Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

I thank all senators who have contributed to the debate previously, and again this morning, on the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017. This bill is about making sure our competition laws are better enforced by levelling the playing field and giving small business better access to justice. Small businesses are the engine room of our economy. They come up with valuable new products and services, they innovate and they push forward new ways of doing things. They drive competition, and this is to the benefit of consumers, employees and the Australian economy more broadly. These businesses should not be disadvantaged by unlawful anticompetitive conduct by the big end of town. Australians more broadly should not have to suffer the effects of anticompetitive conduct either, and that's why we have introduced this bill.

Part IV of the Competition and Consumer Act is an important protection against anticompetitive conduct. It's an important limit on big firms using their market power in an anticompetitive way, but smaller firms can find it hard to make sure that this law is enforced. Since its inception, the Trade Practices Act 1974—now the Competition and Consumer Act 2010—has had section 46. This is the key component of Australia's competition laws. It's designed to prevent firms with substantial market power from deliberately using that power to eliminate or substantially damage a competitor, to prevent the entry of a competitor or to deter or prevent competition. We want to empower small business private litigants to bring litigation under part IV of the Competition and Consumer Act, but without the burden of prohibitive legal fees. Labor's proposal will bring greater balance in respect of our competition laws by allowing a smaller business to request a no adverse costs order early in a court case. This will help to level the playing field and encourage more small businesses to take on anticompetitive behaviour, to the benefit of consumers and businesses alike.

This bill will address difficulties small businesses face in getting justice under Australia's competition laws. It does two things. First, it allows judges in the Federal Court to waive the small business's liability for the big business's cost when the small business is bringing an anticompetitive conduct case. It will be up to the judge as to whether the no adverse costs order is warranted. This empowers the small business owner with the knowledge that they will be able to argue their case without fear of a huge legal bill at the conclusion. If the application is not approved then they can make a decision knowing that they are proceeding at their own risk. Either way they will have greater up-front knowledge and certainty about the impact of proceeding with the competition case. We know that all too often small businesses don't take on the big end of town despite the fact they may actually have a strong case. This is because they can't afford to risk the costs of going to court, especially when their own cash flow is already tight. We on this side of the chamber want to make sure that small and medium businesses are on that level playing field in our justice system, and this bill will help to do that.

The second element of this bill is that small business will be able to go to the ombudsman to get early assistance to find out whether they should consider applying for these new no adverse costs orders. The legislation will allow Australia's Small Business and Family Enterprise Ombudsman to provide professional assistance as to whether the no adverse costs order is likely to be granted. This is to assist in the process of a private litigant requesting a no adverse costs order. While this will not be legally binding, the ombudsman would assist small businesses to better understand their prospects of successful action under the Competition and Consumer Act. A key function of the ombudsman is to assist small business in resolving disputes. This is known as the ombudsman's assistance function. This legislation complements this assistance function well by giving the ombudsman the power to provide assistance to small businesses that are considering applying for these no adverse costs orders.

The Australian Small Business and Family Enterprise Ombudsman, Ms Kate Carnell, has commented favourably on the bill, saying:

Regarding anti-competitive behaviour, the ASBFEO office remains committed to ensuring small businesses have every opportunity to compete on a level playing field. Labor's proposal regarding a 'no adverse costs order' has merit, and deserves serious consideration by all sides of politics.

We have introduced this bill because, under existing arrangements, small businesses are discouraged from taking on anticompetitive behaviour by large businesses. Large businesses have deeper pockets and access to considerable legal firepower. Small businesses that take on larger firms risk being outresourced and face the possibility of having to pay the big business's legal fees if they are unsuccessful. Currently, that imbalance is too great. On the one side is the big end of town, well resourced with all of the legal muscle you can imagine, perfectly positioned to defend themselves in court. On the other side is a small- or medium-sized business just wanting a fair go, wanting to ensure our competition laws are enforced but currently having to risk prohibited costs and drawn-out legal proceedings to do so. This is a huge obstacle, and one that hampers competition.

