Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That all the words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House condemns the Government for pushing ahead with its agenda that will worsen inequality, including increasing penalties for sympathy strikes to hundreds of times the size of other industrial action penalties."

It is timely for this House to be debating competition policy given the increasing concern internationally about the impact of rising market concentration on growing inequality around the world. The importance of competition policy has not always been appreciated by the economics profession. In a recent speech, Rod Sims quoted from a number of doyens of the economics profession, including Milton Friedman, who was sceptical of the role that antitrust has to play. But, as he noted, the economics profession has come around on that issue.

The notion that firms will always demand a competitive environment in which to operate is not borne out by the evidence. Indeed, one only has to look to the strategy literature to see precisely that. In his speech, Rod Sims quoted from perhaps the most famous paper in the strategy literature, Michael Porter's 1979 Harvard Business Review piece, 'How competitive forces shape strategy', in which Professor Porter laid out five focuses of firms that will drive commercial success: 'erect high entry barriers', 'keep suppliers weak and dispersed', 'reduce competition', 'curb buyer power—for example, with high loyalty' and 'reduce the likelihood of substitutes'. In other words, as Rod Sims notes, competition policy equals corporate strategy multiplied by minus one.

The Economist magazine has recently analysed the extent of market concentration in the United States across 900-odd sectors, comparing concentration in 1997 with concentration in 2012. They found that the weighted share of the top four firms in each sector had risen from 26 per cent to 32 per cent. Inspired by their analysis, last year Adam Triggs and I published a paper in The Australian Economic Review, 'Markets, monopolies and moguls: the relationship between inequality and competition', in which we used private market research data to estimate the degree of market concentration across 481 industries. We found that the largest four firms controlled 36 per cent of the market—a higher degree of market concentration than in the United States. In a number of industries, the big four controlled more than 80 per cent of the market, including department stores, newspapers, banking, health insurance, supermarkets, domestic airlines, internet service providers, baby food and beer.

The impact of this emerging research on the growth of market concentration has been significant within the economics profession. As The Economist noted on 12 April this year:

ONE sign that monopolies are a problem in America is that the University of Chicago has just held a summit on the threat that they may pose to the world’s biggest economy. Until recently, convening a conference supporting antitrust concerns in the Windy City was like holding a symposium on sobriety in New Orleans. In the 1970s economists from the "Chicago school" argued that big firms were not a threat to growth and prosperity. Their views went mainstream, which led courts and regulators to adopt a relaxed attitude towards antitrust laws for decades.

But the mood is changing. There is an emerging consensus among economists that competition in the economy has weakened significantly.

Increasingly, researchers are suggesting this is not just a problem for growth but also a problem for equity with the increase in market concentration potentially behind the rise in the profit share, the fall in the labour share, stagnant wage growth, and sluggish research and development and productivity statistics. Indeed, the overall rise in inequality has been well documented and the Leader of the Opposition, the shadow Treasurer and many others on the Labor side have spoken about it.

With regard to the Competition and Consumer Amendement (Competition Policy Review) Bill 2017, Labor opposes schedule 6 and supports the remaining 13 schedules. Were the government to remove schedule 6 from this bill, Labor would support it in this House and in the other place. The bill is largely uncontroversial. It flows from a panel led by Professor Ian Harper that was commissioned in 2014 and reported in March 2015. It has been 2½ years since the Harper review was handed to the government, and the parliament could have acted with much greater alacrity to implement the recommendations. As the shadow Treasurer has made clear, Labor engaged constructively with the Harper review throughout and would have been happy to support these recommendations in 2015 when the Harper review finished its work. We won't be supporting schedule 6 of the bill since that schedule proposes to increase the maximum penalty for breaches of secondary boycott provisions—also known as sympathy strikes—from $750,000 to $10 million. I will detail later in my remarks the reason that Labor won't be supporting this largely industrial relations measure.

Labor has been the party of competition for decades. We recognise that competition means lower prices, higher wages and better-quality products for Australian families. It brings about a more productive and innovative economy and increases the standard of living. Labor backs competition law because Labor backs the little guy. We believe in an economy in which start-ups are able to break into new markets. For us, supporting competition is about supporting consumers over vested interests. It is about supporting the little guy over the rent seekers.

Labor introduced the Trade Practices Act in 1974. Prior to that, there was no act of parliament dedicated to competition matters. The original act is now known as the Competition and Consumer Act 2010 and remains the backbone of competition law in Australia. Under Prime Minister Keating, Professor Fred Hilmer was commissioned to chair a comprehensive review into competition policy. The Hilmer report set the agenda for the next two decades of competition policy reform in Australia. The Grattan Institute has described national competition policy as one of 10 big reforms which has underpinned recent decades of strong economic growth in Australia. The Productivity Commission found that the reforms from the Hilmer review led to a significant and permanent increase in Australia's economic capacity.

Under the Rudd and Gillard governments, further changes were made to competition and consumer policy settings. The introduction of the Australian Consumer Law in 2011 was a cooperative reform between the states, territories and the Commonwealth government that created a consistent approach to a range of consumer issues, such as unfair contract terms, consumer rights and product safety.

