Gai Brodtmann (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

I will continue where I left off. While this comment from Justice French was not binding, and he did not express a view at the time as to his opinion on the outcome, it certainly highlights the possibility that, at some point in the future, the ACCC or a court could take this definition. In doing so, it would be very difficult to show that any one merger or acquisition had limited sustainability competition. This could potentially have a number of grave consequences, particularly in relation to creeping acquisitions.

Creeping acquisitions are those acquisitions which in and of themselves do not lessen competition but, taken as a collective, may have a greater effect over time. One area in particular that has been noted is grocery prices. Indeed, this bill is a direct result of the ACCC's inquiry into grocery prices and the government's subsequent public consultation on the matter. In the ACCC's report it stated that it considered that:

… the supermarket industry, because of the particular structural features of the market, is one where creeping acquisitions are a potential area of concern.

Further, I imagine that most Australians buy their groceries from local supermarkets, in most cases only a few kilometres from their home. Given that, the issues raised by Justice French in his comments over the definition of the market are problematic to say the least. It is important to note that, while these issues have not impacted on grocery prices, this is not an excuse for inaction.

We have identified two areas where action is needed and the imperative now is to take adequate action to address these concerns. In doing so, the government is responding with specific remedies to specific problems, rather than with general remedies that could well have unforeseen and detrimental consequences on competition and on the economy as a whole. The government action today is one of the measures I highlighted earlier. It is a measured and appropriate response to the long-term interests of competition, economic growth and the country. In this light, I commend the bill to the House.

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

I rise to speak on the Competition and Consumer Legislation Amendment Bill 2011. There are four main parts to this bill. Chapter 1 deals with mergers and acquisitions, chapter 2 deals with unconscionable conduct, chapter 3 is merely a few minor technical amendments and chapter 4 deals with what is known as creeping acquisitions. In the time permitted I would like to discuss each part separately. However, firstly, sadly, in totality this bill is nothing other than window-dressing—a meaningless nothing. It demonstrates that Labor, after all the sound bites when in opposition, have given up on competition policy. They have simply hoisted the white flag.

Competition policy is arguably one of the most crucial portfolios for any government. But, sadly, after the failed tenures of the current Minister for Trade and the current Minister for Immigration and Citizenship, when the single highlight was the farce of GroceryWatch and Fuelwatch, this Labor-Greens government has, appallingly, downgraded the competition portfolio to that of a parliamentary secretary. So it is of little surprise that we end up with a bill like this.

The first chapter of the bill is on the subject of mergers and acquisitions. Our current merger law provides:

A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate where the acquisition is likely to have the effect of substantially lessening competition in a market for goods or services.

Let us be clear: when two firms merge, what happens is that firms that have previously been in competition with each other get together to coordinate and fix prices and divide markets. What mergers actually do is take conduct that we find so detrimental to competition and consumers—and our laws make such conduct illegal, with penalties including jail—and make that same conduct legal. The first change proposed by this bill in affecting mergers is purely academic. It changes the words 'substantially lessening competition in a market for goods or services' to the words 'substantially lessening competition in any market for goods or services'. It simply replaces the words 'a market' for the words 'any market'—a change that creates the impression of doing something without doing anything.

The second change is to remove the word 'substantial' as it applies to restrict the application for section 50 to substantial markets. The problem with this bill is that it takes out the wrong 'substantial'. The 'substantial' that should be deleted from the act is in respect of the word 'substantial' as it relates to 'substantially lessening of competition'. Under our current laws we have the absurdity that a merger that results in a mere lessening of competition to the detriment of consumers and to the detriment of our national interest is acceptable provided that such lessening of competition is not deemed as 'substantial'. We are productivity-growth stalled, with problems throughout our economy and hyper-concentration in many of our markets. How can we permit any further concentration occurring through mergers that result in further lessening of competition? If we have the proviso, we can only prevent it if that lessening of competition is 'substantial'.

