George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to the government amendments to be moved to the Trade Practices Legislation Amendment Bill (No. 1) 2007 which was circulated in the chamber on 10 September 2007.

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

I move Democrat amendment (1) on sheet 5324 revised:

(1)    Schedule 1, page 3 (after line 6), after item 1, insert:

1A  After section 6AA

Insert:

6AB  Procedures for merit selection of appointments under this Act

        (1)    The Minister must by writing establish a code of practice for selecting a person to be appointed by the Commonwealth or a Minister to a position under this Act that sets out general principles on which the selections are made, including but not limited to:

             (a)    merit; and

             (b)    independent scrutiny of appointments; and

             (c)    probity; and

             (d)    openness and transparency.

        (2)    As soon as practicable after establishing a code of practice under subsection (1), the Minister must publish the code in the Gazette.

        (3)    The Minister must conduct a review of the operation of the code of practice established in subsection (1) not later than the fifth anniversary after the code has been established.

        (4)    The Minister must invite public comment on the code when a review is conducted in accordance with subsection (3).

        (5)    A code of practice established under subsection (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

In moving that amendment, I will begin with a general remark. It is my view that this election is going to be contested on four broad fronts covering the issues of the economy, society, the environment and integrity. This particular measure is an integrity measure.

It interested me that, as soon as Mr Brown took over from Mr Blair as Prime Minister of the United Kingdom, almost the very first thing he did was to move a very substantial set of proposals for improving integrity in the United Kingdom political system. If there is one issue on which the Howard government is roundly and commonly condemned, in my experience, throughout the population, it is failure to advance integrity in our political system. That applies whether you are talking about failure to improve freedom of information legislation or whistleblower legislation, or failure to properly control and manage government advertising programs, and, of course, it applies to the issue which I raise here, of appointments on merit.

Appointments on merit are a fundamental integrity issue, and now, as we reach the eleventh and a half year of coalition governmental milestone, I remind the Senate that about three dozen times the coalition has rejected appointment on merit proposals from the Australian Democrats. Labor, too, have rejected quite a number of those, but they have also supported a number of those, because they and we recognise that the issue of avoiding patronage and ensuring independent appointments is a vital and critical one, even if it is just a perception of patronage or a lack of independence. That is not, of course, to condemn or to imply that all appointments made by the Howard government have been poor—they have not. There have been some excellent appointments of some very excellent people. But it is the principle that needs to be laid down. Essentially, the principles that we consistently put before this chamber are built on Lord Nolan’s examination, in 1995, of the issue of appointments and patronage in the United Kingdom and on his proposals that were agreed to by the conservative government of John Major, then carried through and supported by the Blair government and now to be further enhanced and improved by the Brown government.

We are trying to build on best practice that is emerging in democratic countries with which we have common traditions. It is simply a safeguard that in future governments, under future ministers, the procedures for merit selection appointments will always be conducted to the highest level. Of course, it is not just a federal issue; it is also a state issue, but we are dealing here with federal legislation.

The basic structure of this amendment has been put before us some three dozen times. I am certain the Howard government will reject it. I think that just contributes to its generally low reputation on integrity matters, but that is its lookout, not mine. It is my job simply to try to keep putting forward proposals such as these, which are designed to address an area of concern amongst voters—that is, appointments might not always be made on merit and might be made with regard to other circumstances, such as patronage or political considerations. This amendment calls for the general principles on which the selections are made to be established by a code of practice, including that the selection of the person shall be on merit and shall cover independent scrutiny of appointments, probity, openness and transparency. It is hardly the sort of amendment which is unbearably restrictive or impractical.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Labor support the sentiment of the Democrat amendment. However, we do not agree with particular details that have been laid out. Labor believe in merit based appointments and have announced selection processes for government bodies such as the ABC board—

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

Except in your own preselections.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

and our Fair Work Australia, which we believe delivers this. The former National Party member should be the last one to talk about selection processes given his behaviour in jumping parties. Back to the issue: the selection processes that Labor have announced demonstrate our commitment to the Nolan principles. The Nolan rules govern appointments to government bodies in the United Kingdom. Labor have consistently argued for this policy for the last few years. The Nolan rules require that appointments are merit based and the process of appointment is independent and transparent. Labor and all of the other parties, including of course the Democrats, have advocated merit based appointments. This government is tired and out of touch after almost 12 years in government—tricky, mean, stale—and we saw the very worst of that on display last week. It is important that political appointments to bodies, such as the ACCC, are based solely on merit.

