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

I move Democrat amendment (6) on sheet 5324 revised:

(6)    Schedule 2, page 6 (after line 12), after item 3, insert:

3C  After subsection 50(1)

Insert:

     (1A)    A corporation must not directly or indirectly:

             (a)    acquire shares in the capital of a body corporate; or

             (b)    acquire any assets of a person;

if the acquisition and any previous acquisitions by the corporation in any relevant market in the 5 years preceding the current proposed acquisitions collectively have the effect, or are likely to have the effect, of substantially lessening competition in a market.

      (1B)    A person must not directly or indirectly:

             (a)    acquire shares in the capital of a body corporate; or

             (b)    acquire any assets of a person;

if the acquisition and any previous acquisitions by the person in any relevant market in the 5 years preceding the current proposed acquisitions collectively have the effect, or are likely to have the effect, of substantially lessening competition in a market.

This is one of those amendments which have been terribly difficult to design. The Senate Economics References Committee, in March 2004, in its report on the effectiveness of the Trade Practices Act 1974 in protecting small business, referred to the issue of ‘creeping acquisitions’. Those people who have participated in competition law discussions over probably a decade or more would know that creeping acquisitions have been the bane of the grocery retailing sector in particular. Everybody understands the problem of creeping acquisitions. It is an easy one to express and an easy one to understand—that is, the cumulative effect of acquisitions over time can result in the accumulation of market power such that it will threaten competition—but how to deal with it has been the topic of major discussion. At page xviii of the report of the Senate committee I referred to, it stated the following:

Submissions before the inquiry suggested that in the retail grocery sector and the retail liquor sector, large chains are acquiring the stores of independent competitors in a program of ‘creeping’ acquisitions. Witnesses expressed concern that s.50 of the Act, designed to prevent acquisitions that would have the effect of ‘substantially lessening competition in a market’, is inadequate in dealing with piecemeal acquisitions because no single purchase is likely, by itself, to lead to a substantial lessening of competition.

The ACCC itself expressed concern about this issue, but also noted that it has not yet determined whether creeping acquisitions in general (as opposed to specific case) do substantially lessen competition and so cause economic detriment. Further, if they do have this effect, the ACCC expressed uncertainty about whether the current section 50 provisions would be adequate to deal with that issue.

The Committee considers, as a matter of logic, that creeping acquisitions must, if continued indefinitely, at some point result in a very concentrated market. The clear consensus of evidence before the Committee supported this view, and no substantial arguments were raised to oppose it. Current merger law does not effectively address this issue. Section 50 of the Act should be strengthened to take account of the cumulative effects of acquisitions which over time may substantially lessen competition.

Recommendation 12

The Committee considers that provisions should be introduced into the Act to ensure that the ACCC has powers to prevent creeping acquisitions which substantially lessen competition in a market.

Easy to say but hard to do. The government senators said at page 89:

Government Senators do not support this recommendation. In our view, the existing provisions of Part IV, subject to the amendments we have recommended above, adequately deal with such competition issues which ‘creeping acquisitions’ might raise.

With respect, I disagree with the government senators. There are a number of government senators I know who are extremely concerned about creeping acquisitions, and some of them might be sitting near me in this debate.

The Democrats have attempted to address this issue. We have created amendment (6). There may be those people who cannot see this amendment working, because it does use the time period of five years as the period in which creeping acquisitions can be taken into account or when they may or may not impact on an acquisition made in another state. That may be, but there needs to be some time based recognition of the creeping acquisition phenomenon.

Everybody knows that the definition of ‘market’ in the Trade Practices Act is an integral part of a case getting up. So, if the relevant market is recognised as a national market, this amendment allows a court sufficient flexibility to review the pattern of acquisitions over five years in any relevant market to get a better fix on their collective or aggregated impact on competition. If the pattern of behaviour demonstrably substantially lessens competition then this amendment allows the ACCC to deal with them. At the moment, the ACCC cannot.

More importantly, this amendment allows creeping acquisitions in local and regional markets to be considered, and that is where the adverse impact on competition from creeping acquisitions over five years may be much more pronounced. One only needs to think about the changing media landscape, for instance, to see the validity of this argument. I freely confess to the minister that this is a difficult one to design; it is a difficult one to attack. But the principle that I wish to see expressed is that creeping acquisitions, in the same way as substantial acquisitions, should be seen as potentially capable of creating the same effects as a substantial acquisition could, and that is the mischief we are seeking to remedy through this amendment.