The Productivity Commission and the government's own competition review have highlighted that small businesses face numerous disadvantages in the court process. Businesses have the right to take action under section 46. The regulator, the Australian Competition and Consumer Commission, is also able to take action under section 46. The ACCC has taken action in this space, although it has been suggested that this is insufficient relative to the number of allegations. There is the need to ensure that private businesses are able to exercise their legal rights in this area. Businesses have the legal right to take action under section 46 if a competitor is engaging in anti-competitive conduct. However, at the moment, this is very hard for small and medium businesses to do, even when there is a clear breach of our competition laws.

Indeed, on this point, the government's Harper review into competition found that private enforcement of the competition law is an important right. However, there are many regulatory and practical impediments to the exercise of such a right. It is important to find ways to reduce those impediments. The Harper review also stated that from submissions and consultations with small business, the panel is convinced that there are significant barriers to small business taking private action to enforce the competition laws. Reducing those impediments for small and medium businesses is something that this bill seeks to do. There are certainly disincentives to bringing private litigation under the Competition and Consumer Act. The primary consideration is the potential liability of opposing costs in situations where an applicant loses a case. When the misuse of market power is considered, the opposing costs are likely to be large, given the reliance on solicitors and barristers, as well as competition experts. Unlike some other international jurisdictions, competition litigation in Australia is primarily by public in nature. In the United States, about 10 private cases are bought for each public case. In Australia, the ratio is about one private case for every three public cases.

We think this bill is an important step to improving competition and strengthening enforcement of our competition laws, and to giving small business greater access to justice. We think this is an area where enabling small and medium businesses to take action here would lead to a more competitive economy and more opportunities for small business and better outcomes for consumers.

I want to talk briefly about this bill's interaction with the effects test, which I note a number of other senators have commented on. We know there are a variety of views in this chamber on the effects test. As is known, Labor is opposed to the effects test. However, we acknowledge that other parties in this chamber support it. As I have noted before, this bill is separate to the effects test. It ensures that when small businesses take action under Australia's competition laws, the playing field is more even between small and large businesses. Those in favour of the effects test and those against the effects test can both support this bill. This bill simply allows better access to competition laws for small and medium businesses.

Labor supports strong competition policy. However, we are opposed to an effects test because we have serious concerns about its impact on competition. An effects test is a test that looks at whether conduct engaged in by a firm with a substantial degree of market power has the purpose, effect or likely effect of substantially lessening competition. We believe that consumers are the losers under the effects test because the effects test risks making businesses afraid to compete. In our view, the effects test creates a legal risk for a business every time it seeks to lower prices for its customers.

Submissions to the Harper Review raise serious concerns about the effects test, including that it would cause uncertainty, that it would be legally unworkable and that it would chill competition. At least 10 inquiries into Australia's competition laws have considered the proposal of an effects test and have rejected it. Apart from Professor Harper's review, only one other inquiry has recommended it. We believe that this bill is a better approach to competition law by making sure that small and medium businesses have greater access to justice and are not discouraged from taking action under our competition laws when they have a good case. However, as I have said, the access to justice policy in this bill is distinct from the effects test. It can be supported by those in favour of the effects test and by those opposed to the effects test. It complements the competition laws in Australia by enabling greater access for small business.

It is so important that this parliament supports small business. They make up 97 per cent of businesses in Australia. They are the engine room of the economy. They employ more than 4.7 million people and contribute in excess of $380 billion to the economy every year. When small businesses receive the support they need, they are better able to grow, which in turn creates more jobs and contributes more to the national economy. Unfortunately, the government has not addressed the most significant issues for small business. It hasn't addressed issues such as rising energy costs, delays in payment times and problems in the rollout of the NBN. These are all issues that are consistently raised by small business with me. Labor certainly welcomes the decision to extend the small business instant asset write-off; however, we are concerned and disappointed that the government has not acted to stimulate jobs growth or address the all-important issue of cashflow for small businesses. Waiting for payments for supplies or services delivered is debilitating for small businesses right across Australia, and this government has made no effort to address the payment terms problem exposed in the Australian Small Business and Family Enterprise Ombudsman's recent report on the practice.

