introduction of the Trade Practices Act in 1974—let us not forget that. It was Labor that made substantial improvements to the act in 1986, as well as instigating National Competition Policy in the early 1990s. These have all been very important steps toward providing the right economic environment to ensure that small businesses, the backbone of this country, have had the right equipment and tools to carry on with their business. Let us remember that, when it comes to any kind of major competition reform in this sector, the Labor Party has been the driving force.

Today’s bill looks to amend the Trade Practices Act 1974 and to clarify a number of terms—in particular, the term ‘take advantage’. The bill also seeks to address problems of predatory pricing which relate to the prohibition of misuse of market power in section 46 of the act. The bill will also extend the jurisdiction for section 46 cases to the Federal Magistrates Court. Where the previous government has failed over the past decade to act on important parts of the Trade Practices Act and for the business environment, we are now acting.

The proposed amendments to section 46 of the Trade Practices Act are predominantly aimed at promoting competition in the industry and at cracking down on anticompetitive behaviour by powerful businesses. It is the Rudd’s government intention to continue to stand up for small business and defend them from predatory pricing. What is predatory pricing? Basically, it is when a company sets its prices at a sufficiently low level with the purpose of damaging or forcing a competitor to withdraw from the market. This in turn leaves the company with less competition. It can then disregard market forces, raise prices, exploit consumers and, over time, drive those other businesses out of business. Price cutting or underselling competitors is another form of advantage taken by predatory practices.

However, price cutting is not always necessarily predatory pricing. Larger businesses that are able to legitimately use their size to reduce their costs and the prices at which they sell their products to consumers are acting in a pro-competitive way. So we should be careful to make a distinction. There are genuine businesses, large and small, that are fair, open and competitive in the market. They compete properly and try to drive down costs and provide better services to consumers. Then there are predatory businesses which act only to get rid of their competition and in a manner that ensures that, over a period of time, they will be either the only competitors or amongst a small group of competitors that can control prices and, in the end, exploit the market. Businesses that exploit market power to eliminate or damage competitors are anticompetitive and that is a misuse of the market power that they enjoy.

These are not the only major changes that the government is proposing in this bill. There is also a significant need to give small businesses a permanent voice within the ACCC and to simplify the process of prosecuting businesses which engage in anticompetitive behaviour. They are important factors which ensure that our regulatory watchdog, our competition watchdog—the ACCC—actually has the right advice, the right people and the right environment itself to ensure that these practices do not go on. This will ensure they have a representative voice on their own team. It is high time that small business had a seat at the table. They have been waiting for a long time. We are going to give them that seat at the table and we are going to give them the voice they deserve. With these reforms, and a requirement for at least one of the ACCC deputy chairpeople to have small business expertise, small business will now have a permanent voice within the ACCC. Giving small business a permanent voice within the ACCC will improve the understanding of the special circumstances and difficulties confronted by small businesses every day when dealing with anticompetitive behaviour by more powerful businesses than their own.

So far we have debated the merits of the proposed amendments and identified the necessity for a number of things. If anything, the debate has been going on for too long. There is no better time to act than the present, which is what we are doing. We want to ensure that victims of predatory pricing will not need to prove that the predator has the ability to recoup losses after participating in an anticompetitive, below-cost pricing strategy. This is an important factor in trying to address the after effects of what happens when large businesses take on uncompetitive predatory pricing strategies.

We want to clarify the meaning of the term ‘take advantage’ in section 46. That will address specific concerns raised by business and the ACCC. At present, the meaning of that term has prevented section 46 from capturing anticompetitive behaviour. It is important to define, clarify and give more weight to the definition of ‘take advantage’ so that it is not just included in the act but serves a useful purpose which can be properly used to not only prevent and deter anticompetitive behaviour but give the ACCC the power to act within the terms of the law, if need be.

I would also like to indulge the House for a brief moment and talk about the previous government’s approach to competition policy and the mess they ultimately created. I am sure that people here recall what happened with the two-track process for predatory pricing. It was a process developed under the previous government and it caused considerable confusion amongst businesses because they focused on fundamentally different concepts of market share and market power. It is time we removed the unnecessary uncertainty that has arisen following the two-track process for predatory pricing. I recall at the time that the ACCC voiced particular concern about this scenario. That is why we need to act to provide clarity and certainty for the business community. It is the least we can do in providing the right regulatory environment to ensure that they can get on with their business of acting in good faith.

While speaking about the ACCC, it is important that we also give our consumer watchdog the powers it needs to assist those who will require its continued support. These reforms will provide the ACCC with new information-gathering powers, which will enable it to fully investigate suspected breaches of the law—something that I know has been a complaint of many small businesses in the past when they have tried to take action through this particular process. The government will also extend the reach of the ACCC by removing the arbitrary monetary threshold currently applicable to allegations of unconscionable conduct, enhancing the protection of small business from transactions involving such things as undue influence. Again, that is a very important part and it will remove an obstacle to ensure that the letter of the law not only can be met but also can be followed through. The process is not only about having it codified or written in law but also about following through with the action needed so that those who participate in the system actually understand that the law has weight and that action can be taken.

These amendments will deal with predatory pricing while allowing businesses to engage in genuine competition and discounting, to the benefit of consumers. It is an important step forward and one which is long overdue, and one that I know that all businesses around the country should be more than satisfied with. Small business certainly will be satisfied because it will offer them more protection and more genuine competition in the market, but also it will give some certainty to the way any large business operates with its own competitors—large business against large business. So this is a win-win legislative amendment for all those in business. I have mentioned that these reforms are long overdue—and they are. That is not because the previous government did not know about the underlying problems within the act; it is because they decided that it just was not important enough, not high enough on the agenda, and that it was not a priority in the 12 years they were in government.

During question time today, we heard opposition members asking questions such as, ‘What have you done in the past nine months?’ and I just kept thinking, ‘What did you do over the past 12 years on some really fundamental, important key factors to ensure that small business had a fair, competitive environment and could get on with its job?’ I recall small business screaming out for assistance and for clarification—for the ACCC powers to be enhanced to ensure that they could have some assistance and support when they needed it. But those calls fell on deaf ears. The former government, the now opposition, completely ignored all those calls for significant reform. I suspect that was because, while they mouthed the words that they are the friends of small business, in the end they are not; they are the friends of the big end of town. I will have more to say about that in a moment.

I also believe that the previous government lost touch with the broader constituency—the mum and dad investors, the families that invest not only their time and energy but also their hearts and souls into running a small business, a family business, and into making a major investment. All they are seeking is a fair go, a competitive environment, a chance to operate, a chance to create jobs and a chance to return something to their own family. It is the Rudd government’s fundamental belief that competition policy is at the core of a good economic agenda. This government believes that being pro-business and pro-competition delivers the best results for consumers. Those opposite simply do not have the same concerns for consumers or for small business. At every opportunity they side with the big end of town.

In opposition we decided that we would strengthen the Trade Practices Act to restore its original 1986 intention. I think that is important to note. Those opposite, when they were in government, ignored those key reforms and amendments on a number of occasions quite deliberately. Members might recall sitting here in 2004 for the review of the Senate Economics References Committee. That committee conducted a review entitled The effectiveness of the Trade Practices Act 1974 in protecting small business, which detailed a number of concerns about the effectiveness of section 46 at that time.

So, when I say they ignored it, it was not just a case of them ignoring it because they did not have the information at hand or because they were not informed. In fact, there were committee reports and recommendations that specifically directed the then government to these particular issues that needed to be addressed. One of those issues, which remains today—although not for much longer—was whether the Trade Practices Act gave sufficient guidance as to what constitutes ‘substantial power in a market’. The report also focused on whether the Trade Practices Act provided sufficient guidance as to what constitutes ‘taking advantage of market power’. It also referred to whether the Trade Practices Act provided sufficient protection against predatory pricing or whether the financial power test should be introduced. It went further to say that there should be an examination to proscribe the misuse of market power in a second market. It examined whether the Trade Practices Act provided sufficient protection against the use of coordinated market power and also whether an effects test should be included as an addition to or substitute for the current purpose test. These were all very good outcomes of a good committee and a good committee report, but they were ignored by the Howard-Costello government.

I am sure people have picked up that there seems to be a recurring theme—whether in this debate on the Trade Practices Legislation Amendment Bill, in debates on other bills and in questions during question time today or as a theme that has evolved over the past nine months. Let me give people a small indication of how that theme might read, and maybe they will tune in to what I am getting at.

When we talk in this place about schemes like a Fuelwatch scheme to give consumers some choice and some information—very much like the Fuelwatch scheme which the big end of town, the big oil companies, run very privately for themselves—and when we try to extend that sort of scheme to the ordinary consumer, to give them some choice and some market power of their own, we see the opposition backing big oil. That is the recurring theme. When we try to talk about GroceryWatch, about grocery pricing, about competition in shopping and groceries and about national pricing schemes, the opposition ridicule us. When we try to look after the consumer, when we try to give them some market power back in terms of the prices they pay for their shopping goods, again we see the opposition siding with the big end of town. When we talk about industrial relations law in this place and we look at trying to redress some issues of balance, we see the opposition siding with the big end of town again.

The theme continues and continues. When we talk about interest rates and banks, about passing on interest rate savings, putting downward pressure on inflation, and about putting as much pressure as we can in this place on the banks to pass on interest rate cuts, what do we see the opposition do? They actually back the big banks in keeping interest rates high. When it comes to the Medicare surcharge levy, a levy which has not changed in almost a decade, when we see about moving that levy upwards to save consumers money, what do we see the opposition doing? We see them backing the private insurance companies, backing the big end of town to make sure they reap more rewards. When we see a rebate exemption scheme for condensate off the Western Australian shelf—an exemption on a tax that has been in place for about 25 years—and when we are in a position where we can remove that fairly and pass on those savings to consumers, again we see the opposition backing the big oil end of town and saying that the exemption should remain in place and that the taxpayer should forfeit the hundreds of millions of dollars that would be coming their way.

It is a recurring theme and one that people can spend some time thinking about in terms of the changes we are making to support small business and to make sure there is proper competitive behaviour and that we are doing the job that has not been done for the past 12 years. While we support the changes that we have indicated in this amendment bill, there is more to be done and more that we will continue to do. Labor has a strong legacy of competition reforms, having been responsible for the introduction of the Trade Practices Act in 1974. We will continue to do that—to look after and enhance the welfare of all Australians through the promotion of competition, fair trading and consumer protection.

