John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

The committee is considering the Trade Practices Legislation Amendment Bill (No. 1) 2007 and amendments (7) and (8) on sheet 5324 revised, moved by Senator Murray.

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

I seek leave to withdraw amendment (8). I have spoken to amendments (7) and (9), so I would ask that those be put consecutively. I would remind the chamber, although I am sure that senators are aware of it, that amendment (7) referred to unfair contracts and amendment (9) related to the recommendation arising from the Effectiveness of the Trade Practices Act 1974in protecting small businessthat is, the Senate Economic References Committee report of March 2004.

Leave granted.

I thank for Senate. I just remind the chamber that amendment (9) refers to the Senate committee report’s recommendation 7, which was that subsection 51AC(9) and (10) of the act be repealed. I do not need to say anything further on those amendments.

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Murray, do you wish to move them separately, because you have not moved amendment (9) yet.

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

I have moved amendment (7) and will move amendment (9) separately.

The Temporary Chairman:

The question is that Democrat amendment (7) be agreed to.

Question negatived.

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

I move Democrat amendment (9):

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

3F  Subsections 51AC(9) and (10)

Repeal the subsections.

Just to explain briefly: as I said, it arose from recommendation 7 of the Senate Economic References Committee report of March 2004. I will not recap all the arguments in its favour, but it dealt with unconscionable conduct. The ACCC agreed with the view that the present limit of $3 million was too low. I quote from the report:

The ACCC agreed with this view, saying that subsection 51AC(3)(a) already stated that the courts may have regard to the relative strengths of the bargaining positions of the companies, so no threshold is necessary.

The Committee noted these arguments and further noted that subsections 51AC(1) and (2) exclude publicly listed companies from the protection of the section. The Committee agrees that the removal of the thresholds will not reduce the current protection for small businesses, and will enhance protection for businesses involved in transactions over $3 Million, who are nevertheless subject to unconscionable conduct within the terms of s.51AC.

Government senators rejected that view but accepted the view that the threshold was too low. I cite government senators’ remarks:

Government Senators are not persuaded of the need to lift the ceilings so as to extend the protections in the section to all firms, irrespective of size. On the other hand, we are concerned that the current statutory ceiling may be unrealistically low, given the size of transactions which some small businesses undertake. Accordingly, we recommend that the government consider prescribing $10 million as the relevant amount for the purposes of the section.

We accept that that is a good advance. The government itself has accepted the recommendation of the government senators but we still hold to the view of the original committee recommendation.

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

I will be brief. Labor will be supporting the Democrat amendment. I gave my reasons last night. We are under time pressures, so I will not repeat myself.

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

The government does not support the amendment because it loses sight of the fact that the particular purpose of part IVA of the Trade Practices Act is to provide a code of protection for small businesses. If there is no ceiling on the value of transactions to which the unconscionable conduct provisions of the act apply, it entirely loses its character as a set of provisions which are particularly concerned with the problems of small business and dealing with issues like inequality of bargaining power and so on. As Senator Murray has rightly pointed out, the government senators did recommend, and the government has adopted the recommendation, that the ceiling be lifted very substantially, to $10 million. You can always have a debate about how high a ceiling should be, but this is not that debate. This debate is about the proposition that the provisions of part IVA of the act ought to be of general application, whether it is to the biggest multinational company in the world, trading in Australia, or the local garage. We think that loses sight of the purpose of the provision; therefore we do not support it.

Question negatived.

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

I move Democrat amendment (10) on sheet 5324 revised:

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

3G  After section 81A

Insert:

81B   Divestiture for abuses of market power

• (1)The Court may, on the application of the Commission, if it finds that a corporation has contravened section 46, by order, give directions for the purpose of securing the reorganisation or division of the corporation into separate and distinct entities including directions for the disposal or divestiture of all or any of the shares in or assets of the corporation to facilitate the reorganisation or division of the corporation.

This amendment relates to divestiture provisions for the abuse of market power. It has been drafted to deal with section 46 because that is the direction taken by the majority Senate report which I referred to earlier. The chamber is well aware, because it has heard me on the matter before, that I do in fact admire the general intent of the American antitrust and divestiture provisions. As a reserve power, they have been extremely effective and act to allow for circumstances where great power, used for anticompetitive or monopolistic purposes, can be reduced. I think that is an appropriate tool for the ACCC to have. The Senate committee report stated:

Divestiture powers are powers which enable a Court to order that a dominant corporation be broken up into several smaller corporations in order to prevent the anticompetitive domination of a market by one player.

Such powers are currently available under s.81 of the Act, but cannot be applied to creeping acquisitions, nor to offences under s.46.

