Andrew Murray (WA, Australian Democrats) Share this | Hansard source

Senator Joyce has moved a motion to disallow the Petroleum Retail Marketing Sites Amendment Regulations 2006 (No. 1) made under the Petroleum Retail Marketing Sites Act 1980. This motion is directly related to the government’s proposal to repeal the Petroleum Retail Marketing Franchise Act 1980 and Petroleum Retail Marketing Sites Act 1980 and replace them with a mandatory oil code under the Trade Practices Act.

In our view, there are two issues before us. One is the question of whether these regulations effectively put the cart before the horse, in that they have been put into law prior to the passage of the bills which would make them valid and reasonable. The second issue is whether this is an incomplete package, in that it is not accompanied by appropriate underpinnings, an appropriate safety net and appropriate protections for small businesses, who will be more disadvantaged than they are at present.

In that regard, I note the remarks made by the opposition revenue spokesperson, Mr Fitzgibbon, as reported by AAP on Wednesday, 14 June 2006:

The Regulation has the effect of repealing the Sites Act before the Parliament considers the merits of the repeal bill. This is an unacceptable abuse of power and an attack on parliamentary democracy.

The government is proposing to repeal the sites act, thereby allowing the oil majors to directly operate all retail sites owned by them. As an interim measure, the government has sought to remove the oil majors from the operation of the sites act through these regulations. By seeking to relieve the oil majors of their obligations under the sites act, the government is pre-empting the parliamentary debate regarding whether or not the sites act itself should be repealed and whether the repeal proposal is complete and adequate in its form. These regulations should therefore be opposed as they are contrary to the parliamentary intention behind the existing law and they represent a blatant attempt to pre-empt parliament’s decision as to whether or not to repeal the sites act, as proposed by the government.

The reason the government are taking this route is that it is an extraparliamentary way of getting around the parliament in a circumstance where they fear that those coalition members who feel strongly about small business might torpedo their proposed legislation. That is not the way to conduct a parliamentary democracy. Coalition members do not seek to oppose or irritate the government on a whim; they seek to do so because they recognise that they have a concern with respect to their constituency. It is a valid concern, and they have the courage therefore to address that concern. Whether I or anyone else happen to agree fully or not with the particular issue at hand, it is a mistake for Liberal and National members, both frontbench and backbench, to allow this kind of practice or procedure to be accepted or entrenched. The proper way for these things to be resolved is, firstly, for them to be raised within the party room of the parties concerned and, secondly, for them to be brought before the parliament for final resolution.

I and many others object to this regulation coming up prior to the enabling legislation, because it is a profound, regrettable, undemocratic and nasty abuse of process. It is nasty because it will not recognise the validity of opinions held very strongly by literally thousands of small business owners and employees and by those parliamentarians who seek to represent them. My party and I strongly object to this on the basis of an abuse of process.

The second issue is whether there is sufficient underpinning for small business in this package. In his remarks, Senator Joyce specifically referred to the section 46 amendments, which small business at large, many academics, many professionals, many businesspeople and many parliamentarians have been urging on the Treasurer and the government. There is a remarkable thing about this. The Senate Economics References Committee in March 2004 conducted an inquiry into the effectiveness of the Trade Practices Act 1974 in protecting small business. That inquiry was chaired by a senator who is present in the chamber today, Senator Stephens, who I thought did a very creditable job in conducting that inquiry and was very ably assisted by all the members of the committee, of whom I numbered one.

That committee produced 17 recommendations. Although there was a minority report which dissented from a number of the recommendations in the majority report—and which was principally authored by someone who deserves to be regarded as expert in this field; namely, Senator George Brandis from Queensland—the Liberal Party members of that committee supported a series of recommendations in the majority report. The government, subsequently, accepted those recommendations in the Australian government response to the Senate inquiry.

That response indicates that the government accept that there are a number of areas that deserve to be amended to assist small business in competing more fairly and more ably in the marketplace. So the recommendations were considered by a Senate committee, a number of them were accepted by the government experts on that committee and they were then accepted by the government. That was two years ago, and they are still not part of a package available to the parliament to underpin a change in law which manifestly will enable big business operators to compete in this industry in a more effective manner but does not provide any assistance at all for small competitors, small individuals and small business people who are faced with this changed environment.

