---

HANSARD EXTRACT

Petroleum Retail Legislation Repeal Bill 2006: Second Reading

10 & 14 August 2006

Mr HAYES (Werriwa) (4.23 p.m.)—The Petroleum Retail Legislation Repeal Bill 2006 shows that this government can actually achieve something when it puts its mind to it. With the bill before us today, the government has decided it is time to take some corrective action in the petrol retail market. It has decided that things cannot remain as they are. Sadly, I am not talking about the government taking action on petrol prices, but I will return to that a little later.

The action is supported by the Labor Party. We support the repeal of the Petroleum Retail Marketing Franchise Act 1980 and the Petroleum Retail Marketing Sites Act 1980. We do so in principle—Labor’s second reading amendment is quite a welcome contribution to this debate because it does draw attention to the tardiness and the dragging of the feet exercise that has been pursued by this government in trying to address petrol retail reform.

Despite the fact that the government has not rushed to deal with the issues facing the petrol retail industry, I do welcome the structures that the passage of this bill will allow to be put in place. It is important that, as we continue to see the march of the large supermarket chains as they purchase more and more businesses in more and more sectors of the retail industry, there should be some exercise undertaken by government to temper that approach. Those who are trying hard to compete against these massive organisations deserve a break. I welcome the fact that the Minister for Small Business and Tourism is at the table, because I am speaking for her constituency in this regard. Like her—at least, I assume like her—I have a lot of small business people talking to me in the electorate, expressing concerns about situations where they believe they need relief against some of the marauding and loss-leading practices of large organisations that seek to manipulate markets that they currently operate in.

Under the current petrol retailing arrangements, there are at least three classes of operators: the commissioned agents, the independents and the franchises. Discrimination in one form or another obviously exists between these classes. It is made more difficult because of the imposition of certain legislative requirements. One in particular is that at the moment we have a class of emerging retailers which are effectively regulation free. The acts that are being repealed as a result of the passage of this bill cover only part of the petrol retailing industry, with more than 50 per cent of the industry by volume not covered at all. Under the existing arrangements, the new force in petrol retailing—the large supermarket chains of Woolworths and Coles—are not covered at all.

The proposed Oilcode will provide protections and regulation for the petrol retail sector and will cover entities that are regulation free at present. This has got to be an important improvement for all those small business people operating as petrol retailers.

A petrol retailer in my electorate spoke to me only recently to ensure that I understood how this piece of legislation would affect him and his business. One of the things he wanted to emphasise was that things are very tough. As a franchise operator he does not get to set the price that he sells petrol for and the margins are, as he put it to me, extremely thin. Despite the fact that petrol is hovering around the $1.50 mark, his margin remains fixed, and it remains at cents per litre.

He also spoke to me about the fear that he has about the unfair competition that takes place in the industry, and he hopes that the action of establishing the Oilcode will go some way to levelling the playing field in the petrol retailing industry. He, like others, finds it difficult to compete with the entrance of the new retailers owned by the large supermarket chains, with their ability to apply discount schemes. Another thing to bear in mind, as I said, is that those large organisations, those large supermarkets, largely operate, in terms of petrol retailing, in an unregulated market at present. For them to be able to come out and offer, for instance, up to 4c a litre off the price of petrol may not seem much, but, as this operator put it to me, when you consider the difference that makes for a family, that is something that must be taken into account. That is the thing that can actually decide whether he as a franchisee can stay in business or not.

There is no doubt that, given the rapid changes in the petrol retailing industry over the last few years, the time has come to address the issue facing the industry and address the disparities and the discrimination between different classes of owners and operators within this industry. We know that the petrol retail industry is currently experiencing some significant restructures, with the number of service stations dropping from some 20,000 to around 7,000 over the last few years. This process is set to continue.

Debate interrupted.

In continuation

August 14, 2006

Mr HAYES (Werriwa) (6.32 p.m.)—Prior to the interruption of the debate on the Petroleum Retail Legislation Repeal Bill 2006 I was speaking about the restructuring of the petrol retail industry. This process is set to continue, regardless of the structures governed by the operations within this industry. However, it is appropriate that the ongoing framework is appropriate in the future as the restructuring is resulting in a greater concentration of market power, particularly with respect to the falling number of service stations. The entrance of the major supermarket chains into the petroleum retail sector has permanently and fundamentally changed the industry. They have brought with them obviously discounted petrol, which is levied against their retailing outlets, but they have also been able to set about snapping up a great number of outlets.

To enter with this level of market strength, outside the existing regulatory structure, during a time of significant industry restructuring can only favour the supermarket chains, and there needs to be a restoration of the competitive relativities between all operators in this sector. The Oilcode will bring about some uniformity in applying a mandatory industry code of practice that will for the first time, as I understand it, cover all sectors of this industry. That has to be a welcome position for all operators—from those at the service station end of the retailing sector through to the peak bodies and motoring advocates within the industry.

I am sure the implications of the actions of the government when it comes to levelling the playing field in the petrol retailing sector will not be lost on small business operators. This government continues to talk big but does very little when it comes to amendments of the Trade Practices Act that will do something to relieve some of the pressures on small business. It continues to resist all calls to introduce the amendments to the Trade Practices Act that will deliver the recommendations of the 2003 Dawson report and the 2004 Senate inquiry. Small businesses are generally suffering as the march of the major supermarket chains continues. Not only are small businesses facing the loss of market share but they also regularly face predatory behaviour.