Considering why this bill proposes to take out the wrong 'substantial' it is important to consider the historical context of the current wording of the bill. The text of Australia's merger laws were inherited from America's antitrust laws—the Clayton act of 1914, a law written almost a century ago. America's Clayton act makes various anticompetitive practices illegal when they might 'substantially lessen competition or tend to create a monopoly in any line of commerce'. The problem with the word 'substantial' is that it is capable of meaning many different things and is open to wide interpretation. By way of example, is 25 per cent a substantial proportion? Twenty-five per cent of our nation's exports are sold to China, and I am sure everyone would agree with the statement that a substantial proportion of Australia's exports are sold to China. In that context, 25 per cent is a substantial number. Yet, at the last New South Wales state election, the flyblown New South Wales Labor government achieved a primary vote of 25.5 per cent. So the statement: 'A substantial number of electors voted for the New South Wales Labor Party at the last New South Wales state election' is a complete absurdity. In that context, 25 per cent is not a substantial number.

Further, for the majority of the last century during America's golden years America's antitrust laws were interpreted as meaning that competition was a process that required numerous participants and a deconcentration of market power and that any lessening of competition was equated with a decrease in the number of participants. However, in the 1970s and 1980s the long-held view that increased concentration means less competition was challenged by a group known as the Chicago school. If you want to mark the time when America started its decline you can circle the time when a small minority who theorised that a lessening of competition is not equated with a decrease in the number of participants in a market took control of the economic leaders of American policy.

One of the greatest supporters of the theories of the Chicago school was Alan Greenspan. But, in 2008, following the collapse of the US economy, Greenspan gave the mea culpa when he said of this theory:

I have found a flaw … I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.

Pressed to clarify his words, Greenspan was asked, 'In other words, you have found that your view of the world—your ideology—was not right; it was not working'. 'Absolutely, precisely,' Greenspan replied.

If anyone wants an example of how these misguided theories of market concentration mean less competition and higher prices for consumers, they only need to study what has happened in the Australian supermarket sector. Over the last 30 years we have seen an ever-increasing concentration in the Australian supermarket sector, where the market share of our two largest retailers has increased from around 30 per cent of the market to where it stands today at around 80 per cent, leaving Australia with one of the most concentrated markets in world economic history outside that of former Eastern Bloc countries.

The so-called experts have theorised that this period of ever-increasing market concentration would lead to efficiencies and greater synergies to the benefit of consumers. But if you look at the empirical evidence and not the computer generated models you will see the exact opposite has happened. The evidence, as clearly demonstrated by OECD figures, shows that during this period of increasing market concentration Australia consumers have been punished with the fastest accelerating supermarket prices in the developed world. Therefore, what we need to look at is removing the other 'substantial' in our merger laws and returning our laws to the original intent that a merger that results in a lessening of competition should not be permitted.

The second part of this bill deals with unconscionable conduct. Before addressing the provisions of the bill, it is worth noting why we need a statutory prohibition on unconscionable conduct rather than just relying on the common law. The history of our common law traces back to the legal principles that we inherited from decisions reaching back to the aftermath of the Norman invasion of the British Isles. Our common law developed in the age of the village market where both parties to a contract were of approximately equal power and were members of a keenly competitive society. They therefore were able to negotiate freely the terms of their contracts and, importantly, had equal access to the law. However, with today's growth of oligopolies and duopolies, with the special privileges handed out to many of our large corporations today to protect themselves from competition and with small business denied equal access to the courts due to the outrageous cost of litigation today, the conditions of a level playing field that existed when our common laws on unconscionable conduct were developed are simply not present today—especially in contractual relations between big and small business in today's economy. Therefore, to level the playing field it has been necessary to advance the existing common law on unconscionable conduct by having specific statutory provisions.

Sadly, the proposed amendments to this bill give the impression of doing something without doing anything. The insertion of a statement of interpretive principles into the unconscionable conduct provisions of Australian consumer law simply add nothing. They merely regurgitate what the courts have already stated. Let us look at these changes. The first provides that:

It is the intention of the Parliament that:

(a) this section is not limited by the unwritten law relating to unconscionable conduct …

This simply adds nothing. The courts have already made it very clear that existing statutory provisions are not limited by the unwritten law relating to unconscionable conduct. The problem which is not addressed by this bill is that without a statutory interpretation the courts have given a very narrow interpretation of what unconscionable conduct is. In doing so, they have hardly moved the law beyond the existing common law interpretation. The first part adds nothing; it simply regurgitates what the courts have already stated.

