Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 provides for the criminalisation of cartel conduct and will necessitate the creation of an indictable criminal jurisdiction in the Federal Court for the trial of offences. The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 was introduced to act as a deterrent to price fixing. Criminalising cartels brings Australia into line with the United States, Canada and the United Kingdom, which have similar sanctions. The bill will make it an offence for a corporation to make or give effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, control outputs, divide or share markets or rig bids.

This cartel legislation has become increasingly necessary because Australian businesses are engaged in the global marketplace. The OECD has defined hardcore cartels, and Australia must ensure it has similar laws to prevent and manage international cartel conduct crossing borders. This bill is important and should be subject to consideration and scrutiny to deliver the intent of the legislation. Cartel behaviour has a major impact on the object of the Trade Practices Act. That object is to enhance the welfare of Australians through the promotion of competition and fair trading and the provision for consumer protection by focusing on issues such as unfair prices, market power abuse and consumer rights violations. By their very nature, cartels have a significant impact on small business through anticompetitive conduct. This is even more relevant in the current global economic environment, where some executives may well resort to cartel practices. It is even more important, then, that this legislation is a strong deterrent, as well as sending a clear message to major corporations or multinationals dealing with small businesses in Australia.

As small business is a key driver of competition and choice, as well as employing nearly half the workforce, it is essential that the commercial environment promotes small business growth and development without the abuse of market power by major corporations. We know that numbers of viable, independent, competitive small businesses cannot be underestimated, particularly in rural and regional areas, where one of the primary principles of National Competition Policy, the public benefit test, is most relevant and most at risk. Small business underpins the economic and social fabric of countless regional communities. They are the businesses that employ locals and financially support local community service, education and sporting groups. Small business brings enterprising families who are prepared to have a go to rural areas and, of course, small business by its very definition is most vulnerable to cartel market concentration and unconscionable conduct practices by major corporations—for example, the farmer and grower sectors and small retailers. The majority of our farmers are absolute price takers, with no capacity to pass on increasing costs of production. They often are producing perishable products that have to be processed very quickly, which automatically places them in a vulnerable position with processors and buyers. They deal with limited numbers of often vertically integrated companies and, for those in the domestic retail market, two major supermarket chains that control the majority of the market. Small business also often has to deal with multinationals.

The Trade Practices Act powers are even more important, given that we have one of the most highly concentrated retail sectors in the world. There appears to be an increasing gap between farmgate prices and retail prices. Equally, farmers, small retailers and small businesses have limited financial capacity, time and resources to take on major corporations, even through the ACCC and court processes, or to apply for exemptions under the trade practices provisions: consider the ACCC and Federal Court process and the time commitment and costs borne by the Victorian Farmers Federation members, and farmers themselves, in the chicken growers bargaining authorisation case and the successful appeal against the ACCC ruling. The authorisation application on behalf of Western Australian dairy farmers is another example of vulnerable growers trying to manage the ACCC process. These cases highlighted the problems the ACCC has in dealing with small business versus big business cases. I can well remember walking into a hearing with the ACCC and being told how disappointed they were with the submission. The ACCC had expected a submission along the lines of that presented in a previous case by Air New Zealand and Qantas. At that time there were fewer than 300 dairy farmers in Western Australia, and now there are fewer than 200 dairy farmers left in the state.

In Australia, of the 2.227 million litres of milk sales in 2008, 55 per cent is sold by supermarkets. An overwhelming majority of this, 78 per cent, is sold by Coles and Woolworths. Coles and Woolworths have significantly grown their home brand milks using a Dutch auction style tendering process to secure milk volumes from milk processors. Of course, the fact that 78 per cent of total milk is sold through these supermarkets is a major driver in the bidding process. Woolworths’ next home brand milk tender is due later this year. With the Dairy Farmers Milk Cooperative now in the hands of National Foods, there will be one less competitor in the tender process. I will be very interested to see which of the nation’s three remaining major processors tender for the contracts, which ones are successful with their bids and, ultimately, what impact this will have on farmgate prices.

One thing we can be sure of is that the farmers will bear the cost of low price tenders. These same farmers are producing one of the most, if not the most, perishable food products in the world and, by this very definition, those same farmers are extremely vulnerable. Their product has to be picked up, processed and sold on virtually a daily basis. Their competitive capacity in this environment, unless there are serious milk shortages, is significantly compromised. We should never forget they are producing milk to some of the highest quality standards in the world. Each time there is rationalisation in the number of processors—by way of mergers, acquisitions or withdrawals from the market, resulting in fewer buyers and less competition—the farmer and the small family business bear the ultimate cost. Dairy is our third largest, major value added and exporting rural and food industry, directly employing approximately 40,000 people. However, as I said, by the perishable nature of their product and the considerable market power of buyers, the farmers are amongst the most vulnerable in the marketplace. In recent weeks, dairy farmers have also seen severe cuts in milk prices.

Small business continues to be affected by major corporations. A previous senate inquiry summary noted:

Over the past twenty years or so, Australia has seen the demise of hundreds of small grocery stores, butchers, bakers, florists, greengrocers, pharmacists, newsagents, liquor outlets and other small retailers as a direct result of the continuous expansion of major supermarket chains and major speciality retailers, often subsidiaries of the same conglomerate.

