Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I have been looking forward to this speech this afternoon. I hope to be able to entertain you for at least a few minutes because I hold in my hands here today another bill called the Small Business Commissioner Bill 2013, which happens to be a Greens bill. I introduced this to parliament prior to the 2013 federal election when we were in the balance of power with Labor.

I looked at the legislation and the act around the federal Small Business Commissioner. At the time, the Small Business Commissioner was doing the rounds and coming and visiting people like myself who were small business advocates for our parties. Mr Brennan his name was. I had several meetings with him and I certainly enjoyed my discussions. It seemed to me that his office and his role needed a lot of strengthening. It actually needed some power and some teeth and a bit more resourcing.

I did get in touch with Mr Brennan when I put my bill up with the small business commissioners from around the country, not to mention all the various advocates from small business organisations such as Peter Strong from COSBOA and others. Right at the time I was doing this, we had a bit of an issue. I would say it was more than a bit of an issue here in Canberra. We had the construction of the new Australian Security Intelligence Organisation headquarters in Canberra and it was dogged with controversy. There were huge cost overruns.

Unfortunately, the cost blow-outs and questions over approval processes led to some tragedy for a number of small businesses that were sub contracting on that project. Over 100 small businesses at one point in time did not get paid at all and in some cases they went bankrupt. It was a really significant issue for a small area like Canberra. I repeatedly met with a number of those small businesses and I held out hope that a newly appointed small business commissioner could actually help represent them and get them what they were owed by Lend Lease.

The money was provided by the government for the construction of the ASIO building project, that money went to Lend Lease, which was the chief contractor, and of course Lend Lease subbed it out. Urban Contractors was organising a number of the smaller contractors and it went into liquidation or at least went into trading in receivership and, of course, a number of the companies at the bottom of the food chain did not get paid. I thought it would be great example of how the small business commissioner could work, and hit the ground running given that we had literally had hundreds of companies knocking on our door saying 'we are in dire straits'. So we put up this bill.

I would like to tell you a little bit more about this bill. Essentially the functions and powers were covered under division 2. Section 8 sets out the dispute resolution functions of the commissioner. We had sought functions and powers which allowed them to receive and investigate complaints from small businesses about their dealings with departments, statutory agencies and executive agencies of the Commonwealth. It allowed the commissioner to investigate complaints and facilitate resolutions of these complaints including compelling witnesses to attend arbitration and hearings.

There were a whole number of other things that I thought were pretty good. It was a no-brainer. All it needed was some good lawyers, which of course we had in the Senate, a good piece of legislation and then a bit of political will to do it. So anyway, I put the bill up, it went off to committee and, unfortunately, it did not get supported. I was not quite sure why. We were going into an election of course.

I will not say exactly who it was but I did speak to a very influential and well respected small business advocate in this country who said, 'Peter, the only reason your bill is not being supported is the Liberal Party expect to be in government after the election and they want to put up the same bill themselves.' I was not sure if that was the case but now that I look at what is in front of me, it is certainly very similar to what we suggested back in 2013. But unfortunately it does not quite have the teeth we would have wanted to have seen around dispute resolution. Although there are better processes in place than there are at the moment for the Small Business Commissioner, who is essentially an advocate for small business and can take some positive roles in facilitating conflict resolution, we wanted to see something a lot stronger than that.

Models did exist with state small business commissioners. It was great to hear that these small business commissioners cut the burden to the taxpayer in their various states—I had a good meeting with the Victorian Small Business Commissioner—because by getting together with parties, they prevent these things from going to court. Of course that kind of litigation is very expensive, not just for the taxpayer but for the small businesses themselves. The Small Business Commissioner provided an excellent first point of contact for people who needed dispute resolution, especially small companies that were taking on bigger organisations. They, of course, would be prime candidates for using a Small Business Commissioner.

So now we have a different name—a small business ombudsman. I can understand why there are concerns around that name. I have read the submissions that express those concerns. Personally, I do not think it is a game changer but, at the end of the day, I just wanted to point out that the Greens had a very good idea that was very similar to this, and it is a shame it did not get up before the election because then I could have campaigned on it. Now, I am standing here supporting another piece of legislation that is very similar. But it is good for small business. It is not perfect—it could have gone further—but it does at least provide avenues for dispute resolution and advocacy. We also recommended a direct link with the small-business department and the minister and that that relationship would be a regular, reporting relationship and that they would work closely together. I see this reflected in this bill, and I see that as a positive as well.

