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Competition and Consumer Amendment (Misuse of Market Power) Act 2017

Previously cited as Competition and Consumer Amendment (Misuse of Market Power) Bill 2016

 

Introduction of the bill

Overview of bill

The Government introduced the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 into the House of Representatives in December 2016. The Bill was passed and received Royal Assent in August 2017. The relevant changes commence 6 November 2017. It implements the Harper recommendations on section 46, including the introduction of an effects test. It will essentially prohibit corporations with substantial market power from engaging in conduct having the purpose or effect of substantially lessening competition.

Senate Committee Review

Referred to the Senate Economics Legislation Committee (referred 1 December 2016; reported: 16 February 2017). It recommended passage of the bill subject to amendment (removing mandatory factors for consideration).

Debate in the House

Debate resumed in the House of Representatives on 23 March 2017 with a proposed amendment (GZ201) (see proposed provision with amendment). Parliament did not sit on 24 March; debate resumed again in the House on 27 March 2017. After much debate it was agreed that the bill be read a second time and subsequently Mr Morrison's proposed amendment was agreed to (see Hansard segment).

Bob Katter MP moved a separate amendment; as only Mr Katter voted in favour of the amendment it was defeated on 28 March 2017. The Bill was subsequently read a third time.

View second reading speeches.

Debate in the Senate

The Bill was read a first time in the Senate on 29 March 2017 and second reading commenced.

Second reading was then adjourned and subsequently resumed on 14 August 2017. The bill passed with relatively minor amendment proposed by the Greens.

View Senate second reading speeches.

The House subsequently approved the amended bill (15 August 2017)

Amendment to the original bill

The Government's proposed amendment involved two significant changes: change to commencement date and removal of mandatory factors:

Change to commencement date

The original bill is amendmed so the new MMP provision will commence 'At the same time as Schedule 1 to the Competition and Consumer Amendment (Competition Policy Review) Act 2017 commences'. This will ensure that the new MMP provision does not come into operation before the altered authorisation provisions which will, in part, allow for s 46 conduct to be authorised.

Removal of mandatory factors

In accordance with recommendations of the Senate Economics Committee the revised bill removes the mandatory factors for the court to consider when assessing whether conduct substantially lessens competition.

In the Senate the Greens proposed amendments relating to the industry specific telecommunications provisions; these were approved (by the Senate and House) and do not alter the proposed amendment to s 46.

View Senate amendment

Assent

The bill received Royal Assent on 23 August 2017 and entered force as Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Act 87 of 2017).

The provisions were subject to the passage of the Competition and Consumer Amendment (Competition Policy Review) Act 2017. This Bill passed both Houses on 18 October 2017 and received Royal Assent on 27 October 2017. Consequently the Misuse of Market Power will come into operation; this will be either a day fixed by proclamation or 27 April 2018 (six months from the date the Competition Policy Review Bill received Royal Assent).

Update: the change commenced on 6 November 2017 (it was scheduled to commence at the same time as Schedule 1 to the Competition and Consumer Amendment (Competition Policy Review) Act 2017 which was proclaimed to commence on 6 November 2017).

 

Referred to Committee

The bill was referred to the Economics Legislation Committee on 1 December 2016.

The Committee reported on 16 February with the majority recommending passage of the bill subject to some modification. The three recommendations made were:

  • Recommendation 1: The committee recommends that the proposed mandatory factors, asdrafted in subsection 46(2) of the bill, be removed.
  • Recommendation 2: The committee recommends that the government undertake a post-implementation review of the reforms to section 46 at least five years after commencement.
  • Recommendation 3: The committee recommends that the bill be passed.

See separate report page.

 

Bill as passed by both Houses (15 August 2017)

Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 (No. , 2017)

A Bill for an Act to amend the Competition and Consumer Act 2010, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act is the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 .

2 Commencement

(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

Commencement information

Column 1

Column 2

Column 3

Provisions

Commencement

Date/Details

1. The whole of this Act

At the same time as Schedule 1 to the Competition and Consumer Amendment (Competition Policy Review) Act 2017commences.

However, the provisions do not commence at all if that Schedule does not commence.

 

Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

 

(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3 Schedules

Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1 - Misuse of Market Power

Competition and Consumer Act 2010

1  Section 46

Repeal the section, substitute:

46   Misuse of market power

(1)  A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a)  that market; or

(b)  any other market in which that corporation, or a body corporate that is related to that corporation:

(i)  supplies goods or services, or is likely to supply goods or services; or

(ii)  supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c)  any other market in which that corporation, or a body corporate that is related to that corporation:

(i)  acquires goods or services, or is likely to acquire goods or services; or

(ii)  acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

(3)  A corporation is taken for the purposes of this section to have a substantial degree of power in a market if:

(a)  a body corporate that is related to that corporation has, or 2 or more bodies corporate each of which is related to that corporation together have, a substantial degree of power in that market; or

(b)  that corporation and a body corporate that is, or that corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in that market.

(4)  In determining for the purposes of this section the degree of power that a body corporate or bodies corporate have in a market:

(a)  regard must be had to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(i)  competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(ii)  persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market; and

(b)  regard may be had to the power the body corporate or bodies corporate have in that market that results from:

(i)  any contracts, arrangements or understandings that the body corporate or bodies corporate have with another party or other parties; or

(ii)  any proposed contracts, arrangements or understandings that the body corporate or bodies corporate may have with another party or other parties.

(5)  For the purposes of this section, a body corporate may have a substantial degree of power in a market even though:

(a)  the body corporate does not substantially control that market; or

(b)  the body corporate does not have absolute freedom from constraint by the conduct of:

(i)  competitors, or potential competitors, of the body corporate in that market; or

(ii)  persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(6)  Subsections (4) and (5) do not limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(7)  To avoid doubt, for the purposes of this section, more than one corporation may have a substantial degree of power in a market.

(8)  In this section:

(a)  a reference to power is a reference to market power; and

(b)  a reference to a market is a reference to a market for goods or services; and

(c)  a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

2  Section 46 of Schedule 1

Repeal the section, substitute:

46   Misuse of market power

(1)  A person who has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a)  that market; or

(b)  any other market in which that person, or a body corporate that is related to that person:

(i)  supplies goods or services, or is likely to supply goods or services; or

(ii)  supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c)  any other market in which that person, or a body corporate that is related to that person:

(i)  acquires goods or services, or is likely to acquire goods or services; or

(ii)  acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

(3)  A person (the first person) is taken for the purposes of this section to have a substantial degree of power in a market if:

(a)  a body corporate that is related to the first person has, or 2 or more bodies corporate each of which is related to the first person together have, a substantial degree of power in that market; or

(b)  the first person and a body corporate that is, or the first person and 2 or more bodies corporate each of which is, related to the first person, together have a substantial degree of power in that market.

(4)  In determining for the purposes of this section the degree of power that a person (the first person) or bodies corporate have in a market:

(a)  regard must be had to the extent to which the conduct of the first person or of any of those bodies corporate in that market is constrained by the conduct of:

(i)  competitors, or potential competitors, of the first person or of any of those bodies corporate in that market; or

(ii)  persons to whom or from whom the first person or any of those bodies corporate supplies or acquires goods or services in that market; and

(b)  regard may be had to the power the first person or bodies corporate have in that market that results from:

(i)  any contracts, arrangements or understandings that the first person or bodies corporate have with another party or other parties; or

(ii)  any proposed contracts, arrangements or understandings that the first person or bodies corporate may have with another party or other parties.

(5)  For the purposes of this section, a person may have a substantial degree of power in a market even though:

(a)  the person does not substantially control that market; or

(b)  the person does not have absolute freedom from constraint by the conduct of:

(i)  competitors, or potential competitors, of the person in that market; or

(ii)  persons to whom or from whom the person supplies or acquires goods or services in that market.

(6)  Subsections (4) and (5) do not limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a person or bodies corporate have in a market.

(7)  To avoid doubt, for the purposes of this section, more than one person may have a substantial degree of power in a market.

(8)  In this section:

(a)  a reference to power is a reference to market power; and

(b)  a reference to a market is a reference to a market for goods or services; and

(c)  a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

Schedule 2 - Telecommunications industry

Competition and Consumer Act 2010

1  Paragraph 151AJ(3)(a)

Omit “45B, 46,”.

2  Subsections 151AJ(4) and (5)

Omit “45B, 46,”.

3  Paragraph 151AJ(5)(a)

Repeal the paragraph, substitute:

(a)  the assumption that subparagraphs 45(3)(a)(ii) and (b)(ii) had not been enacted;

4  Paragraphs 151AJ(5)(c) and (d)

Repeal the paragraphs.

5  Subsection 151AJ(7)

Omit “45B, 46,”.

6  Paragraph 151AJ(7)(d)

Repeal the paragraph.

7  Subsections 151BC(4) and (5)

Repeal the subsections.

 

Current provision

(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;

(b) preventing the entry of a person into that or any other market; or

(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

(1AAA) If a corporation supplies goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying the goods or services, the corporation may contravene subsection (1) even if the corporation cannot, and might not ever be able to, recoup losses incurred by supplying the goods or services.

(1AA) A corporation that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services, for the purpose of:

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; or

(b) preventing the entry of a person into that or any other market; or

(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

(1AB) For the purposes of subsection (1AA), without limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has a substantial share of a market, the Court may have regard to the number and size of the competitors of the corporation in the market.

(1A) For the purposes of subsections (1) and (1AA):

(a) the reference in paragraphs (1)(a) and (1AA)(a) to a competitor includes a reference to competitors generally, or to a particular class or classes of competitors; and

(b) the reference in paragraphs (1)(b) and (c) and (1AA)(b) and (c) to a person includes a reference to persons generally, or to a particular class or classes of persons.

(2) If:

(a) a body corporate that is related to a corporation has, or 2 or more bodies corporate each of which is related to the one corporation together have, a substantial degree of power in a market; or

(b) a corporation and a body corporate that is, or a corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in a market;

the corporation shall be taken for the purposes of this section to have a substantial degree of power in that market.

(3) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(a) competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(b) persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market.

(3A) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the court may have regard to the power the body corporate or bodies corporate has or have in that market that results from:

(a) any contracts, arrangements or understandings, or proposed contracts, arrangements or understandings, that the body corporate or bodies corporate has or have, or may have, with another party or other parties; and

(b) any covenants, or proposed covenants, that the body corporate or bodies corporate is or are, or would be, bound by or entitled to the benefit of.

(3B) Subsections (3) and (3A) do not, by implication, limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(3C) For the purposes of this section, without limiting the matters to which the court may have regard for the purpose of determining whether a body corporate has a substantial degree of power in a market, a body corporate may have a substantial degree of power in a market even though:

(a) the body corporate does not substantially control the market; or

(b) the body corporate does not have absolute freedom from constraint by the conduct of:

(i) competitors, or potential competitors, of the body corporate in that market; or

(ii) persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(3D) To avoid doubt, for the purposes of this section, more than 1 corporation may have a substantial degree of power in a market.

(4) In this section:

(a) a reference to power is a reference to market power;

(b) a reference to a market is a reference to a market for goods or services; and

(c) a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

(4A) Without limiting the matters to which the court may have regard for the purpose of determining whether a corporation has contravened subsection (1), the court may have regard to:

(a) any conduct of the corporation that consisted of supplying goods or services for a sustained period at a price that was less than the relevant cost to the corporation of supplying such goods or services; and

(b) the reasons for that conduct.

(5) Without extending by implication the meaning of subsection (1), a corporation shall not be taken to contravene that subsection by reason only that it acquires plant or equipment.

(6) This section does not prevent a corporation from engaging in conduct that does not constitute a contravention of any of the following sections, namely, sections 45, 45B, 47, 49 and 50, by reason that an authorization or clearance is in force or by reason of the operation of subsection 45(8A) or section 93.

(6A) In determining for the purposes of this section whether, by engaging in conduct, a corporation has taken advantage of its substantial degree of power in a market, the court may have regard to any or all of the following:

(a) whether the conduct was materially facilitated by the corporation’s substantial degree of power in the market;

(b) whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;

(c) whether it is likely that the corporation would have engaged in the conduct if it did not have a substantial degree of power in the market;

(d) whether the conduct is otherwise related to the corporation’s substantial degree of power in the market.

This subsection does not limit the matters to which the court may have regard.

(7) Without in any way limiting the manner in which the purpose of a person may be established for the purposes of any other provision of this Act, a corporation may be taken to have taken advantage of its power for a purpose referred to in subsection (1) notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances.

 

Provision proposed by bill (original)

(1) A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a) that market; or

(b) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) supplies goods or services, or is likely to supply goods or services; or

(ii) supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) acquires goods or services, or is likely to acquire goods or services; or

(ii) acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

(2) Without limiting the matters to which regard may be had in determining for the purposes of subsection (1) whether conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market, regard must be had to the extent to which:

(a) the conduct has the purpose of, or has or would be likely to have the effect of, increasing competition in that market, including by enhancing efficiency, innovation, product quality or price competiveness in that market; and

(b) the conduct has the purpose of, or has or would be likely to have the effect of, lessening competition in that market, including by preventing, restricting, or deterring the potential for competitive conduct or new entry into that market.

(3)  A corporation is taken for the purposes of this section to have a substantial degree of power in a market if:

(a)  a body corporate that is related to that corporation has, or 2 or more bodies corporate each of which is related to that corporation together have, a substantial degree of power in that market; or

(b)  that corporation and a body corporate that is, or that corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in that market.

(4)  In determining for the purposes of this section the degree of power that a body corporate or bodies corporate have in a market:

(a)  regard must be had to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(i)  competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(ii)  persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market; and

(b)  regard may be had to the power the body corporate or bodies corporate have in that market that results from:

(i)  any contracts, arrangements or understandings that the body corporate or bodies corporate have with another party or other parties; or

(ii)  any proposed contracts, arrangements or understandings that the body corporate or bodies corporate may have with another party or other parties.

(5)  For the purposes of this section, a body corporate may have a substantial degree of power in a market even though:

(a)  the body corporate does not substantially control that market; or

(b) the body corporate does not have absolute freedom from constraint by the conduct of:

(i)  competitors, or potential competitors, of the body corporate in that market; or

(ii)  persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(6)  Subsections (4) and (5) do not limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(7)  To avoid doubt, for the purposes of this section, more than one corporation may have a substantial degree of power in a market.

(8)  In this section:

(a)  a reference to power is a reference to market power; and

(b)  a reference to a market is a reference to a market for goods or services; and

(c)  a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, inthat market either as a supplier or as an acquirer of goods or services in that market.

 

Provision proposed by bill (with Government amendments)

(1) A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a) that market; or

(b) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) supplies goods or services, or is likely to supply goods or services; or

(ii) supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) acquires goods or services, or is likely to acquire goods or services; or

(ii) acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

(3)  A corporation is taken for the purposes of this section to have a substantial degree of power in a market if:

(a)  a body corporate that is related to that corporation has, or 2 or more bodies corporate each of which is related to that corporation together have, a substantial degree of power in that market; or

(b)  that corporation and a body corporate that is, or that corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in that market.

(4)  In determining for the purposes of this section the degree of power that a body corporate or bodies corporate have in a market:

(a)  regard must be had to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(i)  competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(ii)  persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market; and

(b)  regard may be had to the power the body corporate or bodies corporate have in that market that results from:

(i)  any contracts, arrangements or understandings that the body corporate or bodies corporate have with another party or other parties; or

(ii)  any proposed contracts, arrangements or understandings that the body corporate or bodies corporate may have with another party or other parties.

(5)  For the purposes of this section, a body corporate may have a substantial degree of power in a market even though:

(a)  the body corporate does not substantially control that market; or

(b) the body corporate does not have absolute freedom from constraint by the conduct of:

(i)  competitors, or potential competitors, of the body corporate in that market; or

(ii)  persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(6)  Subsections (4) and (5) do not limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(7)  To avoid doubt, for the purposes of this section, more than one corporation may have a substantial degree of power in a market.

(8)  In this section:

(a)  a reference to power is a reference to market power; and

(b)  a reference to a market is a reference to a market for goods or services; and

(c)  a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

 

Changes from Exposure Draft Legislation

Although the substance of the bill is largely consistent with Harper and the Exposure Draft legislation, sub-section (1) is now more convoluted and more restricted in its application.  

Exposure draft version of sub-section (1):

(1) A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in that or any other market.

Original Bill version of sub-section (1):

(1) A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a) that market; or

(b) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) supplies goods or services, or is likely to supply goods or services; or

(ii) supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c) any other market in which that corporation, or a body corporate that is related to that corporation:

(i) acquires goods or services, or is likely to acquire goods or services; or

(ii) acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

The explanation for this in the EM is set out from para 1.40:

The Harper Review recommended reframing section 46 to prohibit a firm with a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in any market. However, extensive consultation with stakeholders revealed a concern that the reference to ‘any market’ made section 46 excessively broad in scope.

To address this issue, the scope of section 46 is limited to those markets in which the corporation’s conduct is most likely to have a purpose, effect or likely effect of competition concern. In practice, it is unlikely that a corporation’s conduct will have a purpose, effect or likely effect of substantially lessening competition in an unrelated market without also having that purpose, effect or likely effect in one of the markets described in subsection 46(1). The provisions within subsection 46(1) limit the scope of section 46 to situations where there is an actual or likely supply or acquisition of goods or services, by the corporation or another prescribed entity.

...

Amended bill also removes mandatory factors to be considered when assessing SLC.

 

Explanatory memorandum

Original explanatory memorandum

The overview to the explanatory memorandum provides:

4.2 Schedule 1 to this Bill amends the Act to strengthen the prohibition of the misuse of market power by corporations and better target anti-competitive conduct by corporations with a substantial degree of market power.

4.3 Section 46 of the Act is reframed to focus the prohibition and tests on the process of competition rather than individual competitors. This is achieved by introducing the concept of the purpose, effect or likely effect of substantially lessening competition in particular markets, and by removing three specific prohibited purposes which focus on damage to an actual or potential competitor.

4.4 The prohibition is limited to markets to which the corporation is directly or indirectly related, which are likely to raise a competition concern, rather than to ‘any’ market. The assessment of a purpose, effect or likely effect of substantially lessening competition is to be guided by the mandatory consideration of both pro-competitive and anti-competitive factors, listed at subsection 46(2), in addition to existing jurisprudence on the test as it appears in other sections of the Act.

4.5 Consistently with the current section 46, the rewritten section 46 will only apply to corporations with a substantial degree of market power.

Supplementary EM

A supplementary EM accompanied an amendment to the bill arising from the Senate Economic Committee recommendations (the EM was tabled and amendment passed on 27 March 2017).

In relation to the first key change (to the commencement date) the supplementary EM states:

Amendment 1 amends section 2 of this Bill to provide that the whole of this Bill commences at the same time as Schedule 1 to the Competition and Consumer Amendment (Competition Policy Review) Act 2017 . However, if that Schedule does not commence, this Bill does not commence.

The Competition and Consumer Amendment (Competition Policy Review) Bill 2017 is intended for imminent introduction. That Bill will contain amendments to the authorisation provisions to allow corporations to seek authorisation on the basis of public benefit for conduct which may otherwise contravene section 46.

The amendment to the commencement provision of this Bill ensures that the new section 46 does not commence until, and unless, authorisation is available for conduct to which section 46 may apply.

In relation to second key change (removing mandatory factors for court to consider in determining whether conduct has the effect of substantially lessening competition) the supplementary EM states:

Amendment 2 amends item 1 of Schedule 1 to the Bill to remove the pro-competitive and anti-competitive ‘mandatory factors’ from section 46.

As introduced, the new subsection 46(2) listed several pro-competitive and anti-competitive ‘mandatory factors’ to which the court must have regard in determining whether conduct had the purpose, effect or likely effect of substantially lessening competition. The inclusion of these factors was recommended by the Harper Review to mitigate concerns that section 46 may capture pro-competitive conduct.

However, in its report on the Bill released on 16 February 2017, the Senate Economics Legislation Committee recommended removing the mandatory factors.

The mandatory factors are removed to reduce the complexity of the new section 46, reduce uncertainty as to how the courts may interpret and weigh each of the factors, and reduce the risk that ‘substantially lessening competition’ would unintentionally take on a different meaning in the context of section 46 compared to other provisions which use the same concept but do not contain mandatory factors.

The removal of the mandatory factors does not change the objective of the new section 46, which is to target anti-competitive behaviour by firms with substantial market power, while allowing legitimate pro-competitive behaviour even if this results in harm to inefficient competitors.

Consistently with this objective, the new section 46 continues to focus on harm to the competitive process, rather than individual competitors, and does not shield inefficient competitors from the natural effects of strong competition.

...

 

Second reading speeches (House)

Kelly O'Dwyer MP (Higgins - Minister for Revenue and Financial Services) (1 Dec 2016)

Kelly O'Dwyer introduced the bill on 1 December - her second reading speech is reproduced below: view source.

Kelly O'DwyerThat this bill be now read a second time.

In 2014, the government fulfilled our election commitment and commissioned an independent review into Australia's competition framework: the Harper review. The Harper review was the first 'root and branch' review of Australia's competition laws for 20 years. Professor Ian Harper and the review panel consulted extensively with businesses, consumers, regulators and legal experts and found that the operation of section 46 was a concern for many.

I would like to take this opportunity to thank Professor Harper and his team for their efforts and due diligence in producing the Harper review.

Schedule 1 to this bill amends section 46 of the Competition and Consumer Act 2010, the misuse of market power provision, to better target anticompetitive conduct, better support procompetitive conduct, and simplify the provision.

The current section 46 prohibits corporations with substantial market power from taking advantage of its power for one of three specific purposes related to damaging an actual or potential competitor or preventing them from competing.

In its final report, the Harper review concluded that the current section 46 fails to adequately prevent the misuse of market power and is not reliably enforceable, for two key reasons.

Firstly, the current section 46 requires that a corporation 'take advantage' of its substantial market power. This is a poor test for distinguishing competitive from anticompetitive conduct. It permits a corporation with substantial market power to engage in highly anticompetitive conduct, merely because a corporation without substantial market power could commercially engage in the same conduct. The test does not recognise that conduct that is not anticompetitive when undertaken by a corporation that does not have market power can be anticompetitive when undertaken by a firm that does. This leaves a significant loophole in section 46.

Secondly, the current section 46 only prohibits conduct if the corporation acted with the purpose of damaging an actual or potential competitor. The Harper review found this focus to be inconsistent with the overriding policy objective of the act, which is to protect competition and not individual competitors. The reforms in this bill recognise that it is the competitive process that drives corporations to supply better goods and services and offer lower prices to consumers, and it is the competitive process that our competition laws need to protect.

The failure of section 46 to adequately prevent the misuse of market power allows anticompetitive conduct to slow the entry and expansion of new and innovative firms, delays the entry of new technologies into Australia and impedes economic growth in the long term.

The Harper review recommended amending section 46 to address these problems and strengthen the misuse of market power provision, by refocusing on conduct with the purpose, effect or likely effect of substantially lessening competition. The government acknowledged the importance of this issue for businesses and consumers, and conducted a lengthy consultation process on a range of alternatives before concluding that the recommendation of the Harper review represented the best option to reform the law.

As amended, section 46 will prohibit corporations with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in markets in which they directly or indirectly participate.

The amendment is specifically designed to minimise any uncertainty involved with changing the law, by using existing competition law concepts such as 'substantially lessening competition' and by providing anticompetitive and procompetitive factors to guide consideration of the purpose, effect or likely effect of conduct.

As a result of this reform, section 46 will better target anticompetitive conduct and better support procompetitive conduct. Section 46 will be more reliably enforceable and promote strong competition in Australian markets, benefiting both consumers and the economy.

This reform is an important step to ensure Australia has the best possible competition framework to support innovation, enhance competition and boost economic growth and jobs. It is a key part of the government's response to the Harper review, which is all about increasing choice and delivering better services for consumers.

An effective misuse of market power provision is an important and necessary part of competition law, particularly for Australia's more than two million small businesses which make up more than 97 per cent of all businesses.

While there are some in this chamber who would prefer to keep the current drafting of section 46 and not see Australian businesses able to compete on a level playing field, this government recognises that reforming competition law is one of the best options we have to lift long-term productivity growth and generate economic benefits that can be shared by everyone.

The reforms in this bill will more effectively focus section 46 on the long-term interests of consumers, improving the law's clarity, effectiveness and force. They will provide another tool for regulators to ensure Australian businesses can flourish; new and innovative firms can enter new markets and expand; new technologies can be introduced into Australia; and consumers can receive the best quality products at the lowest price.

Most importantly, this reform will ensure the focus of the law is on protecting the competitive process to the benefit of consumers; it is not about protecting individual competitors or a particular group of businesses.

These amendments will make markets work better for the benefit of all Australians and help to lift our long-term productivity growth. They will ensure that all business can compete on a level playing field, rewarding innovative and dynamic businesses that provide the best services at the lowest cost. This will benefit households by giving them more choice and better value products and services.

Schedule 2 to this bill makes consequential amendments to repeal the telecommunications-specific anti-competitive conduct laws in divisions 2 and 3 of the act. With the amendment of section 46 and the development of competition in telecommunications in the past 20 years, these rules under part XIB are no longer necessary or appropriate.

Following the proposed amendments, any misuse of market power in the telecommunications sector will be managed by the same general competition laws applying to other sectors of the economy, and which will be strengthened by the enhancements being made to section 46.

The Australian Competition and Consumer Commission supports these amendments and retains other extensive powers to deal with other competition concerns in telecommunications.

Full details of the measure are contained in the explanatory memorandum.

I commend the bill to the House.

Debate adjourned.

Andrew Leigh MP (Fenner) (ALP) (23 March 2017)

Andrew LeighDr LEIGH (Fenner) (13:07): There are species of animals known as tardigrades—or water bears or moss piglets—which are considered to be some of the most resilient species in the universe. They can go without food or water for 30 years. They can survive at temperatures of 150 degrees Celsius and minus 200 degrees Celsius. They can withstand pressure of 6,000 atmospheres, six times the pressure at the bottom of the Mariana Trench. They can be dehydrated for 10 years, withstand 1,000 times more radiation than other animals, cope with environmental toxins and survive in outer space. They are indestructible—and so too are bad National Party economic ideas. They just do not die.

That is what we are debating today. We are debating the tardigrade of economic policy: the effects test—a policy which has been recognised by serious economists and by formerly serious economic thinkers on the other side of the House to be a bad economic idea but which, like the tardigrade, has survived the pressure, the temperature and the attacks upon it to come before us today in this bad bill, the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016. Let's be clear: an effects test has been to a coalition cabinet before and been rolled. In the Financial Review, Phillip Coorey wrote, on 2 September 2015:

For reasons the government has not explained, the debate was shelved indefinitely. Had it gone ahead, Mr Billson risked being rolled with the cabinet heavy hitters, many of them lawyers, opposed to his proposals.

These included Attorney-General George Brandis, who has extensive legal experience in the area—

These are Mr Coorey's words, not mine—

Julie Bishop, Joe Hockey, Malcolm Turnbull, Mathias Cormann and Andrew Robb.

It was made clear in other reportage, by Lenore Taylor, that the member for Higgins and the member for Wentworth were not comfortable with an effects test. It is very clear that, when making a decision on the merits of the policy, the member for Wentworth, Malcolm Turnbull, opposed an effects test. Bob Baxt said that it was his understanding, as he put it:

There is a clear body within the cabinet including Kelly O'Dwyer and Malcom Turnbull that will not be comfortable with this proposed change.

In opposing an effects test, they would be in good company, because many who have looked carefully at this have taken the view that an effects test is a bad idea. Richard Goyder of Wesfarmers said:

Every year we look at … 20 new Bunnings warehouses, 30 new Coles stores, 20 new Kmart stores … does that mean now every time we have a capital expenditure proposal come to us that we've got to look at the likely effect on competition?

Former ACCC chair Graeme Samuel said:

Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.

One only has to go through the series of competition reviews conducted since 1976 to see recommendations against an effects test. The 1976 Swanson committee recommended against an effects test on the basis that 'the section should only prohibit abuses by a monopolist that involve a proscribed purpose'. The Blunt review in 1979 recommended against on the basis that it would 'give the section too wide an application, bringing within its ambit much legitimate business conduct'. The 1984 green paper did recommend an effects test, one of only two of the last 12 competition reviews to do so. The 1989 Griffiths committee said that there was 'insufficient evidence to justify the introduction of an effects test'. The 1991 Cooney committee said that an effects test 'might unduly broaden the scope of conduct captured by section 46 and challenge the competitive process itself'. In 1993, the Hilmer committee recommended against an effects test, saying it 'would not adequately distinguish between socially detrimental and socially beneficial conduct'. The 1999 Baird committee said 'such a far-reaching change to the law may create much uncertainty in issues dealing with misuse of market power'. The 2001 Hawker committee recommended against an effects test and said it would 'await the outcome of further cases on section 46 before considering any change to the law'. The 2003 Dawson review said 'the addition of an effects test would increase the risk of regulatory error and render purpose ineffective as a means of distinguishing between procompetitive and anti-competitive' conduct. The 2004 competition inquiry by the Senate Economics References Committee said that, while the committee was sympathetic to some of the arguments, the difficulties with introducing it meant that the committee did not recommend the inclusion of an effects test. So, of 12 competition reviews, 10 recommended against an effects test.

