Monday, 27 March 2017
Competition and Consumer Amendment (Misuse of Market Power) Bill 2016; Second Reading
My Labor colleagues and I are opposed to this reform, quite simply because the effect of it will be to actually reduce competition in markets in Australia. Instead of prohibiting the misuse of market power, the overall effect of Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 will be to reduce competition in markets in Australia. The reason for that is that companies will become timid when it comes to competing on price. They will be scared away from competing on price with the threat of legal action hanging over their heads, because of the effects of discounting campaigns that they may undertake and their competitors potentially using those campaigns, under this proposed legislation, to prosecute them in the courts for misuse of market power. The overall result of this legislation is that Australian consumers will be worse off. Australian consumers will be the great losers under this legislation, because the effect of it will be to reduce competition within markets. This bill does represent, quite seriously, a threat to business across the nation and, for that reason, Labor is opposed to it.
Schedule 1 of this bill amends section 46 of the Competition and Consumer Act to prohibit a corporation with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in that market or any other market in which the corporation itself or a related body corporate supplies or acquires goods or services or is likely to acquire or supply goods or services, or any market in which the corporation indirectly supplies or acquires goods or services or is likely to supply or acquire goods or services. The objective of section 46 is to prevent firms from engaging in unilateral conduct that harms the competitive process. This requires distinguishing between vigorous competitive activity, which is desirable, and economically inefficient monopolistic practices that may exclude rivals and harm the competitive process.
This amendment is more commonly known as the effects test. It has been debated in Australia, up hill and down dale, for many decades. Those opposite like to use the example of Coles and Woolworths and the effects on farmers, but the overall effect for consumers will be that it risks business being afraid to compete, which ultimately hurts consumers and stymies growth in our economy. It will create a legal risk in that every time a business seeks to lower prices for their customers, particularly if they are getting into a competitive process with other businesses—so they get into a discounting campaign, if you like, with other businesses—the effect of that may be prohibited under this legislation, and the consumers will be the losers. The benefits of strong competition are obvious for all. When a business seeks to innovate in their space by creating a new or better product, or lowering prices made possible by lower costs, this often results in less efficient and innovative businesses becoming uncompetitive in the market. This is a natural outcome and is one that should be recognised as not inherently bad but beneficial to consumers, while also providing incentive for better business practices.
The ironic thing about this whole debate is that it appears that it is those on this side of the chamber that are arguing for freer markets, not those on the other side. The previous speaker came in here and said he was all about free markets. He raved on about the freedom of choice that members of the Liberal Party have and how, in the great Menzies tradition, they are free to vote whatever way they like on legislation. Despite the fact that he has been the number 1 opponent of an effects test over the course of the last couple of years in this place, he gets to the end of his speech—I was almost bowled over—and says that despite his opposition to this in the past he is going to vote for it this time in the House of Representatives. You cannot get any more hypocritical than the last speaker, who says that he is opposed to an effects test and he rails about the Liberal Party's philosophy of freedom of vote on this issue and then, at the end of his speech, tries to slink out of it by saying, 'By the way, I'm going to vote for it. That's the end. That's all I've got. I'm out of here', hoping that no one will notice. Hypocrisy is alive and well in the Liberal Party.
As I said, it is rather ironic that it is Labor that is supporting free markets and competition here and it is the government that is seeking to introduce more regulation, stifle competition and bind the hands of businesses in this country. What we see is a dangerous legislative process without either addressing the resources of the ACCC or making it easier for small businesses to litigate in their own private capacity.
I mentioned earlier that this issue has been debated up hill and down dale for many years. Since 1974, there have been no less than 10 inquiries in Australia into competition laws that have considered the proposal of an effects test. All of them have rejected it bar one. Every single one of those inquiries, bar one of them, has rejected it. And, of course, apart from Professor Harper's review, only one other inquiry has recommend it. In the submissions to the Harper review, the effects test has been described as 'legally unworkable', something that would 'chill competition' and something that would create uncertainty for business. Responding to the government's commitment to an effects test in July last year, the Productivity Commission was absolutely scathing of this notion, saying:
The existing competition regulation and oversight is adequate for managing concerns about abuse of market power by supermarkets and traders engaging with farm businesses.
