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

I am mindful of people in the gallery today, and perhaps people listening to parliament, understanding where we are up to. Last night we were having a conversation about this very important legislation that once again demonstrates the government's commitment to competition and consumer law reform, which does impact on the lives of ordinary Australians. The bill on which I was speaking when we stopped our debate last night at 7 pm so that adjournment speeches could proceed, as they normally do, between 7 pm and 8 pm is the Competition and Consumer Amendment Bill (No. 1) 2011. The bill contains a number of regulations that I consider to be very appropriate and much needed, because the banks certainly need to be responsible when they are making their pricing decisions.

We have to give significant credit to the Australian banking sector because during the global financial crisis they weathered the storm far better than many other banking sectors around the world. This was due both to good economic management by the Australian government and to generally good long-term management by the banks. But, despite this history of good management, the banks should not have the ability to engage in anticompetitive practices to the detriment of customers, who are the ordinary Australians we represent here in this place.

Our economy is greatly influenced by consumers who live in mortgage belts, and I certainly live in one of them on the Central Coast of New South Wales. We are an outer regional area on the edge of Sydney and we have a very fast growing population, many of whom have mortgages and are significantly impacted by any variation that the banks make to our credit. Gosford City local government area has experienced the 19th largest population growth in New South Wales. The Wyong Shire local government area, represented by my colleague the member for Dobell, has experienced the 10th largest population growth in New South Wales. So there are a lot of new houses being built.

These population growth numbers need to be considered in addition to the fact that the adult children of the families that moved to the Central Coast in the 1980s and 1990s are now of home-buying age. The general implication of this is that the Central Coast, as a mortgage belt, is significantly affected by unnecessary practices—if I were unkind I might even say collusive practices, at the very worst extent of behaviour—to the detriment of families in my electorate.

It is always ideal that in times of economic growth governments ensure there is downward pressure on interest rates. We must, however, always remember and recognise the important role of monetary policy, as set by the independent bank. Indeed, I recognise that it was both Labor and coalition governments that reformed monetary policy and enabled the establish­ment of our current inflation-targeting system. While increases in the cash rate undoubtedly cause mortgage holders great stress, the prospect of inflation is just as detrimental to ordinary Australian workers and their families. Indeed, inflation is often the most detrimental economic problem that a country can experience. Inflation would be very detrimental in my electorate because of the high population of retirees, many of whom rely on fixed incomes. Additionally, the effective control of inflation ensures the increase of real incomes and therefore the increase of the standard of living. While as a mortgage holder I am always concerned about rate rises, I nonetheless have great respect for the role of the Reserve Bank in making tough economic decisions that provide for the long-term, stable economic growth that is essential in our society.

The role of monetary policy is, however, eroded when banks increase their interest rates beyond the increase in the Reserve Bank target. The banks in our economy are able to make their pricing decisions independently and, in my opinion, this is acceptable. What is not acceptable is the ability of banks and financial institutions to tacitly collude in their pricing decisions following a cash-rate increase. Such actions are uncompetitive; such actions are detrim­ental to working families; such actions may be beneficial to individual banks but they are certainly detrimental to the economy as a whole. To ensure that this situation cannot continue and to ensure competition remains very healthy in our banking sector this bill will address those issues. An important aspect of the bill is that it provides exceptions to the banks relating to the information that they can disclose. These exceptions are detailed and concern the legitimate sharing of information in a variety of circumstances. They include disclosures between related bodies, corporate disclosures and disclosures covered by exclusive dealing.

This bill also contains appropriate arrangements for banks to seek immunity where their conduct provides a net public benefit. The ACCC will have the appropriate power to determine if immunity from provisions is appropriate on the grounds of a net public benefit. This bill provides a balance between providing for a free and competitive banking sector and providing sensible regulation when it is needed.

Whilst both sides of the House contributed to reforms on monetary policy, I once again affirm my strong belief that Labor is the party of competition and consumer law reform. The success of this government and this parliament in reforming and modernising the law in relation to competition and consumer law, national consumer credit law and personal property securities must not be overlooked. These reforms that the govern­ment has succeeded in passing through this parliament are empowering economic reforms. They empower communities, cons­umers and small businesses and they also ensure that regulation is appropriate for the economic conditions and circumstances of this nation as a whole. This compares with the divisive and ideology based policies that those opposite dream about implementing.