Interestingly, it is not just us saying it; it is also the peak bodies. They are saying that they are overwhelmingly in favour of our reforms and our moves. They are saying that it is long overdue and they are saying ‘thank God’ that we are doing it. They support Labor’s stance. For example, the Australian Chamber of Commerce and Industry Chief Executive, Peter Anderson, has stated that it will be easier for small business and the ACCC to take action where there is predatory pricing. The Motor Trades Association of Australia also welcomes the moves, as does the Australian Retailers Association and a number of other distinguished bodies, including the Council of Small Business of Australia, who give similar support to the amendments proposed in this bill. The ACCC also think that these moves will be profound and will give them more ability to protect small business and ensure there is more competition. This bill strengthens section 46 and section 51A(6), and I commend the bill to the House. (Time expired)

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

I have looked at the wording of the Trade Practices Legislation Amendment Bill 2008, which was—let us not beat around the bush—the subject of a fight to secure some action from the previous government on the issue of Woolworths and Coles. This place amazes me. If we added up the number of studies we have done on the water resources of Northern Australia we would find that about $300 million has gone up in smoke. There were two $40 million studies that I know of, and absolutely nothing has happened. We just finished another inquiry, with the ACCC coming out and making the motherhood statement that it would be nice if we could get more competition. It was good of it to say that; I believe in motherhood too.

As I said in the debate on the MPI, the head of the ACCC, in a most extraordinary statement, said there has been no increase in the difference between what the farmer gets paid and what Woolworths and Coles charge. He said that in the report and in the national media. This is the only country in the world that has allowed more than 30 per cent of its food retailing business to go into the hands of two companies. Those who have read Fair market or market failure?, the 1999 report of the Joint Select Committee on the Retailing Sector, which included members of all parties, including the Australian Democrats, will know that the report mentioned six other countries and there was not one that came near Australia. The next closest was Britain. In the other four or five countries mentioned there was something like 45 per cent market share. We had 68 per cent held by just two corporations.

The report effectively gave us another round of motherhood statements and another round of ineffectual proposals. I went to that committee and I had numerous discussions with the Queensland National Party senator and Senator Chris Schacht. Everyone on that committee knew that there were only three things that you could do. The first was capping and divestment, which was effectively what Theodore Roosevelt did to Rockefeller, and he became so famous that his face went up on Mount Rushmore. Capping and divestment was what NARGA, the National Association of Retail Grocers of Australia, requested. The second was to make really tight laws inside the ACCC’s portfolio of enabling legislation. I was there when Senator Schacht put the three proposals up. The committee knew that there were three proposals and proceeded to make a recommendation that it do absolutely nothing.

We have a farmer committing suicide every four days because they are being paid nothing. I went to a meeting of one of the leading farmers’ representative groups in the north. There were 15 farmers at the meeting. They had asked along the acting local mayor because they all wanted subdivisions; in other words, they all wanted to get out of farming—yet this was one of the most active groups in Australia. I have been to Swan Hill and Shepparton. I know they are all getting out. Farming in this country is simply closing down.

I met with the prominent economist Mark McGovern and a senior journalist here at Parliament House, and Mr McGovern said: ‘I know the best argument to use with the Prime Minister. He is worried about ethanol, for example, because it may result in food shortages in the world. Food shortages are imminent throughout the world, and the countries that will be worst off when food shortages come will be those that cannot feed themselves now. Australia, of course, will be in that category.’ Mr Deputy Speaker, I keep saying this here and no-one seems to be interested. They do not really care whether or not Australia can feed itself. The last time I did the sums, I worked out that within nine years this country will be a net importer of food.

This government was elected on the basis of collective bargaining. The only thing this government has done since it was elected is to remove from the wheat farmers the right to collectively bargain. If the Labor Party is a party of principle, I am rather curious to know what the principle is. It can hardly be collective bargaining. The unions are now finding out that maybe this government does not believe in collective bargaining. Certainly its attitude towards the farmers would indicate that.

The only thing we can say about the other mob is that they make no secret of the fact that they are totally opposed to collective bargaining. And obviously they do not read many history books, because they always accuse me of wanting to go back to the 1960s. I say, ‘It’s a hell of a lot better than going back to the 1860s.’ Laissez-faire capitalism is a phenomenon from a century ago. For those who do not read history books, little six-year-old children with dog collars went down into the coalmines on all fours. That was a result of that sort of approach. England was the most successful slave-trading nation on earth, and that was a result of those sorts of laws. Half of the Matabele tribe was slaughtered in Africa to make Cecil Rhodes rich, and that was a result of those laws. If you believe in free markets, what happened in India? What happened in Africa? A hundred thousand people died in the Boer War—28,000 women and children—under the free market policies.

If you say you want free markets, then have a look at what happened in the world when we had that situation previously. As I have said on many occasions to trade union groups throughout Australia when I have addressed their meetings from time to time: what will happen to you is what happened to the farmers. I will not go into all of the deregulations; I will simply say what happened in dairy. What happened was that we all went, under collective bargaining, to a tribunal. Some objective people—judges and those sorts of people—decided what was a fair thing for farmers to be paid, what was a fair thing for the retailers to be paid and what was a fair thing for the consumers to pay. We went into collective bargaining and it was decided what was a fair deal. It was decided that consumers should pay around $1.15 a litre, I think it was, for milk. The farmers got around 58c a litre for milk, and the rest of the consumer dollar was taken by the people in between. That was a fair thing.

Within four weeks of deregulation, my farmers got a letter in the mail that said, ‘As a result of deregulation, you will no longer get 58c. Now you will get 39c.’ That is not a free market. That is the operation of an oligopolistic marketplace. That bears no relationship. Does no-one here have any economics training? If you have a market where, the minute you deregulate, the price goes down 30 per cent, then clearly you do not understand what you are talking about if you say that we have now achieved a free market for milk. Clearly we have not. Clearly there is a total elasticity of demand if the situation is that you suddenly move from 58c a litre down to 39c a litre. For the consumers, it went from about $1.15 up to about $1.80 over the next two or three years. Didn’t Woolworths and Coles have Christmastime! If you multiply that by the litreage in Australia, that is a thousand million dollars of extra profit that went into the pockets of those people—as a result of actions taken by this place.

I came in here last week and I brought five of the most common grocery items that I could find. If you were to ask anyone to name the most common items, they would probably include beef—and we could not get pricing on beef; that is very complicated—but apart from beef they would say ‘sugar, milk and potatoes’. These are just ordinary, average items. On each item there was a 320 per cent mark-up! Heavens, when it was a fair thing in dairying it was less than 100 per cent. It was about 60 or 70 per cent mark-up; it was most certainly less than 100 per cent. Now there is a 300 per cent mark-up. Does anyone think it is fair that little Mrs Housewife out there, who is desperately trying to make ends meet, should be paying this sort of figure?

Let me come back to the bill. I do not want to disparage the good senator. God bless him for getting something through: his Birdsville amendment. God bless him for trying. But at the end of the day it is a fairly pathetic sort of effort if that is the best that the last government could do. It was passed 12 months ago and in that period of time Woolworths, in their report this year, claim that they have increased their market share by 10 per cent. So much for the effectiveness of the Birdsville amendment. But God bless the senator from Queensland for at least trying. That is what we have until we get serious in this place, pass some serious legislation and there is an effort to try and get a fair share in the marketplace.

There is no question about the 80 per cent that Woolworths and Coles hold. There is no question about that. ACNeilsen did a series of surveys, and in 1991 they found that Coles and Woolworths had 50.5 per cent of the market. When the inquiry was undertaken, an interparty inquiry, in 1998, the inquiry unanimously agreed that, whether you looked at the ACNeilsen survey or whether you looked at the ABS survey or whether you looked at the survey the committee did themselves, you came up with between 64 and 68 per cent of the market. So it had grown from 50.5 to 68 per cent in the space of seven years. Without going into all the CPIs and allowing for GDP growth and all of those things, that works out to about 2½ per cent growth a year.

A very interesting story in itself is why the ACNielsen series was discontinued. I rang up certain people who published it and they said that it had been discontinued because ACNielsen refused to do it anymore. I said, ‘Why?’ and was told, ‘We wanted it done, but there are obviously forces at work which have said that they won’t continue the series.’ But you know that it is two per cent a year. If Woolworths are out there claiming that they have had 10 per cent market growth, it is not as if they are denying that they have that share of the marketplace—though when they are under attack they will of course deny it. But wouldn’t someone in the ACCC or someone in the government say, ‘Hey, listen. In 2002 you told us that the growth in your market share was 11 per cent, Mr Woolworths, and you tell us this year that it is 10 per cent market growth.’ I have not checked the years in between, but I will bet London to a brick that they will make similar claims for the years in between. So they are telling one thing to their shareholders and they are telling another thing to people in this place.

It will be rather interesting to see when this place actually decides to stop them. They have taken over all the service stations and they have taken over all the liquor outlets. In fact, you cannot get a job in this country unless you work for them—and unless you work for peanuts as well. God help those people game enough to get out there in the marketplace and have a go. In my home town they closed both the florist shops. I think they closed five butcher shops in Charters Towers. And then we have the corner store. The state government in Queensland—those wonderful friends of the poor—the ALP government in Queensland, have announced that they are considering open trading hours. So all the corner stores will close. So much for the poor people who do not have cars and cannot drive to the shopping centre. Too bad for them! Too bad for the little single mother with three or four kids whose husband has walked out on her. Too bad for her. She cannot afford a car. She will just have to walk or get a taxi to go to the shopping centre.

But this place here does not seem to worry about any of those people. This place does not worry about the farmers, with a suicide being committed every four days. It does not worry about poor little Mrs Housewife with food costs skyrocketing through the roof. It does not worry about them. It does not worry about the pensioners who no longer have their corner store. Every single move this place has made has been in the interests of Woolworths and Coles. That was true of the last mob and it appears that it is true of this mob.

This legislation purports to make it easier for government to restrain Woolworths and Coles. That is not my opinion. I have had a look at the Birdsville amendment and I have had a look at the proposal here, and I will be voting against the proposal here. I will be putting my money on the Birdsville amendment. But I do not do that because it is effective. Clearly, it is not effective. Clearly, its effectiveness can be read in the annual report of Woolworths, where they have claimed they have another 10 per cent market share. And then we have the question of what happens if you go to unlimited trading hours and if you own all of the service stations, which Woolworths and Coles effectively do. They have bought 1,100 outlets.

I say to young people, ‘Don’t look at the class of politician you’ve got now—please don’t look at them—because you will be disheartened, you will be cynical, you’ll be hateful and you will cut yourself off and alienate yourself from the system. Remember that, once upon a time, there were people in this place who had guts.’ Once upon a time, there was a man called Doug Anthony who stood up in this place and said, ‘Mr Shell and Mr BP, you will be limited.’ He and the much maligned Malcolm Fraser stood up in this place and took the oil companies head on and said, ‘You will be restricted to 400 outlets.’ So I say to young people, ‘Don’t look at what you’ve got now—cowardly, spineless people who come in here and serve the interests of big corporations and couldn’t care less how many people commit suicide in Australia or how many little mothers go hungry because they can’t afford to buy enough food for their kids. Look at the great men who were once in this place who had the courage to stand up on these issues and did not fight about some obscure wording in a piece of legislation that won’t make any different to anything.’

