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

I have circulated amendments in my name. As a consequence of the quite constructive collaboration with the government, the Treasurer's office and my debating partner on Thursday morning, Mr Bradbury, I would like to withdraw all amendments other than amendment (2), which deals with an effort to fillet out the per se prohibition in the bill. I move amendment (2):

(2) Schedule 1, item 2, page 6 (lines 15 to 26), section 44ZZW, omit the section.

Question negatived.

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

by leave—I move government amendments (1) and (2) on sheet CA206 and (1) to (5) on sheet CA209:

(1)   Schedule 1, item 2, page 11 (after line 2), at the end of section 44ZZZ, add:

Disclosure if borrower insolvent etc.

(5)   Section 44ZZW does not apply to the disclosure of information between 2 or more corporations (the relevant corporations) if:

  (a)   at least one of the relevant corporations:

     (i)   has provided a loan or credit to another corporation (the borrower); and

     (ii)   has been notified of a borrower insolvency situation (see subsection (6)); and

  (b)   the information relates to services, being loans or credit, supplied, or likely to be supplied, by one or more of the relevant corporations; and

  (c)   the disclosure is for the purpose of one or more of the relevant corporations considering whether to take measures to return the borrower to solvency, or to avoid or reduce the risk of the borrower becoming insolvent.

(6)   For the purpose of subsection (5), a relevant corporation is notified of a borrower insolvency situation if:

  (a)   the corporation is notified that there are reasonable grounds for suspecting that one or more of the following may be or become insolvent:

     (i)   the borrower;

     (ii)   a person who has given a guarantee or indemnity in respect of loans or credit provided to the borrower by one or more of the relevant corporations; and

  (b)   the notification is given by the borrower, or by a person referred to in subparagraph (a)(ii).

(2)   Schedule 1, item 17, page 21 (after line 10), at the end of section 44ZZZ, add:

Disclosure if borrower insolvent etc.

(5)   Section 44ZZW does not apply to the disclosure of information between 2 or more persons (the relevant persons) if:

  (a)   at least one of the relevant persons:

     (i)   has provided a loan or credit to another person (the borrower); and

     (ii)   has been notified of a borrower insolvency situation (see subsection (6)); and

  (b)   the information relates to services, being loans or credit, supplied, or likely to be supplied, by one or more of the relevant persons; and

  (c)   the disclosure is for the purpose of one or more of the relevant persons considering whether to take measures to return the borrower to solvency, or to avoid or reduce the risk of the borrower becoming insolvent.

(6)   For the purpose of subsection (5), a relevant person is notified of a borrower insolvency situation if:

  (a)   the person is notified that there are reasonable grounds for suspecting that one or more of the following may be or become insolvent:

     (i)   the borrower;

     (ii)   a person who has given a guarantee or indemnity in respect of loans or credit provided to the borrower by one or more of the relevant persons; and

  (b)   the notification is given by the borrower, or by a person referred to in subparagraph (a)(ii).

(1)   Schedule 1, item 2, page 4 (after line 3), at the end of section 44ZZT, add:

(3)   The regulations must prescribe a process to be gone through before regulations are made, for the purpose of subsection (1), prescribing a class of goods or services. Before the Governor-General makes regulations, for the purpose of subsection (1), prescribing a class of goods or services, the Minister must be satisfied that the prescribed process has been complied with.

(4)   Subsection (3) does not apply in relation to the first regulations made for the purpose of subsection (1).

(2)   Schedule 1, item 2, page 6 (after line 24), at the end of section 44ZZW (before the note), add:

  ; and (c)   the disclosure is not in the ordinary course of business.

(3)   Schedule 1, item 2, page 10 (after line 29), after subsection 44ZZZ(3), insert:

Disclosure relating to provision of loans etc. to same person

(3A)   Section 44ZZW does not apply to the disclosure of information between 2 or more corporations (the relevant corporations) if:

  (a)   the information relates to services, being loans or credit, supplied, or likely to be supplied, by one or more of the relevant corporations; and

  (b)   2 or more of the relevant corporations are, in relation to the same person (the borrower), doing either or both of the following:

     (i)   providing such services to the borrower;

     (ii)   considering whether to provide such services to the borrower;

  (c)   the disclosure is for the purpose of, or related to, providing services, or considering whether to provide services, to the borrower as mentioned in paragraph (b).

Disclosure between credit provider and provider of credit service

(3B)   Section 44ZZW does not apply to the disclosure of information by a corporation to another person if:

  (a)   either:

     (i)   the corporation is a credit provider, and the other person provides a credit service, within the meaning of the National Consumer Credit Protection Act 2009; or

     (ii)   the corporation provides a credit service, and the other person is a credit provider, within the meaning of that Act; and

  (b)   the disclosure is made in the course of the relationship between the corporation and the other person in their capacities as credit provider and provider of a credit service.

