Kimberley Kitching (Victoria, Australian Labor Party) Share this | Hansard source

I am pleased to speak in support of competition and the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill introduced by the Labor Party—the real friend of small business, contrary to what Senator Hume said. The ALP has long had a good relationship and a good understanding of what the needs of small business and small business owners are. In comparison we see a government that has spent its time in this term giving tax cuts to those who don't need them and hiking up taxes on those who can least afford them. The ALP understands that small business owners and operators want a level playing field when they are competing in the marketplace.

Behaviour that is anticompetitive damages the economy, jobs and future growth. We need small businesses to provide new ideas to provide goods and services. We need young, small businesses to drive new jobs in the labour market. The Council of Small Business Australia estimated in May that there are over 2.5 million small businesses, whether they be sole traders, partnerships or small employers. Whether it is a new IT start-up or a small business that has thought of a new way to make a widget, these businesses have helped underpin 25 years of economic growth. The Council of Small Business states that small businesses employ over five million people and contribute more than $343 billion to the economy every year—$343 billion. This adds insult to injury when we see the Prime Minister and the Treasurer focus on and advantage big business in our economy by giving them tax cuts rather than ensuring that legislation provides a level playing field and one that also helps small business owners. Because what does small business ask in return? They ask for a level playing field, and that includes support for competition policy.

This bill addresses small business's concerns regarding two main elements of competition policy. First, it removes the disincentive of bringing an action that ought properly be brought—that is, the small business is being adversely affected by the conduct of a big business whose conduct is undermining competition. The Harper review recommended a misuse of market power provision to empower small businesses to combat big businesses unfairly undermining them. I want to refer to the 1989 High Court decision in the case of Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Limited. Chief Justice Mason and Justice Wilson stated:

… the object of s.46 is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end. Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to "injure" each other in this way. This competition has never been a tort … and these injuries are the inevitable consequence of the competition s.46 is designed to foster. In fact, the purpose provisions in s.46(1) are cast in such a way as to prohibit conduct designed to threaten that competition—for example, s.46(1)(c) prohibits a firm with a substantial degree of market power from using that power to deter or prevent a rival from competing in a market. The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition, and the addition of a hostile intent inquiry would be superfluous and confusing.

Queensland Wire succeeded in its claim that BHP had engaged in a misuse of market power by refusing to supply it with Y-bar—the type of wire necessary to make star picket fencing. That sounds like a happy ending. Sadly, that was not the case. As is typical in these cases, the defendants tend to have deep pockets, as BHP did, and they tend to be powerful. Compare them with the applicants who, given the nature of their grievance, tend to be less powerful. The upshot in the Queensland Wire case was that while Queensland Wire's private litigation was successful, it was incredibly costly, and by the time the remedies were assessed Queensland Wire had gone out of business. That's pretty unfair.

This bill will ensure a more even playing field for private litigants, so that small businesses have avenues open to them to prove an abuse of competition. Allowing a judge to waive liability for adverse costs will empower private litigants like Queensland Wire to bring litigation without the crushing burden of enormous legal fees. Any sensible person knows to stay away from lawyers. I say that as a former lawyer. It is expensive. As a practitioner I would repeat the warning that a legal practitioner is required to issue that if a client were to lose they could be liable for the other side's costs. It's difficult to watch people grapple with the risk that if they were to lose they could seriously affect not only their own financial security but really, really affect their families as well. They may have a strong prospect of success with their action or they may they prove every element they need to prove but one perhaps not as well as the others, and they may still win in that circumstance; but the down side is just too much. The risk is just too great. So they don't undertake the action. They walk out the door, but not before most of them say, 'This is not fair.'

This bill seeks to bring balance by allowing a small business to request a no-adverse-costs order early in a court case, thereby preventing large legal fees of a defendant being transferred to the applicant. It does not remove a decision around the merits, as Senator Hume was suggesting, but rather it just allows that decision to be made very early in the proceeding, before costs have been accrued. It gives the applicant the knowledge early on to know whether they are proceeding at their own risk. That sounds pretty reasonable to me.

The second part of this bill is to assist in the process of assessing whether a private litigant is likely to be granted a no-adverse-costs order. This bill introduces an Australian Small Business and Family Enterprise Ombudsman with a new category to provide professional assistance in order to determine the likelihood of such an order being granted. The ombudsman will assist small businesses better understand their prospects of successful action. The small business ombudsman is there to assist and stick up for small business interests. This role will help to facilitate public good through private litigation. This is a practical change for small businesses and it is in the public interest. It better allows access to competition laws to small business. Shouldn't everyone have good access to justice? By allowing private litigants to better bring action under the Competition and Consumer Act, anticompetitive behaviour by powerful interests will be better mitigated, helping to support Australia's competition policy framework. This is a modest, sensible proposal to provide some support for small businesses without damaging competition in the process.

The combination of allowing for no-adverse-costs orders and supporting the small business ombudsman to help businesses reduces part of the financial impact and the uncertainty of private litigation under the Competition and Consumer Act. This can be seen in what is known as the 'effects test' and is perhaps the most controversial part of the act. The ALP does not support an effects test. We are not alone in this. Former treasurer Peter Costello said to an Australian National Retail Association function in Sydney last year:

When you are looking at competition policy, there is one basic question you have to ask before you can settle anything else … who is competition policy for? If you take the view that competition is there for the consumer, which is what I believe is the fact, everything else will fit into place. That's why I'm against the so-called effects test. The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

We know that those opposite value Peter Costello. After all, he was the last Liberal Treasurer, or indeed the last shadow Liberal Treasurer, not to be burnt up and consumed by the heat that the Treasury portfolio generates. He is just one Liberal who opposed—might still oppose—an effects test. Of course, in former Prime Minister Abbott's cabinet when discussion turned to competition laws many ministers opposed it. Broad speculation at the time was that those opposed included Senator Brandis, former minister Robb, the foreign minister, Senator Cormann and indeed the now Prime Minister himself. Then the Prime Minister had to do a deal in order to become Prime Minister. One of the deals he made was acceding to the demands by the Nationals for an effects test—or, as it was reported in the Financial Review at the time, 'The federal government has succumbed to pressure from the Nationals'. How did the Retail Council react to this? Well, they said that the backflip by the government was simply 'bad policy' and that 'the consumer is the loser'.

