Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

The Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 ushers in a landmark reform to competition law in Australia. It's a bill that lowers the burden of proof so the ACCC can more easily take action against companies that misuse their market power. It is the culmination of a long campaign by many people, including my predecessor, Senator Christine Milne, former Leader of the Australian Greens, who worked tirelessly to see this change come into effect. She worked with people who have been done over by big businesses that have used their sheer size to squash competition and squeeze out their supply chains. It is a bill that brings into effect a policy that the Greens took to the 2013 election and the 2016 election. We are very pleased to have been a champion for this reform in this parliament.

It was on the day that Malcolm Turnbull actually challenged former Prime Minister Tony Abbott for the Liberal leadership that we saw the Nationals cross the floor to support a Greens motion on introducing an effects test. I'm sure it was at the front of their mind when they negotiated their secret wish list to support a Turnbull government in a formal coalition. Of course, we are seeing the repercussions of that wish list play out with the marriage equality debate right now. It is interesting that what we have got is a bill that is the result of two parties—not the two major parties in this place, but the Greens and the Nationals—who have championed this reform. We know the Liberals don't like it—they don't like it because it's not something that looks after their big business mates—but we know they are forced to cop it if they are going to stay in government with the support of the National Party. Of course, it will be the Labor Party that will be alone in opposing it.

What we have got, again, is not just Coles and Woolies literally using their market power but the Coles and Woolies of politics who have joined together in so many different ways to stymie this reform. Yet, thanks to some good fortune and circumstance, we have got a very important reform going through this chamber. It's a reform that's good for small business; it's good for farmers; it's good for consumers; and it is good for the economy. It's unquestionably a progressive step forward.

Currently, if the ACCC are to take action against a company for misusing its market power, they have to prove that a company intentionally took advantage of its market power to damage a competitor. In other words, it's not just the effect of the action but the intent. Of course, when we have laws that are seeking to prove intent, we set a very high bar, one that's almost impossible to prosecute. It's been very difficult for the ACCC to take action against big business that deliberately crowds out competitors and squeezes the life out of those further down the supply chain. Under this new law, the ACCC need to take action not based on the intent of a company but when the effect of a company's conduct is to damage competition. It might intend to do it; it might not, but an effects test says that, if big business behaves badly, that is the threshold for the ACCC to step in.

Oligopolies now define modern retail. We know that. From supermarkets to the large hardware chains to whitegoods to electronics to fuel to banking, it goes on and on and on. Shopping in Australia is now a big-brand experience. We know that sometimes there are benefits to it, but often there are huge costs to the long-term health of the market and the economy. That's why we always need to be aware of the role that oligopolies are playing and to ensure that there are measures in place to restrict their power when their power is squeezing out other competitors.

I have to say that it's not every day that we see government move ahead with a policy that is in the face of such strong opposition from some of those vested interests. We've been fighting for this for a long time, and the Liberal Party and the Labor Party have refused to entertain any change through that time. But what we see now is an effects test that acknowledges that what actually happens in a market is more important than what the theory says should happen in a market. An effects test says that the result is the thing that counts most. What is the result? What is the effect of these actions?

We know that it's supported by regulators, by academics, by consumer groups and, most importantly, by those many small businesses and farmers who have experienced what it's like to be stomped on by these huge, powerful behemoths of the market. An effects test is a win for many over the powerful interests of the few. It is very, very odd that, given all of those who are lined up in support of an effects test, it is the Labor Party that is standing alone as the voice against an effects test.

The only stakeholders that we can see standing with the ALP are the Business Council. You might be confused by this alliance, but, if you scratch the surface, you find that what you're seeing is a demonstration of the huge but largely silent power of the 'Shoppies' union. It is the Shoppies union who forced Labor to vote against marriage equality for years, time and time again, and who yet may exert their influence on some members of the Labor Party. They forced Labor to engage in a debate around school funding because it stripped out the special funding deals for Catholic schools. Now we're seeing the Shoppies union forcing Labor not to vote for a progressive policy outcome because it comes at the expense of Coles and Woolies. Remember Coles and Woolies, the big businesses that helped the Shoppies union stitch up a secret deal to leave a quarter of a million people, mostly young people, their members, getting screwed over with salaries that are below the minimum wage? Coles and Woolies help deliver the Shoppies their members. And, because there are so many members, they're a very powerful factional bloc within Labor. That is why you get the Labor Party now standing in opposition to what is a very, very positive reform for the nation.