Labor went to the last election with a suite of policies to strengthen the Competition and Consumer Act, including increasing the penalties for anticompetitive and anticonsumer conduct—one of which we're pleased to see was picked up in the government's budget this year—and to use some of the additional revenues generated by those higher penalties to increase the competition watchdog's litigation budget from $24.5 million to a maximum of twice that level. We welcome the government's budget announcement, as I said, but we urge the government to adopt policies that are in line with international best practice, such as making fines for anticompetitive conduct referable to total turnover.

Labor is also committed to giving the competition watchdog a completely independent market studies function, which would allow the competition watchdog to use investigatory powers to look at particular industries, rather than waiting for a reference from the government on a sector such as the electricity distribution industry. This market studies power would help the ACCC identify competition challenges before they become systemic. Labor criminalised cartels back in 2009 and, prior to that, this form of white-collar crime was merely a civil offence. We did so because, again, it brought Australia in line with international best practice.

Labor understands that reducing barriers to entry and protecting consumers is fundamental to a stronger economy. We have consulted widely to ensure that this bill does not water down cartel provisions. We certainly don't want legitimate joint ventures to be unintentionally prohibited by the cartel provisions under the act. This bill broadens the exemption so that it covers not just contracts but also agreements and understandings. The bill also extends the joint venture exemption to include provisions that are 'for the purposes of and reasonably necessary for undertaking the joint venture' and extends the exemption to the acquisition of goods and services, not just the production of goods and services.

Another measure worthy of special consideration is the introduction of a reasonable search defence. Labor's consulted widely to ensure this measure wouldn't allow companies or individuals under investigation to use this defence in refusing or failing to comply with a compulsory information request by the competition watchdog under section 155. Section 155 is the foundation of the Australian Competition and Consumer Commission's ability to investigate alleged breaches of the act.

Labor is also committed to ensuring that sensible measures in this bill receive bipartisan support. Schedule 1 of the bill, which Labor will be supporting, defines 'competition' to include competition from goods and services that are capable of being imported, in addition to those actually imported. The ACCC says it already considers potential imports, so this change merely provides greater clarity than any substantive alteration to the law. We support schedule 2, the changes to the cartel conduct provisions, which I've mentioned already. Confining the application of the provisions to cartel conduct affecting competition in Australian markets is a logical reform which reinforces other parts of the act to prevent extraterritorial application. We support schedule 3, dealing with concerted practice; and creating a new offence in section 45, prohibiting a corporation from engaging in a concerted practice that has the purpose, effect or likely effect of substantially lessening competition. Section 45 continues to also prohibit making, arriving at or giving effect to a contract, agreement or understanding with a purpose, effect or likely effect of substantially lessening competition.

As recommended by the Harper review, 'concerted' isn't defined because it has a clear and practical meaning. However, there is more information in the explanatory memorandum. An example of concerted practice would be where petrol stations communicate their prices to each other whereby—short of creating a contract, arrangement or understanding—a common practice develops where they then set their prices in unison. A recent academic study into the Perth petrol markets suggests that this kind of behaviour may be increasingly widespread in a big-data era.

Schedules 3 and 4 repeal provisions on price signalling and exclusionary provisions—and Labor will be supporting them—as those provisions are made redundant because of the introduction of the above concerted practice offence. Exclusionary provisions are defined as an actual or proposed contract, arrangement or understanding between competitors where the provision has the purpose of preventing, restricting or limiting supplies of goods and services to, or acquisitions from, particular persons or classes of persons. The concerted practice provisions capture this conduct and prohibit it across all industries. The existing price signalling provisions apply only to the banking sector. They were introduced by Labor in 2012 and relate to the private disclosure of pricing information to a competitor on a per se basis and the general disclosure of information where the purpose of the disclosure is to substantially lessen competition in the market. The concerted practice provisions capture this conduct and prohibit it across all industries—not just banking.

We support schedule 5, which deals with covenants affecting competition, simplifies the act by defining 'contract' and 'party' to include covenants. This allows for the repeal of redundant provisions which separately deal with covenants. I'll return in a moment to schedule 6, which Labor opposes. Schedule 7, which Labor supports, deals with third-line forcing—effectively, the behaviour of saying, 'I'll sell you this pen as long as you buy the ink from my sister.' It is prohibited per se, meaning that it's prohibited regardless of its effect on competition. Schedule 7 changes this, such that third-line forcing is only prohibited when it has the purpose, effect or likely effect of substantially lessening competition, which is consistent with other parts of the act and other jurisdictions.

Schedule 8, which Labor supports, deals with resale price maintenance and the supply of goods on the condition that goods not be sold below a price specified by the supplier. Currently, a supplier can seek an authorisation from the ACCC to engage in conduct that would otherwise be prohibited as resale price maintenance when it is in the public interest. The Harper review noted that the seeking of such authorisation is seldom done due to cost and delay and that notification is generally a quicker and less expensive means of obtaining an exemption and is available for other forms of vertical restriction.

