TRADE PRACTICES LEGISLATION AMENDMENT BILL (NO. 1) 2007
Mr CADMAN (Mitchell) (1.43 p.m.)—The Trade Practices Act has been dealt with by this parliament on many occasions and has been examined by committees and specialised groups over a long period of time.
There have been 33 cases in which the section that deals with competition has been brought before the courts. The 33 cases in which section 46 has been argued have given a mixed picture of the way in which section 46 of the Trade Practices Act operates. In five of the 33 cases there was a breach of section 46, and 28 cases were found to be a no breach. Since that time there has been a consistent concern raised by small business that they are not playing on a level playing field. These are welcome changes, but as we move forward great caution is needed to ensure that there is a level playing field.
I have argued in this House that the Robinson-Patman amendment to the United States trade practices act was a worthy addition. The Robinson-Patman amendment said that there should be no difference in price to a purchaser, whether it be a wholesaler or a retailer, if the quantity of the product is the same and the distance travelled for delivery is the same. We do not have those provisions in the Australian legal system to promote competition, and they would be difficult to apply. But I believe there are many small businesses who, when they compare the prices they are able to sell at, see large corporations as having an unfair advantage. Often small businesses claim that they can purchase products from large corporations for a lower price than they are required to pay wholesale in the operation of their own business.
The Trade Practices Legislation Amendment Bill (No. 1) 2007 has come about because of a review put forward by the government in May 2002. Mr Justice Daryl Dawson, a former High Court judge, was asked to conduct a review to investigate the misuse of market power in the provisions of section 46 of the Trade Practices Act. This came about because, despite amendments introduced by this government outlining what was unconscionable conduct in the marketplace and despite the provision of something like $3 million for litigants to bring a case of unconscionable conduct against a provider, very slow progress had been made.
The definition of ‘unconscionable conduct’ was hard to determine in the courts and, despite many efforts by the then minister for small business, Mr Peter Reith, no cases were actually brought—despite the fact that the government was prepared to pay for those cases and felt that the definition of ‘unconscionable conduct’ as it was put into the act at that time would solve some of the problems. So the difficulty of bringing a case, despite the intentions of the government, the changes to the act and the wish to assist small business, resulted in no cases being brought. But, in the following period, there was what was considered to be a weakening of the act by two High Court cases and, I think, two Federal Court cases.
The Australian Labor Party are really exercised about these provisions because they have been caught short on policy on small business. Part of their confected concern being expressed here today is really because, on unfair dismissal and small business, they are left short. Unfair dismissal legislation, as seen by small business, was an impost that cost thousands and thousands of dollars for no benefit to the employee who claimed to have been unfairly dismissed and to the great detriment of small business itself. One can see the impact of those changes by the great upsurge in employment, particularly in small business, since this government has changed the industrial laws.
The Australian Labor Party are struggling to find something to identify it with small business because they know small business is strongly supportive of the government’s proposals to leave in the industrial laws lawful reasons why people should not be dismissed but to remove some of those horrific circumstances where people can make false claims or demands—‘go away money’ as it was often called. Small business has come to the government and said, ‘These are the changes that we want,’ and now the Australian Labor Party, through the changes they are proposing to the Trade Practices Act, are seeking to regain ground with small business.
This is an area where caution is needed. I want to compliment the Minister for Small Business and Tourism, who is in the chamber, for her persistence in saying that we need changes here but we need good and sensible changes. She has achieved her goal. She has tried hard and long to persuade people both in Treasury and in the Senate of the need for changes and of the way in which those changes should be introduced. She has achieved her goal with the introduction of this legislation.
I mentioned earlier the weakening of the Trade Practices Act by a couple of court decisions. One of those cases was the Boral case concerning the activities of Boral during a price war in the concrete, masonry and brick market in Melbourne during the mid-1990s. The ACCC, which is the body responsible for the administration of the Trade Practices Act, alleged that Boral used its market power to engage in predatory pricing to drive out one of its competitors. The High Court found that the ACCC case did not stand and therefore, despite the intentions of the government to strengthen the predatory pricing provisions of the Trade Practices Act by the definition of ‘unconscionable conduct’, the government’s intention was found by the High Court to be flawed. The High Court did not agree that the government’s changes dealt with unconscionable conduct.
There was another case that related to Rural Press. It involved a small publisher expanding the geographic coverage of an existing newspaper, the River News, into a new region where the large Rural Press company already had an established paper. In that case, when Rural Press found out that there was going to be an expansion, they responded by telling the small publisher they were considering launching a rival paper right in the middle of the new area to be covered by River News. That process was looked at by the ACCC, and the publisher subsequently ceased covering the expanded area, pulling the River News back to its original circulation area.
The court found that taking advantage of market power in one market for anticompetitive purposes in a second market was not prohibited by section 46 of the Trade Practices Act. So there on two occasions were cases of unconscionable conduct by large businesses. Therefore we are making these changes. I would point once more to the fact that, of the 33 cases in which section 46 has been argued, the final judgements indicated that only five were successful and 28 were not.
