Jane Hume (Victoria, Liberal Party) Share this | Link to this | Hansard source

I rise today to continue my speech on the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017. I previously spoke on Thursday 11 May. On that occasion, I reminded the chamber that Labor has constantly opposed good-quality, sensible and pragmatic policies that those on this side of the chamber have put forward to look after small business and that their hypocrisy on this issue knows no bounds at all. Those 3.2 million businesses that currently employ more than six million Australians are, in fact, the engine room of the economy. They're the small businesses that we go to every day: the small manufacturers, the fish and chip shop down the road, the bakery, and the small grocer on the corner. They're the people who keep our economy going and keep our economy alive. Only a coalition government genuinely looks after small business. Labor, as we know, looks after big business. Big business is what feeds the hungry and insatiable beast of the trade union movement. It looks after big business and big union mates, but it never comes to the rescue of small business—not with any genuine credibility—and this bill is absolutely no different.

The Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017, proposed by Labor, if enacted would see private litigants given a power to request a no adverse cost order at any stage of a competition case that is a Part IV action under the Competition and Consumer Act—that is, any stage of a competition case that they have brought before a court under the proposed subsections 82(3) to 82(4). If a court grants such an order, the legal fees of the defendant would be prevented from being transferred to the litigant in order to make a no adverse cost order. A judge must then be satisfied that the action has a reasonable prospect of success, raises an issue that may be significant for persons or groups other than the applicant, and that the disparity between the respective financial positions of the applicant and the respondent is such that the respondent could use the possibility of a cost order against the applicant as a means to deter the applicant from pursuing the action. That is proposed in subsection 82(5). It is also proposed in this bill that the small business and family ombudsman would provide assistance with advising private litigants on the arguments that might be made and the evidence that is needed to satisfy a court to grant that particular no adverse cost order.

It will come as no surprise, of course, that those on this side of the chamber, the government, do not support this bill. The main reason for that is that the bill fails. It overpromises, and will fail to deliver its objectives. There is no point in Labor promising to access justice for small businesses when the current law, section 46, is broken. Indeed, if Labor are genuine about supporting small businesses they should, instead, support the government's changes to section 46 of the Competition and Consumer Act 2010. That recommendation was part of the Harper review, which released its final report on 31 March 2015.

The report made 56 separate recommendations on Australia's competition framework, which covered most sections of the economy. The Prime Minister, the Treasurer and the Assistant Treasurer all emphasised, on the release of the report, the government's commitment to strengthening Australia's competition policy. They commented:

…the amendment of section 46 to deal with unilateral anticompetitive conduct is an important step to ensure Australia has the best possible competition framework to support innovation and boost economic growth and jobs.

Indeed, as I have mentioned previously, the Minister for Revenue and Financial Services, the Hon. Kelly O'Dwyer, explained how those proposed amendments would support and promote pro-competitive conduct in business for the ultimate benefit of Australian consumers. The minister said:

These amendments will make markets work better for the benefit of all Australians and help to lift our long-term productivity growth. They will ensure that all businesses can compete on a level playing field—

a term that is a very familiar refrain in this debate—

rewarding innovative and dynamic businesses that provide the best services at the lowest cost. This will benefit households by giving them more choice and better value products and services.

It is section 46 that is broken. This bill is entirely unnecessary, and the changes to section 46 that the government has proposed would genuinely level that playing field for small businesses to ensure that they can compete on merit against those businesses that have substantial market power. The changes to section 46 balance small business to big business market relationships and will do far more to assist small businesses than the proposed bill that is once again under discussion today. These changes are necessary, and they are championed by the small business sector.

The piece of legislation we have before us today is expensive and time-consuming. Labor's policy actually encourages small businesses to engage in litigation. It actively encourages litigious behaviour and potentially vexatious litigation. It does not, however, assist in the resolution of disputes at the earliest available opportunity or at the least cost to parties and to the courts. Labor's policy will in fact do the very opposite of that. It will encourage businesses to commence litigation. The applicant and proceedings will still have very high legal costs and a high evidentiary burden in challenging legal thresholds to establish a breach of the current section 46. The seeking of the order itself carries with it a legal cost in satisfying the court that the order satisfies the hurdle tests—a cost which would be borne by the small business applicant. And, if the court grants a no adverse cost order, the applicant must still fund its own case. The case is likely to be complicated by the legal argument about the facts and addressing the expert advice brought by the respondents. The cost to the applicant for its own legal representatives is still likely to be very, very high.