Writing in the Financial Review on 9 September 2015, Graeme Samuel and Stephen King wrote:

The proposed amendment was a fundamental contradiction to the economic philosophy underpinning our competition laws.

They went on to say:

Let us hope that this unfortunate blight on an otherwise excellent Harper report is dead, buried and cremated.

And dead, buried and cremated it would have been had it not been for the change in prime ministership. Under former Prime Minister Abbott, an effects test had been sent to the dustbin of history, where it belonged. But, because of a dodgy deal between the National Party and the member for Wentworth in order to gain the prime ministership, an effects test came roaring back. The member for Wentworth, Malcolm Turnbull, knows it is bad economics and argued as much when the question came to cabinet. Yet, for the sake of getting some National Party votes, the effects test, this tardigrade of economic policy, has found its way back.

As the shadow Treasurer has noted, one only needs to consider the real-world impact of an effects test for business. He gave the example of a business considering a discounting campaign. If a business notices its sales are down and wants to win back some customers by engaging in vigorous discounting, right now that kind competition is safe, because the law looks to the purpose of the discounting. Under the proposed effects test, the business decision makers would have to consider the effect their discounting would have on competition, considering the different geographic and product markets, and the impact of that might well be to chill competition. Major retailers often put in place uniform pricing on dry goods across their stores. That means if you are buying toothpaste it costs the same at a Woolworths store whether it is in Toorak or Toowoomba, but if you put in place an effects test then the effect of that might well be to hamper competition. Those retailers have warned that an effects test could do away with uniform pricing, which would mean that the price of an effects test would be paid by customers in regional Australia, who currently benefit from uniform pricing.

The possibility an effects test might drive up prices, though, does not seem to trouble the Deputy Prime Minister. The Deputy Prime Minister was asked in an interview last year, 'What about $1 milk?' and replied:

I obviously believe that the proper price of milk is above a dollar.

He went on to say that we sell milk to China for up to $11, so the Deputy Prime Minister clearly believes the proper price for milk is not $1 a litre; it could be as much as $11 a litre. $11-a-litre milk would certainly be a drag on the cost of living for many Australians and a burden on many Australian households, yet we have a Deputy Prime Minister championing an effects test, untroubled by the notion that an effects test might lead to the price of milk going to $11.

This is a government which is adrift from good economic policy. As former Treasurer Costello has said:

If you take the view that competition is there for the consumer, which is what I believe is the fact, everything else will fit into place. That's why I'm against the so-called effects test. The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

Indeed, the member for Hughes, Craig Kelly, has, in this place, described an effects test as 'a Trojan Horse'. I am delighted to see him on the speaking list for this debate and I look forward to seeing whether he still regards this as being a Trojan Horse and as being bad policy, which is what he told this House when he last spoke about it. We also had the announcement in the papers today that the government is going to make further tweaks to section 46. These are hasty, last-minute amendments being thrust upon this House. Just as we have seen this week on the diverted profits tax, with further amendments being foreshadowed, we have further amendments being foreshadowed on section 46.

We are, today, 723 days on from when the Harper review was ordered to be released by then Prime Minister Abbott. It has been 372 days since the Turnbull government responded to the misuse of market power recommendations and yet today, with the bill in the House, the government is foreshadowing amendments to its own bill. It is a further demonstration, if any were needed, that the tardigrades are in control; that the bad economics of the National Party just will not die; and that the government has given up careful, considered reform and the consultation that involves in favour of simply doing whatever they feel like doing when they wake up and have their breakfast.

On the Labor side of the House we have been absolutely clear and consistent in our commitment to good competition policy. At the last election, we proposed increasing civil penalties under the Australian Consumer Law from $1.1 million to $10 million, bringing penalties in line with the competition provisions of the Competition and Consumer Act 2010 and ensuring that, when you have consumer rip-offs like the Nurofen and Dulux examples, the penalties are sufficient to meet the effects. We proposed adopting the European Union's penalty system for anticompetitive conduct, based on 30 per cent of the annual sales of the relevant product or service multiplied by the number of years the infringement took place, limited to the greater of 10 per cent of annual turnover or $10 million. We proposed using some of the revenues from increased penalties to increase the Australian Competition and Consumer Commission's litigation budget, giving it greater teeth by increasing its budget from $24.5 million to a maximum of twice that level—$49 million.

At the last election, we proposed amending the Competition and Consumer Act to give a market studies function to the ACCC so that it could look systematically at industries, with a power to compel witnesses and really go to the bottom of what is going on with anticompetitive conduct. Every now and then, the ACCC is able to look into an industry—as it is has recently done with the beef auction industry—but it does not have those compulsory powers that its British counterpart does and that Labor's proposal, the market studies power, would give it. We proposed amending section 76 of the Competition and Consumer Act to allow the court to apply higher penalties for conduct that targets or disproportionally impacts disadvantaged Australians. We proposed to introduce a requirement in the Competition and Consumer Act that the ACCC prioritise the investigation of conduct that targets or disproportionally impacts disadvantaged Australians and, at last election, we proposed tasking government to investigate the impact of increased market concentration on income inequality.

We also took to the Australian people a proposal for access to justice for small business. This would see small businesses have an opportunity to bring on cases that are in the public interest without the fear of adverse cost orders. We proposed that the Small Business and Family Enterprise Ombudsman be given the power to advise small businesses who want to bring cases with a general application and not have costs awarded against them. Labor is serious about competition, but the government is not. The government has caved to the tardigrades in the National Party and to this bad economic idea of an effects test.

Fragment source: http://parlinfo.aph.gov.au/parlInfo/genpdf/chamber/hansardr/68cddca6-f6c7-4826-b97b-a5e0e7c845e0/0037/hansard_frag.pdf;fileType=application%2Fpdf (from page 34 Hansard)

Ted O'Brien MP (Fairfax) (Liberal National Party) (23 March 2017)

Ted O'BrienMr TED O'BRIEN (Fairfax) (13:22): I found it hilarious that the member for Fenner compared the idea of an effects test to a species that simply will not go away, a species that will outlast any condition and live in any habitat. Well, all I can say in response is that a good idea never dies. But I am not surprised that the member for Fenner and the Labor Party are so adamantly opposed to this legislation, because, at the end of the day, this bill seeks to contain, to curb, misuse of market power. Put in a different way, it seeks to contain any misuse of monopolistic power. Since the union movement effectively controls the Labor Party—the union movement made up of a series of monopolies—it is understandable that, out of principle, the Labor Party will oppose anything that looks, smells and sounds like a restriction of monopolistic misuse of power. But the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 is a good bill, which is why I rise in support of it today.

The bill seeks to deal with one of the fundamental challenges in free market economies everywhere, which is to ensure that competition flourishes. Competition inherently creates winners and losers, and, at a Darwinian level, that is what the free market is all about. Dare I say, it is what makes the problem of dealing with monopoly situations so difficult. As the High Court has said in a passage that is often quoted in this context, because it is just so compelling and clear:

Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away.

Their Honours said:

Competitors almost always try to 'injure' each other in this way …

and such injuries are inevitable consequences of the competitive environment our laws seek to foster.

Herein lies the challenge that this bill seeks to address. The competitiveness of the marketplace—the opportunity to fight, to win, to lose—must be protected. This requires acknowledgement of the fact that, if one misuses the power they accrue as a result of winning in the marketplace, then in doing so they compromise the process of competition itself, thus weakening the competitiveness of the very market in which they operate. This concept of balancing the right of companies to compete with them having a commensurate responsibility not to misuse the power they accrue in the process, to my mind, is an attempt to address what Lord Acton pointed out nearly 130 years ago—that power tends to corrupt, and absolute power corrupts absolutely. Monopolistic power is the antithesis of competition, for it tempts the misuse of power—and that, I hope all members would agree, is something our laws must militate against.

We are of course not the first Australian parliament to grapple with this question. Our first effort to deal with it was in 1915, but it was not until the Menzies era, post World War II, as the pace of the global economy picked up, that major efforts began to reduce the adverse consequences of excessive market concentration. In 1960 the Governor-General, William Morrison, said:

The development of tendencies to monopoly and restrictive practices in commerce and industry has engaged the attention of the Government which will give consideration to legislation to protect and strengthen free enterprise against such a development.

What flowed from that commitment of the Menzies government was a historic piece of legislation, the Trade Practices Act 1965, which sought to establish principles of fairness in business across a very broad canvas, but especially in relation to this issue of appropriate use of market power and constraints on the misuse of market power by the then emerging big operators.

Since 1974 until here and now, section 46 of the act, which has now become the Competition and Consumer Act, has sought to define 'misconduct' in relation to the use of market power through two legal tests. The first involves the question of whether the entity was taking advantage of its market power, and the second involves an entity's intent. That is the question of purpose—whether the purpose of an activity seeks the elimination or the cause of substantial damage to a competitor, or the prevention of another entity entering the market, or the deterrence of a person from engaging in anticompetitive conduct. The legal arguments, and indeed the arguments in this place around the explicit, practical meaning of both the 'take advantage' and the 'purpose' tests of section 46 have been long, complex and, frankly, confusing. But the bottom line in the view of the government, and in the view of a recent root-and-branch review of this issue, is that these tests have ultimately proved to be inadequate. The 'take advantage' test has faltered in the courts, with an effective defence being that a particular form of behaviour that is alleged to be inappropriate for a firm with market power is permissible for a firm without market power. Thus it prompts the reasonable question: how then can it be considered to be taking advantage? If the behaviour is okay and legal for a firm without market power, how can it not be the same for a firm with market power? But it is the 'purpose' test that has really been assessed—

[Debate interrupted - resumed at later hour]

Mr TED O'BRIEN (Fairfax) (16:12): It is the purpose test that has really been assessed as the key failure of the current regime, due to it being too difficult to prove and too specific in its application. How do you prove one's purpose in doing something? How do you prove what one's intent is? It almost reminds me of the song the nuns in the convent sing in the Sound of Music: 'How do you catch a cloud and pin it down?'. It is just all too hard. How do you prove one's real intent? The application of the purpose test has also proven to be too specific, with cases typically seeking to challenge the purpose of an activity undertaken by one firm against other single entities, whereas the idea behind the act was to protect the process of competition itself.

Essentially, this bill seeks to address these flaws in the existing act by swapping the test of 'intent' or 'purpose' with a test of 'effect'. What is more, it is to relate not so much to an activity by one powerful firm towards another single entity, but rather to the question of whether such activity adversely impacts the competitive process. In other words, what counts is whether the little guy actually gets done over by the big guy, regardless of whether the big guy says he meant it or not. If, when this happens, competition is lessened, or is likely to be lessened, then that is enough for it to be against the law.

Clearly, this bill is to be contested. There is no point in denying that. A number of large corporates and their representative bodies are opposed to what it proposes. Small and medium sized entities, which are the bedrock of our economy, and who are most vulnerable to any misuse of market power, are very much in favour of the bill. Some opposition from the bigger end of town is no doubt based on the fact that the current regime has been in place for a long time; they are familiar with it and they would prefer the certainty it offers, along with simple continuity. I get that. Some have said that it could have a material impact on the speed and nature of business decision making and cause delays or changes in investment decisions. Obviously we want our big corporates to continue to invest, but we want those investments to be in line with community expectations that they will be fair and reasonable, not unfair—especially in regard to small and medium businesses.

The Harper review of competition policy, which in 2014 recommended the changes to section 46 that this bill engages, recognised the arguments that were being put by both sides and concluded that, on balance, these changes should be made. The government undertook its own augmentative investigation and discussion around the proposed changes and agreed, early last year, that the Harper review was right and that the changes should be made. The Senate Economics Legislation Committee came to the same conclusion.

As we know, the Labor Party opposes the bill, but its position is, as ever, full of contradiction and of opposition for the mere sake of being in opposition. The opposition Treasury spokesman, who is almost as big a critic of big business as his leader and deputy leader, is suddenly animatedly pro the big end of town when it comes to section 46. The shadow Treasurer does not see any need for change, arguing that the amendments will 'dull' investment, while at the same time, almost with the same breath, he argues against corporate tax cuts, which would positively impact investment and, subsequently and just as importantly, jobs. In other words, on this issue Labor is simply playing a tactical game of opposition politics—it supports the big end of town and then it attacks the big end of town, never with consistency in debate but simply with a view to acting as an opposition. But Australians are better than that. I am sure the vast majority of Australians want those that possess substantial market power to be held to account.

Some people who oppose this bill argue that it represents a breach of faith with the free market economy in that it meddles with Adam Smith's infamous invisible hand and thus undermines the notion of free trade. With all due respect to some otherwise learned warriors who run that line of argument, they have misread their economic theory and, what is more, they have certainly misunderstood the working of the real market economy. I say this as an unashamed, unabashed disciple of the free market and of free trade. Trade that is not fair is trade that is not free.

Small businesses know this best. In my home state of Queensland, there are 414,000 small businesses—that is 97 per cent of all businesses—each employing less than 20 employees. It is even higher in regional Queensland, including in my neck of the woods, on the Sunshine Coast, where around 32,000 small businesses constitute 98 per cent of the total. Should these companies be ring fenced and protected from competition? No, absolutely not—and nor do they want to be, because people who back themselves in private enterprise are not typically shrinking violets who are scared of competition. They are people who are prepared to invest their own bucks in an opportunity and to fight in the marketplace. They are every bit as talented and every bit as competitive as those who operate in large enterprise, but they have a right to compete on a level playing field, and that is what this bill seeks to support. A level playing field is absolutely consistent with the principles of free trade, because free trade is fair trade. It is on that basis that I support the bill and commend it to the House.

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(from p 37 Hansard) and http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;
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(from p 67 Hansard)

Tim Watts MP (ALP) (23 March 2017)

Tim WattsMr WATTS (Gellibrand) (16:19): I am pleased to be able to speak on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 before the House today—despite being disappointed at its contents because, in a previous life, I once practiced as a competition lawyer. They are a funny mob, competition lawyers. They are least legalistic of lawyers, because they are more interested in markets than in statutory interpretation, because the rules of the competitive process are sacrosanct to competition lawyers. It is as much about economics and the operation of a market as the statute books. I was proud to be a competition lawyer, because competition is a Labor value. It stands on the principle that success in the marketplace should be a function of quality and efficiency, not inherited power, and successful strategy, not school ties.

As Paul Keating once said: 'The only thing that can guarantee our future is competition. Competition leads to higher productivity, lower prices and higher living standards. Competition is a Labor word. It is what guarantees working people a growing living standard and ensures that they are not going to be used and abused by businesses trying to lay off substandard products and services on them. Competition provides the spice to the economy.' National Competition Policy was a great gift of the Keating government, but it has always been a hotly contested space. The use of the law to break down entrenched power always is. Those with power tend to resist it being taken away and, in my experience, it is all too easy to say, 'Competition is good for you but not for me.' We are also confronted by the constant special pleading from businesses who want competition law to be used to protect them from competition. Defending the fundamental economic principles underpinning competition law requires strong leadership.

Unfortunately, the bill before the House today reflects a capitulation of the Turnbull government on one of the most fundamental principles of competition law. It is what happens when you let the Deputy Prime Minister run your economic policy. In its present form, section 46 of the Competition and Consumer Act prohibits businesses with a substantial degree of market power from 'taking advantage' of that market power with anticompetitive purpose. The government's proposed changes would amend how to determine whether an organisation is acting anticompetitively. Specifically, the amendment proposes the replacement of the 'take advantage' test with an effects test. The introduction of an effects test into Australian competition law has been something of a Lasseter's Reef for the National Party for the past decade or so. It has been a white whale for snake oil salesmen selling platitudes to small businesses in regional Australia.

I hear those opposite claiming that the Harper review has changed everything and that it is because it has recommended that this change is required that the government is proceeding. What you do not hear about from those opposite are the 10 previous reviews we have had over the past 40 years that have recommended against the introduction of an effects test in Australia. They have recommended against the introduction of an effects test for remarkably similar reasons. The Swanson committee in 1976, the Blunt review in 1979, the Griffiths committee in 1989, the Cooney committee in 1991, the Hilmer committee in 1993, the Baird committee in 1999, the Hawker committee in 2001, another Senate inquiry in 2002, the Dawson review in 2003 and a Senate Economics References Committee review in 2004—all of these inquiries looked at this issue and said that an effects test is just too hard; it introduces far too much uncertainty into this area of law.

According to the Harper review, current legislation is deficient in two ways. The 'take advantage' test does not competently identify the manifestation of anti-competitive practices by a firm; and the 'purpose' test is concerned with conduct that harms competitors rather than conduct that harms competition. As a result, the government's proposed amendment suggests that firms with substantial market power should be prohibited from engaging in conduct that has the 'purpose, effect or likely effect' of substantially lessening competition in the market.

This proposition fundamentally misunderstands competition policy. The 'purpose' element targets the operation of the Competition and Consumer Act towards behaviour that is designed to sabotage the competitive process. By broadening this provision to include its effects, the provision will necessarily cover effective competitive practices. We want our businesses to be competing aggressively. That is how products get better, that is how products get cheaper and that is how what is offered to consumers gets better. What this legislation does is create legal uncertainty about what that competition can look like.

I put to the House the question of whether this provision would prohibit the invention of the iPhone. Let us look at the provision. The law before the House would prohibit a firm with a substantial degree of market power from engaging in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in that market or in any other market in which the corporation operates. 'Substantially lessening competition' is a vague term in case law. It means not merely discernible, but in a material or real sense—a meaningful lessening of competition.

When Apple introduced the iPhone in Australia in 2008, it certainly had market power in the MP3 player market through the iPod. It leveraged this market—the lock-in of consumers using its MP3 player—in the new smartphone market, a market that it entered with a zero per cent market share. Within five years, Apple's smartphone market share in Australia was almost 50 per cent—an effect that substantially damaged competitors like Nokia and Research in Motion—the manufacturer of the BlackBerry, a device that is now lost to time, and their market share plummeted as a result. That is a good thing—I love my iPhone; it is much better than the BlackBerry that I had back in 2003. But it adds the uncertainty: would Apple have had to call the competition lawyers? I used to be a competition lawyer, and this law will be very good for competition lawyers, because it will mean Australian businesses will not be able to walk two steps without calling their competition lawyer and asking them—at a very hefty price, billed at $6 increments—'Can I do this? Can I invent an iPhone? Can I reduce the price of this product? Can I enter a new market?' If you think that is a good way of running an economy, you could have got a job in the Soviet Union. This is directly involving government in the strategy and decisionmaking of business in an utterly absurd way. The example that I give is a deliberately silly one, and I want to stress that I do not think that argument would get up in the courts, but it is an example of the kinds of arguments that we are opening the door to with the uncertainty inherent in this provision.

I should emphasise to those National Party members across the chamber that it is not just large multinationals corporations that will be caught up by this. A market is defined under the Competition and Consumer Act as having dimensions of a product and a geographic space in which rivalry and competition take place. The reality is that there are many fairly small businesses in Australia who have market power within regional markets. They will be caught by this provision. Decisions to open new stores in regional areas will be caught by this provision. If there are competitors who do not like the effects of that competition and if there are other businesses who do not want to try and seek the business of their customers by providing better products but instead by calling up the ACCC and asking if they will intervene, they will do that. It will impose a significant cost on small business in regional areas.

Indeed, the Treasury has already conceded that the introduction of the effects test would increase uncertainty for Australian businesses. This will be a boon for competition lawyers. This provision will force major Australian businesses to pick up their phone to their competition lawyer before every new product launch and every new pricing strategy. They will need to ask whether the 'effect' of these actions could contravene the law—and all too often, the response from their highly paid legal counsel will be, 'Maybe' or, 'It's impossible to say' or, 'You could try.' It will impose completely unjustifiable costs and uncertainty on Australian business management. The government's proposal to replace the 'take advantage' test with an effects test means that Australian competition law will enter a new period of risk and uncertainty. In fact, it will be the most significant upheaval since the introduction of the Competition and Consumer Act. The fallout from the introduction of an effects test would ultimately be handed down to consumers, which means that hardworking Australian families will be the ones that lose out.

The government's intention to introduce the effects test has the potential to fundamentally stifle innovation and dull competition rather than invigorate it—unless you think getting lawyers involved in everything is likely to produce better products. Stifling innovation and dulling competition is not a plan for jobs and growth. The function of competition law should not be creating jobs for competition lawyers. We do not want to increase risk for businesses when they engage in robust competitive conduct. And we certainly do not want to make businesses less inclined to engage in competitive behaviour. Reluctance from businesses to lower their prices in fear of legal risk will slow economic growth. Submissions to the Harper review described the effects test as a 'legally unworkable' mechanism that will inevitably increase consumer prices. Indeed, the Council of Small Business Owners Australia, COSBOA, has criticised the potential to create a 'lawyers picnic' of litigation for small business owners. This is why Labor will oppose these changes.

Labor's alternative is comprehensive, fully costed and robust, and can serve as the cornerstone for a new phase in Australian competition policy. In order to preserve the integrity of Australia's national competition policy, Labor is proposing an access to justice policy. Derived from the successful European competition policy frameworks, the access to justice policy is designed to facilitate—

[Debate interrupted.]

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Mr Bowen MP (ALP) (27 March 2017)

Chris BowenMr BOWEN (McMahon) (16:11): This bill, the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, is about the implementation of the effects test—and it will have an effect. Its effect will be negative. This will have the effect of chilling competition and reducing innovation, and it will affect the prices that Australians pay for goods in a very bad way. What the government is seeking to implement in this bill is bad law. It is law which is not well thought out and which will have a deleterious impact. The Australian people should get no comfort from the fact that, according to leaks from the cabinet, the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the minister for revenue all think it is a bad idea. They have been rolled by the Deputy Prime Minister. Just a few moments ago, the Treasurer was talking about being rolled. He has been rolled on this important piece of economic policy, because the Leader of the Nationals is calling the shots when it comes to competition policy in Australia. That is a very bad thing for the nation.

This is a proposed change in the law which would mean that, instead of looking at the intention of a company with significant market power, you would look at the effect of their actions, particularly if the effect of their action is a substantial lessening of competition in any market. I can understand why some people might look at that and think it was superficially attractive. I do not deny for a second that there are issue and problems which need to be addressed and I will turn to Labor's alternative plan—Labor's positive plan—for doing that. The fact of the matter is that these issues have been addressed, looked at and considered in Australia for a long time.

Since the early 1970s, there have been 12 reviews of competition law in Australia, and 10 out of those 12 reviews have recommended against an effects test. These have been reviews by serious people looking at this in a very considered fashion, and they have recommended against the implementation of an effects test. That is for good reason, because it is a well understood principle of competition law and the law generally that if a business with market power intends to reduce competition for its own benefit this should be dealt with—this is not acceptable behaviour and it should be dealt with. Companies with substantial market power should not act to reduce competition for their own benefit; that should not be their intention. But it is a dangerous leap to change this principle and to disregard the intent of the company and, in effect, outlaw a company making life more difficult for their competitors simply because they are innovating or increasing their own competitiveness. It is a dangerous time for Australia when the National Party is dictating economic policy.

This has been through a Senate inquiry, which I will come to in a moment. The critics of this bill, through the Senate inquiry process, were very clear in their views. The Business Council of Australia criticised this bill and opposes it very strongly. The Treasurer, a few months ago, in relation to other matters, was talking about companies who support a company tax cut. That comes as little surprise—companies supporting a company tax. But you have companies opposing this government, which claims to be pro-business and which lauds its pro-business credentials right around the country, and they are going to the Senate inquiry and saying, 'This is a very bad idea whether it be BlueScope or Woolworths.' And they are saying this not just because of the intent of the government in doing this—the government is designing a system which would reduce the competitive juices in the economy—but also because of the way the government has gone about it. The way it has gone about it creates uncertainty and it creates a lawyers' picnic. The only people who will be happy with this will be competition lawyers. Despite the fact that they think this is bad policy, many lawyers in Australia will nevertheless see the commercial opportunities that will abound because of this government's ineptitude.

It is so clear that the government is inept in doing this that last week the Treasurer briefed The Australian Financial Review that he will be moving amendments to his own legislation. Before it has even been dealt with in the House, he is saying, 'I have to fix a few things up,' and what he is fixing up is removing the defences in the bill, the mandatory safeguards, which were recommended to be put in by the Harper review. I do not agree with the Harper review's recommendation to introduce an effects test; I acknowledge and accept that that was what Ian Harper recommended, but I do not agree with it. I think he got this one wrong. Broadly, I think the report was pretty good, but I think he got this one wrong. But he did recommend that safeguards be put in, and what we saw was an:

… astonishing amendment from a supposed free-market government.

They are not my words; they are words from the Business Council of Australia. That is what the group which the government goes around the country lauding in support of its other policies said about this Prime Minister and this Treasurer, just last week. It means that small business will be subject to uncertainty. What the government is doing is quite cruel here in holding this out as some sort of remedy for what are the legitimate concerns that some small businesses have in Australia, when it is not a remedy for those, and would, in fact, just be creating uncertainty which will damage all.

The fact of the matter is, as I said at the outset, that there are issues that need to be addressed. Labor is the party of competition reform. We are the ones, when it comes to serious competition reforms, who have always delivered. The first federal competition law in Australia, which was an initiative of the Whitlam government, was the Trade Practices Act. That was the first serious national competition law that we had—consumer affairs protection was included in that as well. Then we had the competition policy reforms of the Hawke and Keating years, the National Competition Policy, which was a key reform in leading to the 26 years of uninterrupted economic growth that we have had in this country, and it improved the competitive juices of our economy. Then we had, coming together with the reform of the Competition Act, the criminalisation of cartel conduct and the harmonisation of consumer affairs laws across the country under the Rudd government.

So, our side of the House is pro-competition. We believe that the beneficiaries of competition are the people we are here to represent—people going about their business and wanting a good deal from the economy, because competition produces that good deal. But that competition policy must be finely calibrated and must be carefully designed, not written on the back of a coaster in a hotel, as the Deputy Premier Minister likes to boast that he does from time to time—that he writes his ideas down for competition policy reform on the back of a coaster in the Birdsville Hotel. No, it must be thought through with proper consultation.

This is the other point about the amendments which the Treasurer has flagged that he will move—there has not been a jot of consultation. This bill should go back to the Senate inquiry again. That is what should happen here. The government took a bill to the Senate, it sent it to a Senate inquiry, there was a process where people could come in, and then after the Senate inquiry the Treasurer said, 'Don't worry about that. I've got a whole heap of amendments which completely change the bill.' If this government was fair dinkum and if this Treasurer had an ounce of courage, he would say, 'Fair enough. These are substantial changes; I will send this to a Senate inquiry again, so that these amendments can be considered properly.' That is what the Treasurer should have the courage to do, because these are very significant amendments which he is moving and which need to be dealt with.

The fact of the matter is that the proposal put forward by the Labor Party and taken to the last election is a much better solution to the challenges that small businesses face, because some big businesses have very deep pockets and armies of lawyers. So the risk of a small business being overwhelmed and having to pay the big business legal fees if they take on a competition action against a big business is very substantial, and it means it does not happen as much as it should. This is not just about the ACCC enforcing the law—that has its place and is an important part of it—but businesses can begin and bring their own actions as well. At the moment they are not doing that, for very understandable and legitimate reasons. They are concerned that the court case would be very expensive and they may well have costs ordered against them, and that would drive them out of business.

So last year we announced a policy, which we took to the election, which would deal with the competition issues and deal with the understandable reluctance of many small businesses to bring actions against big businesses in the competition space. We would let a small business request a no adverse cost order, early in a court case. If the judge decided that the case had merit, the small business would not have to pay the big business costs—win or lose, they would not have to pay the big business costs. This would also enable the Australian Small Business and Family Enterprise Ombudsman to provide professional assistance as to whether the no adverse cost order was likely to be successful, in keeping with the ombudsman's current dispute resolution mandate, and to help filter vexatious litigants from the process. In fact, we introduced a private member's bill into the Senate last month which would implement this policy. So it is open to honourable members and Senators who sit opposite us to support that sensible outcome, to say, 'We want to see more small businesses being able to bring the actions.' It is not about changing the law to outlaw actions which are currently legal; that is not the right approach. The right approach is to allow, assist and encourage small businesses to bring actions under the existing law, which is simply not happening enough.

This access to justice reform was welcomed by the Business Council of Australia. It would be a sensible and practical support for small businesses around Australia, unlike this ridiculous policy, which is opposed by the Prime Minister, opposed by the Treasurer, opposed by the finance minister, opposed by the Attorney-General and opposed by the minister for revenue. But it was supported by the Deputy Prime Minister and it was insisted upon by the Deputy Prime Minister as part of the coalition deal when the Prime Minister rolled the member for Warringah in the push in the party room. That was his price for keeping the peace. That is not the way to write economic policy in this country.

These are serious changes. They are far-reaching changes that will have a very significant impact. When this government talk about the cost of living, what is their big cost-of-living policy at the moment? It is to reduce penalty rates for workers who commit no crime other than working on Sundays. As Grant King, the president of the Business Council, is quoted as saying on 23 March in relation to this bill:

"The Turnbull government seems intent on putting pressure on the household bills of every Australian," …

"The proposed 'effects test' is so broad and ambiguous that companies risk being sued by their competitors merely for offering discount prices for consumers.

"The government's latest amendment removing 'mandatory factors' completely disregards Ian Harper's recommendation that safeguards are needed to protect against legitimate competitive conduct being captured.