I remind the chamber that my amendment deals with section 46. The report continues:

The Committee considers that the application of s.81 should be expanded, so that divestiture becomes a remedy for other breaches of the Act, including section 46 (Misuse of market power) and any new section introduced in line with the Committee’s recommendation 12 (relating to the regulation of creeping acquisitions).

As divestiture is a quite severe remedy, it is appropriate to provide “warning mechanisms” to ensure that a corporation which is expanding its business is able to comply with its obligations under the Act. A suitable warning mechanism could be based around a “trigger” market concentration.

This trigger should not operate as a de facto cap on market share. Rather it would require companies proposing acquisitions in concentrated industries to notify the ACCC. The Commission would then assess whether the acquisition would result in a substantial lessening of competition. The Committee notes that this already occurs in the retail grocery industry.

The recommendation of the committee was as follows:

The Committee recommends that s.81(1) of the Act be amended so that s.81 can be applied where a corporation is found to have contravened section 46, section 46A, or any new section introduced to regulate creeping acquisitions.

I have attempted to move towards fulfilling the legislative environment which that recommendation anticipates.

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

Labor does not support this amendment. Labor believes that the current penalties for breach of the anticompetitive provisions of the Trade Practices Act are adequate, other than the lack of criminal penalties for serious cartel conduct, which were promised by the government back in February 2005. These penalties include fines of $10 million for corporations or half a million dollars for individuals for each breach. In addition, sanctions against company directors and officers of a company—for example, disqualification and a prohibition on indemnity for financial liability and legal costs—may also be imposed by the court.

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. The issue was considered by the Dawson report, and Mr Dawson recommended against it. I should point out, though, to the committee that the act does contain divestiture powers, in section 81, but those divestiture powers apply expressly to section 50. The logic of having divestiture powers for section 50, which deals with anticompetitive acquisitions, but not having divestiture powers for section 46, which deals with misuse of market power, is that by committing a breach of section 50 what the corporation does is, ex hypothesi, acquire an anti-competitive market share; therefore there is a logic in having a power to require it to divest of that additional acquisition, because the acquisition itself is the very conduct which the act in the relevant circumstances stipulates against. But in section 46, what one is looking at is not the anticompetitive acquisition of market power but the anticompetitive use of market power, which is not the product of an acquisition but the product of conduct in a given market.

It is the government’s view—as it was Mr Dawson’s view—that the existing sanctions regime, which, you will remember, Senator Murray, was very significantly tightened by the so-called Dawson amendments, is a sufficient deterrent and corrective for misuse of market power which section 46 would render unlawful. May I remind you that the penalty that can be imposed upon a corporation for a section 46 breach includes a fine of up to $10 million per breach, five per cent of the corporation’s turnover or three times the economic value of the transaction which is attacked in the section 46 proceedings per breach. That is in addition to the remedies under section 80 for injunctive relief and the various other ancillary remedies in part VI of the act. So, for all of those reasons, the government’s view is that the armoury of sanctions in relation to section 46 is sufficient and, indeed, very strong and, for the other reason I gave earlier in these remarks, there is a certain illogic in applying, beyond a breach of section 50, the divestiture powers.

Question negatived.

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

I move Democrat amendment (11) on sheet 5324 revised:

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

3H After subsection 95ZF(4)

Insert:

        (5)    The Commission will:

             (a)    commence monitoring prices, costs and profits relating to the supply of goods or services by a corporation once that corporation has attained a market share of 25% of:

                   (i)    the national market for the goods or services; or

                  (ii)    a State or Territory market for goods or services;

             (b)    table a report in both Houses of Parliament on the monitoring at six monthly intervals.

Commercial confidentiality

        (6)    The Commission must, in preparing a report required under subsection (5), have regard to the need for commercial confidentiality.

Commission to send the corporation a copy of the report

        (7)    The Commission must send the corporation a copy of the report required under subsection (5) on the day it tables the report.

Public inspection

        (8)    The Commission must also make copies of the report required under subsection (5) available for public inspection as soon as practicable after the report has been tabled.

This amendment too relates to a theme of mine which I have pursued over time in this place, and it relates to some competition law which I admire in other jurisdictions. I am, of course, referring to the device used in the Fair Trading Act of the United Kingdom whereby they use trigger concentrations of market power to institute a process which could be colloquially described as ‘market watch’. They are alert to the fact that great commercial power, when accumulated, may not be illegal—it may not, in fact, be contrary to the interests of the society or the economy—but it deserves to be watched in a manner which allows for the competition authorities to be fully informed in greater detail than is available through the normal market processes of market disclosure, particularly for publicly listed companies.

