Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary for Science and Water) Share this | Hansard source

I also rise to contribute to the debate on the Petroleum Retail Legislation Repeal Bill 2006. I listened with great interest to the comments by Senator Fielding about the relationship between the Trade Practices Act and this bill, and the bills that are repealed through this bill. This bill repeals two pieces of legislation that were enacted more than 25 years ago—the Petroleum Retail Marketing Franchising Act 1980, otherwise known as the franchise act, and the Petroleum Retail Marketing Sites Act 1980, otherwise known as the sites act. The truth of the matter is that over that 25-year period there have been such profound changes in the petroleum marketing industry that the two pieces of legislation enacted all those years ago now cover less than 50 per cent of the industry by volume. So it is timely that the government reviews this legislation and removes it from the statute book, conditional upon the implementation of an Oilcode. Senator Fielding spoke at great length about the conditions of the Oilcode and the concerns that some parts of the industry had about shortcomings that they still perceived to be in the Oilcode. But, at this stage, it is an agreed set of arrangements between the players in the industry that has finally been brokered by the government.

Such repeal legislation has been contemplated by this government many times but sadly it has not been able to get that Oilcode development, which would provide for greater transparency and a more even playing field for all participants in the industry, until now. Labor supports the repeal of this very old legislation and the implementation of an Oilcode. The sites act is so old that it restricts the number of retail sites that prescribed oil companies—namely BP, Caltex, Mobil and Shell—can directly own and operate in Australia. The franchise act sets out the minimum conditions and terms for franchise agreements between the oil majors and the franchisees. One of the profound changes that has occurred over that 25-year period is the market entry of the large independent retailers chains that we saw in the 1980s and 1990s and, much more recently, the supermarket retailers. We have had many discussions in this place over recent months about the role of supermarket retailers and the relationships that they have with their petrol partners with the debate about the fuel excise legislation and now this legislation.

The Oilcode that has been brokered introduces, amongst other things, a nationally consistent approach to terminal gate pricing. I know that we have had much discussion in this chamber about just what terminal gate pricing is and who pays that amount. It provides for greater transparency in the wholesaling of petrol to independents and other players by the major oil companies. It also establishes a more efficient dispute resolution system to provide the industry with a more cost-effective alternative to taking disputes to court. There were some concerns raised during the inquiry of the Senate Economics Legislation Committee into this bill about that whole dispute resolution process. Some concerns were raised this morning in this debate by Senator Murray, who recounted the evidence that was received by the committee from some of the independents. They were again referred to by Senator Fielding when he was talking about the time constraints between lodging a complaint with the disputes process and having it heard.

This bill is very timely. People all over Australia are struggling with soaring petrol prices, interest rate increases and greater uncertainty in their workplaces. People are now spending a higher proportion of their income on mortgage payments than ever before. We saw in the Sydney papers on the weekend that there are now almost 5,000 mortgagee-in-possession sales going on in New South Wales as people relinquish their mortgages because they simply cannot afford them. At the last election, the Prime Minister promised to keep interest rates low, but people are now realising the hollowness of that promise. People now spend about 11 per cent of their household disposable income on mortgages compared to less than 10 per cent when interest rates peaked in 1989. So these families in my state—and your state, Mr Acting Deputy President Hutchins—of New South Wales who are paying off a mortgage are hurting much more than they did in the past.

This bill shows us that the government is capable of taking corrective action in the retail petrol market. The question begs to be asked of why it has taken so long. Why has a 25-year-old regulatory regime been allowed to fester until today? Rather than take the initiative to resolve the issues raised by this bill, we have had discussions about the Trade Practices Act. The recommendations of the Dawson inquiry into the Trade Practices Act have been sitting here and have been the subject of debate in this place and in the House of Representatives for years as we have waited for the government to take some action on those recommendations. In fact, the Senate Economics Legislation Committee in 2004 reported on the Trade Practices Act amendments, investigated how the Trade Practices Act was protecting small businesses and made significant recommendations on the legislation, which again we are still waiting to see and which would strengthen the conditions of the Oilcode that are part of the whole package of this petroleum reform.