"The mandatory factors didn't provide nearly enough protection for legitimate business conduct, but the answer should have been to improve them, not to remove them altogether.

Mr King and the Business Council are right about these points. I and our side are not prone to agree with the Business Council on every occasion, but we will call it as we see it. We will say when they are right, and they are right about this issue. We could have engaged in politics and supported the government and said that we would crack down on these nasty big businesses. But consumers would have paid the price for that—and consumers will pay the price for that if the government succeeds in getting this legislation through this House and the other place, as I suspect they will.

"The Turnbull government seems intent on putting pressure on the household bills of every Australian," … "The proposed 'effects test' is so broad and ambiguous that companies risk being sued by their competitors merely for offering discount prices for consumers. "The government's latest amendment removing 'mandatory factors' completely disregards Ian Harper's recommendation that safeguards are needed to protect against legitimate competitive conduct being captured. "The mandatory factors didn't provide nearly enough protection for legitimate business conduct, but the answer should have been to improve them, not to remove them altogether. Mr King and the Business Council are right about these points. I and our side are not prone to agree with the Business Council on every occasion, but we will call it as we see it. We will say when they are right, and they are right about this issue. We could have engaged in politics and supported the government and said that we would crack down on these nasty big businesses. But consumers would have paid the price for that—and consumers will pay the price for that if the government succeeds in getting this legislation through this House and the other place, as I suspect they will.

This bill also contains amendments that would repeal the telecommunications specific anti-competitive conduct provisions in part XIB of the Competition and Consumer Act. Currently, part XIB provides the ACCC with powers to take speedy action and better resolve disputes when anti-competitive conduct is suspected. The acting shadow minister for communications, the member for Isaacs, and the member for Throsby will be saying more about this. We will not support this change. Given the concentrated nature of the telecommunications market, it remains appropriate to preserve part XIB. Labor considers that the stronger powers under part XIB remain necessary to deter misuse of market power, potentially by the NBN in the future and certainly by Telstra at the moment. There is no good case for the repeal of this particular section of the act. The government, on the one hand, say they are going to make the market more competitive with this ill-thought-out approach—at least that is their intention—but on the other hand they are seeking to water down the existing provisions for the telecommunications sector. We will be introducing amendments to preserve part XIB as it currently operates.

I now move:

That all the words after "That" be omitted with a view to substituting the following words:

"The House declines to give this bill a second reading and calls on the Government to explain why it is introducing a dangerous piece of economic policy that is legally unworkable, will chill competition, and will create uncertainty for business".

I move this amendment because I think it is appropriate that this House send a message to the government that it has got this wrong. This is utterly bad policy. This is policy which fundamentally misunderstands how competition law works in Australia.

I suspect the Minister for Social Services strongly agrees with the Labor Party position on this. To give him his due, the Minister for Social Services is, as I understand, quite an accomplished lawyer. He understands how competition policy works. There is no way that he would think this is a good idea. There is no way, given the overwhelming weight of expert evidence from competition lawyers in Australia, that sensible commentators in the competition space would think this is good policy, because it is not. It should be resisted by sensible members opposite. It was resisted, to give them credit, by the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the minister for revenue. You would think that would be enough to maintain the position for sensible policy in the cabinet. But, in this government, the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the minister for revenue got rolled on this important matter of economic policy.

On this side of the House, we are of one mind. We stand for good policy, and this is not good policy. Quite the contrary, this is very bad policy. It should be resisted and it should be opposed in the House.

The DEPUTY SPEAKER (Mr Coulton): Is the amendment seconded?

Mr Brendan O'Connor: Yes. I second the amendment and reserve my right to speak.

The DEPUTY SPEAKER: The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.

Bowen MP fragment source (pages 69-72)

Llew O'Brien MP (LNP) (27 March 2017)

Llew O'BrienMr LLEW O'BRIEN (Wide Bay) (16:29): I am really pleased to rise to speak on this bill today. It certainly is an important, fair and much anticipated proposal by the coalition government in regard to competition law. It is certainly much anticipated in the seat of Wide Bay.

In my maiden speech, I highlighted the need for big business to play fair, particularly when it comes to markets and particularly when it comes to monopolies and duopolies. Where there is an abuse of market power, there needs to be a capacity for regulators to step in to ensure there is a level, competitive playing field, so that we give a better and more competitive choice to consumers and allow new participants to enter the market. I support the changes proposed in this bill because they will deliver reforms to strengthen the economy, encourage business to grow, and improve opportunities for creativity and innovation, which in turn will look after the little guy.

A report authored by Australian Competition and Consumer Commission chair Rod Sims outlined the problem with the current section 46 of the Competition and Consumer Act and the need for it to be reformed, when he warned that the current law is fatally flawed and impedes competition. In 2003, Justice Kirby said in a dissenting judgment in the High Court's Rural Press decision that in his view:

… the approach taken by the majority is insufficiently attentive to the object of the Act to protect and uphold market competition. … The outcome cripples the effectiveness of s 46 of the Act. … The victims are Australian consumers.

The coalition's changes proposed to competition law are based on a recent, thorough and in-depth analysis of competition law in modern Australia. In 2014, the newly elected coalition government commissioned a root-and-branch review of Australia's competition framework, known as the Harper Review. The Harper Review fulfilled a 2013 election commitment and delivered the first comprehensive review of Australia competition laws in 20 years. A key focus of the review was to identify impediments across the economy that restricted competition and reduced productivity.

Considering the importance and significance of this reform and the potential impact on competition, the government extensively engaged with all stakeholders through the review process. There were almost 350 written responses received on the Harper report issues paper; around 600 written submissions were received on the draft report; around 140 submissions were made to the government's response to the final report; 86 submissions were received in response to the discussion paper on the misuse of market power that was released for public consultation; and 34 submissions were received on the exposure draft legislation in relation to section 46. Submissions focused on whether section 46 sufficiently deterred anticompetitive conduct by firms with a substantial market power and whether it created commercially predictable outcomes.

The Harper Review found that, while the provisions of the act were sound, section 46 was unfit for purpose, unnecessarily complex, imposed costs on the economy, was not reliably enforceable and burdened business. The Harper Review found that the current section 46 permits anticompetitive conduct that impedes and slows the entry of new and innovative firms to the market, delays the entry of new technologies into Australia and slows productivity growth. The Harper Review recommended refocusing section 46 so that it would prohibit a firm with a substantial degree of power in a particular market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in any market.

So, on 16 March 2016, the government announced it would adopt in full the Harper Review recommendations relating to the misuse of market power. Schedule 1 of the bill amends section 46 of the Competition and Consumer Act so as to prohibit

A corporation with a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect of substantially lessening competition in:

that market; or

any other market in which that corporation, or a body corporate that is related to that corporation:

supplies goods or services, or is likely to supply goods or services; or

supplies goods or services, or is likely to supply goods or services, indirectly through one or more other person; or

any other market in which that corporation, or a body corporate that is related to that corporation:

acquires goods or services, or is likely to acquire goods or services; or

acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other person.

The change change ‘uses existing legal concepts from within the competition law—such as “substantially lessening competition”—and ensures the focus of the provision remains only on those firms that have substantial market power’.

The reform to section 46 will provide a commercial and legal framework that prevents firms with market power engaging in behaviour that harms the competitive process. This reform is particularly important for more than two million Australian small businesses, which make up more than 97 per cent of all businesses. Wide Bay has over 13,000 small businesses, and many of these operate in the agricultural sector which in Wide Bay contributes over a billion dollars to the economy. This sector comprises both small and large businesses competing in the same commercial territory. From fruit growers to dairy farmers, there is much anticipation regarding these changes to the completion law. They hope that, through enabling a fairer and more competitive environment, this reform will also see great growth in the local economy.

The new provision will more effectively address anticompetitive conduct to protect competitive processes, rather than individual competitors. Implementation of the provision will be undertaken jointly by the Australian Competition and Consumer Commission and the Australian government. This bill will deliver on a key election commitment made by the Nationals and the coalition to address misuse of market power by introducing an effects test. This reform equips us with an important tool that will: help to sustain and grow businesses; create an environment in which innovative firms can enter new markets; assist the introduction of new technologies into Australia; and supply the best quality products at the lowest prices for consumers. I commend the bill to the House.

L O'Brien MP fragment source (pages 72-73)

Tim Hammond MP (ALP) (27 March 2017)

Tim HammondMr HAMMOND (Perth) (16:37): I rise to join the honourable shadow Treasurer in opposing this bill, for various reasons. Firstly, Labor opposes any notion that putting into place an effects test is going to enhance competition. More to the point, and quite conversely, as I will set out in further detail, our submission is that any proposed effects test will fail competition policy. The other aspect of this bill, which perhaps is not getting an awful lot of sunshine on the other side, relates to part XIB of the act insofar as it relates to the repeal of telecommunications-specific anti-competitive conduct provisions.

The position of the Australian Labor Party in relation to its criticism of the effects test and the fact that it is likely to fail competition policy has been articulated in a consistent fashion both before the election, immediately afterwards and in this place as we speak. The arguments against the effects test are set out in comprehensive and easy-to-read detail in an opinion piece in The Australian Financial Review by the shadow Treasurer in October last year. He said:

In this year's election campaign the term "anti-business" was thrown around with a lot of abandon and there was of course much discussion of "innovation". All the while, Malcolm Turnbull was carrying a policy that is fundamentally antibusiness in its intent and impact and has the potential to chill innovation just when we need it the most. … The so-called "effects test" would try to assess whether a company with a high degree of market power is engaging in conduct with the purpose, effect or likely effect of substantially reducing competition in any market. It is a well-understood principle of competition law … that if a business with market power intends to reduce competition for its own benefit, this should be dealt with. But it is a dangerous leap to change this principle to disregard what the intent of the company is and outlaw a company making life more difficult for their competitors simply because they are innovating or increasing their own competitiveness.

Put simply, any amendment of the type proposed by the government in this case will not enhance innovation. It will not enhance entrepreneurial fervour. It will not enhance competition, to the point where both business and the consumer will be left worse off. Indeed, the shadow Treasurer makes the point in his article, in relation to posing the question:

How will it benefit consumers for any business to wonder whether a drive to reduce costs and bring down prices will see them hauled before the courts? It won't.

If we go back and have a look at the history of the analysis as to whether an effects test is likely to do the job, the results speak for themselves. If we go back and look at the start upon which the analysis was undertaken, back to 1976, since then 12 Australian competition reviews have considered an effects test. Ten of those reviews have recommended against it. Just in case one was not compelled to a conclusion by the numbers, if one digs a little further down to see exactly what the critics have to say about the imposition of an effects test in competition policy, look no further than Graeme Samuel, who is the ex-chair of the ACCC, Peter Costello himself, the Business Council of Australia, and allegedly also the Prime Minister when the matter was considered and rejected by the cabinet led by the former Prime Minister, the member for Warringah.

The chair of the competition review, Professor Harper himself, has conceded that the proposed effects test will create uncertainty. I will be saying more about that a little later. But if we have a look at what those public commentators have had to say about why this is a flawed piece of policy, the former Treasurer, the Hon. Peter Costello, said:

When you are looking at competition policy there is one basic question you have to ask before you can settle anything else . . . who is competition policy for? … If you take the view that competition is there for the consumer, which is what I believe is the fact, everything else will fit into place.

That is why he was against the so-called effects test:

The so-called effects test is actually designed to protect competitors, particularly less efficient ones, from a competitive challenge.

Let's see what Richard Goyder of Wesfarmers, the largest employer in Australia, had to say:

Every year we look at ... 20 new Bunnings warehouses, 30 new Coles stores, 20 new Kmart stores ... does that mean now every time we have a capital expenditure proposal come to us that we've got to look at the likely effect on competition?

Mr Graeme Samuel, the former ACCC chairman, also echoes those proponents criticising the effects test:

Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.

The member for Hughes himself says: It is not an effects test; its effect is to substantially lessen competition. It is not what you think it is it; it is a Trojan horse.

The reason it is a Trojan Horse is because of the impact of the test once one actually sees it put into place. Firstly, in relation to consumer prices: the day this decision was announced, the Deputy Prime Minister said that selling milk for a dollar a litre was too low; the price should be higher. At the same press conference he raised that milk was sold in China for up to $11. This is just the start of how consumer prices, the everyday cost of living, will hit families after the introduction of an effects test.

In relation to uncertainty: businesses need certainty to plan and make decisions. Litigation over the effect of their decisions will heighten uncertainty and make it difficult for businesses to plan ahead. This will impact on investment and jobs.

On innovation and growth: we hear a lot of talk about innovation over the other side, but when we actually see the rubber hit the road, look no further than Australia's largest employer, Wesfarmers, who have already said that they are deeply concerned about the negative impact of this decision on innovation. It will make it harder for businesses to test new products. That is the context upon what we will really see here if this bill is passed and we see the implementation of a so-called effects test.

There is an alternative path, and it is a path that the Labor Party put forward in a policy called Access to Justice for Small Business—a two-year trial put forward by the party which has two key components. The first component is in relation to making sure we do see true testing of the competition environment in a manner which actually allows businesses to thrive and prosper. The party has put forward a mechanism to allow private litigants bringing actions under part IV of the Competition and Consumer Act to apply to the court at an early stage, seeking relief from potentially adverse costs orders.

That is a very important component because it completely changes the landscape in relation to actually testing propositions as to whether anticompetitive behaviour is being played out in the business environment and, ultimately, to the detriment of consumers. It is well known that one of the largest disincentives in relation to testing these issues of anticompetitive behaviour through the courts is simply the costs involved in bringing such an action, not to mention the risk of adverse legal costs. Quite simply, many small to medium businesses just cannot afford the risk and, on that basis, will decide against pushing propositions where they see anticompetitive behaviour actually taking place.

The other aspect of the access to justice policy relates to the Small Business and Family Enterprise Ombudsman. It is Labor's plan to fund the small business ombudsman to vet small business applications for preventing adverse orders who are considering action under part IV of the Competition and Consumer Act. What this is likely to do is actually enhance the environment in that the reform put forward by the Labor Party will waive the liability of private litigants where they can demonstrate the merit of their case and how they are opposing anticompetitive behaviour. This is a practical policy alternative to encourage access to justice for small businesses. It is good for competition and it is good for small business.

But that is really only one of a suite of proposals which are pro-consumer and pro-competition that Labor took to the 2016 election. Some of the others are as follows: increasing civil penalties under the Australian Consumer Law from $1.1 million to $10 million, bringing those penalties in line with the competition provisions of the Competition and Consumer Act 2010. It is a vitally important reform that is required if we are actually going to put into place a set of enforceable deterrents to business when they are seen to be breaching the Australian Consumer Law. Quite frankly, the problem with such a relatively low threshold of a civil penalty as $1.1 million is that it does not necessarily deter those very large multinationals or corporates from adverse effects upon competition and consumer behaviour because, quite simply, the punishment does not fit the crime.

In relation to other proposals put forward by the party, there was a proposal to adopt the European Union's penalty system for anticompetitive conduct based on 30 per cent of the annual sales of the relevant product or service multiplied by the number of years the infringement took place limited to the greater of 10 per cent of annual turnover or $10 million. Again, for the same reason, what we really need to see here is some teeth on the tiger that are likely to actually have an effect upon preventing anticompetitive conduct or conduct which causes adverse outcomes for consumers.

What the Labor Party has also proposed is the use of some of the revenues from the increased penalties to increase the ACCC's litigation budget from its current level of $24.5 million to a maximum of twice that level at about $49 million. Again, it is all designed so the landscape can be altered to ensure that there is accountability on behalf of corporates who are seen to be engaging in anticompetitive behaviour or behaviour that would adversely affect consumers in a way where these cases can be properly tested in the courts.

They are all triggers or mechanisms in which litigation can be used effectively in order to make sure that corporates do not engage in anticompetitive behaviour which will affect markets, which will affect innovation and which will affect consumers. What we do not see is any of that in relation to this so-called effects test. What we do not see is any real sense or comfort that the implementation of these amendments will do anything but throw the landscape in relation to whether anticompetitive behaviour is being undertaken or not within the court system itself.

There is often a phrase bandied around called 'a lawyer's picnic'. I have not been to too many lawyer's picnics in my time, and they are not exactly the most exciting of affairs, which is why I try to steer clear of them. I suspect the member for Pearce is nodding in furious agreement over on the other side of the table! But what it will create is a situation where there will be an incentive to litigate in a way that is unlikely to benefit anyone, let alone business or the consumer. When we create an uncertain landscape with amendments like this—as night follows day—they are required to be tested, which, in itself, is not a bad thing. But it is a bad thing if what is currently put into place is a myriad of mechanisms and protections in which the legal system can be used for the benefit of consumers, the benefit of innovation and the benefit of business.

In relation to part XIB of the Competition and Consumer Act, it was introduced in 1997 to facilitate the transition to open competition in the telecommunications market. There are two main elements of that part: the competition rule, which sets out telecommunication-specific competition, and the competition notice regime, which allows the ACCC to issue competition notices and quickly respond to a breach of the competition rule. The basis of the argument to amend that provision of the act is that the general effects tests will apply to all industry sectors and, therefore, part XIB is no longer necessary. That is opposed, in no uncertain terms, in relation to this bill because, quite frankly, part XIB should not be repealed because what it does in its current form is provide the ACCC with stronger and faster intervention measures for the telecommunication sector than would otherwise be available under a general effects test.

In conclusion, what is plain to see once the surface is scratched in relation to what is being put forward in this bill is an outcome which is bad for business, is bad for consumers and, generally, is bad for the community, and it should be opposed.

Hammond MP fragment source (pages 73-76)

Mr Andrew Gee MP (Nationals) (27 March 2017)

Andrew GeeMr GEE (Calare) (16:52): It is a great pleasure to support the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016. This bill represents a triumph not only for the Deputy Prime Minister but also for the National Party. It is also a triumph for small businesses, including primary producers who do business with large corporations. This bill is a game changer, ushering in a new section 46 and a new era for competition law in Australia with the effects test. It is a reform that was born of the Harper review into competition policy that was commissioned in 2014. That review found that section 46 did not adequately prevent the misuse of market power. Specifically, the 'take advantage' element of section 46 was found wanting in being able to distinguish competitive from anti-competitive conduct and thereby being able to identify a misuse of market power. In other words, the current section 46 is simply not doing what it was designed to. It is ineffective.

The Harper review also found that the focus of the section on prohibiting conduct if a corporation acted with the purpose of damaging a competitor was inconsistent with the overriding policy objective of the act, which is to protect competition and not individual competitors. Competition itself is, after all, not bad thing. It brings with it innovation, better service and lower prices, which should not be discouraged. But it stands to reason that, by its very nature, competition itself will result in some competitors being harmed. The new proposed section 46 aims to enhance and promote competition.

Not only is the current section 46 ineffective but the ACCC's record in enforcing it is mixed at best, and the win/loss record starts to look even worse when the ACCC's record in contested cases is taken into account. Private section 46 cases have been few and far between, and few of those have been successful. One of the reasons there have been so few of them is because section 46 actions can be David-and-Goliath affairs. If you are a David going up against a Goliath in a section 46 case, you need an iron will.

In fact, the last successful private section 46 action was the case of NT Power, which successfully took on the Northern Territory government's Power and Water Authority and Gasgo for access to transmission and electricity infrastructure. After NT Power lost in the Federal Court and then lost a Federal Court appeal, the case ended in a great come-from-behind victory in the High Court. I know quite bit about that case because, as a youngish solicitor, I had the good fortune to be a part of NT Power's legal team when the case was run in Darwin, and I am here to tell you that section 46 cases are tough ones to get over the line. As I said previously, you need a client with an iron will because taking on the big end of town is not easy. The old 'bury them in tens of thousands of discovered documents, often served at the last minute and during the hearing' trick is one such strategy that I have personally seen deployed. There can be a lot of rain in Darwin but, when you are litigating against the big end of town, it can rain documents as well in a section 46 case.

The fact that section 46 cases are so hard to run and even harder to win makes it even more surprising that the Labor Party have squibbed on real reform of that section. Their so called 'access to justice' proposal does nothing to make it easier for small businesses to run and win a section 46 case. All it does is allow an applicant to make an application at some point in proceedings for the respondent to be liable for the applicant's costs if certain criteria are fulfilled. The proposal is worthless without meaningful reform to section 46.

You can just hear the lawyer's advice to a small business contemplating initiating a section 46 action under Labor's regime. It would go something like: 'Only the brave and the few have ever initiated section 46 actions, and only the fewer still have ever won one. So the odds are stacked against you but, if you are brave enough to give it a go at some point, under Labor's reforms you may be able to make an application for a costs order at some point during the proceedings. We're not sure when. We're not sure how. We'll just have to give it a go and for hope for the best.' The reality is that the chances of any such application for that type of order succeeding under the current regime would be remote. Labor's proposal amounts to window-dressing, pure and simple.

I should point out that the junior counsel on the NT Power case was none other than Alister Henskens, now SC and MP, being the New South Wales member for Ku-ring-gai, and the partner with carriage of that case was renowned litigator Antony Riordan from Colin Biggers & Paisley. He was the original architect of that section 46 action. I know that both are watching the passage of this bill with great interest.

This new and improved section 46 will better target anti-competitive conduct whilst supporting pro-competitive conduct and will greatly simplify the provision. It will prohibit a corporation with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in: that market; markets in which the corporation itself, or a related body corporate, supplies or acquires goods or services or is likely to supply or acquire goods or services; or markets in which the corporation is indirectly supplying or acquiring goods or services or is likely to supply or acquire goods or services. The new section 46 will make it very clear that large corporations with a substantial degree of market power are going to have to think very carefully about the way in which they operate for fear of falling foul of this section.

As we heard earlier, there has been opposition to this bill from some notably large corporations. But as Chairman of the ACCC, Rod Sims, recently stated to The Australian Financial Review:

Companies that want to compete on their merits have nothing to fear. Only those who wish to exclude their competitors and damage the competitive process will need to re-examine their conduct.

He has also described the claim that the changes will lead to a rise in prices as 'nonsense' because, as he has pointed out, consumers clearly benefit from more competition.

Besides the ACCC, the calls for reform have had strong support from a number of key organisations, including: the National Farmers' Federation; the Institute of Public Accountants, which described the reforms as a sensible and long-overdue improvement; Master Grocers Australia; the Queensland Dairyfarmers Organisation; the Australian Chamber of Commerce and Industry; the Small and Medium Enterprise Business Law Committee of the Law Council of Australia; the Australian Small Business and Family Enterprise Ombudsman; the Australian Hotels Association; AUSVEG; and the Australian Dairy Farmers. In the latter's submission to the Senate Economics Legislation Committee it wrote that it:

… congratulates the federal government on working to provide more transparency and fairness in the market through legislation such as the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016.

They added:

This legislation will help ensure that farmers, processors and consumers are not adversely impacted by the actions of those who hold significant market power in Australia.

Very well said. So, in a practical sense, who does this bill assist?

Mr Deputy Speaker, you do not have to look very far, or drive very far, in my electorate to find those who have been crying out for reform in this area—I speak, of course, of the apple and cherry growers of Calare. For many years, they have been making the case for change in this field. Local orchardist Guy Gaeta is one such voice and one such farmer. In fact, he has been calling for reform in this field for so long, he could hardly believe that a government finally had the courage and determination to bring these changes in. Many growers are forced to sell their fruit to big retailers who have a very substantial amount of market power. Growers have felt for a long time that big retailers are able to dictate prices for their fruit, and that they are forced to sell at prices that are unacceptably low. They do not believe that the treatment they have received is fair or that that the current system is transparent. There were hundreds of orchards in Orange decades ago, but now we are down to about 30. That is largely because the sons and daughters of orchardists have left the land, because they could not see a future. This leads to a lessening of competition. In some years, the prices on offer have been so low that growers have questioned whether it was even worth harvesting their crop. When you put it to our orchardists that a bill like this one will lead to higher prices, they laugh in disbelief and point to the—often huge—margins that retailers are able to put on the wholesale price of their produce.

This issue is one of the reasons growers in our areas are pushing so hard to gain access to new markets overseas. In fact, there was a delegation to this parliament last week letting the government know that that is exactly what is needed: better export protocols and better access. Our primary producers in Calare are small-business people; all they want is a system that is both fair and transparent. We have some wonderful orchardists in our area: Peter West and Tim and Jayne West from Balmoral near Orange; Tim Hall from Melrose at Nashdale; Bernard and Fiona Hall from Caernarvon, blazing the trail for exports; Daniel, Jamie and Nina McClymont; Ian and Pru Pearce, Robert and Jeannie Pearce, and also Ross Pearce of Mirrabooka near Orange; Sophie Jones of Hillside Harvest; James Sweetapple—he makes some great wine, but is also a great cherry producer; Kelvin Price of Kelanvale near Borenore; Michael and Kim Cunial at Carinya at Nashdale; Joe Caltabiano at Omaroo near Orange; Zac and Thelma Rossi; Peter and Robyn Vardanega from Prospect Orchard near Nashdale; and Graeme and Anne Eastwood from Rose Farm near Nashdale.

It is not just the orchardists who will gain protection and relief through this provision; other primary producers such as grape growers and dairy farmers could also conceivably benefit from these reforms. Any small business that bears the brunt of misuse of market power could also benefit. Smaller and independent grocery stores are yet another example. Associate Professor Julie Clarke of Deakin Law School stated in her submission to the Senate Standing Committee on Economics in January this year about this bill that:

… its passage will implement a long-overdue improvement to a core element of Australia's competition law.

I agree. And I am proud that it has been the Nationals who have been driving this landmark reform. I congratulate the Deputy Prime Minister for his dogged pursuit of this historic change, and I commend this bill to the House. Let the new era of competition law in Australia begin.

A Gee MP fragment source (pages 76-78)

Ed Husic MP (ALP) (27 March 2017)

Ed HusicMr HUSIC (Chifley) (17:03): You have to shudder, Acting Deputy Speaker Irons, the minute you hear a Nationals MP champion economic policy and say that a bill is as a result of their influence—run! Run, run, run! I have to say, as the member for Calare finished his contribution, he showed what had driven this. We are debating here the introduction of an element of legislation that 10 inquiries since 1974 have looked at, and they have all said: 'No, do not touch the effects test. Do not touch it.' Now we have the government doing just that, and it is not because they have come up with some new way to give effect to this concept within competition law. This is not policy; this is—as is so often the case with this government—all about politics. It is all about delivering on a promise given by a new prime minister back in 2015, to a nervous and unsure National Party that did not necessarily trust that he could deliver for them. That is why we have this effects test.

There is very little data to suggest this will help. There is a lot of concern that it will not help; there are a lot of people saying that it will have a chilling effect on competition, and there are a lot of people wondering what might happen to the prices consumers actually have. Given the last contribution to this debate, the Nationals are there, beating their chests and saying: 'It is as a result of our advocacy that we are getting it.' Barnaby Joyce was out there saying: 'One-dollar milk is too cheap'—that is what he was saying. And then, in the next breath, he was saying: 'If you are in China, you are paying $11 for milk.' Well, he can represent producers; I represent consumers in Western Sydney, who want to see grocery prices lowered. I remember in previous parliaments when we were talking about what we were trying to do with an emissions trading scheme and the imposition of a carbon price: you would only ever see those opposite in a grocery store, or in a butchery outlet or somewhere—anywhere—talking about the impact on prices, saying that we needed to see food and grocery prices go down. Now we have those opposite—now they are in power—championing the fact that grocery bills should be going up, and saying that this is what we should be aiming for. Well, I represent consumers. I represent people who want to get access to cheaper food, who want to get access to fruit and vegetables that are lower in cost. But, as we have seen, this is about representing the Nationals' interest, not the national interest. That is why we are debating this bill; that is why we are debating this very far-reaching change to competition law.

We on the Labor side do not mind strong competition policy but it has got to be informed and, importantly, it has got to be enforced. And we do not believe the government's package provides for being informed properly and backed up with proper enforcement mobility. As has been outlined by the shadow Treasurer, we see dangerous legislative proposals that do not address either resourcing the ACCC or making it easier for small businesses to litigate in their own private capacity.

And whilst we might have the Nationals championing this, what have we had from the champion of the Liberal Party, Peter Costello, a person who occupied one of the most senior economic positions in this country for an extended period of time? When he reflected on what was being proposed and given effect to in this legislation, he said, 'A so-called effects test will protect competitors, especially less efficient ones, from competition.' That is from someone who is heralded by that side as an economic pioneer and occupied the key economic position in the Howard-Costello government. That is his take on what is being proposed right now. He thinks this is all about protecting less efficient competitors, not raising the bar of competition across the board.

In submissions to the Harper review that considered this, the effects test was described as legally unworkable. Further, it will chill competition and create uncertainty for business. These changes will potentially deter job creating investment in Australia by adding new layers of red tape and barriers to investment which have already been imposed by this government. It is not hard to see why you would have another former figure in that government say he could not see the benefit in supporting these changes, and that was the former Minister for Trade and Investment, Andrew Robb. He believed the measures contained within this bill were anti-investment.

As I said before, this is not about good policy, it is all about politics. It is all about ensuring Prime Minister Turnbull satisfies the concerns driven by the National Party. In many respects, the National Party are the ones who are driving economic policy within this government—and exhibit A is this bill. That is not the way this should be done—not on something as complicated as competition law. On both sides of the House a lot of us want to ensure competition law is strong, robust, workable and enforceable. But it should not be subject to some sort of deal-making within the coalition.