The current focus on the potential for the misuse of market power by wholesale merchants and supermarkets engaging with farmers is not well supported by evidence.
It also said introducing an effects test was unlikely to shield farm businesses from intense competition in retail food markets, saying:
… shielding farm businesses from competition would also not be in the interests of consumers.
That is at the heart of this debate. That is what Labor is all about—increasing and enhancing competition in markets not attempting to stifle it. Competition creates downward pressure on prices and leaves consumers better off.
In reality, like so much of what this government does and says, this legislation really is about internal party politics, not what is ultimately in the best interests of Australian consumers. What you see here is the Prime Minister, Malcolm Turnbull, bending over backwards to placate the Deputy Prime Minister Barnaby. We all know that this is one of his pet issues. This is his misguided notion of economic reality and what is good for competition in Australia. On this—and this says it all about this government's approach on this issue—the National Party is determining economic policy when it comes to competition in this country. Well, God help us all! It is the Australian consumer that is going to lose out because of this because businesses will be too timid and too scared to compete with each other on price, and they will keep prices higher. The consumer will be worse off under the threat of prosecution under this legislation.
Ten out of 12 reviews of competition policy in the last 40 years have rejected an effects test as being bad policy which has the potential to drive up prices. That is the key determinant of those inquiries that have been opposed to this—drive them not down but up. This is because of an ill-thought-out and dangerous idea. Professor Harper himself concluded that the proposed test will create uncertainty. Treasury has confirmed this. The directions proposed to accompany the legislation have corrected been described by former ACCC chairman Graeme Samuel as 'bewildering'. They are bewildering. So much for providing certainty for business. So much for providing certainty for consumers and creating an environment of competition for consumers. When the former chairman of the ACCC describes the government's own guiding material on implementing this legislation as bewildering, then you know you have a problem.
In the lead-up to the last election, Labor took a different approach. We did not succumb to populist rhetoric and pressure from the National Party. Labor outlined a practical approach for preventing destructive anticompetitive behaviour with our access to justice package. This was put together—I might say, quite professionally and skilfully and in consultation with the business community—by the member for Greenway, Michelle Rowland, as the former shadow minister for small business. The difference between the Labor Party's approach and the government's approach on this is that we consulted with businesses. We actually consulted with small businesses and consumers throughout the country. All they did was listen to the Deputy Prime Minister and his misguided notion of competition and economics. Labor, listening to and consulting with small businesses, came up with what they really want, which is practical assistance to ensure that they can compete in markets and, where they feel that competition is anticompetitive, take action in tribunals and in the courts without being priced out of the market by big businesses, who can rely on big legal bills and expensive lawyers to hope that they will not have action taken against them.
Our access to justice package basically creates a level playing field. It would ensure that private litigants, small businesses and their industry representatives could better use existing legislation to prove the abuse of competition under part IV of the Competition and Consumer Act, allowing judges in the Federal Court to waive liability for adverse costs orders. So, under part IV of the Competition and Consumer Act, private litigants would be empowered to bring litigation without the crushing burden of enormous legal fees. At an early stage of a court case the private litigant would be able to request a 'no adverse costs order', preventing large legal fees of the defendant from being transferred to the litigant. Even in the lead-up to that, under our system the small business would have the opportunity to go to the small business ombudsman and get—an opinion, if you like—a determination on whether or not a 'no adverse costs order' would be in order if the action were taken. This would have the effect of changing the dynamics of small businesses and their representatives in their ability to bring private litigation. Those who misuse market power or seek to fix prices—amongst other anticompetitive practices—would be subject to closer scrutiny.
Concern continues to surround the potential for this legislation to result in intensification of legal action and the disruption of businesses' ability to move forward with certainty. This will impact on investment and jobs, and that is why Labor is opposed to this bill. This is simply policy on the run to appease elements of the National Party. It will be bad for business and bad for competition, and consumers will be worse off. That is bad policy, and that is why Labor will not support it.