Steve Fielding (Victoria, Family First Party) Share this | Hansard source

Fifteen months ago Family First introduced legislation to stop predatory pricing. Why? Because our competition laws were too weak and did not adequately deal with anticompetitive conduct like predatory pricing. Predatory pricing is a real problem because it can drive small businesses out of the market, and when you knock small businesses out of the market you get less competition, which results in higher up prices for consumers.

Last year, when Family First introduced its plan to stop predatory pricing, small business had already been waiting for government action for more than three years. That is how long it took to action recommendations from the Senate Standing Committee on Economics. Predatory pricing is where large and powerful businesses use their substantial market power or substantial financial power to drop their prices in one area to drive out competitors. Not only are small businesses affected, with some forced to shut up shop because they can no longer compete, but Australian families are also affected, suffering from higher prices in the long term. The Trade Practices Act states:

The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

The welfare of Australians is central, but to achieve that we need a mechanism to protect consumer welfare, which is fair trading and competition. There is a danger that, without the appropriate regulation, unfair trading and distorted competition can lead to higher prices and less choice for consumers as well as the loss of the benefit of small businesses to local communities. Family First acted on predatory pricing because Australia had some of the most concentrated markets in the world. Our grocery market is one of the most concentrated in the world, being dominated by just two players, and now our petrol market has gone the same way with Coles and Woolworths.

In September last year, with the support of both major parties, predatory pricing amendments were passed by this parliament. Family First’s plan to address predatory pricing was similar to what was eventually passed last September with the support of both Labor and the coalition. In fact, Family First’s plan went further by also adding ‘substantial financial power’ to capture those big businesses that may not have ‘substantial market share’ but have very deep pockets to price in such a way as to drive out competitors. Family First’s plan also introduced an ‘effects test’. The ‘effects test’ would mean that those corporations that do have financial or market power would need to be careful in how they use that power so it does not have the effect of substantially lessening competition or eliminating competitors. Up until now it has proven nearly impossible to prove predatory pricing by intent only.

It was interesting that the ACCC supported an ‘effects test’ in evidence to the 2004 Senate committee inquiry but did not take it any further. Last year, when the Senate looked at Family First’s predatory pricing plan, the Fair Trading Coalition pointed to problems in the operation of the Trade Practices Act to stop anticompetitive practising, arguing:

… as markets become more concentrated (as is the case in many sectors of the Australian economy) Australia needs to have strong and properly administered laws which guard against the misuse of market power and in particular, predatory behaviour by large businesses. Without significant laws against such behaviour, the FTC believes that large businesses will continue to take advantage of their market power, resulting in further concentration of markets. That concentration will eventually lead to a loss of competitors and thus competition in markets, a loss of choice for consumers and ultimately less price competition, which further disadvantages consumers.

At the same inquiry, there was widespread concern that, as Professor Frank Zumbo said:

… s 46—

of the Trade Practices Act—

is not operating effectively to prevent large and powerful corporations from engaging in predatory conduct or other abuses of market power.

So that was the background to some of the changes. Even though Family First still believes the predatory pricing laws that were passed last year by the Senate did not go far enough, it seems odd that the Rudd government now wants to undo some of those gains. Family First is not convinced that the changes made last year cannot be used by the Australian Competition and Consumer Commission to improve competition in the Australian marketplace.