Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I welcome the opportunity to speak on this proposed amendment to the Trade Practices Act. The minister, in his second reading speech, noted that competition is the primary means by which consumers get the best possible product or service at the lowest possible price. I think that all members of this House would be in furious agreement with that proposition, with the concept that competition delivers lower prices, better services and a more efficient economy. He also noted that competition enhances Australia’s welfare generally because of the efficiencies it creates and which lead to improved productivity and ultimately to increased standards of living. There would be no argument from the opposition with regard to the positive impact of competition on efficiency and our standard of living.

Given the minister’s support for competition and his acknowledgement of the great benefits of competition for individuals and the general economy, one might ask: why would this same minister introduce the Fuelwatch legislation, which would reduce competition, drive independents out of the market and drive up the price of fuel? Here we have a minister introducing this cartel legislation into the House—the very same minister who brought us the screaming dog that was Fuelwatch. I am delighted that the parliament rejected the Fuelwatch legislation. I am delighted that the parliament rejected the notion of price fixing for 24 hours. What would be the logic of fixing prices for fuel for 24 hours? I put that to one of the ACCC commissioners. I asked: what benefit could there be? Why must prices be fixed for 24 hours? He said that the information is of no use to motorists unless it is actually fixed for 24 hours because, if a motorist saw a particular price, if it was not fixed for 24 hours he could not guarantee he would get that same price when he came back to fill his car up. I would maintain that that statement was nothing more than an unsubstantiated value judgment. I would say that, in any other market, I think it is pretty well universally agreed that price fixing of the nature that was proposed under Fuelwatch would be considered unlawful. If two companies were to engage in such a practice they would be pursued by the ACCC and vilified by the ACCC, but here we had this minister, the minister who has introduced this cartel legislation into the House, being the minister responsible for Fuelwatch—legislation that was clearly anticompetitive and was clearly not in the best interests of the motorists. It was legislation that was designed to be nothing more than a political fix for the Rudd Labor government, for the Prime Minister who made promises on fuel—promises he could not keep, promises he had no intention of keeping, and yet they came up with Fuelwatch. It does seem a strange irony that this minister who sought to introduce that legislation—legislation that would constrain the free market—is here championing this anticartel bill.

Let me say at the outset that the coalition supports the broad thrust of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 legislation. But we do have reservations with regard to some potential unintended consequences. Regrettably, the government has form in relation to unintended consequences—one needs to look no further than the bungled bank guarantee that was introduced by this government without proper consultation with the Reserve Bank and without carefully thinking through what was a very important decision. As a result, thousands of self-funded retirees and other Australians had their deposits frozen. And why? Because this Prime Minister had to make a quick decision to meet the six o’clock media cycle. These were absolutely outrageous unintended consequences that were very severe for many people out there. So whilst the opposition supports the broad thrust, we are certainly mindful of the potential for this government to deliver legislation that has unintended consequences which could have great adverse effects on Australians. I will revisit the issue of unintended consequences later in my contribution.

Criminalising cartel conduct is really about protecting the consumer. It is clear that the penalties available in the past have been inadequate to deter cartel activity of a hardcore nature, and the availability of criminal sanctions should provide a deterrent to those who might engage in such activities. This bill also provides the mechanism through which relevant agencies can use electronic surveillance. This will be useful in prosecuting cartel offences which may, by their nature, be difficult to prove. The Organisation for Economic Cooperation and Development, or the OECD, defines hardcore cartel conduct as:

… an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.

The OECD considers hardcore cartel conduct the most egregious of violations of competition law in that cartels may injure consumers in many countries by raising prices or restricting supply, perhaps making goods and services unavailable to some consumers and making them unnecessarily expensive to others. Furthermore, the OECD recommended that member companies should ensure that their competition laws effectively halt and deter hardcore cartels. The OECD said, in particular, that their laws should provide for, firstly, effective sanctions of a kind and at a level adequate to deter firms and individuals from participating in such cartels and, secondly, enforcement procedures and institutions with powers adequate to detect and remedy hardcore cartels, including powers to obtain documents and information and to impose penalties for noncompliance.