The appointment model suggested by the Democrat amendment does not meet the detailed requirements set out by Labor and so, although we support the sentiment behind the Democrat amendment, we believe it requires further development from government and we will not be supporting the detail of this particular amendment.

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

The government does not support Senator Murray’s amendment for the simple reason that it is entirely unnecessary. With due respect, Senator Murray—and in mentioning him for the first time in this debate, I acknowledge his very significant contribution to this discussion over many years—has, I am sorry to say, on this particular occasion done what he so often does: he has raised a straw man only to knock it down. The existing provisions of the act, in particular section 7(3), provide in very clear terms the qualifications requisite to membership of the commission.

I note with interest that neither in Senator Murray’s speech nor in the concurring remarks of Senator Sherry was there any criticism offered or any appointment that this government has ever made to the Australian Competition and Consumer Commission. So, although sentiments emanating from Senator Murray are characteristically very noble, they also raise a straw man. It is an unnecessary amendment in view of section 7 and also the intergovernmental conduct code agreement, which requires that the Australian government consult with states and territories on proposed appointments to the ACCC. There has never been an issue about the appointment of unsuitable people to the ACCC during the lifetime of this government and nor will there be in the future under the lifetime of this government. Therefore, the government sees no merit in this particular amendment.

Question negatived.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I move opposition amendment (1) on sheet 5344:

(1)    Schedule 1, page 3 (after line 11), after item 3, insert:

3A  After subsection 10(1A)

Insert:

      (1B)    At least one of the Deputy Chairpersons must have a small business background.

This amendment deals with the deputy chairperson having a small business background. The amendment requires at least one of the two ACCC deputy chairpersons to have a small business background. The Treasurer, in his second reading speech to this bill, said he envisaged the second deputy chairperson position created by this bill to be filled by someone with a small business background, so Labor’s amendment will ensure this happens by inserting a requirement in law in the act.

The act currently requires one of the commissioners to have a consumer background. Therefore, it is not without precedent to require commissioners to have a particular background to ensure that they have the experience and expertise to add to the ACCC. Labor believe it is a very appropriate amendment; we are in obvious agreement with the Treasurer if he is true to his word about envisaging that the second deputy chairperson—are they tricky words or not?

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

No, they’re not tricky words, Senator Sherry; it’s plain English.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Is it just another example of trickiness by the government, trickiness in use of language? ‘Envisage’ does not necessarily mean it will be delivered, as Mr Costello may find out if this government is re-elected. The tricky words of the Prime Minister of last week—

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

You’re overdoing it.

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

This is Mr Costello’s bill!

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

If I were Mr Costello, I would not be relying on those tricky words of last week that very begrudgingly extracted comment from the Prime Minister that he would be standing down some time well into the next term—more examples of trickiness.

Anyway, if it is envisaged that the second deputy chairperson is to be from a small business background, let us make it a sure bet, Senator Boswell. That is the challenge for the weak and insipid National Party.

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

Senator Boswell interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Well, you can laugh. Is it the Howard-Vaile government or the Howard-Costello government?

Ross Lightfoot (WA, Liberal Party) Share this | Link to this | Hansard source

Please address your remarks through the chair. And perhaps you should stick to the bulk of the bill.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Of course, and I would appreciate the interjections ceasing and your unbiased drawing of attention of the standing orders to Senator Boswell.

The Temporary Chairman:

My advice is unbiased, Senator Sherry. I have let you go on for quite a while.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I know it is unbiased. That is why I am drawing your attention to Senator Boswell’s rather insipid interjections.

The Temporary Chairman:

You have said that, Senator Sherry. It does not help the debate.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Thank you, chair. We believe that we should confirm in this legislation, through this amendment, that the deputy chair should be from a small business background, full stop.