The classic is what we saw in the Work Choices legislation that the opposition put before the Australian people. If only Work Choices had remained a bad dream. Instead, the impact of that nightmare is still fresh in the minds of all those Australians caught up in a gross distortion of fairness for workers. It was enacted by those opposite, who are interested in ideology rather than the real lives of ordinary Australians. This legislation is about impacting positively on real Australians and ordinary lives.

We do have to recognise that a strong and healthy banking and financial sector is fundamental to our economic health and that the actions of our banks do affect ordinary people. Indeed, it was the actions of banks and financial institutions—certainly in other contexts—that inappropriately provided low documentation credit to people who were really unsuitable to manage that level of debt that they got themselves into. The end result was the crash of the financial system in the United States and the global financial crisis that ensued and caught all of us in its wake.

In Australia we have responded in an excellent manner to these issues and I believe that we have struck a great balance between ensuring a healthy financial sector and ensuring that consumers are not exploited. Our banks, due to their superior regulations, did not experience the same crisis that banks in the US and UK experienced. An effect of the global financial crisis has, however, been the increased difficulty for smaller lenders to effectively compete in the Australian market. The ability to compete becomes even more difficult if the larger banks are allowed to collude in relation to their pricing policies.

This legislation provides protection for smaller lenders, many of whom are regionally based. This legislation allows for the reality that we need to construct a regime in which large banks are forced to act competitively. This legislation once again demonstrates the superior economic manage­ment of this Labor government. This is a government that is absolutely committed to reforming the economy so as to ensure that our economic strength is something that not just benefits the few but, in fact, benefits all Australians, and that we all move forward together.

I believe that this bill succeeds in advancing this great objective. In saying that, I echo the words of the Treasurer who in his second reaching speech indicated clearly that the bill strikes an appropriate balance between allowing legitimate or pro-compet­itive conduct and cracking down on anticompetitive price signalling which harms consumers. It is an important reform and will help ensure that banks can no longer avoid the full force of competition in the marketplace.

The Gillard government is absolutely committed to getting a better deal for Australian families and small businesses in the banking system. I encourage all members of the House to support the passage of this bill and I commend it to the House.

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

I rise to speak on the Competition and Consumer Amendment Bill (No.1) 2011 and to support the comments of my good friend the shadow minister for small business, competition policy and consumer affairs, the member for Dunkley, and I also support the thoughtful comments of my colleague the member for Bradfield on this bill. We all know the great wisdom of Adam Smith, who noted back in the year 1776:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

However, Adam Smith's famous quote continued:

It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

Therefore, following on from the lead of American antitrust law, we rightfully have a provision in our Competition and Consumer Act, formerly known as the Trade Practices Act, which makes it unlawful for a person to make a contract, an arrangement or an understanding which has the purpose, or is likely to have the effect, of substantially lessening competition.

This bill aims to deal with the meaning of the words 'arrangement' and 'understanding' which can be achieved through price signalling. However, not only is this bill badly flawed in many ways but also it provides yet another case study of this government's mismanagement. But at least, thankfully through the work of the shadow minister for small business, competition policy and consumer affairs, some common­sense has prevailed and some of the obvious flaws of this bill look like they may be remedied with amendments.

Firstly, when considering the issue of price signalling, it also worth noting the comments of competition law expert Profes­sor Frank Zumbo, who has insightfully noted that the problem of price signalling is merely a symptom of an illness. That illness is the duopolies and oligopolies that many of our markets in Australia have degenerated into as a result of the failed ideology that big is better. It is only in highly concentrated markets that price signalling becomes as problem.    If you have laws that, as our competition laws currently do, mistakenly encourage and reward bigness and work to protect duopolies and oligopolies from their more efficient and smaller competitors, price signalling can become a problem.

The textbook might describe price signalling with the following example. Let us say supermarket A wants to jack up its prices, but before supermarket A jacks up its prices it wants to ensure that supermarket B will follow its lead and jack up its prices as well. In theory, supermarket A might not be confident that supermarket B will follow its lead and increase prices immediately. Also supermarket A may wish to send a message to its competitor, supermarket B, that supermarket B has nothing to fear if it raises its prices as supermarket A will respond immediately and match the same price increases. Therefore, to encourage super­market B to raise its prices, supermarket A could engage in price signalling by making public statements whereby a wink is as good as nod. So, the very minute supermarket A jacks up its price, supermarket B will immediately follow and the cosy club is maintained.

