Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

I move:

That all words after "That" be omitted with a view to substituting the following words: "the House declines to give the bill a second reading, and:

(1) condemns the Government for its belated action to address the anti-competitive price signalling 'gap' in Australia's competition law;

(2) notes that the bill only arose following Coalition leadership to introduce the Competition and Consumer (Price Signalling) Amendment Bill 2010 as a private member's bill into this House;

(3) recognises the assessment by academics and leading competition law practitioners that the Coalition's bill is superior to the Government's bill and should be brought on for debate in the House;

(4) records its concern about the Government's failure to undertake proper and meaningful consultation on the preparation of its bill, or to allow the House Economics Committee to carry out its work to examine the bill and consider public submissions;

(5) notes the particular flaws in the Government's bill in that it:

(a) recklessly creates a per se liability for private communications without adequately justifying this approach in terms of economic policy or competition law principles;

(b) ignores that sound competition law should wherever possible have an economy wide application unless clear justification is provided to deviate from this settled approach;

(c) includes sector-specific application and per se prohibitions that give rise to a complex task of identifying all conceivable business transactions and conduct that have a legitimate business justification, as an exhaustive list of exemptions is manifestly incomplete;

(d) risks consumer and economic detriment by failing to adequately differentiate between information sharing that may be pro-consumer and pro-competitive from conduct that is clearly not; and

(e) creates uncertainty about which sectors and/or markets will be subject to the bill into the future, with the basis on which the application of the provisions will be extended remaining a substantial economic concern; and

(6) notes that these substantial deficiencies in the bill and their likely detriment to the Australian economy and the well-being of the Australian people means that this bill should not be passed in this form."

Close examination of the Competition and Consumer Amendment Bill (No. 1) 2011 is essential and incredibly important. The government's own explanatory memorandum concedes that the bill contains new concepts and key features that have no equivalent in the current law. By Labor's tactical man­oeuvrings, the government's bill has been spared the kind of close assessment and analytical rigour a change of economic regulation of this kind warrants. The government has truncated the work of the appointed Standing Committee on Econ­omics, disrespecting those who made considered submissions and dishonouring this parliament.

Despite being denied any opportunity to properly consider the government's bill or submissions on it, government members recommended that the bill pass unaltered. This was either a sense of a parliamentary committee made of up of clairvoyants able to foresee what they might have thought had they bothered to examine the evidence or a compliant committee where government members simply do what their government masters direct them to do. Thankfully, though, good sense has prevailed. Just as the Treasurer left his Labor colleagues on Standing Committee on Economics hanging with his own amendment to the bill, we had some constructive discussions regarding the consideration in detail amendments to the bill that have been circulated in my name.

The amendments that the coalition brought forward showed an interest in and a responsiveness to the serious concerns raised by stakeholders, expert competition lawyers, leading academics and practitioners. I am pleased to say that I think we found a meeting of minds with the government on a number of those amendments. I understand the government will be bringing forward its own version of those amendments, which will address a number of the concerns that we have raised. Those concerns include the need for an ordinary course of business exception for conduct that may be captured by the per se prohibition, a number of specific provisions relating to nominating the process where other markets may be captured by this law and also some specific amendments relating to the financial services sector. I am optimistic that we can find common ground in that area and move forward collaboratively on this bill. (Time expired)

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

Is the amendment seconded?

Teresa Gambaro (Brisbane, Liberal Party, Shadow Parliamentary Secretary for Citizenship and Settlement) Share this | Link to this | Hansard source

I second the amendment.

Peter Slipper (Fisher, Liberal 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 Dunkley has moved as an amendment that all words after 'that' be omitted with the view to substituting other words. The question now is that the amendment be agreed to.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Competition and Consumer Amendment Bill (No. 1) 2011. This is one of a number of bills that have come before the House recently to moderate the behaviour of Australia's banks—fine institutions that they are. However, one of the roles of government is to regulate and moderate our banks. This legislation says something about the Gillard government's commitment to ensure a better deal for Australian consumers and small businesses. Unfortunately, it might also reflect a general reluctance on the part of banks to always act in a competitive, consumer-friendly manner, without the gentle, moderating, guiding hand of the Gillard Labor government.

Where the market fails, responsible government must apply the law to ensure strength in our banking sector and a fair go for all Australian consumers. The banks have done very well for themselves from Australian consumers and businesses. There is no doubt about that. Consequently, they have a responsibility to act in the interests of their customers. This is their social licence. Our big four have reported first half-yearly profits of $11.9 billion. The Commonwealth Bank posted a profit of $3.3 billion to December 2010; NAB, $2.67 billion; Westpac, a cool $3.16 billion; and ANZ's six-month profit was up a massive 38 per cent to $2.66 billion. Nice work if you can get it.

