Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition (Social and Community Affairs)) Share this | Link to this | Hansard source

Tonight we are finally debating strengthening section 46 and section 51AC of the Trade Practices Act. This debate has been a long time coming and it has not come soon enough. In 2004, the Senate Standing Committee on Economics produced a report on the effectiveness of the Trade Practices Act, and government senators produced a minority report. Even that report, which was less far reaching than the majority report, actually acknowledged that the Trade Practices Act required changes. That was over three years ago and at the end of the last term. Now at the very end of this term, near an election, the government has suddenly decided to legislate its response to the 2004 inquiry. And what a half-hearted response it is.

However, today, at the eleventh hour, the government has caved into pressure, moving an additional amendment dealing with predatory pricing. This backflip is designed to make the Treasurer look as though he cares about small business and trade practices reform, while the truth is that he has been dragged kicking and screaming every step of the way. Labor has consistently argued that the Trade Practices Act needs to be strengthened to deter predatory pricing. The government’s amendment—which was circulated today—to its own bill means that if a company has substantial market share it cannot sell for a sustained period of time below relevant cost for an anticompetitive purpose. This new, specific predatory pricing section has some fundamental differences to existing section 46 so that there will now be two tests: one for predatory pricing and one for other examples of misuse of market power. The concept of substantial market share and the removal of the ‘take advantage’ connection makes this new provision different from section 46, which uses the concept of substantial market power.

Labor moved sensible, balanced amendments which the government rejected in the House, and this government amendment appears to have been hastily cobbled together at the last minute. Labor will support the government amendments but will monitor any unintended consequences that may arise from this complex, two-test proposal.

This government is not interested in rectifying the weaknesses in the Trade Practices Act that are very well known by all. The recent Senate Standing Committee on Economics inquiry into this bill heard evidence from a number of small business groups and competition law experts that said the bill does not go far enough and, in fact, adds very little to the Trade Practices Act. I will be moving a second reading amendment and detailed amendments in the committee stage which would strengthen the Trade Practices Act to protect competition in the Australian economy and small businesses from unfair practices. This would be good for the economy and good for consumers. The amendments were moved in the House of Representatives. Labor’s amendments represent the approach that Labor will take to the Trade Practices Act if we form government later this year. We will not sit on the necessary reforms for three or more years, like this government has. We will certainly take some action to protect small businesses through an amended and improved Trade Practices Act.

I turn now to the amendments that are in this bill. The bill seeks to clarify the operation of section 46 of the Trade Practices Act. Section 46(1) prohibits a corporation with a ‘substantial degree of power’ from ‘taking advantage’ of that power for the purpose of:

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;

(b) preventing the entry of a person into that or any other market; or

(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

In 1986, the then Labor Attorney-General, Mr Bowen, introduced major reforms to section 46 of the act. Before 1986, section 46 was known as the monopolisation clause. It prohibited a company which substantially controlled a market from abusing its market power. This clause was ineffective because the threshold to establish substantial control of a market meant that only monopolists or near-monopolists were captured by the old section 46. So in 1986 the Labor government amended the act to relax the test: it made it illegal for a firm with substantial power in a market, as opposed to one substantially controlling a market, to abuse its market power. However, the High Court has interpreted the concept of substantial degree of power in the market in a narrow way which does not accord with the parliament’s intention of 1986 to lower the bar of section 46.

In the Boral case in particular, the majority of the High Court found that the key test for establishing whether a firm has a substantial degree of power in a market is whether it is able to raise its prices to recoup its losses after it sells goods below cost for a sustained period of time. It is hard to conceive of any company which is not a monopoly passing this test. The ACCC, for example, has said:

The majority judgments in Boral contain several statements indicating an absolute freedom of constraint is required to establish a ‘substantial degree of power’—effectively restoring the threshold to monopolists or near monopolists contrary to Parliament’s intention behind the 1986 amendments.

Similarly, Associate Professor Frank Zumbo has written:

For the small or medium sized entity competing with larger, more economically powerful corporations, the High Court’s decision appears to mean they will ordinarily have little, if any, recourse under s46—

section 46—

for allegations of predatory pricing by those corporations which, while being large and economically powerful, are unable to set prices unilaterally without losing custom or to act totally or almost totally without competitive restraint ...

The government’s response is to legislate to clarify that a substantial degree of power is a lower test than control of the market, that a corporation can have a substantial degree of power in a market even if it is not free of constraint and that more than one corporation can have a substantial degree of power in a market.

Labor agrees with including the elements that the government proposes, but the fact is the government’s amendments do not go far enough. The opposition believes that it is vital to include a provision in the act to make it clear that the ability to recoup losses is not required to establish market power, and I will be moving as such in the in-committee stage.

There is another element that this bill completely fails to deal with. That is the definition of ‘take advantage’. Section 46 of the Trade Practices Act prohibits a firm from taking advantage of its market power. Courts have defined ‘take advantage’ in a very narrow way. The courts’ interpretation in such a way means that, if the firm is able to act in the way it is alleged, in the absence of market power it shall not be regarded as having taken advantage of that power. To overcome this, I will be moving an amendment to make it clear that ‘take advantage’ encompasses action being materially facilitated by market power. This amendment will make it clear that the key test is whether the firm would have been likely to undertake this action in the absence of market power and whether the conduct was related to the market power.

The bill does make it clear that it is an offence for a firm to abuse its market power in any other Australian market. This is an important amendment due to the finding of the Federal Court in the Rural Press case that it is only an offence to abuse market power in that market. We support this amendment but note that its usefulness is limited unless the government addresses that ‘take advantage’ issue.

The bill also makes clear that firms can gain market power by acting in concert with other firms. The bill amends section 46 to note that a court may take into account any market power that a firm has by virtue of agreements with others or covenants which the corporation is bound by or entitled to benefit from. We support this measure.

In relation to the creation of a second deputy chair, I note the government has indicated that this will be someone from a small business background; however, this is not mandated by the legislation. The act does mandate, however, that one of the commissioners be from a consumer background.

The bill also amends part IVA of the act, which deals with unconscionable conduct. Section 51AC, which prohibits unconscionable conduct in transactions between businesses, applies only to transactions under $3 million, because it is designed to protect small business. The 2004 Senate committee majority report recommended that the $3 million limit be abolished, as it is arbitrary, and unconscionable conduct should be illegal regardless of the size of the transaction or the businesses involved. This is also the recommendation of the ACCC and several small business groups.

Unconscionable conduct is unconscionable conduct regardless of the size of the transaction. There are small businesses that engage in transactions greater than $10 million, and we agree with the ACCC that the concept of a threshold is a flawed one. Labor will be moving an amendment to abolish that threshold. Under section 51AC of the act, when considering whether a corporation has engaged in unconscionable conduct in business transactions, a court may have regard to a non-exhaustive list of factors. This bill amends the section to add to the list of matters that can be considered the ability to unilaterally vary a contract. It has always been open to the courts to take into account the ability to unilaterally vary contracts as part of unconscionable conduct cases. Therefore this amendment, whilst unobjectionable, adds little to the unconscionability provision that already exists.