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

The Australian Democrats agree with the sentiment of this amendment but can see some weaknesses in it. For instance, if the chair of the commission is already from a small business background, why would you want another person from a small business background? The use of the word ‘must’ is a mistake. The bill should probably better express the fact that there is this new person, which, by the way, we welcome. We think the nature of the work engaged in by the commission warrants an extra person in the deputy’s role. It would probably be one of those areas of business expertise to which the government should have regard when appointing, but that should not necessarily be an instruction because it might be that the total constitution of the commission is such that that area of expertise is already covered. There is good sentiment on this from both the Treasurer and the shadow, but I suspect that the amendment could have been better worded.

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

The government does not support this amendment on the grounds that it is otiose, for all the reasons which Senator Murray, who has brought his penetrating intellect to bear upon the issue, has just recited. I draw Senator Sherry’s attention, with respect, to the existing provisions of section 7 subsection 3B of the act, which requires consideration of the small business knowledge or experience of any potential appointee to the Australian Competition and Consumer Commission. As I have said, it is otiose and the government has already indicated that it will be amending the legislation to provide for a second deputy chairperson. The government will have regard to the small business background and experience of such a person in making the appointment, as I set out when summing up the second reading debate.

Question negatived.

by leave—I move government amendments (1) to (3) on sheet PF441:

(1)    Schedule 2, page 5 (after line 5), after item 1, insert:

1A  After subsection 46(1)

Insert:

  (1AA)    A corporation that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services, 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; or

             (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.

  (1AB)    For the purposes of subsection (1AA), without limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has a substantial share of a market, the Court may have regard to the number and size of the competitors of the corporation in the market.

1B  Subsection 46(1A)

Omit “subsection (1)”, substitute “subsections (1) and (1AA)”.

1C  Paragraph 46(1A)(a)

Omit “paragraph (1)(a)”, substitute “paragraphs (1)(a) and (1AA)(a)”.

1D  Paragraph 46(1A)(b)

After “paragraphs (1)(b) and (c)”, insert “and (1AA)(b) and (c)”.

(2)    Schedule 2, page 7 (after line 26), after item 8, insert:

8A  Paragraph 151AJ(5)(c)

Omit “paragraph 46(1)(a)”, substitute “paragraphs 46(1)(a) and (1AA)(a)”.

(3)    Schedule 2, page 7 (after line 28), after item 9, insert:

9A  After subsection 46(1) of the Schedule

Insert:

  (1AA)    A person that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the person of supplying such goods or services, for the purpose of:

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

             (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.

  (1AB)    For the purposes of subsection (1AA), without limiting the matters to which the Court may have regard for the purpose of determining whether a person has a substantial share of a market, the Court may have regard to the number and size of the competitors of the person in the market.

9B  Subsection 46(1A) of the Schedule

Omit “subsection (1)”, substitute “subsections (1) and (1AA)”.

9C  Paragraph 46(1A)(a) of the Schedule

Omit “paragraph (1)(a)”, substitute “paragraphs (1)(a) and (1AA)(a)”.

9D  Paragraph 46(1A)(b) of the Schedule

After “paragraphs (1)(b) and (c)”, insert “and (1AA)(b) and (c)”.

The government is moving these amendments to include a new prohibition in part IV of the Trade Practices Act that will specifically target anticompetitive, below-cost pricing by corporations with a substantial market share. The reason for this is that, although there was a view held by many, including many with expertise in this field, that the existing provisions in section 46 were in their current terms sufficiently broad to deal with the problem, nevertheless out of a sense of abundant caution the government has decided to agree to the proposition that there ought to be more specific provision made in relation to the issue of below-cost pricing. Amendment (1) amends this bill to introduce a new subsection—subsection 46(1AA). That provision will prohibit a corporation with a substantial share of a market from supplying or offering to supply goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services for the same purposes as currently set out in subsection 46(1A) to (1C) of the act. In other words, the existing proscribed purposes will apply but the courts will be given direction to apply them specifically, rather than in the generic framework of the existing section 46, to the particular case of a corporation with a substantial share of market power in the circumstances that I have just recited.

