George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

I rise to speak on the Trade Practices Legislation Amendment Bill 2008. The bill seeks to amend the act in five respects. First, and this is the issue that has attracted the most public comment, it seeks to alter—not, as has erroneously been said, to repeal but to alter—in an important respect the so-called Birdsville amendment, that is, the amendments that were introduced into section 46 of the act and the cognate provisions of the schedule to the act by sections 46(1AA) and 46(1AB) last year. Secondly, the bill proposes to vest jurisdiction in relation to section 46 matters in the Federal Magistrates Court. Thirdly, the bill proposes to make it mandatory that one of the ACCC’s deputy chairmen must have knowledge of or experience in small business matters. Fourthly, the bill proposes to remove the $10 million threshold on unconscionable conduct proceedings under section 51AC. That was a threshold established by the Trade Practices Legislation Amendment Bill 2007 when the threshold was raised from $3 million to $10 million. Under these amendments there will be no threshold required to invoke that jurisdiction. Finally, the bill seeks to clarify, by extending temporally, the powers of the ACCC after a notice under section 155 of the Trade Practices Act has issued. That amendment to section 155 is an amendment first recommended by the Senate Economics References Committee when it reviewed the effectiveness of the Trade Practices Act in protecting small business in 2004.

I say at once that the opposition supports the third, fourth and fifth of those categories of amendments, that is, the requirement that an ACCC deputy chairman must be a small business specialist, the removal of the $10 million threshold on unconscionable conduct proceedings and the reforms to section 155. Let me deal then with the two matters which the opposition will oppose.

The first is the amendments to the so-called Birdsville amendment which would remove the test of market share as the jurisdictional threshold for proceedings under section 46(1AA) in making a determination under the subsection and substitute the words ‘degree of power in a market’. The prohibition is on a corporation then not taking advantage of that power in that or any other market by supplying or offering to supply goods or services.

The Birdsville amendment, of which Senator Barnaby Joyce may be regarded as the progenitor, has attracted a great deal of excited commentary across all stakeholders in this debate whether it be the small business community, academic lawyers and economists who specialise in antitrust law, legal practitioners, business lobby groups representing both the so-called big end of town and the small business sector, and others.

On 28 August this year Professor Stephen Corones, in an article published in the Australian Financial Review, subjected the Birdsville amendment to a scathing attack. At a conceptual level I happen to agree with everything that Professor Stephen Corones, who is one of the nation’s most respected specialists in this field, wrote—at a conceptual level. However, it is the opposition’s view that this question should be approached pragmatically. The Birdsville amendment was first introduced into the Trade Practices Act in September last year—but a year ago. In moving that amendment to the Trade Practices Act on behalf of the then government in the Senate I said that the government felt that it had got the balance right. In the year since it is simply not possible to make a determination as to whether the Birdsville amendment has had the effect which those who promoted its inclusion in the act believed that it would have, simply because there has not been time. There has not been a sufficient passage of time in terms of conduct in the market tested by investigations by the ACCC, let alone litigated in the Federal Court, to see whether the Birdsville amendment works. Those like Professor Corones and many academic specialists who are scathing about the Birdsville amendment at a conceptual level failed to address the simple pragmatic consideration that, since the amendment is fresh to the act—and this is an act which, as anyone who is familiar with it will be well aware, generates its own jurisprudence, more so than most statutes do—it seems at least premature to be removing the key provisions of the Birdsville amendment, that is, the provision that stipulates substantial market share as a trigger in consideration at this time.

Let us remember what the Birdsville amendment sought to do. It sought to benefit small business by addressing the issue of predatory pricing by a corporation with a substantial share of a market. One of the problems that has bedevilled this legislation, as you would know, Mr Acting Deputy President Bishop, is that predatory pricing is itself an undefined term. It means different things to different people, but never before did the act specify market share as a specific consideration which might trigger an inquiry into the existence or nonexistence of predatory pricing. It was part of the jurisprudence, it was part of considerations to which courts might have had regard, but there was no statutory mandate to do so. That was the reform the Birdsville amendment sought to effect.

In order to avoid implicating legitimate discounting, which is of course in the interests of consumers, it provided that the corporation must have the purpose of damaging a competitor or of preventing the entry of a potential competitor in order to be in breach of the section, and that the conduct must also be carried on for a sustained period. The opposition, as the then government, introduced the amendment at the time and believed that the balance was right. In the less than one year since the act was amended, despite the lower threshold the floodgates of litigation did not open and nor did discounting cease or diminish in any measurable way, which was one of the concerns that many had expressed would be a consequence of stipulating market share in the act—the so-called chilling effect on competitive conduct.

There is simply no evidence that the amendment, despite the misgivings of the commentators, did have a chilling effect on conduct in the market and, in particular, on price competition. What it did do was send a message that small businesses had a recourse to the courts when faced with large and powerful competitors with the resources to crush them by sustained discounting engaged in for the purpose of eliminating or substantially damaging them. It could do this without the necessity to obtain complex economic evidence on market issues, market power and the conduct that would amount to a misuse of market power.

The opposition considers that removing the stipulations of the Birdsville amendment, or the key element of it, at this stage will send entirely the wrong message to the small business community and to the commercial community generally. So, with all due respect to the views of the academic commentators, we will be opposing that provision.

The other provisions we will be opposing are those provisions of the bill that seek to confer jurisdiction in relation to section 46 cases on the Federal Magistrates Court. The argument is made on behalf of the government that by transferring these cases to the Federal Magistrates Court it will make them easier to litigate, it will reduce costs and it will make justice more accessible, particularly to small business litigants. Each of those considerations is an illusion. In no respect will changing the jurisdictional forum in which these cases are litigated make the litigation any swifter or any cheaper.

Section 46 cases are inherently complex; they are among the most complex species of commercial litigation conducted by courts in this country, and the issues in a section 46 case do not change depending on which court hears the case. The legal issues, the economic issues and the evidence, including the expert evidence that it is necessary to lead in order to prove up a section 46 case, are the same no matter which court hears the case. So the suggestion that you will reduce the costs by bumping a section 46 case down to a lower court in the jurisdictional hierarchy is an observation that could not sensibly be made by anybody with the slightest familiarity with the way the judicial system works. In fact, on the contrary, there is a very grave risk that it could have the reverse effect of increasing the cost of litigation, for one particular reason: in the 34 years since the Trade Practices Act has been part of the law of Australia, which is roughly the same length of time as the life of the Federal Court of Australia, the Federal Court has developed a high level of skill, competency and sophistication in dealing with section 46 cases. There is now, and has been for a long time now, a body of judges who sit on the Federal Court of Australia who are intimately familiar with this sometimes arcane area of the law and are highly skilled in the efficient conduct of complex cases of this kind. With all due respect to the very eminent men and women who sit on the Federal Magistrates Court, it could not be said—and I do not think it is sensibly urged—that they have the same level of institutional skill, knowledge and familiarity with these complex cases that the Federal Court judges do.

In transferring some section 46 cases to a non-expert, non-specialist court, if anything one risks prolonging those cases with the attendant consequences in relation to costs. I might add that anybody who knows of the habits of solicitors and barristers would not for a moment think that their fees would be any different if a matter of this kind were to be litigated in the Federal Magistrates Court rather than in the Federal Court of Australia.

I understand the argument. I understand the simple-minded belief that by litigating a case in a lower court you will make the litigation cheaper. You will not—not even slightly—because you will not change the complexity of the issues and you will not change the level of experience of the solicitors and the counsel who will be required to deal with and argue the cases, but you run the risk of prolonging them by having them dealt with by a non-expert rather than an expert tribunal. For that very practical reason, the opposition thinks that this is a wrong-headed and misconceived idea and we will be opposing those provisions as well.

