Matthew Canavan (Queensland, Liberal National Party) Share this | Hansard source

The American radio businessman David Sarnoff once said:

Competition brings out the best in products and the worst in people.

In my view, that nicely sums up the dilemma that we have in harnessing competition to deliver good outcomes without damaging our own ethics and morals. Competition is a means to an end. As consumers, we want cheap, affordable and high-quality products. The best way to ensure that is to have choice and competition. If there is no threat that I could change my custom from one business to another, there will be no desire for others to go to great efforts to deliver what I want. Competition ensures that businesses never forget that the customer is always right, and David Sarnoff was right in saying that competition brings out the best in products.

The other part of the quote is true too—competition can bring out the worst in people, especially when some businesses seek to stifle the competition that makes life hard. David Sarnoff himself, as President of RCA, had a large AM radio network in the 1920s and 1930s. The emergence FM radio, invented by Edward Armstrong, was a clear threat to Sarnoff, so he lobbied the Federal Communications Commission to make changes to the FM band, which rendered many FM radios at the time useless. He tied Armstrong up in endless litigation, contributing to Edward Armstrong's suicide in 1951. Not only that, the actions of RCA at the time put back the widespread adoption of FM radio for 20 or 30 years.

Although undesirable, the desire to damage a competitor is a perfectly rational response, and some element of it is simply the competitive process. I cannot compete vigorously without risking damage to some individual competitors. Where there are winners, there will always be losers, too. However, what we should not allow is businesses that seek to damage the competitive process as a whole rather than just individual competitors.

That is why I welcome the Harper review's draft report which was released on Monday. This has been the first comprehensive, root-and-branch review of our competition law for more than 20 years, and the review has made some recommendations to strengthen our competition laws, especially those concerning the misuse of market power is laws under section 46 of the Competition and Consumer Act. Their recommendations would prohibit a corporation that has a substantial degree of market power from engaging in conduct if the proposed conduct has the purpose, or would have, or be likely to have the effect of substantially lessening competition in that or any other market.

The Harper review's proposed wording differs from the current wording of section 46. Under our current laws to prove the misuse of market power three things must be proved: first, that the corporation must have a substantial degree of market power; second, the corporation must have taken advantage of that power; and, third, the corporation must have acted for the purpose of damaging a competitor, preventing the entry of a person to a market or preventing a person from engaging in competitive conduct. The last two of these tests have become problematic and the Harper review's recommendations essentially seek to alter these tests. As the ACCC said in its submission to the Harper review:

... as currently drafted and interpreted, the provision is of limited utility in prohibiting conduct by firms with substantial market power which has a detrimental impact on competition.

The most stark of these limitations is that for an action under section 46 to be successful the complainant must prove that the action has been taken for an anticompetitive purpose. The keyword there is 'purpose'. Because proving why I act is an incredibly high hurdle for people to meet in our courts. Proving that I did not go for a run this morning is a pretty simple matter—I didn't do it—but proving why I didn't do it would take lengthy debate. I would argue that it is simply because I was busy preparing this very important speech this morning, but my wife would probably say it is just because I'm lazy.