Monday, 27 March 2017
Competition and Consumer Amendment (Misuse of Market Power) Bill 2016; Second Reading
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.