Schedule 9, which Labor supports, consolidates the ACCC's various authorisation provisions, including those relating to mergers, into a single authorisation process. It also grants the ACCC a class exemption power, which allows it to provide its usual exemption but across a class of kinds of conduct rather than individually. It also allows the ACCC to impose conditions on notifications for resale price maintenance. Schedule 9 allows the ACCC to impose conditions on notifications for collective boycotts and to introduce a stop notice requiring collective boycott conduct that is the subject of a notification to cease. Schedule 9 also provides for tribunal review of merger authorisation decisions made by the ACCC, and Labor supports that.

Schedule 10 deals with admissions of fact and allows a party bringing certain proceedings under the act to rely on admissions of fact, in addition to findings of fact, made in other proceedings. This makes it easier for parties to bring proceedings under the act and provides clarity in an area that was particularly unclear. Schedule 11 extends the ACCC's power to obtain information, documents and evidence in section 155 to cover investigations of alleged contraventions of court enforceable undertakings and merger authorisation determinations. This has been a gap in the ACCC's powers and is strongly supported by Labor. The bill also introduces a reasonable search defence. Stakeholders in our consultations have assured us that this would not allow companies and individuals under investigation to use this defence in refusing or failing to comply with a compulsory information request by the ACCC under section 155. The bill also increases the fine from noncompliance with section 155.

Schedule 12 amends provisions relating to the National Access Regime, which allows access to nationally significant infrastructure services. The bill's aim is to make it easier to access infrastructure to compete in the provision of services. Its changes include that the declaration criteria that must be considered by the council and minister are contained in a single section; the promotion of public interest in access declarations; and that the minister is taken to have accepted the council's recommendation if he or she doesn't publish a decision on the declaration with the 60-day limit. Schedule 13 inserts a new division 3 into part XIII of the act, which deals with the transitional application of amendments made by a number of other schedules, and schedule 14 includes eight minor amendments, which Labor will be supporting.

I return now to schedule 6—which Labor will not be supporting—which deals with secondary boycotts. Those who are familiar with this issue will know that it has a long history. Following the 1974 introduction of the Trade Practices Act by the Whitlam government, the Fraser government came to power and, with then Treasurer John Howard, introduced section 45D and later section 45E into the Trade Practices Act. Those sections outlawed secondary boycotts, also known as sympathy strikes, and were particularly targeted at trade unions. The Hawke government attempted to repeal sections 45D and 45E in 1984, but the legislation was defeated in the Senate. The Hawke government's view was that these were essentially industrial matters, best resolved through specialist industrial courts or tribunals rather than through competition law and the competition regulator. The repeal attempt was defeated in the Senate, as I said, in 1984, and another attempt by the Hawke government to repeal these provisions was dropped in 1987.

In 1993 the Keating government repealed secondary boycott provisions, modified section 45D and deleted section 45E. The effect of the amendment to section 45D was that the prohibition covering secondary boycotts in the Trade Practices Act was restricted to boycotts that involved a substantial lessening of competition. Other secondary boycott provisions were re-enacted in a much modified form in the Industrial Relations Act of 1988, which limited the operation of the prohibitions on secondary boycott actions and made relief available only if conciliation of the dispute was first attempted through the commission. The effect of this was that, if an employer wanted to commence legal action in respect of a secondary boycott, they had to first go through the conciliation and arbitration process.

Sadly, however, the Howard government, in 1996, introduced the Workplace Relations and Other Legislation Amendment Act, which reformed enterprise bargaining, removing secondary boycott provisions from industrial relations legislation and returning them to the Trade Practices Act.

A secondary boycott, as members will be aware, involves one person in concert with another person engaging in conduct that hinders or prevents a third person from supplying or acquiring goods and services to or from a fourth person. Schedule 6 of this bill attempts to increase the penalty for breaching those provisions from $750,000 to $10 million. International Labour Organization convention No. 87 says that sympathy strikes should be permitted, provided the original industrial action was lawful. The International Labour Organization has indeed turned its attention specifically to Australian law and noted that the prohibition of secondary boycotts in Australian law is beyond what they regard as permissible prohibitions. The higher penalties would move Australia even further away from international best practice.

Unsurprisingly, as befits this government's agenda, secondary boycott laws are typically used against unions that engage in sympathy strikes. They are not as prevalent as they have been in the past, which makes one wonder what the policy case for higher penalties might be. There has been one instance of the ACCC undertaking action on secondary boycotts in the last decade.

This is a move that would put Australia out of step with international best practice. I mentioned previously the criminalising of cartels and Labor's move to increase penalties for anticonsumer conduct and anticompetitive conduct—these have all been done in the knowledge that Australia was out of step with international best practice. But international best practice would not see us increase the penalties on secondary boycotts; indeed, quite the opposite. For more than four decades Labor has held the view that secondary boycotts are primarily an industrial issue rather than a competition issue, and that is reflected in the legislative history to which I have referred.