Amendment (1) also introduces subsection 46(1AB). That subsection provides that the court, in determining whether a corporation has a substantial share of a market for the purposes of the prohibition, may have regard to the number and size of competitors of the corporation in the market. This provision is expressed so that it does not limit the matters to which the court may otherwise have regard in determining whether a corporation has a substantial share of a market. To assist with the interpretation of this new provision, consequential amendments are included to ensure that it is subject to existing subsection 46(1A). As a result, for the purposes of the new prohibition, a reference to a competitor will be deemed to include a reference to competitors generally or to a particular class or classes of competitors, and a reference to a person will include a reference to persons generally or to a particular class or classes of person. These consequential amendments will assist in ensuring coherency between the existing prohibition contained in section 46(1)—that is, what I have described as the generic prohibition—and the more particular application envisaged by the new prohibition.

The second set of amendments deal with the application of section 46 to the telecommunications industry. They are consequential amendments to part XIB of the act. Subsection 151AJ(5)(c) of the act presently provides for an amended application of section 46 for the purposes of section 151AJ(3) in the case of a telecommunications carrier or carriage service provider that is not a corporation or a partnership. In particular, the act currently provides that, in determining whether such a carrier or service provider is in contravention of section 46, it is to be assumed that the expression ‘or a body corporate related to the corporation’ is to be omitted from subsection 46(1)(a). The second set of amendments ensures that the same assumption is made in relation to the prohibition which is contained in the first set of amendments—that is, the amendments which will introduce subsection 46(1A)(a) and 46(1A)(b) to provide ongoing consistency between section 46 and part XIB.

The amendments in the third set of amendments are amendments to the scheduled version of section 46. The purpose of these amendments is to make corresponding changes to the version of section 46 found in part 1 of the schedule to the act. That is the version of the act that applies in the states and territories by virtue of the application legislation. The changes in the third set of amendments are identical to those in the second set of amendments, and they ensure that the new prohibition in subsection 46(1)(1AA) and the provisions of section 46(1)(1AB) apply to all businesses in Australia, regardless of their structure—that is, whether they are governed by Commonwealth or state or territory law.

It should be noted that the amendment is constrained by the conduct of the corporation that has a substantial market share. For example, the corporation must have the purpose of damaging a competitor or preventing the entry of a competitor or potential competitor in order for it to be in breach of the new prohibition, and the conduct must also be carried out for a sustained period. In other words, the test in subsections 46(1)(a) to (c) of the existing section 46—the generic provisions about motive—will apply in relation to the amendments to the scheduled version of section 46 as they do to the specific low-cost pricing provisions which I have outlined.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Labor will be supporting the government’s amendments. The amendments insert a specific section dealing with predatory pricing. Currently, predatory pricing is one type of conduct that can be captured by the section 46 ‘Misuse of market power’ provisions. The new specific predatory pricing section prohibits a corporation with substantial market share from supplying goods at a price below relevant cost for a sustained period of time for an anticompetitive purpose. The new concept of ‘substantial market share’ is different from the concept of substantial market power in section 46. A further difference is that there is no requirement to prove that a corporation took advantage of its substantial market share for an anticompetitive purpose. This removes the second hurdle, of proving taking advantage, which currently exists in section 46.

Labor will support the amendments but is concerned that this amendment was hastily cobbled together at the last minute. It was a very last-minute backflip by the government, and that was due to the pressure brought to bear on the government by small business and Labor, the Democrats, Family First and others. The government’s changes are welcomed but only go a small step of the way. There is a lot more the government needs to do to strengthen the act, on matters such as creeping acquisitions, criminal penalties for cartel conduct, and access to justice for small business through the Federal Magistrates Court. Supporting Labor’s sensible and balanced amendments, which we will deal with, would have dealt with these issues. The key is to strengthen section 46, not to introduce new sections. This change does nothing to crack down on anticompetitive conduct other than predatory pricing but it goes some way—a small way—towards what needs to be done and, to that extent, Labor will be supporting the government’s amendments.

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

This particular debate is not on broadcast and so, for those who are going to be reading the debate, I think it is useful to remark that, in the presence of the duty minister, Senator Brandis, we are fortunate. Sometimes duty ministers do not have particular expertise in the bills they have to run—they have competence but not expertise. In this particular case, Senator Brandis is, of course, a person who deservedly enjoys a high reputation with respect to trade practices matters, which means that we are likely to get responses which do not just accord with the legislative line but hopefully are informed by his background and understanding. I make those remarks deliberately because, of course, I want to put a question arising from these amendments.