International experience, and experience in Australia, demonstrates the need for effective cartel legislation. There has been a range of high-profile cases in relation to the operation of cartels. We had the global vitamins cartel. Other major cartels included the Spanish sugar cartel, where Spanish sugar prices were for many years five to nine per cent higher than those in the rest of Europe—four different producers received a total of €8.7 million in fines. There was the global lysine cartel that doubled the world price of lysine, an amino acid, for three years. There was the global graphite electrodes cartel that affected between $5 billion and $7 billion in sales worldwide, and there was the air cargo cartel which involved our local airline Qantas. By way of an indication of the timeliness of this legislation, it is interesting to note that, only today, the ACCC instituted proceedings in the Federal Court against four airlines, seeking penalties for alleged price fixing between 2003 and 2006. The alleged contraventions relate to fuel surcharges applied to the international carriage of air cargo during that period. The airlines which are the subject of the allegations are Air France, KLM, Martinair and Cargolux—major names in the international airline industry. Australia has also experienced local cartel operations, most notably the Visy case, a very high profile and widely documented case in this country.

This legislation, in criminalising serious or hardcore cartel behaviour, brings Australia into line with the United States, Canada and the United Kingdom—countries which have similar sanctions in place. This becomes particularly important in a globalised world where businesses and cartels operate across a range of jurisdictions. The legislation before the House makes it an offence for a corporation to make or give effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, to restrict output, divide or share markets or rig bids. The legislation provides, for an individual, a maximum jail term of 10 years imprisonment and a fine of up to $220,000 and, for a corporation, a fine that is the greater of $10 million or three times the value of the cartel or, where that value cannot be determined, 10 per cent of the turnover. The penalty for individuals brings Australia into line with the penalties of the United States. The amendments to the Trade Practices Act proposed by this bill would make a cartel offence a relevant offence under the Surveillance Devices Act and, although the ACCC is not a law enforcement officer under the Surveillance Devices Act, the amendments to the bill will allow the AFP to obtain a surveillance device warrant to aid in the investigation of cartel conduct. Amendments to the Telecommunications (Interception and Access) Act 1979 would facilitate this surveillance.

The minister, in his second reading speech, referred to consultation which occurred in relation to the bill, the exposure draft and the period of public consultation, and that it should be said that during that time of public consultation there were significant concerns. The government issued its second cartel conduct exposure draft on 27 October last year, which it indicated would be the final bill. This bill prompted concerns to be raised by competition experts who warned that legitimate commercial arrangements and conduct that are not currently prohibited under the Trade Practices Act might inadvertently be captured as cartel conduct. Competition lawyers complained that the bill was lacking crucial anti-overlap exemptions. Minter Ellison have been reported in the media as saying:

… would have had significant consequences for corporate structures and operations that have historically been clearly compliant with the Trade Practices Act. … This would have caused substantial implications for joint ventures, joint buying groups, franchises, co-operatives and any supply arrangements between competitors that contain exclusivity restrictions.

Quite clearly there are a range of business operating models that, by necessity, require territories to be divided—not for the purpose of having an adverse effect on the consumer but more for commercial practicality. I think that was a very important observation by Minters.

Blake Dawson Waldron partner Peter Armitage said:

People could go to prison for entering into pretty ordinary commercial arrangements.

That is quite worrying. Competition expert Brent Fisse has been quoted as saying that it is impossible to understand why the government would have omitted the anti-overlap provisions. He also said:

The need to introduce cartel offences does not justify amendments to the TPA that are ill-designed and bound to produce unsatisfactory and counterproductive results.

The Australian Financial Review, in an editorial, said:

The resort to criminal sanctions brings added dangers that innocent company officers, engaged in tough competition, may get caught up in unwarranted legal action that can blacken their careers, even if acquitted.

That is one of the real challenges of competition law—that dividing line where rigorous and rugged competition ends and corrupt conduct starts. It can be a grey area and one that legislators have to be very mindful of.

The opposition welcomed the amendments which were subsequently made and incorporated in the bill as introduced, which addressed many of the concerns—though some concerns remain. The opposition will be reserving our position on the bill until the Senate Standing Committee on Economics delivers its findings.