(4)   Schedule 1, item 17, page 16 (after line 36), at the end of section 44ZZW (before the note), add:

  ; and (c)   the disclosure is not in the ordinary course of business.

(5)   Schedule 1, item 17, page 20 (after line 34), after subsection 44ZZZ(3), insert:

Disclosure relating to provision of loans etc. to same person

(3A)   Section 44ZZW does not apply to the disclosure of information between 2 or more persons (the relevant persons) if:

  (a)   the information relates to services, being loans or credit, supplied, or likely to be supplied, by one or more of the relevant persons; and

  (b)   2 or more of the relevant persons are, in relation to the same person (the borrower), doing either or both of the following:

     (i)   providing such services to the borrower;

     (ii)   considering whether to provide such services to the borrower;

  (c)   the disclosure is for the purpose of, or related to, providing services, or considering whether to provide services, to the borrower as mentioned in paragraph (b).

Disclosure between credit provider and provider of credit service

(3B)   Section 44ZZW does not apply to the disclosure of information by a person to another person if:

  (a)   one of the persons is a credit provider, and the other person provides a credit service, within the meaning of the National Consumer Credit Protection Act 2009; and

  (b)   the disclosure is made in the course of the relationship between the persons in their capacities as credit provider and provider of a credit service.

These two sets of amendments will give the banking industry absolute certainty that it can continue to engage in legitimate business conduct without breaching these new prohibitions against anticompetitive price signalling. As I indicated earlier, the govern­ment has consulted extensively with business and has provided a range of explicit exemptions for legitimate conduct. We have also extended the availability of the immun­ity arrangements under the notification and authorisation regime administered by the Australian Competition and Consumer Commission to businesses who wish to make disclosures which fall outside the scope of the exemptions in the bill.

Today's amendments provide a series of further explicit exemptions for legitimate business conduct. The first amendment will provide banks with certainty that certain disclosures made in the context of corporate work-out arrangements will not be subject to the private disclosure of pricing information prohibition. The government recognises that it is important that banks assist financially distressed businesses in avoiding insolvency. These discussions are often commercially sensitive and time critical, and it is vital that we allow banks to support businesses and the jobs of their workers.

The second amendment has four parts. Firstly, it confirms that disclosures made in the ordinary course of business will not be subject to the outright prohibition on the private disclosure of pricing information to competitors. Secondly, a specific exception is provided in relation to syndicated lending arrangements in addition to the joint venture exception already provided. This exception provides lenders with the surety that they need to continue to engage in discussions for the purposes of syndicated loan arrange­ments. Thirdly, an exception for disclosures as part of credit distribution arrangements will provide explicit protection for discussions between banks, mortgage brokers and financial planners. Lastly, we will set out the process which future governments will be required to follow if they are to consider extending the application of the prohibitions beyond the banking sector.

I take the opportunity to thank the member for Dunkley and the coalition for the constructive discussions that we have had that have led to these additional measures. We believe that they maintain the integrity of the provisions that we have brought before the House and strengthen them to ensure that there are sufficient exceptions provided to provide businesses with the certainty that they need but at the same time to ensure that these provisions continue to have full effect.

I table supplementary explanatory memoranda.

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

I advise the House that the coalition will be supporting these amendments. It was quite an ordeal, but we got there eventually, to try and save the government from itself, some might suggest. These amendments, as I mentioned earlier, faithfully reflect the objectives of the coalition's amendments, so the Office of Parliamentary Counsel obviou­sly has a greater flair for drafting than I have. I accept the word that they do faithfully reflect the objectives that we had set out.

We felt it important to have some process defined for markets that may be prescribed under this bill to be subject to these provisions. The government has made it clear that the banking sector is the first cab off the rank. I am not aware of any other markets. I acknowledge that the parliamen­tary secretary is shaking his head. He is slightly at odds there with the chairman of the ACCC, who has been repeatedly quoted as saying he can imagine any number of markets to which these provisions should apply. Mindful of that, we were keen to make sure that markets were not shirt-fronted in the middle of the night by a regulation that no-one knew quite where it had come from or why it was there and that process was just a tad too political, in that it did not provide a proper opportunity and proper process steps. So we think that is a constructive step. I note again the parliamen­tary secretary's advice that banking is all that is on the table at the moment. I also note and encourage the government to continue constructive contributions with the banking sector. I know that, the day before we delivered our dissenting report on this bill from the House Standing Committee on Economics, there had still not been a clear definition of what banking actually was, so we are still not quite sure what will be in, but at least we have a process to be defined that will set out if additional markets are to be captured.