This bill does not go far enough to strengthen the Trade Practices Act. It omits a number of important amendments to the Trade Practices Act that would take us a step forward to better protect honest businesses from anticompetitive conduct. First among these must be the government’s complete failure to deal with the matter of jail terms for cartel operations. The 2003 Dawson committee recommended the imposition of prison terms for individuals found to have engaged in serious cartel conduct. The government accepted this recommendation in 2005 and said then that it would legislate for prison penalties; however, we are now in 2007 and the government has not legislated for prison terms in this legislation. The ACCC has been persistently calling for the imposition of such prison terms.

I note that an amendment to the TPA to introduce criminal penalties is on the agenda for the next sittings. Labor certainly hopes that this will settle the issue, but it should have been included in this bill. There is no reason for it not being included in this bill. The second reading amendment that I move will condemn the government for not introducing prison terms for very serious cartel behaviour and will call on the government to honour its commitment to introduce those jail terms as a matter of urgency.

Labor will give the ACCC the powers it needs to do the job that Australian consumers expect. At the moment, there is a strong case that some of those powers are lacking. Under section 155 of the Trade Practices Act, the ACCC can obtain information relevant to its inquiries by requiring people to provide documents to it or to be interviewed by it. This is the ACCC’s primary information-gathering power. However, the courts have ruled that this power ceases when a court case commences. In evidence before the 2004 committee, the ACCC argued that revocation of section 155 powers is a disincentive to begin court actions and seek injunctions for anticompetitive behaviour, thus delaying the provision of relief to affected businesses and consumers. I will be moving an amendment which deals with this to ensure that the ACCC has the information it needs to do its job.

The Federal Magistrates Court can hear certain matters under the Trade Practices Act but not section 46 matters. This means that small businesses wishing to bring an action under section 46 must commence it in the more expensive and cumbersome Federal Court. In addition, under section 83 of the act a company can bring an action for damages based on findings of fact in another case which allows a small business to bring an action for damages based on the findings of fact in an ACCC case. However, this section 83 action must be brought in the Federal Court. The necessity to bring an action in the Federal Court means that small businesses will be faced with substantial costs. An action in the Federal Magistrates Court is cheaper and there is a conciliation process to resolve matters without proceeding to a full hearing. Several small business groups have called for the Federal Magistrates Court to be given jurisdiction in both types of matters. I will be moving an amendment to give the Federal Magistrates Court, as well as the Federal Court, jurisdiction over section 46 matters, to make it easier for small business to access justice when they have been subject to anticompetitive conduct by bigger players.

Creeping acquisition is a vitally important matter which is completely ignored in this bill. Section 50 of the act gives the ACCC power to disallow mergers or acquisitions if they will lead to an unacceptable degree of control of the market. The lack of the ability for the ACCC to look at small mergers over time means that the ACCC is not able to consider the impact of creeping acquisitions on the national market. The cumulative impact on competition of a series of acquisitions may be something that the ACCC wishes to examine in determining market concentration, but it will have no authority to do so. It is time to give the ACCC the unquestioned and clear power to regulate creeping acquisitions. The second reading amendment I will move will call on the government to do this, and I can indicate that the Labor Party will do this should we form government later in the year.

A major complaint of small business is their lack of bargaining power when it comes to negotiating with big business. An option to protect small business from unfair practices would be to insert a new section into the act which allows unfair contract terms to be struck out by a court, based on the UK and Victorian models. Both the British and Victorian models provide courts with the power to declare as unenforceable terms in contracts that are unfair. Under our proposal, if a court held that a contract term was unfair, there would be no penalty for the larger company imposing the term, but the term would be struck out of the contract. If the contract were viable without the term, then the rest of the contract would stand. There is, of course, a balance to be struck between promoting competition by outlawing unfair terms and allowing vigorous, even aggressive, contract negotiations in an open market. However, there is considerable merit in inserting a new clause in the Trade Practices Act which enables a firm or an individual to seek to have an unfair contract term struck out in the Federal Magistrates Court.

Labor has always been a strong supporter of the Trade Practices Act. In fact, it was Labor that introduced the Trade Practices Act in 1974 and, again, the Labor Party that strengthened the act in 1986. The coalition, on the other hand, have a poor history when it comes to this act. For all their bluster on being the party of small business and better economic managers, we see precious little on their supposed commitment to the Trade Practices Act. The government have waited until the very last minute, the eleventh hour just before an election, to introduce this legislation. It is a case of too little, too late, with a desperate last-minute amendment to its own bill in an attempt to quell well-deserved criticism from small businesses.

I now move the second reading amendment standing in my name, which has been circulated in the chamber:

At the end of the motion, add “but the Senate:

(a)

notes that:

(i)

the Economics References Committee handed down its report, The effectiveness of the Trade Practices Act 1974 in protecting small business, in March 2004, and the Government responded in June 2004 and yet the Government is only now introducing its legislative response,

(ii)

this failure to act represents a disregard for the importance of promoting competition by preventing anti-competitive behaviour directed against small business and consumers, and

(iii)

this bill fails to introduce gaol terms for serious cartel operations, despite the Dawson Review recommending this in 2003 and the Government accepting this recommendation in 2005 and despite the Australian Competition and Consumer Commission (ACCC) consistently calling for such penalties to be introduced;

(b)

condemns the Government for the failure to legislate for gaol terms for serious cartel conduct;

(c)

further notes with concern that this bill does not give the ACCC power to investigate and regulate ‘creeping acquisitions’; and

(d)

calls on the Government to:

(i)

legislate for this as soon as possible, and

(ii)

closely examine options for introducing a regime dealing with unfair contract terms between businesses as well as between businesses and consumers”.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

If these amendments had been introduced in 2004, the same year as the recommendations of the Senate Standing Committee on Economics report in March 2004 into the effectiveness of the Trade Practices Act to protect small business, now a long 2½ years ago, they would have had my nearly unqualified support as a good first step in finally strengthening the Trade Practices Act from the perspective of small business and consumers. In fact, the amendments set out here mirror a number of the amendments I have proposed over the years based on the recommendations of that committee—amendments that have been supported by the opposition and that have been rejected by the coalition government on several occasions. I can only surmise that they were rejected because they were Democrat, not coalition, amendments, and that is pathetic, but it is true. I do not think it reflects well on the government, as a result.

Now that the Trade Practices Legislation Amendment Bill (No. 1) 2007 has come before us, and although my party and I support the bill, it still does need to be improved by further amendments such as those which have been circulated by me, on behalf of Senator Joyce and by Labor. The Senate Standing Committee on Economics reported on this bill in August. I wrote a precise set of additional remarks to the report. I do agree with many of the points raised in the Labor Party’s minority report and the report from Senator Joyce. I compliment Senator Joyce on being able to achieve some of his objectives since that report came down. The amendments contained in this bill generally reflect the minority senators’ report from 2004—that of the coalition senators, not the majority report of Labor and the Democrats. While I am as certain as can be that Senator Brandis, principal author of the minority report, would have gone further towards the majority position if his party had allowed him, the minority view is, nevertheless, a useful advance on the law as it stood.