We on the Labor side are certainly in favour of efficient markets. That has been the big thing. When you look at the way the Labor Party has transformed itself since the eighties, it has been about a realisation that efficient markets that are working properly and fairly are the best ones to be able to work in the interests of all—in terms of business and also consumers, in terms of more efficient investment, in terms of innovation and in terms of delivering for the entire country. These things are critical. Again, if 10 reviews since 1974 have considered the issue of the effects test and cannot bring themselves to recommend it, you have to wonder why we are being required to think about it here.

Besides politicians, senior figures within conservative ranks have questioned whether this is wise policy. In fact, they are not questioning it, they are saying outright that they do not believe in the value of this being imposed in competition law. The former chairman of the ACCC, Gordon [sic] Samuel, said:

Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.

That is what they are saying, and I think that is a real worry.

In this debate about the effects test and the future role of the ACCC, I cannot overlook another recent foray by the ACCC in an area that simply staggers me, and that is their announcement last year that they will now consider the acquisition of start-ups by big businesses. The acquisition of start-ups by big business has been a valid and accepted objective of a lot of start-ups. You can either list on the stock exchange, go public and get bought out that way, or you can be acquired. This has operated for quite some time. In a country where the rate of start-up formation is relatively low, it is unbelievable that we would now have a further level of uncertainty being injected by ACCC Chairman Rod Sims last year, who mused publicly that they would now consider whether the acquisition of start-ups by big business was against the interests of the market.

As I said, what it would potentially do is put a chilling effect on activity in this space. It also flies in the face of the reality of a lot of start-ups: where they have found a market niche, done the R&D, found the investment and developed a proposition that could actually deliver value to consumers or other businesses, it is not necessarily the case that their acquisition would prevent the emergence of a large-scale competitor to established businesses. Rod Sims mentioned the examples of Telstra and Optus in start-up acquisition. Telstra and Optus have very large venture capital funds that are backing this innovation. They are not backing this because they believe that they need to acquire competitors; they are backing this because some of the innovative thinking that is being championed by some of these smaller start-ups will actually add to the strength and security of Australian corporates, our businesses.

Here I am, as a Labor politician, championing that we want to see smaller businesses go and become bigger ones. The issue is not about size; it is about behaviour. If bigger businesses are working and collaborating with start-ups to see an idea grow, take hold and potentially be of benefit to the start-ups, the founders, their employees and the bigger corporate, that has got to be a good thing for the country. I have not heard Rod Sims, the ACCC chairman, come out and clarify exactly what is behind his thinking. What are the examples that are driving his view that he now needs to disrupt, in his own way, the investment flows towards start-ups by suggesting that he will now put the regulatory blowtorch into this sector? I have not seen it.

The other thing that we have not seen is the government come out and say whether or not they back this. The government have been noticeably silent on whether or not the ACCC is on the right path, looking at whether bigger businesses can acquire start-ups, and they need to step up and explain exactly what their thoughts are on what the ACCC is doing. We have seen today that the government can step in, for example, and order the ACCC to look at energy prices. Why can't the government step in and say either way whether or not they believe what the ACCC is doing is right or urge the ACCC to consider very carefully the path it is treading?

This is a disaster in the making. We already have a relatively low rate of start-up formation compared to other parts of the world. If this interrupts or inhibits the flow of capital to start-ups, this is disastrous, because these small enterprises have a capacity to grow much faster than other small businesses and that growth equates to a growth in employment. And so I am certainly calling on the ACCC to spell out very clearly what the business case is for this suggestion that they would intervene in this way to interrupt the flow of capital to capital-demanding start-ups in this country by some sort of regulatory threat. It is unacceptable that the ACCC has left start-ups hanging, wondering what is going on.

Those start-ups themselves have not welcomed this imposition. In fact, some of them have said that there is a better thing to do. For example, the founder of Vinomofo, Andre Eikmeier, said:

Instead of blanket restrictions on what big companies can or can't acquire … the ACCC should focus its efforts on regulating what big companies do after they've acquired start-ups.

This is smart advice. After all, that is what we are trying to prevent through restricting anticompetitive behaviour. That is a good point, and this what he interrupts. The growth in the fintech sector actually went against the grain of what has been recorded on the global scale. On the global scale, there was a cooling in investment, but in Australia it sped up and a lot of it has been driven by, for example, investment in mergers and acquisitions and that is what has been pointed out:

This was driven by large M&A and VC transactions.

Investment in Australia's fintechs reached a record $650 million in 2016. We cannot afford to have investment flows interrupted by regulators that are overreaching and impacting on the growth of valuable sectors to the Australian economy into the future.

Husic MP fragment source (pages 78-80)

Craig Kelly MP (Liberal) (27 March 2017)

Craig KellyMr CRAIG KELLY (Hughes) (17:18): People sometimes ask the question of me: what is the difference between the Liberal and Labor parties? There are many differences, and one of the fundamental differences is that, when Labor members rise to speak in their place, they do so as soft puppets of the union, merely chanting the union line and devoid of individual thought, and no dissent or contrary opinion is allowed. In contrast, on this side of the House, we evoke the spirit of Sir Robert Menzies. We are allowed—in fact, encouraged—to have individual thought. As backbenchers, we are free to express contrary opinions. This is a great privilege offered by the Liberal Party and one that I intend to use now.

Just for clarification, my views are not those expressed by the opposition in regard to the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016. In fact, I listened with great interest to the member for Fenner's contribution to this debate and it seems that he is as clueless on competition policy as he is on the workings of our share market, with his recent most embarrassing comments that five entities owned and controlled the majority of the shares. What an embarrassment—ridiculed and laughed at by every serious economics commentator in this nation, and yet that is the shadow Assistant Treasurer in this parliament.

When it comes to debate on competition policy, it is very important to set out what someone's core beliefs are. My core belief is belief in free markets, that free markets achieve the greatest prosperity for the greatest number of people, and that is what our history is showing. But the free markets are not something that are just naturally occurring. For a market to work properly, we must have some regulation on misleading and deceptive conduct. We must have some regulation on coercion, whether it is physical or economic coercion. The phrase we often hear, 'protecting competition and not competitors', simply gets the cart before the horse. What we should be trying to do with competition law is protect competitive opportunity to engage and enlarge individual liberty. We need to make sure with our competition policy that the individual that wants to have a go and start their own business rather than being a unionised employee of a big corporation does not have their opportunities restricted by any competitive practices designed to eliminate them.

I think my core beliefs were best put by US President Teddy Roosevelt over a century ago when he said:

It is of the utmost importance that in the future we shall keep the broad path of opportunity … open … it shall be not only possible but easy for an ambitious man, whose character has so impressed itself upon his neighbors that they are willing to give him capital and credit, to start in business for himself, and, if his superior efficiency deserves it, to triumph over the biggest organization that may happen to exist in his particular field. Whatever practices upon the part of large combinations—

that was the word they used then for large businesses—

may threaten to discourage such a man, or deny to him that which in the judgment of the community is a square deal, should be specifically defined by the statutes as crimes.

What denies an individual opportunity is anticompetitive price discrimination, buyer induced price discrimination, and predatory conduct, both predatory pricing and predatory buying. This is important not just for the individual but for our society. Overly concentrated markets are bad for both consumers and wealth creation.

We need to encourage individuals to start up and have a go. Look at some of the most recent companies. It is the small firms that play a crucial role in experimentation and innovation and that drive the technology change that creates wealth and drives prosperity. Companies such as Apple, Google and Disney all started in a garage. Walmart, the world's largest retailer, started with just a single store. This is what we want to encourage—entrepreneurialism, free markets and individuals running their own businesses without fear of being driven out by a larger competitor using anticompetitive practices.

This bill has been described as introducing an effects test. Some members of the opposition have talked about the debate on the effects test over a number of years, but that was a completely different effects test to what this bill introduces. I will go through that. Firstly, section 46 currently provides that a corporation with a substantial degree of market power cannot take advantage of that power for the purpose of (a) eliminating or substantially damaging a competitor, (b) preventing the entry of a person into a market and (c) deterring or preventing a person from engaging in competitive conduct. So it is damaging a competitor. If we replace that word 'purpose' in section 46 with the word 'effect', the act will be much more usable and more small-business friendly. It will enable section 46 to actually work in practice.

But that overlooks section 46(7) of the act, which says:

… notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person …

So what it is saying, as Professor Corones notes in his legal text, is that the courts may draw inference from the conduct or any other circumstance without the need for direct evidence. A requisite purpose may be inferred on the basis of objective evidence, so when it goes to proving purpose there is no need for a smoking gun or some form of document that says, 'This was our purpose—to eliminate a competitor.' Purpose can be inferred. If we look at the history of section 46, there is hardly a single case where it has fallen over because the ACCC was unable to prove purpose, yet it has been put that that is the entire problem with the act.

What has been done in this so-called effects test? It is not the effect of damaging a competitor. The words have been changed. A new test has been added that requires not only damage to a competitor but also a substantial lessening of competition. That is completely different. The effect of substantially lessening competition is completely different to the effect of damaging a competitor. So now we have a section that starts off with the requirement that you have a substantial degree of market power and ends with the requirement that the conduct will result in a substantial lessening of competition. Having those two terms—the test at the front and the test at the back—is actually contradictory. It is very difficult to envisage a circumstance where a firm actually has a substantial degree of market power and then goes on and engages in conduct that results in a substantial lessening of competition because, if you have a substantial degree of market power, already the situation has occurred where there has been a substantial lessening of competition. So we need to be very careful about what we are talking about.

I will give you some examples of what is a substantial lessening of competition. Let us look at when St George merged with Westpac. The four largest banks in this country do not have a substantial degree of market power, because the test for a substantial degree of market power is the ability to raise your prices without losing customers to your competitors. If Westpac put up their rates, in theory customers could go to the Commonwealth Bank, the ANZ or the NAB—and likewise. When there was the proposal for St George to be taken over by Westpac the ACCC said:

The ACCC does not consider that there is sufficient evidence … required to show that the removal of St George as an independent player would be likely to lead to a substantial lessening of competition.

For small business, under the new test of section 46, they now have to show that not only were they damaged and run out of town by a company with a substantial degree of market power and it was done for an uncompetitive purpose, but also that that resulted in a substantial lessening of competition. This raises the bar rather than actually lowering it.

The other issue is that this new bill eliminates some of the existing sections of the act. It takes away the specific provision that we have on predatory pricing. The problem we have with the previous act when it comes to predatory pricing is that, to be guilty of an offence of predatory pricing, you must possess a substantial degree of market power at the time you engage in the act. As Justice McHugh said in the Boral case:

Conduct that is predatory in economic terms and anti-competitive may not be captured by s46 simply because the predator does not have substantial market power when it sets out on its course to deter or injure competitors. That may be because until it achieves its objective it has no substantial degree of market power. … … …

Section 46 is ill drawn to deal with claims of predatory pricing in those conditions.

That problem was fixed with section 46(1AA). We are now repealing that in its entirety. Now, under the new provisions, a company will be able to engage in conduct with a specific purpose—a predatory pricing scheme selling below cost with the intention of eliminating a competitor for the purpose of obtaining a substantial degree of market power—but, because when they engage in that conduct, if they do not have a substantial degree of market power, they are not caught by the act.

There is some concern about how this act will be interpreted. We had hearings with the Standing Committee on economics earlier this year, and the ACCC chairman suggested that the changes being made to section 46 would help him police the banking sector and stop the banks from engaging in anti-competitive conduct. He thought there was not quite enough competition in the banking sector. I asked the chairman, 'Can you tell me which bank has a substantial degree of market power, and what market that is?' We had the entire brains trust of the ACCC there, and not one of them could come up with an example of which bank had a substantial degree of market power. That is the problem and the difficulty with the current section 46. It does not apply unless a company has a substantial degree of market power. That is the issue. We are actually, in my belief, making it harder with this act to prove a breach of section 46. We are enabling a company that has a substantial degree of market power to eliminate a smaller competitor from a market by using that market power, but providing that does not result in a substantial lessening of competition; they can now do that.

That brings me to a difficult position that I have. I have concerns with this bill. However, I acknowledge that there are many in the small business community that are in support of this. I also acknowledge that the coalition took this as a policy statement to the last election, and, as a member of the Liberal Party, I stood behind that commitment. That is what people in my electorate voted for; therefore, I am compelled to support this legislation in the House. But we will see. I could be wrong. It will be a number of years until the courts determine the effect of this legislation. I hope that I am wrong.

Kelly MP fragment source (pages 80-82)

Matt Thistlethwaite MP (ALP) (27 March 2017)

Matt ThistlethwaiteMr THISTLETHWAITE (Kingsford Smith) (17:33): My Labor colleagues and I are opposed to this reform, quite simply because the effect of it will be to actually reduce competition in markets in Australia. Instead of prohibiting the misuse of market power, the overall effect of Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 will be to reduce competition in markets in Australia. The reason for that is that companies will become timid when it comes to competing on price. They will be scared away from competing on price with the threat of legal action hanging over their heads, because of the effects of discounting campaigns that they may undertake and their competitors potentially using those campaigns, under this proposed legislation, to prosecute them in the courts for misuse of market power. The overall result of this legislation is that Australian consumers will be worse off. Australian consumers will be the great losers under this legislation, because the effect of it will be to reduce competition within markets. This bill does represent, quite seriously, a threat to business across the nation and, for that reason, Labor is opposed to it.

Schedule 1 of this bill amends section 46 of the Competition and Consumer Act to prohibit a corporation with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in that market or any other market in which the corporation itself or a related body corporate supplies or acquires goods or services or is likely to acquire or supply goods or services, or any market in which the corporation indirectly supplies or acquires goods or services or is likely to supply or acquire goods or services. The objective of section 46 is to prevent firms from engaging in unilateral conduct that harms the competitive process. This requires distinguishing between vigorous competitive activity, which is desirable, and economically inefficient monopolistic practices that may exclude rivals and harm the competitive process.

This amendment is more commonly known as the effects test. It has been debated in Australia, up hill and down dale, for many decades. Those opposite like to use the example of Coles and Woolworths and the effects on farmers, but the overall effect for consumers will be that it risks business being afraid to compete, which ultimately hurts consumers and stymies growth in our economy. It will create a legal risk in that every time a business seeks to lower prices for their customers, particularly if they are getting into a competitive process with other businesses—so they get into a discounting campaign, if you like, with other businesses—the effect of that may be prohibited under this legislation, and the consumers will be the losers. The benefits of strong competition are obvious for all. When a business seeks to innovate in their space by creating a new or better product, or lowering prices made possible by lower costs, this often results in less efficient and innovative businesses becoming uncompetitive in the market. This is a natural outcome and is one that should be recognised as not inherently bad but beneficial to consumers, while also providing incentive for better business practices.

The ironic thing about this whole debate is that it appears that it is those on this side of the chamber that are arguing for freer markets, not those on the other side. The previous speaker came in here and said he was all about free markets. He raved on about the freedom of choice that members of the Liberal Party have and how, in the great Menzies tradition, they are free to vote whatever way they like on legislation. Despite the fact that he has been the number 1 opponent of an effects test over the course of the last couple of years in this place, he gets to the end of his speech—I was almost bowled over—and says that despite his opposition to this in the past he is going to vote for it this time in the House of Representatives. You cannot get any more hypocritical than the last speaker, who says that he is opposed to an effects test and he rails about the Liberal Party's philosophy of freedom of vote on this issue and then, at the end of his speech, tries to slink out of it by saying, 'By the way, I'm going to vote for it. That's the end. That's all I've got. I'm out of here', hoping that no one will notice. Hypocrisy is alive and well in the Liberal Party.

As I said, it is rather ironic that it is Labor that is supporting free markets and competition here and it is the government that is seeking to introduce more regulation, stifle competition and bind the hands of businesses in this country. What we see is a dangerous legislative process without either addressing the resources of the ACCC or making it easier for small businesses to litigate in their own private capacity.

I mentioned earlier that this issue has been debated up hill and down dale for many years. Since 1974, there have been no less than 10 inquiries in Australia into competition laws that have considered the proposal of an effects test. All of them have rejected it bar one. Every single one of those inquiries, bar one of them, has rejected it. And, of course, apart from Professor Harper's review, only one other inquiry has recommend it. In the submissions to the Harper review, the effects test has been described as 'legally unworkable', something that would 'chill competition' and something that would create uncertainty for business. Responding to the government's commitment to an effects test in July last year, the Productivity Commission was absolutely scathing of this notion, saying:

The existing competition regulation and oversight is adequate for managing concerns about abuse of market power by supermarkets and traders engaging with farm businesses.

The current focus on the potential for the misuse of market power by wholesale merchants and supermarkets engaging with farmers is not well supported by evidence.

It also said introducing an effects test was unlikely to shield farm businesses from intense competition in retail food markets, saying:

… shielding farm businesses from competition would also not be in the interests of consumers. That is at the heart of this debate.

That is what Labor is all about—increasing and enhancing competition in markets not attempting to stifle it. Competition creates downward pressure on prices and leaves consumers better off.

In reality, like so much of what this government does and says, this legislation really is about internal party politics, not what is ultimately in the best interests of Australian consumers. What you see here is the Prime Minister, Malcolm Turnbull, bending over backwards to placate the Deputy Prime Minister Barnaby. We all know that this is one of his pet issues. This is his misguided notion of economic reality and what is good for competition in Australia. On this—and this says it all about this government's approach on this issue—the National Party is determining economic policy when it comes to competition in this country. Well, God help us all! It is the Australian consumer that is going to lose out because of this because businesses will be too timid and too scared to compete with each other on price, and they will keep prices higher. The consumer will be worse off under the threat of prosecution under this legislation.

Ten out of 12 reviews of competition policy in the last 40 years have rejected an effects test as being bad policy which has the potential to drive up prices. That is the key determinant of those inquiries that have been opposed to this—drive them not down but up. This is because of an ill-thought-out and dangerous idea. Professor Harper himself concluded that the proposed test will create uncertainty. Treasury has confirmed this. The directions proposed to accompany the legislation have corrected been described by former ACCC chairman Graeme Samuel as 'bewildering'. They are bewildering. So much for providing certainty for business. So much for providing certainty for consumers and creating an environment of competition for consumers. When the former chairman of the ACCC describes the government's own guiding material on implementing this legislation as bewildering, then you know you have a problem.

In the lead-up to the last election, Labor took a different approach. We did not succumb to populist rhetoric and pressure from the National Party. Labor outlined a practical approach for preventing destructive anticompetitive behaviour with our access to justice package. This was put together—I might say, quite professionally and skilfully and in consultation with the business community—by the member for Greenway, Michelle Rowland, as the former shadow minister for small business. The difference between the Labor Party's approach and the government's approach on this is that we consulted with businesses. We actually consulted with small businesses and consumers throughout the country. All they did was listen to the Deputy Prime Minister and his misguided notion of competition and economics. Labor, listening to and consulting with small businesses, came up with what they really want, which is practical assistance to ensure that they can compete in markets and, where they feel that competition is anticompetitive, take action in tribunals and in the courts without being priced out of the market by big businesses, who can rely on big legal bills and expensive lawyers to hope that they will not have action taken against them.

Our access to justice package basically creates a level playing field. It would ensure that private litigants, small businesses and their industry representatives could better use existing legislation to prove the abuse of competition under part IV of the Competition and Consumer Act, allowing judges in the Federal Court to waive liability for adverse costs orders. So, under part IV of the Competition and Consumer Act, private litigants would be empowered to bring litigation without the crushing burden of enormous legal fees. At an early stage of a court case the private litigant would be able to request a 'no adverse costs order', preventing large legal fees of the defendant from being transferred to the litigant. Even in the lead-up to that, under our system the small business would have the opportunity to go to the small business ombudsman and get—an opinion, if you like—a determination on whether or not a 'no adverse costs order' would be in order if the action were taken. This would have the effect of changing the dynamics of small businesses and their representatives in their ability to bring private litigation. Those who misuse market power or seek to fix prices—amongst other anticompetitive practices—would be subject to closer scrutiny.

Concern continues to surround the potential for this legislation to result in intensification of legal action and the disruption of businesses' ability to move forward with certainty. This will impact on investment and jobs, and that is why Labor is opposed to this bill. This is simply policy on the run to appease elements of the National Party. It will be bad for business and bad for competition, and consumers will be worse off. That is bad policy, and that is why Labor will not support it.

Thistlthwaite MP fragment source (pages 82-84)

Sarah Henderson MP (Liberal) (27 March 2017)

Sarah HendersonMs HENDERSON (Corangamite) (17:48): It is my great pleasure to rise and speak on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 and place on record my strong support for this important reform. This is a very important reform. The bill before the parliament today to amend section 46 of the Competition and Consumer Act 2010 is all about standing up for small business, is all about ensuring there is a level playing field and is all about ensuring that we do not continue to see the sort of anticompetitive conduct, dominated by the likes of Coles and Woolworths, which has in many respects served to squash or diminish small businesses.

We have seen some dreadful examples—and where was the Labor Party? Where was the Labor Party in standing up for consumers and small businesses when we saw shocking conduct by the likes of Coles and Woolworths in demanding, unlawfully and improperly—I say a sort of corporate corruption, frankly—rebates from their suppliers that were designed to push suppliers to the wall? What we are seeing from the Labor Party is, 'Yes, the status quo is fine.' The status quo is not fine. What we heard from the member Kingsford Smith, who spoke before me, is just rubbish. As a strong Liberal, I am very proud to stand up for this reform, and the coalition is very proud to stand up for this reform, because we have seen in section 46 a provision that is not properly working.

The Harper review recommended strengthening section 46 of the act after finding that the current law regarding misuse of market power is not reliably enforceable and does not effectively target and deter anticompetitive conduct, to the detriment of Australian consumers. The government has adopted a recommendation from Harper—who did a superb job, I have to say, and I want to put on record that very important point—to create a commercially and legally robust law to prevent firms with substantial market power from engaging in conduct which harms competition in Australian markets. This is not about preventing a large supermarket chain from discounting. What we heard from the member opposite in the previous contribution is just rubbish. This is about ensuring that, whether you are a big business in this country or whether you are one of Australia's more than two million small businesses, which make up more than 97 per cent of all businesses, you can operate as a business on a level playing field. The reformed section 46 will prohibit a corporation:

… from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in markets in which they directly or indirectly participate.

Treasurer Scott Morrison made it very clear in his media statement on 1 December 2016 that:

The new provision will more effectively address anti-competitive conduct, protecting the process of competition rather than individual competitors.

He continued:

These reforms represent an important step towards ensuring Australia's competition laws are fit for purpose and support competition in a dynamic economy. They are a key part of the Government's response to the Harper Review, which is all about increasing choice and delivering better services and outcomes for Australian consumers.

This has been a pressing issue in Australian competition law over a long period of time. It has been supported very strongly by the ACCC. I have to say that Chairman Rod Sims, leading that organisation, is on balance doing a very good job of tackling these issues of failure to comply with competition law. I think he has led the way, along with the likes of Professor Allan Fels and Professor Harper, in illustrating and demonstrating that this is no longer fit for purpose.

This reform modernises competition law by simplifying it and by strengthening the protections for small businesses from economically harmful, illegitimate, anticompetitive behaviour by big firms with market power. As we know, this is done by the introduction of an effects test.

The economic case for this reform is extremely strong. No other country, except New Zealand, allows monopolists to harm competition. This is what the Labor Party is supporting: a proposition where if you have a monopoly or a duopoly, in the case of the large supermarkets, you can conduct yourself in a way that harms competition in the market. I say that because the 'misuse of market power' provision was simply not working. The threshold was too high. It was simply too onerous for a smaller business to go to court and argue that there had been a breach.

In recommending this change, Professor Harper has recommended a reform that ensures there will be continuing protection of legitimate competitive behaviour, which is why I say to members opposite that it is just absolutely wrong and improper to argue that this will prevent some sort of healthy discounting in the market. I think history will prove me to be correct on that important point. It recognises that the line between competitive and anticompetitive behaviour is not drawn by having a purpose test but by having a proper economic test. We know that this is opposed by sections of big business, but it is strongly supported by small business, farmers and consumers.

I want to reflect on the contribution I made on this issue on 3 March last year, when I congratulated the 20 industry bodies calling on our government to amend section 46. Let me mention some of these bodies, all coming together to say that the current law is not working. As I mentioned when I started my contribution, we have seen some terrible examples of abuse of competition law from the likes of Coles and Woolworths, which basically, almost frankly, tried to blackmail their suppliers by demanding, improperly, rebates. Some of the conduct has been terrible. Coles and Woolworths have had legal repercussions. In Coles' case, in fact, it incurred a fine of some $10 million.

We will not tolerate this. We will not tolerate a legal system that allows this to happen. Where the law requires strengthening we will firmly stand behind all businesses, big and small, to ensure that we have a robust market. That is the essence of a free market. It is not to protect the big boys. It is not to protect those who have the power. The essence of a free market is in protecting competition and in standing up when there is anticompetitive conduct in the market. I want to reflect on the alliance of bodies that called for reform—so it is simply not true that most voices are against this reform: the Australasian Convenience and Petroleum Marketers Association, the Australian Chamber of Commerce and Industry, the Australian Booksellers Association, the Australian Hotels Association, the Australian Retailers Association, Australian Dairy Farmers, the Australian Newsagents' Federation, the hairdressing association, the Commercial Asset Finance Brokers Association, the Convenience and Mixed Business Association, Fresh Markets Australia, the Central Markets Association of Australia, MGA Independent Retailers, Independent Contractors Australia, the Motor Trades Association—the list goes on and on.

The current provision simply is not working. I want to put on the record that I consider it to be disgraceful that the Labor Party is not supporting a change in this provision. We are seeing once again a case of the Labor Party saying one thing and doing another—we have sent it on the issue of penalty rates. Might I say that I do want to question the Labor Party's motivation. We all know—and we have had a lot of evidence on this before this parliament in recent weeks—about some of the dirty deals that are being done where young workers have had their penalty rates stripped from them altogether because of deals between the likes of the SDA union, the shoppers union, which is one of the most powerful unions in the country, and the likes of McDonalds, KFC, Woolworths and Coles. There is absolutely no doubt that Labor, metaphorically, is firmly in bed with these large companies and I find it a disgrace that the Labor Party is not prepared to stand up for fair competition and not prepared to stand up for our farmers, our consumers and our small businesses.

So, how ironic is it—and everyone in this parliament knows—that the Labor Party have been doing these deals? That is why they are not backing this reform—because they are in bed with the likes of Woolworths and Coles and other large employers. That is why we have introduced our corrupting benefits bill—because we have heard much evidence in this parliament in recent weeks about the inappropriate payments that have been received by unions, which just coincidentally happened to occur at the same time as these EBAs have been negotiated, EBAs that have left young workers in McDonald's receiving something like $26 an hour on a Sunday with no penalty rates whatsoever and other businesses and other workers being paid at least $10 more an hour. That is what the Labor Party is doing out there in the workplace: dirty deals in conjunction with unions like the SDA. And this is the result. So, we need to look behind what the Labor Party is saying tonight in this debate and we need to see their motivation.

I make the same point on multinational tax avoidance—again, a case of the Labor Party saying one thing and doing another. It is another failure by the Labor Party to stand up for those big multinational companies who were ripping off Australian workers. And it is an absolute disgrace that the Labor Party has opposed our measures to combat multinational tax avoidance, again backing their mates. Frankly, I know—and we all know in this parliament—that there is a great deal of embarrassment by Labor members that they did not support that particular bill, which has now resulted in our government collecting $2 billion in tax liabilities from multinationals, which has come from a range of sectors in the energy, resources and e-commerce sectors by the Australian Taxation Office.

So, when we hear about hypocrisy, look no further than this Labor Party—a Labor Party that does not have the guts, does not have the courage, to stand up to the big boys in town and say 'Enough is enough.' And as I say, we did not hear those voices when Coles and Woolworths were systematically ripping off hardworking men and women who had spent a lifetime building up their business. And even after that conduct, even after they had been caught, even after they had been fined, even after they had paid their penalty, I was getting complaints into my office; there were still stories of suppliers being told what they had to do and not do when it came to repaying Coles and Woolworths with their sleazy rebates.

So, I say, on behalf of the Turnbull government, that I am very proud of this reform. This shows that we are determined to stand up for all businesses. This shows that we are determined to stand up for jobs. I commend this bill to the House.

Henderson MP fragment source (pages 84-86)

Graham Perrett MP (ALP) (27 March 2017)

Graham PerrettMr PERRETT (Moreton—Opposition Whip) (18:03): I rise to speak on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016. And just before I get into the substance of the legislation, for the benefit of those listening I want to explain parliamentary processes. There is normally one speaker from the government side and then one speaker from the opposition side. I just want to be clear that I am a member of the Labor Party speaking now. The previous speakers are actually speaking on behalf of the government about the Competition and Consumer Amendment (Misuse of Market Power) Bill. I say that up-front, because I just want to be sure that people understand what the government is proposing.

I remember—not ancient history, but I remember—a government that said 'We will be elected on a platform of jobs and growth.' That was what they talked about. And the other big thing, the great vision of the Abbott-Turnbull government, which they articulated over three years—and I remember the speeches from those opposite—was about red tape reduction. That was their great vision for the 21st century: jobs and growth, innovation and red tape reduction. Well, what do we have here? This bill that the government members are speaking in favour of does exactly the opposite of what the Abbott-Turnbull government promised. It will deter job-creating investment in Australia.