The exceptions are very important. We argued in the dissenting report that there were clear, acceptable and ordinary business transactions and conduct that should not be captured by this bill. The government members on the committee said: 'No, that's wrong; the bill's perfect. Let it pass through.' I am pleased the executive has seen fit to pick up the work-outs for people in a distressed financial situation or facing insolvency. They are a clear example where lenders would need to engage in a discussion about what to do. The syndicated multiparty lending transactions—I am pleased the government has picked that up. On the legitimate and proconsumer conduct of mortgage and finance brokers: it would have been a crying shame if they had been frozen out of doing that worthwhile work.

I accept the advice from Treasury and the government on the 'white labelled' or 'vanilla' products in the banking sector, where one bank might provide certain services on behalf of other banks and the other bank puts its brand on them. I accept that a specific exemption for that is not necessary and that the notification and authorisation process will capture that.

They are all the provisions that we were arguing for. Above all, the ordinary-course-of-business exception is extraordinarily important. Whilst the government has publicly said and has just confirmed now that it is intending only to apply this competition regulatory framework to the banking sector, the machinery is in place for it to be expanded across any markets. The utility of the bill provides for that, yet the exceptions are overwhelmingly banking centric. They would mean basically nothing to other markets and to other areas of goods and services. So, without having some ordinary-course-of-business exception, if other markets were to be captured and prescribed under this bill, where would they go? They would not have any responsive exceptions for their particular industry. We would need to amend the law every time a new market was prescribed under the bill. That is not tidy, that is not reasonable and that brings no comfort to anybody wondering just how these new provisions might be applied.

With those remarks, I indicate that the coalition will be supporting these amend­ments. I again thank Mr Bradbury, the Treasurer's office and officials for their assistance in getting to this point.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

The Greens will be supporting the amendments on sheets 206 and 209. They are—to follow on from the previous speaker—testament to the scrutiny that has been applied by the member for Dunkley to this bill and to the debate generally. I should place on the record too that I have been assured that the amendments relating to ordinary-course-of-business exemptions will not substantially lessen competition and will allow legitimate business activities that otherwise might have been hindered by the bill.

I am also pleased to see that the gove­rnment has lifted a number of the member's amendments relating to prescribed classes of goods and services, albeit with redrafted wording. We believe that they put in place a sensible process of consultation should these laws need to be extended in future by any government.

The adoption of the provisions to allow the private disclosure of pricing information to competitors in some circumstances is also welcome. The member has identified circumstances in which the bill may have hindered the work of corporations which does not have a purpose of substantially lessening competition in a market.

We are pleased that the government has agreed to, proposed and reworked some of these amendments, and the Greens, as well, are happy to support these amendments on sheets 206 and 209.

Question agreed to.

I move amendment Greens amendment (1):

(1)   Schedule 1, after item 14, page 13 (after line 14), insert:

14A After subsection 95AC(1)

Insert:

(1A)   The Commission must not grant a clearance to a body corporate that is, or is related to:

(a)   National Australia Bank Limited; or

(b)   Commonwealth Bank of Australia; or

(c)   Westpac Banking Corporation; or

(d)   Australia and New Zealand Banking Group Limited;

to acquire shares in the capital of a body corporate that is an ADI for the purposes of the Banking Act 1959, or is the holding company of such a body corporate.

14B After subsection 95AT(1)

Insert:

(1A)   The Tribunal must not grant a clearance to a body corporate that is, or is related to:

(a)   National Australia Bank Limited; or

(b)   Commonwealth Bank of Australia; or

(c)   Westpac Banking Corporation; or

(d)   Australia and New Zealand Banking Group Limited;

to acquire shares in the capital of a body corporate that is an ADI for the purposes of the Banking Act 1959, or is the holding company of such a body corporate.

The House has just spent some time finessing the finer details of the bill—which, as we have noted, the Greens support—but it does strike me that if there were some seriousness about tackling anticompetitive behaviour we would be taking a more active role in preventing what are known to be some of the most blatant examples.

Australia has one of the most concentrated banking sectors in the world, and it is killing competition for consumers. We know that the Australian banking market is more concentrated than it has been for a century. In 2007 the big four banks had a 68 per cent market share of the home loan market, but now the big four banks hold around three-quarters of Australia's deposits and assets and 88 per cent of home loans.

The provisions of this bill are only one piece in the puzzle. The Greens have provided support for the second reading as well as strong support for moves to end price signalling by the banks, but strengthening the powers of the ACCC on signalling will do little to help competition and nothing about growing concentration in the sector. If we are serious about ensuring real competition in the Australian banking industry, we should do more than flog them with a piece of damp lettuce.

My amendment will ensure that the big four banks are not able to take down their competitors by swallowing them up. It will ensure that the ACCC will prevent mergers such as Westpac's takeover of St George in 2008 and the Commonwealth Bank's takeover of Bankwest, resulting in the Commonwealth Bank being clearly the dominant bank in Western Australia. This amendment will protect smaller players and regional banks from the historically predatory actions of the big four, and in doing so it will bring about a healthy change in the culture of Australia's finance sector—and it will result in positive changes for consumers. I encourage all members to join me in addressing the most serious problem in Australia's arguably most anticompetitive sector, and I commend this amendment to the House.