I'm very pleased to stand here today and talk about the many ways in which the Greens have helped to shape the national agenda—the bank levy, for example. We stood firm many years ago proposing a bank levy, and of course we were ridiculed, it must be said, by the government. Yet now here we are with the government introducing a bank levy, something that the Greens campaigned on for many years. We came out and spoke strongly, loudly and passionately against negative gearing, something that distorts the housing market and means that young people don't get an opportunity to buy their own home in the way that their parents and grandparents did. It's great to see the Labor Party change their position on this and adopt some changes to negative gearing. We also championed the need for a banking royal commission. We put that to the parliament. It was voted against by both Labor and Liberal, and yet now we have seen the Labor Party change their tune on that and we are pleased to see it.

We've campaigned for so many things—medicinal cannabis, where we've seen significant reform—and now we have an effects test, this time supported by the government. We are seeing the Greens help shape both the national and economic agenda and the social and environmental agenda in this country. We are very pleased and proud to have championed this reform. I would like to pay tribute to my predecessor, Senator Christine Milne, who made sure that an effects test remained a central policy position of the Australian Greens—something she took to the 2013 election and something I am proud to be able to say the Greens have helped deliver in this parliament.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

For a supposedly liberal government, this is a shockingly bad piece of legislation. In a breathless rush to claim to be protecting consumers from wicked corporations, this bill seems to reflect a profound misunderstanding of both competition and the operation of the marketplace. The Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 implements some of the recommendations of the Harper review of competition policy. Specifically, the Harper review concluded that section 46 of the competition and consumer laws, dealing with the so-called misuse of market power, should be amended to 'prohibit conduct by firms with substantial market power that has the purpose or likely effect of substantially lessening competition.' In line with these recommendations, the bill amends the Competition and Consumer Act 2010 to strengthen the prohibition of the purported misuse of market power and target supposedly anticompetitive conduct by corporations.

The current provision of the act outlaws conduct that (1) is by someone with substantial market power; (2) takes advantage of that substantial market power; and (3) has the purpose of eliminating or damaging a competitor, preventing entry or deterring or preventing competitive conduct. The new provisions continue to see so-called substantial market power as a problem but change the focus of concern away from eliminating or damaging a competitor to any action which supposedly substantially lessens competition. To add insult to injury, the bill is estimated to generate additional compliance costs of $2.5 million per year over the first 10 years as businesses are expected to seek legal advice on the new law. This cost will, of course, be ultimately passed on to consumers. Not only do we get more interference in the marketplace but consumers also end up having to pay for the privilege. Simply put, the entire approach of this legislation is irredeemably flawed.

In trying to work out when a business has an anticompetitive purpose or effect, the bill deems enhancing efficiency, innovation, product quality or price competitiveness as pro-competitive factors, even though businesses do these things with a purpose of reducing competition. They want the market to themselves, and this motivation is good. What is substantial market power? This simply reflects the success of a business in meeting consumer demand. Big businesses, which this bill seems to see as a root of all uncompetitive behaviour, all began as small businesses. They got to be big by being more competitive, not less, and by satisfying their customers better than their competitors, who remain small. In the free market, if you fail to meet the needs of your customers then, however big you are, you will lose market share and eventually close the doors. So, in order to become dominant, big businesses must be doing some things pretty right.

What the authors of this bill seemingly fail to grasp is what actually causes uncompetitiveness. Uncompetitive markets, including monopolies, are, without exception, caused not by businesses, big or otherwise, but by government policies that overregulate and restrict businesses: anticompetitive labour laws, usurious taxation and restrictions on supply and international trade—the list goes on and on. All inhibit the ability of new players to set up and compete. Invariably, government restrictions and controls tend to favour large, established businesses over small business and start-ups.

Naturally any business, big or small, will and should exploit any advantage that comes its way. However, if this leads to a monopoly or duopoly, big business should not be blamed for this, as the fault lies not with them but with the government. Many in this place have complained about retail market dominance by two players, about the dominance of banking in Australia by just four major banks and about the fact that we still have only two airlines dominating domestic air travel. However, the big retailers, banks and airlines are simply the ones with enough cunning to survive in the heavily regulated, taxed and controlled market created by government policy.

The key premise behind this bill is simply wrong. It was not and should never be the responsibility of businesses to encourage competition. A business enhances efficiency, innovation, product quality or price competitiveness because it wants to beat its competition, not increase it. Instead of banning individual corporate conduct with a purpose or effect of lessening competition, if anything, the bill should make such conduct compulsory. Companies should not be blamed or punished for simply exploiting government created market distortions that limit their competitors. All businesses have a responsibility to their shareholders to maximise profits in any market situation. If the government is stupid enough to distort the marketplace with taxes, labour laws and regulations that favour a few big businesses then it is the government, not the businesses, that is to blame.

This bill would have you believe that lack of competition is the fault of big business and that government legislation is the solution. In fact, the opposite is true. The bill will do nothing to increase competition. Increased competition comes from less regulation, less taxes and less restrictive labour laws. When the government actually comes up with legislative solutions that increase competition, they will have the Liberal Democrats' outspoken and enthusiastic support. In the meantime, I will oppose this bill.