What does this bill do? It introduces the effects test into the Australian consumer law. To be clear, this is an additional test to the current purpose test already in section 46 of the Competition and Consumer Act. Yes, it is correct. The Liberal Party is advocating more red tape when it comes to consumer law—yes. That is why I wanted to be sure that people at home who were listening understood. And what are the dangers associated with this economic policy? Surely if it is designed to protect consumers it would be worth having a look at, because all sensible governments will look at things that protect consumers and also obviously have a look at our agricultural producers.

I will go to the words of a former Liberal Treasurer, pretty well known. I think he was in the job for about 12 years. He did not quite have the ticker to go to A grade but as a Treasurer he had 12 years of experience. He is the pin-up boy for the Liberal Party. Former Treasurer Peter Costello has said:

The so-called effects test is designed to protect competitors, particularly less efficient ones, from a competitive challenge.

That is Peter Costello. Well, let's have a look at what this legislation means for businesses. It is not the purpose for which a business undertakes an action but the effect that the action has on competition. For example, a retail chain wanting to expand by opening a new store may very likely be advised by their legal team that taking that step—a step that would create new jobs—might attract litigation under the effects test. Businesses would need to think twice before undertaking any capital expenditure. That would cost hundreds of construction jobs and ongoing retail jobs each time a business decides it is not worth the risk.

Wesfarmers—and I declare up-front, as I do on my register of interests, that I have shares in Wesfarmers, as many mums and dads around Australia do—the largest employer in Australia, each year looks at 20 new Bunnings warehouses, 30 new Coles supermarkets and 20 new Kmart stores. Richard Goyder, the managing director of Wesfarmers, wonders how this proposal to change Australia's consumer laws will affect the growth of their company. And remember: Wesfarmers are an international business, with Bunnings stores in the United Kingdom and beyond, so they know how to compete on the world stage. Richard Goyder said:

… does that mean now every time we have a capital expenditure proposal come to us that we've got to look at the likely effect on competition?

I know there are problems with Coles and Woolworths in terms of selling food and grocery items. And I know that, wherever there is competition in a suburb, Coles and Woolies will actually be cheaper; so the competition is a good thing. But we have to be very careful about bringing in expensive red tape.

Even small business is concerned about this proposal that the party of markets has put to the chamber. The Council of Small Business Australia has raised concerns that the laws will lead to a lawyers' picnic, as litigation around the meaning of the wording could lead to complex court cases. I am all for lawyers having a job, Mr Deputy Speaker Vasta, and I know your family is well connected with Brisbane's legal fraternity. But we have to invest in markets that produce lower prices wherever possible. Small businesses are the ones who are supposed to benefit from this crazy policy straight out of the Deputy Prime Minister's thought bubble. But even small business thinks it is a crazy policy.

As I said, the only people who will benefit from this legislation are lawyers. And I do not have anything against lawyers. I see a few of them in the chamber. I would not say a bad word against them; they do a valuable job. But it is bound to cause a raft of litigation. Obviously lawyers have to work, but why create extra red tape—especially when you have retailed your politics to the Australian people for so long, in the 45th Parliament, saying that there are going to be red-tape-reduction days with celebrations throughout. And now you are bringing in more red tape.

Sadly, what does red tape mean? I do not want to quote back to them those speeches that I heard day after day from those opposite, but red tape means that the real losers in this policy will be the consumers—the mums and dads who are already battling to put food on the table each and every week, as we see a 75-year rise in inequality and wages growth at the lowest level of increase since they started measuring wage growth. So we know families are doing it tougher. Why would you bring in more red tape so that every food item you buy is going to be more expensive?

On the day the policy was announced, the Deputy Prime Minister, Barnaby Joyce, said that selling milk for $1 a litre was too low and the price should be higher. Obviously, this was the National Party looking after dairy farmers. That is a good thing. We all do what we can to support our dairy farmers in terms of buying milk. But, in the same press conference, he said that in China Australian milk sells for up to $11 a litre. So how much does the Deputy Prime Minister think Australians should pay for their milk?

Ms Butler: $11!

Mr PERRETT: Is it $11? I will take that interjection from the member for Griffith. There is no doubt that if this bill is passed and the new test becomes law then consumers will pay more for their everyday living expenses, as I said, at a time when wages growth is flat to negative and inequality is at its highest level since World War II—not a great combination. There is no way around that. Reducing competition means higher prices.

So the effects test has been floating around as a policy idea for many, many decades. Since as far back as 1974, we have had various inquiries which have considered an effects test. In fact, 10 inquiries since 1974 have looked at an effects test. And all of them have rejected it, apart from the Harper review. That is the only inquiry that has ever actually recommended an effects test.

Let us look at some of the evidence the Harper review received. Some said that it was legally unworkable, something that would chill competition and something that would create uncertainty for business. These are not the sorts of conditions that the Liberal Party should be championing. These are not the sorts of conditions that will promote investment. These are not conditions that will create jobs at all. They will just create more unnecessary red tape and be a barrier to business development.

Liberal members, especially those who have spoken on those red tape celebration days, have also, in the past, been critical of the effects test. Let us have a look at them. There is the former Minister for Trade and Investment, Andrew Robb; he knows a little bit about competition; he opposed the test. The former Treasurer, Joe Hockey, also opposed the test. Craig Kelly, the member for Hughes, has said:

It is not an effects test; its effect is to substantially lessen competition. It is not what you think it is … it is a Trojan Horse.

I am sure that Mr Kelly, a man of his word, will vote against this piece of legislation! Like any Liberal member, he is able to make up his mind every time he votes, so I am sure he will cross the floor on this and be true to his own words! In fact, current cabinet members Senators George Brandis and Mathias Cormann, from the other place, have been reported as being against the effects test. Even the Prime Minister himself has previously been critical of the effects test.

So this is yet another example of a Turnbull government backflip when it comes to saving the Prime Minister's job. This crazy harbourside-hillbilly alliance will actually do damage to the country. It is not a policy that is being driven by the good of the economy; it is a policy that is being driven solely to satisfy the unrest in the coalition government.

Well, what is the alternative? Labor has a policy that will encourage competition and be good for small business—the sensible middle way. We know that jobs and growth actually, fair dinkum, come from small businesses. So Labor's plan is to encourage private litigation under part IV of the Competition and Consumer Act, where cases are in the public interest. This policy will allow private litigants who can demonstrate the merits of their claims against anti-competitive behaviour to access the courts without the risk of liability if their claim fails.

Labor will also boost the funding to the small business ombudsman. The small business ombudsman will be able to assess the merits of a litigant's case so that businesses will have a better understanding of the likelihood of their claims' success.

Labor has a good record on pro-consumer and pro-competition policy. In fact, before the 2016 election, the Labor Party introduced a suite of policies, including an increase in the civil penalties under the Australian Consumer Law from $1.1 million up to $10 million, bringing penalties in line with the competition provisions of the Competition and Consumer Act. We adopted the EU's penalty system for anti-competitive conduct, which is based on 30 per cent of the annual sales of the relevant product or service, multiplied by the number of years the infringement took place, limited to the greater amount of 10 per cent of annual turnover or $10 million—so, a bigger stick.

We would use some of the revenues from increased penalties to increase the ACCC's litigation budget from its current level of $24.5 million to a maximum of twice that level, at $49 million. We would amend the Competition and Consumer Act 2010 to give a 'market studies' function to the ACCC so that it can explore public interest issues such as pricing discrepancies and increased market concentration. We would amend section 76 of the Competition and Consumer Act to allow the court to apply higher penalties for conduct that targets or disproportionately impacts disadvantaged Australians. We would include a requirement in the Competition and Consumer Act that the ACCC prioritise investigations of conduct that targets or disproportionately impacts disadvantaged Australians.

The Labor Party is happy to bring positive ideas to the table. The Labor Party would task government to investigate the impacts of increased market concentration on income inequality in Australia and produce policy recommendations on how the negative effects of market concentration can be mitigated. We would encourage states and territories to include competition principles in planning and zoning legislation, as recommended by the Harper review, with a specific focus on shortfalls of appropriately-zoned land for key services in disadvantaged communities. We all know that, if you do not have an effective market when it comes to landlords, in terms of Coles and Woolies, that can actually increase the rents and increase the prices that consumers pay. The Labor Party is fair dinkum about protecting competition and, obviously, if you have competition, that is good for consumers.

When I go for a morning walk around Canberra, I see the most animated Liberal in Canberra—that is, Bob Menzies' statue. He actually believed in markets; now we are seeing the people opposite, the party of government, bring in red tape and more cost for consumers. We know that healthy competition is important, that consumer confidence is important and, more importantly, that business investment is important. Labor understands this and Labor's policies will promote all three of these outcomes. The government's policy will do the opposite; it is designed to stifle competition, which will have a negative effect on business investment. As an illustration of how crucial these economic components are, I will read an extract from a letter dated 10 March 2017 from the Institute of Public Affairs. They label themselves as the premier free-market think tank, 'dedicated to preserving and strengthening the foundations of economic and political freedom'. This might be the last time that I ever quote the IPA, but their letter says: 'Business investment as a percentage of GDP is now below Whitlam-era levels, and it is forecast to fall further. This is a key factor undermining labour productivity and wage growth, which is currently at a record low.' When the 'premier free-market think tank' is concerned that business investment is too low and falling further and the Turnbull government is advocating for a policy that will deter business investment, you know that there is something wrong.

The Turnbull government have failed at the very task that they set for themselves: to create jobs and growth and to get rid of red tape. They set the standard and they have failed their own test. Employment conditions have deteriorated so much that they are now worse than at any time since the peak of the global financial crisis. This policy before the chamber will only make things worse. It is a dangerous economic policy at a time when we should be very careful about the direction that the ship of state is taking. As I said, this policy is not going to be good for consumers at a time when they are really under the hammer; wages growth is low and economic conditions are not ready for this legislation.

Perret MP fragment source (from p 86)

Terri Butler MP (ALP) (27 March 2017)

Terri ButlerMs BUTLER (Griffith) (18:18): When we heard the 'jobs and growth' slogan during the last federal election, who knew the real meaning of it? Who knew that what the Prime Minister was really talking about was jobs for lawyers and growth in litigation? That is what the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 delivers. I guess in that strange, perverse way, this legislation is delivering on the jobs and growth slogan that the government repeated ad nauseam—almost to the point where people in Australia were ready to stick their fingers in their ears to avoid having to hear that phrase one more time—during the federal election. What have they actually delivered when it comes to jobs and growth? Not very much. Underemployment is at record levels. We have been keeping records since 1978, and underemployment is at record levels for that period, with 1.1 million Australians who cannot get enough work. This bill will not do anything for those Australians and nor will it do anything for those Australians who are presently on the unemployment line—about 750,000 of them.

Nor will it do anything for growth; in fact, if anything, it is at risk of putting a handbrake on growth, because of course growth will depend on increases in productivity and increases in innovation, both in big and small firms. If you are looking over your shoulder every time you are thinking about an innovation, it makes it much harder to innovate. If you are looking over your shoulder wondering whether a regulator or an individual is going to bring proceedings against you, because the effect of the innovation making your firm better able to compete against its competitors could possibly be to substantially lessen competition by making it harder for others to compete against you—in other words, if your innovation is going to make your firm amazing and leave other firms being just average—if you are worried about whether or not that is going to get you sued, then of course that is going to be something that will make you think twice before deciding whether to invest in that innovation and before deciding whether to pursue that innovation. A test that focuses on the effect of conduct rather than the intention behind it has every risk of putting people in a position where, through no malicious intent, through no attempt to try to crush their competitors—other than through the ordinary ways in which everybody wants to make a profit and make their own firm the best it can be—through no malice at all, they have to be worried about the unintended effect of substantially lessening competition in a market.

I should say that I have a lot of sympathy for people who are concerned about whether the purpose test is adequate. I understand the difficulties that people have in proving the purpose or intention of someone else in legal proceedings. I certainly do not dismiss those concerns whatsoever. I understand that when you are trying to prove that somebody else had an intention to substantially lessen competition, if that was the purpose of their conduct, that can be a very difficult thing for regulators or private litigants to have to prove, and I certainly do not think that anybody would claim that the current legislation is perfect. For that reason, I certainly understand the concerns of the Council of Small Businesses and, particularly, of Peter Strong, who is the CEO of the Council of Small Businesses. He is a remarkable advocate for small business in this country and he is just tireless; he works very hard and he is always persuasive. I certainly understand the concern that he and his members have in relation to the difficulties facing small business. They are seeking to make sure that anti-competitive behaviour is not engaged in by others to their detriment. But that does not mean we should supplement a purpose based test with a test like the one being proposed now by the coalition government. It will put a handbrake on innovation, a handbrake on productivity improvements and, very possibly, a handbrake on growth.

Instead, we should be making it easier for small businesses to be empowered and making life easier for small businesses. Quite clearly, the bipartisan view in this place is to make life easier for small business. For example, it is why Labor have been so clear that we are committed to tax cuts for small businesses. It is why Wayne Swan introduced the instant asset write-off provisions for small businesses that, unfortunately, the government decided to scrap when they came to office. When they finally—and quite rightly—reinstated the instant asset write-off, it was a tacit admission of the foolhardiness of the decision to scrap it in the first place. But I think there is, by and large, a very clear bipartisanship in relation to making life easier for small business.

Most people in this place will have worked in small business, will have been proprietors of small business or will have had connection with small business. For example, my mum started her own small business when I was still at school. I still remember what it was like after school—going down to the new shop, getting it painted and getting the signage organised. It was a family effort. My father was working at the post office at the time, so he fitted in getting the business up and running around his paid employment. It was a really exciting time for our family, and it was building on a family tradition of small business. My grandparents had opened a newsagent and had then gone on to open a really successful plan-printing business. My mum's sister—my aunt—and her husband started a refrigeration business. My other aunt—mum's other sister—started a business in body corporate management much later on. Our family is very much a small-business family. So I really understand some of the challenges for small business—how hard it can be and how difficult it can be to understand, or just to get the time to think about, all of the different things you have to do. There are all of the challenges—marketing and making sure your employees are doing what they should be doing, while at the same time making sure you comply with legislation, pay the tax on time and all of those things.

I certainly do not stand here in any way dismissing or rejecting the concerns that small business have about the possibility of big players misusing market power in order to substantially lessen competition. But that does not necessitate the conclusion that we should introduce an additional layer of complexity. People have called it red tape, but it is really an additional layer of complexity in our competition laws that will create a whole new set of jurisprudence that is foreign to Australian jurisprudence. It will also create a new level of risk aversion in Australian business, with people being very concerned about the unintended but potentially very real effects of decisions that they make.

As a Labor person, I want to see greater competition. I think that the effects test idea has the real risk of actually lessening competition, of making it less likely that firms will take innovative steps and seek to improve their productivity because of the possible risk of inadvertently running foul of these laws. I also want to see innovation. Labor took to the federal election a comprehensive suite of strong innovation policies aimed at fostering the start-up sector, the start-up ecosystem, in this country. We took to the election our policies for tax relief for angel and early-stage investment, for promoting venture capital in this country and for making sure that people could get the talent they needed by reforming immigration laws and visas and by making sure that all of the start-ups in this country had a real voice and real opportunities to grow, to scale up and to become global. That was the passion behind the innovation policy that Labor took to the federal election. It is something that I am very concerned about too. We want to see a strongly innovative nation, not just in the high-growth start-up sector and in tech firms but also in big firms that want to innovate, that want to make their processes better and that want to do better.

A really good example comes to mind. I had the benefit of chatting to someone from Swisse, who have been doing a lot of work in advanced manufacturing in Australia because of the quality and the reputation that we have as Australians. As a consequence of their innovation and high-quality standards, they are able to create real jobs here in Australia because of the exporting that they are doing now—to China, in particular. I do not want big firms like that having to worry about whether the steps they are taking to scale up their enterprises—even very big enterprises scaling up beyond our borders and becoming global firms—will inadvertently breach Australia's competition laws if the effect of their becoming better is to substantially lessen competition in the market. I certainly do not want high-growth start-ups, in the context of thinking about scaling up, having to worry about whether they might inadvertently breach an effects test.

As I was saying a little earlier, those sorts of highly innovative firms are the firms we are going to be turning to to really innovate and find ways for Australian businesses to become more productive. That is the last thing we should be doing right now, at a time when, globally, economists are saying, 'Where is productivity going to come from?' We are in a low-growth world. The recovery from the global financial crisis has been slower than people predicted at the time. We are looking around for sources of innovation and productivity improvement. The last thing we should be doing is implementing any sort of legislation that might put a handbrake on innovation, that might put a handbrake on productivity improvements. It is not just Australia; the whole developed world is finding it really difficult to see where additional productivity improvements and economic growth are going to come from.

In the face of that challenge, we as a parliament should be working together to think about what we can do to set the right conditions so that firms can innovate. There are all manner of things that we should be talking about rather than this effects test. For example, one of the committees of the parliament heard recently from representatives of the creative arts and the creative industries about the importance of injecting creativity into our national economic debate, in relation to both supporting existing firms and to partnering with universities, start-ups, incubators and accelerators to make sure that the nation's creative talents are being harnessed and tapped, with a view to improving the benefits that we get from blending creativity with, for example, technological skills or business skills. That would be a much better use of the parliament's time than debating the effects test.

Similarly, we are about to hear, over the coming months, about where the start-up sector is in this country—where the ecosystem is. There have been calls for things like, for example, copyright reform. There are some really thorny, difficult issues in relation to copyright reform that would benefit from further debate, discussion and elucidation in this place. That would actually contribute, or could have the potential to contribute, to innovation and productivity to a much greater extent than this potentially harmful legislation we are talking about here today.

We should also be not just considering how we get more productivity enhancements and how we increase innovation in our economy but also thinking about the impact on our economy of legislation that could potentially have an impact on consumption. One of the key criticisms that Labor has made of this bill is that could potentially put up consumer prices, especially for everyday consumer goods. Labor has been very concerned that an unintended consequence of this bill—although it was perhaps anticipated, given the Deputy Prime Minister's comments about the price of milk that the member for Moreton talked about previously—would be to push up consumer prices. Because, when we talk about competition policy, the whole purpose of making sure that we have a good, strong competition policy—or at least the Labor purpose, and you will remember that it was really Labor that drove the early days of competition policy in this country—is to favour the interests of consumers. So if this bill was to put up consumer prices, particularly for everyday goods, that would be an adverse outcome of the legislation for consumers. But it would also, unfortunately, have the effect that they might be a bit less likely to consume, or they might consume a little bit less, and that is the last thing that we want to be promoting at this point.

I mentioned the Deputy Prime Minister before. I really think that this bill is a great example, if one were to be needed, of just how beholden this government is to the National Party economic agenda. This bill suggests that it is the Deputy Prime Minister who is running the economic policy for the government, not, for example, the Prime Minister or the Treasurer. This is very much a measure that is pursued by the National Party. It is something that the Prime Minister himself has not supported in the past. It is something that almost every major review into competition law has opposed in the past. The government might want to reflect on the success or otherwise of having the National Party driving the agenda for this government; it certainly has not worked out well for them in other areas. If you let the Deputy Prime Minister run the show then you end up moving probably every government agency to his electorate, with each move having a benefit-cost ratio of less than one. You would end up having someone who cannot work out the difference between regional Victoria and inner-city Brisbane running the economic policy. I am not sure how well that would go for the nation. I do not think that turning to the Deputy Prime Minister for your economic policy is the right way to go. (Time expired)

Butler MP fragment source (from p 88)

Stephen Jones MP (ALP) (27 March 2017)

Stephen JonesMr STEPHEN JONES (Whitlam) (18:33): The Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 is as confused and incoherent as the government and the Prime Minister himself. Most of the debate within the chamber today has focused on schedule 1 of the bill, which proposes to amend section 46 of the Competition and Consumer Act to introduce an effects test that looks at whether conduct engaged in by a firm with a substantial degree of market power has the purpose or effect, or is likely to have the purpose or effect, of substantially lessening competition.

I want to focus on schedule 2 of the bill. It has not had a lot of focus in this debate, but it is important, because schedule 2 of the bill goes on to propose the repeal of telecommunication-specific anti-competitive conduct in part XIB of the Competition and Consumer Act—a longstanding and very effective regime, which has ensured a greater degree of competition within this industry. I want to foreshadow now that if the government does not come to its senses and back away from this reckless piece of legislation, and if the bill moves from this place to the other place then we will be moving amendments to restore the provisions in part XIB when this bill reaches the Senate. Let me make the case for why that is critical.

On the one hand, the government claims it wants to strengthen competition law through the introduction of a general effects test, a short-sighted and dangerous piece of legislation which is legally unworkable, will chill competition and create uncertainty for business. This has the same effect that it did when at least 10 inquiries since 1974 have considered and rejected it. That is right: 10 inquiries have considered this and they have rejected it. But the Prime Minister, a man who has no advisers, because he is always the smartest man in the room, is pushing this reckless, senseless piece of legislation into the chamber today. We hope that he comes to his senses, but, if he does not, we need to rescue something from the ashes of this reckless path.

On the other hand, through schedule 2 of this bill, the government, through its misguided repeal of part XIB, wants to strip away a regime which is tried, true and tested. This is the provision which applies specifically to the telecommunications sector, a sector which has long been at the epicentre of competition disputes. The government would like us to believe that important features of the telecommunication competition regime have been used less over time and that means that they should be repealed—that is, this was a strongly litigated and strongly used piece of legislation when it was originally introduced and that is true but, because it is used less now, we do not need it any more. We argue something different. In fact, this is a very clear reflection of an ex ante regulation working not only in the interests of the industry but, more importantly, in the interests of consumers. The inconsistency in the intent of this bill is just another example of the lack of policy direction that has been plaguing the Turnbull government since its inception.

I want to focus on part XIB. Telecommunication services are one of the key drivers of productivity and growth in the Australian economy. The connectivity afforded by communications networks breaks down the barriers of distance and helps unlock the economic and social potential of the nation by providing all with a stake in society. The centrality of communications to the lives of Australians emphasises the importance of having well-designed competition regulation in the telecommunications sector, and I hope this is a point which is not lost on this parliament. I would like to quote the CEO of the Council of Small Business Australia in comments that were published on 20 November last year:

While there has been plenty of discussion in recent years about the dominance of the banks, the major supermarkets and the big retailers, Australia's telecommunications sector is arguably the worst example of a major failure in competition laws and policy …

I also note that on 5 September last year the ACCC announced it had commenced a market study of the communications sector, with the view of ensuring that implications of developments in the sector are well understood and of identifying issues that prevent relevant markets from delivering outcomes in the interests of consumers. This begs the question: if the government is so confident that the state of competition in the telecommunications sector is such that it warrants the repeal of longstanding and successful legislation, why is the ACCC devoting considerable and scarce resources to a market study of this very sector? If everything is going so swimmingly and we can repeal these provisions in part XIB, why has the ACCC launched a major investigation of regulation within this sector?

The NBN wholesale market indicators report released by the ACCC on 2 February this year also illustrates that structural separation and the market transition to the NBN is an ongoing issue. According to the NBN wholesale indicators, Telstra had almost 51 per cent of the market share for fixed-line services in operation over the NBN at the end of 2016. This has been achieved in the presence of 148 other access seekers of the NBN and the level playing field that it affords. In comparison, Telstra was reported to have nationwide fixed-line broadband market share of 44 per cent in June 2009. Not much has changed over that period. If anything, Telstra has concentrated its market share. In the mobile sector, Telstra was estimated to have a market share of 45 per cent in mid-2016, in comparison with its 42 per cent market share in June 2009.

To be clear, these examples of increasing market share are not to say that the state of competition in the telecommunications sector has not improved or that it is worse than it was before. Rather, it highlights that the impacts of structural separation, transition to the NBN and the broader evolution of the communications sector on the distribution of market power are not yet wholly understood, nor has there been sufficient time for such changes to diffuse through the market. For these reasons alone, it is irresponsible of the Turnbull government to remove tried, true and tested competition safeguards in the telecommunications sector.

I want to talk about how part XIB of the Competition and Consumer Act actually works, because I suspect the majority of members who are going to pile into this chamber very soon and vote in favour of its removal do not have the slightest clue about what they are about to vote for. The introduction of part XIB in 1997 was intended to supplement section 46 of the act by increasing the ability of the ACCC to respond quickly to evidence of anticompetitive conduct in telecommunications markets.

Broadly, the part XIB regime is composed of two limbs. The first is the competition rule, which broadly defines anticompetitive conduct. There are two circumstances where a carrier, a carriage service provider or a content service provider would be considered to have contravened the competition rule. One circumstance is where a carrier or CSP takes advantage of a substantial degree of market power in a telecommunications market, with the effect, or likely effect, of substantially lessening competition in that or any other telecommunications market. The other is where a carrier or CSP engages in conduct relating to a telecommunications market that contravenes the general anticompetitive conduct provisions in part IV of the Competition and Consumer Act, which, of course, includes section 46. The second limb of XIB is the competition notice regime. This is where the teeth start to bite. It enables the ACCC to respond quickly and issue competition notices where it has reason to believe that anticompetitive conduct has occurred. Substantial penalties will apply if a court subsequently finds that this has been the case and that, in fact, anticompetitive behaviour has occurred.

These two elements combine to provide a very strong deterrent against anticompetitive conduct as well as very fast mechanisms for the competition regulator to respond when suspected issues arise. These powers have been entirely appropriate for a sector with very high levels of market concentration and a unique level of interdependency amongst competing firms relative to other sectors of the economy. Simply put, part XIB is working. It is good for competition and it is good for consumers, and the government today should not be scrapping this provision in the act. That is why it exists.

Let's see how part XIB has worked. Since the introduction in 1997, the ACCC has issued five part A competition notices. In 2005-06 alone the ACCC conducted 11 investigations into anticompetitive conduct. The issues investigated in this period included: alleged anticompetitive conduct in relation to the wholesale and retail pricing of line rental, something very dear to most consumers throughout the country; alleged anticompetitive conduct in relation to the retail and wholesale pricing for bundled services, including broadband, local call services and long-distance call services. Then there was an investigation into carriers introducing new retail products to the market before they were available on a wholesale basis to their wholesale customers; and carriers denying or restricting access to retail mobile services used in conjunction with fixed cellular terminals. There was another investigation into alleged resale price maintenance in relation to wireless broadband services; and there was an investigation into alleged anticompetitive conduct in relation to corporate and government telecommunications services.

What all of these investigations prove is that, when the regulatory gaze is upon the industry, behaviour changes. The ACCC itself noted in relation to some of these investigations that 'the alleged conduct either ceased or changed following the ACCC's inquiries'. There you have it, Deputy Speaker: far from being the case where only litigation corrects or changes behaviour, the mere intervention of an activist regulator conducting inquiries or investigations changes the behaviour of the market players. Who benefits? The consumer—the consumer benefits.

The last Part A competition notice formally issued by the ACCC was in April 2006 in relation to a Telstra wholesale line rental price increase for basic telephony services. At the time of the price increase for wholesale access, there was no corresponding increase to the retail price. This left competitors dependent on the wholesale service at a disadvantage. It was an unacceptable proposition for the competition regulator, who subsequently took action. In its report on telecommunications competition safeguards shortly thereafter, the ACCC noted the complexity of the task before them in building the case. It said:

Investigating alleged price squeezes is a highly involved process, involving the collection and analysis of extensive costing, pricing and other material from industry participants, and assessing that material against the complex economics and jurisprudence relating to misuse of market power and the lessening of competition.

The history of the use of Part X1B and other relevant parts of the act, which in a few short moments are going to be stripped from this act, if the government gets its way, shows that there is indeed an ongoing need for these industry-specific provisions within the act and an ongoing need for an activist regulator which has built up industry-specific knowledge and expertise to ask the right questions, conduct the right investigations and ensure that we have an industry which is structured in a way that delivers highly-competitive, quality services to the end users in the telecommunications industry. The luddites over there might not understand what they are about to vote for, but I can tell you that, if they vote these provisions out of the act, it will be consumers who suffer at the end of the day.

Jones MP fragment source (from p 91)

Adam Bandt MP (Greens) (27 March 2017)

Adam BandtMr BANDT (Melbourne) (18:48): The Greens went to the last election calling for an effects test to be put into our competition law. We have been taking on the Coles and Woolies of politics and we have also been taking on Coles and Woolies. We have heard story after story from small businesses and from individuals who have been put under undue pressure by big corporations with ties to the old political parties in this country. We know, as every customer and consumer knows, that in Australia at the moment the big companies, especially in areas like groceries with the actual Coles and Woolies, have too much power. They are able to wield that power down the line to make their producers produce in a certain way, at certain prices and at certain times in a way that makes life pretty difficult for the farmer or the producer at the end and in a way that makes it very difficult for small businesses to intervene and compete. They have also been able to use that market power to get others out from under them so that they cannot come in and compete with them. That hurts the people who want to set up in competition to Coles and Woolies or who might want to set up a small business with the aim of one day turning their small business into a big business or perhaps just keeping their small business as a small business.