It is worth, therefore, comparing the penalties that the government proposes to impose on sympathy strikes to penalties for unprotected industrial relations activity under the Fair Work Act 2009. The maximum penalty there is 60 penalty units, which is $12,600. If schedule 6 of this bill were to become law, the maximum penalty for a secondary boycott would be nearly 800 times higher than the maximum penalty for unprotected industrial action. We can also compare this to the proposed penalties associated with noncompliance with a section 155 order—20 penalty unites, $4,200. Yet the government thinks that a $10 million penalty is appropriate for a sympathy strike.

The government is pushing ahead with measures that will not improve competition in Australia. We've got the government at the moment still pushing ahead with an effects test, with their proposed changes to section 46. In the words of Peter Costello:

The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

Since 1974, 10 of the 12 inquiries into Australian competition laws have considered the proposal of an effects test and rejected it. In submissions to the Harper review, an effects test has been described as 'legally unworkable', something that will 'chill competition' and something that 'will create uncertainty for business'. That's why, when an effects test came to the cabinet, the now Prime Minister, Malcolm Turnbull, argued against it, as did other colleagues, including Senator Brandis and, we're told, Senator Cormann. The attempt to put in place an effects test is the National Party tail wagging the Liberal Party dog. This is not good competition reform. This is a smokescreen attempt to suggest that the Turnbull government are serious about competition.

If they were serious about competition, they would be supporting Labor's small-business access-to-justice reforms. Those reforms recently passed the Senate, and we believe that, now that they have passed the Senate, they should come before the House of Representatives for a vote. Labor's access-to-justice proposal will overcome the basic problem that small business have when considering whether they have the ability to take on anticompetitive conduct by the big guys. They're willing to pay their own legal costs but what they're scared about is the prospect that, if they lose, they could be bankrupted by an adverse costs order—that they might have to pay for the armada of QCs engaged by the big end of town.

Labor's access-to-justice bill allows court cases in the public interest to seek a no-adverse-costs order from the Small Business and Family Enterprise Ombudsman. Such an order would allow the litigant to go ahead in the public interest, knowing that, if they lose, they'll pay their own costs but not those of the other side. This would supplement the work that's being done by the ACCC. Having private parties litigate breaches of the competition law in the public interest is indeed a pro-small-business measure. It's rumoured that there are many within the National Party who support Labor's access-to-justice reforms, who recognise that to support access to justice is to support small business. That's why many small-business organisations, and the Ombudsman, have come out supporting Labor's position on access to justice. An effects test will simply create additional confusion. Access to justice will create new powers for small business, to level the playing field.

In conclusion, Labor supports good competition policy reform. We are the party of competition law. We are the party that recognises the market concentration challenge that Australia faces today and that is dragging down the productivity and the equity of the Australian economy. We are the party that has constantly been proposing constructive solutions to rein in monopolies and ensure that the Australian economy operates as productively as possible. But we will not support the attempt, under the cover of competition reform, by the government to further attack unions. The attack on unions through the massive increase in penalties for sympathy strikes doesn't make our economy more productive, but it is to be expected from a government which has supported cutting penalty rates for up to 700,000 Australians in the retail, hospitality, fast-food and pharmacy sectors. Despite some positive signs on wage growth in the last quarter, these sectors have seen sluggish wage growth over recent years.

In an environment of sluggish wage growth, Australians don't need further laws that will demonise unions, because we know from careful economic studies that unions are one of the strongest forces for equity in the labour market. A study by Jeff Borland suggests that about a third of the rise in Australian inequality over recent decades can be attributed to the declining share of unions. Other work in the United Kingdom by John Pencavel and Richard Freeman and others in the United States have shown a similar picture: an attack on unions is an attack on equity.

Labor will stand up for penalty rates and will stand up for working Australians. Labor will stand up for Australian egalitarianism. At the same time, we have a government that is denying that Australia even has an inequality problem. No wonder, if you deny that Australia has an inequality problem, you look to bash the representatives of working people. Labor will oppose schedule 6 of this bill and, unless it is removed, we will vote against the bill.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill now be read a time. To this the honourable member for Fenner has moved an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I actually rise to support the government's changes to the Competition and Consumer Act as defined by the Competition and Consumer Amendment (Competition Policy Review) Bill 2017. It's interesting to hear the previous member talk about studies and all sorts of other things. I can talk about a lived experience, because it was the actual access to justice issue that helped to bring me into this place through a lived experience, not through some study. That is why competition policy and this bill is so important to small businesses just like my own. As someone who owns and built—absolutely built—a small business from the ground up, part of the reason that I came to this place was the access to justice issue and that is why I support the government's bill. We were typical of the majority of small businesses right around Australia.

We actually bought our first business, a dairy farm, on the day that we got married. Yes, it was run-down. Yes, it had very little infrastructure, and it had a pretty mixed old herd. And, of course, it was tough going. We lived in two army huts joined together, and the simple economics of it were very interesting for us. We received about $2,000 a month, and our interest and payments were $1,300 a month. We basically had to grow a business, do all the development and live with that income. We bought this on the day we got married with just $12,000 worth of equity between us. We had $118,000 worth of debt. We took a huge risk as two young people—I was 18 and he was 21. I would really like a dollar for everyone who laughed at us and for everyone who said we would go broke and fail.