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

The government will not be supporting this amendment brought forward by Mr Bandt. There are a number of reasons and I will set out some of those reasons shortly. But can I say from the outset that the government endorses much of the sentiment of what the member for Melbourne has just said, particularly in relation to the importance of competition in this sector. That is why it is important that that be a discussion that be given its proper context. The proper context of that discussion is to acknowledge that the price signalling legislation which we are currently debating in the bill before the House is one component in a broader package of reforms that the government announced in December last year under the competitive and sustainable banking package. This parlia­ment has already passed and enacted into law a number of those measures and they will contribute towards the objectives of that package. The objectives of the package were to empower consumers, to provide support to the smaller lenders so that they could provide competitive pressure into the marketplace, and to secure a sustainable banking sector into the future. I will not go into each and every one of the measures but some of them continue to be under discussion as far as the government is concerned, and a number of consultative processes have previously been engaged in.

In relation to the substance of the proposal that the member for Melbourne has brought forward, the government has concerns on a number of levels. The first and most significant concern we have is that there is in place a consistent and very effective framework for competition policy, particu­larly in relation to mergers and acquisitions. Section 50 of the Competition and Consumer Act is the vital provision that needs to be considered in this context. Section 50 has been in place in this country since 1993. It is representative of similar provisions that exist in similar legislation elsewhere in the world. There has been a considerable amount of jurisprudence built up around section 50, and in addition to that jurisprudence has been the practice of the regulator in the way in which they have dealt with merger and acquisition proposals in the past. It provides the community, the business community and indeed individuals at large with some certainty around how these provisions will be dealt with when any future merger or acquisition is to be considered.

One aspect of the proposals within the amendment put forward by the member for Melbourne that the government has partic­ular concern about is the impact of these provisions where an institution were to be in some financial distress. To seek to put in place a mechanism which would preclude or prohibit the ability of one of the larger institutions to enter into a merger or acquisition of a smaller institution may well lead to an outcome that is against the national interest and against the economic interest of the company concerned, the institution concerned. Certainly it may lead to an outcome that is against the interests of shareholders, employees of the company, depositors and other creditors. We think it is appropriate that there be flexibility available for mergers and acquisitions to be considered in those circumstances. We think that is adequately dealt with under the existing regime and we certainly support that continuing to be the case.

I will make a few further observations in relation to the way in which section 50 operates. I specifically draw the House's attention to a non-exhaustive list of items set out in section 50(3) of the Competition and Consumer Act. This sets out some of those matters to which regard should be had when a merger or acquisition is being considered in the context of the substantial lessening of competition test. Factors that need to be considered include the actual and potential level of import competition in the market, the height of barriers to entry to the market, the level of concentration in the market, the degree of countervailing power in the market, and it goes on. There are a range of factors that guide the deliberations of any court and indeed the regulator. We believe that they form part of an effective regime set out in the Competition and Consumer Act, and that is a regime we believe should be retained in its current form. So the government will be opposing this amend­ment.

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

The opposition will not be supporting this amendment. We have just had a debate about good economic concepts and how competition law sees them applied across the whole economy. I wish I had been able to persuade the government about that on the price signalling bill and perhaps we would be debating my private member's bill, not the one that we are dealing with now. So the idea that we then go in and not only deal with a sector-specific but then a transaction-specific prohibition strikes me as an idea that really needs a lot of work to make that argument. We have not seen that argument. The parliamentary secretary has outlined the existing provisions in section 50. I have just come from the Main Committee outlining areas where I think that general provision could be improved, and that may go some way to dealing with what the member for Melbourne was referring to and in other sectors such as supermarkets and the like.

Without dwelling on the subject, I would say that the example cited around St George and Westpac is probably not a good example. Because of the GFC, St George's credit rating meant that their access to wholesale funding offshore was quite expen­sive and much more expensive than Westpac. Gone are the days when a few slight differences in credit rating meant a very thin spread on the cost of your funds. That all changed with the GFC. If for no other reason but for the St George customers not to get a real smack in the chops over higher costs for their mortgages and the like, there was a reason that Westpac could take over St George and then use its wholesale funding machinery and its credit rating to deliver significant savings to consumers. That is the kind of market dynamic that the broad competition and consumer framework dealing with mergers and acquisitions should turn its mind to and that is where transactions of this kind, if any are proposed into the future, need to take account of the market and the consequences on consumers. So the opposition will not be supporting a blanket prohibition of the kind that is being proposed here.

Question negatived.

Bill, as amended, agreed to.