The bill fundamentally also changes the role of the Australian Small Business and Family Enterprise Ombudsman from advocacy and assistance. In particular, the addition of this function would severely limit the Australian Small Business and Family Enterprise Ombudsman's ability to advocate on issues, which is such a key function for this agency.

Additionally, Treasury does not consider that the Labor Party's estimate of costs of $1 million accurately reflects the full cost of this policy. It doesn't appear to account for the increased workload of the Federal Court, and it doesn't appear to account for the significant change to the Australian Small Business and Family Enterprise Ombudsman's functions and the increased resourcing of that agency. The most important issue here is for small businesses to beware of false friends. They are like ivy. They decay and ruin the wall they embrace. To the 3.2 million businesses that currently employ more than six million Australians, Labor is, indeed, a false friend.

Kimberley Kitching (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak in support of competition and the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill introduced by the Labor Party—the real friend of small business, contrary to what Senator Hume said. The ALP has long had a good relationship and a good understanding of what the needs of small business and small business owners are. In comparison we see a government that has spent its time in this term giving tax cuts to those who don't need them and hiking up taxes on those who can least afford them. The ALP understands that small business owners and operators want a level playing field when they are competing in the marketplace.

Behaviour that is anticompetitive damages the economy, jobs and future growth. We need small businesses to provide new ideas to provide goods and services. We need young, small businesses to drive new jobs in the labour market. The Council of Small Business Australia estimated in May that there are over 2.5 million small businesses, whether they be sole traders, partnerships or small employers. Whether it is a new IT start-up or a small business that has thought of a new way to make a widget, these businesses have helped underpin 25 years of economic growth. The Council of Small Business states that small businesses employ over five million people and contribute more than $343 billion to the economy every year—$343 billion. This adds insult to injury when we see the Prime Minister and the Treasurer focus on and advantage big business in our economy by giving them tax cuts rather than ensuring that legislation provides a level playing field and one that also helps small business owners. Because what does small business ask in return? They ask for a level playing field, and that includes support for competition policy.

This bill addresses small business's concerns regarding two main elements of competition policy. First, it removes the disincentive of bringing an action that ought properly be brought—that is, the small business is being adversely affected by the conduct of a big business whose conduct is undermining competition. The Harper review recommended a misuse of market power provision to empower small businesses to combat big businesses unfairly undermining them. I want to refer to the 1989 High Court decision in the case of Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Limited. Chief Justice Mason and Justice Wilson stated:

… the object of s.46 is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end. Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to "injure" each other in this way. This competition has never been a tort … and these injuries are the inevitable consequence of the competition s.46 is designed to foster. In fact, the purpose provisions in s.46(1) are cast in such a way as to prohibit conduct designed to threaten that competition—for example, s.46(1)(c) prohibits a firm with a substantial degree of market power from using that power to deter or prevent a rival from competing in a market. The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition, and the addition of a hostile intent inquiry would be superfluous and confusing.

Queensland Wire succeeded in its claim that BHP had engaged in a misuse of market power by refusing to supply it with Y-bar—the type of wire necessary to make star picket fencing. That sounds like a happy ending. Sadly, that was not the case. As is typical in these cases, the defendants tend to have deep pockets, as BHP did, and they tend to be powerful. Compare them with the applicants who, given the nature of their grievance, tend to be less powerful. The upshot in the Queensland Wire case was that while Queensland Wire's private litigation was successful, it was incredibly costly, and by the time the remedies were assessed Queensland Wire had gone out of business. That's pretty unfair.

This bill will ensure a more even playing field for private litigants, so that small businesses have avenues open to them to prove an abuse of competition. Allowing a judge to waive liability for adverse costs will empower private litigants like Queensland Wire to bring litigation without the crushing burden of enormous legal fees. Any sensible person knows to stay away from lawyers. I say that as a former lawyer. It is expensive. As a practitioner I would repeat the warning that a legal practitioner is required to issue that if a client were to lose they could be liable for the other side's costs. It's difficult to watch people grapple with the risk that if they were to lose they could seriously affect not only their own financial security but really, really affect their families as well. They may have a strong prospect of success with their action or they may they prove every element they need to prove but one perhaps not as well as the others, and they may still win in that circumstance; but the down side is just too much. The risk is just too great. So they don't undertake the action. They walk out the door, but not before most of them say, 'This is not fair.'