I will also foreshadow the amendments that I have circulated in the chamber. In relation to the proposed amendments to sections 46(1AA) and 46(1AB), the opposition will be opposing items 1, 2 and 6 in schedule 1 and items 1, 2 and 6 in schedule 2. In relation to this simple-minded and wrong-headed proposal to vary the jurisdictional requirements of the courts that may deal with these matters, we will be opposing item 3 in schedule 1, item 3 in schedule 2 and items 1, 2, 3, 4, 9, 10 and 11 in schedule 3. We will be supporting the balance of the bill.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Tonight will probably be the night where I say as little as I ever will about trade practices issues—especially section 46 of the Trade Practices Act—by reason that, although I am passionately involved in it, I have just got off a plane and have not had the day to prepare as I should like.

The first issue with the Trade Practices Legislation Amendment Bill 2008 is that the Labor Party is intending to take the fog of inconsistency back to the Trade Practices Act in areas such as the definition of market power. Let us first of all understand what market power means. If someone is driving you out of business not to enhance competition but to destroy it by a mechanism that you have no hope of competing against—that is, they are selling below cost and basically running you out of money to run you out of business—at the end of the day the consumer loses because the market centralises and that brings exploitation, inflation, higher interest rates and, ultimately, a move towards dysfunctionality in the economy.

There are wider implications. It is not the parochial protection of Mary McGillicuddy’s corner store; it is a statement about keeping the dynamics and dynamism in the market in such a way to give the Australian consumer the best deal at the end of the day through the range of choice. Market power means that, if someone is attacking you, before you can get access to the courts to prosecute that case you have to first of all prove that they had the capacity to put up prices without losing customers. Who on earth has the capacity to do that? This was one of the outcomes of the Boral decision back in 2006. Who has that capacity? No-one—not even a monopoly. You would have to be a government sponsored monopoly to have that sort of position in the market. So it became a piece of dead-letter law, so much so that, since the Boral decision—I might have got the date wrong—

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

2002, I think.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Thank you, Senator Brandis. Since the Boral decision in 2002 there has not been a successful prosecution of a predatory pricing case. The law obviously had to be changed. It had to be fixed. There had to be some clarity put into it. Section 46(1AA) was brought in by the former Treasurer, Peter Costello. It was later termed the ‘Birdsville amendment’. Why did we call it the Birdsville amendment? It was because we did not want to spend the next month talking about ‘proposed section 46(1AA)’. That just did not have the gravitas that was required. For the record, and for all those cynics out there, it was faxed from the Birdsville Hotel, not written in the Birdsville Hotel. It is lucky we were in Birdsville, because otherwise it could have been the ‘Hamilton amendment’ or the ‘Ascot amendment’ or gosh knows what. But we were in Birdsville, it seemed like a good name for it and that is how it came to be known.

This amendment brought something that people could clearly understand—that is, if a person who is engaging against you has substantial market share, they are big in the market, then you have access to the courts. You do not win your case just because you can prove they are big. You then have to go to court and prove your case. And the court is not a fool. The court is not going to sit back and say, ‘Just because someone is big and they are selling a product that is cheap and you are inefficient, we are going to award the case for you.’ The proof is that, of the 75 cases that have already been brought before the ACCC—it may be over 100 now—none have been deemed to be in breach of the act. That in itself possibly leads to another question: are the ACCC being diligent enough in their oversight of that? That is the next question that we will progress to.

All the Birdsville amendment did was to give Australian citizens the right to at least get access to the courts and to justice. It should have been anachronistic for us to have had such predetermined access to the courts as the market power test. That was removed and the market share test came into place. But once someone gets to court they then have to prove that there was the purpose of:

• (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
• (b) preventing the entry of a person into that or any other market; or
• (c) deterring or preventing a person from engaging in competitive conduct in that or any other market.

This is obviously something that would require a deal of acumen.

The idea was put up that this amendment would knock out Christmas sales. It did not. Last year there were lots of Christmas sales. It did not knock out Christmas sales. Why? It is because they are not for the purpose of removing a competitor from the market and they are not sustained. One would probably find that they are not even below cost. I remember a classic example of when someone from one of the major corporate entities who was very upset by this amendment came to my office. I asked, ‘Do you sell below cost for a sustained period for the purpose of removing your competitors?’ He looked at me and said, ‘No, I do not.’ I said, ‘If that is the case, you have nothing to worry about because you are not in breach of the act. This is just not going to cover you.’

At its simplest, this amendment brought back a sense of clarity to the law. Over a period of time, as Senator Brandis has well pointed out, jurisprudence will define the act and it will grow and precedents will be set. But what we have now is no more than people trying to second-guess precedents that do not exist because no case has ever held up by use of the Birdsville amendment. So why we would get rid of a piece of legislation that has not even been tested in court can only be by reason of one issue—that is, those who have a great deal to gain by the continued market centralisation that has happened in this country, which has forced up grocery prices and fuel prices, have got in the government’s door and have done extensive lobbying so as to change its position around. That is why the government is trying to repeal this.

It seems peculiar in the extreme that a government that paraded itself before the Australian people as wanting to deal with, amongst other things, grocery prices and fuel prices would make as one of its primary acts the repeal of the Birdsville amendment and give those people who have exploited the Australian consumer the keys to the till again. That is exactly why section 46 (1AA) of this obscure little act is so offensive—not to the man and the woman on the street and not to the small businesses who lobbied over years to get this in place—to those who have been the persecutors of the Australian consumer by their centralisation of the market place, using a mechanism that they know full well has the capacity to destroy competition.

That is the reason that you have come in here tonight to get rid of the Birdsville amendment. The sneaky little way of embellishment to bring this about is through the take-advantage test. Once more, the take-advantage test has raised the sceptre that if you can do it with or without market power it is not a breach of section 46. If you can do the action, with or without market power—because market power is back in under the government’s legislation—then it is not a breach of section 46. I could therefore say: ‘Well, I am selling below cost for three years while I put this business out of business. But I could have done that with or without market power, so I am not in breach of the act.’ It is the most sneaky little get-out clause that you have been well briefed to insert into this act so as to look after the people who have been well and truly looked after by this nation’s lack of attention to the trade practices laws that other nations have benefited from.

I bring to the attention of this chamber section 18(2) of the United Kingdom’s Competition Act 1998. To dispel this illusion that the Birdsville amendment is something onerous and unseen in any way, shape or form in any other nation, 18(2) says:

(2)

Conduct may, in particular, constitute such an abuse if it consists in—

(a)

directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b)

limiting production, markets or technical development to the prejudice of consumers;

(c)

applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage—Imagine how that one would go down in some of the shoppping malls—

(d)

making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts.

That is the United Kingdom—hardly some sort of retrograde in the economic world; in fact, I would say it is a nation that has a substantive well-tested trade practices act. But maybe it is just the UK that is unique, so I looked at section 51 of the Canadian Competition Act. This is what is outlawed there:

Every one engaged in a business who:

(a)

is a party or privy to, or assists in, any sale that discriminates to his knowledge, directly or indirectly, against competitors of a purchaser of articles from him in that any discount, rebate, allowance, price concession or other advantage is granted to the purchaser over and above ...

You can see the context. These are far stronger than that which is placed in the market share test in the Birdsville amendment. If we really wanted a lift, these sections of the act would make for a far stronger trade practices act than we already have. But even with that small movement that we delivered for small business, people have come out kicking and screaming to get rid of it.