Nick Xenophon (SA, Nick Xenophon Team) Share this | Link to this | Hansard source

I can indicate on behalf of my colleagues that we support the second reading stage of the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 and we're broadly supportive of this bill. It's been a long time coming, and we do actually need to have strong competition laws in place to prevent abuses of market power. Otherwise, it becomes a free-for-all. Otherwise, dominant players can squash the smaller players, and we've seen evidence of that where a small business that is trying to break into a market can be squashed as a result of predatory pricing practices of bigger operators, because they can afford to do that. That is something that this bill goes some way in addressing.

This bill is a result of the extensive work undertaken by Professor Ian Harper and the review panel. The government ought to be congratulated for undertaking this review. It was the first significant review of this type for many years, and it's a review that has been a long time coming, because of concerns that our competition laws have not been working as effectively as they can be. The practical consequences of that have been set out very eloquently by the great Australian writer Malcolm Knox, the author of the book Supermarket Monsters: The Price of Coles and Woolworths' Dominance, which was published in 2015, a couple of years ago. I commend this book to anyone who's interested in seeing the practical consequences of what happens when you have one or two businesses having an extremely large market share, because that market share brings with it enormous market power, resulting in distortions in the market and problems for smaller operators to do with that.

Now, in relation to this particular piece of legislation, I welcome it. I know that the Nationals have had a significant role in pushing for the effects test, which I think is a good test that ought to be introduced—in fact, it's been long overdue—but I believe it needs to go further. It needs to go further, because the effects test essentially cannot be triggered unless there has been a substantial lessening of competition. Those words 'substantial lessening of competition', I believe, are inherently too restrictive. I think we need to look at what the Europeans have been doing for a number of years in the way they look at competition law. They look at the impact of competition in the marketplace, which looks at it from a broader perspective rather than a very narrow test—a hurdle that I feel would be quite difficult to get over in many circumstances.

We need to see how this bill will work, but, having said that, I believe we actually need to have access to justice for this bill to effectively work. It's no good having a piece of legislation with beneficial clauses in it unless people can access those clauses. It's no good having a law in place unless you can enforce that law effectively. As it currently stands, small-to-medium businesses with clear cases of abuse of market power against them are prevented in practical terms from pursuing those claims due to the impact an adverse legal costs order would have on the business in the event their case were to fail.

A costs order is an elephant in the room that particularly prevents companies that have a good case from pursuing it further. There's one retailer in South Australia—I don't think it's necessary to identify that retailer—who has said to me that he's regularly advised by his lawyers that they actually have a good case for abuse of market power in the current provisions, but the problem is that if they lose the case they will be subject to a multimillion dollar costs order against them, in addition to the very high costs of bringing a case forward. That is a problem that does not exist in the United States or Europe, because cost orders are not made in those jurisdictions in competition matters. It's instructive that in the home of capitalism, the United States, they do not exclude small businesses from access to the protection of their competition laws. Their laws go much further to protect competition than Australian laws do now, or as proposed in this bill.

The Harper review acknowledged the problems of access to justice but offered no practical solutions to them. I note that Senator Katy Gallagher had a bill in this parliament that passed the Senate last week. When I spoke to her about this, she was concerned that I would damn her with faint praise. Well, she will be damned with faint praise. No, I will be praising her with real praise, because that is a good piece of legislation that I hope can pass through both houses of parliament. It finally tackles issues of access to justice so that you don't get these monumental cost orders against a small or medium business taking on a giant corporation. And that's why that bill is so valuable. I think that bill is so good that I've incorporated the provisions of that bill into an amendment to this bill. I understand Labor is opposed to this bill, but I would be gobsmacked if Labor would effectively oppose their own provisions of their own bill in the amendment that I propose to move that will incorporate their access to justice provisions. The government's bill, as good as it is in parts, will not be truly effective unless you tackle the issue of access to justice, and that is something that needs to be dealt with.

The other issue that this bill does not address is something that Senator Canavan has previously raised, and I appreciate his support for this issue. We need to have divestiture powers. You need that sword of Damocles hanging over companies, because it isn't enough if it's simply a monetary penalty. There's nothing like the fear of divestiture to change the culture of a corporate company that could be abusing its market power.

As it currently stands, in the rare situation where a market power abuse finding has been found by a court, the court can order the company be restrained and also impose a large financial fine against a company. And that's problematic, because no amount of restraint or fine will bring back to life the hundreds of small businesses that have been wiped out by large companies' misuse of their market power. And the perpetrators of market abuse can be so large that the fine will be considered by the offending company as simply a cost of doing business. This bill proposes positive changes to the way in which market abuse is proved but it does nothing with respect to enhancing the remedies. That is why there ought to be an ability for a court, as a last resort, to order divesture, which, like the sword of Damocles, would serve as the ultimate threat. It makes sense that a court should have a remedy in its tool kit that makes it impossible for a serious or big business offender to offend again.