This bill seeks to bring balance by allowing a small business to request a no-adverse-costs order early in a court case, thereby preventing large legal fees of a defendant being transferred to the applicant. It does not remove a decision around the merits, as Senator Hume was suggesting, but rather it just allows that decision to be made very early in the proceeding, before costs have been accrued. It gives the applicant the knowledge early on to know whether they are proceeding at their own risk. That sounds pretty reasonable to me.

The second part of this bill is to assist in the process of assessing whether a private litigant is likely to be granted a no-adverse-costs order. This bill introduces an Australian Small Business and Family Enterprise Ombudsman with a new category to provide professional assistance in order to determine the likelihood of such an order being granted. The ombudsman will assist small businesses better understand their prospects of successful action. The small business ombudsman is there to assist and stick up for small business interests. This role will help to facilitate public good through private litigation. This is a practical change for small businesses and it is in the public interest. It better allows access to competition laws to small business. Shouldn't everyone have good access to justice? By allowing private litigants to better bring action under the Competition and Consumer Act, anticompetitive behaviour by powerful interests will be better mitigated, helping to support Australia's competition policy framework. This is a modest, sensible proposal to provide some support for small businesses without damaging competition in the process.

The combination of allowing for no-adverse-costs orders and supporting the small business ombudsman to help businesses reduces part of the financial impact and the uncertainty of private litigation under the Competition and Consumer Act. This can be seen in what is known as the 'effects test' and is perhaps the most controversial part of the act. The ALP does not support an effects test. We are not alone in this. Former treasurer Peter Costello said to an Australian National Retail Association function in Sydney last year:

When you are looking at competition policy, there is one basic question you have to ask before you can settle anything else … who is competition policy for? If you take the view that competition is there for the consumer, which is what I believe is the fact, everything else will fit into place. That's why I'm against the so-called effects test. The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

We know that those opposite value Peter Costello. After all, he was the last Liberal Treasurer, or indeed the last shadow Liberal Treasurer, not to be burnt up and consumed by the heat that the Treasury portfolio generates. He is just one Liberal who opposed—might still oppose—an effects test. Of course, in former Prime Minister Abbott's cabinet when discussion turned to competition laws many ministers opposed it. Broad speculation at the time was that those opposed included Senator Brandis, former minister Robb, the foreign minister, Senator Cormann and indeed the now Prime Minister himself. Then the Prime Minister had to do a deal in order to become Prime Minister. One of the deals he made was acceding to the demands by the Nationals for an effects test—or, as it was reported in the Financial Review at the time, 'The federal government has succumbed to pressure from the Nationals'. How did the Retail Council react to this? Well, they said that the backflip by the government was simply 'bad policy' and that 'the consumer is the loser'.

I want to go to where the effects test, in legal policy terms, comes from, because there is no standard test in other jurisdictions across the world. There is a view that in the United States public interest in private litigation is good. That is, we all benefit from the litigation individuals bring and, based on that, measures should be taken to ensure that it can happen, which is really what this bill, brought by Senator Gallagher, actually seeks to do. We've all heard of famous antitrust cases in the United States, and some are deservedly famous. For example, the Standard Oil antitrust case is very widely read across all legal jurisdictions, where JD Rockefeller was accused of predatory pricing, including with railroads, in order to eliminate his competition.

In Australia there have been a number of reviews and inquiries into our competition laws. Over the last 30 or so years there have been about a dozen, and the Harper review is the most recent. Australia's competition laws have considered a proposed effects test. In these former reviews and inquiries an effects test was considered but then rejected. So, apart from Professor Harper's review, only one other inquiry has ever recommended it. There is a reason that 10 out of 12 inquiries have recommended against an effects test. The reason is that it is bad law. It's going to have a detrimental impact on the consumer. In the submissions to the Harper review, the effects test has been described as 'legally unworkable', something that will 'chill competition' and something that will 'create uncertainty for business'. These changes will deter job-creating investment in Australia by adding to the new layers of red tape and barriers to investment which already have been imposed by the coalition government. It is little wonder that the government's own former Minister for Trade and Investment, Mr Robb, was opposed to this latest anti-investment measure.