Small business knows where their bread is buttered. This is not Barnaby Joyce’s or anybody else’s amendment; this is small business’s amendment. This is the whole purpose of the conservative side of politics: to be the bastion that protects the freedom that is enmeshed in the capacity for someone to be master of their own ship. That is what I think binds together the parties that form the conservative side of government in this Senate: the belief that you must have access to that freedom to be allowed to be your own boss, for your actions to be determined more fully in the outcomes of your life. That is why we on this side protect this mechanism for people to continue on that path. Unfortunately, the trade practices record in Australia has been one of centralisation. Unfortunately, the consequence of that without a doubt—and you only have to look at fuel prices today and what is happening with grocery prices—has been the exploitation of the Australian consumer. All these paltry and pathetic attempts that the Labor Party have put up—Fuelwatch, ‘grocery watch’, we are almost heading to ‘school watch’ and we will end up with ‘pensioner watch’—stand in proxy for good legislation, which, historically, was delivered to Australia from this side of the chamber.

The Labor Party want to move back to this very narrow interpretation of the take-advantage test. They also want to move back to the market power test. Both these tests, irrespective of the gloss the government put on it later on, completely remove the capacity of the Australian citizen to recourse under law for actions that would remove their ability to be in the market place, which is something that I have not even really heard about from any section. Minister Bowen has really struggled with this one. He really has been at sea. I have not heard one example from the government: ‘This is where the Birdsville amendment has affected competition, and this was the consequence.’ Not one. Graeme Samuel is a man who has had an interesting epiphany of late.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

The biggest conversion since the road to Damascus.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

That is right. The biggest epiphany since the road to Damascus. This is the man who is supposed to be the independent arbiter. This is the man who was supposed to have been removed. To be honest, he has just become a mouthpiece for the government. Contemporaneous to his elicitations on this issue was his reappointment. Surprise, surprise!

Even the sole mouthpiece of the government has been unable to give us one case where the Birdsville amendment has been used to remove the proper competitive structure of the marketplace in such an onerous way that it affects the consumer. But consumers driving down Parramatta Road or the Ipswich Motorway can see where they are getting exploited. They just have to look at the price of petrol on the billboards. Working mothers pushing trolleys through checkouts at one of the major supermarkets—and about 80 per cent of the market is centralised—can see where they are getting touched. Farmers who are getting 45c or 50c a litre for milk at the farm gate—they are probably getting a bit more now—

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

Fifty-eight.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

can work out that they are getting exploited. They are getting 58c, yet the product on the shelf is selling for $2.50. People are not stupid. They know where the exploitation lies. It is the Labor Party who tonight are going to assist that exploitation by the greatest benefactors of that process so far.

I will obviously be supporting my coalition colleagues in supporting the Birdsville amendment. I hope we will get the support of others on the crossbenches who I know also have deep and sincere concerns about where Labor is going on this issue. They have deep and sincere concerns about the unseen, dark lobbyists, who are controlling and manipulating the political process. They have made the Labor Party so passionate of late to protect the market centralisation of the major corporate players in this nation. This is really and truly new Labor and a new process. It is not completely out of line with the approach to politics they have in New South Wales but it is a new juncture for us here in Canberra.

This debate for small business will go on. There are other issues that also need to be dealt with. There are issues pertaining to creeping acquisitions and unconscionable conduct. We have to look into the future. Those people in the shopping malls are getting walked over and are being completely exploited. In the shopping malls all the bargaining power is held by one entity. That is another impost on the right of the Australian citizen to go into business; the right of the Australian citizen to be part of the merchant class, to buy and sell a product at a profit. It is only when the merchant class is strong that the nation is strong, that democracy is strong and that the progression of rights grows.

In closing, it is peculiar in the extreme that we now look to places such as the People’s Republic of China which have stronger protections for small business than Australia does. This is clearly spelt out by our history and the unfortunate retrograde steps of the courts in determining the rights of the individual under law in protecting their right to be in business. I also have read what Menzies said about why it is so important to maintain that structure of small business. He said, ‘Look after small business because big business are big enough to look after themselves.’ That is also a process.

This is also a return to the conservative heartland and it is from there that this nation’s rights and prosperity will grow. I look forward to the debate in the future that properly defines and enshrines more consistently—in the way that other nations did when they had our population size—the rights of people to go into business. That is the path that Australia should continue on. (Time expired)

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Of course competition and small business are very important in our society. We need small business to provide services and to provide that competition to keep the big operators on their toes and to make sure that they do have competition in prices. People are able to take-advantage of competition to get lower prices. Competition ensures that we do not have only a few players in the market who can charge prices that are well above their profit margin and that people do not end up paying more than they should for goods and services.

The Labor Party is concerned that Australia has an environment where competition is encouraged and flourishes. The essential difficulty that any government faces when making sure that there is not unfair use of market power to force out small businesses is ensuring that it does not also put in place legislation which discourages competition. That is the balancing act that we have here. As has been outlined by previous speakers on this Trade Practices Legislation Amendment Bill 2008, it is not only a matter of government and business, whether big or small, and the consumers; it is also a matter of the interpretation of the courts. That is what makes trade practices legislation difficult, expensive and intricate.

Now the Rudd government has put forward a package of measures which it believes will crack down on anticompetitive behaviour by big business. We all know what can happen. The larger businesses in an area, a region or indeed a country can reduce their prices, take action that undercuts their competitors and force them out of business—because of course people will tend to shop where they get the cheapest prices. Once their competitors have been forced out of business the company with more market power can then safely raise their prices and, without competition, have no resistance to those price rises. Standard economics will have it that once that business with the market power reaches a certain stage of profits then that will encourage other businesses to come into that lucrative market. Standard economics does not always work so wonderfully, and probably does not always work so wonderfully in rural and remote areas where it is often very difficult to start up a business and where there are greater difficulties involved.

So, recognising the importance of this, the government has put together a carefully constructed package of measures that it believes deals with the key issues of anticompetitive behaviour. It deals with the tendency of the courts in several key cases to take a very narrow interpretation of the Trade Practices Act and it deals with the costs and the barriers in the way of even taking action in the first place. The government has demonstrated in this bill that it does want to defend small business from predatory pricing and ensure that many of the barriers to actually taking action if there is predatory pricing are removed. There are three major thresholds that must be proved before predatory pricing can be proved. These are: that the business has sufficient market power and/or market share to do this, that it has taken advantage of that market power or market share and that it is able to recoup those costs in taking that action.

I can understand Senator Joyce’s attachment to the Birdsville amendment, because it was something that he worked hard for and lobbied hard to achieve, but the government argues that, in addressing the take advantage threshold and in addressing the recoupment threshold, it has addressed those court cases that have given quite a narrow definition in those areas. The government has put in place other measures, such as giving the ACCC wider powers to gather information, and has ensured in this bill that cases can be taken to the Federal Magistrates Court to reduce cost and to hopefully make things a bit speedier. What this bill puts in place is the ability for small business to make a speedier approach, and it reduces a lot of the barriers to this.

Going back to the market power definition, the government have said, ‘We have rectified the thresholds around that, so we are putting market share back to a market power definition because then it is fully consistent with the rest of the legislation and will not lead to a whole new body of law which addresses the issue of what is market share rather than market power.’ Now the argument there is that we already have a body of law that addresses market power and we know the attitude of the courts to that definition of market power. Therefore if we address all of the issues around it then we will have put in place the ability for the courts to deal with that. Whether that is the case or not we will just have to wait and see.

