Ron Boswell (Queensland, National Party) Share this | Hansard source

I am in continuation at present on the Trade Practices Legislation Amendment Bill (No. 1) 2007 and I was explaining to the Senate that, under section 46 as it presently stands before this legislation goes through the House, to secure a section 46 conviction it almost had to be a monopoly taking on a smaller business, and it had to have a substantial degree of market power that was considered a monopoly. Just to explain that, I would like to read the judgement of a member of the full bench of the High Court, and this was his finding. He supported Boral’s appeal. Justice McHugh concluded:

Even though Boral drove down its prices in order to remove competition, this does not mean that it had a substantial degree of market power. That must be proved before there is a breach of section 46. Predatory pricing without a substantial degree of market power cannot result in a breach of section 46.

That, in a nutshell, is why we have to amend section 46 today. There were clear cases—even Justice McHugh recognised that Boral drove down its prices in order to remove competition. And even after it knew that, the High Court could not bring in a breach of section 46.

Since that finding, there have been no more court actions under section 46. The ACCC have just not bothered to take any section 46 cases to the court because they knew that they would be unsuccessful and would have been wasting their hard-to-come-by money. So there was an acknowledgement that Boral may have predatory priced but no way to prosecute because they were deemed not have a substantial degree of power in the market. So the reason we are bringing this legislation in today is to make sure that we do have an effective safeguard for unfair practices of predatory pricing. The Treasurer and the government have now produced this bill and should be congratulated on it.

The major small business groups, NAGA, the NFF, COSBOA and the Fair Trading Coalition, all agree that changes will have significant effect in again making section 46 operational and functional in discouraging and protecting them from a misuse of market power by the large competitors.

Reforms that we are making to section 46 reflect the wishes of small business and really address four major issues. One is threshold, another is predatory pricing, another is cooperative action to misuse market power and the other is recoupment. This legislation addresses those four issues. I just take a minute to thank Hank Spier, because he did a lot of work with the small business organisations and got this legislation to the point where it became part of the government’s program. Senator Joyce will move amendments that support small business.

Can I substantially address the four issues. On the threshold: a successful section 46 prosecution relies on a business being deemed by the court to hold a substantial degree of market power and to have taken advantage of that power in the market by acting in some way to disadvantage a competitor. Legally, this has become a problem since Boral raised the threshold and made it almost impossible for non-monopoly businesses to reach the required level of market power to proceed on a case alleging breach of section 46.

On predatory pricing: we have already discussed this issue in some detail. The bill enables the court to consider the operation of a business in supplying goods or services below cost and the reasons for this behaviour when deciding that a business holds a substantial degree of market power in the market. The government will also move an amendment to the bill today that will leave no doubt that predatory pricing is a practice that will not be tolerated. It introduces a new prohibition specifically for the practice of predatory pricing within the misuse of market power framework, and that will be welcomed by small business.

On cooperative action to misuse market power: through this bill we will also address this by making it clear in the Trade Practices Act that misuse of power can take place when two or more businesses cooperate or are coordinated in misusing market power. Also, the bill makes it clear that misuse of market power can occur across markets so that, for example, if a business holds a substantial degree of market power in a grocery market, it is being made clear that the business cannot leverage and misuse that market power, say, in a fuel market.

One problem that was worrying small business was that of recoupment. We have included reference to recoupment in the explanatory notes. Recoupment was being given too much consideration in the courts when they were considering predatory-pricing cases. The government maintain that this is covered in the legislation, but we have included clarification in the explanatory memorandum that makes it clear that there is not a legal requirement of recoupment or loss to prove that predatory pricing is taking place. It is not a requirement to prove a breach of section 46.

There is also the addition of a new small business commissioner on the ACCC and improvements to section 51AC to raise the transaction threshold from $3 million to $10 million, something that small business continually asked us to address. (Time expired)