Monday, 27 March 2017
Competition and Consumer Amendment (Misuse of Market Power) Bill 2016; Second Reading
You have to shudder, Acting Deputy Speaker Irons, the minute you hear a Nationals MP champion economic policy and say that a bill is as a result of their influence—run! Run, run, run! I have to say, as the member for Calare finished his contribution, he showed what had driven this. We are debating here the introduction of an element of legislation that 10 inquiries since 1974 have looked at, and they have all said: 'No, do not touch the effects test. Do not touch it.' Now we have the government doing just that, and it is not because they have come up with some new way to give effect to this concept within competition law. This is not policy; this is—as is so often the case with this government—all about politics. It is all about delivering on a promise given by a new prime minister back in 2015, to a nervous and unsure National Party that did not necessarily trust that he could deliver for them. That is why we have this effects test.
There is very little data to suggest this will help. There is a lot of concern that it will not help; there are a lot of people saying that it will have a chilling effect on competition, and there are a lot of people wondering what might happen to the prices consumers actually have. Given the last contribution to this debate, the Nationals are there, beating their chests and saying: 'It is as a result of our advocacy that we are getting it.' Barnaby Joyce was out there saying: 'One-dollar milk is too cheap'—that is what he was saying. And then, in the next breath, he was saying: 'If you are in China, you are paying $11 for milk.' Well, he can represent producers; I represent consumers in Western Sydney, who want to see grocery prices lowered. I remember in previous parliaments when we were talking about what we were trying to do with an emissions trading scheme and the imposition of a carbon price: you would only ever see those opposite in a grocery store, or in a butchery outlet or somewhere—anywhere—talking about the impact on prices, saying that we needed to see food and grocery prices go down. Now we have those opposite—now they are in power—championing the fact that grocery bills should be going up, and saying that this is what we should be aiming for. Well, I represent consumers. I represent people who want to get access to cheaper food, who want to get access to fruit and vegetables that are lower in cost. But, as we have seen, this is about representing the Nationals' interest, not the national interest. That is why we are debating this bill; that is why we are debating this very far-reaching change to competition law.
We on the Labor side do not mind strong competition policy but it has got to be informed and, importantly, it has got to be enforced. And we do not believe the government's package provides for being informed properly and backed up with proper enforcement mobility. As has been outlined by the shadow Treasurer, we see dangerous legislative proposals that do not address either resourcing the ACCC or making it easier for small businesses to litigate in their own private capacity.
And whilst we might have the Nationals championing this, what have we had from the champion of the Liberal Party, Peter Costello, a person who occupied one of the most senior economic positions in this country for an extended period of time? When he reflected on what was being proposed and given effect to in this legislation, he said, 'A so-called effects test will protect competitors, especially less efficient ones, from competition.' That is from someone who is heralded by that side as an economic pioneer and occupied the key economic position in the Howard-Costello government. That is his take on what is being proposed right now. He thinks this is all about protecting less efficient competitors, not raising the bar of competition across the board.
In submissions to the Harper review that considered this, the effects test was described as legally unworkable. Further, it will chill competition and create uncertainty for business. These changes will potentially deter job creating investment in Australia by adding new layers of red tape and barriers to investment which have already been imposed by this government. It is not hard to see why you would have another former figure in that government say he could not see the benefit in supporting these changes, and that was the former Minister for Trade and Investment, Andrew Robb. He believed the measures contained within this bill were anti-investment.
As I said before, this is not about good policy, it is all about politics. It is all about ensuring Prime Minister Turnbull satisfies the concerns driven by the National Party. In many respects, the National Party are the ones who are driving economic policy within this government—and exhibit A is this bill. That is not the way this should be done—not on something as complicated as competition law. On both sides of the House a lot of us want to ensure competition law is strong, robust, workable and enforceable. But it should not be subject to some sort of deal-making within the coalition.
We on the Labor side are certainly in favour of efficient markets. That has been the big thing. When you look at the way the Labor Party has transformed itself since the eighties, it has been about a realisation that efficient markets that are working properly and fairly are the best ones to be able to work in the interests of all—in terms of business and also consumers, in terms of more efficient investment, in terms of innovation and in terms of delivering for the entire country. These things are critical. Again, if 10 reviews since 1974 have considered the issue of the effects test and cannot bring themselves to recommend it, you have to wonder why we are being required to think about it here.