We should come into this place and do things that seriously need to be done. Before you go to bed at night or when you get on your knees and say your prayers to the good Lord up there, all of you should ask yourselves whether, by continuing to support the growth of these people, you have done the right thing in this place. In all conscience—unless you are a self-deceived person—you will have to say to yourself, ‘I have not done the right thing by the people of Australia; in fact, I have done terrible things by the people of Australia.’ (Time expired)

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

The purpose of the Trade Practices Act 1974, as section 2 of the act makes clear, is to ‘enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’. This bill, the Trade Practices Legislation Amendment Bill 2008, which I support, will further that purpose by restoring the intended effect of the provision of the act which prohibits various trade practices that are anticompetitive conduct. That provision, section 46, has been undermined in recent years by a series of court decisions, which I will go to. Before doing so, though, it is worth recalling that the Trade Practices Act was introduced in 1974 by a Labor government, under Prime Minister Whitlam, and substantially improved by another Labor government, the Hawke government, in 1986. Labor also introduced, in a similar vein, the National Competition Policy in the 1990s. Labor has a very longstanding commitment to promoting competition. It is also worth remembering that the 1986 amendments—

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

It has gone from 50.5 per cent under you to 82 per cent, and you are telling me that you have done a wonderful job!

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

Order! The honourable member for Kennedy should know that interjections are disorderly.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

I will start the sentence again. It is also worth remembering that the 1986 amendments were also focused on section 46 of the Trade Practices Act, the subject of this amending bill. The 1986 amendments deleted the requirement of control so that, instead of applying to corporations which were ‘in a position to substantially control a market’, the prohibition was to apply to corporations that have a ‘substantial degree of power in the market’. The House will note that the 1986 amendments, like this bill, were focused on ensuring that the Trade Practices Act is an effective deterrent to anticompetitive conduct.

The member for Kennedy asks rhetorically what principle Labor stands for, and I would have thought that this bill makes clear that in this area of economic regulation Labor stands for the principles of competition, of deterring anticompetitive conduct and of eliminating unfair trade practices like predatory pricing.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Mr Deputy Speaker, I just want to ask him if he thinks 85 per cent of the market is fair.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The honourable member for Kennedy should not address the Deputy Speaker in that way. If he wants to take a point of order he can, but he has made his contribution to the debate.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

Labor’s commitment to the principle of competition has played a very large part in the strong economic performance of our country over the last decade and more, and it is a commitment which is reflected not only in the Trade Practices Act introduced by Labor in 1974 and strengthened by Labor in 1986 but also in the many structural economic reforms of the Hawke and Keating governments.

This bill contains amendments which are very long overdue. That is a familiar theme that we have heard in this parliament all through this year, where we bring to the parliament legislation that has been overdue for several years because the former government simply did not do the jobs that it was meant to do, particularly the kind of overhaul that from time to time is needed for major pieces of legislation like the Trade Practices Act.

The amendments are intended to deal with an approach to section 46 of the Trade Practices Act taken by the High Court in several decisions which has produced a very narrow interpretation that has dramatically reduced the effectiveness of the section. I refer, of course, to the decisions of the court in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd, a 2001 decision; Boral Besser Masonry Ltd v Australian Competition and Consumer Commission, a February 2003 decision; and Rural Press Ltd v Australian Competition and Consumer Commission, a decision handed down by the High Court in December 2003.

Justice Kirby was in dissent in these decisions, and in characteristically clear language His Honour identified the problem with the approach of the majority. In the third of these cases, the Rural Press case, Justice Kirby said:

This is the third recent decision of this Court (Melway and Boral Besser Masonry … being the other two) in which a majority has adopted an unduly narrow view of s. 46 of the Act. In effect, it has held, in each case, that the established large degree of market power enjoyed by the impugned corporation was merely incidental or coincidental to the anti-competitive consequences found to have occurred. Notwithstanding the proof of market power, the Court has held that the impugned corporations did not directly or indirectly ‘take advantage’ of that power to the disadvantage of competition in the market.

In my view, the approach taken by the majority is insufficiently attentive to the object of the Act to protect and uphold market competition. It is unduly protective of the depredations of the corporations concerned. It is unrealistic, bordering on ethereal, when the corporate conduct is viewed in its commercial and practical setting. The outcome cripples the effectiveness of s. 46 of the Act. It undermines this Court’s earlier and more realistic decision in Queensland Wire. The victims are Australian consumers and the competitors who seek to engage in competitive conduct in a naive faith in the protection of the Act. Section 46 might just as well not have been enacted for cases like these where its operation is sorely needed to achieve the purposes of the Act. Judicial lightning strikes thrice. A novel doctrine of innocent coincidence prevails. Effective anti-competitive threats can be made without the redress which s. 46 appears to promise. Once again I dissent.

I am pleased that by these amendments the well-expressed and powerful dissent of Justice Kirby—a long time ago now, in 2003—is finally being acted on.

Following these three High Court decisions, the Senate Economics References Committee in 2004 conducted a review entitled The effectiveness of the Trade Practices Act 1974 in protecting small business. The review detailed several important concerns about the effectiveness of section 46. Relevantly to this bill, the review looked at whether the Trade Practices Act provides sufficient guidance as to what constitutes taking advantage of market power and whether the Trade Practices Act provides sufficient protection against so-called predatory pricing. The Senate committee received detailed submissions and recommendations from the ACCC and many business groups, who were all concerned about the narrowness of the approach of the High Court and how that had undermined what was intended to be the effect of section 46.

On the ‘taking advantage of market power’, the Senate committee expressed great concern about the High Court’s interpretation, particularly in the Rural Press decision, in which the High Court had defined ‘take advantage’ very narrowly, by holding that a test of whether the company had taken advantage of its market power was whether it could have acted in that way in the absence of market power. This ‘could’ test looks at physical or business capacity rather than rationale or intent. It seems to produce a situation where corporations may use their market power to engage in proscribed conduct with impunity as long as they could also undertake that conduct in the absence of such power.

It is worth recalling what the former government’s response to the Senate committee’s recommendations was. What was the response of the former Treasurer, the member for Higgins? The Senate committee recommended in no uncertain terms that there should be a declaratory provision outlining the elements of ‘take advantage’ for the purpose of section 46 and, at length, indicated what the contents of that declaratory provision might be. I will not take up the time of the House by going through it, but the Senate committee indicated that the provision should refer to such matters as whether the conduct of the corporation was materially facilitated by its substantial degree of market power, looking also at the intention of the corporation. The response of the government was this, in bald terms:

The government does not accept this recommendation. It is not accepted that the interpretation of ‘take advantage’ requires any statutory clarification.

On the other matter relevant to this bill, the Senate committee made some very clear recommendations about predatory pricing. The Senate committee recommended that the act be amended to provide that, without limiting section 46, in determining whether a corporation has breached section 46, the courts may have regard to the capacity of the corporation to sell a good or service below its variable cost. It also recommended that the act be amended so that, where the form of proscribed behaviour alleged under section 46 is predatory pricing, it is not necessary to demonstrate a capacity to subsequently recoup the losses experienced as a result of that predatory pricing strategy.

This question of the degree to which recoupment, or potential recoupment, is to be considered has been the subject of a great deal of comment in the last four or five years, but here again the former government and the former Treasurer said only this: ‘The government accepts this recommendation in part.’ Even this, regrettably, was an empty pretence because the former government and the former Treasurer, the do-nothing member for Higgins, did nothing at all until 2007 and even then did not in any real sense adopt the recommendation that I have just referred to.

In 2007, what we instead had produced by the former government and the former Treasurer was the so-called Birdsville amendment. This was some three years after the Senate Economics Reference Committee had reported in 2004. Really, this so-called Birdsville amendment should be called the Costello-Joyce amendment because it was introduced by the member for Higgins, the former Treasurer, apparently after being produced on the back of an envelope by Senator Joyce. The former government and the former Treasurer have never explained why they took so long to do so little in response to the Senate committee’s report and have also never explained why the government failed to consult with industry bodies or with the ACCC before introducing the amendments that they did in 2007.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Mr Katter interjecting

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

The 2007 amendments ignored the detailed submissions and recommendations of the ACCC. I can hear from the member for Kennedy’s interjections that he has completely failed to understand the role that the ACCC plays in regulating anticompetitive conduct in this country. What needs to be borne in mind is that the 2007 amendments were resoundingly criticised after their passage through this parliament. I will start with the comment made by Peter Armitage, a very senior solicitor from Blake Dawson Waldron in Sydney. He was the practice head for competition and consumer protection last year when he made these comments. In respect of the Costello-Joyce amendment that those opposite seem keen to defend still, Mr Armitage said:

Make no mistake; this law is bad for consumers and bad for competition. This warning will be dismissed no doubt as special pleading by a lawyer who acts routinely for the big end of town. Unfortunately for Australia’s consumers, shooting the messenger will not alter the truth of the message. It is a fundamental requirement of good law that it can be understood by those who must comply with it. This is not the case with the Birdsville amendment. Under this amendment, no company will be able to safely know whether it has a ‘substantial share of the market’, what the ‘relevant cost’ will be for assessing its price-cutting and how long is a ‘sustained period’.

Mr Armitage went on:

Not only will consumers suffer but a great many businesses across the country, including mini businesses that may think of themselves as small, will be at risk. For example, a pharmacist whose company operates one pharmacy in a remote country town that has only other pharmacy will be at risk of breaching the Birdsville amendment if it engages in repeated loss leading as part of a vigorous attempt to attract customers and get the better of its competitor.

To complete Mr Armitage’s comments, he said:

These amendments are a fundamental attack on the process of the competition and the benefits it delivers.

There were others who commented. Professor Bob Baxt, a former chair of the Trade Practices Commission, had this to say about the Costello-Joyce amendment:

Far from protecting small businesses, this amendment is likely to prove unwelcome to them as well as to others, as increased complexity will lead to litigation and lengthy appeals. Not only will the small business sector not enjoy any real success as a result of these amendments but, most importantly, consumers will suffer significantly as companies abandon any attempt to discount in situations where they have any degree of market share.