The other changes in this bill are, again, meaningless and add nothing. The existing statutory provisions under section 22 of the Australian Consumer Law state:

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of financial services to a person … engage in conduct that is, in all the circumstances, unconscionable.

The existing section continues:

(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to …

The section then goes on to list a long list of non-exhaustive factors which the court may have regard to. So our courts are already able to look at all the circumstances and the proposed amendments, again, are simply meaningless.

There is an alternative way to address the inadequacies of our statutory provisions on unconscionable conduct. Firstly, to move the law on from the narrow provisions of interpretation given by the courts we need a statutory definition of unconscionable conduct in the act. We need to look at the reasonableness of the conduct and whether it is harsh or oppressive.

Secondly, we need the existing provisions of the unfair contract terms in the Australian Consumer Law extended to small business. If you want an example of the anti-small business agenda of this current Labor government you need look no further than their shameful removal of small business from the unfair contract provisions of the Australian Consumer Law done by the current Minister for Trade during his term as Minister for Small Business, Independent Contractors and the Service Economy. Initially Labor proposed that the unfair contract terms legislation would apply to small business in their dealings with big business, and that they should have been congratulated on. But, instead, cuddling up to their mates at the big end of town, this government have shamefully sold small business down the river by excluding them from the unfair contract provisions. It is an absolute disgrace which every small business person in this country should never ever forget.

The third part of this bill merely makes a few minor technical amendments which are of no significance. The fourth part of the bill involves so-called creeping acquisitions. The theory behind the need for this legislation is that in a series of small acquisitions each individual acquisition when looked at separately may not result in a substantial lessening of competition. But when these single acquisitions are looked at together as a group they may lead to a substantial lessening of competition. This law would be an illusion. It would not have any effect. Just look at the Westpac takeover of St George Bank. St George has over 400 branches. If the ACCC considered that Westpac taking over more than 400 St George Bank branches in one single hit did not substantially reduce competition, how would changing the law to enable Westpac taking over a few at a time through creeping acquisitions make any difference? Again, this is a meaningless nothing.

In conclusion, this bill is a meaningless nothing. It creates the appearance of making changes. It creates the appearance of doing something to address problems with our nation's competition laws while doing absolutely nothing. We have real problems with competition policy in this country. Our productivity growth has stalled. Many of our markets have degenerated into states of hyperconcentration. Consumers are being punished by higher rates of inflation. We need a lot more than what this bill offers.

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

The philosophy of those of us on this side of the House is that free markets are the mechanism best developed to generate wealth in society, to raise living standards and to ensure that Australians have the opportunity of work and leisure that is part of a fulfilling life. We on this side of the House recognise that free markets work best when accompanied by appropriate regulation—such as the Trade Practicesw Act 1974 originally brought in under the Whitlam government in 1975. Appropriate regulation such as the Fair Work Act 2009, brought in under this government; legislation that realises that it is critical to strike the right balance between employers and employees. This is a balance which those opposite apparently supported in the last election but which, by now taking the lead from the member for Bennelong, they have begun to abandon, with a new attack on penalty rates and an attack on the overall notion that free markets work best under proper regulation.

The bill before the House today, the Competition and Consumer Legislation Amendment Bill 2011, began its life as a bill under the now Minister for Trade, Dr Emerson. It was a product of extensive consultations. The bill does three things: it provides greater clarity to the provisions of the CCA regarding mergers and acquisitions; it streamlines and clarifies the unconscionable conduct provisions; and it corrects some minor drafting errors.

Public consultations, conducted in 2008 and 2009 by the member for Rankin, identified the importance of getting the term 'market' appropriately defined. This bill will replace references to 'a market' with references to 'any market'. That will clarify that a court or the ACCC can consider the competitive effect of a merger or acquisition on multiple markets in any one investigation. This amending legislation will ensure that a court or the ACCC looks beyond the primary market in which the merger or acquisition would occur.