Besides politicians, senior figures within conservative ranks have questioned whether this is wise policy. In fact, they are not questioning it, they are saying outright that they do not believe in the value of this being imposed in competition law. The former chairman of the ACCC, Gordon Samuel, said:
Under the Harper amendment, businesses would curb their competitive behaviour because of the legal risk. This would have drowned the commercial activity of big business in a sea of uncertainty. Lawyers and economists would need to sit at the right hand of business CEOs to guide them on the legality of every significant transaction.
That is what they are saying, and I think that is a real worry.
In this debate about the effects test and the future role of the ACCC, I cannot overlook another recent foray by the ACCC in an area that simply staggers me, and that is their announcement last year that they will now consider the acquisition of start-ups by big businesses. The acquisition of start-ups by big business has been a valid and accepted objective of a lot of start-ups. You can either list on the stock exchange, go public and get bought out that way, or you can be acquired. This has operated for quite some time. In a country where the rate of start-up formation is relatively low, it is unbelievable that we would now have a further level of uncertainty being injected by ACCC Chairman Rod Sims last year, who mused publicly that they would now consider whether the acquisition of start-ups by big business was against the interests of the market.
As I said, what it would potentially do is put a chilling effect on activity in this space. It also flies in the face of the reality of a lot of start-ups: where they have found a market niche, done the R&D, found the investment and developed a proposition that could actually deliver value to consumers or other businesses, it is not necessarily the case that their acquisition would prevent the emergence of a large-scale competitor to established businesses. Rod Sims mentioned the examples of Telstra and Optus in start-up acquisition. Telstra and Optus have very large venture capital funds that are backing this innovation. They are not backing this because they believe that they need to acquire competitors; they are backing this because some of the innovative thinking that is being championed by some of these smaller start-ups will actually add to the strength and security of Australian corporates, our businesses.
Here I am, as a Labor politician, championing that we want to see smaller businesses go and become bigger ones. The issue is not about size; it is about behaviour. If bigger businesses are working and collaborating with start-ups to see an idea grow, take hold and potentially be of benefit to the start-ups, the founders, their employees and the bigger corporate, that has got to be a good thing for the country. I have not heard Rod Sims, the ACCC chairman, come out and clarify exactly what is behind his thinking. What are the examples that are driving his view that he now needs to disrupt, in his own way, the investment flows towards start-ups by suggesting that he will now put the regulatory blowtorch into this sector? I have not seen it.
The other thing that we have not seen is the government come out and say whether or not they back this. The government have been noticeably silent on whether or not the ACCC is on the right path, looking at whether bigger businesses can acquire start-ups, and they need to step up and explain exactly what their thoughts are on what the ACCC is doing. We have seen today that the government can step in, for example, and order the ACCC to look at energy prices. Why can't the government step in and say either way whether or not they believe what the ACCC is doing is right or urge the ACCC to consider very carefully the path it is treading?
This is a disaster in the making. We already have a relatively low rate of start-up formation compared to other parts of the world. If this interrupts or inhibits the flow of capital to start-ups, this is disastrous, because these small enterprises have a capacity to grow much faster than other small businesses and that growth equates to a growth in employment. And so I am certainly calling on the ACCC to spell out very clearly what the business case is for this suggestion that they would intervene in this way to interrupt the flow of capital to capital-demanding start-ups in this country by some sort of regulatory threat. It is unacceptable that the ACCC has left start-ups hanging, wondering what is going on.
Those start-ups themselves have not welcomed this imposition. In fact, some of them have said that there is a better thing to do. For example, the founder of Vinomofo, Andre Eikmeier, said:
Instead of blanket restrictions on what big companies can or can't acquire … the ACCC should focus its efforts on regulating what big companies do after they've acquired start-ups.
This is smart advice. After all, that is what we are trying to prevent through restricting anticompetitive behaviour. That is a good point, and this what he interrupts. The growth in the fintech sector actually went against the grain of what has been recorded on the global scale. On the global scale, there was a cooling in investment, but in Australia it sped up and a lot of it has been driven by, for example, investment in mergers and acquisitions and that is what has been pointed out:
This was driven by large M&A and VC transactions.
Investment in Australia's fintechs reached a record $650 million in 2016. We cannot afford to have investment flows interrupted by regulators that are overreaching and impacting on the growth of valuable sectors to the Australian economy into the future.