We know that the law at the moment places far too high a hurdle in front of any small business that wants to complain about the way that these big companies are using their market power. What they have to do under the current law is to say, 'Big companies, you are using your power to squeeze us out of the market and make our life unviable, not just as part of the cut and thrust of normal competition. You are misusing your market power in a way that is designed to eliminate us, but you are using it for the purpose of eliminating us. You are not using it for the purpose of increasing competition or keeping prices low or bringing new products on line, but you are doing it for the purpose of putting us out of business or of lessening competition in some other way.' That is a pretty high hurdle for any small business to jump over, because it asks them to read the minds of the people sitting around the boardrooms of Coles and Woolies and to get them to prove that they had a particular intent in their minds and then come to court and litigate it and win that litigation. That is something that is very difficult, if not impossible, to do for most small businesses in this country.

The reason we have been calling for an effects test is that what has to be demonstrated is not the purpose or the reading of the minds of board directors or the sales managers or the marketing managers of Coles and Woolies, but actually looking at the effect of their actions in practice. If it has had the effect of substantially lessening competition and forcing them out, they should be held to account for it. That is why, for quite some time, we have campaigned for an effects test. But it is interesting to come into this chamber now and hear this debate, because hearing the Labor opposition talking about it, they are conducting this debate like Liberals. The Labor Party is sounding like the Liberals, because they are getting up and talking about the importance of pure, unfettered competition that cannot be intervened in at all by legislation. They are saying that by and large things work fine as they are at the moment—there is no problem with what Coles and Woolies are doing. Maybe that is tied to the donations they make; maybe it is tied to other arrangements that Coles and Woolies have with other parties that make donations. I do not know. But it is odd listening to the Labor Party come in one after another and say that we have to preserve pure competition and economic rationalism, especially when it has delivered such a raw deal for consumers, small businesses and small producers around this country.

Labor is acting like the Liberals, but the Liberals have gone missing in action on this a bit. There has been a high proportion of National Party MPs on the speaking list and a smaller proportion of Liberals. This is something that the National Party was able to secure from the current Prime Minister. To that extent, good on them for getting a reform that is not about doing farmers over by having more coal seam gas extraction on their land and giving farmers fewer rights than they currently have. Good on them for getting a reform out of the government that might actually do something for small producers that want to take on Coles and Woolies or their equivalent in other areas.

But—there is a but—I say this to the National Party members of this House who have been able to secure this arrangement: have a close look at the bill, because one of the concerns that we have is that the government is so intent on being seen to pass it but not actually passing it that they have buried a couple of traps in there. One of those has been something that the members of the opposition have drawn attention to, which is the effect that this is going to have on telecommunications. On our quick, first reading, this will take out some provisions of legislation that provide ways of dealing with competition issues in the telecommunications sector. It is not immediately apparent why this bill needs to do that. It would have been interesting if the opposition had come along and moved an amendment to take that part of the bill out. They have not done that, so maybe they do not feel that passionate about it. They feel about it from the perspective of speaking about it, but they have not moved an amendment to take that part out of the bill. But it is an issue. We are going to need to give this a bit of scrutiny as it progresses through this parliament. If what is being done is bundling up in what could be a very good piece of legislation about introducing an effects test some other matters that might, either by design or intent, by purpose or effect, slow things down in the Senate, that would be of concern.

I would urge those National Party MPs, who seem to have some sway over what this Prime Minister and government do, to listen to the concerns that have been raised so that this bill, or a version of this bill, can get through the Senate in a way that puts a proper effects test into law. In relation to this bill here and now, I will be supporting the passage of the bill in this place because it represents a chance to reform the law properly and introduce an effects tests; but some of these issues that have been raised—not the ones where Labor has gone back to the old Kevin Rudd days of being economic conservatives—it is odd that we go from rightly saying that we do not want to have a tax cut for big corporations to all of a sudden walking in here the same day and saying, 'We are now economic conservatives who want to defend pure neoliberal competition policy.' Let's put that to one side. The issues about the telecommunications industry are important issues, and they deserve to be addressed and looked at. There are potentially others as well about when this bill will come into operation. Is it going to be contingent on future pieces of legislation being passed, which it probably does not necessarily need to be? Or is this going to come into effect if the Senate reaches agreement on it?

I support the passage of this bill through this place so that we can get a closer look in the Senate. I would hope that there might be some amendments moved by various parties at that stage to try to deal with some of these things, and I would hope that National Party MPs, in particular, take a very close look at this bill and make sure that a good effects test comes into law when this is passed through the Senate. If we have to strip away other bits of the bill to make sure that happens, that is what should happen. Hopefully there will not be other things buried in this bill that are designed just to slow the progress of it down.

Bandt MP fragment source (from p 93)

Scott Morrison MP (Liberal) (27 March 2017)

Mr MORRISON (Cook—Treasurer) (18:58): I would like to thank those members who have contributed to this debate. Having reflected on some of that debate, I have to ask the question: what has the Labor Party got against small business? Why are they so opposed to small business? Today they came into this place and voted against a tax cut for small business, to actually increase the threshold for a small business definition, which I know that Deputy Speaker Kelly is very passionate about when he is not sitting in that chair, where he is completely independent at this moment, but sitting elsewhere. Two to 10 million dollars—they voted against that today. They said today that small business has to pay more tax. Now they do not want to level the playing field for small business. If you are a small business person in this country, you must look at the Labor Party benches with complete despair. I suppose many small businesses have had much experience of looking at the Labor Party with despair. As these two bills have come into this place today and are being dealt with, it has demonstrated once again that the Labor Party has no friends in small business and small business has no friend in the Labor Party.

This bill represents one of the most significant reforms to our competition laws in recent times. It will ensure that our laws promote strong competition in our markets and a level playing field for business, including over two million small businesses, to the ultimate benefit of Australian consumers. The bill reforms section 46 of the Competition and Consumer Act and makes consequential amendments to the telecommunications-specific competition laws in part XIB of the same act. The amendments introduced in this bill are designed to address fundamental deficiencies with section 46 as identified by the Harper review, which was initiated by this government and is being implemented by this government. The new section 46 will better target anti-competitive conduct, better support pro-competitive conduct and facilitate more reliable enforcement. The reforms will ensure that section 46 is appropriately focused on protecting the competitive process and the long-term interests of consumers, rather than individual competitors or a particular group of businesses. Overall, this reform will benefit consumers and the economy by giving all businesses a better opportunity to compete on their merits.

When first introduced into the parliament, and as recommended by the Harper review, schedule 1 included a provision requiring the courts to have regard to anti-competitive and pro-competitive factors—these are the so-called mandatory factors—when deciding whether conduct has the purpose, effect or likely effect of substantially lessening competition. As was recommended by the Senate Economics Legislation Committee, the mandatory factors will be removed from the new section 46 through amendments that I will put to the House shortly in the consideration in detail.

Stakeholders expressed concern that the inclusion of the factors would add significant uncertainty and complexity to section 46. Removing the factors would also reduce any risk that the substantially lessening competition test will take on a different meaning with the new section 46 compared to other provisions in the competition law that use that test but do not contain mandatory factors. The commencement of this bill has also been adjusted to ensure that the new section 46 does not take effect until and unless authorisation is available for conduct that might otherwise breach section 46. A broader competition law reform package, which among other things, will extend authorisation to section 46 conduct, is currently being finalised for imminent introduction.

As a result of the reforms in this bill, our competition regulator will be better equipped to promote open, competitive and well-functioning markets in Australia that are focused on producing better outcomes for customers. These reforms will support a level playing field for all businesses, to ensure that new and innovative firms can expand and enter new markets, new technologies can be introduced into Australia and consumers can access the best-quality products at the lowest prices. By strengthening our competition laws, these amendments will support our long-term productivity growth, which is absolutely essential to creating jobs, securing jobs, ensuring wages can increase and ensuring Australia's continued economic growth.

As Treasurer, I have been very pleased to sponsor this bill into this parliament and, through the government's processes, to have been joined, in particular, by the Minister for Revenue and Financial Services, who has also been working very strongly to this end. I particularly, once again, want to congratulate and thank the former member for Dunkley, who was responsible for carriage of these matters in the last parliament. I think it is a testimony to his commitment on these issues while he was in this place. That work has been followed on by myself and the Minister for Revenue and Financial Services. I commend the bill to the House.

The SPEAKER: The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

[That question was negatived (77-65) [see votes]]

The SPEAKER (19:15): The question is that the bill be now read a second time.

[That question was agreed to (78-64)]

Morrison MP fragment source

 

Second reading speeches (Senate)

Sen. Anne Ruston (SA - Ass Minister for Agriculture & Water Resources) (29 March 2017)

Senator RUSTON (South Australia—Assistant Minister for Agriculture and Water Resources) (18:18): I present a revised explanatory memorandum relating to the bill and I move: That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

COMPETITION AND CONSUMER AMENDMENT (MISUSE OF MARKET POWER) BILL 2016

In 2014, the Government fulfilled our election commitment and commissioned an independent review into Australia's competition framework: the Harper Review. The Harper Review was the first 'root and branch' review of Australia's competition laws for 20 years. Professor Ian Harper and the review Panel consulted extensively with businesses, consumers, regulators and legal experts and found that the operation of section 46 was a concern for many.

I would like to take this opportunity to thank Professor Harper and his team for their efforts and diligence in producing the Harper Review.

Schedule 1 to this Bill amends section 46 of the Competition and Consumer Act 2010, the misuse of market power provision, to better target anti-competitive conduct, better support pro-competitive conduct, and simplify the provision.

The current section 46 prohibits corporations with substantial market power from taking advantage of its power for one of three specific purposes related to damaging an actual or potential competitor or preventing them from competing.

In its Final Report, the Harper Review concluded that the current section 46 fails to adequately prevent the misuse of market power and is not reliably enforceable, for two key reasons.

Firstly, the current section 46 requires that a corporation 'take advantage' of its substantial market power. This is a poor test for distinguishing competitive from anti-competitive conduct. It permits a corporation with substantial market power to engage in highly anti-competitive conduct, merely because a corporation without substantial market power could commercially engage in the same conduct. The test does not recognise that conduct that is not anti-competitive when undertaken by a corporation that doesn't have market power can be anti-competitive when undertaken by a firm that does. This leaves a significant loophole in section 46.

Secondly, the current section 46 only prohibits conduct if the corporation acted with the purpose of damaging an actual or potential competitor. The Harper Review found this focus to be inconsistent with the overriding policy objective of the Act, which is to protect competition and not individual competitors. The reforms in this bill recognise that it is the competitive process that drives corporations to supply better goods and services and offer lower prices to consumers, and it is the competitive process that our competition laws need to protect.

The failure of section 46 to adequately prevent the misuse of market power allows anti-competitive conduct to slow the entry and expansion of new and innovative firms, delays the entry of new technologies into Australia and impedes economic growth in the long term.

The Harper Review recommended amending section 46 to address these problems and strengthen the misuse of market power provision, by refocusing on conduct with the purpose, effect or likely effect of substantially lessening competition. The Government acknowledged the importance of this issue for businesses and consumers, and conducted a lengthy consultation process on a range of alternatives before concluding that the recommendation of the Harper Review represented the best option to reform the law.

As amended, section 46 will prohibit corporations with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in markets in which they directly or indirectly participate.

The amendment is specifically designed to minimise any uncertainty involved with changing the law, by using existing competition law concepts such as 'substantially lessening competition' and by providing anti-competitive and pro-competitive factors to guide consideration of the purpose, effect or likely effect of conduct.

As a result of this reform, section 46 will better target anti-competitive conduct and better support pro-competitive conduct. Section 46 will be more reliably enforceable and promote strong competition in Australian markets, benefiting both consumers and the economy.

This reform is an important step to ensure Australia has the best possible competition framework to support innovation, enhance competition and boost economic growth and jobs. It is a key part of the Government's response to the Harper Review, which is all about increasing choice and delivering better services for consumers.

An effective misuse of market power provision is an important and necessary part of competition law, particularly for Australia's more than two million small businesses which make up more than 97 per cent of all businesses.

While there are some in this Chamber who would prefer to keep the current drafting of section 46 and not see Australian businesses able to compete on a level playing field, this Government recognises that reforming competition law is one of the best options we have to lift long-term productivity growth and generate economic benefits that can be shared by everyone.

The reforms in this Bill will more effectively focus section 46 on the long-term interests of consumers, improving the law's clarity, effectiveness and force. They will provide another tool for regulators to ensure Australian businesses can flourish; new and innovative firms can enter new markets and expand; new technologies can be introduced into Australia; and consumers can receive the best quality products at the lowest price.

Most importantly, this reform will ensure the focus of the law is on protecting the competitive process to the benefit of consumers; it is not about protecting individual competitors or a particular group of businesses.

These amendments will make markets work better for the benefit of all Australians and help to lift our long term productivity growth. They will ensure that all business can compete on a level playing field, rewarding innovative and dynamic businesses that provide the best services at the lowest cost. This will benefit households by giving them more choice and better value products and services.

Schedule 2 to this Bill makes consequential amendments to repeal the telecommunications-specific anti-competitive conduct laws in Divisions 2 and 3 of the Act. With the amendment of section 46 and the development of competition in telecommunications in the past 20 years, these rules under Part XIB are no longer necessary or appropriate.

Following the proposed amendments, any misuse of market power in the telecommunications sector will be managed by the same general competition laws applying to other sectors of the economy, and which will be strengthened by the enhancements being made to section 46.

The Australian Competition and Consumer Commission supports these amendments and retains other extensive powers to deal with other competition concerns in telecommunications.

Full details of the measure are contained in the explanatory memorandum.

Ordered that further consideration of the second reading of this bill be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.

Sen. Ruston fragment source (pp 103-105)

Sen Gallagher (ACT - Manager of Opposition Business) (14 August 2017)

Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (12:52):

The Competition and Consumer Amendment (Misuse of Market Power) Bill 2017, which is before us today, seeks to implement the so-called effects test, and it certainly will have an effect—an overwhelmingly negative one. It will have the effect of chilling competition and reducing innovation, and it will affect the prices that Australians pay for goods, in a very bad way. What the government is seeking to implement is bad law. It has not been thought out at all, and it will have a deleterious impact.

The Australian people should get no comfort from the fact that, according to leaks from the cabinet, the Prime Minister, the Treasurer, the Minister for Finance, the Attorney-General and the Minister for Revenue and Financial Services all think this is a bad idea. Given these names, how could this bill possibly have come forward? It's clear that they were rolled by the Deputy Prime Minister. It's a very bad thing for the nation when it's the Leader of the Nationals calling the shots in relation to competition policy in Australia.

What the proposed effects test means is that, instead of looking at the intention of a company with significant market power, you would look at the effects of their actions, particularly if the effect of their action is a substantial lessening of competition in any market. You could understand why this would look like something that should be done. I don't deny for a second that there are issues and problems which need to be addressed, and I will turn to Labor's alternative plan for doing that.

The fact of the matter is that these issues have been addressed, looked at and considered in Australia for a long time. Since the early 1970s, there've been 12 reviews of competition law in Australia, and 10 out of those 12 reviews recommended against an effects test. These have been reviews by serious people looking at this in a very considered fashion. The overwhelming majority have recommended against the implementation of an effects test. The 1976 Swanson committee recommended against an effects test on the basis that the section should only prohibit abuses by monopolists that involved a proscribed purpose. The Blunt review in 1979 recommended against it on the basis that it would 'give the section too wide an application, bringing within its ambit much legitimate business conduct'. The 1984 green paper recommended an effects test, one of only two of the last 12 competition reviews to do so. The 1989 Griffiths committee said that there was 'insufficient evidence to justify the introduction of an effects test'. The 1991 Cooney committee said that an effects test 'might unduly broaden the scope of conduct captured by section 46 and challenge the competitive process itself'. In 1993, the Hilmer committee recommended against an effects test, saying it 'would not adequately distinguish between socially detrimental and socially beneficial conduct'. In 1999, the Baird committee said that 'such a far-reaching change to the law may create much uncertainty in issues dealing with misuse of market power'. The 2001 Hawker committee recommended against an effects test and said it would 'await the outcome of further cases on section 46 before considering a change to the law'. The 2003 Dawson review said the addition of an effects test would 'increase the risk of regulatory error and render purpose ineffective as a means of distinguishing between procompetitive and anticompetitive conduct'. The 2004 competition inquiry by the Senate Economics References Committee said that, while the committee was sympathetic to some of the arguments, the difficulties with introducing it meant that the committee did not recommend the inclusion of an effects test.

It is a well-understood principal of competition law, and the law generally, that, if a business with market power intends to reduce competition for its own benefit, this should be dealt with. This is not acceptable behaviour, and it should be dealt with. Companies with substantial market power should not act to reduce competition for their own benefit. That should not be their intention. But it is a dangerous leap to change this principal and to disregard the intent of the company and, in effect, outlaw a company making life more difficult for their competitors simply because they are innovating or increasing their own competitiveness. It is a dangerous time for Australia when the National Party is dictating economic policy like this.

This has been through a Senate inquiry, and the critics of the bill were very clear in their views. The Business Council of Australia criticised this bill and opposes it very strongly. You have companies opposing this government, which claims to be probusiness and which lauds its probusiness credentials right around the country. These companies are going to the Senate inquiry and saying this is a bad idea, whether they be BlueScope or Woolworths. They are saying this not just because of the intent of the government in doing this and because he government is designing a system which would reduce the competitive juices in the economy, but also because of the way the government has gone about it. The way the government has gone about it creates uncertainty and a lawyer's picnic. The only people who will be happy with this will be competition lawyers. Despite the fact that they think this is bad policy, many lawyers in Australia will nevertheless see the commercial opportunities that will abound because of this government's ineptitude.

Another sign of the government's ineptitude in relation to this policy was the Treasurer at the last minute introducing amendments to the bill and briefing the media about it before the bill was finally dealt with in the House. What these amendments went to was to remove certain defences in the bill, the mandatory safeguards which were recommended to be put in by the Harper review. The Labor Party broadly believes the Harper review was very good; we obviously disagree on this effects test. It was recommended that these safeguards be put in. The government's amendments were described as an 'astonishing amendment from a supposed free market government'. These are not my words. They're not even the words of the shadow Treasurer or the shadow Assistant Treasurer. They are the words of the Business Council of Australia. That is what the group which the government goes around the country lauding for its support of the big company tax cuts thinks. Mr Grant King, the President of the Business Council, is quoted as saying in relation to this bill:

The Turnbull government seems intent on putting pressure on the household bills of every Australian … The proposed 'effects test' is so broad and ambiguous that companies risk being sued by their competitors merely for offering discount prices for consumers.

The government’s latest amendment removing ‘mandatory factors’ completely disregards Ian Harper's recommendation that safeguards are needed to protect against legitimate competitive conduct being captured.

The mandatory factors didn't provide nearly enough protection for legitimate business conduct, but the answer should have been to improve them, not to remove them altogether.

Mr King and the Business Council are right about these points.

On our side of politics we are not prone to agree with the Business Council on every occasion, but we call it as we see it and we will say when they are right—and they are right about this issue. We could've engaged in politics and supported the government and said that we would crack down on these nasty big businesses, but consumers would've paid the price for that and consumers will pay the price for that if the government succeeds in getting this legislation through the parliament.

The fact of the matter is that there are issues that need to be addressed. Labor is the party of competition reform. We're the ones who have always delivered serious reform. The first federal competition law in Australia, which was an issue with the Whitlam government, was the Trade Practices Act. That was the first serious national competition law that we had. Consumers affairs protection was included in that as well. Then there were the competition policy reforms of the Hawke and Keating years. The national competition policy was a key reform in leading to the 26 years of uninterrupted economic growth that we've had in this country and it improved the competitive juices of our economy. Then we had, coming together with the reform of the competition act, the criminalisation of cartel conduct and the harmonisation of consumer affairs laws across the country under the Rudd government.

So our side of the House is pro competition. We believe that the beneficiaries of competition are the people we are here to represent, people going about their business and wanting a good deal from the economy, because competition produces that good deal. But competition policy must be finely calibrated and carefully designed, not written on the back of a coaster in a hotel, as the Deputy Prime Minister likes to boast that he does from time to time—that he writes his ideas for competition policy reform down on the back of a coaster in the Birdsville Hotel.

The proposal put forward by the Labor Party and taken to the last election—and, indeed, passed by this chamber last week—is a much better solution to the challenges that small businesses face. Because some big businesses have deep pockets and armies of lawyers, the risk of a small business being overwhelmed and having to pay the big business's legal fees if they take on a competition action against a big business is very substantial, and it means that it doesn't happen as often as it should.

This is not just about the ACCC enforcing the law. That has its place and is an important part of it. But businesses can begin and bring their own actions as well. At the moment they're not doing that, for very understandable and legitimate reasons. They are concerned that the court case would be very expensive and that they may well have costs ordered against them and that that would drive them out of business.

Indeed, the policy which we enshrined in draft legislation and which passed this chamber last week sought to address that with our access to justice bill, the Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017. I would urge the government to consider supporting that when it goes to the House and changing the position of their vote from last week. This access to justice reform has been welcomed by the Business Council of Australia and by the Australian Small Business and Family Enterprise Ombudsman, who also believed it was a practical way to assist small business in addressing the level playing field issue.

The access to justice reform was welcomed, as I said, by the Business Council of Australia, and it would be a sensible and practical support for small businesses around Australia—unlike this legislation, which was originally opposed by the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the minister for revenue, but which was, apparently, supported by the Deputy Prime Minister and insisted upon by the Deputy Prime Minister as part of the coalition deal when the Prime Minister rolled the member for Warringah in the party room. That was the price for keeping the peace. And it is not the way to write economic policy in this country.

This will impact on the cost of living of Australians by putting upward pressure on prices. It stands to reason that if you have a big business or even a medium-sized business that has substantial market power in one particular market, they will talk about how they can improve their operation in that market, and they may say: 'Let's discount—let's go on a discounting process; let's reduce our prices; let's be more competitive,' but now there will be this effects test in the way, if this legislation passes, and they may have to say: 'But this might affect some of our competitors; some of them might actually go out of business if we're as competitive as we possibly can be. If our prices are as cheap as they possibly can be, some of them might actually be adversely reflected.'

Every boardroom and every manager will now have to consider that, and not just consider that in a national sense but consider their approach to smaller markets and their approach in any particular market segment. Even if their intent is not adverse, which in many cases it will not be, if the effect of their actions is adverse then they will be taken in by this piece of legislation. This is a fundamental change to the principles that have underpinned competition policy and competition law in Australia for many decades, certainly since Commonwealth control and Commonwealth authority in the 1970s.

This bill also contains amendments that would repeal the telecommunications-specific anticompetitive conduct provisions in part XIB of the Competition and Consumer Act. Currently, part XIB provides the ACCC with powers to take speedy action and better resolve disputes when anticompetitive conduct is suspected. This allows disputes to be resolved faster and more cheaply than by relying on general competition law. Given the concentrated nature of the telecommunications market, it remains appropriate to preserve this section. Labor considers that the stronger powers under part XIB remain necessary to deter misuse of market power. There is no good case for the repeal of this particular section of the act, and the government has not been able to put forward a single credible argument. It is a reckless approach to policymaking and sums up the incoherence of the Turnbull government. Labor will not support this repeal.

There is no way, given the weight of expert evidence from competition lawyers in Australia, that sensible commentators in the competition space think this is a good policy, because it's not. It should be resisted by sensible Senators opposite. As we know, it was resisted originally—to give them credit—by the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the Minister for Revenue and Financial Services. You would think that that would be enough to maintain the position for sensible policy within the Cabinet. But, in another sign of this government's weakness, the Prime Minister, the Treasurer, the finance minister, the Attorney-General and the Minister for Revenue and Financial Services have been rolled on this important matter of economic policy.

On this side of the chamber we are of one mind. We stand for good policy, and this is not good policy—quite the contrary. This is very bad policy. As I have said, there have been 12 reviews of this since the 1970s and 10 have said that this is a very bad idea. It should be resisted and opposed here in the Senate. Thank you.

Sen. Gallagher fragment source (pp 27-29)

Sen McKim (Tasmania - Australian Greens) (14 August 2017)

Senator McKim (Tasmania) (13:07)

 I rise to speak on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017. The effects test is a very necessary change to competition law that will basically make it easier for the ACCC to crack down on anticompetitive behaviour. For too long in this country we have sat back as a parliament while major corporations have been able to abuse and misuse their market power to the detriment of smaller players, to the detriment of primary producers and to the detriment of the Australian people. I commend all of those people and organisations who have worked so hard for so long to bring about this important reform.

I also want to acknowledge the work of my friend and colleague Senator Whish-Wilson, who for a long time has carried the torch on this issue for the Australian Greens. He has advanced this debate and the campaign through his work in this place. As a result of the work he has done, I have no doubt that he contributed significantly to the outcome that I believe we're about to see when this legislation passes through this place.

As I said, there is a range of people, organisations and political parties who support an effects test. It is odd, very odd indeed, given all the people, all the organisations and all the political parties that are lined up in support of an effects test in Australia, that it is the Labor Party who stands alone alongside the Business Council of Australia as a voice against an effects test in this place. How odd. How very odd! The Labor Party voting against a law that is supported by progressive people—a law that actually is progressive, a law that looks after the little guys in their endless fight against big corporations, a law that takes on big business and a law that's good for competition, good for consumers and good for the economy.

How could this be? How could it be that the Labor Party is the sole voice against this legislation? I will tell you how it could be. I have got three letters for you: SDA. The Shop, Distributive and Allied Employees Association—the 'shoppies', as they would be better known to the HR departments of Coles and Woolworths. The shoppies have a good thing going with Coles and Woolworths. They've got a good thing going with Maccas, KFC, Hungry Jack's and a host of others in the retail and fast food industry in this country. This is the good thing they've got going: every time a 16-year-old or 17-year-old signs up for eight hours a week pushing trolleys, stacking shelves or flipping burgers, their employer slips them a membership form for the SDA. It's a regular part of the paperwork: 'Sign here, here and here and you are good to go.' That's right. Those employers unionise these kids the day they get a job.

Mr Acting Deputy President, you might be thinking, 'That's amazing.' You might be thinking that means we live in a workers' paradise. Unfortunately, nothing could be further from the truth, because these kids are just numbers to the shoppies. The shoppies have cynically exploited these kids and others who are part of one of the lowest-paid and most casualised workforces in this country for decades just to get the numbers. The shoppies started trading away penalty rates well before Tony Abbott and Malcolm Turnbull thought it was fashionable—

The ACTING DEPUTY PRESIDENT ( Senator Bernardi ): Senator McKim, I would ask you to refer to members of the House by their appropriate titles.

Senator McKIM: The shoppies started trading away penalty rates well before Mr Abbott and Mr Turnbull thought it was fashionable, and they did so just to get the numbers. The shoppies, according to no less of an authority than the full bench of the Fair Work Commission, signed off on a workplace agreement that resulted in more than half of Coles workers being paid less than the minimum rate. That's right. Let's be clear about what happened there. The shoppies got its members a worse deal than what they would have gotten had there been no deal at all, just to get the numbers—numbers in preselection, numbers in this parliament and numbers on the floor at the national conference of the ALP, all so they can push their retrograde social agenda.

The shoppies are a relic of a bygone era in this country. They're a relic of the old Catholic right that kept the Labor Party so divided for the better part of 20 years. The shoppies carry the ghost of Bob Santamaria, and that ghost stalks the halls of this building to this very day as a result of the way the shoppies conduct themselves. They are an anchor on the ALP and a handbrake on progressive politics in this country. Every time Labor tries to go forward, there are the shoppies holding them back. We could have had marriage equality five years ago in this country if it weren't for the shoppies. We could have had truly needs-based education funding in this country—the original Gonski—if it weren't for the shoppies. In all likelihood, we would have an effects test years ago if it weren't for the shoppies. When something like the effects test comes up, the shoppies' allegiances are not with their members and not with the broader public; they are with the companies that their business model is built upon, because what's bad for Coles and Woollies is bad for the shoppies.

So it is that Labor stands alone in this chamber today. I have got no doubt this sticks in the craw of a good number of Labor senators who see this legislation for what it is: good law and a necessary legislative change. Bound as they are by factional pacts, those Labor senators will vote against it today.

Those who defend the shoppies by saying that its members should organise to change their union if they have issues fall for the same faulty logic as those who support individual agreements. There is a power imbalance. How on earth is a 16- or 17-year-old who is pushing trolleys, stacking shelves or flipping burgers meant to overhaul the political-industrial complex that is the shoppies in this country? I have a short answer for you: they can't. That's why some have set up an alternative union—a real union that's got its members' interests at heart rather than being obsessed with what people get up to in their bedrooms.

The Retail and Fast Food Workers Union are taking on the shoppies, and strength to their arm and good luck to them. I hope they break the shoppies wide open and end this rotten situation in our country and within the Australian Labor Party that is doing no-one any good. Strong unions are good for this country. Strong unions have delivered the weekend to Australia. They've brought us health and safety protections and minimum wage laws. But, when a union uses its strength to cosy up to big companies like Coles, Woolies, KFC, Macca's and Hungry Jack's and screw over its workers, someone needs to call it out. That's what I'm doing here in the Senate today.

The SDA is a shocking advertisement for unionism to the hundreds of thousands of young workers who start their first job in retail or fast food only to find out their union is the reason they're getting screwed and paid below the award. The SDA gives unions a bad name. It will put off some young Australians from being union members for life.