The ACCC itself acknowledges that cartel conduct probably costs economies all over the world trillions of dollars each year, hurting small business and consumers and adding an estimated 10 per cent to the cost of products where they are operating. Increasing market concentration in business also costs small business and consumers. We see this in the retail sector affecting smaller retailers. We are seeing it in the banking sector, particularly with the Labor government’s support of the big four banks. There is no doubt that this makes the big four banks even more dominant players in financial markets and undermines competition. The ACCC’s approach to this will be extremely interesting.

We see increasing market concentration in the fuel market. In 2002-03 for instance, Coles and Woolworths sold 10 per cent of petrol. In 2006-07, Coles and Woolworths accounted for approximately 44 per cent of all petrol sales. In an article by Melissa Singer the CEO of the Service Station Association, Ron Bowden, is reported to have said in relation to the defeat of Fuelwatch that he was ‘relieved with the Senate’s decision’ and that ‘since the supermarket chains had entered the petrol market, the rate of independent closures had doubled’. Then we see the concentration of the wholesale fuel market. In 2006-07, Caltex held 39 per cent of the market, Shell 29 per cent, Mobil 16 per cent and BP 12 per cent. Collectively, that is 96 per cent of wholesale sales. The independents hold four per cent.

A further example of the ACCC’s incapacity to manage small versus big business issues is the fertiliser industry. The substantial market share opportunities for Incitec Pivot in recent times and the ‘take it or leave it’ position farmers find themselves in was clearly highlighted by the gap between world benchmark prices and prices being paid by our farmers—again, farmers in small business being affected by market concentration. The terms of reference of the Dawson review said that the government is aware of concerns that ‘excessive market concentration and power can be used by businesses to damage competitors’. This will not be the last amendment to the Trade Practices Act; it is just the next amendment. A range of definitions of cartel conduct is contained throughout the act. Sections 45 and 45A are quite specific in relation to serious, hardcore cartel conduct.

Under this legislation, other Commonwealth offences will be heard in state and territory courts.  The Federal Court is to be vested with this jurisdiction due to its extensive experience with civil and quasi-criminal cartel cases under the current Trade Practices Act. However, it is understood that, where prosecutions involve offences both under the cartel provisions and state or territory law or, alternatively, other Commonwealth offences to which this bill does not apply, state or territory superior courts will hear those matters without the offences being disjoined.

The amendments proposed in this bill will provide for the complex procedural framework required by the new jurisdiction. The procedural provisions have been modelled on existing state and territory provisions and will apply in all Federal Court trials, regardless of where the trial is being conducted. This is considered preferable to applying the procedural and evidentiary provisions of the relevant state or territory, and this is where the Evidence Act 1995 will be applied.

I note that the proposed penalties relate to 10 years jail and/or a fine of $220,000 for individuals. Corporations will face fines that mirror the current maximum pecuniary penalties for breaches of civil penalty provisions. That is, the greater of $10 million—or three times the benefit obtained by the criminal cartel conduct, if this indeed can be determined—or 10 per cent of its annual turnover. The penalty for corporations was a recommendation of the Dawson review of the Trade Practices Act.

This bill is also to be considered by the immigration and legal policy committee. An issue raised at the Senate Standing Committee on Legal and Constitutional Affairs in December related to pretrial disclosure. Proposed section 23CF requires an accused who takes issue with a fact, matter or circumstance disclosed in the prosecution’s case to state the basis for doing so.

The Law Council of Australia has indicated its concern that this may compromise an accused’s right to silence. The justification stated in the explanatory memorandum is that this will permit the court to narrow the issues to be dealt with at trial. The Law Council recommended that a comparable provision to that applicable in New South Wales which allows such a procedure be adopted, unless it will cause prejudice to the defence. Alternatively, there should be no adverse consequences flowing from the accused’s nondisclosure, which is the practice in Victoria.

In relation to bail, proposed section 58DA provides:

If the Court refuses to grant bail, the accused cannot make a subsequent application unless there has been a significant change in circumstances.

That is more onerous than provisions applying in any other Australian jurisdiction. Proposed section 58DB is also silent as to whether there is any presumption in favour of bail. In other jurisdictions, there is generally a presumption in favour of bail, except in specific circumstances. There is also no provision in this bill for the court to provide reasons for refusing bail.

Six submissions have been lodged with the Senate Standing Committee on Legal and Constitutional Affairs. Some requested more debate on the matter, suggesting that a separate reference to the Australian Law Reform Commission should be made to engage wider debate and consideration. With 118 pages of complex draft legislation and such a short time frame in which to lodge submissions to the committee, this has resulted in mostly short submissions, citing insufficient time to consider the bill in detail. There was general belief that it is essential to consider such an important bill in detail. I support the bill, subject to the findings of the Senate inquiry, due on 20 February.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008.  Competition is good, competition works, competition lowers prices; cartels are oligopolistic. Cartels distort markets, cartels raise prices. Cartels are agreements to organise prices and production. Cartels price fix. They determine production outcomes, they allocate customers, they divide territorial boundaries and they engage in all manner of nefarious conduct. Adam Smith, in The Wealth of Nations, published in 1776, said this:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

I concur with the man often described as ‘the great prophet of capitalism’. He is right. Cartels are iniquitous arrangements which harm consumers and usually those who are weak in terms of their financial arrangements—those on low incomes and those who are not in a position to exercise choice as wisely as they ought. Cartels are a problem in Australia.

