HANSARD EXTRACT
| Trade Practices Legislation
Amendment Bill (No.1) 2007 - Second Reading |
| 8
August 2007 |
Mr HAYES
(Werriwa) (5.02 p.m.)—For so
long the government has laid claim to being the great defender of
small business, yet the introduction of the
Trade Practices Legislation Amendment Bill
(No. 1) 2007
would certainly come as a disappointment particularly to those
in small business, whom this government claims to defend. This bill
has taken far too long to come to this parliament, and many would be
left wondering why it has taken so long and yet does so little.
There are few who would question the importance of the Trade
Practices Act, as it is a key plank in consumer protection and the
prevention of restrictive trade practices by companies. It is
essential for providing consumers and small businesses with
confidence so that they can adequately participate in competition
within markets. As such, it is important that from time to time the
act be amended to reflect contemporary business practices or to
improve upon its operations. Amendments that strengthen competition
should be welcomed and are certainly welcomed by this side of the
chamber.
Strong and effective competition laws provide the environment that
allows businesses to compete effectively in open markets, which is
ultimately to the benefit of consumers. To allow competition laws to
diminish or to have their value eroded through time only acts to the
detriment of business and consumers. It is important that the
Australian competition laws remain at a level comparable to those of
world’s best practice. As with any legislation of this nature, there
is a range of views on how that should best be achieved and how it
should best operate. I will make further comments on this a little
later on. The important thing to remember is that the application of
the Trade Practices Act, and regular maintenance and improvement of
it, is not the means through which uncompetitive businesses or
industries can be saved. The Trade Practices Act protects and
preserves the value of competition first and foremost. Accordingly,
the Trade Practices Act should provide a sound basis for fair and
reasonable competition to occur in the markets.
As I mentioned earlier, this bill has taken some time in coming. It
has been some time, primarily because this government has been far
too willing to have the Trade Practices Act near wither on the vine.
It is interesting that this bill has been introduced in the lead-up
to another election. I say that in the context of the government’s
approach to the ongoing maintenance and improvement of the act.
Members will recall that, in the lead-up to the 2001 election, the
government responded to the growing concerns of the small business
community about the operation of this act and it promised a review.
In 2003 that review concluded in the handing down of the Dawson
report. The government provided a detailed response to the report
and signalled its intention to legislate in the future.
Following the release of the
Dawson
report, the High Court handed down a decision in the Boral case,
which has been well cited so far during this debate. The Boral case
involved the abuse of market power and was significant in terms of
the operation of section 46 of the act. The Senate economics
references committee conducted an inquiry into wide-ranging aspects
of this application of the Trade Practices Act. The Labor senators
recommended that the act be strengthened, and, unsurprisingly, the
government senators recommended something less. Despite the fact
that the bill mirrors the recommendation of government senators, it
has nevertheless taken since 2004 to get this far. As I said at the
outset, from the perspective of many small business operators this
bill is disappointing both in its context and its timeliness.
The provisions of section 46 relating to the misuse of market power
are always cause for debate. They are also subject to varying
interpretations about how this provision should properly operate.
People have diverse expectations when it comes to section 46, and
diverse expectations about the relative ease of action under section
46.
The bill that we have before us today does a range of things. In
summary, firstly, it clarifies that a substantial degree of power in
a market is a lower threshold than a substantial degree of control;
secondly, it clarifies that a corporation can have a substantial
degree of market power even if it does not have freedom of
constraint; thirdly, it makes clear that more than one corporation
can have a substantial degree of power in the market; and finally,
it clarifies that the court may take into account a substantial
period of below-cost pricing when considering whether a firm has
abused its market power, and that a court can consider the company’s
reasons for engaging in below-cost pricing.
The amendments fall short of the preferred position which was
recommended by the ACCC. While the amendments in the bill go some
way to dealing with the recommendations of the ACCC to the Senate
inquiry, they certainly fall short. Bear in mind that the ACCC also
recommended:
Section 46 requires amendment to provide that in cases involving
allegations of predatory pricing, a finding of expectation or likely
ability to recoup losses is not required to establish a
contravention of section 46. Such amendment would ensure the
application of section 46 is consistent with parliament’s stated
intention.
Labor’s view is simple: that the strengthening of section 46 can be
more effective by dealing with recoupment and ascribing a legal
definition to the words ‘take advantage’. I will be supporting
Labor’s proposals to strengthen section 46 as such proposals are an
important improvement to the act.
The improvement to the unconscionable conduct provisions of the act
is important but, again, the changes stop well short of what many
believe they should be. Unconscionable conduct allows legally
binding transactions to be disallowed or set aside when one party is
at a special disadvantage in dealing with another party to a
transaction because of a range of circumstances that affect their
ability to look after their own interests and the other party to the
transaction unconscionably takes advantage of the opportunity.
The section of the Trade Practices Act dealing with unconscionable
behaviour applies to goods and services. Limitations exist on the
operation of this relevant section of the act, and the bill before
us seeks to change that limit. Currently, the act limits the
application of the unconscionable conduct provisions where services
involved are less than $3 million. This limit was primarily designed
to protect small business.
The majority of the report of the Senate committee recommended that
the monetary limit be removed entirely as, by its very nature, it is
arbitrary and that unconscionable conduct should be illegal in all
circumstances. This is a position that has been supported by a range
of small business groups and the ACCC but, notably, it was not
supported by the government senators and, consequently, it has not
found its way into the amendments which are contained in this bill.