Under the current interpretation of our laws, such tacit collusion falls short of an 'arrangement or understanding', as our courts have interpreted the words 'arrangement or understanding' as meaning that there must be 'a meeting of the minds'. It is difficult to address such tacit collusion with legislation, but in the above example the real problem is that there are only two supermarkets in the market—A and B. It is the type of duopoly which exists throughout most Australian suburbs. Therefore the best way to fix the problem of price signalling is to ensure that there are not only supermarkets A and B in the market but also supermarkets C, D, E, F and G and so on—all in vigorous competition with each other—as in such a highly diversified market, with many competitors, supermarket A can price signal until the cows come home and it will not influence its competitors.

The origins of this bill go back to the ACCC's bungled case against a group of Geelong petrol retailers. As amazing as it may seem, at the very same time as the ACCC were cheering on the supermarket duopoly to engage in third-line forcing by the use of shopper dockets to destroy competition from independent fuel retailers, and as the ACCC was watching on as the big oil companies were manipulating prices to create the weekly fuel price cycle, the ACCC unleashed their legal dogs of war against predominantly small family-owned busine­sses, petrol retailers in Geelong. What a debacle that was by the ACCC, with millions of taxpayer dollars wasted on futile legal proceedings against mainly small family businesses.

The Age reported on 17 June 2005 that an ACCC analyst had fabricated data in a working paper, and that the regulator had omitted data showing when petrol prices fell and by how much. During the case, Justice Peter Gray said the ACCC should seriously examine the way it compiled evidence, and he said about that evidence:

It does not give anything like a complete picture of what is going on.

Justice Grey concluded:

The ACCC must certainly be made to pay the costs of all the respondents who defended the proceedings.

When he says the ACCC must be made to pay, that is the taxpayers—you and me, Madam Deputy Speaker. If the ACCC could not obtain direct evidence of an under­standing, why it did start proceedings? Why did the ACCC not seek an enforceable undertaking, which would saved the taxpayers millions of dollars in wasted legal fees?

The problem of price signalling, being just one of many loopholes in our competition laws, has been evident to this Labor government since the ACCC had their case against small petrol retailers in Geelong thrown out by the Federal Court in 2007—and the ACCC has been complaining ever since. For more than three years this government has been sitting on its hands—typical of this government in relation to competition law reform. All they have given us so far is gimmicks, such as the high farce of Fuelwatch and GROCERYchoice, which do nothing to address the underlying problem of the continued destruction of competition as markets become more concentrated.

With the government asleep at the wheel on competition policy, it has been left to the coalition, through our very learned member for Dunkley, the shadow minister for small business, competition policy and consumer affairs, to act to address the problem of price signalling when he introduced a bill back in November 2010 to deal with this exact issue. Instead of supporting the coalition and attempting to address this problem, the government for months played catch-up football and in so doing delivered a badly flawed bill. There is a simple reason for the government being asleep on the job following the unfortunate stints by the members for McMahon and Rankin as failed competition ministers in the first Rudd government, a government which no less an authority than the current Prime Minister confirmed had lost its way. Although it is universally accepted that the Rudd government had lost its way, just one example of how the Gillard government has wandered deeper and deeper into the wilderness and become hopelessly lost is the government's downgrading of the oversight of one of our most important portfolios, that of competition policy, to a parliamentary secretary, at the very time Australians are being punished by some of the highest rates of food inflation in the developed world. I remember looking through the Gillard ministry when it was announced, and seeing that we had a ministry for social inclusion, a ministry for sustainability and a ministry for privacy but we had no ministry for competition policy. This is an insult to consumers.

So it is little wonder that the government has been caught asleep on this issue and once again found itself playing catch-up football. When you push the pass, when you rush a move, when you sidestep sound policy, when you take shortcuts, this only leads to further mistakes—and that is exactly what has happened with this bill. As reported in the Financial Review of 23 May this year, the chairman of the Law Council's trade practices committee said, when referring to this government bill, that it had had the shortest consultation period he had ever seen and the time permitted for feedback was 'manifestly inadequate'.

One of the many problems with this bill is that it only applies to only one sector of our economy, the banking sector. It is even unclear if it applies just to retail banking, commercial banking or merchant banking. Either price signalling is an anticompetitive problem or it is not. It simply makes no sense for this government to limit this legislation tackling the problem of price signalling to just the banking sector, while leaving other dangerously concentrated sectors such as petrol, groceries and liquor free to engage in anticompetitive price signalling.