The former chair of the ACCC, Professor Allan Fels, was also very critical of the Costello-Joyce amendment, saying that it may drive up consumer prices. The Law Council of Australia was intensely critical of the Costello-Joyce amendment. Indeed, I can say that, looking at the Costello-Joyce amendment, it is apparent on its face that its language is unclear. Most importantly, it uses different concepts to the terms and concepts already used elsewhere in the Trade Practices Act and particularly in section 46. As such, it is wording which is guaranteed to produce extensive legal argument and almost guaranteed to produce judicial disagreement. Certainly the amendments that were produced by the former government did nothing to add any clarity and were—

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

I agree with that.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

And we have agreement from the member for Kennedy that they did nothing to add clarity. They also did nothing in any sense to add to consumer protection in this country.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Mr Acting Deputy Speaker Slipper, I rise on a point of order. I claim to have been misrepresented.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

The honourable member may well claim to be misrepresented and I will certainly give him the call after the honourable member has finished his speech. But the member for Isaacs is entitled to finish his speech and then I will call the member for Kennedy.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

In the debate on this bill, we have heard members opposite persisting in the defence of the 2007 amendments with absurd statements like that of the member for Fadden, who told the House that there had not been enough time for the amendment to operate and, ‘It needs time to work its way out’—whatever that was meant to mean. The member for Riverina also sought to defend the 2007 amendments. The member for Dickson has moved an amendment calling for recognition of:

... the impact on small business of the Government’s proposed changes to the ‘Birdsville Amendment’ ...

To that, I would say that the only impact will be a good one and that is what should be recognised as the force of these amendments. Those opposite have chosen not to engage at all with the cogent criticism that has been expressed by so many business groups, by commentators, by lawyers and by the ACCC of the amendments passed last year. Not only do those opposite fail to meet the criticisms of their muddled and ineffective reform from 2007, but they fail to acknowledge the manner in which the reforms contained in this bill have been welcomed by Australian business, welcomed in particular by small business groups, welcomed by commentators and welcomed by the ACCC.

I notice the time, so I might quote simply from the Daily Telegraphnot a noted supporter of the government. In April this year, it stated:

The Federal Government’s reforms to the Trade Practices Act might seem basic enough, but they’re long overdue.

The proposed changes will be music to the ears of small businesses that now stand a chance against much larger and more powerful companies.

Currently it’s too easy for big firms to undercut smaller enterprises and drive them out of business. The government’s reforms will make it easier to investigate and prosecute businesses engaging in anti-competitive behaviour.

Strengthening the consumer watchdog, the ACCC, will also provide more protection for consumers, who are disadvantaged by a monopoly in any market.

With those words from the Daily Telegraph, I commend the bill to the House.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Mr Deputy Speaker, I wish to make a personal explanation.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Does the honourable member claim to have been misrepresented?

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

Yes.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Please proceed.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

The previous speaker said that I agreed with what he was saying. I agreed with his comment that it was ineffective; I did not agree with his comment about clarity and the fact that the Birdsville amendment was not a move in the right direction. I have specifically said on a number of occasions that I believe it was a move in the right direction. The ineffectiveness part of his comments I agreed with, but only that part.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Trade Practices Legislation Amendment Bill 2008. I note that there have been a considerable number of contributions from both sides of the House on this bill and the points of difference between the approaches that have been adopted by both sides, I think, are now clear. On the one hand, those on this side of the chamber have sought to place this set of amendments within the broader context of the Australian Labor Party’s long-term commitment to delivering greater competition within markets right across the economy. It was the Labor Party that introduced the Trade Practices Act and the Labor Party have played a significant role in all of the significant competition reforms that have occurred certainly since that time.

In relation to the bill before us, a range of measures are proposed and they have been set out by speakers previously. To summarise the items that I wish to comment on, I wish to make some comments in relation to the proposals to clarify the definition of market power, which of its nature involves comment on the so-called Birdsville amendment as it currently exists within the existing legislation. I also will be commenting on the efforts of this bill to clarify and legislate in respect of the issue of recoupment of losses and to make it clear that recoupment of losses should not be necessary in order to make out a case in respect of predatory pricing. Another important element of the bill relates to the provision of more guidance in relation to the definition of ‘take advantage of’, which is something that, in the absence of any legislative detail, the courts have been left to interpret. The parliament now has an opportunity to provide some guidance that might overcome perceived inadequacies in the interpretations that the courts have previously had applied in respect of that definition. I also wish to make some comments in relation to the legislative requirement for a deputy chairperson of the ACCC to be someone with knowledge of or a background in small business.

That brings me to the issue of small business generally. Certainly those on the other side have sought to hide behind some belief in the merits of their case being advantageous to small business as being one of the primary arguments that they have mounted in this debate. It is interesting that just about every speaker from the coalition that has spoken on this issue has said, ‘We are the party of small business’—that is, the coalition, and presumably that includes the National Party as well. On that basis, they cannot support these amendments.

Sometimes it is just as interesting to reflect on what is not said as on what is said. I reflect upon the fact that the shadow minister for small business, the service economy and tourism has not made a contribution to this debate. I think that is telling. I think it also exposes as a fig leaf the argument that the opposition is opposed to these amendments on the basis of its commitment to small business. I note an article on 29 April 2008 in the Australian:

Opposition small business spokesman Steve Ciobo said the coalition would back the amendments “in principle”—

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

The honourable member ought to refer to the honourable member for Moncrieff by the title of his electorate and not by his actual name.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I am sorry; I was quoting from the article. The member for Moncrieff, the shadow minister for small business, is on the record in April as saying that the coalition supported the amendments ‘in principle’. We should not be surprised, because the coalition had a position back before the legislation was previously introduced—until Senator Joyce got his hands on it. A recurring theme that seems to be emerging in a number of the debates that I have been involved with in the last little while has been the increasing dominance of the National Party in driving economic policy from the opposition. I think that is a matter of grave concern and I will explore that a little bit further in a few moments.

In terms of what small business really thinks of this, I heard a number of people on the other side say, ‘We are standing up for small business on this,’ but there were not all that many comments by people who genuinely represent small business introduced into the debate. I saw a quote in the Australian on 28 April of this year:

Tony Steven, chief executive of the Council of Small Business Organisations of Australia, said the Rudd Government had gone further to protect small business than the previous government, with the changes sending a much clearer message to the courts.

I think Mr Steven is well placed to represent small business; certainly, his endorsement of this bill is one that is not lost on those of us on this side of the House, because we are committed to ensuring that the things that we do in this place are going to assist small business and at the very least not hamper their efforts to get on with doing what they do—that is, generating so many jobs throughout our economy.

I also noticed that the Australian Chamber of Commerce and Industry chief executive, Peter Anderson, said that the competition reforms were ‘a balanced package’. We see further endorsement of these measures by industry and representatives of business—in particular small business. It really does pose the question: if small business is at least largely supportive of these measures—and certainly, on the basis of those quotes, it is—and if defending small business is the argument that is being presented as the basis upon which those on the other side are opposed to the amendments, what is their reason for opposing them?

I turn to the predatory pricing provisions and in particular to the question that clearly emerges in the debate about this bill: whether or not we should retain the very new definition that came in as a result of the so-called Birdsville amendment, which favours this notion of a share of market, as opposed to market power, as being the formulation of words by which we can ascertain whether or not these predatory pricing provisions should apply. Clearly, if the definition is as restrictive as market share then there is a certain possibility, and it has been noted by speakers on all sides that these matters have not yet been tested before the courts. I have to say I find it rather peculiar that those in the opposition are suggesting that there is some benefit in us pursuing this through the courts, that somehow leaving these things to the courts is how really good law emerges.

I happen to think that one of the motivations for many of us to come into this place is to make the laws and to do it in a way that is going to provide some certainty to those citizens and businesses within our community, our society and our economy so that they can operate on the basis that they are either complying with those laws or they are not. It is an absolute absurdity to suggest that it is good law to come into this place, to acknowledge that something is unclear and uncertain and to abdicate our responsibility to the courts. If you listen to those on the other side, that is what they would have this place do.

On this side we are very much committed to meeting our responsibility as legislators, and that is why we would like to provide greater clarity in the market power definition. On the share of market versus market power debate, we have seen—at least from the example of the Safeway case—that market share, of itself, does not necessarily demonstrate market power or potentially taking advantage of market power. If we look at the Safeway case in 2006, the Federal Court imposed penalties totalling $8.9 million on Safeway with respect to four breaches of section 46(1) and other anticompetitive conduct. This was despite Safeway having only around a 16 to 20 per cent share of the relevant market.

Those on the other side have said that one of the great virtues of the market share test is that it is easily ascertainable to those who might be willing to meet their obligations because you can quantify someone’s market share. You can quantify someone’s market share, but what remains a mystery, to me and to all of those citizens out there wanting to meet their obligations under this legislation as it currently stands, is what level of market share gets you over the line. Is it 16 per cent? Is it 20 per cent? Is it 25 per cent? Is it 50 per cent? This is just one of the questions that remains unanswered as a result of the so-called Birdsville amendment.

I understand the Birdsville amendment was conceived in a hotel in Birdsville by Senator Joyce. On occasion I have certainly seen some good ideas, some inspired thoughts, emerge over a cleansing beer at the local hotel. But, thankfully, on most occasions those inspired thoughts wash away with a Berocca the next morning—they do not find their way into legislation. The unfortunate reality here is that this proposal, which was ill-conceived, made it through the Senate on the last occasion because the government of the day required the support of Senator Joyce.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

Just before I vacate the chair to the relieving Deputy Speaker, I should point out to the honourable member that I hope that he did not intend to cast a reflection on the senator from Queensland.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

Certainly not. Thanks, Deputy Speaker; I was merely seeking to—

Bob Baldwin (Paterson, Liberal Party, Shadow Minister Assisting the Shadow Minister for Defence) Share this | Link to this | Hansard source

Madam Deputy Speaker, I rise on a point of order. The previous occupier of the chair made a very light directional invitation to the member to withdraw the comments asserting that Senator Joyce’s development in the Birdsville amendment occurred because he had consumed too much alcohol.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

There is no point of order. A comment was made by the chair which I heard on my entry. It was not a direction.

Bob Baldwin (Paterson, Liberal Party, Shadow Minister Assisting the Shadow Minister for Defence) Share this | Link to this | Hansard source

With due respect, Madam Deputy Speaker, you were not in chamber to hear what was said.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

I did hear what was said, and I heard the Deputy Speaker invite the member to consider his statements. It was not a direction to withdraw.

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

On the point of order: I simply make the point, Madam Deputy Speaker, that the shadow minister has just reflected upon the chair in a rather adverse way. It was completely unjustified.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

I thank the member for the intervention, but I think we can proceed with the debate.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

Thanks, Madam Deputy Speaker. I certainly was not seeking to make any such implication. What I was merely attempting to draw the House’s attention to was the ill-conceived nature of these proposals. I think it is demonstrative of the fact that the National Party are now increasingly driving the economic policy of the coalition. I can understand why they might have given in to Senator Joyce back in the previous parliament, where they really needed his vote in the Senate, but what absolutely bewilders me is why they continue to pay homage to this amendment, which I note has been criticised roundly in many circles.