This is a good law. It's law that the Australian Greens have led the campaign for over many years in this place. We've advanced the arguments, we've worked closely with a range of small-business stakeholders and we stand here today and will vote accordingly and proudly for an effects test. We stand here today proudly opposed to the unholy alliance of big corporations, the shoppies and the Labor Party in this place. I say again to the good senators of the Labor Party—and there are many of those good senators in the ALP—have a think about your position on this. Stop allowing yourselves to be manipulated by the SDA. Stop allowing yourselves to be directed by one of the great forces of conservativism in this country—the SDA.

Sen. McKim fragment source (pp 29-30)

Sen Bernardi (South Australia (Australian Conservatives)) (14 August 2017)

Senator BERNARDI (South Australia) (13:18):

Senator BernardiI have to say at the outset that I was somewhat conflicted about how to go on this bill, because I am a free marketeer. I do believe markets are, in general, very good, but I'm being tortured by what Senator McKim has said: that this bill is somewhat a progressive agenda and an initiative of the Greens. If ever it's going to turn off my vote, he's nearly done it! But I hate to say that he's got a point. Free markets only work where there is a level playing field, if you will. As I remarked in the Senate last week, there is not a level playing field for small business in this country.

When I'm talking about small business, I'm not so much talking about the medium-sized businesses that have an HR department that can do those things. I'm really concerned for the mum and dad operators—the ones that put their financial lives on the line. They sacrifice a lot of family time and mortgage their houses to live the dream and start a business. Sometimes they don't pay themselves; they struggle and pay their employees. I find it extraordinary, just extraordinary, that these small businesses, which have to deal with the bureaucracy and the red tape that government foists upon them—they have to deal with the industrial relations laws that are an impediment to employment; they have to deal with onerous taxation requirements and occupational health and safety requirements—just to live their part of the dream, are also having to compete with big business that has been allowed to trade away employee entitlements to benefit the union movement.

Senator McKim is happy to put his anti-Catholic rhetoric out there and blame the shoppies union and the ghost of BA Santamaria and so forth. Let's dismiss the Greens' hatred of religion, unless it's the worship of the earth, and deal with the facts. It is wrong for a union to be able to do a deal with business that benefits the union and disadvantages the worker. That is absolutely wrong. We know there is a huge track record of this. Mr Shorten himself is as guilty as sin in this respect. I do note that the minister said, in effect, under the laws about corrupting benefits for unions that were changed last week, that Mr Shorten would probably find himself charged with an offence were he to do the same thing again today.

I am also quite sympathetic to the shoppies union, as Senator McKim said. They are a bastion of conservativism, or they were until recent times. That doesn't mean they are perfect. There is only one pure conservative party in the place and the shoppies are welcome to join it any time they'd like to. I'll straighten out their sharp edges, if you like, and we can ensure there is a voice for conservativism across the political divide. But they've done the wrong thing here, and I cannot, in good conscience, stand and defend big business, notwithstanding the benefits they provide to the Australian people. They provide stacks of jobs, they provide opportunities, they invest and all of those things, which are positive, so I'm not anti-big business, but I am absolutely pro small business.

On balance, this gets the balance right in protecting small business. When I say 'protecting', I mean in trying to level the playing field as much as it can. This is the great torment for us; there's no perfect science in this. Do you say, 'Big business will misuse its market power?' Yes, that benefits consumers in the short term and they can provide lower priced products, but I also know that competition is absolutely vital. If I look at Coles and Woolworths—it's easy to beat up on them, and I will—they have been charging Australian consumers far in excess of what their international competitors do from a margin point of view, which means the cost of our groceries, the cost of our goods and services are far greater here than they should be. Australia is a high cost-of-living country.

This is also compounded by the fact that small business is not effectively able to compete where there is a misuse of market power, there are onerous obligations, there is a huge potential for legal consequences and costs incurred simply to have the fight and have the battle. You can be mobbed in small business via lawfare that will cost you hundreds of dollars every time you have to respond to a legal letter from one of the big businesses, and it is simply onerous. Sometimes small business goes, 'It's just too hard.' We need to be able to get some legal redress here.

But I'm talking about the very smallest businesses. I know that later on you're going to have a discussion and one of the senators will come in here and talk about misuse of market power, and they're going to be defending a big supermarket chain that is not Coles or Woolworths. They will be defending them and saying, 'This is a small business that's really struggling.' A small business that turns over $100 million a year is not that small a business, as far as I'm concerned. Similarly, it would be no coincidence that this small business that a senator later on will talk about will no doubt mention on the public record that all the employees of that small business were given time off or paid to man their polling booths for them. Let's not pretend that some of the strongest advocates in this space are not absolutely self-interested.

What I can tell you is that I'm interested in making sure that small business in this country gets a fair go. I want to make sure that Australian consumers get a fair go. In order to do that, it sometimes means trading off the short-term immediate benefits that come with a lower price tag, which eventually drives out competition and leaves a market monopoly or a duopoly. I'm very happy to see that change. I'm happy to see the international entrants come into this space—in the retail space, in the consumer goods space—but, more importantly, I want small businesses to be able to have a crack. That means they've got to be able not only to source their products but to run their businesses on par.

If there was any doubt about my support for this test, it was effectively nullified when I recognised just what the union movement had done in trading away workers' rights so that Coles and Woolworths could get some sort of competitive advantage—as if they didn't have it already—and so that the unions themselves could benefit from it. This is the most self-interested behaviour. It was Sir Robert Menzies, who would be an Australian Conservative today—if he were alive I am sure he would be—

Senator Williams: He would be a Nat!

Senator BERNARDI: No, he wouldn't be a Nat, Senator Williams. It is about the forgotten people who don't have that voice for them anymore. They don't have the budgets to hire lawyers, expensive accountants and lobbyists to patrol the halls of Parliament House. They're the people who don't have an HR department. Their HR department is their kitchen table every Sunday night. They're the people who can't afford to engage or employ a union or pay off a union, effectively, to get better deals for themselves. They're the people who are the forgotten ones in our country. They're the ones who provide the engine room, the growth and the innovation for our economy. They're the ones who employ people. Government and unions, unfortunately, now seem to be putting a roadblock in their way at every single turn. Whether it be about the bureaucracies I mentioned, whether it be about taxation, whether it be about HR impediments or whether it be about unfair advantages that the union has negotiated for big business at the expense of small employees—however you want to do it—small business is up against it all the time.

Unashamedly, I'm a fan of small business. I started in small business, and my family's been involved in it for our entire lives and continues to be involved in it. I know exactly what it's like for people to make a go of it—and make a success, I have to say. But the success doesn't come without a whole bunch of pain along the way. No-one sees the pain except the families involved in it. Sometimes the employees see it. No-one sees the pain except the two people or the one person engaged in it with the stress. People only see the success at the end, but I can assure you nothing is further from the truth.

In conclusion, I will be supporting this—not without reservations, I have to say—because I do like competition. I do like competitive forces and I like markets that are free so that people can compete on a level playing field with innovation.

Senator Williams: And fairness.

Senator BERNARDI: Senator Williams makes a good point: it is about fairness but not in the sense of social justice, equality, or anything like that. It is about fairness where you know that, if you can source a product, you can sell it at a reasonable price or at a fair price, but you also know that your competitor across the road is not able to pay $3 or $4 less an hour because of some cosy sweetheart deal that's taken place. These are the questions that often go through the minds of people who believe in something. We've got to balance the ideal scenario against what we can achieve.

I don't want the perfect to be enemy of the good. I think, in the end, that the good—and what is most important and what is so important for this country—is for small business to have that fair go and to have that opportunity to grow into medium-sized businesses. I have no horse in this race apart from that. There is no-one that's going to be paying their employees to man my polling booths for me. There are no lobbyists that are making massive donations to my political campaign or to my union. The only interest I have is in the mums and dads of Australia, so that they can have a business they want to make a go of and make a success, because their success is our success.

Sen. Bernardi fragment source (pp 31-33)

Sen Williams (NSW - Nationals Whip in the Senate) (14 August 2017)

Senator WILLIAMS (New South Wales—Nationals Whip in the Senate) (13:30):

I would like to contribute to this debate on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017—certainly not for 20 minutes, but just to put a few points on the record.

This recommendation is a result of the Harper review, and it is about maintaining competition. Let me expand on that. If you start a small business and you start to become successful, one of two things is going to happen: big business, the big end of town, are either going to buy you out or they are going to squash you out. Make no mistake about that: if you're a threat to big business they will squash you out.

For years I have asked the question: how do we make section 46 effective? The purpose test simply has not worked. I have had many discussions with a bloke I have a huge amount of respect for, Mr Allan Fels, the former boss of the ACCC. Allan Fels was telling me: 'You need an effects test.' Let me explain this to those in the chamber and those in the gallery.

If I were part of a big multinational company, say we had 300 stores, and we started up a branch in a country town that had a successful small business just poking along, employing seven, eight or 10 people, we could sell at cost—we could sell at a ridiculously low price. Under the purpose test, if I were a small business and I or the ACCC had to take them to court to prove that the purpose for that big business selling at half price was to send me broke, that was a very difficult case to prove. Now, with the effects test, I can simply go to the ACCC and say, 'The effect of this big business charging $10 for some product in all their stores around Australia but charging $5 in the store opposite me in the street is sending me broke.'

This is about maintaining competition. I'm surprised the Labor Party are not supporting this. This is about maintaining competition and seeing competition that means small businesses can survive. I give an example: I know many small businesses—the corner stores. Where do they buy their cans of Coca-Cola? They go to Coles and Woolworths and buy their Coca-Cola there when it's on special. Why? Because they can buy it cheaper at a retail price from Coles or Woolworths than they can by buying directly from Coca-Cola. That is a fact. Why? Because when Woolworths and Coles order their Coca-Cola, they order in umpteen pallets. They bulk purchase, with a big discount. The small business at the corner of the street can't do that.

That is what the direct responsibility of the amendment to section 46 of this legislation is: to see the effect of the business is not to use their power, their strength and their might simply to squash a small business or to move into town—especially in country towns—and squash a small business that has been established there. It could have been a family business that might have been there for generations; it might be the local IGA. But the big business can't go in and say: 'Righto, this town is growing. It's got a good future. We'll sell it at half price or even less,' simply to cripple and shut down their opposition.

That is unfair, and as Senator Bernardi said, it is about fairness. I believe that life is about fairness, and the current section 46 is not treating small business fairly. That's why we need this amendment. As I said, and I will repeat it, it is to maintain competition. If we're going to have a situation where the big end of town, the multinationals, can squash their small businesses in competition, we're going to have three or four companies run this nation in retail.

Master Grocers Australia has welcomed the bill. The National Farmers' Federation says that the effects test will help protect Australia's 135,000 farm businesses from unfair marketplace conduct, which will in turn drive innovation and jobs growth for the Australian economy. The Australian Small Business and Family Enterprise Ombudsman strongly supports a business environment that allows small businesses to participate in markets and to compete on their merits alongside larger businesses. This freedom depends on the existence of a level playing field, where those with substantial market power are effectively prevented from using that power to lessen competition.

The Institute of Public Accountants highlighted the effect that Australia's concentrated market structure has on competition, noting that small or medium-sized businesses are vulnerable to exploitation or exclusion by firms with substantial market power. The current situation is simply David and Goliath; and, as the biblical story says, it is not often that David wins. So this should be supported from all around the chamber. I am very confident that Senator Xenophon and his team will support this. Senator Xenophon and I, and many others in the National Party, especially Senator Canavan, and many in the Liberal Party as well, have been on about this. Craig Kelly is one who says this might not be the whole answer but it may be helpful. But we cannot have this situation for small business. I am referring largely to small business in the smaller regional cities and growing regional towns, not so much the big cities. But certainly it could be the case in a big city that a big business comes in and cuts the price; and it can do that because of its bulk purchasing power, the huge volumes that many of these big businesses purchase when they order their stock.

I think this is a very fair piece of legislation. As I said, it will encourage competition. The more of your opponents you can cripple and shut down the less competition there is. It is good to rely on small businesses for service. Small businesses are renowned for good service and the friendly service they provide, but there's a limit on that when it comes to price. You can provide all the service you want but if you're double the price of your competitor, customers will look for the discounts and the best deal, especially to save a dollar with the cost of energy prices and so on. Here is a situation where we will have some fairness in the market through this effects test, some fairness with the powers given the ACCC under section 46 and some fairness to not only allow existing small businesses to survive but to give incentive to future generations of Australians who want to start a small business. This will say: if you want to mortgage your house on a low-doc loan, if you're going to have a go, we're going to make a level playing field out there; we're going to see that the big end of town doesn't do the Goliath bit and stomp on you.

This legislation is very fair. I question why some opposite are not supporting it. I question why they are anti-small business and supporting big unions and big business all the time. Small business is the biggest employer in our country. They are the hard workers. Many in small business do not have superannuation and do not pay themselves penalty rates. They work on weekends and public holidays to save costs because they simply cannot afford to employ many people on weekends and public holidays. They work hard and deserve to be rewarded for their efforts. This legislation adds weight to that. It is a sad situation when we lose something in Australia. I think hard work should always be rewarded. But under the current legislation, the purpose test in section 46, hard work is not enough. It is very disappointing when people work hard only to find that they get put down the financial tube, their business goes belly up, because of the power, might, purchasing power, tactics and strategies of huge businesses, multinational businesses in many cases, who simply squash their opponents. I commend the bill to the Senate and I hope for support. If Labor and the Greens are not supporting this bill—I hope the Greens are: Senator Whish-Wilson has been very familiar with small business in his life. And I hope the crossbenchers support this bill to give a go in this very competitive world.

Sen. Williams fragment source (pp 33-34)

Sen Whish-Wilson (Tasmania - Greens) (14 August 2017)

Senator WHISH-WILSON (Tasmania) (13:39): 

Senator Whish-WilsonLet me start by putting it on the record that the Greens will be supporting this legislation. In fact, the Greens have campaigned for an effects test in section 46 for nearly five years. Prior to my entrance to the Senate, Christine Milne had campaigned on this. She was from a farming background and worked very closely with and was very popular with Tasmanian farmers. She understood the pressures on supermarket supply chains over a number of years, and she had seen the dairy industry reduced to nearly a quarter of its size from numerous pressures, including being squeezed by the big supermarket chains. This is something my party has long campaigned on because we support small businesses, rural communities and our farmers. Let me also make it very clear and be up-front that there is the policy aspect of this and then there is the political aspect. I think it helps to cover off on, to quote Peter Garrett, 'the power and the passion' behind any particular piece of important legislation when it comes to parliament and goes through the political process to become legislation and, hopefully, ultimately, law. I will make some brief comments on that.

Let's start with the policy. Competition policy in this country is reasonably complex. There are a large number of components to competition. The one that has caused the most controversy over time is section 46. Section 46 is designed to prevent the misuse and abuse of market power or market concentration. Essentially, it is unworkable—section 46 in its current form is unworkable. This is something I talked about last week when Labor brought their private member's bill into this place. I quoted the ACCC. Mr Sims, who we all think does a really good job with the war chest he has available, has been making it clear that section 46 is unworkable. The Harper review, instituted by the government, also recommended that section 46 be changed, to introduce an effects test.

Probably the best analogy I have read, which simplifies what is fairly technical and complex detail, is that it is similar to the difference between a manslaughter charge and a murder charge. Currently, the way section 46 is set out, for any death you would need to prove motivation for murder. We have all grown up watching detective shows—Law and Order and those kinds of things on TV—and we know that a manslaughter charge is different to a murder charge. It has a lower burden of proof. The comparison is a really good one with the misuse of market power under section 46. The way section 46 is structured at the moment, you have to prove murder. You have to prove intent; that anticompetitive behaviour is designed to stamp out your competition. The reason it has been unworkable is that it has been almost impossible to prove intent. However, if you look at the effects of the action of a company that does stamp out competition, and that can be proven, then you have your manslaughter. You have your lower burden of proof. It is actually a really interesting and easy to understand comparison. The way that competition law is set out at the moment, it is virtually the same as trying to prove a murder charge where a much higher level of proof is required, and you have to prove motivation and intent. Whereas, over time, we see that markets fail and there are important roles for regulators to play and very tough regulations and laws to prevent, for example, market concentration, where monopolies and duopolies exist and crush competition. Lack of competition is not just bad for consumers, it is also bad for those who provide the inputs into the supply chain, like farmers and distributors. It is actually a really important debate.

Section 46 is not workable. Don't take my word for it. Let's hear what the ACCC have to say. In their submission to the Senate Economics Legislation Committee, Mr Rod Sims in his submission said:

The ACCC continues to strongly endorse the proposed, simplified reformulation of the misuse of market power provision of the Competition and Consumer Act 2010 (CCA) (section 46).

They go on—and, senators, it is well worth reading this if you have not read it—to talk about a number of objections to the adoption of a lessening of competition which is called an SLC, and a test in section 46 of the CCA. In this submission, they debunk the myths that have been put out there by those who oppose an effects test. No guesses who the power is behind this debate when we are talking about the power and the passion. It is big business. As we heard from Senator McKim, I think quite surprisingly to most Australians, behind that big business is also a big union—the SDAs, who we call the 'shoppies'—and the deal they have done with big business.

Mr Sims goes through, talks about the purpose of an effects test and refutes, one by one, the arguments that have been put in place; for example, that an SLC test is novel or uncertain. On the contrary, he says that it is a 'well understood test that is applied in the majority of the other competition provisions of the CCA, including anticompetitive agreements, mergers and acquisitions.' But there is more. He then goes on to talk about arguments that adopting a SLC test will prevent or deter competition. He says:

The adoption of an SLC test will not restrain large businesses from competing on their merits, reduce productivity, chill investment or lead to higher prices.

And he sets out all the reasons why. Labor's key argument here today is that somehow this is going to lead to higher prices. Mr Sims also refutes arguments that a SLC test will remove the causal connection between market power and conduct or that amending section 46 would impose an unreasonable burden on large business. He then deals with mandatory factors, which are the key arguments we have heard from Labor today.

Obviously, the Labor Party missed the appendix to the submission by the ACCC, but it sets it all out in easy-to-understand detail. Labor found some examples of where an effects test under a new section 46 of this new legislation, if it gets up, would be different from the existing section 46. They talk about anticompetitive conduct like land banking, locking up supplies, restricting supplies of essential materials, retaliatory threats by big business, joint marketing fees, freezing out competing suppliers from retail display and demonstration opportunities, targeting price discounting strategies by an incumbent designed to dissuade new entrants in a region and tying up customers in long-term contracts with anticompetitive clauses. I once again thoroughly recommend senators read this simple, easy-to-understand table because it sets out these overly simplistic and misleading arguments provided by the Labor Party today as to why they are not opposing this regulation.

A lot has been written about and discussed in the public debate about the supermarket duopoly. Believe me, they are a stark example of the misuse of market power in this country. There is the perception—and the reality—that many farmers and small businesses have been squeezed by their ferocious war for market share over the last few years. We have the most concentrated grocery market in the world. Up to 70 per cent of the grocery market and in some cases, I have heard, up to 80 per cent including the now take-away liquor market is controlled by the duopoly. These big supermarkets have cornered nearly 50 per cent of Australia's petrol market by using their size and their muscle. They are amongst the top 20 retailers in the world. Of course, they appeal to customers by suppressing prices, by discounting and by campaigning as price suppressors. But, at the same time, they have massively increased profits. You might scratch your head. Any first-year economics student might say, 'Wait a second. That does not sound right, Senator. How have they managed to get away with it?' They have got away with it by transferring over $2.5 billion in profit from the food producing and the food manufacturing side of Australia—so think of farmers, out struggling to make a living; small businesses struggling to provide distribution, provide food and also compete with them on a retail level—to the retail side of the business over the last seven years. So the question you would ask is: what is the future for food producers and how can they keep going if they are continually being squeezed and driven towards being unprofitable? That is the other side of this debate.

The Greens, as I said earlier today, are proud to have been campaigning on this issue now for a long time with farmers and with small business. We have some amendments which I will deal with when we go in committee, and I will certainly talk about Senator Xenophon's amendments and any other amendments we may see.

Let me get to the politics side of this now. I am going to talk about politics on both sides of this chamber today, Labor and Liberal. I put a motion to the Senate, just by coincidence, nearly two years ago for an effects test to stand with farmers and small business. Much to my surprise that day, my Green colleagues and I were joined on this side of the chamber by the National Party. The entire National Party Senate team crossed the floor to vote with the Greens on our motion on the effects test. I'm not going to divulge confidences, but I did say to those senators, 'Thank you for standing with farmers and small businesses today.' They thought that was quite funny. They said, 'No, Senator, thank you. Today we are negotiating with Mr Malcolm Turnbull on forming a new government.' That's right—it was the same day that Mr Malcolm Turnbull knifed Mr Tony Abbott in the back and took the leadership of the Liberal Party. Perhaps, as these strange coincidences occur, the politics is that the Liberal Party had done a deal with the National Party to bring in an effects test, and that was what helped underwrite Mr Turnbull's leadership as Prime Minister of this country.

I only say this not because it's a bad thing but because I am worried that there are senators on the other side of this chamber who fundamentally and philosophically disagree with an effects test that makes life harder for big business. I hope that they are going to stick this legislation through and not put any poison pills into this or any future legislation that could help unwind this very important piece of legislation today.

I was very surprised when I heard that the Labor Party weren't going to support an effects test. I didn't know why. I scratched my head like a number of other people did. That decision was obviously made a long time ago. We heard from Senator McKim, and I read some transcripts from media articles on the power that the shoppies union has over the Labor Party. The only conclusion I can draw is that Labor, through their relationship with the shoppies, are in bed with big business. They were in here spouting on about the Business Council for nearly 15 minutes and supporting big business. At least they acknowledged that wasn't a normal thing for them. If it wasn't a normal thing, what's so special about this particular legislation?

We know that the donations to the Labor Party through the shoppies and the connection to Coles, Woolworths and Wesfarmers are black and white. I suspect that Labor voting against this bill today, regardless of the faux arguments they put up for not supporting an effects test, because of their donations. If that is true, that is rotten to the core. If they are voting against good legislation that helps improve our competitive landscape and helps make it easier for farmers and small business because this is going to impact their support and donations, I think that's not going to go well for them with small businesses and farmers in this country who expect us all, without fear and favour, to look at these things in the cold, hard light of day and take every opportunity for reform that we can when we see it.

I say to any farmers, small-business people or groups out there who are looking at this debate, it's important I put on record today that this is not a silver bullet for fixing all your problems in the competition space. This will certainly make it a lot easier for the ACCC to prosecute cases of misuse of market power. I gave some examples where the ACCC has stepped out and why an effects test in section 46 will make it easier, but it isn't a silver bullet. It's not necessarily going to stop a new supermarket opening in their area. It's not necessarily going to stop aggressive price discounting. But it will make life a lot easier.

But it's not just a supermarket duopoly. It's big business everywhere that should be worried about an effects test being introduced if they are conducting anticompetitive behaviour. That's what we want. We want the right tools in the toolbox for Mr Sims at the ACCC to be able to conduct his job in the most efficient and effective manner possible.

My example that I would like to talk about today in the few minutes I have left is King Island off Western—off North West Tasmania. It kind of is of Western Australia, in a way—I don't think I can spin my way out of that one too easily. I went to King Island and the farmers there used to have an abattoir and they used to have their own brand: King Island Beef. It was arguably the best brand in the country.

JBS—a big, aggressive company, which Senator Heffernan had lots to say about when he was in this place—came in, bought the abattoir and shut it down. What then happened to the farmers was that they didn't have their own abattoir so they had to put their cattle on boats, which was terrible for the cattle. It was not only cruel for the cattle but it also affected the quality, the MSA, of their beef. The farmers have essentially now lost their brand and have to sell their cattle to other producers on mainland Tasmania.

I went over there and I thought: 'That's a bit unfair. Why don't we see if we can buy this land off JBS?' They had an entire abattoir set up, including a $5 million facility paid for by the Australian taxpayer for treating effluent to allow the abattoir to keep going and to modernise it. They refused to sell the abattoir or any of the equipment or the land to the farmers who wanted to buy it back and control their own destiny.

I was interested because I not only wanted to help these small businesses and these farmers but I also didn't want to see the cattle to be put on these boats in one of the roughest stretches of water in the world. I wrote to the ACCC and they wrote back to me and said, 'Unfortunately, unless you can prove intent, unless you can prove that JBS bought that abattoir to shut it down to consolidate their market power in the cattle market, you've got no chance. So, no, we're not going to investigate it.' Guess what? Unfortunately, this legislation is not retrospective, but I reckon, under these laws now, we could mount a pretty good case that that company did have a marked effect on the profitability of those farmers on King Island. That's a real example of where I have participated in this debate and tried to work with stakeholders—local farmers and small businesses—to help them out.

The way competition law is now under section 46 makes it next to impossible to succeed. That is something we can fix. We can fix this today. We can make life easier for the ACCC. We can make really clear-cut cases of anticompetitive behaviour. We can cut them out, and we can stand up for small business and small farmers. It's not often we get to see legislation where we can actually make a difference. I will argue here today—and strongly urge senators to look at this piece of legislation—that it's not a silver bullet. Farmers shouldn't be relying on this to solve all their problems, nor should small business, but it does go a long way to improving competition policy. Please don't let politics and the power ruin this chance to actually fix this.

Let's go back to my quote on the power and the passion in this place. I would argue that the Labor Party only putting up one speaker on this bill, this really important piece of competition legislation, suggests that there is no passion in the Labor Party for this piece of legislation; no passion for opposing it and no passion for supporting it. I was really surprised that Labor only put up one speaker here today. I sense that they would like this to pass quickly and that they would like it to go away. And that's a real shame, because this is something my party has campaigned on for nearly five years. It's a rare opportunity to help fix the competitive landscape in this country. It's a rare opportunity to stand up for small business and farmers in this country and say: 'We did our bit. We'll continue to work with you on what else needs to be fixed.' This is an opportunity to support the ACCC chairman and CEO. Get out there—help Rod Sims prosecute the case against what we know is anticompetitive behaviour, misuse of market power and market concentration solely to underwrite the fat margins of big business at the expense of farmers and small business in this country. Let's pass this legislation.

Sen. Whish-Wilson fragment source (pp 34-37)

Sen Di Natale (Victoria - Leader of the Australian Greens) (14 August 2017)

Senator DI NATALE (Victoria—Leader of the Australian Greens) (17:47): 

Senator Di NataleThe 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.

Sen. Di Natale fragment source (pp 80-81)

Sen Leyonhelm (NSW - LDP) (14 August 2017)

Senator LEYONHJELM (New South Wales (Liberal Democratic Party)) (17:56): 

Senator LeyonhjelmFor 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.

Sen. Leyonhjelm fragment source (pp )

Sen Xenophon (SA - Nick Xenophon Team) (14 August 2017)

Senator XENOPHON (South Australia) (18:03):

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.

Sen. Xenophon fragment source (pp 83-85)

Sen Cormann (WA - Minister for Finance and Deputy Leader of the Government in the Senate) (14 August 2017)

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (18:16):

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.

Sen. Cormann fragment source (p 85)

 

Senate Amendment (14 August 2017)

Greens' Amendment (Telco)

The Senate considered two proposed amendments in committee and approved the Greens' amendment relating to telecommunications-specific provisions.

View Greens' amendment

Senator Whish-Wilson (Greens) said of the amendment:

'the Competition and Consumer Act currently includes an effects test for the telecommunications industry, as well as giving the ACCC greater powers of intervention and the ability to issue competition notices against misuse of market power in the telecommunications industry. The bill before us tonight proposes to remove both these existing provisions on the grounds of duplication. Our amendment retains these powers.'

In response, Senator Cormann (Liberal) noted:

The government will indeed be supporting this Greens amendment. This amendment will replace schedule 2 in the bill with a new schedule. The new schedule will retain the telecommunications-specific anticompetitive conduct provisions in part XIB but stop the new broader section 46 flowing through to that part. As introduced, the bill sought to repeal the anticompetitive conduct provisions in part XIB in light of the introduction of the broader and stronger general misuse of market power law in section 46. With the strengthening of section 46, it would not have been necessary to apply part XIB because section 46 effectively supersedes the competition law rule in XIB. It would also be inappropriate for section 46 to flow through unimpeded to part XIB because of the unique and heavy-handed enforcement mechanisms in part XIB.

Competition notices, which can result in significantly higher pecuniary penalties and the reversal of the onus of proof, are designed for a completely different legal trigger. Our view is that a strengthened section 46 will be able to address any misuse of power in the telecommunication industry. In addition, the Australian Competition and Consumer Commission continues to retain other targeted powers to deal with competition concerns in telecommunications. However, it has also become clear that the repeal of the part XIB rules is not supported by all senators. Given this, the government will support the alternative approach developed by the Greens. This retains the part XIB provisions but stops the new section 46 flowing through to part XIB. This approach will leave part XIB largely in place as it stands, with its own additional enforcement provisions but linked to the existing lower effects test. However, the new section 46 will not be enforceable using the disproportionate enforcement mechanism in part XIB. The amendment does not change the new section 46, which will apply to all sectors of the economy.

 

Senate Committee (14 August 2017)

The Senate considered two proposed amendments in committee.

Hansard (14 August 2017):

The CHAIR (18:17): The question is that the bill stand as printed.