The worst of this is that the government's proposed effects test is a move to satisfy internal politicking; it's not about policy. A level-headed analysis of the effects test shows that the Prime Minister is using competition policy as a political plaything. The Prime Minister has backflipped on the effects test, because he has previously said that he would be deeply concerned about the introduction of such a test. We've heard other people, such as Mr Samuel, the former ACCC chairman, saying:

Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.

Richard Goyder, the former CEO and managing director of Wesfarmers has said of the effects test, 'I think it will have a negative impact, because it will cost consumers more.' The managing director of Coles, Mr Durkan, has warned that the effects test could push up prices, particularly in the chain's regional stores.

I just want to talk about regional stores for a moment because, let's compare what he has just said—so, someone who operates many, many stores in urban and regional and rural Australia—with someone who purports to care about rural Australia, and that is the Deputy Prime Minister. It is quite clear that the member for New England, who is sometimes a disturbingly influential economic voice in the government, if not on occasion the government's chief economics spokesperson, has actually supported a test which is detrimental to Australian consumers and the broader economy. If Barnaby Joyce were just another coalition renegade, it might not have mattered so much, but his views are driving competition policy in Australia. This contrasts starkly with alternative options. Some in the small business community have said that the change would mean that business would have to consider the effect of their day-to-day business decisions. That is an incredible burden to place on people. A marketing manager should not be wondering if their latest sales campaign will affect competition, but rather how that campaign will help the business grow and expand. A CEO needs to focus on strategic growth and look into the long term, not fighting off litigation because a new multimillion dollar investment in regional Australia threatens established businesses. This is dangerous economic policy that will lead to uncertainty across the economy, potentially adding substantial costs to every single transaction, of which millions occur each day.

Coming back to an international standard: there is none. There is no international standard effects test to assess dominant-firm unilateral conduct. The perceived trend, which is what the government is relying on—a perception of a trend where the effects test is not universal, nor what is really happening in the US and the EU—appears to substantially respond to discredited structuralist approaches to assessing lessening of competition in which, for example, increased supply concentration is equated with harm to competition, regardless of actual competitive dynamics. This is, however, not a problem encountered in Australia under the current act. We should not underestimate the consequences of amending section 46 to introduce a test that is not consistently developed in the US or the EU in their legislation and that will rely on Australian courts to develop a distinctly Australian effects test over time.

The American Bar Association submitted to the competition review that there is no US standard for determining effects and that, if such a test were adopted in Australia, it should be left to the courts to develop. However, as it is not proposed to adopt the US jurisprudence—you will be pleased to know that I am not going into the last 100 years of judicial thinking on competition policy in the US—this may be a recipe for repeating the past 40-year cycle of judicial interpretation of the current section 46 and repeated legislative intervention. The EU proposal, article 102 of the treaty for the functioning of the EU, is likewise a very simple provision, with no express effects test and a considerably smaller body of judicial interpretation. Its purpose is to enhance the operation of the internal market. The implied effects test arises from the European Commission's 2009 guidance on enforcement priorities, which focuses attention on practices that harm the process of competition and, thus, adversely affect consumer welfare—for example, in the form of higher prices, limiting quality or reducing consumer choice. Note that consumer welfare in this usage has quite a different meaning from the long-term interests of consumers, as interpreted by Frontier Economicsand apparently used by that review. The EC guidance also refers to conduct of dominant firms that excludes competitors by means other than competition on the merits. The guidance indicates that the focus of enforcement should be on cases where exclusionary conduct adversely affects equally efficient competitors—that is, impact on less efficient competitors is of no concern.

As discussed, the contribution that small business makes to our economy is crucial. This bill is about making sure our competition laws are better enforced by giving small business access to justice. Isn't this not only fair but also vital to ensure that the major cog of the Australian economy, small business, is looked after? Thank you.

Anne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Link to this | Hansard source

I rise to speak on the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017. In doing so, I stand here as a small business owner and operator. This private senator's bill seeks to amend two particular acts—that is, the Competition and Consumer Act 2010 and the Australian Small Business and Family Enterprise Ombudsman Act 2015. It allows judges in the Federal Court to waive liability for adverse costs to small business private litigants in cases related to the misuse of market power. It also allows the Small Business and Family Enterprise Ombudsman to provide assistance to small businesses in preparing these cases.