I want to go to where the effects test, in legal policy terms, comes from, because there is no standard test in other jurisdictions across the world. There is a view that in the United States public interest in private litigation is good. That is, we all benefit from the litigation individuals bring and, based on that, measures should be taken to ensure that it can happen, which is really what this bill, brought by Senator Gallagher, actually seeks to do. We've all heard of famous antitrust cases in the United States, and some are deservedly famous. For example, the Standard Oil antitrust case is very widely read across all legal jurisdictions, where JD Rockefeller was accused of predatory pricing, including with railroads, in order to eliminate his competition.

In Australia there have been a number of reviews and inquiries into our competition laws. Over the last 30 or so years there have been about a dozen, and the Harper review is the most recent. Australia's competition laws have considered a proposed effects test. In these former reviews and inquiries an effects test was considered but then rejected. So, apart from Professor Harper's review, only one other inquiry has ever recommended it. There is a reason that 10 out of 12 inquiries have recommended against an effects test. The reason is that it is bad law. It's going to have a detrimental impact on the consumer. In the submissions to the Harper review, the effects test has been described as 'legally unworkable', something that will 'chill competition' and something that will 'create uncertainty for business'. These changes will deter job-creating investment in Australia by adding to the new layers of red tape and barriers to investment which already have been imposed by the coalition government. It is little wonder that the government's own former Minister for Trade and Investment, Mr Robb, was opposed to this latest anti-investment measure.

The worst of this is that the government's proposed effects test is a move to satisfy internal politicking; it's not about policy. A level-headed analysis of the effects test shows that the Prime Minister is using competition policy as a political plaything. The Prime Minister has backflipped on the effects test, because he has previously said that he would be deeply concerned about the introduction of such a test. We've heard other people, such as Mr Samuel, the former ACCC chairman, saying:

Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.

Richard Goyder, the former CEO and managing director of Wesfarmers has said of the effects test, 'I think it will have a negative impact, because it will cost consumers more.' The managing director of Coles, Mr Durkan, has warned that the effects test could push up prices, particularly in the chain's regional stores.

I just want to talk about regional stores for a moment because, let's compare what he has just said—so, someone who operates many, many stores in urban and regional and rural Australia—with someone who purports to care about rural Australia, and that is the Deputy Prime Minister. It is quite clear that the member for New England, who is sometimes a disturbingly influential economic voice in the government, if not on occasion the government's chief economics spokesperson, has actually supported a test which is detrimental to Australian consumers and the broader economy. If Barnaby Joyce were just another coalition renegade, it might not have mattered so much, but his views are driving competition policy in Australia. This contrasts starkly with alternative options. Some in the small business community have said that the change would mean that business would have to consider the effect of their day-to-day business decisions. That is an incredible burden to place on people. A marketing manager should not be wondering if their latest sales campaign will affect competition, but rather how that campaign will help the business grow and expand. A CEO needs to focus on strategic growth and look into the long term, not fighting off litigation because a new multimillion dollar investment in regional Australia threatens established businesses. This is dangerous economic policy that will lead to uncertainty across the economy, potentially adding substantial costs to every single transaction, of which millions occur each day.

Coming back to an international standard: there is none. There is no international standard effects test to assess dominant-firm unilateral conduct. The perceived trend, which is what the government is relying on—a perception of a trend where the effects test is not universal, nor what is really happening in the US and the EU—appears to substantially respond to discredited structuralist approaches to assessing lessening of competition in which, for example, increased supply concentration is equated with harm to competition, regardless of actual competitive dynamics. This is, however, not a problem encountered in Australia under the current act. We should not underestimate the consequences of amending section 46 to introduce a test that is not consistently developed in the US or the EU in their legislation and that will rely on Australian courts to develop a distinctly Australian effects test over time.

The American Bar Association submitted to the competition review that there is no US standard for determining effects and that, if such a test were adopted in Australia, it should be left to the courts to develop. However, as it is not proposed to adopt the US jurisprudence—you will be pleased to know that I am not going into the last 100 years of judicial thinking on competition policy in the US—this may be a recipe for repeating the past 40-year cycle of judicial interpretation of the current section 46 and repeated legislative intervention. The EU proposal, article 102 of the treaty for the functioning of the EU, is likewise a very simple provision, with no express effects test and a considerably smaller body of judicial interpretation. Its purpose is to enhance the operation of the internal market. The implied effects test arises from the European Commission's 2009 guidance on enforcement priorities, which focuses attention on practices that harm the process of competition and, thus, adversely affect consumer welfare—for example, in the form of higher prices, limiting quality or reducing consumer choice. Note that consumer welfare in this usage has quite a different meaning from the long-term interests of consumers, as interpreted by Frontier Economicsand apparently used by that review. The EC guidance also refers to conduct of dominant firms that excludes competitors by means other than competition on the merits. The guidance indicates that the focus of enforcement should be on cases where exclusionary conduct adversely affects equally efficient competitors—that is, impact on less efficient competitors is of no concern.

As discussed, the contribution that small business makes to our economy is crucial. This bill is about making sure our competition laws are better enforced by giving small business access to justice. Isn't this not only fair but also vital to ensure that the major cog of the Australian economy, small business, is looked after? Thank you.