Amendments proposed by Senator Xenophon (divestiture, adverse cost orders)

Nick XenophonHansard (14 August 2017):

Senator XENOPHON (South Australia) (18:17):

Chair, I have some amendments, and I will get your guidance as to how they are to be dealt with. I think I'm the first on the circulated amendments sheet. I'm happy to deal with those as you wish. I won't be proceeding with some amendments, so I will be guided by you as to whether it's appropriate that I firstly withdraw a particular amendment that's on the running sheet. In respect of amendment (1)—and I'm not sure if there's an amended sheet to that effect, but I will be guided by you as to whether it's appropriate that the amendments are dealt with at this point in time, given the running sheet in respect of the bill.

The CHAIR: 

Senator Xenophon, are you indicating that you don't want to move (1) because (2) is linked to it?

Senator XENOPHON:

Yes, that's right. So, in terms of sheet 8139, I seek leave for what is referred to in item 1A to be withdrawn, but I seek leave still to proceed with item 1B, which is the amendment after section 80C.

Leave granted.

The CHAIR: 

Senator Xenophon has removed item 1A. Senator Xenophon, are you now seeking to move item 1B and amendment (2) together, on sheet 8139?

Senator XENOPHON: 

No, because—and I apologise, Chair—

The CHAIR: 

That's OK.

Senator XENOPHON: 

I can explain this: in relation to subsection 2, that relates to 51(3) after the amendments to do with item 1A. I only want to move the amendment on the original sheet that is headed '1B After section 80AC,' which starts off with 'Insert: 80AD Divestiture where contravention of section 46' down to subclause 6. The amendment (2) on the original sheet relates directly to the amendment that I do not wish to proceed with. So, it only deals with the issue—sorry, Chair, I understand there is a fresh amendment and I apologise—

The CHAIR: 

Okay, Senator Xenophon: you're amending section 1 and seeking to move that?

Senator XENOPHON: 

It's on sheet 8139, revised and hot off the presses. While that is being circulated, can I just indicate that the reason I'm not proceeding with that earlier amendment is that it was drafted at a time when there was a damage-to-competitors clause considered by the Harper review. It's no longer necessary, particularly with the rewording of the legislation—

The CHAIR: 

Senator Xenophon, with regard to your voice, you've sought leave on that and leave was granted so I think it's understood. So it's probably best if you save your voice for the things you really want to move!

Senator XENOPHON:

Thank you. I thank Senator Whish-Wilson for the Strepsil. I'm not sure which Strepsil it is, but I won't consume it until I've sat down. I move:

Amendment No. (1) on sheet 8139 revised.

It relates to divestiture, and that includes a whole range of provisions in terms of adverse cost orders, assistance where there may be—sorry, let's just stick with divesture. I will deal with adverse costs shortly because—

The CHAIR: 

What you are seeking to do is to move No. (1) on sheet 8139 as revised?

Senator XENOPHON: 

That's right. It relates, as I indicated in my second reading contribution, to the issue of divestiture powers.

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (18:22):

The government will not be supporting this amendment. The Harper review, like the Dawson and Harmer reviews before it, considered and recommended against establishing divestiture as a remedy to address misuse of market power concerns. At these reviews, each concluded that the existing range of available remedies is sufficient to deter misusers of market power and to compensate parties harmed by such conduct. Divestiture is not appropriate for breaches or misuse of market power as it would not target the conduct of concern.

But divestiture is currently available as a remedy for mergers and acquisitions which breach the Competition and Consumer Act. This is appropriate because the remedy directly targets and unwinds the transaction which breached the act. This would not be the case for section 46, where divestiture would at best be a blunt weapon which would not directly address the conduct of concern. The courts would then need to engage in the difficult task of restructuring what may be a highly-integrated firm to achieve this reduction in size. Moreover, there would be a high risk of unintended consequences—for example, a business or parts of it becoming uncompetitive or even unviable, which would be detrimental to consumer welfare.

As I've indicated in various reviews in this space—most recently the Harper Review but before it the Dawson and Harmer reviews—all looked at this and all recommended against it.

Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (18:23):

Labor won't be supporting this part of the Nick Xenophon Team's amendment. We note that the divestiture provisions are an extension of comments Senator Xenophon has made in the past.

The potential for repeat offenders of anticompetitive conduct is certainly a concern Labor shares. Labor has a proposed reformulation of how base penalties under the Competition and Consumer Act are calculated. We took that to the last election and we have recommitted ourselves to it.

Labor has proposed that Australia adopt a European Union-type penalty system for anticompetitive conduct, which is based on 30 per cent of the annual sales of the relevant product or service multiplied by the number of years the infringement took place, capped at 10 per cent of annual turnover. This would have both a punitive effect on culprits and a disincentive effect on potential culprits. We also note that this is a considerable departure from the status of the Competition and Consumer Act and that the amendment itself would warrant further scrutiny. A divestiture power that judges may apply would be a change to Australian competition laws on a large scale. As such, the measure itself would need to be considered on its own merits rather than in tandem with the proposed effects test. Normally a measure of this scale would be better suited to an in-depth inquiry conducted by a body such as the Productivity Commission. Further to that, drafting would require extensive consultation with extensive stakeholder collaboration. We won't be supporting this section of Senator Xenophon's amendment tonight.

Senator WHISH-WILSON (Tasmania) (18:25):

I would like to start by noting Senator Xenophon's been nothing if not consistent on this over a long period of time. The Australian Greens would certainly like to continue the conversation on this with Senator Xenophon. The proposal in the amendment, which allows courts to make divestiture orders and enables courts to break up serious or repeat big business offenders, is an appealing one. I know the Harper Review didn't recommend it and instead suggested the power reside with parliament, but I would like to note that this is a very significant change in what's being proposed here tonight, and that warrants careful and stand-alone consideration, not just being a rider to this bill. This chance to change competition law, which we've got in front of us—on section 46—is critically important. Senator Xenophon, I've done a little bit of reading on the trust-busting legislation in the US. It's not used as often as people perhaps think it is, but nevertheless it's certainly something that interests me, and I would say to you tonight we will keep an open mind on it if it can be brought to this place with separate legislation.

As it is before us tonight, I'm not going to mince my words. If supporting this risks the other legislation going down—and the government said clearly tonight that they won't support it—then we won't be in a position to support this tonight. We would recommend that you bring this back to the Senate in the form of a private member's bill, and we'll give it due consideration.

Senator Xenophon: 

I did.

Senator WHISH-WILSON:

Well, do it again.

Senator XENOPHON (South Australia) (18:27):

Can I just thank my colleagues from the government, the opposition and the Australian Greens for at least stating their position on this. I won't be seeking to divide on this. I understand where the numbers lie on this. But I will just make this point to Senator Cormann, respectfully. The fact that we have a merger and acquisitions power that allows for divestiture within the mergers and acquisitions context indicates that the power does exist and the concept of divestiture is not a novel one in the context of competition law in this country. It's a point that can be made to the opposition and to the Australian Greens. I believe the time will come when divestiture will be seen as an appropriate last-resort remedy where divestiture doesn't mean the whole company is broken up. It could be that, in one state or one marketplace where a company has behaved particularly egregiously and abused its market power, the court should have the right to say, 'You will be broken up in that particular market.' That to me is in some respects more targeted and more nuanced, in a sense, than having an approach where it's just an across-the-board 30 per cent fine or a 10 per cent fine on their turnover—which I'm not opposing from what the opposition is proposing. I think this should be in the toolkit of the courts.

In Europe, they do have divestiture powers. The reason you don't hear about them is that they're not used very often. It is a last-resort power and, as Senator Whish-Wilson said, they're not used much in the US, because it does change the culture of corporations. If a corporation realises and understands that it can be broken up in whole or in part by abusing its market power, that makes a difference to the culture of that corporation and their conduct in the way they deal with smaller companies down the supply chain. That to me would have a very beneficial and powerful role in changing corporate culture in this country in terms of the abuse of market power.

I am grateful to my colleagues for having the courtesy to indicate why they don't support this. My prediction is that eventually in this place we will have a divestiture power and it will be a good thing for competition law, for the conduct of businesses in this country and for competition and the chance it will give for small businesses and medium businesses to have a level playing field against the big guys.

Question negatived.

 

Senator XENOPHON (South Australia) (19:30):

I have another amendment to move—I think now is the appropriate time—and, insofar as I need to, I seek leave to move that amendment.

The TEMPORARY CHAIR ( Senator Williams ): 

You do not need leave. Continue, please.

Senator XENOPHON: 

I was just being very cautious in this place. We have to be very cautious about all the things we do, like citizenship and all those sorts of things. I move amendment (2) on sheet 8139 revised in relation to cost orders:

(2) Page 13 (after line 8), at the end of the Bill, add:

Schedule 3—Adverse costs orders

Australian Small Business and Family Enterprise Ombudsman Act 2015

1 At the end of section 7

Add:

; and (h) conduct within the meaning of subsection 4(2) of the Competition and Consumer Act 2010.

2 At the end of section 15

Add:

; (c) to give assistance under Division 3A of Part 4 in advising on and preparing a person's case for a no adverse costs order under subsection 82(4) of the Competition and Consumer Act 2010.

3 After subparagraph 23(h) (ii)

Insert:

   (iia) assistance being given under section 74B (assistance in relation to a no adverse costs order in proceedings to recover the amount of any loss or damage as a result of contraventions of the Competition and Consumer Act 2010);

4 At the end of section 65

Add:

; (g) conduct, within the meaning of the Competition and Consumer Act 2010, that:

   (i) may be in contravention of a provision of Part IV of that Act; and

   (ii) affects, or may affect, a small business or family enterprise.

5 After Division 3 of Part 4

Insert:

Division 3A—Assistance where there may be a contravention of the Competition and Consumer Act 2010

74A Application of this Division

This Division applies if the relevant action in relation to which a person requests the Ombudsman to give assistance is conduct, within the meaning of the Competition and Consumer Act 2010, that:

(a) may be in contravention of a provision of Part IV of that Act; and

(b) affects, or may affect, a small business or family enterprise.

74B Ombudsman may give assistance in relation to costs order

(1) The Ombudsman may assist the person by doing either or both of the following:

(a) advising the person on the arguments that might be made, and the evidence that might be adduced, to satisfy a court that an order under subsection 82(4) of the Competition and Consumer Act 2010 should be made (a no adverse costs order in proceedings to recover the amount of any loss or damage as a result of contraventions of that Act);

(b) preparing arguments that might be made in satisfying a court that an order under that subsection should be made.

(2) Nothing in this section limits the functions, duties and powers of the Ombudsman under this Part in relation to the relevant action.

6 At the end of Division 2 of Part 5

Add:

91A Disclosure for the purposes of a no adverse costs order under the Competition and Consumer Act 2010

(1) This section applies if the relevant action in relation to which a person (the applicant) requests the Ombudsman to give assistance is conduct, within the meaning of the Competition and Consumer Act 2010, that:

(a) may be in contravention of a provision of Part IV of that Act; and

(b) affects, or may affect, a small business or family enterprise.

(2) A person assisting a small business or family enterprise may disclose to the applicant any document or information obtained by the person assisting the small business or family enterprise in the course of performing functions or duties, or exercising powers, in relation to assistance given to the applicant under section 74B.

Note: Section 74B allows the Ombudsman to give assistance in relation to a no adverse costs order in proceedings to recover the amount of any loss or damage as a result of contraventions of the Competition and Consumer Act 2010. This assistance may include advising the applicant on the arguments that might be made, and the evidence that might be adduced, in pursuing a no adverse costs order, and preparing arguments.

Competition and Consumer Act 2010

7 At the end of section 82

Add:

No adverse costs orders

(3) A person who brings an action under subsection (1) in relation to a contravention of a provision of Part IV may at any time during proceedings on the matter seek an order under subsection (4) from the court hearing, or that will hear, the matter.

(4) The court may order that:

(a) a respondent in the proceedings is liable for any of its costs in relation to the proceedings; or

(b) two or more respondents in the proceedings are jointly and severally liable for any of their costs in relation to the proceedings.

(5) The court may only make an order under subsection (4) if the court is satisfied that:

(a) the action has a reasonable prospect of success; and

(b) the action raises an issue that is not only significant for the applicant, but may also be significant for other persons or groups of persons; and

(c) the disparity between the financial position of the applicant and the financial position of the respondent or respondents is such that the respondent or respondents could use the possibility of a costs order that does not favour the applicant as a means to deter the applicant from pursuing the action.

(6) A person who appeals a decision of the court under section (4) is liable for any costs in relation to the appeal.

8 Application

The amendment of the Competition and Consumer Act 2010 made by this Schedule applies in relation to actions under subsection 82(1) of that Act brought on or after 1 July 2017.

This relates to adverse costs orders. As I indicated in my second reading contribution, no matter how good a piece of legislation is—and I think it is fair to say that this has good elements, but I believe it should have gone further. Notwithstanding that, we need an ability to have real access to justice for competition law in this country. As I indicated previously, there are many businesses who get advice from their lawyer saying there has been an abuse of market power—predatory pricing or whatever the breach may be—but the lawyer then advises their client, 'By the way, if you want to take this to court, you'll be spending a couple of million dollars and you might be up for an adverse cost order in the millions of dollars.' An adverse cost order could be $5 million, $10 million or $15 million, depending on the complexity of the case, because these can be complex matters.

What I have done here is to move amendments that—and I make no apology for this—are effectively lifted from the amendments that Senator Gallagher moved in her bill, a very good piece of legislation. I think Senator Gallagher was concerned I would be damning her with fake praise. I am praising with her real praise. There is a big difference between the two. My colleagues and I supported her bill, which I was very pleased to see pass the Senate last week as a private senator's bill, and I hope it will pass the lower house as well.

That bill sets a framework for the first time in this country to allow for real access to justice where there can be a whole range of measures: ensuring there are no adverse cost orders; having the office of the Australian Small Business and Family Enterprise Ombudsman act as part of the framework of this; enabling applications to be made for assistance and enabling the ombudsman to give assistance in relation to cost orders. It would provide a framework, as set out effectively in Senator Gallagher's bill, as incorporated in this amendment, to ensure that, once and for all, we can proceed to test the competition laws in this country in a way that would make sure they have real teeth. That is why I think Senator Gallagher's bill is such a good bill and why it needs to be incorporated in this particular amendment, to give real teeth to these competition laws.

Mr Temporary Chair—I know this is a bit unfair on you because I know you can't interject from the chair, but your interjection would be one of hearty support, I'm sure—you and the Nationals have had a very important role in driving competition law reform in this country and you should be congratulated for it. All I am seeking to do here is to ensure that this piece of legislation works as intended. It won't work as intended unless we have real access to justice. This is what these amendments are about.

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (19:34):

The government will not be supporting the amendment. The Senate might recall that similar amendments, if not the same amendment, was actually passed as part of a different bill so they arguably double-up what was dealt with before. We believe this is poorly thought out policy with significant implementation issues, which will not have any real practical benefits for small business. Enabling courts to grant cost waiver orders to small business at the outset of a case would raise significant practical issues. It is unclear how a court could be expected to assess the merits of a case at the start of a matter—that is, before evidence has been tested by the parties. This creates a significant risk of cost waiver orders being granted inappropriately.

The party in receipt of the no adverse costs order is incentivised to take up belligerent litigation tactics which are unhelpful for the court. This policy would also have workload implications for the Federal Court. The workload of the Federal Court would increase, as judges would be called up to make cost waiver assessments. The proposal to allow the Small Business Ombudsman to provide a professional opinion on the likelihood of a party successfully obtaining a no adverse costs order would appear to require the office to provide a form of legal advice which is not appropriate for a public statutory office of this nature.

It is not clear how a party who took up litigation on the basis of such an assessment and subsequently did not obtain an order in their favour could then withdraw from the litigation without a cost penalty. We will not be supporting these amendments.

Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (19:36):

Thank you very much for the call. I also acknowledge Senator Xenophon's support for Labor's small business access to justice policy and    I thank him for his support last week. We appreciate the fact that these amendments of Senator Xenophon's have been split which allowed us to support this section of his amendments whilst noting that we strongly oppose this legislation as it stands. We voted that way at the second reading stage.

We are opposed to the effects test; however, we do support the lift of Labor policy into Senator Xenophon's amendment. I agree with him that, in terms of drafting that bill and formulating our policy prior to the last election, it was really about providing real access to justice for small and medium businesses. Anyone who spends any time with small business will hear stories of reluctance to pursue anticompetitive conduct based on the uncertainty of the costs associated with pursuing that and the acknowledgement that large corporations—big business—have very deep pockets. In terms of protecting their markets, they are prepared to dig deep into those pockets to ensure that small business doesn't pursue practical access to justice. That is exactly what these amendments sought to address in last week's bill and we certainly support the amendment here tonight.

In terms of some of the comments Senator Cormann just made in criticising this, there is a public interest threshold that would be assessed against the no adverse costs order amendments as part of our legislation. It's not predetermining every case. It is looking at cases where the court has decided that there is a public interest question at stake. But, having said that, we will be voting against this bill for the reasons I have already outlined at the second reading stage. However, we are happy to support Senator Xenophon's amendment.

Senator WHISH-WILSON (Tasmania) (19:38):

I won't speak for very long on this, because I think it's already been stated by the Labor Party—and the government to some extent—that this is a duplication, essentially, of what we considered in a private member's bill in this place only a few days ago. I understand there may be some slight differences, but this is something that Senator Xenophon has been talking about for some time. I am not sure if Labor got their idea from this but, nevertheless, I am sure you will be happy with the fact that we all agreed on a private member's bill in here that essentially does what you have been campaigning on for some time. We already voted for it. We commended the Labor Party for bringing it forward. I thank Senator Xenophon for his amendment, but we don't feel there is a need to support this tonight given we have just supported the private member's bill.

Senator XENOPHON (South Australia) (19:39):

Now is the time to support this amendment. This is something that Senator Gallagher and others in the Labor Party have done a lot of good work on—

Senator Gallagher: 

You could actually amend the bill.

Senator XENOPHON: 

Here's an opportunity to amend the bill now. Here's an opportunity to progress this issue now. It is an opportunity that will make a difference to access to justice.

With respect to Senator Cormann, in terms of his comments, this is not about belligerent litigation tactics. I have a tiny law firm that knows a bit about litigation, and the biggest single impediment for small businesses to take on a big corporation is the adverse cost orders. The biggest single impediment for a small business to defend itself in a case, even where it could be meritorious in terms of their defence, is the cost orders that will crush them. Often, if there is some small element of risk, they will try and resolve the case, because the consequence of losing the case could be that their business would be destroyed or go into liquidation or that they would be personally bankrupted. The belligerent litigation tactics come from those with very deep pockets.

I have been talking about issues of access to justice for a number of years. Senator Gallagher has done terrific work on this, and none of that should be taken away from her or her colleagues who put up this bill that I am very pleased to support.

On the issue of a cost waiver, there has to be a public interest requirement. The cost waiver is one that will be used only in public interest cases. This won't open the courts to a flood of litigation, but it will open the courts to real access to justice for those who need it most. That's why I support this amendment.

Senator WHISH-WILSON (Tasmania) (19:41):

I want to get it on record, in case I wasn't clear, that we support the intention of this, as we did with the private member's bill, but the difference between us and the Labor Party is that this is not the main game. The main game is amending section 46, a law that we know is unworkable in this country and that we have been campaigning to amend now for some years. That's what we have before us here in the chamber today.

The government has made it clear they won't support this. Labor wants the Greens and others to support this, because they want the bill to be torpedoed. They want this to go down. But we have campaigned long and hard to get section 46 amended. That's the main game here today. We are happy to work with Senator Xenophon or Labor on their private member's bill, and we hope the government gives that consideration when it goes to the other place, but we are here tonight to get a very important reform in place in this parliament, and that is amending section 46 of the Competition Act.

The DEPUTY PRESIDENT: 

The question is that the amendment as moved by Senator Xenophon, No. 2 on sheet 8139 revised, be agreed to.

DIVISION

Question negatived by 12 vote majority (see Hansard fragment for breakdown)

Amendments proposed by the Australian Greens (14 August 2017)

Senator Whish-WilsonSenator WHISH-WILSON (Tasmania) (19:50):

I move Australian Greens amendment to the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 on sheet 8190:

(1) Schedule 2, page 8 (line 1) to page 13 (line 8), omit the Schedule, substitute:

Schedule  2—Telecommunications industry

Competition and Consumer Act 2010

1  Paragraph 151AJ(3)(a)

   Omit "45B, 46,".

2  Subsections  151AJ(4) and (5)

   Omit "45B, 46,".

3  Paragraph 151AJ(5)(a)

   Repeal the paragraph, substitute:

   (a) the assumption that subparagraphs 45(3)(a)(ii) and (b)(ii) had not been enacted;

4  Paragraphs 151AJ(5)(c) and (d)

   Repeal the paragraphs.

5  Subsection  151AJ(7)

   Omit "45B, 46,".

6  Paragraph 151AJ(7)(d)

   Repeal the paragraph.

7  Subsections  151BC(4) and (5)

   Repeal the subsections.

There is one amendment to this bill. It relates to schedule 2, on the telecommunications industry.

Just a little bit of background: the Competition and Consumer Act currently includes an effects test for the telecommunications industry, as well as giving the ACCC greater powers of intervention and the ability to issue competition notices against misuse of market power in the telecommunications industry. The bill before us tonight proposes to remove both these existing provisions on the grounds of duplication. Our amendment retains these powers.

Let me explain a little more about the existing provisions that are currently in place and why we wish to retain these. Division 2 of part XIB sets out the telecommunications-specific competition rule which prohibits a carrier or carriage service provider—called a CSP—from engaging in anticompetitive conduct. Essentially, this is an effects test applying only to the telecommunications market. Let's make this point very clear: we have, for all intents and purposes, an effects test in the telecommunications market right now. And let me make this point clear: stakeholders in the telecommunications industry have been knocking on our door, as I am sure they have on other senators' and MPs' doors, asking us to maintain the effects test as it stands—and I will call it an effects test—because it works for them and they have confidence in it.

My third point, to make it very clear, is that, if you support the Greens amendment tonight to retain this because you recognise that the telecommunications industry likes what's in there now and thinks it works, on principle you support an effects test—a broader effects test for other industries. Let's make that very clear.

What we have at the moment is an effects test applying only to the telecommunications market. Division 3 of part XIB grants the ACCC power to issue competition notices in respect of a contravention to the competition rule. That's called division 2. There are two types of competition notices, part A and B notices, that differ with regard to the particulars of the contravening conduct that the ACCC must include. The issuing of a competition notice requires a carrier or CSP to cease engaging in the identified anticompetitive conduct subject to high potential fines. Division 3 also allows for a person to apply to the ACCC for an order exempting specified conduct for the scope of the anticompetitive conduct provisions in division 2. Overall, by providing for the issuing of competition notices, division 3 enables the ACCC to respond quickly to anticompetitive conduct in the sector.

It is interesting to note also tonight, that Telstra is the only body that is calling for the removal of the ACCC's current intervention powers. We believe they should be retained because not only is the industry firmly of the view that they have worked and they are very confident in them but they give the ACCC the capacity to intervene early in the piece should they see potential misuse of market power. Further, given the rapidly-developing and asymmetrical nature of the telecommunications industry, the retention of the existing provisions is prudent.

I will finish by saying that I hope the Senate can support this amendment. I understand the government will be supporting our amendment tonight, and I thank them for this. I understand that Senator Xenophon will be supporting the amendment. I'm not sure about the other crossbenchers and I'm not sure of Labor's position. I'm guessing they won't be supporting this because this is an effects test—an effects test that seems to work and has the industry engaged and out there lobbying for it to be retained. I thank the government for their flexibility on this. We were working very closely with the telecommunications industry. This was a sticking point for them and for some senators in the Greens, and we thank them for keeping this in place. It's a very powerful symbol that an industry, like the telecommunications industry, believes that an effects test is effective, hence the logic for us transferring this more generally to section 46 for other industries' potential misuse of market power. It's what the ACCC have been asking for.

Senator CORMANN (Western Australia—Minister for Finance and Deputy Leader of the Government in the Senate) (19:55):

The government will indeed be supporting this Greens amendment. This amendment will replace schedule 2 in the bill with a new schedule. The new schedule will retain the telecommunications-specific anticompetitive conduct provisions in part XIB but stop the new broader section 46 flowing through to that part. As introduced, the bill sought to repeal the anticompetitive conduct provisions in part XIB in light of the introduction of the broader and stronger general misuse of market power law in section 46. With the strengthening of section 46, it would not have been necessary to apply part XIB because section 46 effectively supersedes the competition law rule in XIB. It would also be inappropriate for section 46 to flow through unimpeded to part XIB because of the unique and heavy-handed enforcement mechanisms in part XIB.

Competition notices, which can result in significantly higher pecuniary penalties and the reversal of the onus of proof, are designed for a completely different legal trigger. Our view is that a strengthened section 46 will be able to address any misuse of power in the telecommunication industry. In addition, the Australian Competition and Consumer Commission continues to retain other targeted powers to deal with competition concerns in telecommunications. However, it has also become clear that the repeal of the part XIB rules is not supported by all senators. Given this, the government will support the alternative approach developed by the Greens. This retains the part XIB provisions but stops the new section 46 flowing through to part XIB. This approach will leave part XIB largely in place as it stands, with its own additional enforcement provisions but linked to the existing lower effects test. However, the new section 46 will not be enforceable using the disproportionate enforcement mechanism in part XIB. The amendment does not change the new section 46, which will apply to all sectors of the economy.

Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (19:57):

Labor will be supporting the Greens amendment despite the very ungenerous speech by Senator Whish-Wilson. Coming from a party that just reversed its position on the amendment that Senator Xenophon moved around access to justice compared to their position last week, it was very ungenerous to then stand up and start attacking Labor when we are prepared to support your amendment, Senator Whish-Wilson—despite our overall concerns about the bill as a whole, and which we remain opposed to.

To just pick up on your argument, I would pose this question. If the amendment that you are moving is accommodated in the bill that the government has introduced, and extrapolating your argument that by supporting your amendment we obviously support the effects test, then my question would be: why are you moving this amendment? If this is dealt with under the government's bill, then why the need for the specific amendment that you are moving, Senator Whish-Wilson? It is entirely reasonable for Labor to support this amendment, as you yourself have recognised. You drafted this amendment and you have done a deal with the government, which forced you to oppose the access to justice provisions that you supported last week. Be up-front about it; don't then come swinging at us when we have legitimate reasons to be supporting this amendment as it deals with safeguards in the telecommunications sector, a very specific issue, rather than the much broader application of the section 46 amendment. We are happy to support it. Our position is consistent. By doing so, by supporting it, it does not mean that we will be supporting the broader application of section 46, which we remain opposed to.

Senator WHISH-WILSON (Tasmania) (19:59):

I can't let that go unchallenged.

Senator Gallagher: 

You can actually.

Senator WHISH-WILSON: 

It's interesting—

Senator Gallagher interjecting—

Senator WHISH-WILSON:

You're screaming blue murder because we didn't support Senator Xenophon's amendment. If you think that's really important, why did you bring your private member's bill in here in the first place? You were trying to put up a smokescreen so you didn't have to vote for section 46. We all know why you didn't vote for section 46, a very comprehensive reform that we have been campaigning on for years. Why bring the private member's bill and waste the Senate's time and money if you thought we were going to get this amendment here tonight? I didn't hear from Senator Xenophon before tonight about his amendment on costs. If I had, we may have had a different considered position. All I know is that we voted on Labor's private member's bill a couple of days ago but that no-one came to see the Greens to support this amendment. Don't accuse us of being hypocrites.

The TEMPORARY CHAIR ( Senator Williams ): 

The question is that Australian Greens amendment (1) on sheet 8190 be agreed to.

Question agreed to.

The CHAIR: 

The question is that the bill, as amended, be agreed to.

The committee divided. [20:05]

...

Question agreed to.

Bill, as amended, agreed to.

Bill reported with an amendment; report adopted.

 

Senate Third Reading (14 August 2017)

Senator Cormann moved that the bill now be read a third time (Handard p 93)

The motion passed by a 22 vote majority

AYES NOES PAIRS
Bernardi, Brimingham, Burston, Bushby, Cash, Cormann, Di Natale, Duniam, Fawcett, Fierravanti-Wells, Fifield, Georgiou, Gichuhi, Griff, Hanson, Hanson-Young, Hinch, Hume, Kakoschke-Moore, Lambie, Macdonald, McGrath, McKenzie, McKim, Nash, O'Sullivan, Parry, Paterson, Payne, Reynolds, Rhiannon, Rice, Roberts, Ruston, Scullion, Siewert, Sinodinos, Smith, Whish-Wilson, Williams, Xenophon Bilyk, Chisholm, Dodson, Gallacher, Gallagher, Kettter, Kitching, Leyonhjelm, Lines, Marshall, McAllister, Moore, O'Neill, Polley, Pratt, Singh, Sterle, Urquhart, Watt Abetz/Dastyari
Brandis/Wong
Canavan/McCarthy
Farrell/Ryan
Seselja/Brown


[Senator Collins did not vote to compensate for vacancy caused by Senator Back's resignation]

 

 

Assent (23 August 2017)

Royal Assent was given on 23 August 2017 and the bill entered force as the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Act 87 of 2017).

See Commonwealth of Australia Gazette C2017G00923 (28 August 2017).

Commencement of the new provisions is, however, contingent on the passage of the Competition and Consumer Amendment (Competition Policy Review) Bill 2017.

 

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