The consequent Trade Practices Legislation Amendment Bill (No. 1) 2007 has two weaknesses: it is long overdue and it does not go far enough. Its strength is that it does not weaken the Trade Practices Act; it strengthens it in a number of ways. The bill will create a second deputy chairperson position for the ACCC and allow for the effective operation of the ACCC with that additional position focusing on small business. It amends section 46 of the act to provide that a corporation must not take advantage of a substantial degree of market power, either in the market in which the power is held or in any other market. It amends section 46 to provide that, for the purposes of determining the degree of power that a corporation has in the market, the court may have regard to any market power the corporation has that results in contracts, arrangements or understandings with others, or results in covenants that the corporation is bound by or entitled to the benefit of. It amends section 46 to provide that courts may take into consideration the supply of goods or services for a sustained period at a price less than the relevant cost to the corporation, and the reason for that conduct, when determining whether a corporation has misused its market power. It amends section 46 to provide that, without limiting the matters to which the court may have regard, a body corporate may have a substantial degree of market power, even though it does not substantially control the market or have absolute freedom from constraint by the conduct of its competitors or persons to or from whom it supplies goods or services. It amends section 46 to provide that more than one corporation may have a substantial degree of power in a market.

It makes amendments to ensure the continued consistency between sections 151AJ and 46 in relation to leveraging of market power, coordinated market power and predatory pricing. It makes amendments to the version of section 46 found in part 1 of the schedule to the Trade Practices Act, which is the version that applies in the states and territories by virtue of application legislation in those jurisdictions, to correspond to the changes in the bill. It amends section 51AC of the act to extend the non-exhaustive list of factors in sections 51AC(3) and 51AC(4) to provide that the court may also consider whether a party has a contractual right to vary, unilaterally, a term or condition of a contract between a supplier and a business consumer, or between an acquirer and a small business supplier.

It amends sections 51AC(9) and 51AC(10) of the act to raise the price limitations relating to the supply or acquisition of goods or services from $3 million to $10 million and it makes amendments to section 12CC of the Australian Securities and Investments Commission Act 2001, which applies the unconscionable conduct rules of section 51AC of the Trade Practices Act to the supply and acquisition of financial services, to duplicate the changes made by the bill to section 51AC.

When I read these, you will not be surprised to know that I get a sense of grievance, because I have heard much of it somewhere before. Several of those amendments reflect the gist and substance of amendments which I have moved in the past—although for a number of them the wording has changed very slightly from the wording that I proposed—and which have been rejected by the coalition and probably forgotten by people listening to this debate, because they were passed by. Two years have been wasted by the foot-draggers in the Treasurer’s office. It is absolutely unacceptable that that happened—this, I might add, from a Treasurer who has initiated brave and wholesale reform in many legislative areas under his control. His slow and modest efforts on trade practices law reform for small business stand in stark contrast to what otherwise is a very credible record in many areas.

I appreciate the amendment to section 46(1) of the Trade Practices Act, but, as Associate Professor Zumbo rightly states in his submission to the economics committee, in order for section 46 to be effective there is an urgent need to restore the parliamentary intention behind both the concept of a ‘substantial degree of power in the market’ and the concept of ‘take advantage’. I emphasise the words ‘both’ and ‘and’. I note that Senator Joyce was reported in the media as saying that he will put forward an amendment which addresses the concept of substantial financial power in a market, taking his lead from the 2004 report. He is right to do so.

The greater the financial power an entity has in any market, the greater freedom of action it has in undercutting the price of goods. This was shown in a recent story on Today Tonight featuring a small grocer located right beside a Woolworths store. When he reduced his prices, he was undercut. Even when he reduced the price to well below his cost, they followed him down. The only reason that this small grocer could do that was because Today Tonight was subsidising the difference between the cost price and the reduced sale price. Woolworths simply reacted to the competition with perfectly natural behaviour. But its effects in certain circumstances can be anticompetitive. It was shown that a Woolworths in another suburb where there was no grocer competition did not reduce its prices at all.

An entity does not have to be in a monopoly position or even in an oligopoly position to have substantial financial power in the market if it can take advantage of that financial power in the market to impose unsustainable prices on competitors. The reference to a ‘substantial financial power in the market’ would, many commentators believe, have the effect of overcoming the current problem with section 46 which arose from the Boral case. I will be proposing amendments which I hope will address these shortcomings. I believe that these amendments of mine will provide more guidance to the courts to overcome the difficulties presented by the Boral case—in particular in relation to the issue of ‘substantial degree of power in the market’. I am hoping that Labor and Senator Joyce, as supporters of trade practice law reforms for small business, will be willing to support these amendments.

Predatory pricing exists. It is a daily problem for many small and medium businesses, both upstream and downstream. From a public policy point of view, the issue is that the destruction of competitors, if taken to its logical conclusion, can result in the destruction of competition. That is why market power has to be regulated and constrained. That is why modern dynamic markets have proper competition law to restrain this sort of behaviour.

Section 46 of the Trade Practices Act currently applies only to the conduct of monopolists and near-monopolists, so small businesses have little protection against large and powerful corporations choosing to throw their financial and material resources around. Two possible measures could overcome this problem and still maintain fairness. The first is to remove the requirement to show intention and instead put in place a requirement to show that the actions of the alleged perpetrator have had the effect of damaging competition—in other words, you examine the results, not the intent. The second is to get behind the corporate veil by changing the onus of proof when the ACCC pursues the matter. The onus would fall on the defendant and not the applicant to show that there was no purpose of eliminating competition. A system of protecting and rewarding whistleblowers who provide evidence about collusive and anticompetitive conduct could also be considered.

The ACCC should be given a power to grant cease-and-desist orders against companies involved in anticompetitive behaviour. Such a power would allow intervention on behalf of small firms who are being harmed by the behaviour of a large competitor. Rather than wait years for a court to determine the legality of a firm’s behaviour—by which time the small business’s lease has expired and they have moved on—a cease-and-desist power, where it is relevantly and carefully applied by an independent regulator, would allow early intervention before a competitor was driven out of business by anticompetitive conduct. This would not affect normal competitive conduct, which can include price cutting. These are matters which could have been addressed in this bill but have not been, and the Democrats and small business have to await a time when a Labor government will give the Trade Practices Act some sharper teeth to truly protect small business. In that respect, I note the remarks of the shadow minister in the Senate and of Labor speakers in the lower house, and I will hold them to them.

In the 2005 report of the Senate Standing Committee on Rural and Regional Affairs and Transport on the operation of the Australian wine-making industry, there was reference to the discussion of unconscionable conduct in the 2004 report of the Senate Economics References Committee in relation to unilateral variation clauses in a contract, which allow one party to vary the contract without further negotiation or without the other party’s agreement. That recommendation by the rural and regional affairs committee was unanimous. During the Senate Economics References Committee’s inquiry, the ACCC had voiced concern that unilateral clauses could be unreasonably exploited by the stronger party, and it was the recommendation of the ACCC, followed by the Senate economics committee in its March 2004 report, that unilateral variation clauses should be added to the list of matters which a court may have regard to in deciding whether conduct is unconscionable. I refer to sections 51AC(3) and 51 AC(4) of the Trade Practice Act. I welcome those particular amendments wholeheartedly. But why were farmers and others made to wait two years for those amendments to come forward?