Hopefully, where there are cases of predatory pricing the ACCC will be able to deal with it—hopefully outside of the courts because it does cost everyone a lot of money to go to court and most lawyers in fact will recommend that you do not do that. But if there is a case of predatory pricing that does go to court then the steps are in place to address that. If that does occur and if market power is still interpreted by the courts, even with the other changes, in such a narrow way that it is incredibly difficult to bring a predatory pricing action in the courts then possibly we will need to have a look at this again. This was addressed in the report by the Senate Standing Committee on Economics.

The Senate Standing Committee on Economics has a history of pushing for small business to be protected from predatory pricing. As the current chair of that committee, I certainly am pleased that the government has responded with this package of legislation that does indeed address those ills of predatory pricing. A key part of this is the take advantage test, and this bill clarifies what is meant by the term ‘take advantage’. The bill says that a corporation must take advantage of the substantial market power that it has for the purposes of eliminating or damaging a competitor or preventing the entry of another company or entity into the market or other markets, and it must deter or prevent a person from engaging in competitive conduct. I cannot see how Senator Joyce is not persuaded that that does not clarify the term and get over the narrow interpretation of that term ‘take advantage’ by the High Court.

In its report in 2004 the Senate Standing Committee on Economics supported the ACCC view that this should be broadened, and the Rudd Labor government has done that in this bill. The Rudd Labor government has also addressed the other key area: recoupment. This modification was required in response to the High Court making a ruling which frustrated the very intent of the legislation by setting an unrealistically high barrier to proving predatory pricing—and this was the Boral case that Senator Joyce referred to. That Boral case meant that the ability to recoup losses incurred from below cost pricing was a necessary precondition to establishing that a corporation had engaged in predatory pricing and, as Senator Joyce said, that is an extremely difficult thing to prove. This bill means that that is no longer required. I think what Senator Joyce has focused on is simply the Birdsville amendment, and indeed his initial proposal for the Birdsville amendment was amended by the Howard government and it has been amended again—on advice—as part of this total package of legislation. That is what is important to look at. It is not only those three thresholds that are addressed here but also an ability by the ACCC to strengthen its information-gathering powers, which is critical. It has greater powers to go in and gather information about the conduct of companies involved in a predatory pricing case and that will be critical to ensuring a successful outcome where that case is taken to court.

The government has also said that the case can be dealt with in the Federal Magistrates Court and this—despite Senator Brandis’s view—should provide a simpler and more accessible alternative to litigation than the superior courts. Of course, if a company chooses to hire lawyers they should indeed be lawyers with the required expertise in this area but, let us face it, in most cases small businesses are not going to employ lawyers anyway. It will be something that the ACCC will deal with on behalf of a small business. We have had strong evidence from the ACCC that this is the legislation that they require in order to strengthen their ability to take cases forward. This is the legislation that they require to ensure that small businesses will get a fair hearing in the courts, whether it is the Federal Magistrates Court or the High Court. I completely reject Senator Joyce’s cynicism about Graeme Samuel and the ACCC. The ACCC did not get the kind of support from the previous government that it needed to deal with these and a range of other cases, but they have now indicated, in the strongest terms, that this is the kind of legislation that they need to go forward. I see no reason that they would reject their charter and make that sort of statement about legislation that they did not believe in.

In any case, regardless of this, this legislation also provides for another commissioner for the ACCC who has expertise in small business. This is something that has been welcomed by small business. We will now have an ACCC deputy chairperson who has knowledge and experience of small business matters. This will ensure that small business interests are front and centre in the ACCC. Small businesses and peak groups representing small business have welcomed this measure. It is one that will give them some certainty that their interests will be paramount. The ACCC is now focused much more strongly on small business. I am sure that the deputy chairperson’s focus will be very much on predatory pricing because that is something that does indeed affect small businesses greatly—and the ACCC has welcomed this. It is a useful signal to the ACCC and the small business sector that the general community and the parliament acknowledge the role of small business in keeping markets competitive and that the trade practices legislation has an important role in preventing large businesses unfairly reducing competition in markets at the expense of small business. We all know that small businesses are under great stresses, yet they are a very important and innovative element of the market. In this area of global competition and of goods moving around freely and with the general pressures of pricing on business, large businesses do—even more—have an advantage over small business. I certainly welcome having a deputy chairperson in the ACCC who has that working knowledge of small businesses and who knows the kind of pressures they are under—one who will have some solutions to bring to the table at the ACCC on how to address those issues.

I find it strange that the opposition, in looking at this bill, would seek to eliminate several key clauses of it. I think that we should look at this bill as a whole and acknowledge that it puts together a package that will assist small businesses and improve the Trade Practices Act. It will hopefully create an environment in our markets where it is acknowledged that big businesses are not given permission to act in a way that disadvantages small businesses—that they must not engage in predatory pricing and that they must not act in a way that forces out small business and leaves the market much more to big business. I commend this bill to the Senate in the strongest terms. I hope that we see the entire package put forward so that we can go forward with legal certainty. I hope we can go forward on the advice that the government has given and see these strong improvements to the Trade Practices Act.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Trade Practices Legislation Amendment Bill 2008. The bill amends sections 46, 51 and 155 of the Trade Practices Act 1974 and seeks to clarify a number of terms relating to predatory pricing and unconscionable conduct. The amendments to sections 51 and 155 can be described as little more than procedural changes and will make little difference to the underlying substantive flaws and gaps in key sections of the Trade Practices Act dealing with abuses of market power and unconscionable conduct by large and powerful entities. As such, I seriously doubt they can deliver the benefits that the majority report of the Senate Standing Committee on Economics inquiry claims that they will.

However, the amendment to section 46 will have far greater effect than will the lukewarm amendments to sections 51 and 155. This amendment will actually impose a further disadvantage for small business by making it much more difficult to obtain the protection against predatory pricing that the section is intended to deliver. Predatory pricing is the practice of firms deliberately setting prices at an unsustainably low level with the intent of driving competitors out of the market. Section 46 prohibits the misuse of market power and provides the legislative framework under which a court may rule on the degree of power that a corporation has in a market. Subsection (4A), recommended by the Senate economics committee in 2007 and passed into law later that year, allowed the courts to take into account ‘a sustained period’ of selling goods and services at a price ‘less than the relevant cost to the corporation of supplying such goods and services’ and the corporation’s reasons for engaging in this practice. Subsection (1AA), known as the Birdsville amendment, regulates predatory pricing on the basis of providing proof of ‘market share’, as opposed to market power, as it had been prior to the 2007 amendment. It also introduced such concepts as ‘relevant cost’ and ‘sustained period’. It is interesting to note that the Birdsville amendment was supported by the then opposition, who are now in government.

Why do we have a section of the TPA to address predatory pricing? Surely it can be argued that a business looking to sell its goods at a price less than the relevant cost to the corporation of supplying such goods is a good thing for consumers—even more so if it does it for a sustained period. Surely the bottom line is that the more of this below-cost selling that goes on the better served are the consumers. It all sounds like very effective competition. The problem is that predatory pricing is anticompetitive. The practice removes efficient competitors, usually small businesses, from the market, allowing for prices to be increased in the absence of competition. This ends up reducing the efficiency of the economy as a whole and, as such, presents negative medium- and long-term consequences that far outweigh the positive short-term benefits of cheaper prices

The result is that the efficiency and effectiveness of the Australian small business sector in supplying goods to the Australian consumer is undermined, and Australians, especially Australian working families, will be left to wear the costs of less choice, higher prices, loss of the convenience of local shops, lower levels of service and shopping in less friendly and welcoming environments. Given all that, it is surprising that a newly elected government that was elected on the promise of doing something about rising grocery prices would seek to so quickly revoke the effect of an amendment that was intended to eliminate anticompetitive practices—practices with real and detrimental consequences for consumers—and that they supported in opposition.