The next question is: why is the government seeking to limit this bill to the banking sector only? The Treasurer's second reading speech for this bill stated:

Today I introduce amendments to the Competition and Consumer Act 2010 to crack down on anticompetitive price signalling and to get a better deal for consumers in the banking system.

'Crack down' and 'better deal'—this language indicates that the Treasurer acknowledges that price signalling is a problem in the banking sector and that Australian consum­ers are being done over by our big banks. In the second reading speech, the Treasurer also noted:

… the ACCC has told us there is strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition.

The question to be asked of the ACCC is: if they believe there is 'strong evidence' that the banks are engaged in price signalling 'in a bid to undermine competition', why on earth did the ACCC allow the merger of St George Bank with Westpac?

The need for a bill on pricing signalling in the banking industry is a clear acknow­ledgment that the Treasurer and the ACCC made a tragic blunder when they allowed St George Bank to be taken over by Westpac and removed as an independent competitor in the market, a tragic blunder that consumers and small businesses are paying for to this very day.

As the ACCC appear to now belatedly admit that we have problems with compet­ition in our banking sector, just look at the 2009 report by Fujitsu Consulting, which found that Australian bank customers pay the Western world's highest bank fees. The report states:

… a lack of competition in Australia meant local banks were collecting $5 billion in fees from consumers, making them the most expensive in the western world.

The report goes on:

The average household is, in our view, paying up to $200 more each year than they should thanks to the wide range of fees and charges levied in Australia, and to the lower levels of competition in the market.

But it is not only banking. Just have a look at the OECD's figures on food inflation and see how Australia rates. These figures simply show how Australian consumers are being punished by the grocery duopoly with some of the highest rates of food inflation in the developed world. These OECD figures are a damning indictment of the uncompetitive nature of our supermarket sector. So why is the government protecting the supermarket duopoly and exempting them from this legislation?

But this is not the first time we have seen this government work to protect the supermarket duopoly from competition. We witnessed the unedifying spectacle of this government closing down GroceryWatch to prevent the consumer organisation Choice from exposing the duopoly's use of geographic price discrimination.

The pitiful excuse given by the Treasurer for protecting the supermarket duopoly from this legislation—again, from his second reading speech—was:

We have been very clear all along that we would only extend these laws to other sectors of the economy after further detailed consideration.

At best, this is simply an admission that the government has failed to think this legislation through and consider all the unintended consequences.

There is no doubt that the bill presented by the member for Dunkley is far superior, because it would prohibit anticompetitive price signalling in a measured and targeted manner and apply the law across the whole economy. More needs to be done to ensure we have more competition, more diversity and more choice for the benefit of consumers. We need effective competition laws which deal with the underlying disease that is eating away at the fabric of our free enterprise system.    We need to stamp out all forms of anticompetitive conduct and ensure that mergers and acquisitions by dominant players in the market are not allowed to continue to knock out the efficient competitors that are so essential to a vibrant and competitive market.

I look forward to working with the coalition in the months and, hopefully, years ahead to bring in policies that deal with this underlying problem and give the Australian consumers the deal they deserve, which they are not currently getting.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Competition and Consumer Amendment Bill (No. 1) 2011. I wish to begin by rebutting a claim made by the member for Dunkley repeatedly in his various speeches on this legislation, of which I think there have been three. The member for Dunkley has repeatedly claimed that the House of Representatives Standing Comm­ittee on Economics did not have the opportunity to hear witnesses give evidence on the government's bill. The claim that he repeatedly made to this parliament was that the witnesses called before the House of Representatives economics committee inqu­iry only looked at his bill and did not give evidence on the government's bill. But that of course is false, and one can see quickly how false it is simply by going to the transcripts. Allow me to quote from a couple of points in the transcript of the hearing of the House of Representatives economics committee on 18 February 2011. In opening his evidence for the Australian Competition and Consumer Commission, Mr Brian Cassidy said:

… we are pleased to be here today to be able to provide comment and answer questions on the bills—

plural—

that have been proposed.

Later in the hearings the member for Dunk­ley himself asked the following question of the ACCC:

On the cases that you are considering—as it is explained in the EM for the government’s bill …

And he went on to ask the question—clearly a question from the member for Dunkley, directed to a witness, about the government's bill. He himself was asking witnesses about the government's bill. That is not the impression one would have gained if one only had listened to what he said in this chamber.