I have noted the argument articulated in the minority report of Labor senators which says that these amendments add little or nothing to the operation of the sections because unilateral variations are already a matter which the courts can take into account in determining whether there is unconscionable conduct. With respect to that argument—unless I have misunderstood it—we would not need statutes at all, of any kind, if that were true. Rather than subject business to the time and costs of courts, it is better to point to black-letter law and say to the stronger party, ‘You cannot do that; the legislation says that you cannot do that.’ That is much easier than having to say, ‘I don’t think you can do that; I think it’s unconscionable, so let’s all go to court,’ and, after a number of years—during which your lease has expired and you have gone out of business—and several hundred thousand dollars later, see if that is one of the things that the court will consider. Black-letter law in competition law is good, not bad, because it enables clearer decisions and clearer understandings to occur.

The practicalities of life on the front line of small business are substantially different, and this amendment is very welcome. However, you will see from my amendments that I do not think it goes far enough. In both Victoria and the United Kingdom there is legislation regarding unfair contract terms, and my amendments attempt to incorporate aspects of those pieces of legislation to beef up section 51.

This bill fails to address the substantial areas of creeping acquisitions and divestiture. These continue to be areas of concern for small business and the Australian community, and we continue to be out of step with major jurisdictions such as the United States, that dynamic market which has its terrific reserve power known as anti-trust legislation. Section 50 of the Trade Practices Act currently prohibits corporations from making acquisitions that would have the effect of substantially lessening competition. Divestiture can be ordered to remedy a breach of section 50. However, this provision is limited in scope. One limitation is the difficulty of applying it to creeping acquisitions. It is difficult to establish that a smaller, more recent acquisition following a series of other small acquisitions over a number of years finally tips the balance to create a substantial lessening of competition by someone moving into a monopolistic situation in a particular market.

Creeping acquisitions can allow very large corporations to achieve a market size that might have been prohibited by the ACCC if those acquisitions had been aggregated into one purchase which could therefore have fallen foul of the existing merger provisions in the Trade Practices Act. I think there is no better example of that point than the Franklins purchase, when the very large corporations that wished to take advantage of Franklins’ troubles and acquire the stores on the break-up were forced to divest or shape their acquisitions to ensure they did not achieve the kind of market power that was regarded as a danger to full competition—yet if they had achieved those same stores by creeping acquisitions there would have been no similar action.

In Australia, many markets are experiencing oligopolisation, which is a concentration of power in the hands of a small number of competitors. One that is of substantial concern to Australian consumers is the grocery market because they see that, if it becomes much more controlled than it is at present, that will directly impact their hip pockets, their choices and the opportunities for competition. It is a fact of life and economy that the big get bigger. With respect to our market and its size, sometimes that is natural, necessary and unavoidable. But as they get bigger they do develop the ability to operate more cheaply and efficiently. Over time, the smaller players are forced out of the market. That is the way of the market, and that activity is valuable while it promotes efficiency, innovation and competition—but only up to a point, as I said earlier.

Eventually, the destruction of competitors results in the destruction of competition, or the predatory intimidation of competitors reduces effective competition—and I have noted recent court cases where major retailers in the bread market and in the liquor market, for instance, have been had up for abusing their market power. Where that has occurred or will occur, the state must intervene to save the market from eating itself. By its very nature, the power to order divestiture should be regarded as largely a reserve power. As international precedents indicate, it would be seldom employed. It should be used rarely and used responsibly by an independent and powerful regulator. The great virtue of divestiture, of anti-trust power, is as a cautionary power, making oligopolies careful of abusing their market power. It would be used only where necessary to maintain or restore competition. This is an area which this country must address at some stage.

The United States Federal Trade Commission’s 1999 study of the divestiture process found that about three-quarters of divestitures appear to have created viable competitors in the relevant market. It further found that divestitures of ongoing businesses tended to succeed more frequently compared to asset divestiture. The ACCC has indicated that it is not supportive of an open-ended divestiture power, but it has supported consideration of a divestiture power where there is a breach of the section 46 prohibition on the abuse of market power. Examining divestiture in the context of section 46 is essential, but it may need even broader scope in light of Australian court decisions. At the very least, I believe that concentrated industry sectors need a trigger market-share percentage at which point the ACCC takes formal and public note of potential danger—similar to that used in Europe. Such thresholds recognise market power but do not constitute an automatic declaration of market dominance; nor are they an automatic signal as to the existence of anticompetitive prices or an abuse of power. They act instead as a trigger to the regulator to maintain a watching brief on the company concerned. I consider the figure of 25 per cent used under the United Kingdom Fair Trading Act as constituting a fair market-power measure. If such a measure were adopted in Australia, the ACCC would thereafter notify a company so identified that it needed to keep the ACCC advised of all market acquisition activity, with a specific requirement to report to the ACCC annually on the concentration of market power in the markets it operates in. The ACCC could then, of its own volition, review the company or the industry concerned.

I have previously moved amendments to allow the ACCC to order divestiture where an ownership situation has the effect of substantially lessening competition. This is necessary to ensure that the ACCC can effectively break up megagroups that substantially inhibit competition as a result of monopolistic characteristics and can reduce monopoly market power, particularly in regional markets, by requiring limited and selective divestiture. The government turned down those amendments. I will be moving those amendments again in relation to this legislation. I am also including amendments to expand the role of the ACCC to monitor prices. There will be those who argue that this will require an increase in staffing for the ACCC and cost a lot of money, but that is not the concern. The concern is to ensure competition is maintained and enhanced. The fact is that price monitoring through the ACCC is an effective way of making sure prices operate well in a competitive marketplace. It has been shown on a small scale by the FuelWatch website in WA with regard to petrol pricing, and it is an effective stratagem in key market sectors. (Time expired)

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

I want to address a number of matters raised tonight, not by way of the set piece speeches my colleagues have delivered—which is, of course, their entitlement—but to go through and look at some of these matters. The first thing I want to say is I am always amused when I hear the Australian Labor Party talking about their concern for small business. If you look at their record, Madam Acting Deputy President, you would be acutely aware that it is absolutely appalling.

I want to give you some quotes in relation to what the Australian Labor Party thinks of small business. In July 2000 Kim Beazley, the member for Brand, admitted:

... we have never pretended to be a small business party, the Labor Party, we have never pretended that.

The opposition leader, Kevin Rudd, admitted that the party has been absolutely atrocious on small business. Greg Combet, who is coming in, said in 2005, ‘I’m afraid I am not a small business advocate.’ Of course he is not, and no-one in the Australian Labor Party is.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator George Campbell interjecting—

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order! Senator Campbell, you will cease interjecting. Senator Ronaldson has the floor.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Tell Senator Ronaldson not to be a bully, and I will not interject.