In order to compete in a global economy, small businesses need access to high-speed internet to grow their business and sell their products, and they are being consistently let down by Prime Minister Turnbull's substandard National Broadband Network. The inaction of the government makes it inevitable that Australian small businesses will continue to struggle with one of the slowest and most expensive internet services in the developed world. The budget also leaves small business to fend for themselves on increasing energy prices. We've seen a complete absence of leadership from the Prime Minister on energy policy. This has a real impact on small business. It means higher energy prices and uncertainty for small business operators, which is prevent or restrict their ability to grow and employ. Wholesale power prices have doubled under this government and will continue to rise unless the Turnbull government is able to develop a real national energy policy.

Labor recognises that Australia's small businesses make a huge contribution to our national prosperity. Over two million small businesses have helped underpin the more than 25 years of continuous economic growth that Australians have enjoyed. Their contribution includes employing millions of people. In doing so, they provide both a livelihood and the dignity of employment to nearly half of all working Australians. Labor is proud to have been leading the debate in this policy area in recent years. We've done so by offering practical policies to support Australia's industrious small business sector, including in 2012, when the former Labor government established the first iteration of an expanded instant asset write-off to assist small businesses in the challenging conditions they faced post-GFC. More recently, we took a comprehensive suite of small business policies to the federal election in 2016, including a fiscally responsible and targeted plan to reduce company tax for genuine small businesses; a plan to level the playing field for small businesses by ensuring that multinationals pay their fair share of tax; and a plan to help small business incorporate without additional red tape, along with a range of other innovative policies to assist small business to better access finance and to aid entrepreneurs seeking to start their own business.

Labor has continued and will continue to fight for small business in the 45th Parliament. We have continued to develop and advocate for policy that will benefit Australian small businesses by helping them grow and prosper. We have announced a package of reforms to tackle illegal company phoenixing. In 2012, PricewaterhouseCoopers' report, prepared for the Fair Work Ombudsman, estimated that the cost to Australian business from illegal phoenix activity was somewhere between $1.87 billion to $3.1 billion per annum. A large share of that cost is borne by small businesses, who in most cases are never able to recover what they are owed. I have spoken to a number of small business owners who have been affected by phoenixing activity and whose businesses and lives have been ruined by it. Our proposal contained a number of considered reforms, including a director identification number that would reduce the illegal phoenix activity and its cost on small businesses.

Importantly, Labor's policy agenda does not neglect the less acknowledged elements of public policy that support small businesses. This includes Labor's substantial commitments to increasing investment in our social capital from skills, training and education funding to health and infrastructure—all are critical in creating the conditions conducive for sustaining and growing our small business sector. Small business owners right across the country in discussion with Labor have consistently pointed to rising energy costs, inadequate broadband infrastructure and late or delayed payments as key priorities for them that they want addressed by government. They also have raised the issue of wanting to compete on a level playing field with big business and being able to engage and respond to anti-competitive conduct when they have seen it. That has led to the formulation of this policy and this bill that is before us today.

The only people who need to be nervous about the access to justice policy in this private senator's bill are those who are systemically misusing their market power, safe in the knowledge that their disadvantaged competitors don't have the resources to bring the law to bear on them. We all know that larger players have the money, the lawyers and the capacity to fight these cases. In some instances, the larger players have an incentive to drag these cases out so the smaller business folds. Even when the smaller business has a strong case, they worry that if they lose or if they have to fold they could face huge legal bills. This means that smaller players are discouraged from taking action to enforce Australia's competition laws, and that means they are currently discouraged from accessing justice and that is exactly what this bill will address.

The bill represents a practical change for small business and it is in the public interest. By allowing private litigants to better bring action under the Competition and Consumer Act, anti-competitive behaviour by powerful interests will be better mitigated, helping to support Australia's competition policy framework. This is a sensible proposal to provide some small support for small business without damaging competition in the process. I encourage those who consider themselves friends to small business to support this bill and help us deliver greater access to justice for Australia's millions of small businesses. This bill will lead to a more competitive economy, better outcomes for consumers and a fairer playing field for small business. I thank other senators for their contributions.