Grant Chapman (SA, Liberal Party) Share this | Hansard source

The Trade Practices Legislation Amendment Bill (No. 1) 2007 has come about because of a review initiated by the Howard government back in May 2002. At that time Mr Justice Daryl Dawson, a former High Court judge, was asked to conduct a review investigating the misuse of market power as defined in the provisions of section 46 of the Trade Practices Act. The Trade Practices Act has been dealt with by this parliament on many occasions and has been examined by committees and specialised groups over a long period of time. There have been a number of cases in which the section that deals with competition has been brought before the courts. A consistent concern raised by small business is that they are not playing on a level playing field. Many small businesses, when they compare the prices at which they are able to sell, see large corporations as having an unfair advantage. Often small businesses claim that they can purchase products from large corporations at a lower retail price than they are required to pay if they purchase wholesale in the operation of their own business.

Following the report by what has become known as the Dawson committee, which was released in April 2003, the relevant Senate committee had a look at the Trade Practices Act and the Dawson recommendations. In 2004 the then Senate Economics References Committee, now the Senate Standing Committee on Economics, of which I am a member, examined the economic benefits of small business, the effect of the Trade Practices Act 1974 on small business and the way in which the act and small business promote competition together with the need for fair trading. At that time, the committee also looked at the competition laws in part IV of the Trade Practices Act, which promote competition by prohibiting conduct that may lessen competition, and further at the provisions of part IVA of the Trade Practices Act, which promote fair trading by prohibiting unconscionable conduct. The Senate committee specifically looked at the Dawson review recommendations and subsequent case law that considered section 46 of the Trade Practices Act, which covers the misuse of market power and unconscionable conduct, and brought down a report. It was the joint recommendation of the then chair of the committee, Senator George Brandis, and I that further action be taken to amend the Trade Practices Act 1974 to strengthen protections for small business against anticompetitive practices. We did so because of widespread dissatisfaction with the validity of the courts’ interpretation of the misuse of market power provisions.

The bill today delivers for small business in a number of important ways in enhancing the effectiveness of section 46 of the Trade Practices Act. It addresses the issue of predatory pricing, allowing the court to consider sustained below-cost pricing when looking at a breach of section 46. It clarifies the threshold for misuse of market power in a number of important ways. For example, it takes into account leveraging power from one market into another. It specifies that more than one corporation may have a substantial degree of power in a market and further provides that a corporation can have market power without substantially controlling that market. This limit assists in protecting small business from unconscionable conduct. On predatory pricing, the bill puts into law the Senate economics committee recommendation to include reference to a company’s capacity to sell below cost. On the issue of unconscionable conduct, the bill implements the Senate economics committee recommendation on the unilateral variation of contracts and Senator Brandis’s and my recommendation to increase the monetary threshold to $10 million.

Additionally, the bill makes amendments to the unconscionable conduct provisions by raising the transaction limit from $3 million to $10 million. The bill also provides that the court should look at whether a party can unilaterally vary a contract term or condition in considering whether there has been unconscionable conduct. In July and August this year, the Senate economics committee examined the provisions of this bill. The committee’s inquiry attracted a large range of submissions from groups interested in trade practices reform. Several submitters to the inquiry noted that the bill provides greater clarity for the courts in section 46 in relation to both the threshold test for the misuse of market power and predatory pricing.

The bill’s amendments on the threshold test were those recommended by Senator Brandis and me in the report and endorsed by the ACCC. The ACCC remains strongly supportive of these amendments. The current committee believes the bill’s amendments are important in order to state expressly the legal principles that have been established by the courts. A majority of the committee also rejected Labor senators’ claims that the bill’s amendments do not strengthen sections 46 and 51 of the act. In fact, sections 46 and 51 will draw courts’ attention to potential areas of contravention. The bill extends courts’ capacity under the terms of section 51AC to protect a greater range of transactions entered into by small businesses, while enabling courts to continue to rule according to the facts and circumstances of the individual case in question.

There has been a great deal of community interest in this bill. In May this year, I was interviewed on South Australian radio in relation to small business concern about predatory pricing. While the finer detail of the bill was not available at that time, there was a groundswell of interest from the small business sector in my home state of South Australia in the Howard government’s stated intentions to strengthen the law and support small business.

In direct contrast to this, the Australian Labor Party, the opposition, have been caught short on policy on small business. They state that this bill is inadequate and offers little protection for small business. Their concern for small business is utterly disingenuous, coming from a party which intends to reimpose draconian unfair dismissal legislation which will bring about a repeat of the thousands and thousands of dollars in costs to the small business sector for ‘go away money’ and the loss of thousands of jobs, as occurred when it was previously in operation.

Where does Labor’s concern for small business sit with their policies which will overturn the rights that small business people currently have to run their businesses free of interference from the trade union movement? Under Labor, non-union collective agreements would be a thing of the past, and that would open up a million small businesses to potential union control. Labor’s workplace relations policy is not a plan to keep the economy strong and instead will mean more power to the union bosses to push industry-wide wage claims, leading to higher inflation and upward pressure on interest rates. Small business have good reason to be very afraid. If Labor were really serious about doing something positive for small business and standing up for small business, they would not propose to reinstate unfair dismissal legislation and they would not get rid of Australian workplace agreements.

I said at the beginning of my remarks that the Trade Practices Act has been dealt with by this parliament on many occasions. It will be so in the future, because the Howard government is committed to improving and clarifying the operation of the provisions of the act relating to the misuse of market power by corporations, including in relation to leveraging market power, coordinated market power and predatory pricing.

The government shortly will be moving to introduce legislation imposing criminal penalties for serious cartel conduct. The government is concerned about the ability of small businesses to be competitive in markets where there is cartel activity, where they are often the direct victims of cartel behaviour. I also welcome the government’s proposed amendment to this legislation regarding predatory pricing, which will provide clarification about recoupment.

I note the government’s positive response to the work of the Senate economics committee. I note that Senator Brandis is now in the chamber. He did so much work on this, as I mentioned earlier, having regard to our earlier joint work on this committee. That positive response by the government certainly highlights the willingness of the Howard government to consult widely with interested parties on issues before the parliament. I believe this legislation reinforces the value of the work of Senate committees. On that basis I wholeheartedly commend this legislation to the chamber.