But like most small-business owners know only too well: it takes courage; it takes debt, as the great motivator; and it takes sleepless nights. This is the real lived experience—not a study. It takes those sleepless nights wondering how you're going to pay your bills and getting up to calve cows in the middle of the night, especially when at the time interest rates went from 17 per cent to 23 per cent. It takes hard work over many, many years. This is not a short-term investment when you're a small-business person. And, in fact, it was actually a separate contract hay-baling round, that my husband did in between milkings—with me raking and at times baling and mowing hay, as well as my husband—that kept us afloat. In fact, it was eight years before my husband and I could actually afford a holiday.

The Competition and Consumer Act was called the Trade Practices Act at that time. I saw immediately how competition, or the lack thereof, affected our business. We sold culled cows and sometimes dairy store cattle at the cattle sales. There was a limited number of buyers and they would frequently decide well in advance of the sale which pens of cattle each would buy and, therefore, they would not compete with each other. This of course meant that we, as the sellers, received far less than we should have in what should have been an open and fair marketplace. They were even brazen enough in those days to call out across the pens as to whose turn it was to buy and to not bid on my pen.

I learnt very early as a dairy farmer in a regulated environment. I learnt that government decisions had a major impact on my business, which is why I got so involved early. Following deregulation of the industry in 2000, there was the vulnerability of being a producer of one of the most perishable products in what is a majority domestic market in WA, with very few buyers and a lot of sellers. One thing I learnt was that we actually had no bargaining power. In fact, we became absolute price-takers, as we see today with current contracts. That's why measures in this bill continue to be so important. As chair and a member of Dairy Western Australia, we worked with dairy farmers to set up a milk negotiating agency, with the voluntary membership of the same dairy farmers. We applied to the ACCC for authorisation through a collective bargaining process. What blew me away was the attitude of the ACCC at that time. I remember vividly a meeting in Perth. I walked in to present the case for around 300 dairy farmers. I was really concerned about the need to change the ACCC because their disdain was palpable. A comment was made that they were particularly disappointed with the submission by me and Dairy WA because they'd previously had an inquiry into Air New Zealand and Qantas and expected something along those lines. I was representing a group of dairy farmers who were going through very tough times. I reminded the ACCC that they were small business people and that this was the best that we could do. When we walked out of that meeting, I knew that we were done. Our plans to set up the agency and then potentially attract manufacturing and export investment simply would not happen because, not surprisingly, the ACCC said that the action would substantially affect competition, and they refused to let us set up a milk negotiating agency.

I look at where the dairy industry in WA is today. Three farmers were put out of business last year when their contracts were not renewed: Graham Manning, Tony Ferraro and Dale Hanks. I wonder where the industry would have been today had the ACCC approved the application that we made back in 2005. I would suggest it would look entirely different. To add insult to injury, I presented to the ACCC some information about breaches to the Trade Practices Act that made us even more vulnerable, which is why I support so strongly the work of the government on this bill. There were four breaches of the Trade Practices Act that included third-line forcing. At the time, they were not acted on. One very salutary lesson for me was the fact that one of the processors who gave me information about what was actually going on in the marketplace with their interaction wouldn't meet me unless it could be at a parking lot in Perth where there were no cameras. That told me a lot about where we were as an industry, and that is why we need the changes that the government is making.

I note that the Harper review considered that secondary boycotts had not been vigorously enforced by the ACCC compared with other offences. In fact, the Harper review stated that, as with all competition laws, the secondary boycott laws will only act as a deterrent to unlawful behaviour if the laws are enforced consistently and effectively, which is what the government is intending to do.

I'm counting on the ACCC to be a completely different entity today. It has moved on—and with a lot of action from this government. I want to see the ACCC actually focused on small business. I'm looking forward to some very strong recommendations from their current inquiry into the competitiveness of prices, trading practices and the supply chain in the Australian dairy industry. And, of course, it is subject to intense focus by my dairy farmers. There are a number of the inquiry considerations that they'll be very interested in, such as: the nature of competition between processors for both acquisition of raw milk and supply of processed milk and dairy products; the nature of the commercial relationship between dairy producers and acquirers of raw milk; the terms on which raw milk is acquired from dairy producers and the means by which such terms are agreed; and the existence of, or potential for, anticompetitive conduct and the possible impacts of any such conduct on businesses in the supply and dairy chain.

I want to talk, also, about other measures that this government is taking, not just the measures within this bill that I support. The government set up the Office of the Australian Small Business and Family Enterprise Ombudsman—not the Labor Party but our government set this up—as an independent advocate for small businesses like my own that went through those challenges. It supports small business efforts to be innovative, to employ and to thrive. That's what it should be about. That's what this agency is about. The key principles of a fair and competitive trading framework is exactly what I want to see as a small business owner and someone who has built a business.