The member for Dunkley later asked the same witness:

… why is your bill, the government bill, not weighing purpose …

Again, clearly he was asking witnesses to adduce evidence on the government's bill.

Later the member for Dunkley said to a witness 'in the two bills that we are discussing'. He then went on to say:

… essentially the difference is that in the government’s bill there is a per se prohibition on private communication …

He then asked the witness to draw a compa­rison between the bills. Indeed, the member for Dunkley later, when hearing evidence from the Australian Banking Association, asked Mr Munchenberg:

Can you just, for the benefit of the committee, contrast the two bills as you understand them …

So let us not have any suggestion, as the member Dunkley just made to members in this chamber, that somehow the House of Representatives economics committee left half of the job undone. We did not. We considered both bills and, by a majority, we found the government's bill to be superior to the bill put forward by the member for Dunkley.

As the committee's report makes absolutely clear, there is a wide range of areas in which the government's bill is superior to that of the member for Dunkley. Allow me to go into some of the key reasons why the government's bill is superior to that of the member for Dunkley. As the comm­ittee's report pointed out, there are four chief areas of difference: whether the bills apply to prices or whether they apply to other market information, whether the bills require purpose and effect, the substantial lessening of competition test, and the coverage of the bills. I will deal with each of these in turn.

On the question of the price related information, the ACCC and other witnesses argued that there is a range of behaviour that, while not directly involving price, ultimately impacts on consumers. The ACCC gave examples: quantity based offences, collusive tendering, and market sharing in which a business discloses to the market or particular competitors that they are going to focus on part of the market and leave the rest to their competitors. Those kinds of activities work to undermine markets, but it is the govern­ment's bill that picks up the full range of information. The inferior bill put forward by the member for Dunkley captures only pricing information.

The next key difference goes to purpose and effect. The committee noted that the purpose and effect test required in the member for Dunkley's bill would be so onerous that the ACCC would, as they advised us in evidence, 'probably take very few cases'. The committee noted that again, in this respect, the government's bill is superior, and that is because it places a strong prohibition on private price disclos­ures between competitors.

The next difference goes to industry coverage. As the committee recognised, there is a question of balance. There is gen­eral advantage in having widely applicable legislation but there is also significant community concern about the conduct of banks. Given that the ACCC is—like every part of the government—resource constr­ained, the government's bill has the key advantage that the ACCC can focus its resources on a high-priority area. It gives the government the flexibility to make further regulations to apply the prohibitions to other sectors of the economy as called for but to do that with time for review, time for detailed consideration.

The House of Representatives economics committee rightly concluded by majority that the government's bill was superior, capturing the most serious conduct with a per se offence and thereby ensuring that we have the competitive markets which are so critical to raising productivity and boosting efficiency and innovation—those advantages of competitive markets which have under­pinned substantial improvements in living standards for Australians.

This bill very much lies in a Labor economic reform tradition. It was Labor that cut tariffs in Australia, Labor that put in place enterprise bargaining, Labor that floated the dollar and Labor that put in place the key competition reforms of the early 1990s that underpinned the subsequent rise in productivity. In other areas, again, Labor are committed to long-term reform with the market in mind. We put in place a timely, temporary and targeted stimulus when the global recession hit. We are committed to a market based mechanism for addressing dangerous climate change.

While those opposite put in place command and control systems often likened by some to 'Moscow on the Molonglo', we on this side of the House are committed to using markets to find the cheapest and most efficient way of addressing dangerous climate change. While those opposite are running from serious economic reform they have even, in some cases, found themselves running from their very own reforms. So we saw the spectacle in the most recent settings of those opposite refusing to back a reform on fuel taxation first introduced in this place by then Treasurer Costello in 2003. Those opposite have walked so far away from reform that they are now walking away from Peter Costello's economic reforms. Meanwhile, we on this side are committed to long-term, fundamental economic reform across the macroeconomy, the microec­onomy in our education reforms and in competition policy, such as in this bill. I commend the bill to the House.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

This bill attempts to prohibit price signalling, particularly between banks. It does so by claiming that the current status of the industry allows anticompetitive price disclosures that, while falling short of cartel measures, are detrimental to consumers. Anticompetitive price signalling refers to corporations revealing their future pricing strategy to their rivals and in so doing eliminating price uncertainty and reducing the functioning capacity of a competitive market. It has become a topical issue in Australia, particularly after last November's RBA decision to raise rates which prompted the four big banks to all act in a similar way.