The final bill, tabled in parliament on 3 December, was accompanied by a memorandum of understanding between the Australian Competition and Consumer Commission and the Director of Public Prosecutions. The revised MOU that was introduced set out the respective roles and responsibilities of the ACCC and the DPP in relation to the prosecution of cartel conduct and how the organisations would interact. It is interesting to look at this document, which is entitled ‘Memorandum of Understanding between the Commonwealth Director of Public Prosecutions and the Australian Competition and Consumer Commission regarding’—and the next bit is very interesting—‘Serious Cartel Conduct’. But clause 4.3 of the MOU says:

The ACCC will not ordinarily refer relatively minor cartel conduct to the DPP for consideration for prosecution.

It is a document that says it is in relation to serious cartel conduct, but clause 4.3 says that the ACCC would not ordinarily refer minor cartel conduct to the DPP for prosecution. Certainly the spirit of this legislation is that the criminal sanctions relate to serious, hardcore cartel conduct and that conduct of a minor nature would be dealt with in a civil jurisdiction, not in a criminal jurisdiction. But 4.3 is worryingly ambiguous. Clause 4.4 goes on to say:

Referral of possible serious cartel conduct will concentrate upon conduct of the type that can cause large scale or serious economic harm, and the ACCC will have regard to considerations including such as whether:

• the conduct was longstanding or had, or could have, a significant impact on the market in which the conduct occurred
• the conduct caused, or could cause, significant detriment to the public, or a class thereof, or caused, or could cause, significant loss or damage to one or more customers of the alleged participants
• one or more of the alleged participants has previously been found by a court to have participated in, or has admitted to participating in, cartel conduct either criminal or civil
• the value of the affected commerce exceeded or would exceed $1 million within a 12 month period—

with regard to the combined value of all those involved in the cartel. And the final part of clause 4.4 is:

• in the case of bid rigging, the value of the bid or series of bids exceeded $1 million within a 12 month period.

This is of concern to the opposition, with regard to the lack of clarity in the definition of ‘hardcore’ and the fact that clause 4.3 of the memorandum of understanding is exceedingly ambiguous where it says that the ACCC would not ordinarily refer relatively minor cartel conduct to the DPP—but it might. That certainly is of concern. I put this thought clearly on the public record and, as I said, the opposition will be waiting for the results of the Senate inquiry into this legislation.

Competition policy is vitally important to ensuring that we have an efficient economy that allocates resources effectively and ensures that, if you start a business, you can operate that business in an environment where you are free from illegal competition. It is not about protecting businesses, large or small; it is about protecting competition. When you have a cartel, you have the potential for the community to be paying very substantial additional funds—far more than it should be paying—for a particular good or service. You have the potential for the losses to the community and the loss of efficiency to be very great indeed. So this is very important legislation. That is why the opposition support the broad thrust of the bill. But we are certainly concerned about the issue which I raised about the lack of clarity in relation to that definition. It is something on which we will be waiting for the results of that Senate inquiry. The memorandum of understanding between the DPP and the ACCC is quite an interesting document. It says:

Price fixing, market sharing, output control and bid rigging … adversely affect Australia’s domestic and international competitiveness. Such conduct harms consumers, businesses and the economy by increasing prices and reducing choice, service, innovation and efficiencies.

I think that that opening comment pretty much sums up the intent of the legislation in ensuring that we do not have a situation where cartels are fixing prices, where they are sharing the markets, where they are dividing up the cake and where they are colluding with their mates to get a better deal at the very significant expense of the consumer. It is a very important concept that Australia may well be a less efficient country and have a less efficient economy because of the actions of cartels.

I believe that the community will welcome this legislation. I believe that if an executive from the big end of town is ripping off the Australian public, he should face the consequences. If someone goes into a 727 store and robs the till of $1,000, he would go to jail. But without criminal sanctions against serious cartel conduct, a cartel could rip off the 727 chain for $50 million and the executives of the cartel who are conducting the operation would not go to jail. There is a question of equity here: robbing a store through the front door by stealing the money out of the till is a crime; robbing the store through the loading dock—effectively taking money and causing consumers to pay more than they otherwise would for a particular product by making the 727 chain, for example, pay more than they need—is not a crime.