There are examples where things have fallen between the cracks—between state and federal agencies. There are a number of positive roles for a federal small business ombudsman to play—I will switch my use of the frame and the name now to the 'small business ombudsman'. If you want a real-life example of where this kind of legislation that we have in front of us today could have played a really positive role, once again, go back and have a look at that situation with the cost overrun with the ASIO building, because the government does spend a lot of money in Canberra. The federal government allocates a lot of money, and when we go through the tender and the contract processes a number of small businesses are involved in that. These things are buyer beware—there are risks associated with these large contracts, and that was an example where, had we had a good advocate on the ground who was well resourced and had the ability to help these small businesses, we could have achieved some very positive outcomes.

I look forward to hearing what the other contributors have to say about this, and I hope that it is implemented in the spirit that the Greens brought this original legislation to the Senate with in 2013.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I welcome the Greens' support for this measure, although I will make one comment on Senator Whish-Wilson's contribution. I know numbers are not the Greens strong suit, and they might not have noticed, but before the election the coalition—the Liberal and National parties—did not have the numbers. We did not have the numbers either here in the Senate or in the other place. As well-intentioned as I am sure Senator Whish-Wilson's private senator's bill was, at the time, and I was not a member of the Senate then so I cannot recall it, it would not have been able to be implemented by the government at the time. The only way we could have got to the place we are today, to do something like this, was for the Liberal and National parties to be elected at the last election, which fortunately we were. We were elected on a platform to introduce an ombudsman, and it is with great pleasure that I rise today to share my support for this initiative and welcome the fact that the government has brought it forward as an important way to help small businesses receive appropriate access to justice and redress through our competition system.

To start my comments today, I want to go back to when we did have an ombudsman. We actually had an ombudsman for some areas of our economy that will be impacted by this bill. A grocery ombudsman was established back in 2000, I believe. He was around for about five or six years. Last year I was fortunate enough to meet Mr Robert Gaussen, who was the Produce and Grocery Industry Ombudsman at the time. He also subsequently came and provided evidence to the economics committee about his work and what the effect of it was. I thought he gave very compelling evidence. He gave very compelling evidence to show why an ombudsman is an important tool in the competition workshop and an important way of providing a low-cost means for small businesses to access justice and bring matters to a head. At the time, Mr Gaussen told the Senate Standing Committee on Economics:

...any code of conduct that has no adequate enforcement regime will not be a successful code of conduct. The words that appear in this code—

which is the grocery code—

are good words. The content and intention of what is being described in this code are great, and they are needed and are long overdue. But there is no obligation on anyone to do anything, even if they sign up to it, because of the system under which there is no enforcement.

Mr Gaussen goes on to say:

The average cost for the ACCC to investigate, inquire into and manage disputes is massive, so there is no way in the world that they can provide, through their systems and the laws under which they have to operate, an effective enforcement regime. They are not resourced to do that. An ombudsman service, with referral capacity to the ACCC, provides that filter and at a much reduced price—and quickly. The key to disputes is speed.

I think that is a very important point. To resolve disputes—whether with my wife or with your contracting business—the key is speed. When I have a fight with my wife I try to resolve it as quickly as possible, because if you let matters fester that is when people start—

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Happy wife, happy life.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Happy wife, happy life! Senator Bilyk, that is absolutely right. That is the anthem I operate under in my life—I try to, at least. Sometimes I go to bed without resolving those disputes, but I try the next morning to make sure I reflect on my behaviour—usually it is me at fault—and resolve that dispute and restore the relationship. I do not think it is any different in business either. If we can have an easy service, which allows people to resolve disputes quickly, they are more likely to continue on with a trusting and productive relationship, going forward, compared to having to rush off to court or make a complaint to the ACCC, in which case, clearly, people will start to bear a grudge on either side of the fence and positions become strengthened and put in concrete through that process. So this is a very important bill in that regard.

There are, of course, alternatives to an ombudsman, other than going to the ACCC or going to court directly. Many other codes of conduct and other dispute resolution frameworks in our country rely on mediators or arbitrators rather than an ombudsman. Indeed, the recently introduced and regulated Food and Grocery Industry Code of Conduct relies on mediation and arbitration. Last year we established a legislative instrument to do with bulk wheat export marketing. Similarly, the provisions of that rely on mediation and arbitration. They are a useful alternative dispute resolution process. But they have their own limitations as well. They are not as costly as the ACCC or a court action, but they still can be slow and expensive at times.

In the case of mediation they can sometimes, of course, not resolve a dispute, because there is no decision maker put in place. While mediation can sometimes be a useful way of resolving disputes it will not necessarily do so in all cases. Then there is arbitration, which is a higher level of dispute resolution. It does provide for a decision maker and a final conclusion to be made, but it can be quite costly these days, in particular. Most arbitration services now rely on third parties or contractors to be involved, which can be quite expensive.