The remedy of divesture has been available in the home of capitalism, the United States, for nearly 100 years. The US competition laws were born out of a community call to break up Standard Oil, which was misusing its market power in the oil refinery sector. With divesture written into the market power abuse statutes, the boards of big businesses will think more than twice before proceeding to misuse their market power against competitors. I am thankful for the support that Senator Canavan gave me when I introduced a bill to this effect several years ago. It didn't have much support from the major parties, but Senator Canavan, in a very sensible, erudite additional comment to that report, supported the bill for the reasons that I've outlined.

In relation to the position the Australian Greens have negotiated, I want to say at the outset that I do have enormous regard for Senator Whish-Wilson and the work that he has done and I'm sorry I didn't have a chance to speak to Senator Whish-Wilson previously. But I am disappointed that there weren't further amendments in relation to divesture, that there weren't further amendments in relation to abuses of market power, but also in relation to access to justice, which I think is very important. But I'm hoping that there will be another opportunity, sooner rather than later, to do that. I think there has been an opportunity lost here. I say that respectfully but with a great sense of disappointment because I think Senator Whish-Wilson and I share similar concerns about small and medium businesses being given a fair go in this country.

In relation to the amendments circulated by Senator Whish-Wilson on behalf of the Greens, this amendment relates to the government's proposal to repeal part XIB of the Competition and Consumer Act. The amendment will retain the existing enforcement powers that relate to the telecommunications industry. It is something I've raised on more than one occasion with the chairman of the ACCC, Mr Rod Sims. The repeal of part XIB was the subject of criticism of various telecommunications companies. While Telstra agreed with the proposal that part XIB provisions were are no longer necessary or appropriate given the amendments to section 46, Vodafone—VHA—expressed strong opposition to the repeal under divisions 2 and 3 under part XIB characterising the proposed amendments as unnecessary and premature.

During Senate Estimates in March this year I asked the chairman of the ACCC, Mr Sims, about the utility of part XIB in light of the amendments being made to section 46. He said there's a particular part of XIB that was put in place when the ACCC was having a lot of issues with Telstra and that they were very strong powers in terms of its ability to issue competition notices and fine them $1 million a day. The ACCC just felt that with where the telecommunications market is now, if the current section 46 changes go through then the ACCC has got all the adequate powers. So the other things we're looking at are different sorts of issues. Mr Sims went on to state that the ACCC does not judge that there is any reason to have the industry different to other markets and state that competition in the telecommunications sector, I think it is fair to say, has a long and complicated history.

In 2010, I moved amendments to strengthen the provisions of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill. That bill set a framework for either a voluntary structural separation or compulsory functional separation of Telstra and put in place a number of safeguards with regard to access competition and consumers, something I negotiated with then Minister Conroy. The key issue with respect to whether the Senate ought to pass the amendment was whether part XIB has served its purpose or whether the existing regime should be retained to act as a strong deterrent to anti-competitive conduct in the telecommunications sector.

The last competition notice was issued in April 2006, but this does not mean that part XIB has not been playing an important role. It is my view that the ability of the ACCC to issue a competition notice has been acting as a sufficient deterrent and should continue to operate within what is a dynamic telecommunications sector—or rather, a market is the sector, but it's a dynamic market as well.

Further, the ACCC is currently conducting a market study of the communications sector. The study will allow the ACCC to consider a wide range of interrelated developments that have been raised by the industry and go to the effective functioning of the market. It will inform how the ACCC will undertake its role in parts XIB and XIC of the Competition and Consumer Act to facilitate markets that provide consumers with a choice of products at a price and quality that meet their needs and circumstances. I do not believe it is appropriate to repeal part XIB prior to this market study concluding. I will review the report once it is completed, in order to ascertain if part XIB should remain in its current form.

I can indicate that I and my colleagues will support the amendments circulated by Senator Whish-Wilson. I do have more to say, Deputy President, but my voice is giving way on me—which I'm sure is something that my colleagues are very pleased to hear! So I will try and save my voice for the committee stages of this bill.

We support the second reading of this bill. We believe it can be improved. We believe there has been an opportunity lost in terms of further reforms. In particular, in relation to the issue of the abuse of market power, the threshold for substantial listing of competition I fear will be too high. But the general principle of an effects test is a good one, and that is why we want to see this bill go through—hopefully, with amendments that will strengthen it and make it much more effective.

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

I thank all senators who have contributed to this debate and commend the bill to the Senate.

Question agreed to.

Bill read a second time.