This bill not only puts us into line with Canada, the UK and the US but it also meets community expectations. Cartel crooks deserve to go to jail, and people involved in the legal system need clarity. That is why the opposition was keen to see the issue of the definition of hardcore cartel conduct considered. That is why we raised that concern—because cartels have the potential to seriously disadvantage the interests of consumers. Cartels have the ability to make consumers pay more than they need to for a particular product. Cartel activity can cause substantial inefficiencies in the market. As I have said, we certainly support the thrust of the legislation and we await the outcome of the Senate inquiry.

Mark Butler (Port Adelaide, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. Cartels are the white-collar version of organised crime. Essentially they represent companies colluding to squeeze undue profit from their customers and other businesses by market sharing, bid rigging, restricting output and fixing prices. Whilst their covert nature makes it difficult to determine their true impact, it is estimated that cartel behaviour causes prices to rise by 10 per cent on average, costing billions of dollars across the globe. Cartel conduct is theft, and this legislation is long overdue.

Due to the need for secrecy and containment, cartels tend to arise in industries with few competitors. Our small markets and concentrated industries make us in Australia particularly susceptible. Cartel conduct can come in many guises. For example, three major companies in our freight industry were eventually fined $11 million for a price fixing and market sharing scam that lasted for 20 years. One aspect of the deal involved customers having their freight deliberately lost or damaged if they shifted companies from the one they had been secretly allocated. It is vital that Australia is armed with strong legislation to tackle this scourge.

Globalisation has ensured that borders do not contain or constrain cartels, and we must have a global response both with the sharing of information and the enacting of tough legislation. An international vitamin cartel operating in the 1990s was estimated to have affected about US$20 billion worth of business globally. Criminal prosecutions were brought in a number of countries. In Australia in 2006, criminal proceedings were not an option but an indication of the cartel’s damaging effect was the class action brought against three multinational pharmaceutical companies for animal vitamin price-fixing being settled for $30.5 million.

We are now in a global economic and financial crisis on a scale not seen since the Great Depression. Whilst this government will do all it can to shield our country from the effects of recession, our economy does not operate in a bubble. Both internationally and locally the pressure for profits is increasing and likewise the temptation to boost those profits through cartel behaviour. Deceptive practices that raise costs for consumers and other businesses are always reprehensible, but to distort the market through artificial prices at a time of economic vulnerability is particularly dangerous. Living costs are increased by inflated prices and small businesses are strangled. On a broader scale, anticompetitive behaviour encourages a sluggish attitude to business. Captive profits reduce the drive for efficiency and innovation, leading to decreased international competitiveness and stifled growth. It is vital that we act now by sending out a clear message to business that cartels will not be tolerated, investigative powers will be effective, and penalties will be harsh. This bill, long overdue, will do just that.

In 1998, the OECD issued recommendations to all member countries for effective action against hardcore, or what we term serious, cartels. Recognising the need for concerted international action to halt and deter what the OECD called ‘the most egregious violations of competition law’, it was recommended that member countries ensure that their laws provide, in particular, effective sanctions and adequate enforcement procedures. When he was the ACCC Chairman back in 2002, Professor Allan Fels proposed introducing jail terms for serious cartel conduct. Cartels are created and maintained by the actions of individuals. These are not legitimate actions on behalf of shareholders. This is unlawful behaviour with direct personal gain in the form of increased bonuses, salaries and influence lurking behind fraudulently obtained corporate profits.

Restricting cartel prosecution to the civil arena means that penalties are limited to the financial. Corporations can find ways to restore the money levied on their executives in fines, damages or costs. What they cannot do is find ways to restore their liberty. For deterrence to be effective, the punishment must be meaningful. Australia’s biggest detected cartel case so far provides a good illustration. Between 2000 and 2005 two major companies in the cardboard industry were estimated to have overcharged businesses by around $700 million. In 2007, the company that did not blow the whistle attracted individual and corporate penalties of around $40 million. The company admitted that it would cover the fine levied on the CEO; the other individual fined was the billionaire owner.

In January 2003 the OECD recommended criminal sanctions if they were consistent with the nation’s social and legal norms. In Australia an individual can be jailed for welfare fraud or tax evasion, yet the scale of their theft is minuscule when compared to that perpetrated by a serious cartel. Jail sentences already exist for other white-collar crimes. It is entirely consistent with our social and legal norms—to use the terms of the OECD recommendation—to apply criminal sanctions to those who steal through manipulation of the market.