One of the Small Business and Family Enterprise Ombudsman's principles is adequate access to justice for small business where there is likely to be a significant imbalance of bargaining power. I look at the assistance, the pre-mediation and the alternative dispute resolution available through that office. It is looking at the payment times and practices inquiry, the small-business loans inquiry and, of course, the impact of the Road Safety Remuneration Tribunal payments order. This had a huge impact—the RSRT—on small businesses in my electorate. I saw so many small businesses in absolute dire straits. These are small, family-owned enterprises.

What were some of the key findings of the Small Business and Family Enterprise Ombudsman's inquiry? One was that the payments order resulted in owner-drivers in the long-distance and supermarket distribution sectors being made uncompetitive. There was uncertainty and anxiety for owner-drivers about the impact of these. They were extremely complex and had a short implementation time. I note, with great regret and sympathy, that it was reported to the inquiry that some owner-drivers who found they were unable to cope with further hardship caused by the payments order took their own lives. When we talk about the real world of how decisions made in this place actually impact on small-business people and individuals, there is no greater indication than this one.

I want to thank every small-business owner, particularly those owner truck drivers, who came out and supported us while, often, under significant pressure from unions. And there was significant pressure from unions on those small-business owners at the time. They had courage—the courage that it took them to actually start their own business in the first place, invest and mortgage their home. And they've been consistent in their efforts ever since. They understand exactly that it is this coalition government, the Turnbull government, that stood up for small businesses in the RSRT issue. It was a very significant one, putting small business owners actually out of business and worse. I saw so many of them in my electorate, and I want to acknowledge the work they do as a transport industry. We take them for granted, but they are small businesses who do it tough and who are on the road. And, basically, Australia pretty well runs on the back of the trucks of those small business owners, and I want to acknowledge their efforts. I also want to, again, support the measures that the government is taking with this bill.

Small business is a key part of the reason the amendments in this bill are so important. As I have said, from personal experience and from building and developing a small business and facing the challenges that go with it, I want to acknowledge every small business out there that is investing and that is having a go. They know that this government is there supporting them through the changes in this bill.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I am speaking in support of the second reading amendment moved by the member for Fenner in relation to the Competition and Consumer Amendment (Competition Policy Review) Bill 2017. Labor support the majority of the schedules contained in this important legislation; however, we do oppose schedule 6, which seeks to increase the maximum penalty for breach of secondary boycott provisions by a substantial, and we would say unreasonable, amount.

Labor, of course, is the party of competition. It was the Whitlam government that introduced the first Trade Practices Act into Australian law in 1974. That reform was brought in with the aim of promoting competition and producing productivity and efficiency outcomes in our economy. The aim was to prevent monopolistic and cartel behaviour that was stifling competition in numerous Australian markets. It was also to prohibit practices and policies which reduce competition in a market.

So it was a Labor government that established the foundations for competition policy in this country and it has been successive Labor governments, after the Whitlam government, that have built on that competition legacy. Probably the most important reforms in modernising our economy and promoting productivity, efficiency and competition were introduced by the Keating government, when Prime Minister Paul Keating commissioned Fred Hilmer to review Australia's competition policies. This led to massive sweeping reforms in a number of industries, but particularly in aviation, banking and financial services, and utilities, most notably in electricity by the establishment of the east coast electricity market. These have laid the foundations for decades of successive and uninterrupted economic growth in Australia.

This was again built upon by the Rudd and Gillard governments in 2011, when they instituted a wholesale reform—an overview of Australia's consumer law through a COAG process. The aim of that was to harmonise Australia's consumer and competition laws, to produce a consistent national approach when it came to consumer issues associated with unfair contracts, consumer rights, product safety and of course competition reform. Those laws and those changes criminalised cartel conduct, which up until that particular point in time in 2009 had been a civil penalty. They also brought Australia into line with international best practice that mandated jail time for people and organisations that were caught fixing prices through unfair and uncompetitive behaviour and also through cartel conduct.

When it comes to competition policy and ensuring that we're promoting competition and efficiency in markets, those opposite tend to have a different approach and a different philosophy to the Labor Party. They seek to use this platform of competition review and reform as a means of reducing wages, working conditions and safety in particular industries in Australia. They've used competition laws as a smokescreen for reforms to what essentially are workplace laws and worker health and safety laws. They have used this to reduce collective bargaining rights and collective action in support of fair incomes and safe workplaces. The way they do it—and it's not just this government; there have been successive Liberal coalition governments in the past—is by seeking to have secondary boycott provisions within Australia's competition and consumer laws when they probably rightfully should be within workplace relations legislation. When they have it in this particular piece of legislation, they massively increase the penalties. That is what schedule 6 of this bill does today, by introducing, quite simply, unreasonable and unrealistic penalties for breaches of secondary boycott provisions.

It's all to do with their core philosophy of making life harder for workers and their families. We've seen this over recent years with the policies that have been introduced by this government and their recent support for cuts to penalty rates for weekend workers in Australia. This is the Turnbull government that's stood by and done absolutely nothing when it comes to ensuring that workers' penalty rates for working on Sundays in retail and hospitality industries are protected. Malcolm Turnbull, the member for Wentworth, as Prime Minister, could have stepped in and supported Labor's bills to stop cuts to penalty rates but chose not to. They've sought to restrict collective bargaining in workplaces. They seek to restrict union rights to enter workplaces and they seek to introduce unreasonable and unrealistic penalties that are not internationally consistent for breaches of workplace laws. This bill contains one of those in the increases in penalties for secondary boycotts.