In listening to the contributions made by some of those opposite, they have consistently said this is about access to justice. I suggest it is not necessarily about access to justice; it is about whose model for access to justice gets selected. It appears to me that, instead of accepting that there are a number of different options and models through which small businesses, particularly small businesses without access to much resource, are able to get a fair and equitable opportunity to settle disputes in the Australian legal system, we are now seeing this as an opportunity to try to once again wedge government. As everybody in this place would know, following a very extensive review by Professor Harper, the government made an election commitment that we would review the provisions within the Competition and Consumer Act 2010 to make sure we put additional protections in place for small businesses.

What we have got here today is a bill that, if enacted, would see private litigants given the power to request a no adverse cost order at any stage of a competition case. If the court grants such an order, the legal fees of the defendant would be prevented from being transferred to the litigant. In order for this particular no adverse cost order to occur, a judge would have to be satisfied that the action has a reasonable prospect of success. It raises an issue that may be significant for persons or groups other than the applicant, and when the disparity between the respective financial positions of the applicant and the respondent is such that the respondent could use the possibility of a costs order against the applicant as a means to deter the applicant from pursuing action. It is much the same way as model litigation occurs, where any government instrumentality cannot use its power and resources in order to deter a smaller organisation from seeking its legal rights.

Probably one of the more important aspects of the bill before us is that it is proposing that the Australian Small Business and Family Enterprise Ombudsman may provide assistance in advising a private litigant on the arguments that might be made and the evidence that is needed to satisfy a court to grant a no adverse costs order. In doing so, they would be charged with the capacity to prepare those arguments, which is outlined in proposed sections 15(c) and 74B of the Australian Small Business and Family Enterprise Ombudsman Act 2015.

Whilst I think everybody in this place would like to see that there is a level playing field and there is access to adequate opportunity for any small business to be able to seek legal recourse in a situation where they believe that they have been wronged, what we've got here is a bill that is largely seeking to overpromise but largely likely to underdeliver. The fact is that there's no point in promising a litigant access to justice for a small business when the current law is actually broken. The reality is that, if you break the law, the consequences will follow. If Labor is really genuine about supporting small business, why aren't they actually working with us to effect changes to section 46 of the Competition and Consumer Act? The changes to that section have been universally supported within business as providing a balance to the small business market and small-to-big business market relationship and will do far more to assist small business than any other proposals that are currently on the table.

By levelling the playing field for small business, we want to ensure that they compete on their merits against businesses with substantial market power and prosper. But we equally have to make sure that the tools that we give them to do so are fit for purpose and the best possible tools that we can give. So we absolutely fundamentally believe that changes to section 46 of the Competition and Consumer Act are absolutely essential to delivering the level playing field that everybody in this place universally agrees needs to happen. The bill that we have put before this place seeks to repeal the existing section 46, which prohibits a corporation with substantial market power from taking advantage of that power for one of three prohibited purposes that are largely directed towards harming or deterring particular competitors. We seek to replace that particular section 46 with a new section 46 which prohibits a corporation that has a substantial degree of power from engaging in contact that has the purpose, effect or likely effect of substantially lessening competition in a relevant market.

What we think that we have achieved by the amendments that we are proposing to the Competition and Consumer Act, through the repeal and replacement of section 46, is exactly what those opposite are proposing and purporting to be trying to achieve by this private members' bill which is before us today. What we've got to remember is that the bill that was put forward as a government bill that sought to change section 46 has gone through a very rigorous process. It came off the back of a very substantial review, as I mentioned earlier, by Harper. It's also gone through all the usual rigorous processes of Senate committees. In fact, the majority view of the Senate committee, when it undertook its investigation inquiry into this particular bill, was that the bill provided adequate protection for non-dominant firms from the destructive actions of firms with substantial market power. It also not only considered that the new provisions would provide a more equitable market but also made clear that the amendments do not represent an argument for small versus big—rather, they represent support for open and fair markets that allow all businesses to participate and compete on their merits.

What we've got here—the situation at the moment—are, essentially, two bills in this place that are seeking to effect the same sorts of protections and provisions for small business. We seem to be having a debate about whose bill is better—the one that's gone through a very rigorous process or the one that's just been popped in by the Labor Party. And, by their very own admission, in listening to a contribution of a couple of the Labor members before standing to give my contribution, there seems to be a level of 'gotcha politics' in all this. We can go out and find these people who say, 'We think we've got a better idea,' when talking about the provisions that will be enacted if the effects test changes that are proposed by the government come into place. In a democracy, as you well know, not everybody always agrees with everybody else. What I think we need to do is agree that we have an outcome that we're seeking to achieve. Then, we need to go through a proper and thorough process.

