Inquiry into the Effectiveness of the Trade Practices Act 1974 in protecting Small Business
Senate Economics References Committee
On 25 June 2003, on the motion of Senator Conroy, the Senate referred the terms of reference to the Economics References Committee for inquiry and report by 1 March 2004.
The Chair of the Committee was Senator Ursula Stephens (ALP Member, Senator for NSW)
Whether the Trade Practices Act 1974 adequately protects small businesses from anti-competitive or unfair conduct, with particular reference to:
(a) whether section 46 of the Act deals effectively with abuses of market power by big businesses, and, if not, the implications of the inadequacy of section 46 for small businesses, consumers and the competitive process;
(b) whether Part IVA of the Act deals effectively with unconscionable or unfair conduct in business transactions;
(c) whether Part IVB of the Act operates effectively to promote better standards of business conduct, and, if not, what further use could be made of Part IVB of the Act in raising standards of business conduct through industry codes of conduct;
(d) whether there are any other measures that can be implemented to assist small businesses in more effectively dealing with anti-competitive or unfair conduct; and
(e) whether there are approaches adopted in Organisation for Economic Co-operation and Development (OECD) economies for dealing with the protection of small business as a part of competition law which could usefully be incorporated into Australian law.
(2) That the committee make recommendations for legislative amendments to rectify any weaknesses in the Trade Practices Act identified by the committee’s inquiry.
A total of 55 public submissions were received by the following parties:
1 Liquor Stores Association of Victoria
3 Post Office Agents Association Limited (POAAL)
4 The Independent Liquor Group Distribution
5 Fair Trading Coalition
6 National Federation of Independent Business (NFIB) Inc
7 Palamedia Limited
8 Shopping Centre Council of Australia
9 Independent Booksellers Network
10 Housing Industry Association Limited
11 Alan Edward Barnard
12 Office Choice Limited
13 Business Council of Australia
14 National Competition Council
15 Telstra Corporation Limited
16 Meridian Connections Pty Ltd
17 Drake Food Markets
18 Law Council of Australia
19 The Pharmacy Guild of Australia
20 Small Business Union of Australia Ltd
21 The Queensland Retail Traders & Shopkeepers Association
22 Coles Myer Ltd
23 Boral Limited
24 Small Business Development Corporation
25 The Council of Small Business Organisations of Australia Ltd (COSBOA)
26 Franchise Council of Australia
27 Woolworths Limited
28 Motor Trades Association of Australia
29 Australian Retailers Association
30 Australian Competition and Consumer Commission (ACCC)
31 South Australian Government
32 Spier Consulting
33 Australian Chamber of Commerce and Industry
34 Federal Chamber of Automotive Industries
35 Victorian Government
36 Australian Retail Lease Management
37 National Retail Association
38 Tasmanian Independent Retailers
39 Real Estate Institute of South Australia
40 W.A. Independent Grocers Association (Inc.)
41 National Association of Retail Grocers of Australia
42 Metcash Trading Limited
43 National Farmers' Federation
44 T C Boxall
45 ACT Government
46 Queensland Lease Consultants
47 Master Grocers' Association of Victoria (MGAV)
48 Dr Evan Jones
49 A G Hayward
51 Frank Zumbo
52 Stones Investments Pty Limited
53 Lottery Agents Association of Victoria
54 NSW Farmers Association
55 Agreements in principle with sentiments expressed in the Small Business Union of Australia Ltd's Submission
Public hearings were held in 2013 - the were held in Canberra on October 10, 17 and 30 and November 7 and 24 and in Melbourne on 31 October 2013.
The 122 page report was produced in March 2004.
It included the following recommendations:
Misuse of market power
The Committee recommends that the Act be amended to state that the threshold of ‘a substantial degree of power in a market’ is lower than the former threshold of substantial control; and to include a declaratory provision outlining matters to be considered by the courts for the purposes of determining whether a company has a substantial degree of power in a market. Those matters should be based upon the suggestions outlined by the ACCC in paragraph 2.16 of this report.
The Committee recommends that the Act be amended to include a declaratory provision outlining the elements of ‘take advantage’ for the purposes of s.46(1). This provision should be based upon the suggestions outlined in paragraph 2.28 of this report.