The Acting Deputy President:

Order! You will cease interjecting. Senator Ronaldson has the floor.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. Tell Senator Ronaldson not to be a bullyboy and I will not interject.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

What an extraordinary outburst! I can understand you are upset about what is happening, Senator Campbell, but I think to bring it here is very unfortunate.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I just think you are a moron.

Chris Ellison (WA, Liberal Party, Minister for Human Services) Share this | Link to this | Hansard source

I rise on a point of order, Madam Acting Deputy President. Senator George Campbell should withdraw the remark that he just made.

The Acting Deputy President:

Yes, he should withdraw that unparliamentary term.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I am not aware that it is unparliamentary, Madam Acting Deputy President, but if it is I withdraw it.

The Acting Deputy President:

I would like an unqualified withdrawal, please.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I am not sure it is unparliamentary, but if it is I withdraw it.

The Acting Deputy President:

It is casting aspersions on another senator, and I am asking you to withdraw it.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

If it is unparliamentary, I withdraw it.

The Acting Deputy President:

I would ask you to withdraw it unconditionally.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I am doing that.

The Acting Deputy President:

I would like you to withdraw that unconditionally, please.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Are you ruling that it is unparliamentary?

The Acting Deputy President:

I am ruling that the term you used is casting aspersions on the character of another senator and I am asking you to withdraw it.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The Acting Deputy President:

Yes, I am ruling that it is unparliamentary.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Then I will withdraw it.

The Acting Deputy President:

Thank you.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. I say, in all fairness to Senator Campbell, Madam Acting Deputy President, you have not heard some of the ways I describe some of his golf shots, so I will not be offended by the comment that he has made; I can assure you of that.

Clearly, this has got under your skin, Senator Campbell. You know and I know that those who are going to replace you and who have removed you from this place are the very people who have acknowledged that they are not small business advocates. Exactly. So what is going to change? When you are gone and others come in—

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise on a point of order, Madam Acting Deputy President. If I was casting aspersions on Senator Ronaldson, then he is casting aspersions on me. I do not mind Senator Ronaldson picking on me for what I do, but at least attribute it to me. Do not attribute it to others. I will deal with the other situations in my own good time.

The Acting Deputy President:

Senator Ronaldson has not yet used a term that is unparliamentary, whereas you did, Senator Campbell, which is why I asked you to withdraw. Senator Ronaldson will proceed.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. We were having, I thought, a quite sensible debate with Senator Stephens and then Senator Murray. I was making my contribution and Senator Campbell seems to have gone completely troppo over the whole thing.

This is a good bill. Senator Stephens made comments about the government’s amendment. We actually listen. These amendments are a direct result of us listening to small business, and indeed this bill comes about through us listening to small business. I will take the chamber through some of that consultation and find the passage of the government’s Trade Practices Amendment Act (No. 1) 2006—the Dawson act. The government has met with small business groups on many, many occasions. Unlike Mr Combet, we actually are small business advocates, and unlike what the member for Brand said about Labor we have always been a small business party.

If Senator Campbell would like me to repeat it, the member for Brand said, ‘We have never pretended to be a small business party, we have never pretended that.’ Exactly. We on this side of the house unashamedly say that we represent—as the minister said—small business, and this bill is just part of the government’s commitment to small business and to supporting small business. As Senator Stephens has quite rightly indicated, although her pious amendment referred to it—but she knows as well as I do that it has been addressed, so why would you put in a pious amendment? Why would you do that? Because you are not serious, that is why. She knows what is coming in. Senator Stephens knows what is going to happen with jail terms for serious cartel conduct, so why put in the pious amendments in (c) and (d)? Why put them in when she knows full well what is going to happen?

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

What is a pious amendment?

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

You know exactly what a pious amendment is. How long have you been here for? If you do not know what that is, no wonder they have got rid of you. If you do not know what a pious amendment is by now—and I was thinking of putting you on as a staffer, too, after the election, Senator Campbell! I think you might have just done your dash in relation to that.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator George Campbell interjecting—

The Acting Deputy President:

Order! Senator Ronaldson, would you resume your seat. I would ask senators other than Senator Ronaldson, who is speaking, to desist from interjecting and I would ask Senator Ronaldson, who is speaking, to direct his remarks through the chair and to pay no attention to interjections.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

I will indeed do that, Madam Acting Deputy President. The consultations that I was referring to, before I was so rudely interrupted, have involved the Minister for Small Business and Tourism, the Hon. Fran Bailey; the leader of The Nationals in the Senate, Senator Ron Boswell; and Senator Barnett and other senators. The groups consulted included the National Association of Retail Grocers of Australia, NARGA; the Council of Small Business Organisations of Australia, COSBOA; the Fair Trading Coalition, FTC; and the National Farmers Federation, NFF. The government has also consulted on the amendments with the Housing Association, the Australian Chamber of Commerce and Industry, the Business Council of Australia, the Law Council of Australia and the Australian Competition and Consumer Commission. That is consultation to make sure that we are delivering for small business. I want to now turn—and I appreciate that the Senate has a lot to get through—to some of the matters that Senator Stephens referred to.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator George Campbell interjecting—

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

I am happy to give Senator Campbell a briefing on this bill after this, because he clearly knows nothing about it at all. I thought it was interesting that Senator Stephens was talking about cartel conduct. The Labor Party’s pious amendment said:

(4) condemns the Government for the failure to legislate for gaol terms for serious cartel conduct ...

Guess what Senator Stephens did in relation to the Dawson bill? The Australian Labor Party opposed it. What did the Dawson bill have in it which the Australian Labor Party opposed? It increased the penalties for cartel conduct. This brought increased penalties of ‘the greater of $10 million or three times the value of the benefit it and any related body corporate derived from the cartel or, where that value cannot be determined, 10 per cent of its annual turnover’. Senator Stephens stands up here and talks about cartel conduct, knowing full well that we are just about to address that. She comes in here having opposed a bill that would have strengthened this provision. What an extraordinary approach.

Chris Ellison (WA, Liberal Party, Minister for Human Services) Share this | Link to this | Hansard source

Totally.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Totally, as the Minister for Human Services said. I would now like to turn to the matters raised by Senator Stephens in relation to the Federal Magistrates Court, particularly section 46 of the Trade Practices Act. From the evidence given to the committee, it is interesting that, in relation to these matters, there seems to be a notion, an assumption by some, including Professor Zumbo, that there are no costs associated with appearing before the Magistrates Court. This was the secondary boycotts matter we were inquiring into recently. There is a notion that you can just run off to the Federal Magistrates Court and have a duty solicitor there and it does not cost you anything—and they can do exactly what the Federal Court can do and exactly what the ACCC can do. What a load of patent nonsense! There were costs associated with all this.

In 2006 we amended the Trade Practices Act to enable the Federal Magistrates Court to consider unconscionable conduct under part 4A of the act and the contravention of industry codes under part 4B, which has obviously assisted small business in bringing these actions in court. This includes the ability of the Federal Magistrates Court to accept evidentiary findings, as permitted under section 83, in relation to matters for which it has jurisdiction. Senator Stephens also referred to creeping acquisitions. The Dawson review examined this in detail and concluded that section 50, in its current form, is adequate to enable the ACCC to consider creeping acquisitions. There is nothing in the wording of section 50 that would permit a merger acquisition of any size that would result in a substantial listing of competition in the market.