I believe, and the coalition believes, that a proper and thorough process has been gone through in relation to making changes to section 46. The statements made before with some level of pettiness—'This is your idea, so, therefore, we're not going to accept it; we want to achieve exactly the same thing, so we're going to bring in something that's our idea so we have every opportunity to say why your idea's wrong'—are not constructive debate in this place. This is not what the people of Australia asked us and elected us to come to this place to do. The people of Australia elected us so we could come here, work together, put different ideas on the table, and hopefully come up with satisfactory legislative and regulatory outcomes that deliver what they actually seek from those that they elected to this place. They do not want 'I don't like it just because it's your idea' type politics. That, unfortunately, seems to be what we're descending into in so many instances in this particular parliament.

We need to be very careful about creating a very clear balance between making sure that we put protections in place for everybody so there is a level playing field in the legal environment to get legal recourse against any damage or wrongs and making sure that when we do these things we don't overly burden the legal system and don't overly burden the litigant by creating a system that is unnecessarily expensive or particularly time-consuming. It often becomes expensive when it is time-consuming. We need to make sure any legislation that we pass in order to put these protections in place is not seen in any way, shape or form as an encouragement for small business to engage in litigation as an example. It absolutely never assists in the resolution of a dispute, particularly at the earliest opportunity or at the least cost, if we end up with our parties going to court. In the first instance, we should always try every single possible opportunity to come up with a dispute resolution mechanism that does not encourage access and entry into court.

Unfortunately, the bill that is before us today moves immediately to the inference that litigation is the first point at which we need to start engaging, and that is a very bad signal to be sending to the marketplace. In essence, it is encouraging small business to commence litigation. The reality is that as soon as you commence litigation you will immediately start to incur extraordinary costs. It then becomes an ever-increasing problem, because the higher the costs, the more need for the litigant to try and establish that they will not have to pay any costs against them. We have seen so many small businesses go to the wall because they have been encouraged to litigate when there are many other remedies available to them to try and deal with their disputes. The seeking of a court order in itself carries with it the legal cost in satisfying the court that the order satisfies the hurdle test, which would be borne, once again, by the small business applicant. Even if the court grants the no adverse costs order, the applicant must still fund their own case—and the case is likely to be complicated by the legal argument about the facts—and address the expert evidence brought by the respondent. The cost to the applicant for their own legal representation is in itself likely to be high under the conditions that have been put forward by the bill before us today.

Of particular concern is the role that has been purported to be required of the Australian Small Business and Family Enterprise Ombudsman by this particular bill. The functions that would be given to the ombudsman would require them to provide legal advice on the prospects of obtaining an order, which I don't believe, and the government doesn't believe, is an appropriate role for a public statutory office of this nature. It also doesn't seem to be clear how a party who took up litigation on the basis of an assessment and subsequently did not obtain an order in their favour could then withdraw from the litigation without penalty costs. It is also unclear what liability the ombudsman would have should the party not be successful in obtaining an order in their favour. A party in receipt of a no adverse costs order is incentivised to take up belligerent litigation tactics, which are absolutely unhelpful for any judge and for the other party if they are acting in good faith.

Additionally, the ability to request a no-adverse-costs order at any stage of the proceedings raises two key issues. Firstly, it's not clear how a judge would be expected to consider a no-adverse-costs order at the outset of a matter, where the evidence has not been tested by the parties. This in itself could be the subject of an appeal and further add to the risk and potential cost of any proceedings that may subsequently commence. Secondly, allowing such an order to be requested at a later stage would appear to undermine the rationale of the policy. If parties are not taking private action because of the risk of significant adverse costs orders, only at the outset of the matter would a no-adverse-costs order be able to address this. It's unclear why a party who considers a no-adverse-costs order is available to them would then wait until later in the proceedings to request such an order. In a sense, it's somewhat contradictory. As it stands, the bill would allow a party to request a no-adverse-costs order when it becomes aware that it does not have a reasonable prospect of success, rather than withdrawing from the case, as it possibly should.