It was very interesting listening to the Senate Economics Legislation Committee inquiry into this bill. The evidence suggested that the government did not proceed with the bill in 1998 because the affected parties could not agree on the Oilcode proposal. It has taken six years for the government to broker a compromise on this particular legislation and, on the evidence, there are still some parties—particularly the independents—that are very worried about some parts of the Oilcode.

However, there can be no doubt that vigorous marketplace competition is one step to holding petrol prices as low as possible; so we have waited to see this legislation come into the Senate, hoping that it has been drafted in a way that can mitigate the impact of petrol prices on ordinary Australians. We have had significant representations from both the ACCC and the Australian Institute of Petroleum about the importance of repealing the two acts and about the impacts that might have on petrol prices. Let us hope we do see the impacts that are anticipated from the repeal of these pieces of legislation. The committee actually recognised that neither act is effective and that neither act keeps pace with the structural changes that have taken place in the petroleum industry. The acts expose different parts of the industry to different regulatory requirements that are now very difficult to justify.

The entry into the market of the supermarket chains, with their market strength, means that it is necessary to ensure that all participants can compete on equal terms. Failure to do this is likely to lead to a lessening of competition if the refiners withdraw from the market altogether, which was something that was discussed during the hearings and was considered to be a possibility. That is possible if their competitive disadvantage is not addressed. The committee was also very concerned that failure to address these issues might lead to a continuing loss of refining capacity. We now know that we have lost more than half of Australia’s refining capacity over recent decades. As we have heard from several speakers’ contributions to this debate, that raises serious issues for Australia on energy security.

So, on the whole, the committee supported the repeal of the acts and considered that the proposed Oilcode would significantly improve the situation of many industry participants, particularly the commissioned agents who do not currently enjoy any of the protections afforded by the franchising act. These groups will also have access to a low-cost dispute resolution scheme for the first time. The committee also noted the concerns of some industry participants about aspects of the Oilcode, particularly in relation to tenure and the potential for abuse of market power. The committee did not believe that the concerns about tenure were very well founded, although they were passionately argued throughout the hearings, but we did suggest that the government revisit the issue of the $20,000 threshold for extended tenure under the Oilcode and we did express our concerns about the government’s need to bring forward amendments to section 46 of the Trade Practices Act, which we believed was a much more appropriate way to address these concerns.

The Labor senators argued the importance of section 46 of the Trade Practices Act and added some comments to the report which reflected our concerns about the fact that, in the Rural Press case that had been brought to the Federal Court and the High Court, the concept of abusing market power in another market had been brought into question. In the Boral case the very concept of market power was brought into question. The ACCC gave evidence that they had effectively given up taking cases under section 46 of the Trade Practices Act because they now knew that it had been rendered ineffective.

We made several recommendations in the report of the Senate inquiry on the effectiveness of the Trade Practices Act on small business. These recommendations involved strengthening the Trade Practices Act, some of which the government has committed to. But much more needs to be done. The measures in this legislation do not achieve the objectives of encouraging competition in this sector in isolation from the section 46 reforms that the Senate has previously called for—and Senator Fielding made those points in his contribution to the debate. We on this side of the chamber believe that the most effective market outcome will not be achieved unless section 46 reforms are implemented concurrently. We note the comments of Mr Cassidy from the ACCC in evidence to the Senate inquiry:

I would say that, to the extent that there are shortcomings in the current section 46—and that is obviously well-travelled ground—we think the answer to that is to amend the section.

So the ACCC clearly supports the strengthening of section 46 to support competition in this and other markets—and I suspect Senator Joyce does too. Ideally, the government should commit to immediately legislating the recommendations of the Senate committee in relation to section 46 of the Trade Practices Act.