My other colleagues want to talk on this bill so I will not continue much longer. But what I will say to the Senate is that this is part of a comprehensive package of amendments to the TPA that this government is frankly quite proud of. We had the Dawson act, the Trade Practices Legislation Amendment Act (No. 1) 2006, this bill, the cartels bill, the Trade Practices Amendment (2006 Measures No. 2) Bill and the secondary boycotts bill. Of course, we have the cartel matter as well. This is a comprehensive approach to an issue that has been here for a long time. Our commitment to small business is clearly evidenced by the ministry. The last Labor government did not have a minister for small business until, from recollection, five or six years into its term. What a remarkable legacy that is.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator George Campbell interjecting—

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

While we are talking about legacies to small business, because I have been provoked again by Senator Campbell and I feel duty bound to respond—

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

If I were you, I would not, Senator Ronaldson.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Okay, Madam Acting Deputy President. I think I know what Senator Campbell is thinking and I am going to respond to that. It is obvious to me that Senator Campbell is thinking about interest rates. It is obvious to me that he heard Senator Sterle yesterday—and I hope Senator Sterle is listening. Senator Sterle corrected one of our ministers, who suggested that interest rates had only got to 18 per cent. To his great credit, Senator Sterle interjected: ‘No; it was 22 per cent.’ I have found in my dealings with Senator Sterle a refreshing honesty. So this is your legacy to small business.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator George Campbell interjecting—

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Senator Campbell, I do not expect you to understand this, but for small business during the enforced recession of the Australian Labor Party—and you would not know this, Senator Campbell, because you are not a small business advocate; you, of course, like your colleagues—

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Madam Acting Deputy President, I rise on a point of order. Again, Senator Ronaldson is attributing things to me. I do not know whether he is right or wrong but I do know a fair bit. I have been around a long time and I do know that the only time we had a wage freeze in this country when workers suffered a decline in living standards—

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order! That is not a point of order.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I know it is not, but I just make the point.

The Acting Deputy President:

That is not according to the Senate rules of debate, so there is no point of order.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

I presume, from where Senator Campbell is sitting, that he is a member of the Australian Labor Party. I think that is a reasonable assumption, isn’t it?

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

For 42 years!

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Terrific. I am glad that you acknowledge that, because I was talking about you before, my friend, when I said: we have never pretended to be a small business party—the Labor Party of which you are a member, Senator Campbell. I am not attributing something to you that you are not part of. You are part of the Australian Labor Party and that is what was said. You have never pretended to be a small business party.

But small business does remember 22 per cent interest rates plus, as do those whose businesses that were marginal, paying upwards of 24 or 25 per cent. That was your legacy to small business. Your other legacy to small business was high inflation. But the best legacy you gave to small business, which you have reintroduced in your so-called changes to IR in relation to small business, is the proposal that you keep those unfair dismissal laws which have destroyed small business in this country.

In the last 15 months there have been close to 410,000 jobs created in this country—some 86 per cent plus of which are full-time jobs. As for the comments of the Australian Labor Party that this is all in the mining sector, that is absolute bunkum. A substantial amount of this new employment has been driven by the renewed confidence of the small business sector in their ability to hire. That has been directly responsible for the enormous job growth. You gave this country part-time work and 18 per cent unemployment. We have given this country in the last 15 months an extra 400,000 jobs and an unemployment rate of 4.3 per cent.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

And part-time wages and no security of employment.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

In four decades we have not seen this level—and you have got the gall to stand up here and constantly interject. I just wonder whether Senator Campbell might be feeling a tad guilty, because he has not stopped interjecting since I started. If you like, I will go through—

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Because you are a bully!

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Senator Campbell is calling somebody a bully! That is breaking new ground—

The Acting Deputy President:

Order! Senator Ronaldson, would you address your remarks through the chair.

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President, I will. I think that it is Senator Campbell that is a bully. I distinctly remember playing golf with him when he forced me to play a lot quicker, and I was bullied by Senator Campbell. If you look at what this government has done for small business—and obviously lower interest rates have been extraordinarily important for the small business sector—we have reduced company tax from 36 to 30 per cent. There were reductions in personal income tax rates in the last four federal budgets—tax changes that you would never deliver because you have never been committed to lower taxation. We have reduced tax compliance particularly through streamlining the simplified tax system, BAS lodgement and GST compliance with the raising of the annual turnover thresholds for registration for the GST from $50,000 to $75,000 for business. We have established a dedicated $50 million Regulation Reduction Incentive Fund to reduce the red-tape burden imposed on small business by local government. This will save small business over $450 million in time and money. We made workplace relations simpler and easier—

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

You certainly made it easier!

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

We took the yoke of unfair dismissal from the neck of small business, and they responded, as Senator Campbell will see if he reads the Econtech report. If the Australian Labor Party is proud of an increase of 1.4 per cent in interest rates, if the Australian Labor Party is proud of a loss of 360,000 jobs, if the Australian Labor Party is proud of a significant reduction in GDP, then you go ahead and make your changes. Then you can come back to the Australian people again after you have destroyed small business and you can apologise. The Australian Labor Party has never been a friend of small business. This legislation is just part of a package of support for the small business sector, which we have always supported and will continue to support.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I would like to start by acknowledging and thanking some people who have been involved with this piece of legislation. I acknowledge that the legislation has taken a dramatic step forward, although in the past I thought that this would not be the case. The first person I would like to thank is the Treasurer. He has listened. I will be so presumptuous as to term the government amendment ‘the Birdsville amendment’ because that is the town in which it was devised. It was devised in a motel room whilst I was travelling out to the west of Queensland. Taking that on board was a great step forward, not just for small business in Australia but for the way in which small businesses throughout the world assess market share.

I would also like to thank the Senate Standing Committee on Economics, which I see as a very informed and bipartisan committee. It works very effectively on some of these more complicated pieces of legislation. The members generally have their hearts in the right place. I would like to thank my colleague Senator Boswell who, for as long as he has been in this place, has been a fighter for small business. I hope that Senator Boswell sees this legislation as yet another endorsement of his career in working for small business. Senator Boswell and I—being National Party senators from Queensland—have been working with small business to try to get a better deal.

I would like to acknowledge Senator Murray from the start. This legislation, which we all know he has an extremely strong connection to, will possibly be one of the last pieces of legislation he deals with. Senator Murray has been one of the most diligent and hardworking senators to have graced this chamber. If you want an expert on this issue and if you want someone who will go through the fine detail and who is always a gentleman in the way in which he deals with other people doing committee work, then Senator Murray is a pretty good exemplar. I would like to acknowledge the effort he puts in.

Finally, I would like to acknowledge the support of all colleagues but especially my National Party and Liberal Party colleagues, who have put up with what they would see as my irrational and threatening behaviour at times in trying to get a better deal. There are some people who have said tonight that they believe this legislation could have gone further—that will always be the case—but they must agree with what we have. It is always easy to say we should have gone further and not acknowledge the point which we have reached. The point we have reached is a major step forward. I know it is major step forward because people such as the Australian National Retailers Association—who inform me that they were founded in 2006 to become the voice of large-scale retailers in Australia—have big problems with my amendment. That, for me, is a great endorsement.