I will describe the landscape in which these profits were delivered. This inform­ation is from the statistics and mapping section of the Parliamentary Library. I caution those opposite that I cannot guarantee that some of this information was not prepared by economists. I am pretty sure some of it would have been prepared by economists but I do not have their names to name them. Here are some of the key points. Looking at interest rates, we see the average home loan standard variable interest rate has remained steady for the past seven months at 7.8 per cent. Bankruptcies and business investments are always a good guide to what is actually going on in the money-making section of the community. In the March quarter 2011, total bankruptcies decreased by 17.4 per cent when compared to the same period last year. It is a bit constrained, a bit tight out there, but some of these key indicators suggest that the economy is holding firm. However, we obviously we need to do as much as we can to support it. This bill before the House will drive greater competition in the banking sector by empowering the ACCC to act against banks who signal their prices to competitors to undermine competition. I also note that the ANZ job ads were up and that unemployment was steady at 4.9 per cent.

The ACCC has reported evidence of anti-competitive price signalling by the banks. We are not talking about collusion but behaviour where the banks communicate their pricing intentions to competitors. We have seen the announcements on the TV quite regularly. This is usually done via press release and media rounds. We are not talking about backroom boys type of behaviour, but nevertheless it has aspects of collusion because the banks indicate their pricing intentions to their competitors. For example, they may signal in advance what their response will be to a change in interest rates by the Reserve Bank. That is followed by what is almost a nod and a wink, with the understanding 'if you raise your mortgage rates we'll raise ours too'. Our banks, reliable as they are, have been able to get away with this behaviour because it is done with no formal price agreement and, like a three card trick, it is always done right before our eyes—as I said, through the media. Unfortunately, the losers from this behaviour are Australian consumers, who because of reduced competition face higher interest rates.

Under current laws there is nothing to stop banks behaving in this way—and I stress again that it is not illegal or unlawful; it is just the resulting squeeze on consumers that is wrong—and that is why the Gillard Labor government has acted. The bill before the House amends the Competition and Consumer Act 2010 to prohibit, firstly, the private disclosure of pricing information between competitors outright, which is called the per se prohibition, and, secondly, the disclosure of pricing or other information if made for the purpose of substantially lessening competition. Initially this will apply only to the banking sector, but it could be extended to other areas of the economy after further review.

The per se prohibition bans private communications between banks about their prices. This amendment targets disclosures that are clearly anticompetitive and damag­ing to consumers. For example, if one bank gets on the phone to another bank to tell them privately about a planned mortgage interest rate rise, the ACCC can take action. As I said, this bill also empowers the ACCC to prosecute a bank for communicating its pricing intentions to substantially lessen competition. This means a bank cannot inform its competitors that it will follow them if they raise mortgage rates.

These tough new laws are accompanied by strong civil penalties of up to $10 million, 10 per cent of a business's annual turnover or three times the benefit of the conduct—whichever is the higher. These are very, very strong civil penalties, but we are talking about banks; we are not talking about the local bowls club. These are significant institutions with significant resources. The prohibitions are, however, subject to specific exclusions to ensure pro-competitive behav­iour is not restricted. These exemptions allow banks to comply fully with their disclosure and legal obligations.

There will also be occasions when banks need legitimately to discuss pricing with their competitors. This bill ensures that these business activities can continue through the joint venture exception, which captures act­ual and proposed joint ventures. Banks will also be able to obtain immunity from the prohibition from the ACCC.

It is important that we close this loophole in competition law. It brings Australian law into line with those of the United States, the United Kingdom and the European Union. These laws strike the right balance by enabling banks to get on with their legitimate business while providing the necessary protections for consumers by eliminating anticompetitive price signalling. I commend the bill to the House.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I am pleased to speak on the Competition and Consumer Amendment Bill (No. 1) 2011. On this side of the House we believe that this is a deeply flawed bill. We do not disagree that there is an issue which needs to be add­ressed, which is why the coalition brought forward our own bill, the Competition and Consumer (Price Signalling) Amendment Bill 2010. But we believe that the approach taken in the bill that the government has put before the House raises some very serious issues.

The stated purpose of the bill is to give powers to the ACCC to deal with the issue of price signalling, and it does this in both a public and a private context. In the private context it creates a so-called per se prohib­ition on the private disclosure of pricing information to competitors. 'Per se' means that the disclosure does not need to be for the purpose of substantially lessening compet­ition, nor does it need to have that effect. In both the private and the public contexts, the bill contains a general disclosure prohibition of the disclosure of pricing information. That is also, we will argue, a prohibition that raises significant policy issues.

The stated approach in this bill is to strike a balance. The explanatory note from Treasury states:

… it is recognised that any proposal to address anti-competitive price signalling and other information disclosures will need to carefully balance the potential anti-competitive impacts of particular information disclosures, with the benign and pro-competitive effects of other information disclosures.