I note that Australian Industry Group spokesman Peter Burns said of the Birdsville amendments:

They were silly. It is sensible to get rid of them. They have created a lot of uncertainty.

I note that Professor Alan Fels, who was the previous chairperson of the ACCC, said in the Australian Financial Review on 25 September 2007:

The pendulum has swung too far in the wrong direction.

These are eminent and respected commentators criticising the outcome of that particular ill-conceived thought, the result of an ill-conceived process which occurred in the Birdsville Hotel. We are all familiar with the term DUI, driving under the influence. It seems to me as though—and I say this without casting any aspersions on Senator Joyce—this is LUI, legislating under the influence of the National Party. We have seen the once-great Liberal Party caving in, when it comes to key economic policy decisions, to the demands of the National Party—in the same way as the then Treasurer, who, when the previous amendments were introduced, was not from the outset prepared to countenance these proposals, ended up having to give in. The shadow minister for small business was not able, unfortunately, to get his policy through the opposition party room, and we can only speculate that that may be the reason he has chosen not to speak on this particular debate, which those on the other side have consistently reminded us is on a critical set of amendments affecting small business.

In relation to recoupment, it is critical that these amendments be passed. They ensure that the case law that has developed, which runs counter to the intention of the parliament—or certainly counter to what this parliament believes was the intention of the law at the time—will be rectified and there will be no such requirement to prove recoupment in order to make out a case under these provisions.

In relation to the definition of ‘take advantage of’, it is critical that these proposals are adopted. The courts have been left with the expression ‘take advantage of’, and they have interpreted it in a certain way. It is imperative that, if the parliament believes that that is not the correct interpretation or that the courts have not always ended up with the correct interpretation, there be rectification of the statute to ensure that greater guidance is given to the judiciary when these matters come before them.

Importantly, these proposals ensure that a very strong voice is always present for small business within the institutional arrangements of the ACCC. I think ensuring that a deputy chairperson of the ACCC is someone that has knowledge and experience from a small business perspective will ensure that, in the continued deliberations of the ACCC, the needs of small business will be taken into account to a greater extent. Once again, it strikes me as strange that the shadow minister for small business has chosen not to make a contribution to this debate.

There are a range of other amendments contained within this bill, but, to summarise, what we have seen with this bill is in large part a consolidation of the great commitment of those within the government, the great commitment of the Australian Labor Party, to ensuring greater competition within the marketplace. Greater competition is not something that we pursue as a goal in its own right; it is something we pursue to get a better deal for consumers. There are many consumers, I am certain, within electorates such as mine that will benefit greatly from these amendments when they are passed by the parliament. I commend the bill.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

The Labor government is committed to promoting competition and cracking down on anticompetitive behaviour by powerful companies. I am therefore very pleased to rise to speak in support of the Trade Practices Legislation Amendment Bill 2008. The bill will facilitate our objective by improving the effectiveness of the Trade Practices Act in protecting competitive processes in the Australian economy. The primary purpose of this bill is to amend the act to clarify the meaning of the term ‘take advantage’ and to address problems in relation to predatory pricing in the context of the prohibition on misuse of market power in section 46. In addition, the bill will extend the jurisdiction for section 46 cases to the Federal Magistrates Court. It is the government’s view that a series of court decisions have undermined the operation of the act, section 46 in particular. The government’s amendments strengthen section 46 and crack down on anticompetitive behaviour by: first, ensuring that victims of predatory pricing will not need to prove that the predator has the ability to recoup losses after participating in an anticompetitive below-cost pricing strategy; second, clarifying the meaning of the term ‘take advantage’ in section 46 in response to concerns that the present meaning of that term has prevented section 46 from capturing anticompetitive behaviour; and, third, removing the unnecessary uncertainty that has arisen following the two-track process for predatory pricing that developed under the previous government.

The ACCC has said that the dual-track process has caused considerable confusion because it focuses on the fundamentally different concepts of market power and market share. The Law Council of Australia stated that this process deters corporations with substantial market share from discounting to low prices for what may be genuine competitive reasons for fear of action from the ACCC. These amendments will deal with predatory pricing while allowing businesses to engage in genuine competition and discounting for the benefit of consumers. The bill forms a key part of the government’s economic reform agenda, giving the ACCC the tools it needs to promote competition and fair trading and to protect consumers. The government will extend the reach of the ACCC by removing the arbitrary monetary threshold currently applicable to allegations of unconscionable conduct, enhancing the protection of small business from transactions involving such things as undue influence. The ACCC will be required to have a deputy chair with knowledge of small business, and the act clarifies the commission’s information-gathering powers, which will strengthen its ability to fully investigate suspected breaches of the law.

Giving small business a permanent voice within the ACCC will improve understanding of the special circumstances confronting small businesses and the difficulties that they face in dealing with anticompetitive behaviour by more powerful larger businesses. These reforms will make it easier to prosecute businesses engaging in anticompetitive behaviour, give small business permanent representation on the ACCC and allow small business to access cheaper and more efficient judicial processes. Allowing small and medium businesses in appropriate circumstances to have their cases heard in the Federal Magistrates Court, rather than in the Federal Court, will save considerable costs. The amendments undertaken by this government strengthen the provisions of the Trade Practices Act to curtail misuse of market power by addressing the real impediments that have prevented the law from functioning properly.

The Motor Trades Association of Australia have acknowledged that the bill will assist small business operators in seeking redress against predatory behaviour while also ensuring a diversity of competitors and choice for consumers. They have commended the government for recognising the need for these reforms. The Australian Retailers Association has also supported the bill, stating that the amendments distinguish predatory pricing from legitimate competitive discounting, which was previously unclear. This allows retailers to get on with business and provide benefits to consumers without being concerned they are breaching the Trade Practices Act under recent amendments. The ACCC has stated that the reforms by the government to section 46 continue the process of providing the regulator with the tools it needs to vigorously protect competition while not falling into the trap of protecting competitors from the impact of that competition.

Small businesses can be at a distinct competitive disadvantage in the market. This bill will give them a fair go when in competition with those businesses with considerable market power, providing them with what I believe is the greatest protection in 30 years against predatory pricing and the misuse of market power. Working families will also benefit from the government’s reforms because they will facilitate effective competition, which should result in lower prices, greater choice and better quality products and services. In the tradition of Labor governments, this bill makes a substantial contribution to the legacy of competition reforms—and we can go back to the introduction of the Trade Practices Act in 1974, to tariff reform, to deregulation of the banking sector in the 1980s and the National Competition Policy in the 1990s. This stands in stark contrast to the opposition, who are either economic reform plodders who covet as their own the economic dividend that previous Labor government reforms delivered in the form of low inflationary economic growth, or who are, on the other hand, reform extremists, as was demonstrated with Work Choices and the disadvantage this inflicted on ordinary workers. This government has competition policy as the centrepiece of its economic agenda. This bill is no exception to our intention to make markets work more efficiently, with consumers and small business being the ultimate beneficiary.

I want to commend to the House the Small Business Charter of Fairness recently produced by the Fair Trading Coalition. The Fair Trading Coalition comprises an impressive range of small business representatives, including the various motor trades associations around the states, the Pharmacy Guild of Australia, the Victorian Automobile Chamber of Commerce, the Australian Newsagents Federation, the Australian Motor Body Repairers Association, the Civil Contractors Federation and many more. There are many things proposed in the Small Business Charter of Fairness which I would commend to the attention of my parliamentary colleagues, but there are two which are particularly relevant in the context of this debate. The first is this:

The strengthening of section 51AC (unconscionable conduct) of the Trade Practices Act to proscribe ‘take it or leave it’ contracts and the termination of contracts at will without just cause.

Too many small businesses are subjected to unfair business practices, including the use of ‘non-negotiable’ contracts and termination of contracts at will without just cause. Section 51AC should be amended to proscribe these practices.

The second is this:

Access to justice for small business.

To ensure that all businesses have affordable access to the protection and remedies available under the Trade Practices Act:

the jurisdiction of the Federal Magistrates Court should be extended to deal with contraventions of Part IV of the Trade Practices Act including misuse of market power, contravention of industry codes and unconscionable conduct matters; and

the ACCC should be able to seek compensation for victims of breaches of the Trade Practices Act so that individuals don’t have to take their own action and there should also be effective and inexpensive scope for victims of breaches of the Trade Practices Act to use sections 82 and 83 of the Act following successful prosecutions by the ACCC.

I think that these are important things for the House to consider. In the time I have been a member of the federal parliament, I have experienced representations from small businesses who have been the victims of rough handling from large businesses. I remember, in particular, cases involving retail tenants who were in dispute with shopping centre landlords and, back in the 1990s, some of the disgraceful ways in which retail tenants were being treated by those landlords. I remember cases involving petrol station franchisees and their dealings with the large oil companies. I remember motor accident repairers and their struggle to get fair value for work done.

On each occasion, in seeking to assist them, I would find that the previous federal government, the Howard government, was essentially unsympathetic to small business concerns and was on the side of large corporations. That is typical. On any given issue, whether we are talking about industrial relations laws, Fuelwatch, grocery prices, banks passing on interest rate reductions, the Medicare levy surcharge or the levy on condensate, given an opportunity to support small business, to support workers, to support consumers, the Liberal Party always passes by on the other side. It always supports large corporations. It always supports big business at the expense of small business, at the expense of workers, at the expense of consumers. That is why it has fallen to a Labor government to introduce the legislation before the House here.

To return to some of the detail of the bill, part IV of the Trade Practices Act promotes competition by prohibiting anticompetitive conduct. Section 46 in part IV prohibits unilateral anticompetitive conduct, most notably by prohibiting corporations from misusing substantial market power to harm or eliminate competitors or competition generally. Part IVA of the Trade Practices Act promotes fair trading by prohibiting unconscionable conduct. In particular, section 51AC of part IVA prohibits unconscionable conduct in connection with the supply of goods or services to or the acquisition of goods or services from a corporation.

Labor in opposition indicated that we would strengthen the Trade Practices Act to restore it to the original 1986 intention. This bill strengthens section 46 and section 51AC as part of our ongoing commitment to improve trade practices laws in Australia. These really do constitute the biggest reform to the Trade Practices Act legislation in over 20 years.

I mentioned that the bill amends the Trade Practices Act to require that at least one of the deputy chairpersons of the ACCC have knowledge of or experience in small business matters. I think this is a very important reform. Those opposite say that they support small business, but effectively they get the support of small business on false pretences. They never do anything to help them and they certainly do not do anything to help them in their struggles with big business.