The Committee recommends that the Act be amended to provide that, without limiting the generality of s.46, in determining whether a corporation has breached s.46, the courts may have regard to:
- the capacity of the corporation to sell a good or service below its variable cost.
The Committee recommends that the Act be amended to state that:
- where the form of proscribed behaviour alleged under s.46(1) is predatory pricing, it is not necessary to demonstrate an capacity to subsequently recoup the losses experienced as a result of that predatory pricing strategy
The Committee recommends that s.46 of the Act be amended to state that, in determining whether or not a corporation has a substantial degree of power in a market for the purpose of s.46(1), the court may have regard to whether the corporation has substantial financial power.
‘Financial power’ should be defined in terms of access to financial, technical and business resources.
The Committee recommends that s.46 be amended to state that a corporation which has a substantial degree of power in a market shall not take advantage of that power, in that or any other market, for any proscribed purpose in relation to that or any other market.
The Committee recommends that s.46 be amended to clarify that a company may be considered to have obtained a substantial degree of market power by virtue of its ability to act in concert (whether as a result of a formal agreement or understanding, or otherwise) with another company.
The Committee recommends that subsections 51AC(9) and 51AC(10) of the Act be repealed.
The Committee recommends that subsections 51AC(3) and 51AC(4) of the Act be amended to include ‘whether the supplier (in s.51AC(3)) or acquirer (in s.51AC(4)) imposed or utilised contract terms allowing the unilateral variation of any contract between the supplier and business consumer, or the small business supplier and acquirer.’
The Committee recommends that s.2B(1) of the Act be amended so that it is clear that Part 1VA of the Act applies to the Commonwealth Government; and that the Government consult with the states and territories with a view to amending subsection 2B(1) of the Act, so that Part IVA of the Act applies to state, territory and local governments.
The Committee recommends that the Commonwealth Government negotiate with state and territory governments, with a view to introducing measures which would prohibit retail lease provisions compelling tenants to keep their tenancy terms and conditions secret.
Codes of conduct
No specific recommendation - expressed skepticism at extent to which voluntary codes of conduct could address concerns and suggest that the recommendations made are more likely to 'support successful competition'
The Committee recommends that the Government immediately bring forward legislation to introduce a collective bargaining notification scheme, including the right to boycott, and excluding the proposed $3 million threshold for notifications.
The Committee considers that provisions should be introduced into the Act to ensure that the ACCC has powers to prevent creeping acquisitions which substantially lessen competition in a market.
The Committee recommends that s.81(1) of the Act be amended so that s.81 can be applied where a corporation is found to have contravened section 46, section 46A, or any new section introduced to regulate creeping acquisitions.
Powers of the ACCC
The Committee recommends that the Act be amended to provide for cease and desist orders, modelled on the orders provided for in sections 74A to 74D of the Commerce Act 1986 (NZ), appropriately modified to conform with Australian constitutional law.
The Committee recommends that s.155 of the Act should be amended to enable the ACCC to seek the permission of the court (whether as part of a warrant application or otherwise) for the continued use of its powers under s.155 after the commencement of injunctive proceedings. The use of s.155 powers should cease prior to the commencement of substantive proceedings.
Resources of the ACCC
The Committee recommends that the ACCC should be adequately funded to undertake its role as the principal litigant in s.46 and s.51AC cases.
The Committee recommends that the jurisdiction of the Federal Magistrates Court be extended to enable it to deal with Misuse of Market Power (s.46 and s.46A where cases rely upon s.83), Contravention of Industry Codes (s. 51AD) and Unconscionable Conduct (Part IVA).
Approaches adopted in OECD economies
No specific recommendation - noted that in making recommendations Committee has considered approaches adopted in other jurisdictions.
The Government Senators' (minority) Report (from page 81 - Senator George Brandis and Senator Grant Chapman) deals with each of the 17 recommendations of the Committee
The 17-page Government response (Australian Government Response to the Senate Inquiry into the Effectiveness of the Trade Practices Act 1974 in protecting small business) deals with each of the recommendations by the Committee (rejecting most).
Media release 15 December 2013
This media release called for additional submissions - to be received up to 14 January 2014. This was prompted by the decision in Rural Press handed down on 11 December 2003.