We have to look after small business. Small businesses encapsulate the freedom of living in this nation—the freedom to go into business, to be master of your own ship, to determine your own destiny, to profit by the sweat of your brow and by so doing to espouse that freedom in the way you think and the way you act in society. Small business is the absolute seedbed from which the freedom of democracy is built. You have to make sure that you keep looking after that seedbed so that you keep the ability for people to enter at the ground level and prosper.

One of the things that the Australian people have spoken loudly on—whether it be on the Alan Jones show; Today Tonight; Leon Byner’s show, in South Australia; or Steve Austin’s show up in Queensland—is the fact that the scale has tipped too much in favour of big business. That needed to be addressed. In this legislation we are addressing that. We are taking that issue on board. There is a substantial change here. The substantial change is to do with the assessment of predatory pricing and the move to ‘significant market share’ and away from ‘substantial lessening of competition’.

I just want to run through those two terms because they are very important. The ‘substantial lessening of competition’ test, as Senator Stephens pointed out, was the premise that you had to prove that someone had the ability to put up prices without losing market share. Unless you could pass that test you could not proceed with a predatory pricing case. The only people who can put up prices without losing market share are monopolies. That issue had to be addressed. In this legislation and the amendment that the government has put forward that issue is addressed. We are now moving to a completely new definition which says that a corporation that has a substantial share of a market must not supply goods and services for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a person into a market, or deterring or preventing a person from engaging in competition. To put that in another way, a big supermarket cannot drop its price below cost to put the corner store out of business. A big liquor distributor attached to a big supermarket cannot drop the price of a case of beer to a level that puts out of business every bottle shop in town. That is now illegal, and that is a major step forward.

Some people say that it is going to be the end of discounting. What a load of rubbish! When you do it with the motive of destroying small businesses—those mum-and-dad businesses which are the cornerstone of our economy and which encapsulate the aspiration of freedom to advance within Australia—then you are breaking the law. That is why this amendment, and this legislation, has been so well received today. It has been unanimously well received, whether it was on the Alan Jones show, Leon Byner’s show or the ABC in Melbourne. People have been looking for this and this is a dramatic step in the right direction for the protection of small business.

The other issue that is dealt with is the conjecture that has surrounded the recoupment test. The recoupment test is the belief that you have to prove that the person who put you out of business is going to put up the price to recoup the loss that they incurred in that action. It has never actually been defined, but it has morphed into that through the actions of the court. The explanatory memorandum in this bill clearly deals with that issue, and no doubt we will be hearing about that in the second reading speech as well. That is something that needs to be put to bed, because it was one of the problems that emerged from the Boral decision in 2003. That issue has hung around and stymied—in fact, not stymied but completely stopped—predatory pricing cases. There have been no successful predatory pricing cases since the 2003 Boral decision. If we believe in predatory pricing, we must believe in dealing with the issues that have stymied the progression of those cases, and this deals with them.

This bill reflects hard work and the aspiration of democracy. Certainly within the National Party—I am not fully aware of Liberal Party resolutions; I imagine they have been the same—there have been unanimous resolutions from our state conference in Queensland that started on the ground and said people wanted this issue dealt with. When the democratic process of the state conference indicates they want an issue dealt with, you have the responsibility when you get yourself to Canberra—if you are so lucky as to have the honour of representing your nation—to try and progress it, to try and pursue the issues on their behalf. It is good to be able to go back to your membership of the National Party in Queensland and say: ‘You’re a member of a political party because you want to see change. You asked for change, and here the change is.’ It reinforces that sense of democracy, certainly within my party, the National Party, but also within this nation, and says that aspirations for change, when you take them through a political forum, can be achieved.

In the future we know that cartel issues are going to be dealt with. That issue is coming forward. People have mentioned other things. In the future I suppose it would be good to see a move to deal more effectively with divestiture. We do have divestiture powers, but they are only very temporary—just after any merger or acquisition. If divestiture powers are enhanced in the future that will be yet another move that will assist small business. I acknowledge what Senator Murray says, not so much for the wish to use them, because they are a very heavy instrument, but just for the fact that they are there. That puts people on notice that if they play up they will be broken up. They have them in the United States and other countries, and they are something that over time we should certainly move towards in this country.

Creeping acquisition is another issue that in the future we should seriously consider. Creeping acquisition is not to make a major purchase of another organisation but to increase your market share bit by bit over a period of time. That also needs consideration in the future. I acknowledge the movement that the Treasurer has made on this issue, and I also believe in being honest with the people. We talk about just terms and the terms of the deal. The terms of the deal are that we get a major move forward. I will be supporting the government’s amendments and I will not be supporting any others, because that is a fair outcome for this issue. I hope that everybody acknowledges just how seminal this legislation, especially the government amendment, is in changing the anticipation and assessment of the corruption of big business in pushing small business out of business. This is a statement, which I believe will speak to the conservative core constituency, that we believe in their aspirations above all others. We believe in the aspirations of the small business person above all others, because we know that once that aspiration is taken out of the economy, once the prospect of being your own master is squeezed out of our society, the tenets of a range of freedoms are lost.

It might be a joke, but I use the example that even Jesus Christ, when he was looking for disciples, went and found small business people. He went out and found fishermen. Even just looking at that as an example, he found people who had the freedom to make their own decisions on whether to stay or go; they did what they wished. It is a very important point. I do not know how he would go if he turned up today and he had to stand at the back of a queue at a major bank and scream to people to listen to a message. That is also part of why I have such an entrenched fervour for the protection of small business. It is a key thing that we need to look to.

Within the National Party there is one thing that is unique about all of us, every senator who sits in here. We are all small business people, the whole lot of us: I was an accountant, Senator Nash was a farmer, Senator Scullion was a fisherman and Senator Boswell was a paintbrush salesman. That is where he came from.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

A superb one!

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

A superb one! Senator Sandy Macdonald was also in farming. They were all small business people. People say, ‘What is the core ethos, a similar tenet, that runs through the whole lot of you?’ It is small business. You have to protect small business because they are so damned busy trying to look after their own businesses that they do not have the ability to have lobbyists walk up and down our corridors. They do not have the money to put on marvellous gala functions so you can swan around all night. All that they rely on is your intent, your goodwill and their belief that you will go in and fight for them. Probably the best support that they can give you is to turn up to a function in Brisbane, Cairns or out at Longreach, and that is about as close as it gets. They rely more than most on the good nature of this chamber to do the right thing by them. Big business has big pockets to fund strong lobbying positions in this building, and that is why we must always be mindful of small business.

As we go forward, I hope that this ‘Birdsville amendment’ is something that people will reflect on and think that there was a change that came about, and that when people go to Birdsville, amongst other things like going to the races, they will say that this is where a new stage—not the complete stage, not the panacea, not the be-all and end-all—of looking after small business started. That would be another part of the intrigue of how these issues are pursued and how they get somewhere.