In 2003 the Dawson review of competition provisions in the Trade Practices Act added its weight to the calls of the ACCC and the OECD. It recognised that growing international experience showed that criminal sanctions provided effective deterrence for serious cartel conduct and recommended their introduction in Australia.

In 2005 the then Treasurer, the member for Higgins, finally announced that the Howard government would introduce criminal penalties for serious cartel conduct. This announcement proved as sincere as the promise of no GST. Despite 15 separate warnings from the ACCC, despite repeated calls from the OECD, despite our responsibilities as an OECD member state, despite other nations toughening their legislation and despite the need to protect Australians from this extortionate practice, the coalition failed to act.

Now, a decade on from the initial OECD recommendations, there can be no more excuses for dragging our feet on this important reform. Cartel conduct is notoriously difficult to detect and successfully prosecute. Strong deterrent measures, combined with effective powers for investigation, are vital to give the clearest possible message to the international business community, as well as our own business community, that Australia will not tolerate cartel activity.

In line with the ALP’s election commitments, we released a draft bill in January last year. The amendments in this bill reflect an extensive consultation process with industry experts and the consideration of international best practice. Persons involved in serious cartel conduct will now face both criminal charges and civil sanctions, with protections against double jeopardy incorporated into the Trade Practices Act.

In recognition of the need for strong deterrence, and in concert with US practice, this bill doubles the proposed maximum jail term to 10 years for serious cartel conduct. We already have the same jail term for the protection of body corporates against fraud, deceit and the fraudulent appropriation of property by their employees. Consumers and other businesses deserve no less.

Unlike our predecessors, we believe it is a contradiction in terms to claim that an individual who engages in serious cartel conduct can also be a good citizen. This is exactly the sort of message that actively encourages cartel conduct. The outward respectability of those who engage in cartel conduct should never be an excuse to whitewash unlawful activity predicated on greed and deceit.

One of the strongest weapons that enforcers of anti-cartel laws can use is whistleblower knowledge. This bill provides for protection of cartel information provided by whistleblowers as well as immunity, with some clear provisos, from civil and criminal prosecution for the first active member of a cartel to come forward. Those who hesitate stand to lose much more than their reputation, and expectations are that the strength of this legislation will bring an early rush of confessions.

A memorandum of understanding between the Department of Public Prosecutions and the ACCC provides clarity for whistleblowers by ensuring a uniform approach to immunity and leniency between the civil and criminal provisions.

This bill improves enforcement measures by removing the requirement that an offender acted dishonestly. The Dawson review had expressed concern that proving dishonesty beyond a reasonable doubt to a jury was so difficult that it would weaken enforcement. The ordinary criminal fault elements of intention, knowledge or belief will apply instead. This is in line with international best practice. The only other jurisdiction that uses the dishonesty defence is the UK, and its own experts cite that as a reason for its poor conviction rates.

Another key enforcement measure introduced by this bill is enforcers having the power to use, amongst their tools, telecommunications interception for detecting possible breaches of the law and identifying the main players. The 10-year jail term brings the cartel offences within the threshold for the use of such powers.

This bill does not endanger legitimate business operations. Joint ventures are protected. It clarifies what constitutes a cartel provision within a contract, arrangement or understanding and requires the satisfaction of two alternative tests, as well as threshold requirements for a requisite level of competition.

Serious cartel conduct is an unfortunate reality in our market and one that costs consumers, other businesses and our market economy heavily. In tough financial times, the incentive to engage in this form of theft is even higher than usual and we must not delay in implementing this long overdue legislation. I strongly commend the bill to the House.

Judi Moylan (Pearce, Liberal Party) Share this | Link to this | Hansard source

I am pleased to have the opportunity to speak on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. It is an important piece of legislation. It is legislation that has evolved over a long period of time, it has been the subject of much debate and academic interest and yet it is legislation that remains vexed and problematic.

This legislation is aimed at criminalising serious cartel conduct; it is aimed at protecting the consumer. That is a commendable goal and, indeed, the overarching concern to protect the consumer should lie at the centre of all debates surrounding this bill. But a commendable goal is not enough to make inherently worthy legislation. This bill should be supported on the grounds that it has the potential to reduce consumer harm, but it is also necessary that it be subject to stringent review and further debate.