The second area is in relation to the definition of 'market' in section 50(6) of the CCA. The bill will delete the word 'substantial' in the definition of 'market'. That will clarify that the competitive effects of a merger or an acquisition on a local market can be considered under section 50. That will ensure that a court or the ACCC can examine a merger or acquisition in any market, regardless of its size or its geography.

The bill also makes changes in relation to the unconscionable conduct provisions, which will streamline and clarify the operation of the provisions. It will unify the consumer and business related provisions of the ACL and the ASIC Act, replacing sections 21 and 22 of the ACL with a single provision that will apply to both consumers and businesses. The bill will amend the mirrored provisions in sections 12CB and 12CC of the ASIC Act, which will reflect these changes to the Australian consumer law.

The bill will clarify the unconscionable conduct provisions by inserting interpretive principles into the acts that will assist courts in applying the prohibition, as well as improving stakeholder understanding of the meaning and scope of the prohibition. There have been substantial improvements in legislative drafting over recent decades, partly to ensure that courts have as much information as possible to help them interpret statute laws. These interpretive principles are derived from existing case law, so they will be clarifying rather than altering the effect of the statutory prohibition against unconscionable conduct. Those principles will include, for example, that unconscionable conduct is not limited by unwritten law; that the prohibition applies to systems of conduct or patterns of behaviour; and that a court can examine the terms and progress of contract in considering whether conduct to which the contract relates is unconscionable.

Finally, as I have mentioned, the bill corrects a number of minor drafting errors in the CCA that were the result of the passage of legislation by this House in 2010. Overall, the measures in the bill will improve the operation of Australia's competition and consumer laws. They will clarify the breadth of matters to be examined by a court or the ACCC in considering whether a proposed merger or acquisition would substantially lessen competition in the market. They will unify the prohibition against unconscionable conduct and provide the courts with greater guidance in its application. Overall, this is legislation which is part of Labor's commitment to free and effective markets, but markets which are appropriately regulated.

I was very proud recently to speak to students in Marist College. Mary-Lou Minty, their economics teacher, brought me in and we had a wide-ranging conversation with the boys about the major principles involved in economic reform. They understood—perhaps even better than some of those opposite—the importance of getting the balance right with regulation. Letting the market rip can often produce outcomes which give less growth, less improvement in living standards and less productivity. Getting the balance right in competition law, as in industrial relations, is critical to improving the living standards of all Australians. I commend the bill to the House.

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 members who have taken part in the debate on the Competition and Consumer Legislation Amendment Bill 2011. The bill will give effect to two important reforms to strengthen and clarify our competition and consumer laws. Firstly, the bill will enact laws—

A division having been called in the House of Representatives—

Sitting suspended from 10:25 to 10:42

The bill will give effect to two important reforms to strengthen and clarify our competition and consumer laws. Firstly, the bill will enact laws to deal with creeping acquisitions, by amending the mergers and acquisitions provisions in section 50 of the Competition and Consumer Act. This bill will remove the requirement that a market in which the competition effects of a merger are assessed must be a substantial market. The amendments will also ensure that the courts and the Australian Competition and Consumer Commission can consider the totality of the competitive effects resulting from an acquisition, including those where creeping acquisition concerns may be raised in the community.

Secondly, the bill enhances and simplifies the unconscionable conduct provisions of the Australian Consumer Law and the Australian Securities and Investments Commission Act. The bill will assist consumers, businesses, regulators and the courts by inserting interpretive principles to clarify the meaning of 'unconscionable conduct' in those laws and by unifying their business and consumer related provisions. These amendments clarify the parliament's intention as to how the unconscionable conduct law should apply. They will place the ACCC and the Australian Securities and Investments Commission in a better position to take more effective enforcement action.

Finally, the bill makes minor technical amendments to correct a small number of drafting errors in the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010. I thank all of those who have made contributions to the consultation process. I also once again thank my colleagues in the states and territories for their ongoing cooperation in competition and consumer law.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.