This bill, combined with what is universally accepted as a gross waste of taxpayers’ money in what can probably be described as one of Australia’s most unbelievably useless pieces of public policy delivery—certainly the most useless in recent years—GROCERYchoice, appears to be about the extent of the government’s delivery on grocery prices. The Prime Minister’s comment that ‘the government has done all it can’ in respect of grocery prices has often been quoted. But, with respect, that is not good enough when his government was elected on the promise that it would make a real difference in this area.

Despite all that, I doubt that there are many who would argue that the section as amended in 2007 is the perfect solution to the problem of predatory pricing. The reality is that it is difficult to create a legislative prohibition that prohibits anticompetitive behaviour in a manner that can be effectively and efficiently proven, but what is clear is that the section as it stood prior to the 2007 amendments did not work. The 2003 Boral case proved that clearly, when the High Court, presented with factual circumstances that any reasonable person in Australia would accept as unreasonable, found that a breach of section 46 was not proven. The High Court took a very narrow view of substantial market power in the Boral case, essentially defining it as the ability to raise prices without losing business. It is a very high threshold and ultimately only applies to monopolists or near monopolists, and, during the time since 2003, the ACCC has not mounted any section 46 cases—most likely as a result of that High Court decision and a handful of other decisions by the High Court and the consequent cost of mounting cases with little prospect of success.

I doubt anyone would suggest that this is evidence that predatory pricing is not a practice that has been employed in this nation since that time, because there is no shortage of cases, as acknowledged by Senator Hurley just a few minutes ago, where allegations of this practice are evident. But the chances of proving it under the legislation in place prior to the 2007 amendments were slim to none, and the potential costs of taking on a corporation which had the resources to engage in such practices in the first place are way beyond the capacity of small businesses that may find themselves the victims of predatory pricing and are, it would seem, of little attraction to the ACCC post Boral. The 2007 amendments were designed to overcome some of these practical challenges in making out a predatory pricing case.

However, evidence was received at the hearing into this bill suggesting that, if enacted, the changes proposed in the bill will remove vital aspects of the 2007 amendments that were designed to address these practical challenges and will provide no new redress in that respect. The evidence received by the economics committee inquiry stated that the proposed changes to section 46 fail to deal with the problems of defining and proving market power, and thereby fail to overcome the practical near impossibility of proving a predatory pricing case.

For example, Associate Professor Frank Zumbo stated:

Because those changes to market power do not change that underlying definition and interpretation by the High Court, it is clear that the market power threshold remains a very high threshold. Reinstating that threshold to the Birdsville amendment would render the Birdsville amendment useless.

               …            …            …

… reinstatement of these two hurdles—

market power and take advantage—

will make it next to impossible to bring section 46 cases … That High Court definition of market power … will not be changed by amendments that this government is proposing.

The amended sections have been in place now for less than a year. They are yet to be tested in court. And, yes, they do contain new terms that are also yet to be tested. If left in the hands of courts, their effectiveness will ultimately be determined and opportunities for further improvements will be highlighted if and when needed. But to simply say, ‘These terms aren’t well enough defined, so let’s take things back to the days when we knew what all the terms meant because it will give small business greater protection,’ is intellectually dishonest, as we know that the way things were effectively provided no protection from predatory pricing behaviour.

The facts are that the proposed amendments to section 46 of the Trade Practices Act in relation to predatory pricing will reinstate the problematic and almost impossible-to-prove concept of market share, and the previous additional hurdle of ‘take advantage’ will have no positive effect and can only lead to the complete neutering of the section as it applies to predatory pricing. The market share test stated in section 46(1AA), the Birdsville amendment, however, is intended to provide access to what, if given a chance to be tested, is likely to be an effective legal remedy against predatory pricing. It is intended to target the particular evil of anticompetitive below-cost pricing and does so without creating any unusual levels of uncertainty or acting in a manner that undermines legitimate competitive practices.

It is important to note that these 2007 amendments include sufficient safeguards to ensure that legitimate competition is not and will not be diminished, and there is no evidence that the 2007 amendments undermine competition. The bottom line is, as quoted over and again by my colleague Senator Joyce, that the market share test is only the door into the court. Proving a substantial market share does not in itself prove predatory pricing.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

It is only one of the doors you need to go into.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Exactly, that is right. The other elements of the section also need to be made out. As Senator Brandis has pointed out, there are a number of other doors that you need to go through to get in there. These include a sustained period of selling goods at a price less than the relevant cost to the corporation of supplying goods and, importantly, doing so with the intention of putting competitors out of business. As such, a business with a large market share selling goods at clearance prices will not be caught by the provision—not unless it is able to be proven that it was doing so for a sustained period and with the specific intention of putting competitors out of business.

Coles gave evidence to the ACCC price inquiry that their pricing behaviour had not been changed as a result of the 2007 amendments. They gave no evidence that those amendments frightened them into not discounting but, on the contrary, said their pricing practices had not changed. Similarly, the experience of the ACCC itself since the 2007 amendments were introduced backs the claim that there has been no resultant dampening of competition or any apparent unintended consequences. Earlier this year the ACCC noted that it had received 75 complaints alleging predatory pricing under section 46(1AA) but that of those 75 complaints it considered none represented a provable breach of that section. We heard earlier from Senator Joyce that the number of those complaints is probably now around 100, and still none has presented as a provable breach of that section. That suggests to me quite strongly that the 2007 amendments have not opened the floodgates to litigation and prosecution of corporations which hold substantial market share and which also choose to discount.

The 2007 amendments had the support of small business groups and continue to enjoy that support. For example, the Senate Standing Committee on Economics inquiry into the bill received a submission from the Fair Trading Coalition, which is an informal coalition of small business groups, stating their support for the section as it currently stands and their belief that most of the problems identified by the ACCC in relation to the 2007 amendments will still exist following the passing of this bill’s proposed amendments—problems such as: what is below the relevant cost, what is a sustained period and what is purpose? In addition to having to prove market power, the government, through this bill, is placing a further obstacle in front of small business in the form of the take advantage test. The take advantage test will add extra complications to the process of having to prove predatory pricing. The government has put forward the argument that having both a market power and a market share test in the same act creates uncertainty but, at the same time, it acknowledges that having separate predatory pricing offences is on balance a good thing.

Market share is a well understood concept, and the government’s claim that the test will lead to uncertainty has not taken into consideration the fact that the ACCC will closely review the market share of the entity alleged to have engaged in predatory pricing when assessing pricing claims. The government has also argued that having both market share and market power tests in section 46 means that there is a dual track process under section 46. This may or may not be the case, but I fail to see the problem if each of the tracks presents an opportunity to limit what are ultimately uncompetitive practices that present detrimental outcomes to consumers. In any event, this is nothing new, as dual track processes are contained within other competition law sections of the Trade Practices Act.

It is often argued in relation to the Trade Practices Act that it is there to protect competition and not competitors. That is very true, and I agree. However, if the regulatory scheme designed to do just that fails to stop practices which lead to increased opportunities for the development of oligopolistic and monopolistic markets, then it is not doing its job. The key is not the protection of businesses per se but the protection of efficient, healthy, competitive markets in which consumers are provided with a real choice based on price, service, quality and environment. Failing to ensure we have adequate protection in that regulatory regime against predatory pricing is a failure to protect competition. Rolling back the 2007 amendments and replacing them with the complications and difficulties of the market power and take advantage tests will only serve to exacerbate the problems of making out a case and will ultimately fail in the stated aim of protecting competition. And, in the end, it will be the Australian consumer who wears the cost.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise to make some comments on the Trade Practices Legislation Amendment Bill 2008. I note that essentially we are talking about section 46, which is an important part of the Trade Practices Act and does concern the prohibition on the misuse of market power, as has been said by all and sundry here this evening. We know that section 46 has not been working effectively, and we know that High Court decisions have narrowly interpreted the provisions of section 46, making it very difficult to prove anticompetitive behaviour. So we have wrestled in this parliament with how to provide the competition that is necessary and how to guarantee that competition and a competitive market. How do you ensure that you have a market which is fair to small business? How do you oversee section 46 in such a way that the consumer is also protected?