The amendment as I have attempted to design it—as usual, with legal assistance—only applies to state, territory and national markets. That is an important consideration because, of course, the market definition was quite properly changed in our competition law following a joint house inquiry in, I think, 1997 which recommended that markets, in Australian competition law, no longer be defined as national but as applicable in a regional as well as a larger market sense. In practical terms I would anticipate that the companies involved would provide disclosure of relevant information to the ACCC and the ACCC would assess that information to identify trends which may suggest areas where greater care should be taken with respect to competitive activity. If such trends were identified then a more detailed scrutiny may occur—much in the same way as ASIC monitors particular trends under its jurisdiction.

It is essentially an ACCC watching brief over highly concentrated markets that I am recommending. I think that would be to the advantage, not the disadvantage, of our economy. It would obviously need the ACCC to take note of how other jurisdictions such as the United Kingdom operate. It does seem to be a practical, effective and responsible market measure, as used in the United Kingdom. I am suggesting it could be useful in our own legal context.

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

Labor does not support this amendment. Labor believes these amendments are just too onerous on the ACCC and may result in unnecessary monitoring of markets without a competition problem. Labor believes that price monitoring should be focused and occur where there is a problem in a particular market.

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

Before I begin, can I mention that I think I misspoke in my last contribution when I said that one of the pecuniary penalties for a section 46 breach was five per cent of turnover. It is, of course, 10 per cent of turnover—so allow me to correct myself. The government does not support this amendment for much the same reasons as indicated by Senator Sherry. I might point out that the amendment is not limited as to jurisdiction, so that any market, no matter how small by value or turnover, would appear to be caught by it so long as any corporation operating within that market attained a market share of 25 per cent in the markets to which the amendment is directed, down to state and territory markets. So, theoretically, you might have the market in Alice Springs for snack bars, in which one snack bar had more than 25 per cent of the market share, and, under the terms of this amendment, the ACCC would be required to monitor it. In fact, it would be required to monitor any market in which there was any reason to believe that any corporation trading in it would pass the threshold or trigger point of 25 per cent. It would so vastly expand the obligations of the ACCC as to be—with respect—nonsensical. We regard it, as does Senator Sherry, as not a workable proposition, and we do consider that the powers of the minister to direct price monitoring under section 95ZF work well.

Question negatived.

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

by leave—I move opposition amendments (4), (5) and (6) on sheet 5344:

(4)    Schedule 3, item 7, page 11 (line 4), omit “Omit “$3,000,000”, substitute $10,000,000”“, substitute “Repeal the subsection”.

(5)    Schedule 3, item 8, page 11 (line 6), omit “Omit “$30,000,000”, substitute “$10,000,000”“, substitute “Repeal the subsection”.

(6)    Schedule 3, page 11 (after line 6), after item 8, insert:

8A Subsection 51AC (11)

Repeal the subsection.

Labor’s amendments deal with the issue of the threshold for section 51AC on unconscionable conduct. The $3 million threshold for section 51AC on unconscionable conduct is abolished, and the bill proposes to increase this to $10 million. The 2004 Senate Economics References Committee majority report into the Trade Practices Act recommended that the $3 million limit be abolished. Labor agree with this recommendation, as a threshold is arbitrary and unconscionable conduct should be illegal regardless of the size of the transaction or the businesses involved. Labor’s amendments ensure that all small business transactions will be covered, as there are circumstances in which the transaction may be more than $10 million; hence our amendments to remove it.

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

These amendments are substantively the same as the Australian Democrat amendment which was deliberated upon a few moments ago. For the same reasons, the government does not support them.

Question negatived.

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

by leave—For the record, I mention that the Australian Democrats support those Labor amendments.

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

Thank you, Senator Murray. I move opposition amendment (7) on sheet 5344:

(7)    Page 11 (after line 11), at the end of the bill, add:

Schedule 4—Other matters

1  Subsection 86(1A)

After “any matter arising under”, insert “section 46,”.

2  After subsection 155(1)

Insert:

     (1A)    The power under subsection (1) can be exercised at any time prior to the commencement of substantive proceedings in a matter before the courts.

Labor’s amendment does two things. Firstly, it allows section 155 powers to remain following the commencement of an action seeking an injunction and only cease when the substantive case commences. Labor’s amendment will allow the ACCC’s information-gathering powers under section 155 to remain following the commencement of an action seeking an injunction and only cease when the substantive case commences. This is vital to ensuring that the ACCC has the information-gathering powers for as long as possible to ensure it can act to protect small business and consumers from anticompetitive conduct.

Secondly, it provides the Federal Magistrates Court jurisdiction over section 46 and section 83 cases. The amendment will provide the Federal Magistrates Court jurisdiction over section 46 and section 83 cases. Currently, the Federal Magistrates Court can hear certain matters under the TPA, most notably section 51 cases. However, the Magistrates Court cannot hear section 46 matters. This means that small business wishing to bring an action under section 46 must commence in the Federal Court. The Federal Court is more expensive than the Magistrates Court. The Magistrates Court also provides a conciliation process that would be of particular use to small business.