Section 46 contains two prohibitions against unilateral anticompetitive conduct. Firstly, subsection 46(1) prohibits a corporation with a substantial degree of market power from taking advantage of that power for a prescribed purpose. This bill amends the prohibition on predatory pricing in subsection 46(1AA) to align it with the prohibition on the misuse of market power in subsection 46(1). Consistent with the findings of the Senate inquiry, a specific prohibition against predatory pricing makes predatory pricing a clear target of section 46.

The bill also incorporates four non-exclusive factors into section 46 which may be considered by a court in determining whether a corporation has taken advantage of its substantial market power. Importantly, the amendment ensures that, in addition to considering whether a corporation could have engaged in the relevant conduct in a competitive market, the court may also consider whether that corporation would have been likely to do so.

I turn to the question of jurisdiction. Concerns have been expressed about the costs and delays associated with bringing section 46 matters. If the costs associated with privately pursuing section 46 claims are prohibitively high, then it will not be as effective in addressing anticompetitive conduct. The bill addresses these concerns by conferring jurisdiction on the Federal Magistrates Court to hear private matters arising under section 46. By doing so, the bill improves access to justice for businesses in cases arising under this important provision in appropriate circumstances.

Schedule 3 repeals the price thresholds that currently limit the protection afforded by section 51AC of the Trade Practices Act against unconscionable conduct in business transactions. In doing so, the bill implements a recommendation of the Senate inquiry. It enhances the protection afforded by section 51AC by focusing the prohibition on the wrongdoing involved, rather than arbitrary monetary thresholds. The ACCC chairman, Mr Graeme Samuel, stated on 11 June this year that, as a result of the amendments contained in the bill, small businesses will soon enjoy their greatest protection in 30 years against predatory pricing and the misuse of market power.

I also want to comment on the Birdsville amendment, given that the coalition have indicated they will be voting to keep it. I want to point out to the House that the Birdsville amendment is not supported by the ACCC. It is not supported by the former ACCC chairman, Professor Alan Fels—for whom I think there is high regard right around the country in terms of his commitment and expertise in this area—and it is not supported by Bob Baxt, the former chairman of the Trade Practices Commission.

The present reference to market share has given rise to uncertainty and may reduce pro-competitive price competition in markets. The ACCC has publicly stated that subsection 46(1AA), as currently drafted, adds considerable confusion to the law and should be amended to clarify the protection it provides. This bill achieves this by aligning the Birdsville amendment with the longstanding prohibition in subsection 46(1). In particular, the bill amends subsection 46(1AA) to focus it on a corporation’s market power as opposed to its market share. The size of a firm, including its market share, will, however, remain a relevant factor in establishing a corporation’s market power for the purposes of the revised prohibition.

Subsection 46(1AA) presently operates in relation to firms with ‘a substantial share of a market’. This is inconsistent with the longstanding prohibition in subsection 46(l) which operates in relation to firms with ‘a substantial degree of market power’. The concept of market power allows a court to consider all the relevant characteristics of a market in determining whether a firm has acted in an anticompetitive fashion. Such factors would include the size of a firm, as well as the size and number of its competitors. The concept of market power has been effective in targeting unilateral anticompetitive conduct. I heard this example mentioned in the House previously, but in 2006 the Federal Court imposed penalties totalling $8.9 million on Safeway with respect to four breaches of section 46(1) and other anticompetitive conduct. This was despite Safeway having only around a 16 to 20 per cent share of the relevant market.

I think this is a good bill. It is a bill which is good for small business; it is a bill which is good for consumers; it is a bill which continues the Labor tradition of providing assistance to small business and providing assistance to consumers. I commend it to the House.

Belinda Neal (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak to the Trade Practices Legislation Amendment Bill 2008 before the House today. This bill will amend the Trade Practices Act 1974 to clarify the meaning of the term ‘take advantage’. It will also address problems in relation to predatory pricing in the context of the prohibition on misuse of market power in section 46. In addition, the bill will extend the jurisdiction of the Federal Magistrates Court to include section 46 cases.

This bill forms part of the Rudd government’s agenda to make the Trade Practices Act 1974 work more effectively. The amendments will promote competition and fair trading in the Australian market, and they reflect the importance that this government places on competition policy and the protection of small business. This competition policy agenda builds on a strong tradition of Labor initiatives and reform in this area.

The Labor Party introduced the Trade Practices Act in 1974 to enhance the welfare of Australians through the promotion of competition, fair trading and consumer protection. Labor again made improvements to the act in 1986, as well as establishing a National Competition Policy regime in the 1990s. The National Competition Policy put in place many of the policy settings that have resulted in Australia’s strong economic performance over the past decade. The Rudd Labor government has a fundamental belief that competition policy is at the core of the government’s economic agenda.

Unlike those opposite, the Rudd Labor government believes that a pro-business and pro-competition approach to small business will bring benefits to business operators and consumers alike. In my own electorate of Robertson on the Central Coast of New South Wales, small business forms the bedrock of the regional economy. In Robertson, there are approximately 4,500 small businesses that employ staff and 11,700 non-employing small businesses. This economically vital and rapidly growing sector makes a huge contribution to our local economy and constitutes one of the mainstays of my area and its job creation.

Labor supports reward for effort, risk-taking and entrepreneurship in small business. Above all, I believe it is vital that government allow small businesses an opportunity to grow and prosper. Personally, I have spent most of my life in small business. I know that many of those on the other side believe in the stereotype that Labor people are employees and that all Liberal Party members are employers, but that is just not the case anymore. I think it is about time that those on the other side understood it. I have spent the majority of my life working as a small business person and employing people, with all the joys and risks that that includes. I think we need to take a more mature look at this debate. The opposition needs to understand and accept that there is broad experience and understanding of small business on this side of the chamber and that we can debate these issues in a mature and more complex way.

The amendments before us today will ensure that the small business economy of the Central Coast—and, indeed, small businesses across Australia—will continue to grow. There is an increasing trend in the Australian economy, particularly noticeable in the last few decades, in which previously employed people are setting up business entities. This trend also involves the establishment of an increasing number of non-employing small businesses, as well as independent contractors and other microbusinesses. These businesses employ a significant number of Central Coast people, and the number is growing and will continue to grow.

I have undertaken quite a lot of work in the small business area in Robertson, particularly in relation to issues of tenancies in major shopping centres, but also a large range of other businesses have consulted with me and spoken to me about their issues. There are increasing pressures on many small businesses in my area, as there are across Australia. This bill offers more effective measures to deal with anticompetitive behaviour and unconscionable conduct that will be welcomed by many business operators in Robertson. It focuses on increasing competition in the Australian business economy and promoting fair trading, which should be welcomed by both business and the public.

The Trade Practices Act itself—in particular, part IV of the original Trade Practices Act 1974—promotes competition by prohibiting anticompetitive conduct. Section 46, in part IV, prohibits unilateral anticompetitive conduct, most notably by prohibiting corporations from misusing substantial market power to harm or eliminate competitors or competition generally. Part IVA of the Trade Practices Act promotes fair trading by prohibiting unconscionable conduct. Within that, section 51AC prohibits unconscionable conduct in connection with the supply of goods or services to or the acquisition of goods or services from a corporation.

However, it is the government’s belief that a series of court decisions have undermined the operation of the act, in particular section 46. It is not just the government that believes it; the ACCC has made this point for several years. The ACCC has been operating under severe restrictions upon its ability to regulate anticompetitive conduct. So, despite all these attempts at reform, concerns remain that section 46 does not achieve its purpose of prohibiting the misuse of market power.

In the bill before the House today, the amendments to section 46 of the Trade Practices Act are aimed at promoting competition and cracking down on anticompetitive behaviour by powerful businesses. The government intends to enhance the legitimate interests of small business by protecting them from predatory pricing and giving them a permanent voice in the competition watchdog, the Australian Competition and Consumer Commission. This package will ensure genuine competition for the benefit of consumers and small business.

The bill covers four significant areas of reform. The specific areas to be amended and reformed are set out in the schedules as follows. Schedule 1 of the bill amends section 46, ‘Misuse of market power’, of the Trade Practices Act to promote competition in Australia. This enhances the prohibitions against anticompetitive unilateral conduct in business transactions. The amendments contained in this particular schedule seek to address predatory pricing, clarify the role of recoupment in predatory pricing cases, clarify the meaning of the term ‘take advantage’ and confer jurisdiction on the Federal Magistrates Court for section 46 matters. In particular, the schedule amends section 46(1AA) away from the terminology placed in it by the Birdsville amendment, changing it from ‘share of the market’, which was the amendment accepted while the clause was in the Senate in 2007, to ‘degree of power’.

I am somewhat concerned that I heard indicated earlier that the opposition intends to oppose the amendment put forward by this government to rectify the dangers created by the Birdsville amendment. I find it somewhat surprising, in the light of some of the commentators’ comments in relation to that. I draw the House’s attention to a number of comments made at the time. These may have been raised previously, but I feel that it provides benefit to the House to draw the attention of the opposition to them again, bearing in mind that it is considering opposing the amendment in this bill. In the Australian Financial Review on 19 September 2007, in relation to the Birdsville amendment to section 46 of the Trade Practices Act, Bob Baxt said:

What is equally disappointing is the fact that the government on this occasion has not consulted with a significant number of bodies from which it had previously sought views on amendments to trade practices law and in particular the Trade Practices Legislation Amendment Bill (No. 1) (2007) earlier in the year.

Also, in the Australian, again on 19 September 2007, in relation to the amendment that the opposition is still intending to try and retain in this bill, Martin Collins said:

JOHN Howard has single-handedly destroyed the entire premise of the Trade Practices Act through his predatory pricing amendment, which will have the effect of killing price discounting, to the detriment of small business and consumers.

In other words, the Prime Minister’s amendments have the real threat of hurting the very people he misguidedly thought he was helping in accepting the amendment, proposed by Queensland senator Barnaby Joyce and radio shock jock Alan Jones.

I guess everyone makes mistakes. But what concerns me is that, some 12 months after the original mistake, the opposition have not seen fit to carry out the consultation that they should have carried out and to reconsider their position. I urge them, on this occasion, to think a little bit more and accept the fact that they may have made a mistake and that they should reconsider and support the government, because this government is doing what they should have done on the first occasion, and that is to enhance competition for the benefit of small business and consumers.

Looking further on, schedule 2 of the bill seeks to promote competition by enhancing the prohibitions against anticompetitive unilateral conduct that are contained in the Competition Code. It makes amendments to the version of section 46 found in the Competition Code which applies to all persons in the states and territories by virtue of the application of legislation in those jurisdictions.