On this side of the House we argue that this bill does not strike the right balance, and that argument is supported in the arguments made by many parties that made submissions in relation to this bill, including the Business Council of Australia and the Law Council of Australia. Unfortunately, the question of whether the balance has been properly struck is not the one which appears to be principally motivating the government in its approach to this piece of legislation. This legislation ultimately is being driven by political considerations and the desire of the Treasu­rer to be seen to be doing something. The result, unfortunately, is a piecemeal measure with, in its current form, many unintended consequences.

It is true, as has been noted, that some amendments are proposed, and to some extent that advances the position. But there remain many fundamentally troubling aspec­ts of this piece of legislation, and the basis upon which the legislation has been developed is also extremely troubling. The consultation process that was employed in arriving at the introduction of this bill was seriously flawed. A draft exposure bill, for example, was provided for comment on 12 December last year, with comments due by 14 January. It really is very far from good practice in consultation with industry to require very detailed consideration of wide-ranging reforms to be provided in the middle of the Christmas holiday period.

Let me make a number of specific points in the brief time available to me. The first point is that one of the central provisions of this bill, the so-called per se prohibition, is bad policy. I secondly want to argue that a measure which is specific to one sector—in this case, the banking sector—is also bad policy. I thirdly want to argue that to give the Treasurer the capacity to extend, by regulation, the measures contained in this bill to other sectors without needing to come back to the parliament is also bad policy. I fourthly want to highlight the poor policy consequences of the inconsistency between the regime set out in this bill and the well-established continuous disclosure rules which apply to listed companies, including of course the major banks which are listed.

Let me turn firstly, therefore, to the question of the per se prohibition to remind the House what this means. It means that if the specified conduct is found to have occurred then it becomes irrelevant as to whether there was any anticompetitive purpose in carrying out that conduct. Indeed it is also irrelevant whether there was any anticompetitive effect. In other words, if the conduct occurs then it matters not whether there was any intention, any purpose, to lessen competition. Nor does it matter whether there was actually the effect of lessening competition. There is simply a blanket prohibition on private disclosure of the relevant pricing information.

The arguments that can be made that circumstances in which one bank or executives of one bank meet privately with another to discuss pricing information and the arguments that can be made about the anticompetitive consequences of that are clearly forceful. But if you say, 'We do not really care whether the conduct actually has an anticompetitive effect. We do not really care whether there was an intention, a purpose, of reducing competition in meeting to have these private discussions,' then you are missing the whole point of what policy ought to do in the case of seeking to maintain and strengthen competition. Policy ought to focus on conduct which has an effect of reducing competition; policy also ought to focus on conduct which is intended to reduce competition—that is to say, which has the purpose of reducing competition—even if, for reasons that are beyond the capacity of those who have joined together to have the conversation, it does not result ultimately in the anticompetitive effect. But there is another even more fundamental point, which is this: there are often circumstances in which private disclosures can be procom­petitive, and there are certainly an extensive range of situations in which private disclosures can be necessary and desirable in the carrying on of business and are not harmful to competition. When you look at the provisions in the bill before the House, you will see that the scope of what is caught by this provision is very wide. It includes historic, aggregated and non-confidential data.

The submission from the Australian Bankers Association lists a range of situa­tions in which the bill will create great difficulties. They cite syndicated lending, which of necessity involves more than one bank. Typically in a syndicate there are many banks. They talk about loan switching, where a customer switches a loan from one bank to another, or a situation where two or more lenders are dealing with a financially distressed business—perhaps a business which has received loans from a syndicate and some time later it transpires that the business is in financial distress and the banks need to engage in consultations to work out how they are to deal with this business. The approach which the government has taken to this problem is to set out a specific range of exemptions in which the per se prohibition will not apply. But that is poor policy. It would be much more sensible not to start with a per se prohibition in the first place. It would be much more likely to produce a rational policy outcome.

Let me turn to the next point I want to make, which is that policy which is specific to one sector is bad policy. It is a very curious approach indeed to competition policy to say that certain conduct, if carried out by bankers, is anticompetitive; but, if carried out by airline executives or pharmac­eutical industry executives or telecomm­unications sector executives or agricultural industry executives, is not anticompetitive. Under the provisions contained in this bill conduct in one industry will attract potentially criminal penalties, whereas cond­uct of exactly the same kind carried out by executives in different industries, carried out by companies in different industries, will not attract a penalty. It is impossible to see the policy rationale for such inconsistent treat­ment. The Swanson, Hilmer and Dawson reviews all found that competition law prohibitions as a general principal ought to apply across the board.

Let me quote from the submission by the Law Council:

Any prohibition on price signalling should apply universally and not just to selected business sectors. Selective application of the proposed prohibitions and undermines the general application of the Competition and Consumer Act 2010 across all industries on an equal basis.