Let me say at the outset that the Democrats support the amendments. I understand these amendments now go under the quaint name of ‘the Birdsville amendments’, as proposed by Senator Joyce, and I want to compliment Senator Joyce again on his persistence in getting these amendments accepted and put forward, because they do advance the general cause. I have the view that, in certain respects, there are people who cannot be satisfied by trade practices law—that, in certain respects of the law, perhaps particularly with regard to section 46 matters, that which advantages small business will disadvantage big business, because it restrains their ability to take advantage of their market power to exercise the natural monopolistic instincts of any business faced by opportunities to increase their market share and increase their profitability. I often refer to business behaviour, even where it is prohibited or condemned, as natural behaviour, because it is the natural desire of businesses to acquire market share, to increase their profitability and to increase their market standing.

That is my lead-in, Minister, to discuss a reaction I have noted from big business and big business organisations. Firstly, it is with some pleasure I note antagonism from big business because that means it is actually reflecting some benefit to small business. But I have also seen a particular argument put out in this case by the Australian National Retailers Association—and I am restating their position; I do not want to verbal them—which is essentially that this will severely limit the ability of national retailers to discount and to operate competitively as they have in the past. I personally think that is arrant nonsense. As soon as this bill is passed, big retailers will continue to compete and discount as they have in the past. They will just be restrained if they go too far and breach this particular new provision.

My question to you, Minister, is: are you aware of criticisms of big business surrounding this amendment? Are you in particular aware of the Australian National Retailers Association’s attitudes and are you able to rebut concerns which I think somewhat exaggerate the effect of the amendment?

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

Thank you, Senator Murray, for that question and thank you for your acknowledgement. I actually have run predatory pricing cases under the old section 46 in the old Federal Court, in fact, on several occasions. I was of the view—which I think we share, Senator Murray, though it is not shared by everyone—that the decision of the High Court in Boral did change the ground somewhat by reading section 46 too narrowly and, in fact, more narrowly than it had hitherto been read. It was really, as I think you know, Senator Murray, the High Court’s reasoning in the Boral case, the judgements which were handed down on 7 February 2003, which did provoke me and others—including your good self—to agitate for reform of section 46 and the reference to the Senate Economics References Committee, which has been referred to earlier in the debate.

On the other hand, one must, in seeking to deal with and amend a provision as delicate as section 46, be particularly conscious that we do not, as it were, kill the goose that laid the golden egg. The basic proposition that cannot be recited often enough about section 46, Senator Murray—and I think it is shared by both sides of politics—is that the purpose of section 46 is to protect competition, not to protect competitors. It is about process, not individual companies. As the courts both before and after the Boral case have said time beyond number, the fact that an individual firm may as a result of competition go out of business is not of itself a bad thing. Often that is the clearest proof that the competitive process is working and that resources are being allocated efficiently. The necessary condition—as you, Senator Murray, better than most people know—is the consumer getting the best possible deal. The vice is where the conduct which drives a corporation out of a market features some of the maligned purposes which the existing section 46(3)(a) to (c) proscribe and which it is the purpose of this provision to apply more particularly to the issue of predatory pricing.

As I said earlier on, there are different minds as to whether the existing section 46 deals with predatory pricing sufficiently and it is one of the problems in this area of discussion that predatory pricing is not a defined term. Different people throw this term around and it means different things to different people. But it has never been the understanding of either the economists who write about this area or the lawyers who practise in the area that predatory pricing means discounting per se. It is plainly the intention of the government in drawing this amendment to ensure that it is not so widely drawn that it would have a chilling effect on discounting per se. That is why the language of the amendment is hedged in the various ways, as you can read from the terms of it.

So, Senator Murray, I hope that addresses your question in a somewhat longwinded way, for which I apologise. But let me make it as clear as can be that it is not the government’s intention—nor would it be good policy, nor, in my view, would it be the effect of these words properly construed by a court—to read them as constraining the practice of discounting per se.

