House debates

Monday, 27 March 2017

Bills

Competition and Consumer Amendment (Misuse of Market Power) Bill 2016; Second Reading

4:11 pm

Photo of Chris BowenChris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | | Hansard source

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.

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 is this effects test they may say, 'But this might affect some of our competitors. Some of them might actually go out of business if we are 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 affected.' 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. As I said, there have been 12 reviews of this since the early 1970s, and 10 have said that this is a very bad idea. We will continue to say it is a very bad idea, and we will continue to argue against this because we will stand up for good policy.

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.

Photo of Mark CoultonMark Coulton (Parkes, Deputy-Speaker) Share this | | Hansard source

Is the amendment seconded?

Photo of Brendan O'ConnorBrendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | | Hansard source

Yes. I second the amendment and reserve my right to speak.

Photo of Mark CoultonMark Coulton (Parkes, Deputy-Speaker) Share this | | Hansard source

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.

4:29 pm

Llew O'Brien (Wide Bay, National Party) Share this | | Hansard source

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 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.

4:37 pm

Tim Hammond (Perth, Australian Labor Party) Share this | | Hansard source

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.

4:52 pm

Andrew Gee (Calare, National Party) Share this | | Hansard source

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.

5:03 pm

Photo of Ed HusicEd Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | | Hansard source

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 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.

5:18 pm

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | | Hansard source

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.

5:33 pm

Photo of Matt ThistlethwaiteMatt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | | Hansard source

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.

5:48 pm

Photo of Sarah HendersonSarah Henderson (Corangamite, Liberal Party) Share this | | Hansard source

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.

6:03 pm

Photo of Graham PerrettGraham Perrett (Moreton, Australian Labor Party) Share this | | Hansard source

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?

Photo of Terri ButlerTerri Butler (Griffith, Australian Labor Party) Share this | | Hansard source

$11!

Photo of Graham PerrettGraham Perrett (Moreton, Australian Labor Party) Share this | | Hansard source

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.

6:18 pm

Photo of Terri ButlerTerri Butler (Griffith, Australian Labor Party) Share this | | Hansard source

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)

6:33 pm

Photo of Stephen JonesStephen Jones (Whitlam, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | | Hansard source

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.

6:48 pm

Photo of Adam BandtAdam Bandt (Melbourne, Australian Greens) Share this | | Hansard source

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.

6:58 pm

Photo of Scott MorrisonScott Morrison (Cook, Liberal Party, Treasurer) Share this | | Hansard source

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.

Photo of Tony SmithTony Smith (Speaker) Share this | | Hansard source

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.

7:15 pm

Photo of Tony SmithTony Smith (Speaker) Share this | | Hansard source

The question is that the bill be now read a second time.