It should be noted—and the minister mentioned it briefly—that major corporations like BP, Caltex and others support those proposed bills and they oppose this disallowance motion. They have a legitimate case to make. In contrast, the Motor Trades Association and small business owners oppose the bill in its current form and support the disallowance motion. So you have a clear cleavage in the market. My question to the government is: instead of saying you will fall only on the side of the one party, which is all you are doing, and instead of being the big business lapdogs that you appear to be, why don’t you match your proposals with those which you have already accepted in the government response and provide some leverage for small business in these circumstances? That is the problem with what you are putting forward. Both the reality and the perception are that this is biased, one-sided and just not fair.

The central issue is not whether the franchise and sites acts should remain but, rather, that the post-repeal environment allows sufficient opportunity for small business and independent fuel operators to remain competitive and not be driven out by the oil majors and the supermarket chains. That requires: firstly, the strongest possible oil code, to ensure that small business and independent fuel operators have continued access to suppliers of fuel products—at prices and under terms and conditions that enable them to compete in the market; and, secondly, that an effective Trade Practices Act ensures that small business and independent fuel operators cannot be driven out by anticompetitive practices by the oil majors or supermarkets.

It is not my view that it is anticompetitive that those practices are possible. It is the view of a Senate committee which has majority support for all of its recommendations and unanimous support for a number of its recommendations, which the government have accepted. Those potential anticompetitive practices should be addressed. For an effective Trade Practices Act, one of the most important things a government could do would be to implement the recommendations from the Senate inquiry. In my view it would be preferable to implement all 17 of them, but at least they should implement those that they have accepted. Two years later, they will not do it. Why won’t they do it? It is not because they do not agree with them, but because big business pressure is telling them not to. That is just not acceptable for a government which claim to govern for all Australians and for all businesses.

Those recommendations would assist the Australian Competition and Consumer Commission in more effectively dealing with potential abuses of market power and unconscionable conduct by the oil majors and the supermarkets. Under the Petroleum Retail Marketing Sites Act 1980, oil majors have been restricted to operating only five per cent of service stations. The original policy objective was to prevent the vertical integration of oil companies all the way through to the final consumer. By restricting the number of service stations that the oil majors operated, smaller business operators were to be given the opportunity to participate in the retail fuel market. That would have led to greater price competition to the benefit of consumers as the oil majors could not—because of section 48 of the Trade Practices Act, which prohibits resale price maintenance—directly set the retail price at sites operated by these small businesses.

The Democrats recognise that the market has moved on. We understand that. We understand that it is necessary to reform and change the legislation governing this industry. So we are in a situation which, as I read it, is exactly that of the Labor Party opposition: if the government showed some good faith and moved towards recommendations and the simultaneous implementation of changes to the Trade Practices Act, we could consider this legislation favourably. The ALP minority report of the recent Senate Economics Legislation Committee inquiry into the Petroleum Retail Legislation Repeal Bill 2006 stated:

Ideally, the Government should commit to immediately legislating the following recommendations of the Senate Committee in relation to s46 of the TPA:

I note that Mr Fitzgibbon listed those recommendations in his earlier remarks.

The issue is that you cannot have one set of changes which are not simultaneous, contiguous or coincident with changes which would assist small business in general through general competitions law. For decades, the Australian Democrats have argued that a strong small business sector is essential to the economic and social health of Australia—that small business has a value of itself. That is a very important statement. We do not see small business just as an economic mechanism. We see it as a fundamental part of our social fabric. That needs to be understood by the coalition. You cannot regard these matters purely in economic rationalist terms or purely under economic criteria. You have to recognise that there is a value to this country in keeping small business in business.