Schedule 3 of the bill amends the Trade Practices Act and the Australian Securities and Investments Commission Act to extend the protection against unconscionable conduct in business transactions. The amendments contained within this schedule will require that one of the Australian Competition and Consumer Commission’s deputy chairpersons have knowledge of or experience in small business matters—something that I think will provide great benefit. The amendments in this schedule also repeal the thresholds for unconscionable conduct cases under section 51AC of the Trade Practices Act and section 12CC of the ASIC Act. There are also some other amendments contained in this bill which clarify the ACCC’s information gathering powers under section 155 to facilitate the effective enforcement by the ACCC.

In conclusion, this bill makes the Trade Practices Act significantly more effective in its primary objective, which is to improve the competitive processes in Australian markets. Importantly, it enhances the interests of small business and provides the ACCC with the tools it needs to protect competition, promote fair trading and protect the interests of consumers. The amendments in this bill will clear major impediments that have prevented the law from functioning effectively and have prevented more cases under section 46. The Chairman of the ACCC, Mr Graeme Samuel, stated on 11 June this year that, as a result of the amendments contained in this bill:

Small businesses will soon enjoy the greatest protection in 30 years against predatory pricing and misuse of market power ...

More cases will now be eligible to proceed and this represents a win for all those who depend upon the Trade Practices Act to protect the competitive process. This bill contains some of the most significant reforms of the Trade Practices Act in a long, long time. I do not say this is the end; I think we still need more protection, particularly for small business, and I am particularly concerned about the power relationship between large shopping centres and the retail sector. But certainly this is a step in the right direction, and I urge the opposition to support the bill.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the legislation that we have before us, the Trade Practices Legislation Amendment Bill 2008. In doing so, I would like to acknowledge the role that small business plays. Small business is the largest employer in our communities. Small businesses are also the lifeblood of our nation and a very important part of our economy. The government acknowledge their contribution to our economy and our society. We have the fundamental belief that competition policy is at the core of a government’s economic agenda. The legislation that we have before us today looks at that very issue.

The government believe that being pro-business and pro-competition delivers the best results for consumers. Those opposite do not have the same concern for consumers. We on this side of the parliament know that those opposite are the slaves of those who put them in this place and we know that, when it comes to weighing up the issue of whether or not they are concerned about protecting consumers, always they come out on the side of their bosses.

The member for Robertson raised a very important issue—the anticompetitive behaviour that exists with shopping centres and those people who are tenants within them. This issue has been of great concern to me for a very long time. It is an issue that I deal with on a regular if not daily basis within my electorate. Wherever there is a redevelopment in a shopping centre or any change within a shopping centre, it is always the tenants who come off second best. These are tenants who have invested their life savings in their businesses and they stand to lose everything.

Currently, there is a redevelopment of a shopping centre within my electorate and an added burden has been placed on small business owners of being caught between a franchisor and the business. The franchisor obviously wants to have a good relationship with the shopping centre management because they are reliant on them to be able to get good positions not only in one shopping centre but in shopping centres throughout the nation, so they need to negotiate and stay in favour there. On the other hand you have the franchisee, who needs to have a relationship with both but is often the victim in the power relationship that exists; they are the least powerful. And I hope that, as a government, over time we revisit this. At the moment I am advocating very strongly for a number of businesses within my community and I will not rest until they get a fair deal. It is very hard to sit back and see people who have invested their last cent in a business lose everything. It is something that government needs to address and I, along with the member for Robertson, will be advocating for that in this parliament.

Schedules 1 and 2 of the Trade Practices Amendment Bill 2008 promote competition in Australian markets by enhancing the prohibitions against anticompetitive unilateral conduct in the Trade Practices Act 1974 and the competition code. Schedule 3 makes additional amendments to the TPA and the Australian Securities and Investments Commission Act 2001.

Schedule 1 of the bill amends section 46, which relates to the misuse of market power—and I once again relate that back to the issue I have just raised—to address predatory pricing, to clarify the role of recoupment in predatory pricing cases, to clarify the meaning of the term ‘take advantage’ and to confer jurisdiction on the Federal Magistrates Court for section 46 matters.

Schedule 3 of the bill amends the TPA and the ASIC Act to require that one of the Australian Competition and Consumer Commission’s deputy chairpersons have a knowledge of or experience in small business matters. I think this is a very important change and one that I would have hoped members on the other side would support, because I do not think that small business has the voice that it deserves. The voice of business is disproportionately vested in larger businesses. As small business plays such a vital role in our economy as an employer, it is absolutely imperative that this change is made. Schedule 3 also repeals the threshold for unconscionable conduct cases under section 51AC of the TPA and section 12CC of the ASIC Act, and it clarifies the ACCC’s information-gathering power under section 155. The government intends to further defend small business from predatory pricing and give it a permanent voice in the competition watchdog, the Australian Competition and Consumer Commission.

I have heard members on the other side of this parliament speak very disparagingly of the ACCC and Graeme Samuel. Under the previous government, the ACCC was made, in effect, a toothless tiger. The government of the day did not support the ACCC in any shape or form. The government recognise that the ACCC is a very important body; we are about giving power to it, not making it a toothless tiger. If members on the other side of the parliament had been prepared to stand up when they were in government to try and turn that around in order to give the ACCC the powers it needed to be effective then the criticisms they are now directing at it would not have any veracity whatsoever. There have been many times that I have referred cases to the ACCC and they have been outside of its jurisdiction purely because of what the Howard government did to it.

This legislation will be cracking down on anticompetitive behaviour by powerful businesses. The new rules make it easier to prosecute businesses engaging in anticompetitive behaviour. They ensure that victims of predatory pricing will not need to prove that the predator has the ability to recoup losses after participating in an anticompetitive, below-cost pricing strategy. The previous rules made it very, very hard. The legal issues that were involved were quite complex. This legislation will clarify the meaning of the term ‘take advantage’ and remove the unnecessary uncertainty that has arisen following the two-track process for predatory pricing that developed under the previous government. As I have said, the reforms will also strengthen the role of the ACCC by enhancing its information-gathering powers, enabling it to fully investigate suspected breaches of the law—something that the Howard government sought to ensure it did not have.

The government will also extend the reach of the ACCC by removing arbitrary monitoring thresholds currently applicable to allegations of unconscionable conduct and by enhancing the protection of small businesses regarding transactions involving such things as undue influence. These amendments will deal with predatory pricing while allowing business to engage in genuine competition and discounting for the benefits of consumers. That is for the mums and dads, the families and the pensioners in our communities; that is what it is about. Those on the other side of parliament should realise that.

As I have mentioned, the fact that small business will have a much greater voice on the ACCC is very, very beneficial. One of the things that I find quite interesting is that the legislation that the previous government introduced—in particular, the Birdsville amendment—created significant uncertainty. Birdsville is a great place to visit: it has the Birdsville races, a great little pub and a strong community. But I do not know whether it is really appropriate for the Prime Minister of the day to sit down in the Birdsville pub and—over a couple of beers with a senator who might not support him in everything he needs support for—say, ‘Okay, that sounds like great policy.’ This is the way the previous government did business and, unfortunately, the Birdsville amendment appears to have been quite flawed.

We have Graeme Samuel stating that there was enormous uncertainty around the Birdsville amendment. We have Peter Armitage, the practice head of Blake Dawson Waldron’s competition and consumer protection team in Sydney, supporting what I have said. He says that many fine ideas have been conserved in the Birdsville pub, but the predatory pricing amendment to the Trade Practices Act that was accepted by the government of the day—the Howard government—was a mistake. He goes on to show just why it was such a mistake and how it will work against competition.

One example he uses is of a pharmacist whose company operates one of the two pharmacies that exist in a remote country town; that pharmacist will be at risk of breaching the Birdsville amendment. Another example I read of, which was even more damning of the Birdsville amendment, is where a newsagent in a small country town sells biros and a service station in that same town also decides to sell biros. If the newsagent then decides to reduce the price of their biros, they breach the current Birdsville amendment. So not all things that happen in the Birdsville pub should be embraced by the parliament.

Martin Collins in the Australian points out that the predatory pricing change was made without consultation with the business community. That would suggest that, if the previous government, led by Prime Minister Howard and Treasurer Peter Costello, had really been serious about making changes to support business, it would have consulted with the community and also with consumers.

It is the same with every piece of media that I have looked at. The Australian Financial Review states ‘abandon all hope of discount’. Once again, the Australian Financial Review talks of ‘competition changes rile big business’. The Australian Financial Review, which I would see as the Bible of business, reports that ‘suppliers will feel the squeeze’. Finally, we see, again in the Australian Financial Review, ‘pricing reforms go too far with Fels’. The previous government let down business and consumers; but this government, through this legislation, will deliver amendments that will make for a more competitive environment and will make it work for all Australian people.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

It gives me great pleasure to sum up debate on the Trade Practices Legislation Amendment Bill 2008. The passing of this bill will be a significant event in the development of trade practices law in Australia. It represents the biggest reforms to the Trade Practices Act in 22 years. I thank all honourable members who have made a contribution to this debate—the member for Shortland and all those who went before her.

These reforms put beyond doubt the intention of the parliament, first expressed by Lionel Bowen in the 1986 reforms, for a strong law to deal with predatory pricing. This bill will at last deal with the problems created by the various court decisions, most notably the High Court in the Boral case of 2003. Importantly, this bill strikes the right balance. Competition law is a very nuanced thing. It is very easy to have anticompetitive consequences when you are trying to have pro-competitive results, and getting competition law just a little wrong can have very, very serious impacts throughout the economy—and I will return to this point a little later in my contribution.

Importantly, this bill implements a key election commitment outlined by me in the House almost exactly 12 months ago in response to the previous government’s trade practices reform bill. The two most important elements of this bill are the removal of the necessity to prove the ability to recoup losses in predatory pricing cases and the clarification of the ‘take advantage’ element in the abuse of market power cases.

In the Boral case, the High Court held that it would be necessary to prove that a firm would be able to recoup its losses when pricing below cost in order to damage a smaller firm. On any objective reading, in my view, the reforms that Attorney-General Bowen pushed in 1986 were designed to show the courts that it was the intention of the parliament that this would not be a relevant evidentiary burden. It is most concerning that the High Court put this evidentiary burden in these cases, although how their Honours interpret the law is up to them. But what is much more concerning is that the previous government allowed that situation to continue and did not clarify the law. As a result of that court case, the ACCC immediately dropped all the predatory pricing cases it had been working on, because it would have been a waste of taxpayers’ money to continue them, as the evidentiary burden could never be met.