I note the first, second, third, fourth, fifth and sixth recommendations of the Labor senators’ report. The first is that the legislation be amended to state that the threshold of a substantial degree of power in a market is lower than the former threshold of substantial control—a subtle difference but an important one—and to include a declaratory provision ‘outlining matters to be considered by the courts for the purpose of determining whether a company has a substantial degree of power in a market’. It says these matters should be based upon the suggestions outlined by the ACCC.

Recommendation 2 says:

The Committee recommends that the Act be amended to include a declaratory provision outlining the elements of ‘take advantage’ for the purposes of s.46(1). This provision should be based upon the suggestions outlined in ... this report.

We recommended:

... the Act be amended ... without limiting the generality of s.46, in determining whether a corporation has breached s.46, the courts may have regard to: the capacity of the corporation to sell a good or service below its variable cost.

Even in the current inquiry that is taking place into the supply and cost of petrol in Australia, we are hearing serious concerns about the way in which the independents in particular are feeling very vulnerable without the provisions of section 46 of the Trade Practices Act being amended by this government. We understand that the government will bring forward a bill that includes a small set of the recommendations but that it has been held up, as I said earlier, by the apparent linkage with the other trade practices bill—the Dawson report bill, which contained merger changes that were deleted from the bill in the Senate. So our recommendations, presented as an amendment by Senator O’Brien, relate to section 46, which constrains abuse of market power. They seek to toughen section 46, to allow the ACCC to crack down on the abuse of market power, and we know that this is an important concern of senators on both sides of the chamber. We believe that there should be no ducking and weaving on the other side in relation to this amendment, which will ensure only that huge corporations operate properly and fairly towards small businesses.

While one aim of this bill is to increase competition, we cannot forget that the main objective of competitors within a market is to eliminate competition. The increasing oligopolisation in this and many other industries pays testimony to this fact. The government should not half-complete its job of promoting competition in the petroleum industry by ignoring the vulnerability of small businesses to the blatant abuse of market power. High Court cases dealing with this issue do not bode well for the ACCC securing prosecutions for the misuse of market power under current provisions in the future. Again, we should not allow dysfunctional legal provisions to fester while market share is increasingly being concentrated in the hands of a few rather than in the hands of many.

In the past the government believed the best approach for controlling the power of the major oil companies was to specify the number of retail sites the companies could operate. As I have said, Labor believes the focus should be on reforming the Trade Practices Act. We need to ensure that the ACCC has the power to ensure that oil companies are not abusing their market power. Labor’s amendments to this bill reflect the recommendations of the Senate report into the effectiveness of the Trade Practices Act for small business. We want to toughen section 46 of the act to allow the ACCC to crack down on the abuse of market power.

While Labor accepts that the Petroleum Retail Marketing Sites Act and the Petroleum Retail Marketing Franchise Act represent an outdated model for regulation of the petrol retail sector—as they exclude major supermarket chains engaged in petroleum retailing and have been circumvented by major oil companies in some circumstances—I am also of the view that the principal issue in encouraging competition in this sector, and indeed across all markets, is the strengthening of the provisions of the Trade Practices Act against misuses of market power. That can only occur if the section 46 reforms are implemented concurrently. Even the ACCC has shown its clear support for strengthening section 46 to support competition in this and other markets—and I have quoted comments made by Mr Brian Cassidy to the original inquiry.

There are enormous challenges ahead for Australia as supplies of fossil fuels come under increasing pressure from the rapid pace of development in countries like India and China, but there are also opportunities for us as we develop our own resources. With vision and leadership there is the real prospect of major new industries opening up in areas such as natural gas and the conversion of coal to diesel. As a representative of a regional and rural electorate, I am very interested in the potential for large-scale ethanol and biofuels industries in Australia. What I do not want to see, though, for the people of Australia is ever-rising fuel prices and an increasing reliance on overseas oil, with our future prosperity and security held to ransom as a result of the government’s lack of initiative.

I commend the bill to the Senate. I look forward to seeing those long-awaited changes to the Trade Practices Act which need to be part of the Oilcode as soon as possible.