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

I thank the minister for his answer; I agree with all that he has said. The media release I saw on 11 September 2007—and there was another one today—stated that ANRA, the Australian National Retailers Association, CEO Margy Osmond said:

… amendments to the TPA put forward by the Nationals Senator Barnaby Joyce—

they are put forward by the government as a result of the advocacy of Senator Joyce—

and being considered by the Government, would deter retailers from offering customers discounts, for fear of being prosecuted.

On the record, I say that I disagree with that. That is not the effect of the law and the minister has confirmed that is not the effect of the law.

Question agreed to.

by leave—I move amendments (2) and (3) together and amendments (4) and (5) together:

(2)    Schedule 2, page 6 (after line 2), after item 2, insert:

2A  After subsection 46(3)

Insert:

      (3E)    In determining for the purposes of this section whether a corporation has a substantial degree of power in a market, the Court may consider the corporation’s degree of power in a market to include any market power arising from any contracts, arrangements, understandings or covenants, whether formal or informal, which the corporation has entered into with other entities.

      (3F)    In determining for the purposes of this section whether a corporation has a substantial degree of power in a market, the Court will at least take into account the following principles:

             (a)    the substantial degree of power in a market threshold does not require a corporation to have an absolute freedom from constraint, it is sufficient if the corporation is not constrained to a significant extent by competitors or suppliers; and

             (b)    evidence of a corporation’s behaviour in the market is relevant to a determination of a substantial degree of power in a market.

      (3G)    For the purposes of this section, without limiting the matters to which the Court may have regard for the purpose of determining whether a body corporate has a substantial degree of power in a market, a body corporate may have a substantial degree of power in a market even though the body corporate does not have the ability to raise prices without losing business to rivals.

(3)    Schedule 2, item 3, page 6 (after line 12), at the end of subsection (4A), add:

   ; and (c)    the capacity of the corporation to supply goods or services at a price below its variable cost.

      (4B)    Where it is alleged that a corporation has contravened subsection (1) by undertaking a strategy of predatory pricing, it is not necessary for the Court to be satisfied that the corporation has the capacity to subsequently recoup the losses which arise from that alleged predatory pricing strategy.

(4)    Schedule 2, page 6 (after line 12), after item 3, insert:

3A  After subsection 46(4)

Insert:

      (4C)    In determining for the purposes of this section whether a corporation has taken advantage of a substantial degree of power in a market, the Court will disregard what the corporation could or would have done in the absence of a substantial degree of power in a market.

(5)    Schedule 2, page 6 (after line 12), after item 3, insert:

3B  After section 46A

Insert:

46AB  Anti-competitive price discrimination

        (1)    A corporation must not supply or offer to supply goods or services at different prices to different persons for the purposes of:

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

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

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

        (2)    It is a defence to an action under subsection (1) if the different prices are justifiable solely by reference to a difference in the costs of supplying or offering to supply the goods or services to the different persons.

46AC  Anti-competitive geographic price discrimination

        (1)    A corporation must not supply or offer to supply goods or services at different prices in different locations for the purposes of:

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

             (b)    preventing the entry of a person into any location; or

             (c)    deterring or preventing a person from engaging in competitive conduct in any location.

        (2)    It is a defence to an action under subsection (1) if the different prices are justifiable solely by reference to a difference in the costs of supplying or offering to supply the goods or services in the different locations.

I will speak briefly to all four amendments. These amendments have been circulated on sheet 5324 revised. Item (2) that I have raised refers to the misuse of market power. In some respects, I can argue—and those responding to my amendments could argue—that this amendment does not change the law significantly. In my view, that is its virtue, but others may argue that it is not necessary. I am attempting here to provide more guidance to the courts in relation to a substantial degree of power in the market. There are some key words included in my amendment that, in my view, make it slightly more effective than the government’s amendments, which have already been put through the bill.

Although this amendment does look similar to the government’s amendments, it includes additional key words and concepts that the government’s amendments lack. I refer in particular to the phrase ‘at least’, which leaves open to the court to find that there may be other factors that may determine a substantial degree of power in the market. In other words, I seek to give the courts more leg room. My remarks in that regard refer to (3F).