Last year the previous government introduced some changes to improve section 46 and that was when Senator Joyce, as we know, introduced what has become known as the Birdsville amendment, which was a specific offence of predatory pricing. He did the parliament and the people of Australia a service in introducing that as a specific offence. At that time we supported that legislation, including the Birdsville amendment, as did several parties in this place, and we recognised that it was a genuine attempt to address some of the problems that had existed with section 46. In observing the reaction to the passage of the Birdsville amendment we recognised that it was welcome in some quarters, particularly small business, and criticised in others. We also note, as Senator Brandis and Senator Joyce have pointed out, that it has yet to be tested in court and therefore we remain in ignorance about whether it would work effectively if it were tested through the courts.

Today we are presented with the current government’s attempt to address the ongoing problems of section 46. The bill before us makes several amendments, as Senator Hurley indicated earlier, as a package, and part of that package amends the Birdsville amendment, or changes it as Senator Brandis would suggest, and introduces a series of other amendments with the aim of making section 46 more effective in preventing—

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

They are not really a package, Senator Milne. Any one of those amendments could stand alone.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Regardless of Senator Brandis’s interjection I am regarding it as a package that is building on the amendments that came in last year and is aimed at being more effective in preventing the misuse of market power and predatory pricing. The aim of both what Senator Joyce tried to do with the Birdsville amendment and what is being attempted here today is to try and make section 46 more effective, and that is something that the Greens definitely support.

Apart from some of the other matters in the bill, the key issue is the debate between market power and market share. Essentially that is the key difference between what the government is putting forward here today and what the Birdsville amendment sought to do. We note that small business believe that market share provides a better test, given the previous narrow interpretation of market power. We also understand the frustration of small business, given the inability of section 46 to provide adequate protection from anticompetitive behaviour. But we remain to be convinced that market share is the answer to a more effective section 46. We note that the ACCC and other commentators do not accept that market share is easier to demonstrate and they argue that market power is a more appropriate concept for the purposes of the section. I note in particular that that is the view put forward by the ACCC. Since that is the body responsible for the act and, of course, the body most likely to prosecute under section 46, I think it is worth listening to what the ACCC had to say. In the speech by Graeme Samuel to the National Small Business Summit on 11 June this year he said:

The reforms announced recently by the government to section 46 and section 155 of the TPA continue the process of providing the regulator with the tools it needs to vigorously protect competition, while not falling into the trap of protecting competitors from the impact of that competition.

He went on to say:

However, in practice the concept of market share is no clearer than the concept of market power—particularly when the goal is to ensure the forces of competition operate effectively, rather than simply protecting small firms against larger firms.

How does a court determine what constitutes a substantial share of a market—particularly in the context of competition?

          …            …            …

The current government has recognised there is a concern in the community about the specific issue of predatory pricing. Accordingly, the government is proposing to keep section 46(1AA) as a specific predatory pricing provision but to couch it in terms that are familiar in section 46, and on which there is a significant body of case law …

          …            …            …

With these changes in place the ACCC considers that the balance has been adequately struck between ensuring that businesses are exposed to the rigours of competition—with all the associated economic benefits—while being protected from the possible anti-competitive consequences associated with firms gaining power from that competitive process.

          …            …            …

But what it does mean is when firms that have market power are using that power for an anti-competitive purpose the ACCC will be well placed to act.

The submission and evidence from the Consumer Action Law Centre to the Senate inquiry supported the government’s position. Given that the key purpose of the act and the section is to protect the interests of consumers the Greens also take the centre’s views into account. The Consumer Action Law Centre said specifically that they strongly supported many of the proposed amendments and supported the proposed amendments in the bill to section 46 of the Trade Practices Act. I note that the Council of Small Business on 3 July put out a media release stating their support for the government’s amendments but then, more recently, changed their position. They did not really say why they changed. It was done in a media release saying that the debate about market share versus market power had come up since their July press release. I find that a bit difficult to believe since it has been fundamentally the issue of debate for some considerable period of time.

Many speakers tonight have referred to the 2003 Boral case and the High Court’s narrow interpretation and so on without acknowledging that there have been some amendments in the intervening years, notably last year, which have given more clarity and more direction in relation to a definition of market power—in particular, section 46(3C). It says that a firm can have market power even though it does not substantially control a market and that a firm can have market power even though it does not have absolute freedom from constraint from the conduct of its competitors, its suppliers or its customers. Furthermore, under section 46(3A) a court can consider any market power that results from agreements entered into by the firms. So there have been a number of changes since 2003 which have tried to define more clearly what market power might mean for the purposes of a legal interpretation.

The other amendments made by this bill extend the jurisdiction to the Federal Magistrates Court. We appreciate that the government is trying to make court processes more accessible. Anything that encourages greater accessibility for small business in a less highly charged environment that may mean getting to mediation is a much better way to go. We will see whether it works. It is probably logical that most cases will go straight to the Federal Court because they do involve complicated issues of law, particularly with the new amendments. I note that the Law Council is not supporting this move to the Federal Magistrates Court. However, we think that it is worth a try. It may not do anything; it may do so. Let us see whether it can make a difference. We as parliamentarians ought to be supporting processes that try to make courts more accessible rather than less so.

The removal of the price thresholds on prohibition of unconscionable conduct implements a recommendation of the 2004 Senate report which we endorse. We also think that it is important for the ACCC deputy chairperson to have knowledge of or experience in small business. While we recognise that some commentary to the Senate Economics Committee suggested that this was putting the interests of small business ahead of the consumer, I do not think that this will be the case. Getting someone onto the ACCC who has specific expertise in small business must be a good thing. It will help clarify issues and so on.

As to the extension of the information-gathering powers of the ACCC under section 155, we certainly support that. We want to have a situation where the—

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

If it was a national security issue you would think it was the most outrageous thing in the world. You are perfectly comfortable about granting substantive police powers here, Senator Milne.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Thank you, Senator Brandis, for your considered opinion. I have heard it once; I do not need to hear it again. As I said, the amendments provide that the ACCC can continue to exercise its information-gathering powers until it commences proceedings or until the close of pleadings in relation to injunction proceedings. We support that occurring.

In conclusion, it is fair to say that the Greens are supportive of this legislation. I must say that it is difficult to make a judgement as to whether the changes to the definition of market power are sufficient to give effect to what the government is trying to do. But they do give internal consistency to the provisions of the Trade Practices Act. We note that things have changed since 2003. We are not dealing with the same environment as when the Boral case was heard. We need to make that perfectly clear. On that basis, on balance the Greens support what the government is seeking to do. What needs to be recognised is that the whole parliament wants to do the best it can to prohibit the misuse of market power for anticompetitive purposes. The difference of opinion comes down to whether you believe market power or market share is the proper way to go. We have to bear in mind that you can have considerable market power even though you may only have a small market share. That is something that has been demonstrated.

I would like to acknowledge that everybody is approaching this debate from the point of view of trying to protect the consumer as best we can and trying to protect small business against the anticompetitive power that other businesses may exert in the market. I am persuaded that the changes were made to the legislation last year and these amendments are what the ACCC says it needs.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

This could be in Swahili for all you understand it.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I am sorry that Senator Brandis is so distressed that he has not gotten his own way yet. As I was about to say, there have been further attempts to clarify issues to do with the Trade Practices Act and to protect the consumer. I will be interested in the government’s response to some of the proposals and arguments put forward in various contributions to the debate.