Earlier, I quoted Mr Robert Gaussen, who is the former grocery industry ombudsman. He appeared at a Senate Economics Committee hearing on the recently introduced Food and Grocery Industry Code of Conduct, which relies on mediation and arbitration. We heard evidence in the committee hearing that arbitration can these days be extremely costly. Mr Gaussen said that arbitration is overwhelmingly more expensive in today's years than even litigation, because the courts are now much quicker and more efficient in the time they take to resolve matters. Arbitrators might get one or two matters a year. They have very little practical experience in the area so they are learning from nought. Quite frankly—and Mr Gaussen said some of his close friends were arbitrators—they spin it out unnecessarily so because they are being paid a higher rate. It is a bad system. Most of them are on daily rates but some will get $2,500 to $8,500 a day. It is not bad work! But people have to pay that cost. It is normally shared between the businesses that are involved in the dispute. Often it will be a small business that is involved in the dispute, and they will potentially be up for $2,500 to $8,500 a day. It is quite expensive.

After we had heard that evidence, the committee asked Treasury to provide more information. Unfortunately Treasury had not calculated these costs when it did the regulatory impact statement for the Food and Grocery Industry Code of Conduct, but it did go away and get some information for our committee and it came back and said that professional fees varied, depending on the complexity of the case and the amount in dispute. They also varied between service providers. Treasury understands, based on consultation with a private mediation provider that typical mediation costs are in the order of $275 per hour for each party and that typical disputes resolved following around seven hours of mediation, so that the total cost is around $1,925 for each party, which, again, is quite an expensive way of resolving a dispute.

For some businesses that will not be an overbearing hurdle for them to resolve their dispute. Indeed, for a healthy business it probably should not be, at a couple of thousand dollars. The issue here is that many businesses, particularly small businesses that are involved in disputes are often at the very same time under cash flow pressures or perhaps even long-term operational issues. Because they are involved in a dispute they might not be getting paid by the relevant suppliers. They might be getting paid lower amounts of money than they believe are due to them. Therefore, even just a couple of thousand dollars, on average, could be too much a burden to bear.

That is why, in my view, it is important that we have an alternative cheap and low-cost way of resolving disputes, and an ombudsman allows us to do that. It allows us to do that because an ombudsman is something the Commonwealth government will fund. It will provide the ability for small businesses and others to come forward and have their disputes resolved in an easy and costless fashion.

Indeed, after finishing the Senate Economics Committee inquiry into the Food and Grocery Industry Code of Conduct, I concluded, along with some senators from the National Party, that we should have the grocery code ombudsman in place of the mediation and arbitration process in the grocery code. Relying on arbitration and mediation in the grocery code was not, in my view and that of the National Party senators, an effective way of dealing with the issues in this particular field. We have mediation and arbitration for bulk wheat exporting. That is a different market. You have grain traders who trade substantial amounts of grain and have a substantial amount of turnover who probably can afford to go through processes of this kind. The grocery code is dealing with a completely different class of businesses and operators, often businesses with very thin margins, small amounts of turnover in relative terms, and businesses that may be put under undue pressure from time to time.

I firmly believe that an ombudsman would be the best way to deal with issues in the grocery sector in particular. I commend the government for bringing forward this bill to provide for a low-cost way for small businesses generally to get access and resolve disputes—not specifically from the grocery code, as I would like to see, but generally for the small business sector. That will provide a way for the small businesses in our community to achieve more readily available redress.

This is a policy that the coalition took to the last election. It was part of our small business policy—and one of a number of initiatives at that election—to establish a small business and family enterprise ombudsman. This particular bill implements that commitment. It will do three things. It provides a Commonwealth-wide advocate for small businesses and family enterprises, someone who sits above all of the policy-making areas in this field, to provide a voice within government for small businesses. It will provide a concierge for dispute resolution and provide its own dispute resolution service. So it will allow small businesses an alternative way of coming forward. They can still, of course, go to the ACCC, they can still, of course, engage their own lawyers under private enforcement and law, and they can still seek to resolve disputes under the various codes of conduct that might apply in their sector. But they can also now access an alternative way of doing that, and that is only a good thing and should be supported. It will also, of course, contribute to development of small business policies more widely across the government.