I understand the government's sentiment and its need to at least appear that it wants Australian markets to operate with transp­arency and efficiency. However, this bill simply will not achieve this and, despite a huge backlash from industry, the Treasurer will not listen. He does not seem to be willing to make all of the changes required to bring this bill in line with sound economic principle. It is the industry, not the gover­nment and not government departments, that understand how regulation affects their business practice and how the cost of that regulation is passed on to consumers.

While the Treasurer announced this amendment in December last year, he closed public submissions in January. What is this Gillard government trying to hide? Transp­arent consultation is a crucial part of the process of good government. This govern­ment has failed in that process by leaving stakeholders with less than two months—a large portion of which was over Christmas—to make submissions regarding legislation that substantially affects their lives.

The government had an opportunity to rectify this in May this year when the bill was sent to the House Standing Committee on Economics. However, true to form, the government gave only a two-day period in which submissions could be made. This demonstrates yet again that the government is simply not interested in consultation with stakeholders. It appears that the Treasurer is very set on pushing this policy through regardless of the consequences.

This is particularly disappointing as in recent sittings we have seen that some of the Treasurer's colleagues were able to address the faults of their legislation through consultation—a process which has seen commendable legislation put forward in the Tertiary Education Quality and Standards Agency, TEQSA. What a shame the Treas­urer cannot follow Minister Evans's lead and actively engage with the industry to address the faults of this proposed amendment. It seems that the Treasurer is complicit in this government's standard approach—big ideas and rushed announcements but, as usual, no thought for the consequences of its implem­entation.

The government has failed to ground this bill in sound competition policy concepts. To quote the Hansard record of the Treasurer's introduction of this bill to parliament, he stated that:

This important reform will help to ensure that banks can no longer avoid the full force of competition in the marketplace.

This is concerning as a government cannot simply stand over an industry and demand it to be competitive. Market forces need to be allowed to act in order for competition to thrive. Simply introducing one-size-fits-all regulation is unlikely to achieve what the government is aiming for, and coupling that with the lack of consultation, poor drafting, ambiguity, and a less than solid competition policy base has resulted in legislation that could really have disastrous effects on the industry. In fact, the Business Council of Australia has warned that this policy could:

… actually result in poor outcomes for consumers and act as an impediment on legitimate and pro-competitive commercial behaviour.

This reflects what I believe to be one of this government's greatest failings. They fail to understand the ripple effect. They fail to realise that their policies and legislation affect all industry and all members of society.

They seem to approach legislation with the view that they can implement policy that affects only one sector of the economy. They think the carbon tax will only affect 'big polluters', the mining tax will only affect profitable mining companies and cutting medical research will only affect scientists. This simply is not true, and not addressing the ramifications of their policies in their entirety has already and will continue to cause our nation great harm if it is not rectified by this government in the very near future.

By not thinking through the policies of the bill we are debating today, the government seems to have overlooked that the amendment over-reaches into disclosures with legitimate business justification. The private disclosure clause of this bill seeks to prevent corporations from making a private disclosure to their competitors of any information relating to their price, from discounts to strategy. The broad nature of this prohibition makes the legislation ambiguous and illogical when followed through. The government may intend for this legislation to simply stop one bank manager picking up the phone to their counterpart at another bank; however, the drafting of this bill is solely focused on who and how this information is disclosed. It does not focus on the type of information or its purpose in its assessment of anticompetitive behaviour. Not all price discussion is inherently anticompetitive, but this broadbrush policy does not allow for this assessment to be made—you breach the prohibition by disclosing price information to a competitor in any sense. The proposed legislation before us takes the stance that any price disclosure whatsoever is so serious that it need not even be anticompetitive in its nature to be a punishable issue. There is no provision that competitors must be acting strategically. It is unclear as to whether this is the government's intention, it is an unintended consequence or it is simply poor drafting, but the end result is that this legislation has huge scope to overreach—indeed, unjustifiably overreach. Furthermore, by making these per se prohibitions, the government is opening a door for the legislation to be easily circumvented by institutions simply making these disclosures more public, lifting it out of the per se category. In this situation, the objective of stopping anticompetitive price signalling would not occur even if the legislation were in place.