Having perused some of the submissions to the Senate Standing Committee on Economics regarding this bill, I can say that it is clear that there are still stakeholders with considerable reservations, and these reservations warrant discussion. In one such submission, it was stated:

The need to introduce cartel offences does not justify amendments to the TPA that are ill-designed and bound to produce unsatisfactory and counterproductive results.

That said, those who set out to deliberately manipulate the market to disadvantage their consumers and to make dishonest personal gain should be punished—businesses that practice anticompetitive conduct contrary to the central notions of our economy. However, the process of criminalising cartel conduct is not straightforward. It is extremely complicated and requires not just a deep understanding of the law and the Trade Practices Act but also innate awareness of Australian business practices and needs. It is the complexity of this reform that prevented its earlier introduction.

Despite the lengthy consultation period in government deliberations, this bill continues to have significant flaws. The bill that is before us is of a lesser standard than should be expected with such an important and far-reaching change to the existing law. It has been rushed and it shows the government’s neglect in failing to properly consider the issues and opinions surrounding the criminalisation of cartel conduct.

There is a host of issues concerning this bill—issues that I am sure will be discussed further within the Senate committee review relating to the technicalities of this law. I am not a lawyer, but I do have significant experience in business—and, indeed, in business law—so I will focus on those issues which I believe are going to affect the Australian business community. Firstly, the broad and ambiguous drafting of this bill will surely create uncertainty for businesses currently conducting legitimate, procompetitive transactions that will, under this bill, expose them to criminal liability. Secondly, the penalty regime that has been amended in the version of the bill before us poses serious questions of inconsistency.

The process to criminalise cartel conduct began in 1998 with the OECD recommendation that members ‘ensure that their laws adequately prohibit such cartels and that they provide for effective sanctions, enforcement procedures and investigative tools with which to combat them’. In this respect the OECD was referring to ‘hard-core’ or serious cartel conduct, which includes such practices as price-fixing, bid-rigging, output restriction and horizontal market sharing. In the case of ACCC v Visy Industry Holdings Pty Ltd No. 3, Justice Heerey noted:

The whole point of price fixing and market sharing is to obtain the benefit of prices greater than those which would be obtained in a competitive market. It must follow that customers pay more than they would in a competitive market, and so suffer loss.

The coalition strongly believes that protection of the consumer should be the driving consideration behind this amendment to the Trade Practices Act. I believe that there is bipartisan support to pursue criminal sanctions for those involved in serious cartel conduct. It is important to remember that this bill was targeted at criminalising only serious anticompetitive behaviour. However, there has been much commentary on the fact that the government has now taken an overzealous and, in some cases, a hurried approach.

The approach taken within this bill to broadly define offences and then provide specific defences poses a number of problems. Having been involved in business and having previously been the shadow minister for small business, I am acutely aware of the risk that legitimate, innocuous commercial transactions that have not been foreseen in the drafting of this bill will become illegal. I am also aware that the broad drafting style is a contravention of good legislative practice and will open up an extremely wide discretion for the ACCC. With so many commercial transactions at risk of prosecution under this bill, the ACCC will be forced to decide which transactions to pursue. Of those that are pursued, the ACCC will then need to decide which are so serious as to attract criminal liability and those that are worth pursuing for civil remedy. One does not need to contemplate too hard to see that this wide level of discretion has the potential to create enormous uncertainty within the Australian business community. We cannot attempt to map out new offences and not clearly delineate where the proper boundaries lie.

In response to the draft legislation, the American Bar Association noted:

In a world of ever-increasing regulatory complexity, the distinction between criminal and civil matters is not always as clear as it should be, and that lack of clarity creates unnecessary risks and can lead to potentially devastating costs.

In this time of unprecedented uncertainty for business, we cannot allow any confusion surrounding new legislation to cause businesses to stop conducting legitimate commercial transactions for fear that they will be found outside the blurred boundaries that the ACCC will, in time, decide. There is a real risk that businesses will cease worthwhile trading and err on the conservative side of caution, losing out at the hands of the government’s hastily designed and poorly articulated legislation. The government, which was democratically elected, has a responsibility to make laws, to determine what constitutes criminal behaviour and not to abdicate such powers to a body such as the ACCC.