Where do we go from here? I will be interested to see where the ACCC takes this. I am persuaded that, if the organisation which will take these cases forward argues that this is what it needs to equip it to be better placed to do so on behalf of small business and thinks that the government amendments are the way to go, we should listen to that body. That is why the Greens, after listening to what the ACCC had to say, are supporting this legislation.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

I rise to make a contribution in this place. I suppose I am one of the few people in this parliament who have ever actually had to trade—buy a product, sell at a higher price and make a profit. So I think I have had a fair bit of experience in the marketplace. The Trade Practices Legislation Amendment Bill 2008 that we have before us tonight seeks to change a number of important aspects of the Trade Practices Act including the last amendment that we moved—I think in September last year—when we established that market share should be the qualification. The government now wants to change that back to market power.

We tried this for years and years and were never successful. Since 2002 there has not been a successful case of predatory pricing carried forward by the ACCC. In fact, up until the stage when we brought this legislation through in 2007 the ACCC had more or less thrown in the towel because they recognised that they could not get a decision out of any court that would allow a conviction through for predatory pricing. What took place was the well-known Boral case, where Boral the brickmaker, or block maker, decided that they would go in and clean up the market in Victoria. There were two or three very competitive brickmakers down there—probably five, from memory. Boral went in very hard to take out a particular brickmaker who had developed a pretty smart machine that could turn out bricks a lot faster than Boral. The particular brickmaker was giving Boral a haircut. Boral virtually said that it did not matter what the price was; they told their reps to just go out and get the business.

That particular brickmaker rang me up and complained to me. At this stage Senator Brandis was not in the parliament—he is recognised as one of the most prominent trade practices solicitors but he was not here at the time. The particular brickmaker rang me up and said: ‘This is getting very serious. They have taken two of the competitors out and I am next.’ The ACCC warned Boral. The business environment picked up and the particular brickmaker survived. The ACCC then took Boral to court, bringing them in on a predatory pricing charge. Boral won that particular court action. The ACCC then appealed and the ACCC won. Boral then appealed to the High Court and the judgement came down, and Justice McHugh concluded:

Even though Boral drove down its prices in order to remove competition, this does not mean that it had a substantial degree of market power. That must be proved before there is a breach of section 46. Predatory pricing without a substantial degree of market power cannot result in a breach of section 46.

From that day forward I do not believe that there has been a successful predatory pricing court conviction by the ACCC. In fact I think they virtually threw in the towel and said that they did not have the case law to go before a court. As the court interpreted it, you would have to have so much power that you almost had to be—and I have used the term before—a Qantas cutting the fares for the Cairns Aero Club or something like that where they had a couple of little Barons that they were letting out. The power had to be immense. It almost had to be a monopoly power before you could even get into the court.

The National Party and the Liberal Party, the coalition, brought forward a change to the act. That change has been on foot for 12 months, and this bill seeks to change what is now called the Birdsville amendment from market share to market power. That is turning the clock back to where we were before. The bill gives a new criterion to the definition of taking advantage which assists the courts in their interpretation of the terms and makes jurisdictional changes so that section 46 is administered by the Federal Magistrates Court, and it legislates that one of the ACCC’s deputy chairmen have knowledge and experience in small business matters and strengthens the ACCC information gathering power under section 155.

All those things are admirable. I do not think that whether you are in a Magistrates Court or in the High Court is important, though I imagine that it would probably be better to be in the High Court, where the judges have had some experience with this particular act of parliament. But I do not think that it makes it any cheaper to go a Magistrates Court than it does to go to the High Court.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

I can assure you that the barristers will charge the same fees whichever court you are in.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

We have a saloon bar opinion here from Senator Brandis saying that whatever court you turn up in the barristers’ fees are pretty heavy.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

I did not say heavy; I said the same.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

The same, which would be pretty heavy when you get in front of the Trade Practices Commission. Irrespective of all those other amendments, the main amendment is the change to section 46. I reiterate Senator Brandis’s statement: this legislation has only been in place for roughly 12 months and we have not seen anyone lose business, anyone be affected by products being sold under price or anyone taking this legislation to court and winning. In fact, we have not seen any movement at all under section 46. I understand that over 100 cases have been presented to the ACCC and there has been no movement or advances in any court actions taken by the ACCC.

So this legislation that the federal government put in place in September last year that was going to be so detrimental to the big end of town or the small end of town has not really had any effect. I would be loath to go back to market power because it has never worked since 2002—no-one could even get into court because market power was interpreted as being almost a monopoly situation. The government wants to make the change and go back to where we were—the unsuccessful piece of legislation that we put through in 2007. But the government cannot give us any evidence of where this legislation has failed in 12 months. It has not failed—it has not moved; the ACCC has not been able to take it to court. It has not resulted in the consequences that the Labor Party said would occur, that people would not be able to cut prices to get rid of old stock.

What this bill is trying to clarify is whether:

• the conduct of the corporation is materially facilitated by its substantial degree of market power;
• the corporation engages in the conduct in reliance upon its substantial degree of market power;
• the corporation would be likely to engage in the conduct ...

But this is not required because we have not had any evidence that it is a detrimental bill. Why don’t we leave it there and if it turns into jelly or custard then we can take the appropriate decision. But that has not happened at the moment. You are asking us to go back to our piece of legislation that was constructed under market power that never worked—it never let anyone get into court. Unless we can have some definition of what predatory pricing is and be able to then have that predatory pricing taken to court by the ACCC, all we are going to get is more and more market concentration. We are going to get some of the big players coming in and trying to predatory price.

I have seen this happen myself. I have seen where butter has been advertised in, say, Monto for $1 a kilo and in every other bulletin in other places that the particular firm puts out it is $1.50. You would have to say that that particular bulletin is aimed at predatory pricing someone in the smaller town to try to remove them. I have seen it happen and I have taken it up with the main store that was doing it and they assured me that it would never happen again. I support the legislation. I support the amendments that Senator Brandis has moved. We should give it a go and see what happens.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The Trade Practices Legislation Amendment Bill 2008 strengthens sections 46 and 51AC of the Trade Practices Act as part of the government’s commitment to improve Australia’s trade practices laws. The bill includes a number of measures to improve the enforceability of the Trade Practices Act. The measures in the bill were originally a package of amendments to the former government’s Trade Practices Laws Amendment Bill 2007, known as the Birdsville amendments. Despite being recommended by the Senate inquiry into that bill, the former government refused to adopt what were very sensible amendments. Business, especially small business, is entitled to the protection of effective trade practices laws. Consumers are entitled to the protection of effective trade practices laws. This bill will ensure that there is genuine competition for the benefit of consumers and small business.

The previous government’s amendments were a rushed job, put together in haste as a result of internal political pressure before they went to last year’s election. Those changes introduced confusion into the Trade Practices Act. This bill will clarify the act and undo the mess created last year. This bill will strengthen the power of the Australian Competition and Consumer Commission to identify anticompetitive behaviour.

On the advice of the ACCC, this bill replaces the share of market test with a market power test. Market power is a broader term that captures anticompetitive behaviour from powerful businesses whether that power comes from market share or any other source. The amendments passed by the former government were not supported by the ACCC or its former chair, Professor Alan Fels, or by Bob Baxt, the chair of the former Trade Practices Commission.