We are a government that is about protecting small business, supporting small business, supporting people who want to take a risk in their lives, back themselves and be their own boss. I said in my maiden speech in this chamber that I want to have a country where people can, if they so choose, start their own business, have their own job, save for their own house and start their own family. Having economic security as part of small business is one aspect of achieving that. This legislation is only a small way of doing that but it fits into a broader context of supporting small business in our country through the recent tax changes we made in the budget, through the grocery code of conduct we have established and through the competition policy review that has recently concluded and the various changes that might come from that.

I note that this legislation has gone through the regulatory impact statement process. This has shown that it will lead to a net reduction in the regulatory burden facing businesses by a small amount: 0.007 million per year. I suppose that is only $7,000—I am getting a nod from some advisers. It is a small amount of money but it is a net reduction in regulatory burden because this will be an easier way to resolve disputes. It will produce broader economic benefits across the economy, not just in terms of red tape, of around $18 million per year. So it is something that should be supported, and I commend the government for it.

In the time remaining I will say a little more about the government's small business agenda. As we saw in the budget, this government is about supporting small businesses, particularly making sure that they face a lower tax burden over time, with both the reduction in the corporate tax rate for small businesses and the granting of a tax rebate for small businesses that are not incorporated, which will help to achieve that. The more than $3 billion worth of savings in depreciation allowances that we have implemented in the budget has been a great stimulus for our economy, again supporting small businesses that want to invest in our economy. We want to support people who take a risk, invest in their business, invest in our country and invest in creating more jobs for all Australians, and we have been able to achieve that.

Late last year the Harper review reported. That was a broad look at competition policy across our policymaking landscape. I will particularly focus on some conclusions of that report that relate to these bills and their objective of supporting small business. We have various competition laws in Australia that seek to restrain the ability of large corporations to act in a dominant and abusive way in marketplaces. We have a good competition law but—just as I said on corporate tax earlier that we have a good tax system—that does not mean that it cannot be made better.

Bring on section 46.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I thank Senator Whish-Wilson. I was just about to come to section 46. The centrepiece of our law which seeks to restrain the activities of dominant firms or firms with a significant degree of market power is section 46. The jurisprudence around section 46 has evolved over time. I would argue—and I agree with the Harper review—that the jurisprudence has evolved to an extent which effectively means that actions under section 46 have very limited ability to succeed. The courts' interpretation of the 'taking advantage' test is a hypothetical one and one that, as an economist, I would say helps economists put their kids through college but does not help small businesses take action in court. Recent cases on Rural Press and Melways that have come to the court on section 46 have involved long, arduous and technical debates about economic structures, particularly of markets and particularly hypothetical structures in those markets, and it has proven very difficult for plaintiffs to prove and take successful action on that. It is also the case that the 'purposes' test as it is currently drafted is out of kilter with the rest of the world. Most other countries, at least in western and English-speaking countries with a common law background similar to ours, have adopted codified laws which make it an offence for a dominant firm to act in a way that has the effect of being anticompetitive in some way, shape or form as defined.

The Harper review has made some detailed recommendations as to how we could finetune our law to introduce an 'effects' test, to remove that 'taking advantage' test which has proven so problematic and, relatedly, to adjust the proscribed purposes under section 46 to make it a more comprehensive test of a substantial lessening of competition. I know that the government is considering its response to the Harper review at this point. I am on record in this chamber as supporting the general thrust of the Harper review recommendations. I think it has clearly identified a problem in our existing law and jurisprudence and a problem that deserves some response.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Bring us some legislation.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I am sure that the government in due course, after due consideration of the Harper review, will bring a response forward, and I look forward to that. Returning to the bills before us, they should be supported by this chamber because they add to the avenues that small businesses can access to get a better deal for themselves. They will provide small businesses with a lower cost way of resolving disputes and they will reduce the burden that is placed on our regulators and the business sector more generally in resolving those disputes. As I said earlier, that is an important attribute because it will help resolve disputes quickly, cheaply and efficiently. That is the same approach I take to my marriage. If it is good enough for me and my wife, I think it is good enough for our small business sector that we try to resolve disputes quickly, cheaply and efficiently. I think this bill will help do that. Senator Cormann was not here to hear my earlier contribution about my marital difficulties from time to time. Suffice to say I have a very strong marriage thanks to the fact that I do try to resolve disputes quickly, and I think this bill will help the small businesses of our country achieve the same result. They do need to have productive relationships with bigger businesses. Small businesses are not islands. They often do rely on contracting with larger businesses. They do face difficulties in that regard. Anything we can do that will build the trust and confidence for them to have those relationships, to invest in their own businesses and to develop stronger and more productive relationships with other businesses will be good for our economy. It will be good for jobs, it will be good for investment, and it should be supported by this chamber.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Firstly, I would like to thank all those senators who have contributed to this debate. Our government is very serious about supporting small business as the engine room of our economy, and this proposed legislation, the Australian Small Business and Family Enterprise Ombudsman Bill 2015 and the Australian Small Business and Family Enterprise Ombudsman (Consequential and Transitional Provisions) Bill 2015, is another manifestation of that serious commitment. In 2013 the government announced that it would transform the current position of Australian Small Business Commissioner into one with real power to assist small business and family enterprises, and the current bills deliver on that commitment.