It is interesting that the Australian Compet­ition and Consumer Commission, the ACCC, also noted its scepticism of the approach of industry-specific competition prohibitions. The ACCC had the following to say:

… we would hope signalling laws would be of a general application rather than focusing on a particular sector, because we do not see that there is a reason for signalling out one sector as opposed to another.

Even Choice, the consumer advocacy group—they do very important work but are not known to be a friend of the big end of town—had this to say:

It is Choice's submission that legislation should be, to the extent possible, uniform in its approach to all industries across Australia.

So from first principles and in the submiss­ion of a wide range of parties the approach in this bill of establishing specific restrictions on price-signalling behaviour which apply only to the banking sector is extremely poor policy.

While it is poor policy to restrict this approach to one sector, another aspect of the bill which raises equally serious concerns is the fact that as a legal matter the bill emp­owers the Treasurer to extend this regulation to other sectors. This grants excessive disc­retion to the executive government. The perception, based upon what has been stated publicly by this government in seeking to justify the measures in this bill, is that this is a bill directed towards the banking sector. It is true that in its initial application it will apply only to the banking sector, but it also provides for other sectors to be specified by regulation and so the prohibitions in the bill will apply to them.

It is very hard to understand the policy rationale here. The preferred approach, as I have indicated, would be to have a legal regime in this area which applied uniformly. But if you are going to, as this government appears to be doing, introduce measures directed to one sector, it is then very hard to understand why you retain the flexibility, why you retain the discretion, to extend this to other sectors without coming back to the parliament. The imposition of the prohib­itions contained in this bill is a substantial policy matter and it is one which ought to be considered by the parliament rather than imposed by regulation.

The fourth point I wish to make in the brief time available to me is that there is a tension between the provisions contained in this bill and the obligations imposed upon the major banks which are listed to meet their continuous disclosure obligations under the ASX listing rules. It is one of the many aspects of this bill which does not appear to have been very well thought through, no doubt because the bill has been rushed through largely to achieve a set of political objectives.

This is a poor piece of legislation which is based upon bad policy, selective policy, and driven largely by political motives. We on this side of the House certainly think that very substantial amendment is needed before it can be supported.

Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Competition and Consumer Amendment Bill (No. 1). This bill once again demonstrates the government's commitment to competition and consumer law reform and to ensuring that ordinary Australians experience the benefits of a strong economy. Those opposite attempt to decry the word 'competition' as a Labor word. I assert that in a genuinely competitive economy consumers benefit because of lower prices and the economy benefits as a whole because of the need for business to be more efficient. A truly competitive economy is a Labor ideal that benefits working families. It benefits working families bec­ause a competitive economy can provide goods and services that are of a lower cost and better quality. Whilst those opposite may argue that they are the party of small business and competition, it is the Labor Party and Labor governments that have successively and truly achieved central reform in this area.

The main issue addressed in this bill is the competition between banks and other financial institutions in home loan interest rates. The ideal of competition is that it lowers the ability of a business in a market where competition is ideal to increase or control prices. We have, sadly, been confronted with the issue that when the Reserve Bank increases its cash rate target the banks and other financial institutions increase their home loan interest rates beyond the Reserve Bank increase. This has occurred because banks are able to signal, before a potential increase in the cash rate targets, an intention to increase the home loan rate to a level beyond the cash rate. This lowers the fears of competitors that they might lose customers if they act in the same manner. The result of this signalling is a breakdown in the competitive forces in the provision of home loans and it negatively affects hardworking families for whom loan repayments can make up a really significant part of the family budget.

This bill will help address these issues by prohibiting banks from privately disclosing information on pricing policies to a competitor. Such disclosures are unfair and uncompetitive and result in home loan interest rates which are not reflective of the competitive ideal. This bill will prohibit outright a bank from disclosing privately to a competitor information regarding the market to which the price information relates. Additionally, this bill gives the ACCC vital powers to prosecute banks who communicate price intentions and other strategic informa­tion to a competitor for the purpose of substantially lessening competition.

I understand that regulation of the financial industry needs to be appropriate and cannot stifle the role of financial institutions in what is a healthy free market economy, but the regulations proposed in the bill are appropriate and needed because the banks need to be responsible when they are making their pricing decisions. The Aust­ralian banking sector remained stable during the global financial crisis. This was due to both good economic management by the Australian government and long-term good management of the banks. Despite this history of good management, the banks should not have the ability to engage in anticompetitive practices to the detriment of consumers. Indeed, our economy is greatly influenced by consumers who live in mortgage belt areas. The Central Coast and the seat of Robertson, which I am proud to represent in the parliament, display the typical characteristics of a mortgage belt area. The Central Coast is an outer suburban region which has had a fast-growing population over the last 30 years. The Gosford City local government area exper­ienced the 19th largest population growth in New South Wales.

Debate interrupted.