Instead, this bill seeks to raise the application level to $10
million—that is from $3 million to $10 million. While Labor supports
this amendment because it makes sense, this level could just as
easily be $12 million, $15 million or $50 million. The arbitrariness
of the monetary value remains no matter what level is set and no
matter what monetary value is finally determined. Through time it
must be adjusted. It is patently obvious that establishing a
monetary level for the threshold of illegal behaviour is
unnecessary. That is why Labor takes the same view that was adopted
by the majority recommendation of the Senate inquiry, and as was
made in the recommendations of the ACCC—that is, that a monetary
value for the purpose of assessing unconscionable conduct is not
necessary and should not be part of the section of the act. For this
reason I will be supporting the amendments forwarded by the shadow
Assistant Treasurer to abolish that threshold.
While the bill puts forward a number of amendments that small
business and others have been clamouring for for some time now,
there are some notable omissions. I will not try to outline all of
them here at this stage, but there are some notable ones which I
would like to draw attention to. In the government’s response to the
Dawson
review released in April 2003, it indicated that it would introduce
criminal sanctions for serious cartel behaviour. In his media
release announcing the response the Treasurer said:
The Government has, in principle, accepted the proposal to introduce
criminal sanctions for serious cartel behaviour, subject to further
examination of the issue by a working party.
In a media release that followed in February 2005, entitled
‘Criminal penalties for serious cartel behaviour’, the Treasurer
said:
I
am announcing today that the Australian Government will amend the
Trade Practices Act 1974 to introduce criminal penalties for serious
cartel conduct.
In the same media release the Treasurer went on to say that the
maximum penalty would be five years imprisonment and a fine of
$220,000. The point I am making is that the government certainly
emphasised that it was going to be strong on cartel conduct.
Despite this rather impressive media splash to describe how tough it
was going to be on cartel conduct, absolutely nothing has eventuated
in that respect. The government has not introduced legislation that
would enact its announcements despite the fact that the case for a
custodial sentence remains strong and remains consistent with the
approach taken by similar jurisdictions. It applies in the
US
and other similar jurisdictions looking to have criminal sanctions
where there is serious cartel conduct. This is not something that
was just an afterthought; this was a recommendation that the
government responded to and something it said it was going to do.
Yet after all this time there has not been one word on that
recommendation; in fact, the government has avoided it. The
government has not introduced legislation that would enact its
announcements in any way, shape or form.
Another notable omission in the bill is an amendment that would give
the Federal Magistrates Court jurisdiction over section 46 and
section 83 based cases. I support Labor’s amendment in this regard.
I support Labor’s amendment because it is a serious attempt to bring
legal action to a level that is reasonably accessible for those
seeking redress. Currently the act requires that actions brought
under section 46 and section 83 must be brought before the Federal
Court. The fact that these actions are required to be brought before
the Federal Court means that small businesses who seek to take an
action are faced with substantial costs. If these actions were able
to be brought before the Federal Magistrates Court, this would not
only reduce costs but also open up the very real prospect of using
that jurisdiction’s conciliation process to resolve matters without
a full hearing—which I would have thought would be in everyone’s
interest, particularly a small business operator trying to protect a
business under section 46.
It should not be a surprise that the government has not taken action
to place legal remedies within the reach of most people. Having
legal remedies that, by virtue of the costs of the jurisdiction in
which they are found, are out of the reach of those who might seek
to use them, is akin to not having any legal remedy at all. The
government, of course, neglects to provide the detail of the hurdles
that are faced in seeking legal redress, but it certainly tries to
perpetuate the myth. One only has to look at the WorkChoices
legislation, where aggrieved employees face going to the Federal
Court to pursue unlawful termination actions. Most recently, we had
the fake fairness test. To have it reviewed, employees have to run
the full gamut of the Federal Court jurisdiction and may in fact end
up in the High Court.
If this is a reflection of the attitude of this government when it
comes to legal redress, it should come as no surprise to the small
business community that this government would take no action to make
legal redress more accessible and more affordable. A move to allow
small business to have access to legal action through the Federal
Magistrates Court is reasonable. Members opposite who support small
business, who truly believe that small business should have
reasonable access to redress, and who truly understand and want to
support the desires of small business should vote in support of
Labor’s amendment. Not to do so will demonstrate how little they
care about small business operators.
I also wanted to raise the issue of mergers and acquisitions—an
issue that has been quite topical of late and is a concern for many
small business operators. It is important that the government’s
failure to act on creeping acquisitions is noted by the House today.
The ACCC’s power to intervene in some mergers is not in question,
but the fact that it is not able to consider creeping acquisitions
that impact on national markets is in question. The cumulative
impact of a number of acquisitions is something that the ACCC cannot
examine; however, it is something that it wishes to examine—and why
shouldn’t it be something that ACCC can examine? If you can examine
one acquisition and make sure that there are not unfair practices
emerging out of it, why would you be prevented from looking at a
whole series or pattern of acquisitions that could have an
accumulative effect on a national market? Quite frankly, these are
things that the government has neglected in putting together this
bill. The government has had since 2004 to deal with these things,
but we are yet to see anything occur in that respect. Laws that
facilitate competition, outlaw anticompetitive behaviour and act to
exert downward pressure on prices to the benefit of consumers are
essential. That is why I request that members consider voting for
Labor’s amendments. (Time expired)
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