The ACCC has publicly stated that section 46(1AA) as it presently stands adds confusion to the law and should be amended. This bill does that by focusing section 46(1AA) on a corporation’s market power as opposed to its market share. The size of a firm, including its market share, will however remain a relevant consideration in establishing the firm’s market power. The present section 46(1AA) operates in relation to firms with a ‘substantial share of a market’. This is inconsistent with the longstanding prohibition in section 46(1), which operates in relation to firms with a ‘substantial degree of market power’. This bill realigns the two subsections.

The concept of market power allows the court to consider a wide range of factors, including all of the characteristics of a market that may contribute to the capacity of a firm to engage in anticompetitive behaviour. The concept of market power has been effective in targeting unilateral anticompetitive conduct. For example, in 2006 the Federal Court imposed penalties totalling $8.9 million on Safeway in relation to four breaches of section 46(1). This was despite Safeway having only around 16 to 20 per cent of the relevant market. Arguably, that prosecution could not have proceeded under the law as it stands following the previous government’s amendments last year.

This bill clarifies the role of recoupment in predatory pricing cases. Presently, section 46 does not expressly provide whether it is necessary to prove recoupment to establish a case based on predatory pricing. Submissions to the Senate Economics Committee inquiry raised concerns about the lack of clarity and its impact on the effectiveness of section 46. In particular, concerns were raised that it may be necessary to establish a predatory pricing case following the High Court’s decision in the Boral case.

The creation of second deputy chair at the ACCC is extremely important. It is important so that small business gets a permanent voice on collective bargaining, on retail tenancy issues, on franchising and on unconscionable conduct. This is an initiative that is long overdue, and it is a positive initiative as part of the government’s package. In addition, small business can also sue in the Federal Magistrates Court, making the courts more accessible under this legislation.

It is fundamental for good law that it provides clarity and certainty. The two-track approach that has emerged has caused confusion between market share and market power.

I would like to take you through some of the views that other people have on the bill. An editorial in the Daily Telegraph on 28 April said the following:

The proposed changes will be music to the ears of small businesses that now stand a chance against much larger and more powerful companies.

Peter Anderson, the chief executive of ACCI, was reported in the Daily Telegraph on 28 April 2008 as saying:

It will make it easier for small business and the ACCC to take action where there is predatory pricing underway or an abuse of market power, and that will generally be welcomed by the small business community.

Peter Burns from the Australian Industry Group was reported in the Australian on 28 April as saying that he was relieved that Senator Joyce’s amendments were being overturned. He said:

They were silly. It is sensible to get rid of them. They have created a lot of uncertainty.

And there was much discussion about the previous government’s amendments. Peter Armitage, the practice head of competition and consumer protection at Blake Dawson Waldron, said that many fine ideas had been conceived in the Birdsville pub, but the predatory amendments to the Trade Practices Act accepted by the government are a mistake. He said:

Make no mistake; this law is bad for consumers and bad for competition.

In the Australian on 19 September 2007 John Durie said:

John Howard has single-handedly destroyed the entire premise of the Trade Practices Act through his predatory pricing amendment, which will have the effect of killing price discounting, to the detriment of small business and consumers.

And Bob Baxt, a partner at Freehills and former chairman of the Trade Practices Commission, said that the legislation, which was introduced in haste and apparently as a result of, among other things, the criticisms made on a certain radio station, will not serve the Australian community well.

This legislation is designed to provide more effective competition policy, it is designed to provide clarity to the Trade Practices Act in this country and it is designed to protect both consumer and small business. It is quite clear that not only has there been a strong voice from the academic analysis of this legislation but the people who have to practically implement it—industry and small business—are saying: ‘This is what we need. This is good legislation that epitomises Labor doing the right thing by small business and doing the right thing by the community.’ This is good policy and it should be adopted by the Senate, and I have been pleased to speak on it tonight.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

I welcome the Trade Practices Legislation Amendment Bill 2008 as it is in the interests of competition, consumers and business. It is a key part of the government’s economic reform agenda, giving the Australian Competition and Consumer Commission the tools it needs to promote competition and fair trading and to protect consumers. It is indeed the most significant reform of the Trade Practices Act in some 22 years. And I am pleased to say that enhancing competition policy is at the core of the Rudd government’s economic agenda, as is highlighted by other policy measures such as ‘grocery watch’ and Fuelwatch, which we will continue to pursue.

These reforms will make it easier to prosecute businesses engaging in anticompetitive behaviour, give small businesses permanent representation on the ACCC and allow small businesses to access a cheaper and more efficient judicial process. So I believe these reforms are good news for small businesses like independent petrol retailers and small grocers who are competing against more powerful, larger businesses.

These reforms have been welcomed by consumer and small business advocates. In particular, I would like to highlight the views of the Fair Trading Coalition, which is an informal coalition of small business working towards reform of the Trade Practices Act. I note that the Senate inquiry into the effectiveness of the Trade Practices Act in protecting small business some time ago called for the reform of the concept of ‘take advantage’ in section 46. The present meaning of the term has prevented section 46 from properly capturing anticompetitive behaviour, so the amendment to clarify the phrase ‘take advantage’ has been welcomed. The government’s amendments will ensure that victims of predatory pricing will not need to prove that the predator has the ability to recoup losses after participating in an anticompetitive, below-cost pricing strategy. I think this is significant because the bill removes the unnecessary uncertainty that has arisen following the two-track process for predatory pricing that developed under the previous government.

It is also time—and we have heard many speakers say this this evening—for the Birdsville amendment to go, in favour of a stronger and more workable predatory pricing provision. The initial introduction of the Birdsville amendment was welcomed as the first explicit recognition of predatory pricing within the act. However, as Mallesons Stephen Jaques partner Dave Poddar said to the Australian Financial Review:

The Birdsville Amendment, apparently derived at the pub by Senator Joyce, was one of the more unusual policy initiatives of the last government—

having been created in a pub, I am sure it is—

and is a law which is out of step with competition policy in this area.

He went on to say that it is flawed because it focused on market share alone in deciding whether a company had market power. He said that it was an overly simplistic approach and that the government’s proposed changes are sensible. Likewise, Stephen Corones from the School of Law at QUT has highlighted—

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

Corones.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

Thank you for correcting my pronunciation, Senator Brandis. You have knowledge of what the good professor has to say?

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

If you had heard my speech you would know that I quoted from his article.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

He has highlighted that:

Many corporations have a substantial share of a market; however, few firms have substantial market power.

He highlights that having a substantial share of the market tells us little about whether there is a problem that warrants attention. So market share is meaningless, as the key question is whether a firm acting on its own has what is called discretionary power. That is whether it is able to take account of the competitive reaction of other firms. It might have 100 per cent of the business but still not be able to raise its prices because of the threat of a new entry into the market if it does. So market share is indeed an inadequate test. It is disappointing that the coalition seems intent on voting down important elements of this legislation. It is time for a provision that will serve to assist the regulator to bring cases against big companies that abuse their market power, and the Birdsville amendment as enacted about 12 months ago just does not cut it and will not do the job.

The Consumer Action Law Centre have highlighted the complexity of predatory pricing versus competitive pricing and they have supported a new proposed subsection 46(1AB). They said:

As noted above, proceedings alleging predatory pricing have been particularly difficult to prove. One of the reasons for this is that, in order to find that a firm had substantial market power, the courts have required the firm to be able to recoup the losses it had incurred by under-pricing. In our view, the requirement for recoupment of loss in every case of predatory pricing is misguided. The ability to recoup losses after eliminating competitors through sustained price-cutting conduct may be relevant to determining whether the conduct was predatory or simply competitive, but it is not determinative of such. Indeed, it has been suggested that the upshot of the Boral decision, in which the High Court dismissed the allegations of—

Debate interrupted.