George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Hansard source

The government does not support Senator Fielding’s amendments. There are several reasons for that; let me deal with the three most important. But I should indicate that one of the reasons given by Senator Sherry for the Labor Party’s opposition to your amendments, Senator Fielding, is quite wrong. Senator Sherry, if I understood him correctly, thought that introducing substantial lessening of competition would add uncertainty. Substantial lessening of competition has been a key concept of part IV of the Trade Practices Act since 1974. I do not know who is advising you, Senator Sherry, but that is not the issue here at all.

There are three particular reasons why the government does not support these amendments, Senator Fielding, and they are these. First of all—and I dare say you expect me to say this—in our view the government amendments that were passed by the Senate earlier in the day sufficiently, if that were necessary beyond the existing terms of section 46, deal with the issue of predatory pricing in any event.

Secondly, your amendment would for the first time introduce into section 46 of the act—that is, the misuse of market power provisions—two quite novel concepts. The first is to regard substantial financial power as an alternative test to substantial market power. That, if I may say so, Senator Fielding, really is a heresy when it comes to competition law. The whole point here is to deal with the exercise of power in a market. Part IV of the Trade Practices Act is about the use or misuse of market power so that the conduct upon which the prohibitions in the act fix are the various ways and circumstances in which market power may be abused.

What you are saying, Senator, is, ‘As well as the misuse of market power, we should have a second concept: the misuse of financial power.’ But that concept would only have any operative effect if one could not make out misuse of market power. So, Senator Fielding, you ask yourself the question: ‘In what circumstances could it be anticompetitive for a company which was not misusing market power nevertheless to be constrained in its commercial activity because of its financial power?’ I suppose the only answer to that question would be: if you had a very wealthy company. But if wealth of that company—a company with great financial power—did not translate into the existence of market power, which could very easily be the case, why would we want to attack the company merely because it was a wealthy company?

It is very commonplace. In fact, in any healthily functioning market you will find several players, several corporations, with financial power—if that is to be defined as financial resources or wealth or as ‘deep pockets’—which, nevertheless, do not have substantial market power because it is a competitive market. But, if it is given that it is a competitive market, why would the Trade Practices Act be interested in intervening? That is the very thing that the Trade Practices Act is there to secure, so the premise of your amendment, insofar as it would invoke this additional concept of financial power as a ground of intervention, really is deeply anticompetitive.

Thirdly, we do not agree with the introduction of an effects test into a section which would operate cognately with section 46. There is an effects test, as you know, Senator Fielding, in section 45, but it is about horizontal arrangements. There has been a debate going on for as long as the Trade Practices Act has been the law of the land as to whether or not what the misuse of market power provisions—which are about corporations acting unilaterally, not in concert—should deal with is a purpose, which section 46 does, or also an effect. The reason that most respectable opinion settles upon limiting the operation of section 46, or of any provision cognately operating with section 46, to purpose is that if you said that the operation should settle upon merely an effect absent a purpose to drive competition out of the market then you would potentially be capturing any successful competitive strategy. If you had a corporation which was not motivated by one of the three purposes prohibited by section 46(1), and it was not seeking to eliminate or substantially damage or drive out of the market a competitor but nevertheless an effect of its corporate conduct was to damage a competitor, then that conduct would be prohibited.

As I said earlier in the debate, the basic proposition of part IV of the Trade Practices Act is that it exists to protect the competitive process, not to protect individual competitors. If the Trade Practices Act were to seize upon any occasion in a competitive market when an effect of a powerful corporation might be to drive out of the market a competitive company, albeit that that was not the purpose of the successful company, then I can leave it to you to imagine what a chilling effect that would have on the operation of the market. Ultimately, by its chilling effect on the operation of free competition, it would in fact be deeply anticompetitive, so that is another reason why the government does not go along with your proposed amendment.