In addition, under section 83 of the act, a company can bring an action for damages based on findings of fact in another case. For example, if the ACCC brings a successful action against a company under section 46, small business can bring an action for damages based on the findings of fact in the case. However, this section 83 action must be brought in the Federal Court. This amendment would provide small business with better access to compensation and justice when they suffer from anticompetitive conduct.

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

This amendment complies with the thrust of recommendations in the March 2004 Senate Economics References Committee report. Recently there was an inquiry by the Senate Standing Committee on Economics into another trade practices bill, which is on its way, to address the issues of small business in respect of the secondary boycott provisions and representative action. Evidence provided to that committee indicated that small business continues to support the view that the Federal Magistrates Court should be available for trade practices actions to be taken on two counts: lower cost and speedier access to justice.

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

The government does not support opposition amendment (7), although I find myself a little embarrassed because the government senators in the 2004 report were rather persuaded to that view. Nevertheless, it does involve a very narrow point. You do not define substantive proceedings, Senator Sherry, through you, Madam Temporary Chair. What I take that you mean by substantive proceedings is the proceedings from the time after which an action has commenced by the filing of an application. As you would be aware, Senator, the Federal Court held as long ago as 1980, in Brambles Holdings and the Trade Practices Commission, that once an action had been commenced under part IV then that was the end of the section 155 powers. There is a reason for that, and that is that under the Federal Court rules there are a suite of interlocutory proceedings including discovery, interrogation, the exchange of witness statements and so on which deal with the matter.

The only occasion on which your amendment might operate is in the very narrow and limited circumstances contemplated by the ACCC in its submission at paragraph 5.27 of the 2004 report, where the ACCC was seeking in a very urgent case an interim injunction—that is, an injunction sought before the substantive application had been filed—and it sought to augment that with section 155 powers as well. That very seldom happens, and one would imagine that the only case in which one would seek an interim injunction, as opposed to an interlocutory injunction after the filing of an application, would be in circumstances of such extreme urgency that there would not be time for there to be a section 155 examination usefully conducted in any event. So I think, theoretically, you may be right, Senator Sherry, but it is the government’s view that, given the almost theoretical narrowness of the circumstances in which the amendment would have any operation, it is scarcely worth doing.

I will now reply to Senator Sherry’s final amendment, the amendment to include matters arising under section 46 within the jurisdiction of the Federal Magistrates Court. The reason you advance—that this would make proceedings under section 46 much less expensive for small business—is illusory. Section 46 proceedings are extremely complicated. Not only do they involve a large amount of factual evidence but they also invariably involve a large amount of expert economic evidence. There have only been a few dozen section 46 cases in the 33-odd years since the Trade Practices Act has been in operation, and you do not get more complicated litigation than a section 46 case, frankly. You would need the same evidence, the same witnesses and the same experts to prove a section 46 case in the Magistrates Court as you would in the Federal Court, so you would not save any money at all. But what you would have is this extremely complicated sort of litigation being adjudicated, with all due respect to the Federal Magistrates Court, by less senior judicial officers. And that is also why the government is of the view that section 46 cases should only be dealt with by the senior federal judicial officers—that is, in the Federal Court of Australia in its sitting as a trial court.

The point that you make about recovery of damages under section 83, Senator Sherry, is a fair point. However, I do not think your amendment would achieve that either. You say in your amendment that it has to be a matter arising under section 46, but there is a great deal of rather arcane law about whether a proceeding to recover damages based on findings of fact under section 83 are proceedings under section 46 or fresh proceedings under section 83. So for those several reasons I do not think amendment (7) meets the mischief that you identify.

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

My point to the minister is this: I think one of the weaknesses of section 46 has been that it has been so difficult to access and so few cases have been concluded. Without going to the fact that I and the opposition believe that section 46 could be strengthened even more, my belief is that the amendments in the government’s own bill actually improve the opportunity for section 46 cases to be successfully prosecuted and would therefore make it less difficult than it has been in the past. That is one of the reasons why the Magistrates Court option could be considered now under the new regime as opposed to the old.

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

I do not want to prolong things, but I thank Senator Murray for that sentiment. It is the intention of the government with this bill to breathe life into section 46, which has been moribund since the Boral case. However, that does not mean that the issues of proof are going to be any easier. The problem with the Boral case is not that it changed the mode of proof but that it changed the threshold legal tests in one particularly important respect—and that is what is addressed by this legislation. The complexity of the trial process is not going to change, but it is the government’s intention that the thresholds that an applicant has to meet should be less onerous than they have been since section 46 has been construed by the High Court in the Boral case.

The Temporary Chairman:

The question is that opposition amendment (7) on sheet 5344 be agreed to.

Question negatived.

Bill, as amended, agreed to.

Bill reported with amendments; report adopted.