With respect to (3G), this amendment does not elevate the ability to raise prices to being the sole test of substantial market power, because that is already the test used by the courts through the Boral case. The amendment states that a company can have substantial market power, even though it cannot raise prices without losing business. My amendment attempts to oblige the court to look beyond an ability to raise prices to other determinants of market power. Currently, the High Court has become too focused on an ability to raise prices without losing business and this amendment operates to move them away from that focus, in accordance with the parliamentary intention behind the concept of ‘substantial market power’.

Item (3) covers predatory pricing. I have included this amendment as I was unsure whether Labor would be putting forward the amendments they originally proposed in the House of Representatives. I believe that this is an important point to be made and it should be made again: the court does not need to have regard to the ability of a corporation to recoup its losses when determining whether or not there has been predatory pricing. The issue of recoupment is a huge issue in trade practices cases, trade practices theory and trade practices commentary. My own belief—and, in part, it comes from my extensive business experience—is that the ability of a corporation to recoup its losses is not a necessary condition when referring to the issue of predatory pricing. So they are items (2) and (3), which I put.

I will now discuss items (4) and (5), which I will have moved separately. In introducing item (4)(4C), I suggest that some people may again see this as rather nuanced. Currently, the test for taking advantage is whether the company could have engaged in the same conduct without substantial market power. That is, if a company with substantial market power could have engaged in the same conduct without market power, the firm is currently not considered to have taken advantage of its substantial market power. Up until now, the courts have treated ‘take advantage’ as another onerous hurdle to render section 46 relatively weak. This amendment attempts to stop the courts from using the current onerous test for ‘take advantage’. If this amendment were in place, the test would revert to ‘using market power’.

Item (5), 46AB, is the attempted amendment. Although there has been a move away from using the word ‘anticompetitive’ in the Trade Practices Act—I might say, through the chair, that I have always rather liked the word ‘anticompetitive’—I think it is essential that it is made clear that it is only anticompetitive price discrimination that is prohibited. As we all know, not all price discrimination is anticompetitive. In fact, as the minister recently outlined, price discrimination and price competition are to be desired and encouraged and not discouraged. So being able to buy something on special at one store instead of another is what a competitive marketplace is about. That is why the amendment is framed as it is. There may be different costs in supplying, and there is a defence built into the amendment. The amendment also seeks to stop a firm from engaging in price discrimination and, if a person or company were seeking to induce a person to do so, that person or company would be involved in a breach of this amendment through the operation of section 75B(1B).

Item 5 is an attempt to introduce 46AC, anticompetitive geographic price discrimination. People may wonder why you should have anticompetitive geographic price discrimination. The reality is that there can be locations where price discrimination happens to attempt to eliminate the competition in a particular locale, whereas in a different suburb or city there is no price discrimination. In other words, it is particular to a branch or store and not to the chain or organisation. I would point out that ‘location’ here is given its ordinary meaning—that is, Canberra as different from Sydney or from Perth, or it could even be Deakin as different from Belconnen. I think this amendment is potent in looking at situations in suburbs where large supermarket chains charge different prices to try to drive out competitors in the particular suburbs where those competitors still exist.

If prices are different in any location for an anticompetitive purpose—not for a competitive purpose—they will come under scrutiny under this amendment, unless justified by a pro-competitive reason such as clearing perishable or obsolete stock or by higher costs of supplying at different locations. Different prices can therefore fall under this provision. I would point out that this type of behaviour is recognised in Canada and this amendment is modelled on a provision of Canadian law. That is why we have put it up as an idea. From my long experience in these matters, I have no doubt that the government will reject the idea, but I would like to hear on the record why they would reject it.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Firstly, I thank Senator Murray. Labor is supporting Democrat amendments (2) and (3) but not supporting amendments (4) and (5) for the reasons I will outline. Senator Murray—and I thank him—has taken up a suggestion to move amendments (2) and (3) together and amendments (4) and (5) together but separately.