Following the report by what has become known as the Dawson committee, the Senate had a look at the Trade Practices Act and the Dawson recommendations. A Senate inquiry commenced in 2003 and a report was presented in 2004. The Senate Economics References Committee looked at the economic benefits of small businesses. There are over 1.1 million small businesses in Australia. It is a very important and dynamic part of the Australian economy, employing something like 60 per cent of Australians and comprising over 90 per cent of all businesses. The Senate committee looked at the way in which small business promoted competition and the need for fair trading. The committee looked at the competition laws in part IV of the Trade Practices Act which promote competition by prohibiting conduct that may lessen competition. The Senate committee also looked at the provisions of part IVA of the Trade Practices Act which promote fair trading by prohibiting unconscionable conduct—the part that I have just been referring to—including unconscionable conduct in business transactions.
The Senate committee looked at the Dawson review recommendations and subsequent case experiences—the Boral case and the Rural Press case, in particular. There were also two Federal Court cases which considered section 46—the Universal Music Australia Pty Ltd case and the Australian Safeway Stores Pty Ltd case. Both cases were brought to the court by the ACCC in an endeavour to assist small business—but were brought unsuccessfully. As I have said, section 46 of the act, which covers the misuse of market power and unconscionable conduct, was looked at by the Senate committee and they brought down a report. That report forms the basis of what we are doing today.
According to the headlines, there has been a bit of a mixed reaction to the Labor Party’s proposal regarding a grocery superspy. It was about the best jawboning effort I have ever seen. They said, ‘We’re going to look at grocery prices, but we can’t do a thing about it.’ We have been through that in this House on many occasions. I am really surprised that the press thought it was a brand-new idea and something that should receive wide coverage. The fact of the matter is that this parliament cannot control prices in Australia. That has been looked at time and time again. I remember when we had the Prices Surveillance Authority, which looked at things like prices. I also remember Caltex going to the Prices Surveillance Authority at one point. There were a lot of smart, intelligent bureaucrats in the Prices Surveillance Authority. Caltex came to them wanting a 5c per litre increase in petrol. The Prices Surveillance Authority examined it for two months and decided that they would not allow a 5c increase; they would allow only a 3c increase in the price of petrol. Caltex accepted that gracefully and entered into a price-cutting war where they reduced their prices by 6c a litre. So much for the capacity of public servants and government authorities to decide what is going on in the market! The only thing we can really rely on is fierce competition for the support of the consumer.
So that is why there has been such a mixed reaction to the efforts of the Leader of the Opposition in saying that they would monitor supermarket prices and then having to admit that that would produce no results whatsoever, could bring about no changes whatsoever and would not be a very good way of informing the public about the activities of some stores. I think he was talking about Woolworths and Coles. He tried to gloss over this failure by saying:
Good economic policy is also measured by its impact on the lives of individual families.
Nothing can impact more upon the lives of individual families than having sensible changes to the Trade Practices Act such as we are doing today to make sure that large business do not use their power to subvert the market and do not use their power in an unconscionable way against small business.
The reaction of small business groups to these proposals by the federal government has been strong and supportive. The Australian Financial Review of 22 May said that small business leaders were very happy with the sensible compromise that they had achieved with the government. Mr Bill Healey, of the Australian Hotels Association, said:
It does reinvigorate the legislation and it hopefully will maintain fair and appropriate competition.
A group that has been particularly concerned about national competition has been the Association of Retail Grocers. The Chairman of the National Association of Retail Grocers of Australia, Mr Cummings, said:
The government’s action would dissuade big companies from undercutting small shop owners. This will send a clear message to the boards of directors of the big companies that their practices aren’t as rosy as they claimed.
Some other small figures were not as supportive, but the main ones said that this was a very important reform. Mr Cummings concluded his remarks by saying:
One of the assurances we have achieved from the Treasurer was once there was agreement for these amendments to go through we would engage in discussions to see where we go next on reform.
It was a very sensible approach adopted by the government—to make a change, continue negotiations and then be prepared to bring about further amendments to the Trade Practices Act should they be seen as necessary.
This House ought to compliment both the Treasurer and the Minister for Small Business and Tourism for moving carefully, picking up the recommendations of the Senate committee and bringing about the changes to the Trade Practices Act which have been long sought but hard to achieve. The efforts of the government to bring about changes to the Trade Practices Act with regard to unconscionable conduct have only partially been successful. The ACCC, despite best efforts, could not bring successful cases against large companies—neither the Boral case nor the Rural Press case was successful. This amendment legislation will sharpen up the Trade Practices Act to a point where fair competition will once more return to the marketplace and small business will receive the support it deserves.
The SPEAKER—Order! It being 2 pm, the debate is interrupted in accordance with standing order 97. The debate may be resumed at a later hour and the member will have leave to continue speaking when the debate is resumed.
Author: Alan Cadman MP
Source: House Hansard - 8th August 2007
Release Date: 8 Aug 2007