Finally—and I hear some people denigrating me, which I do not think is needed—I would also like to acknowledge the support and the hard work of Professor Zumbo. I do not feel that he is welded to any political group. I believe that he has a belief in small business. When I read him in the Australian Financial Review I see that he understands legislation and the Trade Practices Act like nobody else I know. That does not mean that I agree with everything that he says—I do not—but I think that he has been a great advocate for small business. I thank the Senate and hope the Senate gives strong support to this bill—I know it will—and to the amendments. I look forward in the future to progressing other issues pertaining to small business.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

This is a big day for small business. The amendment that the government is putting through, and which has Barnaby Joyce’s fingerprints on it, is one of the biggest breakthroughs for small business that I have seen in my time in parliament, and it deserves the support of all senators. It would be absolutely churlish of anyone to say that this has not gone far enough. I do not believe that. This is just about the panacea for small business. It is very important because, as Senator Joyce has said, if we want an egalitarian society—which Australia is well noted for—with a bit of poverty on one end and a bit of wealth on the other but with an overwhelming middle class, then that has to be supported by a strong small business community. Whether it be retail trade, engineering, manufacturing or whatever, small business definitely underpins the egalitarian society of this nation.

My view has always been that you have to have competition—it is healthy for the consumer and it is healthy for the economy in the long term. If we have manipulation or control of a market by one or two larger players, without competition and without competition being provided by small business, it will eventually lead to higher prices, less range, less innovation and less opportunity for producers to sell their products. We have seen a number of trade practices amendments come through this house over the past few years, and we have always tried to maintain that balance. We amended the Trade Practices Act in 2006 with the Dawson reforms, which introduced a faster, cheaper system of collective bargaining for small businesses with their suppliers and buyers and provided them with a new formal merger process which big business had been asking for. That was when this legislation became a goer and was supported in this chamber. After the Dawson reforms there was agreement on the legislation that came through this chamber to amend section 46. But those changes were not as significant as the changes that we are making today.

In my 24 years in the Senate, there has been no more contentious issue than the misuse of market power under section 46 of the Trade Practices Act. Misuse of market power is where a business holds an advantage in market power over its competitors and uses that market power to unfairly compete with other businesses. A classic example of that was the Boral decision. That was where the whole of section 46 changed and got out of whack. Boral undercut a particular block maker—I was involved in this—and the block maker went to the ACCC. The ACCC took Boral to court and Boral won; the ACCC appealed and won. Boral then took the ACCC to the High Court and won, and then the whole of section 46 was knocked out of whack. Since that time, as Senator Joyce and others have said, there has not been another predatory pricing case before the ACCC.

So this amendment will bring back the balance in the misuse of market power. I will just explain what it means. A classic example of misuse of market power is the practice of predatory pricing where a larger competitor prices a product or service below cost price for a sustained period for the purpose of driving competitors out of the market. Predatory pricing can end in ruin for the targeted business or in the bigger company buying the smaller company out and absorbing it, often burying the innovation and the new technology it had begun to produce—a new product, design, production or method of operation.

That is exactly what happened in the Boral case. A particular brickmaking operation designed a new machine which worked three times as fast as previous ones and was able to reduce the cost of the Besser blocks or whatever. Then Boral decided to take them on. To cut a long story short, Boral ended up buying this particular brickmaker out after trying to predatory price him out of the market. Predatory pricing and other misuse of market power actions to drive out a competitor are poison for the Australian consumer. Not only do they reduce competition in the marketplace, which we aim to encourage and promote, but they also reduce innovation and the essential search for business efficiencies, which have been the hallmark of small businesses forever.

Small business remains an integral part of the Australian economy. Certainly, it has an importance for rural and regional areas, where it is the backbone of local communities and towns. It is the employer and contributor to the local footy club, the local scout group. Small business is always good for a touch: when the scouts, the football club or the basketball club come around, the first port of call is the local shop and it is always good for a donation. So it is very important to the National Party.

You cannot expect business just to be there; it has to grow from something. It just does not become big business overnight. Big businesses start from a seed; an oak tree grows from an acorn. The existing legislation envisages that new, internationally competitive business will just come into existence without encouraging, nourishing and providing fair protection for small business not only in the regions but also in the cities. It just will not happen. We have an effective trade practices regime that relies on three basic premises. One is effective merger laws and we have those. In 1986 the Labor Party changed that. When Chris Schacht was the Minister for Small Business, I asked him to change the merger laws. He was a great mate of mine, and I said to him, ‘Chris, you’ve given Keating 23 votes; call in your IOUs and change the merger test.’ And that is what he did. He was a great believer in small business, and we were great mates. I said to him at the time: ‘You cannot just create small business; it has to grow. You cannot just have a monopoly test’—and that is what we had. You had to have a monopoly before section 46 would cut in. We changed that act to say, ‘You cannot substantially lessen competition in a substantial market.’ It was called the Chris Schacht amendment. I always claim victory for that, because I said to him: ‘Chris, you’ve just given Keating 23 votes in his leadership challenge. He is now the new Prime Minister, call your IOU in.’

We have effective merger laws and we have effective laws against cartels and pricing. We have very effective laws against predatory pricing and the misuse of market power, as a result of corporations possessing substantial market power. I do not believe you can go any further than this amendment. Small business must think it is Christmas today. We have negotiated and dealt with changes to the merger process through the Dawson reforms. We have maintained the strong mergers test in section 50 of the Trade Practices Act that Chris Schacht and I colluded to bring forward, which states that you cannot lessen competition in a substantial market.

We have a strong law and penalties against cartel behaviour which have been further strengthened under the coalition government, and legislation is imminent to strengthen them even further. The Treasurer has recently introduced a bill to allow the ACCC to take court action to access compensation for victims of secondary boycotts, and now we are going to revisit section 46. Section 46 must be available as a working remedy for small business in a form which reflects the intention of the 1986 test. The intention of the last change to section 46 in 1986 was to ensure that it was not just a monopoly business that could be prosecuted for misuse of its market power under the Trade Practices Act—and full credit to Mr Duffy, who I think was the Attorney-General at the time. I had an interesting interlude with Mr Duffy. I said to him, ‘You have to be able to get a small business to grow.’ He said, ‘You’re right; I can never buy Bulla yoghurt in the shops and I love Bulla yoghurt.’ I said, ‘That’s because Bulla is small and it can’t get on the shelves, and Bulla will be bought out if you don’t change section 46.’ Bulla yoghurt was one of the mediums that we got section 46 changed through.

However, the High Court decision in the Boral case changed all that and knocked it back. I raised this issue time and again in the party room with Senator Brandis, who is a noted trade practices lawyer. The Brandis committee was set up, which Senator Joyce has given accolades to. It brought down recommendations, and that is how this legislation came before the House. A number of us in the party room kept raising this issue, saying: ‘Since the Boral decision, section 46 is rendered useless. You have to be a monopoly.’ It is almost like Qantas attacking Cairns Air with two Barons or something like that. That is an example of the way it would work.

Debate interrupted.