As I mentioned prior to the interruption to this debate, the net effect of the repeal of this bill in conjunction with the introduction of the Oilcode will be that market participants will no longer be subject to different protections and regulatory requirements. All market participants, no matter their ownership structure or market strength, will be treated relatively equally. Sure the Oilcode could be improved by the strengthening of section 46 of the Trade Practices Act, but if we all waited around for that to occur then many other businesses would go to the wall.

Small business operators throughout the country are suffering at the hands of major retail chains. We have many examples of that. I certainly see that from day to day within my own electorate. They simply are not able to compete on fair grounds. They are strangled by unfair business practices and predatory behaviour by some of the market giants.

Major supermarkets such as Coles and Woolworths currently have between them approximately 80 per cent of the dry grocery market. They are dominant players, and they are now becoming significant players in the petrol retailing industry. Recent estimates indicate that, between them, Coles and Woolworths already have 50 per cent of the petrol retailing market. This is probably unsurprising to most, given the fact that both supermarkets offer fuel discount schemes and that they have rapidly expanded the number of petrol stations they operate either themselves or in conjunction with the existing retailers.

At a time of a rapid increase in the price of petrol, petrol discounting schemes offered through more than 1,200 locations throughout the country give you a pretty good head start when it comes to establishing your position in the petrol retailing market. Add to that the fact that, between them, Coles and Woolworths currently operate petrol retailing networks of more than 1,000 outlets themselves, and that gives you a fair indication of the degree of dominance which is being shown by the retailing sector in this area. When you can set up retail sites and networks like this as rapidly as the supermarkets have been able to do, that certainly delivers you great clout within the petrol retailing market.

Of course, the major supermarket chains are not stopping just with petrol. Progressively, supermarket chains are using their market dominance, sometimes in conjunction with quite predatory behaviour, in other sectors. Demands on small business—and often what we see as the destruction of small business—in many sectors have led to the reduction of competition. I have to say that everything I see indicates that this will continue. Many small business operators, not just petrol retailers, are the focus of efforts to reduce the amount of competition generally, but this bill will at least, for the first time, try to level the playing field to ensure that there is no difference between businesses of different ownership structures as they apply their trades throughout the petrol retailing sector of the market. It does seem that, under the Oilcode, the playing field from hereon in will be somewhat more balanced and that small operators in the petrol retailing sector will be protected from the misuse of market power.

The government might claim that it has attempted to improve the lot of small business by trying to introduce industrial relations reforms. I have to say, after talking to a number of small businesses in my electorate of Werriwa, that plenty of them do not want what is on offer, and they certainly do not like what they are being asked to do by this government. No matter how much the government might not want to hear it, quite frankly, reform in industry is not a one-way street.

This government has rammed through changes to industrial relations that have impacted on the labour side of production, yet it sits on its hands when it comes to reform involving business. It does not see itself as responsible for amending the Trade Practices Act, particularly to strengthen the sections on the misuse of market power, to assist small business. Yet, when it wants to talk about industrial relations, you would be forgiven for thinking that all of this has taken place simply to accommodate the wish of small business. It is a pity that the minister has not been out there—as I have been—listening to small business, because this is not what they are after. Small businesses want some protections from predatory behaviour, loss-leading behaviour, behaviour that is designed to effectively destroy the ability of small business to compete within a marketplace. That is what they want from this government, and that is what they have been denied. As a consequence—and it is not just in the petrol retailing sector—we are seeing a greater tendency now towards the emergence of duopolies or even worse in many industries. As I said, it is not just in this sector or throughout the retailing sector generally.

Productivity reform should be driven by competition. Competition produces better outcomes for all market participants. However, this government continues to condone bully-boy tactics, loss-leading behaviour and the use of sheer market strength to stamp out competition. If this trend continues, innovation will be stifled, no doubt competition will be decreased and choice for consumers will disappear—and obviously that will have an effect in industrial relations by slashing wages as well. Competition is a great regulator. Small business operators in every sector deserve the opportunity to compete on a fair basis, and this government continues to resist implementing any changes that will facilitate competition in many of our Australian markets.

In the time I have left, I would like to say a little about petrol prices. Ultimately this bill is designed to address the regulatory aspects of the industry but, at the back of people’s minds—and certainly the minds of people in my electorate—is: ‘What effect does it have on my family? What effect is it going to have on petrol prices?’ I have said on many occasions here that, having regard to the significant reliance on imported crude product, I accept that there are issues beyond our control when it comes to setting petrol prices. However, that does not mean that the government is excused from doing anything to try to protect the public.

It was only last week that I seconded a motion by the member for Hunter that called upon the Treasurer to refer the necessary powers to the ACCC, to not simply monitor petrol pricing but enable it to examine all relevant elements that come into play as companies set petrol prices. That is what people want. They do not want to see the ACCC just use a database and simply go through an exercise of working out changes in petrol prices. They want to be assured that there is some transparency in petrol pricing when they are paying for petrol at the pump. Further, if we are going to be serious about it, we should have the ACCC at our disposal. It should not be left with the Treasurer. He has shown that he was not prepared to sign a letter giving back the powers that this government has stripped away from the ACCC to examine petrol pricing. (Time expired)

 

 

Return to Speeches Menu.