The previous government was prepared to see the neutering of predatory pricing law in this country. The Senate Economics References Committee recommended, in 2004, that the necessity to prove the ability to recoup losses be removed, and the previous government refused to act. By requiring proof that a firm could at some time in the future recoup its losses if successful in driving a smaller firm out of operation, the previous government gave predatory pricing a green light. The ACCC has made it clear that this reform is necessary. In addition, many commentators have made this very clear. For example, Smith and Trindade put it this way:

... the High Court has introduced what amounts to a threshold dominant test and failed to provide a proper framework for distinguishing between conduct which the act is designed to foster and that which the community expects it to present.

It is up to the High Court to interpret the law but it is up to the parliament to make our will clear. This amendment makes our will clear. It is four years after it should have been made clear, but we make it clear tonight.

The second important reform contained in this bill is the clarification of the term ‘take advantage’ in relation to taking advantage of substantial market power. On the face of it, this might not seem like such an important thing—but it certainly is important. To be found to be in breach of section 46, a firm must be found to have taken advantage of its market power. ‘Take advantage’ has been defined by courts in different ways, in different cases. But most concerning is that, in the Rural Press case, the High Court defined ‘take advantage’ in a very restrictive way, focusing on whether the firm in question could have undertaken the action in question in the absence of market power. Justice Kirby, in his dissent ruling, described this interpretation as being based on a ‘narrow, formalistic and substantially verbal ground’. The bill clarifies the term ‘take advantage’ in a more expansive way than the High Court defined it, breaking down the other big barrier to the effectiveness of section 46 of the act. Again, this is an overdue reform.

There are other less significant but still important components of this bill. It expands the information gathering powers of the ACCC and enshrines the role of the small business deputy chairman in the bill. It also adopts the recommendation of the Senate Standing Committee on Economics of 2004 to give the Federal Magistrates Court some jurisdiction over section 46 cases. I do not consider it likely that many section 46 cases will be brought in the Federal Magistrates Court; nevertheless, if a small business wishes to bring a section 46 case and not leave it to the ACCC, they should have the ability to do so in a low-cost jurisdiction. The Federal Magistrates Court will retain its ability to refer complex cases to the Federal Court, and the normal limits on damages in the Federal Magistrates Court will apply. Importantly, the conciliation mechanism in the Federal Magistrates Court could be useful in assisting small business. Most small businesses, if subject to predatory pricing, simply want it to stop. They do not necessarily want to run a big, complex and expensive law case; they simply want a mechanism which helps them stop the predatory pricing from occurring.

I would now like to turn to the so-called Birdsville amendment. After years of telling the Labor Party and every other commentator that there was no problem with the operation of section 46 of the act, the previous government at five minutes to midnight, with zero consultation, introduced the Birdsville amendment. It is called the Birdsville amendment because it was conceived by Senator Joyce in the Birdsville Hotel. Like the member for Shortland, I have nothing against the Birdsville Hotel—it is a lovely place—but it is not where I would write trade practices law. The amendment was rushed through by the previous government as part of a deal to secure Senator Joyce’s support. There was no consultation on its effects, and it was greeted with amazement and incredulity by the vast majority of experts in competition law. The Birdsville amendment replaced market power as the threshold test in predatory pricing cases. One word can make lot of difference.

Given that it was the only change that the previous government was willing to accept, the Labor Party did not oppose the change. However, at the time, we expressed our misgivings and the view that it would be much better to implement the recommendations of the numerous inquiries, implement the recommendations of the ACCC and improve the operation of market power rather than throwing market power out the window and introducing a whole new test. Now that the government is restoring substantial market power to a more appropriate test, a pre-Boral test, there is no good reason to keep the market share test.

But the reasons for getting rid of the Birdsville amendment go much deeper. The Birdsville amendment, I accept, is designed to help small business. I accept that is its intention. But it could very well harm small business. There is also contained in it the potential to harm consumers. It puts Australia in breach of the OECD guidelines on the appropriate test of dominance, which is quite concerning. The OECD guidelines state:

Market share data continue to be the high priest in assessing whether a firm has substantial market power. Although the limitations of market shares as a proxy of market power are widely acknowledged.

Further, they state:

Entry barriers are arguably the single most important factor in assessing whether a firm has substantial market power. If other firms can enter or rivals can expand, the firm will not be able to maintain market power in the long run; hence, its market power will not be durable.

The market share test was ill-conceived, rushed, poorly drafted, and it creates considerable problems. By introducing a new concept into the act, it creates considerable uncertainty. I can understand the superficial attraction of market share as being a simpler dominant test—but it is far from simple. Who knows what substantial market share is? No-one from the opposition has been able to say in this debate what substantial market share would be. It could be 20 per cent, 30 per cent, 50 per cent or 70 per cent. It would take years of court cases to determine what a substantial market share would be regarded as by Australian courts, and to do that would be to perpetrate a substantial disservice on Australian businesses, both big and small, and on Australian consumers.

My second concern is that, by making market share the test, we will potentially be bringing into the purview of section 46 small businesses that are not meant to be in its purview. If the courts define substantial market share at a low level of, say, 20 per cent, then businesses which have a reasonably large market share, for instance, a hardware store in a small country town which has 20 per cent of the market, could be prosecuted for being in breach of the predatory pricing law. Almost every academic and expert commentator in this field agrees with the government that this is an ill-conceived clause. In fact, the only academic I can find in all my research who supports the Birdsville amendment is the one who helped Senator Joyce draft it. Not one other prominent academic in Australia supports the Birdsville amendment.

I will share with the House some examples of the views of experts on the Birdsville amendment. Julie Clarke of Deakin University said that, if small business was defined, for example, at 20 per cent, which I referred to before:

Small business could thus be exposed to liability was it to challenge a larger rival by aggressive and sustained price cutting.

So the opposition say they are trying to help small business but, in fact, the view of a large number of expert commentators is that they could be harming small business. Arlen Duke of the University of Melbourne said:

The Birdsville amendments introduced considerable uncertainty into the law by introducing the concepts of ‘substantial market share’, ‘sustained period’ and ‘relevant cost’.

Bob Baxt, who I regard as the pre-eminent trade practices commentator in this country, said:

Those who support the Birdsville amendment ignore the fundamental basis upon which competition law operates.

He went on to say:

The Birdsville amendment is apparently based on a simplistic and unprincipled evaluation of how competition law should operate.

That is a pretty powerful indictment of the views of the previous government, the current opposition.

Professor Stephen Corones, professor of law at the Queensland University of Technology, said of this government:

The government is to be congratulated for attempting to fix a significant problem that is working to the detriment of Australian consumers, including small business, every day that it is on the statute books.

So we have a consensus of every expert commentator in the country bar one that the Birdsville amendment is erroneous, ill-conceived, poorly drafted and will have adverse consequences on Australian consumers and on Australian small businesses.

Not one of the written submissions to the Senate inquiry, which expressed some sympathy for the market share test, recommended that the market share test be retained at this point. When you look through those submissions, whether they be from NARGA or the Consumer Action Law Centre in Victoria, none of them said that it is urgent and important to keep the Birdsville amendment in place but rather called on the government to monitor the situation to ensure that our amendments have the desired effect. So the case for keeping the Birdsville amendment is very thin indeed.

The opposition have indicated they will oppose removing the Birdsville amendment—although, I must say, Mr Acting Deputy Speaker, you would not know it from the shadow minister’s second reading speech. I had to get to the amendment at the end before I found any reference to this bill whatsoever in his contribution. The shadow minister joins us in the House now. I must say, with due respect, that his contribution to the second reading debate was an insult to the House. To talk about the most substantial trade practices reforms in this country in 22 years, in representing the opposition, and not make one reference to those reforms in his opening remarks in this debate was an insult to the House.

I gather that the opposition will be opposing the changes to the Birdsville amendment. I gather that because I have had made available to me the coalition joint party submission from the shadow minister. It is a particularly flimsy document. If I took such a submission to my caucus room, I would be laughed out of the building. This submission from the shadow minister, the member for Dickson, makes the case to the coalition joint party room that the changes to the Birdsville amendment will return a level of uncertainty to the Trade Practices Act to the detriment of small business, as the threshold test will change from market share to market power, as the definition of market power that has been defined by the High Court following the Boral case in 2003 is a very high threshold which essentially applies to only monopolists or near monopolists. So the whole basis on which the opposition has decided to oppose the removal of the Birdsville amendment is in error. The shadow minister’s submission to his joint party room ignores the fact that these amendments do not return the market power test to the Boral situation but to the pre-Boral situation and that the government’s amendments return the market power test to the test envisaged by Attorney-General Bowen in 1986.

So I fear what we have is the opposition playing cheap politics and attempting to garner the small business lobby when every qualified academic commentator in the nation says that this has the capacity to hurt small business. It certainly has the capacity to chill competition and, over time, reduce discounting, and yet the opposition thinks it is acceptable to oppose the removal of the Birdsville amendment. I understand the politics of this are difficult. I understand there are various views in the opposition shadow cabinet and in the opposition party room. There are various views in my party room on this, but this is a matter on which you have to show leadership. This is a matter on which you have to say the Birdsville amendment, which was rushed through the parliament with zero consultation as part of a cheap deal 12 months ago, simply will not work. We should stand as a parliament and say to the small business lobby, the small business groups in this country, that we are united in restoring the market power test to its proper 1986 test. That is what the opposition indicated they would do when we first announced this policy, but they backflipped.

Peter Dutton (Dickson, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

Why didn’t you vote for Birdsville back in September?

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The shadow minister asks me why I did not vote for it in September. If he had been here earlier, he would have heard me say that we supported this because that was all the previous government was prepared to do and we said at the time it would be better to adopt the recommendations of inquiry after inquiry of the ACCC.

All of those submissions and all of those inquiry recommendations were completely ignored, year after year, by the previous government until five minutes to midnight, and then they introduced the Birdsville amendment with zero consultation with small or large business. At the time that was regarded as having considerable adverse impacts on competition in this country, and we still have the view that it has considerable adverse impacts on competition in this country.

You do have to show leadership on this issue and that is what the government have done. We have restored the market power test to its pre-Boral position. It is an appropriate test, once those anomalies have been corrected. The opposition can continue to engage in cheap political stunts, but they do so as a disservice to small business. They create so much uncertainty that the only people who will be happy about this are the trade practices lawyers, who will be arguing it in the High Court for years to come. They will be arguing over what substantial market share actually is; whether it is 20 per cent, 30 per cent, 50 per cent or 70 per cent. The opposition are doing the small business community and consumers in Australia a considerable disservice by allowing a position to be the law of this nation which every expert commentator says will chill competition, will reduce discounting and will be a disservice to small business. The shadow minister and the opposition should hang their heads in shame.

Kevin Andrews (Menzies, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be read a second time. To this, the honourable member for Dickson has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question. There being more than one voice calling for a division, in accordance with standing order 133 the division is deferred until after 8 pm.

Debate adjourned.