The Australian Small Business and Family Enterprise Ombudsman Bill 2015 will create an ombudsman with two key functions: and advocacy function and an assistance function. Through these functions the ombudsman will be a Commonwealth-wide advocate for small business and family enterprises, a concierge for dispute resolution who will also offer an outsourced alternative dispute resolution service, and a contributor to making Commonwealth laws and regulations more small business friendly.

In relation to the advocacy function, part 3 of the Australian Small Business and Family Enterprise Ombudsman Bill will allow the ombudsman to conduct inquiries for the purpose of advocating to government on behalf of small businesses and family enterprises. Inquiries may be undertaken on the ombudsman's own initiative or on referral from the minister. Importantly, for the purpose of giving the ombudsman real power, the legislation will allow the ombudsman to require a person or entity to produce information and documents for the purposes of an inquiry. Noncompliance with such requests may attract a penalty.

The ombudsman's advocacy role will contribute to making Commonwealth laws and regulations more small business friendly. This forms part of the Australian government's general deregulation agenda. Regulatory compliance costs as estimated by the Treasury in 2014 could be as high as five per cent of gross domestic product. To assist with getting rid of inefficient regulation and to prevent it from being imposed in the first place, the ombudsman will provide advice on legislation, draft legislation and regulatory practices. The ombudsman will thus be a strong and influential advocate for the interests of small business and family enterprises being at the forefront of policy and program design. The ombudsman will also promote best practice interactions, which could involve the ombudsman recommending changes in practices by Commonwealth government agencies.

Naturally, the ombudsman will be impartial, but the ombudsman must also be seen to be impartial. Therefore, because the ombudsman will advocate particular positions in relation to various issues, the ombudsman may not personally take any part in any alternative dispute resolution processes.

In relation to the assistance function, under part 4 of the Australian Small Business and Family Enterprise Ombudsman Bill, the ombudsman may provide assistance in relation to requests. It is anticipated that, in the majority of cases, the ombudsman will transfer requests to other officials under whose jurisdiction the requests fall. The various levels of government—Commonwealth, state, territory and local—and the agencies within those levels often appear as a maze to those in the private sector. Therefore, the ombudsman's concierge function will assist by guiding small businesses and family enterprises to the relevant agencies. In some cases the ombudsman may refer requests for assistance to the ombudsman's own outsourced alternative dispute resolution service.

The scope of the ombudsman has been deliberately designed to be very broad. There is therefore a very broad definition of both a 'family enterprise' and a 'small business' as being a business with fewer than 100 employees or with revenue under $5 million in the previous financial year. Despite this very broad definition, there are naturally restrictions on the ombudsman's operation. The Commonwealth Constitution, for example, contains no power which would allow the ombudsman, in most cases, to deal with disputes between two unincorporated entities in the one state. In addition to such constitutional restrictions, the ombudsman will also not duplicate the functions of any other official, for the simple reason that doing so would be a waste of public money. The ombudsman therefore will work cooperatively with other officials and complement their existing services—thus providing more services to small businesses and family enterprises.

The government acknowledges the feedback provided on the ombudsman through an extensive consultation process, consultation which has included public feedback on a government discussion paper and draft legislation and responses to a committee inquiry. In relation to recent commentary on the ombudsman, proposed section 95 of the Australian Small Business and Family Enterprise Ombudsman Bill requires that a review of the ombudsman's assistance function be conducted no later than 30 June 2017, with further reviews at intervals of not more than four years. The first review represents a good opportunity not only to review the assistance function as required by this bill but also to consider other matters raised before the Senate. This includes comments provided in the inquiry report of the Legal and Constitutional Affairs Legislation Committee.

The Australian Small Business and Family Enterprise Ombudsman (Consequential and Transitional Provisions) Bill 2015 ensures that the ombudsman can work collaboratively with the Commonwealth Ombudsman by allowing the Commonwealth Ombudsman to transfer matters to the Australian Small Business and Family Enterprise Ombudsman.

These bills fulfil an election commitment and, moreover, they demonstrate the importance of small businesses and family enterprises to Australia. I commend these bills to the Senate.

Question agreed to.

Bills read a second time.