This also significantly and fundamentally changes the role of the Australian Small Business and Family Enterprise Ombudsman from advocacy to assistance. In particular, the addition of this function would severely limit the ombudsman's ability to advocate on issues. In addition, we have received advice that Labor's estimated cost of $1 million over the forward estimates does not reflect the true cost of this policy. It does not appear to account for the increased workload of the Federal Court that would result if judges were called upon to make cost waiver assessments, and the forecast costs do not appear to account for the significant increase and change in the role and functions of the ombudsman and the increased resourcing of that agency that would be required.

As I said earlier, the government believes that before this place at the moment, through our amendments to section 46 of the Competition and Consumer Act, we have a fit-for-purpose instrument that the Labor Party could support to facilitate the changes and the outcomes that they are seeking for small business. Why are we sitting here debating this when we could be getting on with the job by just proceeding, even with amendment, with the changes to section 46 and the bill before the place, instead of sitting here having a debate over whether a no-adverse-costs order legislative instrument is a better instrument than the section 46 effects test amendments being proposed by the government?

What I would say to those opposite and those who have put this bill into this place is, let's get back to doing what the people of Australia expect us to do: have respectful, positive, proactive and outcome-driven debate about how we are going to deliver for the Australian public a better landscape in which they can do business. I can assure you that it is pretty hard out there, whether you are a big, small or medium business. Do not be fooled—it is a really tough environment out there. In my home state of South Australia we have the added indignity of power costs. We are in a situation where in any energy-exposed business it is the only bill that anybody cares about getting at the end of the month or quarter because it is so large. Added to that insult is the fact that not only is your bill enormous, but sometimes when you go to turn on your power it's not there at all.

It's a pretty sad state of affairs that we should be sitting in here and arguing the semantics of whether your bill is better than my bill, when we are both trying to seek the very same outcome. I think it's a pretty sad reflection on where we have got to in this place. Unless I missed something completely in this whole exercise, I believe that the intent of both of our bills is exactly the same. I believe that everybody in this place genuinely wants to help and support small business. We want to try and create the most opportunity for a level playing field for access to everything. We don't like to see the big guy beating up on the little guy, but equally we don't like to see vexatious little guys biting at the heels of the big guys unnecessarily. We need to create an environment in Australia where all business can prosper. We need to lower taxes as much as we possibly can so businesses are in a position to employ people, because at the end of the day the best outcome for Australia is to make sure that everybody has a job, and wouldn't it be great to think that we had an economy that was prospering so well that people could not only have a job but also have a job that they loved, just like I know that you and I, Mr Acting Deputy President, love the jobs that we've got.

Obviously the intent of this bill is supported by the government but, with the completely unnecessary cost and burden that is going to be put on the public by it, I would much rather see our bill passed. (Time expired)

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

The Greens will be supporting the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill today. This bill is a private senator's bill. It amend two acts, the Competition and Consumer Act 2010 and the Australian Small Business and Family Enterprise Ombudsman Act 2015. It allows judges in the Federal Court to waive liability for adverse costs to small business private litigants in cases related to the misuse of market power. It also allows the Small Business and Family Enterprise Ombudsman to provide assistance to small businesses in preparing these cases. The explanatory memorandum that has been provided by the Labor Party says:

This Bill addresses a prominent problem with the operation of section 46 without changing the intention. The problem relates to private parties litigating breaches of the competition law, namely the risk of significant adverse cost orders should an applicant lose and the time taken to finalise action in the Courts.

That may be the case, that this is not changing the intention of section 46—the Greens are supporting this because we will support anything that helps the competitive process and especially helps small business and farmers take action against what they see as uncompetitive behaviour—but let me make it very clear: the intent of section 46 does need to change. My party, the Greens, have campaigned for years on changing section 46. It is unworkable in its current form and, while it is good to be giving assistance wherever you can to struggling hardworking small businesses and farmers who feel that they have been negatively impacted by or had adverse consequences from especially misuse of market power by big powerful companies, it is no good doing that if it is nearly impossible for them to prosecute a case because of the way section 46 stands now. The way it stands now, a small business of any kind, no matter how much financial assistance they are given, needs to prove the intent that it was intended to be anticompetitive when a big supermarket was to buy, for example, all the land in their area and block competitive access. As we know from personal experience, and I look forward to giving some case studies on this when we debate the effects test bill, that is next to impossible and a small business or a farmer or a medium-size enterprise has always failed when it has tried to prove intent.