The issue with drafting has been described well in a quote in the Australian newspaper by a partner at Mallesons Stephen Jaques:

The attempt to cover all cartel conduct means we’ve ended up with a fairly complex and prescriptive bill, which may catch some things that shouldn’t be caught …

There are legitimate business practices that are going to be put into doubt by the very breadth of these provisions.

Australia needs to have laws which can effectively deter serious cartel conduct. As businesses continue to spread their operations outside of national boundaries, it is more important than ever that our laws do not provide a safe haven for international cartel conduct or tempt businesses into such conduct with soft, lackadaisical prosecution. The penalties for such conduct must serve as a punishment but, more importantly, as a deterrent, and Australia must present itself on an international stage as a country which will not tolerate serious cartel conduct.

In the draft exposure bill and discussion paper released on 11 January 2008, the maximum jail term envisaged for individuals found guilty of serious cartel conduct was five years. This has since been increased to a 10-year jail term. The Assistant Treasurer and the Minister for Competition Policy and Consumer Affairs stated that this increase was to ‘send a clear message about cartel conduct’. I find it somewhat misleading that the government can purport that ‘together with the United States, that 10-year jail term puts Australia at the forefront in fighting illegal cartels’. While it may be true on paper that the United States is the only other jurisdiction with a maximum jail term of 10 years, one cannot assume that the practical application of these penalties will be comparable. The Dawson review noted that in the United States plea bargaining is used to settle the majority of cartel cases. Plea bargaining is uncommon in Australia and indemnities against prosecution are rarely issued as they are in the United States. The Dawson review noted that in 2000, 18 individuals were imprisoned under the United States anti-cartel laws for an average of just eight months—some deterrent!

Most other OECD members have a maximum penalty ranging from three to five years imprisonment. The government’s attempts to legitimise the criminal penalty of 10 years imprisonment for individuals—double what was recommended by the Dawson review—on the back of a United States precedent is wholly misguided, not to mention misleading. Imprisonment is used as a penalty in this context to be a deterrent. It would seem that the ACCC submission to the Dawson review recommending that the term of imprisonment be seven years maximum is quite fitting for this offence. The penalty should also ensure that the proposed amendment to the Telecommunications (Interception and Access) Act would remain viable, as the penalty will still be serious enough to warrant the additional investigatory powers.

I support the prosecution of those individuals and companies involved in serious cartel conduct. Their behaviour is designed to create a benefit for themselves at the expense of the consumer and the market. But I cannot withhold my reservations about a bill that will have the practical effect of exposing Australian businesses that are legitimately conducting their affairs with no ill intention, dishonest motives or desire to manipulate the market in an unconscionable manner to the risk of criminal liability. That is my concern, and I think it is a legitimate concern. This bill has been a long time in the making. The coalition, when in government, spent a number of years ensuring that, when legislation to criminalise cartel conduct was introduced, it would be legislation that would appropriately address the distinction between criminal and civil conduct and do so with minimal impact on the majority Australian businesses that operate within full compliance of the law.

On the other hand, this bill shows clear signs of having been rushed. Criminalising cartel conduct is not as easy as the Labor Party may have envisaged when they promised to do it within the first year of being elected to government. This promise was populist—made in the heady wave of momentum less than 24 hours after Visy’s Richard Pratt made a guilty plea in by far the biggest cartel case ever conducted in Australia. Having been swept away in the excitement of this high profile case, the government have since found themselves struggling to uphold unrealistic and empty promises. The promise to introduce legislation of this nature within 12 months of election is surely a promise that could only be made by a party with little understanding of the concerns of the Australian business community and with little understanding of the reality of legislating on such complex matters.

On the same day that the Labor Party condemned themselves to a year of rushing through complex and important legislation, the former Treasurer, the member for Higgins, said:

… the Government has been consulting very carefully. But you have to be careful here, to make sure that when conduct passes from civil to criminal the lines of demarcation are quite clear. And it’s quite technical and it’s very, very important to get the consultation right and to draw the statute accordingly.

The member for Higgins’ appreciation of the complexities of this legislation is a testament to his experience and his deep understanding of the needs—

Debate interrupted.