In respect of that particular piece of legislation, what this bill is seeking to do in relation to schedule 6, which Labor is opposing, is introduce and increase massively the penalties for secondary boycotts. A secondary boycott involves one person in concert with another person engaging in conduct that hinders or prevents a third person supplying or acquiring goods and services from a fourth person. Schedule 6 of this bill will increase the penalty for breaching those provisions from $750,000 to the greater of $10 million or three times the total value of the benefits obtained from the secondary boycott or, if the court cannot determine the total value of these benefits, 10 per cent of the annual turnover of the corporate for the 12 months leading up to when the secondary boycott occurred.

This is an unreasonable approach from this government and puts us out of step with what's occurring internationally in respect of competition and consumer provisions and secondary boycotts. The International Labour Organization's convention No. 87 does permit sympathy action. This change is inconsistent with that approach. It will introduce higher penalties for anticompetitive and anticonsumer conduct in terms of international best practice. Penalties for unlawful conduct under the Fair Work Act attract a maximum penalty of $12,600. That's for a breach of industrial and workplace laws, where these provisions should be. But under this reform of schedule 6 the penalty will be 800 times that, at $10 million, for a secondary boycott penalty. In our view, that is unfair. It's inconsistent with Australia's obligations that we've signed up to through the International Labour Organization. It's not something that Labor will be committing to.

I have some brief comments in respect of the effects test. That's been another hotly contested issue in respect of changes to competition and consumer laws. The original draft bill that we're debating here today included the effects test amendments to the misuse of market power provisions in the act. It was removed by the coalition government and introduced separately, because they know that the effects test is the very definition of dangerous economic policy. As the member for Fenner pointed out, the Prime Minister has argued against an effects test in cabinet. We know, through leaks from cabinet, that the Prime Minister argued against this policy when he was the Minister for Communications. Senator Brandis argued against this policy. But, because the member for Warringah wanted to keep the National Party onside, they agreed to this effects test.

God help us when the National Party is determining economic policy in Australia! God help Australia! But that is exactly what is occurring with this introduction of an effects test into the parliament in separate legislation to this. It's dangerous because the major effect of an effects test will be to create a climate of fear for businesses looking to compete through reductions to prices. Every time a business reduces its prices, it will be creating a legal risk for itself if there is an effects test. We know that, since 1974, at least 10 inquiries into Australia's competition laws have considered a proposal for an effects test, and all of them have rejected it, apart from Professor Harper's review, which is the only one that's recommended the effects test. In the words of the former Treasurer, Peter Costello:

The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

That's the antithesis of what we're trying to do with an effective competition policy in this country. We all know that the government's own former Minister for Trade and Investment, Andrew Robb, was also opposed to an effects test. An effects test is bad economic policy. It will end up being a lawyer's picnic when it's up to them to argue before the Competition and Consumer Commission or before the Federal Court whether or not there has been an effect, or a likely effect, on competition by an organisation reducing its prices.

This bill also seeks to introduce a reasonable search defence. We've consulted widely to ensure that this measure wouldn't allow companies and individuals under investigation to use this defence in refusing or failing to comply with compulsory information requests by the ACCC under section 155. Section 155 is the foundation of the ACCC's ability to investigate alleged breaches of the act, and Labor went to the last election with a suite of policies to strengthen it. We're committed to increasing penalties for anticompetitive and anticonsumer conduct to ensure revenue to increase the ACCC's litigation budget from $24½ million to a maximum of twice that level. We welcome the government's announcement to align Australian consumer law penalties with the rest of the act but urge them to adopt Labor's other policies that are in line with international best practice.

In conclusion, Labor has long recognised that an effective competition policy is at the heart of a well functioning economy, but it's also at the heart of a fair society that protects the interests of consumers over rent-seeking monopolists. Our record on this could not be stronger.

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

I am pleased to rise to speak on the Competition and Consumer Amendment (Competition Policy Review) Bill 2017. I'd like to make some comments on what the member for Kingsford Smith said about the effects test back in section 46 of what was previously known as the Trade Practices Act and is now known as the Australian competition law.

The effects test has long been debated, and some of the things that the member for Kingsford Smith said about criticism of the effects test in the past were correct. But he is confused. The effects test that has been put in recent legislation is not the effects test that has been debated over many decades. To explain further, previously under section 46, for there to be a violation, the company had to firstly have what is called a substantial degree of market power. Unless it could show that it had a substantial degree of market power, it could not be in breach of section 46. And that was the basic problem with the law. In fact, in the Boral decision, one of the learned judges highlighted the issue in predatory pricing cases. He said the problem with the law was that it's not applicable at the time that the conduct is engaged in, even if a substantial degree of market power is obtained. His words in that case were that section 46 was ill drawn because of that first-up 'substantial degree of market power' test. The second test under section 46 was that a company had to take advantage of that power. 'Take advantage of' is simply defined as 'used', which is fair enough—you have to use your market power to be in breach. The third section—the section to which the effects test debate relates—previously said it had to be for the purpose of damaging a competitor, restricting entry into a market or limiting a supply. Basically, it was about having a substantial degree of market power and taking advantage of that power for the purpose of damaging a competitor.