I do not want to see a service station market reduced further with respect to its independent participation than it is at present. If my memory is correct, we have come down from something like 30-odd thousand independent service station operators to around 8,000 now. That is a market rationalisation of huge scope and nature. In many respects, it is inevitable. It is the nature of the modern world that there is an increasing concentration of market power in fewer hands. It is the nature of our changing world environment. But it should not mean the total destruction of the small competitors, and, if we can do anything to retain small business as a viable, effective and meaningful contributor to our economic and social health, we should do so. That is why I consistently say that small business has a value of itself.

Our views on the Petroleum Retail Legislation Repeal Bill are necessarily coloured by that perspective. We, the Democrats, strongly support the workings of a free and fair market, as evidenced by our work on corporations, trade practices and tax law. But we have long been concerned that a weak Trade Practices Act does not deliver sufficiently fair competition for small business with sufficiently adequate protections from predatory pricing and the abuse of market power. We need to understand in this country that we have a weak Trade Practices Act compared with international trends in legislation.

In that respect we set great store on recommendations in the majority report, which we support, of the Senate Economics References Committee of March 2004, titled The effectiveness of the Trade Practices Act 1974 in protecting small business. If those 17 recommendations were implemented—that cover the misuse of market power, unconscionable conduct, collective bargaining, creeping acquisitions, divestiture and the power and resources of the Australian Competition and Consumer Commission—then free and fair competition would be greatly strengthened in Australia. Further, there would then be less of a case—and that is an important point—for industry specific regulation in any industry if the general law was so strengthened.

The Democrats opposed the earlier version of this bill, arguing that stronger trade practices powers were first required to address the abuse of market power and to introduce the threat of divestiture on over-mighty corporations. We said then that Trade Practices Act reform was a precondition to considering whether this industry regulation could be lifted or modified. That is still our position, but at least offer us those things that the government have said they would accept with respect to changes to the Trade Practices Act following that Senate committee in 2004—two years ago. This is a government that can produce terror legislation in 24 hours but takes over two years to even drag themselves into the parliament to discuss Trade Practices Act reform. What is the matter with them? Does it not matter to them that the small business community feels strongly about this?

I have argued again and again—and I will repeat some of my remarks that I have made before—that the thing that is missing in our laws is the flip side of the merger and acquisition power. Workplace, tax, corporations, finance and trade practices laws are the main laws affecting the functioning of the market and the regulation of the behaviour of corporations. In matters of competition and consumer interest, all over the world the law restrains great commercial power because of the known abuse of power that often accompanies it. When it comes to the size and behaviour of corporations, the Trade Practices Act 1974 is Australia’s prime protective device, yet the act is weaker and more deficient in its protective capabilities in comparison with legislation in countries like the United Kingdom and the United States.

I have said before that big business roars approval at the dynamism of the American market but fiercely condemns a major contributor to that dynamism—and that is the effects of antitrust or divestiture laws. We need those regulatory tools in Australia. Balanced divestiture laws are the corollary of balanced merger laws. We do not have effective divestiture laws, and it is to me a strange and illogical policy that can prevent mergers to maintain effective competition but cannot require divesture also to maintain effective competition.

As in Australia, many markets are experiencing oligopolisation, which is a concentration of power in the hands of a small number of competitors, this is partly a natural result of economies of scale—the big get bigger and as they do they develop the ability to operate more cheaply and efficiently. Over time the smaller players are forced out of the market. That is the way of the market and it is valuable while it promotes efficiency, innovation and competition—but only up to a point. Eventually the destruction of competitors results in the destruction of competition, or the predatory intimidation of competitors reduces effective competition. Where that has occurred or will occur the state must intervene to save the market from eating itself.

By its very nature, power to order divestiture should be regarded as largely a reserve power as international precedents indicate it would be seldom employed. It should be used rarely and used responsibly. Its great virtue is as a cautionary power making oligopolies careful of abusing their market power. It will be used only when necessary to maintain or restore competition.

I am repeating remarks I have made again and again simply because they are remarks that need to be made again and again—until the government of the day eventually gets the point that its Trade Practices Act must be strengthened so that the economic health of Australia is assured and recognised in an appropriate manner. The Australian Democrats do accept that there is a need to update the regulation governing the petroleum sector but we are not content that the package of measures that accompanies it has yet been put before the parliament.