Competition and Consumer Amendment (Misuse of Market Power) Bill 2014 (lapsed)
Note: The Senate Economics Legislation Committee recommended against passage of the bill in Feb 2015; see Inquiry page
Bill lapsed on dissolution of Parliament: 9 May 2016
This private member's bill - Senator Xenophon - would give the Court power to direct a corporation found guilty of a s 46 breach to reduce its market share. It is squarely directed at supermarkets.
The Bill, if passed, would insert at new s 80AD after s 80AC, in the following terms:
80AD Divestiture where contravention of section 46
Circumstances when this section applies
(1) This section applies if the Court finds, or has in another proceeding instituted under this Part found:
(a) that a corporation that has, or is taken to have, a substantial degree of power in a market has contravened subsection 46(1); or
(b) that a corporation that has a substantial share of a market has contravened subsection 46(1AA).
Reduction of corporation’s market power
(2) The Court may, on the application of the Commission or any other person, by order, give directions for the purpose of securing, within 2 years of the order being made, a reduction in the corporation’s power in, or share of, the market.
When application must be made
(3) An application under subsection (2) may be made at any time within 3 years after the date on which the contravention occurred.
Order by consent
(4) Where an application under subsection (2) has been made, the Court may, if the Court determines it to be appropriate, make an order by consent of all the parties to the proceedings, whether or not the Court has made the findings referred to in subsection (1).
Alternative to order under subsection (2)
(5) Where an application is made under subsection (2) for an order to give directions for the purpose of securing a reduction in the corporation’s power in, or share of, the market, the Court may, instead of making the order, accept, upon such conditions (if any) as the Court thinks fit, an undertaking by the corporation to take particular action to reduce the corporation’s power in, or share of, the market.
Section does not limit Court’s powers.
(6) This section does not limit the Court’s powers under any other provision of this Act.
The EM was circulated by authority of Senator Xenophon. It states that:
"The aim of this Bill is to provide the Court with the power to give directions to order a corporation to reduce its market share, where the corporation has been found to have contravened subsections 46(1) or 46(1AA) of the Competition and Consumer Act 2010."
The bill would allow the Court to 'direct a corporation to reduce its market share within two years of the order being made, on the application of the Australian Competition and Consumer Commission (ACCC) or any other person'.
The EM claims that the provisions are:
a response to the high concentration of many Australian retail markets, including grocery, fuel, liquor and hardware. There are significant concerns that the lack of competition in these markets is leading to higher prices for consumers and putting producers under increasing financial strain. The measures in this Bill would give the ACCC a further option in addressing these issues, as well as creating a new disincentive for corporations to abuse their market share.
Senator Xenophon's second reading speech was published in Hansard on 6 March 2014 (pages 42-43)
The need for the measures in this Bill is painfully obvious. The amount of power that Woolworth and Coles have over our food industry is genuinely frightening, with the two chains holding around 80% of the dry grocery market. They are the ones who decide whether to stock local or overseas products for a massive part of the market.
They also have influence over the country of origin labelling laws, and despite massive community support for change, we are yet to see any positive and real advances on this front. A Roy Morgan survey of Australian consumers released in August last year found that more than half of all respondents - 55% - said that buying Australian - made had become more important to them in the last 12 months. Of those surveyed, a staggering 78% were happy to pay a little extra to buy local.
With control of four - fifths of the market in some categories, Coles and Woolworths are in an extraordinarily powerful position to be part of the solution, or a key cause of the problem. To put this duopoly into perspective, in the UK four separate chains – not two - hold a similar percentage of the market, and in the US the largest chain can only hold around 20 per cent, with the top four only holding 35 per cent. This is thanks to laws that limit the amount of market share a corporate entity can hold.
The United States divestiture law s focus on monopolies and monopolistic behaviour, and so tend to prevent the kinds of issues this Bill addresses before a corporation has enough market share to be able to abuse its power.
We need similar safeguards here in Australia, and that is what this Bill aims to establish.
In case you need any evidence that some suppliers feel bullied and afraid of these two very powerful players, you only need to look to the actions of the ACCC.
In early 2013, ACCC Chairman Rod Sims encouraged suppliers for Coles and Woolworths to bring forward evidence of unconscionable conduct. However, it wasn't until the ACCC guaranteed a confidential process that suppliers felt safe to provide information.
Mr Sims has also identified the main focus of the ACCC's attention as being shopper docket schemes. In the last week, the consumer watchdog has launched court action against the two supermarket chains over the fuel shopper docket schemes, following the failure of Coles and Woolworths to abide by the limits set by the ACCC.
These most recent developments are further evidence of their striving for market power in Australia and, as Mr Sims says: " if these shopper dockets continue at these levels, it ' s going to be very hard for other players to compete and we may end up with just two companies in the country selling petrol" .
The purpose of this Bill is to give the ACCC and the Courts another option when it comes to tackling misuse of market power. The provisions in this Bill will allow the ACCC, or any other person, to make an application to the Court for a divestiture order. The Court can choose to apply this order when a corporation has breached Section 46 of the Competition and Consumer Act .
The Court also has the option of agreeing to a consent order with a corporation, whether or not a breach of the Act has occurred. A corporation can also offer to enter into an undertaking with the Court, rather than waiting for the Court to issue an order.
Requests for orders can be made within three years of the offence occurring. The Court can order a corporation to reduce its market share or market power within two years.
The provisions in this Bill provide both punitive measures and act as a deterrent. I acknowledge that there are still many concerns about how breaches of section 46 can be proven, and I agree that section of the Act needs to be reviewed. However, it is time that more effective measures were put in place to sanction companies abusing their market power.
The mere existence of such provisions will, I believe, in itself act to change the culture and behaviour of large corporations for the better