The effects test debate over many years was about replacing the word 'purpose' with the word 'effect', so the act would say that a corporation that has a substantial degree of power in a market shall not take advantage of that power for the 'effect' of damaging a competitor. But the change that was made was not just replacing the word 'purpose' with 'effect'. Firstly, there was a strong case that that was not required, because another section in our competition law, section 46(7) said that the purpose could be ascertained from the conduct. In proving purpose, you did not need a smoking gun, you did not need an admission from the company accused that they actually went out for the purpose of damaging their smaller competitor and wiping them out, because a specific section, section 46(7), enabled purpose to be ascertained not by direct evidence but simply by inference of the purpose of the conduct. So much of the debate over the effects test over many years was simply a debate about nothing, because the purpose could be inferred.

We are not just substituting 'effect' for 'purpose'. That was one thing that the member for Kingsford Smith seemed to be confused about. But we're not just changing the word from 'purpose' to 'effect'. We are changing the test from 'damaging a competitor' or 'limiting a competitor's opportunity to enter the market' to 'a substantial lessening of competition'. So it is no longer the purpose of damaging a competitor; it is the effect of substantially lessening competition. Those words may not mean very much, but 'a substantially lessening of competition' and 'damaging a competitor' are two completely different concepts. For there to be a substantial lessening of competition, you almost need a case where the act of substantially lessening the competition results in a near monopoly in a market, or where one player is able, as the court said, to increase their prices without losing business to their competitors.

Under the new effects test, if a small business has been damaged or has been the victim of a predatory scheme of a company taking advantage of their market power—not using their greater efficiencies, not using a superior product or a superior marketing platform but simply using a predatory scheme, using the weight of their market power to eliminate a smaller competitor—that will not be an offence unless there is also a substantial lessening of competition. You have the test up-front that that company must also have a substantial degree of market power and it must engage in conduct that involves a substantial lessening of competition. It's almost like being pregnant and engaging in an act to get yourself pregnant again. The concepts simply do not make sense. Yet this is what the Labor Party are accusing the coalition of not understanding. Clearly, it is the Labor Party who do not understand the effects test. They do not understand the significant change from 'damaging a competitor' to 'a substantial lessening of competition'. If they did, we would not hear speeches like we've heard from the member for Kingsford Smith, who clearly does not understand the concept. I hope I am wrong in this, but my prediction is that we will see even fewer cases and less ability for small business to take advantage of section 46 with that change.

We're doing many great things for small business—lowering the rate of corporate tax and extending the instant asset write-off. We have encouraged small business to invest in this economy, and we have seen that in the numbers. We have seen substantial increases in the number of people being employed by small business in this country. We will see what effect the change to the effects test and section 46 will have. But there is one thing that I can assure you. The concerns about the effects test raised by the Labor Party simply will not come to fruition.

This bill makes numerous changes. One of the changes is to the law on resale price maintenance. I would have preferred to do what they have done in the USA and actually eliminate our resale price maintenance laws. That is what they have done in the USA. Resale price maintenance is the concept where the supplier of a good, a wholesaler or a manufacturer sets out to the retailer the minimum price that he can sell his goods for. We've seen numerous examples over the years. It could be a retailer of jewellery or of perfumes setting a minimum retail price that their goods can be sold for. That may very well be anticompetitive in highly concentrated markets where there's not much interbrand competition, but in markets today, where they are highly competitive, a law on retail price maintenance simply no longer makes sense. That's what they discovered about a decade ago, because there is interbrand competition. I believe that a wholesaler or a manufacturer in a highly competitive market should be able to determine the retailers that stock their product and ensure that their product is sold under certain conditions which enable them to set a resale price. If they set that price too high, there is such competition from so many other brands, they could actually be harming themselves.

This law was introduced into the Trade Practices Act in 1974. Since that time we've seen this law used against very small businesses in the wholesale sector and in the manufacturing sector that simply haven't been aware of the law and have done something that they thought they could do in a free market—that is, they selected the retailers that they distribute their goods through on the basis of the price and the quality that they sell for. Many of these small companies have found themselves before the ACCC, before the courts, and fined hundreds of thousands of dollars, when all they have done is try to protect their brand.

So I welcome the change in this legislation that allows a business that wishes to set the retail price amongst their retailers to obtain an authorisation from the ACCC. This is good policy. This is pro-competitive policy. This is pro-small business policy. I hope that the ACCC understand the intent of the parliament in allowing businesses to obtain this authorisation, and that they grant those authorisations where they practically can, because we've seen many cases where the law has been unfairly and very harshly used against many, many small businesses.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

Order! The debate is interrupted in accordance with standing order 43. Debate may be resumed at a later hour. Are there any statements by honourable members?