It is also concerning that the legislation is so industry specific. From my understanding of what the Treasurer has put forth in relation to this bill, the focus is to prohibit the banking system from disclosing price strategies to each other. In fact, the Treasurer stated that this is the primary aim of the bill when he said:

Today I introduce amendments to the Competition and Consumer Act 2010 to crack down on anticompetitive price signalling and to get a better deal for consumers in the banking system.

The Treasurer went on in his speech to solely discuss the banking sector, with a particular focus on the big four banks, and the amendment itself, at least initially, will only target the banking sector. This seems contradictory as the amendments themselves are quite general.

The government's position seems to be that price signalling is only bad in the banking sector, but not bad elsewhere—that is, the bill is market specific rather than economy wide, which introduces ambiguity at best and, at worst, uncertainty, into the entire industry. It also goes against the general intention of bills of this nature, such as the Trade Practices Act. As the ACCC said:

The general principle of the Trade Practices Act … is that it should apply with very rare exceptions, such as telecommunications, across all sectors of industry and commerce. We consider that this is an issue that will affect a variety of sectors in industry and commerce in Australia and ought to apply across the board.

This bill, however, is solely focused on the banking sector.

The industry is highly critical of this bill. From the government's arrogance in the consultation process to its blind determination to dig its heels in and not make changes, this bill is simply not up to scratch. I implore the government to consult properly, consult with stakeholders and address the issues raised by the member for Dunkley in his amendment. This is legislation which will have a significant impact on consumers through producer regulation and it is vitally important that the government gets it right.

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

I would like to take this opportunity to thank honourable members who have taken part in this debate on the government's Competition and Consumer Amendment Bill (No.1) 2011. The government's intention to introduce these new laws was announced in December last year as part of its compre­hensive package of reforms to the banking sector to empower families, support smaller lenders and secure the flow of credit to our economy. We have worked closely with the Australian Competition and Consumer Commission since mid 2010 to carefully design these amendments and we have consulted extensively on draft legislation with businesses, legal experts and other stakeholders. The government's bill reflects the results of these consultations and is an effective and targeted way to address anticompetitive price signalling in the banking sector.

The bill closes a gap in the anticom­petitive conduct provisions of the Competition and Consumer Act 2010, fulfill­ing the government's commitment to crack down on anticompetitive price signalling and get a better deal for consumers in the banking sector. These laws will build on our 2009 reforms to strengthen Australia's cartel laws by banning signalling designed to keep interest rates higher. These laws will be initially applied to the banking sector, where the ACCC has told us there is strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition.

The bill adds two new prohibitions to the act to address anticompetitive price signalling and information disclosures. First, the bill prohibits outright the private disclosure of pricing information to one or more actual or likely competitors. This prohibition is targeted at those disclosures which are the most clearly anticompetitive and harmful to consumers. Second, the bill gives the ACCC the power to take action against any bank which signals its pricing intentions to a competitor for the purpose of substantially lessening competition.

The bill provides a comprehensive set of exceptions to ensure that legitimate business activities are not captured by the prohibitions and today I will move amendments so that further exceptions are provided that give clear guidance to business around what conduct is and is not subject to the prohibitions. More specifically, disclosures made in the ordinary course of business will not be subject to the outright prohibition. Disclosures in relation to corporate workouts, syndicated lending arrangements and credit distribution arrangements will also be explicitly exempt from the outright prohibition.

Consistent with the existing anticompe­titive conduct provisions in the act, the bill also provides notification and authorisation arrangements for businesses to seek immunity from action under the new prohibitions where they can demonstrate that their conduct provides a net public benefit. Like other prohibitions in the act, breaches of the prohibitions will be subject to 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 higher. The bill demonstrates the governm­ent's strong, ongoing commitment to promoting competition in the banking sector. Anticompetitive price signalling and information disclosures are used by compet­itors to facilitate prices above the competitive level. They can lead to inefficient outcomes for the economy and ultimately higher prices for consumers. The government's bill will provide the ACCC with effective and targeted tools to ensure that banks who signal their prices to competitors to undermine competition, to the detriment of Australian consumers, can no longer get away with it.

Again, I wish to thank all members for their contribution to this debate. I commend the bill to the House.

Question negatived.

Original question agreed to.

Bill read a second time.