Labor agrees to amendments (2) and (3) moved by Senator Murray on behalf of the Australian Democrats. The amendments lower the barrier to prove substantial market power in a sensible way and also partly overcome the government’s amendments which provide little guidance on what substantial market power really is. The amendments make it easier to prove that a corporation has a substantial degree of market power due to informal contracts, arrangements or understandings. The amendments provide more clarity to what constitutes substantial market power by stating that it is sufficient that a corporation is not constrained to a significant extent by competitors or suppliers. The amendments clearly state a corporation will still have substantial market power if it does not have the ability to raise prices without losing business to rivals. This is aimed at directly overcoming the problems of the Boral case. The amendments also look at a corporation’s pattern of behaviour to determine whether a corporation has a substantial degree of market power.

Labor support Democrat amendment (3). Labor’s amendment to explicitly state that recoupment is not required to prove predatory pricing also covers this issue. This amendment is similar to Labor’s, so Labor is pleased to support it.

I turn to amendments (4) and (5) that Senator Murray has moved. Firstly, on amendment (4)—similar to amendment (3)—Labor believe that our amendment to clarify what ‘take advantage’ means, which we will reach soon, will be more effective and adequately cover the issues of connection between substantial market power and the use of that power for an anticompetitive purpose. Again, if Labor’s amendments were found to be ineffective, Labor would consider this change to the ‘take advantage’ concept in section 46.

Labor does not agree with amendment (5). The amendment has the potential to increase prices for consumers because suppliers would not be able to offer discounts to some retailers who in turn pass on savings to consumers. Labor wants lower and cheaper prices for consumers and believes that these price discrimination amendments are counter to that aim.

So, in summary and conclusion, Labor will be supporting Democrat amendments (2) and (3) but we will not be supporting Democrat amendments (4) and (5).

George Brandis (Queensland, Liberal Party, Minister for the Arts and Sport) Share this | Link to this | Hansard source

The government do not support these Democrat amendments, not because we disagree with the sentiment but because they are otiose—either they merely restate in, if I may say so, less appropriate statutory language the effect of the government’s amendments in any event or they merely state unnecessarily what is uncontroversially the existing law.

In amendment (2) proposed section 46(3E) seems to be based upon recommendation 6 of the 2004 Senate committee report and is comprehended by the government’s amendments to insert section 46(3A) in the existing legislation. This is a point, Senator Murray, if I may be permitted to say so, that Ms Kiefel QC, as Her Honour then was, and I argued in the Federal Court 16 years ago in Dowling v Dalgety. It was a proposition settled by Justice Lockhart in Dowling v Dalgety in 1992. This is nothing new and dramatic. Government senators supported recommendation 6 of the Senate committee because we thought it was just as well to import that proposition into the legislation, but it was already set in law at the time. The government has adopted our support for recommendation 6 in proposed section 46(3A).

Your proposed amendment to insert section 46(3F) is again, with respect, not required because the freedom from the constraint by the conduct of competitors and suppliers which the amendment contemplates is already covered by proposed section 46(3C)(b) in the government’s bill. In fact, the government’s bill goes further than your amendment would, Senator Murray, by dealing with constraint by customers—that is, persons to whom the firm supplies goods and services.

In relation to your amendment to insert section 46(3F)(b), the government’s response to the 2004 Senate economics committee report rejected that amendment on the grounds that it is unnecessary because firm behaviour is already taken into account in assessing market power and nothing in the Boral case changed that. The Boral case, as you know, Senator Murray, did change the judicial interpretation of section 46 in a number of respects but not in that respect. So what you seek to achieve through proposed section 46(3F)(b) it seems to me is entirely unnecessary, given the uncontroversially understood existing state of the law.

Turning to Democrat amendment (3), regarding the capacity of a corporation to sell below cost, once again the amendment is not required because the provisions in the government bill already explicitly provide that the court may have regard to that matter—‘the supply of goods or services for a sustained period at a price that is less than the relevant cost to the corporation’; that is, the provision of one of the two government amendments I moved a few moments ago. Perhaps your amendment was drawn before you saw the government amendments, but I think, Senator Murray, that the mischief that you seek to correct there, if it was not already dealt with under existing section 46, is certainly now covered by government amendments. I see the time, and I might leave the matter there. When I resume I will return to your other amendments, Senator Murray.

Progress reported.