I have been through this situation myself with the ACCC. What we need to do is look at the effects themselves as the basis for section 46, and that is what the effects test will do. While we are happy to support this bill today, we do believe that it is actually the intention of section 46 that we need to change because it is unworkable. If we did both, if we had this bill today, which we commend Labor for bringing forward, and we also changed section 46 to make it workable, then we would get the best of both worlds, the best possible outcome for struggling small businesses and farmers in Australia.

As a Tasmanian senator, this issue is particularly acute for me and I have campaigned strong and hard on it since I have come into the Senate. Prior to my taking over the competition and small business portfolio, my previous colleague, Senator Milne, campaigned on this issue with Tasmanian farmers for a number of years. We need to do everything we can to improve competition policy in this country. Don't just take it from me as a Greens senator. The head of the ACCC, Mr Rod Sims, has been scathing of the way section 46 has played out in competition policy in this country. He has been out there publicly stating he wants to see section 46 changed; he wants to see the implementation of an effects test. The ACCC's submission to the Senate inquiry and to the Harper review was very clear. Mr Simms has been in the media taking on the heads of the big supermarkets, who don't want to see change, and you need to ask yourself: why? He has been out there dispelling the myths that have been pedalled by big powerful businesses in this country that want to keep section 46 left intact the way it is now. He is the guy that we trust to actually crackdown on misuse of market power and anticompetitive behaviour. We may all have different views in here as to how effective the ACCC has been, but Mr Simms is making this very clear: don't expect me to get good outcomes for you unless you change section 46.

So let's do both. Let's support Labor's bill today, which I think is a good one. I know Senator Xenophon himself has campaigned for years to get a funding system put in place to help small businesses litigate against big businesses. But let's also make it a lot easier for them to win, to get justice in the case of misuse of market power. Let's take the Harper recommendations, which the Greens have campaigned on for years, and let's change section 46 as well. In this building we have politics and we have policy. Sometimes the two co-join and sometimes they don't. The policy the ALP are putting up today is not a bad policy, but I hope that the ALP aren't going to use this as an excuse to get out of supporting a change to section 46 on the effects test.

This is something that no doubt we'll be debating shortly. We are expecting the competition and consumer amendment on the effects test to come to the Senate this week. No doubt it will be here next week. We need to ask ourselves the question: why, if the ALP are putting this up as a ruse to not support section 46, would that be the case? Why would Mr Bill Shorten and Senator Sam Dastyari and all the Labor MPs in this place not support a change to section 46? This is a change that small business groups around this country want, the farming community wants, and the head of the ACCC, Rod Simms, wants. Why would we not support a change to section 46? It is a question that I don't have the answer to at this stage. No doubt we will hear from the ALP when this legislation comes to the Senate.

But I note there have been articles about this in the media, including in the Ageand the Australian. The one I want to quote from was written by Mr Ken Phillips in the Business Spectator. It talks about the close relationship between the SDA—the Shop, Distributive and Allied Employees' Association, or what we commonly call 'the shoppies'—the ALP and the two big supermarkets, Coles and Woolworths. He says in his article of 30 March 2016:

With some 230,000 members, the SDA are one of the largest unions funding the ALP. And arguably the largest source of money for the SDA is Australia’s largest retailer, Wesfarmers. Coles always 'encouraged' employees to be members of the SDA and that tradition of union membership 'encouragement' continues today under Wesfarmers.

He goes on to say:

In effect, Wesfarmers is a massive funding source for the ALP and others through the SDA.

This fact turns on its head the probably naive assumption of Australians that the Coalition—

that is, of course, the coalition in this chamber—

is by default, pro-big business and the ALP pro-worker. Rather, the political game has had powerful undercurrents that of late are little commented upon.

I hope to be commenting more on this when the debate on the effects test comes to this chamber. I think it's really important to highlight why the ALP would effectively jump into bed with big business, and that's what they'll be doing if they vote against an effects test in here next week. Just to wrap up, in the little time I have left: we will be supporting this policy. It is good policy. We congratulate the ALP for bringing it forward. But let's not put the politics of this issue aside. If the ALP are going to use this as an excuse not to support long-needed and much campaigned for changes to section 46 then it will be very disappointing indeed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stephen Parry (President) Share this | Link to this | Hansard source

The question is that the bill be now read a second time.

Bill read a second time.