On 21 November 2008, the ACCC chairman, Graeme Samuel, said in relation to cartels, and particularly this bill, that this bill was terribly important in the current global financial crisis. He said:

The global financial crisis has given some companies an incentive to collude with others and raise prices …

The bill under consideration today has been the subject of intensive community consultation. All the relevant stakeholders have been engaged in this process. The bill amends a great Labor government initiative, the Trade Practices Act, which did so much, from 1974 onwards, to protect the rights of consumers, to give them choice and to ensure that we had as level a playing field in business, in pricing arrangements and in the market as we possibly could. But, sadly, there are some in our community who do wrong, both corporations and individuals. That is why we have the Corporations Law and the criminal law.

What we are doing today is very long overdue, as the member for Isaacs has said. He described the pace of reform under the previous Howard government as glacial; I would describe the Howard government’s approach as that of idleness and ignorance. We are aligning the law with that of our OECD partners—for example, a term of 10 years imprisonment for the most egregious criminal behaviour is the same as applies in the United States of America.

As with so many of the bills that have been introduced by the Rudd Labor government since 24 November 2007, we have members opposite getting up and saying, ‘We were going to do that.’ The member for Pearce talked about how this was to happen under their government, but when you look at the years and years of procrastination one wonders. This bill’s genesis does not go back to the report of Sir Daryl Dawson, known as the Dawson review. It goes back much further. The member for Isaacs was absolutely correct when he referred the House to the OECD reports of 2002 and 1998. The Dawson review, much vaunted and acclaimed by those opposite, actually recommended that there should be criminal sanctions for serious cartel behaviour and that there should be a definition in the Trade Practices Act for serious cartel behaviour. That was a report from 2003, some four years before the Howard government was turfed out of office.

It took at least 1½ years before the then Treasurer, the member for Higgins, finally decided to do something about this matter. He announced on 2 February 2005 that the Howard government would amend the Trade Practices Act accordingly. But it is interesting that nothing happened until 24 November 2007, when the Rudd Labor government was elected. The member for Higgins’s bill—what I would describe as the fictitious Higgins bill—was never introduced. Perhaps it was to be introduced in the 13th year of the Howard government. Indeed, Prime Minister Howard stated that the coalition government, if re-elected, would re-examine the Trade Practices Act and ‘make changes if needed’, effectively ignoring the work of the OECD in 1998 and 2002 and snubbing Sir Daryl Dawson and his review. This was a gross failure of the regulation of business, of criminal law and of competition policy in this country. As has been the case on many occasions, it is left to Labor to stand on the side of consumers. In the lead-up to the 2007 federal election, the Labor Party committed itself to the implementation of the Dawson review recommendations.

The 1998 OECD report was very interesting and was adopted by the council of the OECD on 25 March 1998. There were some very strong recommendations in that report that dealt with fighting hardcore cartels. It was subsequently discussed and examined in a 2002 OECD report called Fighting hard core cartels: harm, effective sanctions and leniency programmes. This second report reiterated the findings of the first report that hardcore cartels are the most egregious violators of competition and hence a principal focus of competition policy and law enforcement. The recommendations were very strong, direct and unequivocal. The report stated that world trade was at risk if there was no effective application of competition policy and that these anticompetitive practices constituted an obstacle to the achievement of economic growth, trade expansion and other economic goals of member countries. The recommendations can be found in bold in the report. Member countries were urged strongly to consider all obstacles to effective cooperation of enforcement laws against hardcore cartels and to consider whatever actions were necessary, including national legislation, to eliminate or reduce those obstacles.

We have seen consumers across Australia, including in my electorate of Blair, in South-East Queensland, rise up against oligopolistic practices, against too-high prices at supermarkets and petrol stations and against other organisations which offer their services at too-high prices. Nothing irritates Australian consumers more than paying too much for goods and services that are offered in the marketplace. They absolutely hate it, and they talk to us politicians about it all the time. I do mobile offices almost every Saturday morning in my electorate, and I can guarantee you that when I am at Brassall Shopping Centre in Ipswich on Saturday morning someone will come and talk to me about the prices of goods offered in the supermarkets across Ipswich and beyond. We have seen absolutely stark displays of malfeasance by leading companies in this country in relation to price fixing. It is a national disgrace and it really annoys the Australian public. The Visy group of companies was fined $36 million and there were separate pecuniary penalties for the former chief executive and the former general manager. Before that, there was for years secretive behaviour from individuals and various corporations dealing with price fixing, collusion and anticompetitive behaviour, and no-one knew about it. It was only by almost inadvertence that the matter came to the attention of the Australian Competition and Consumer Commission. There was a request by Amcor for immunity from prosecution and it all flowed from there.

The key elements in this bill are to be applauded—they are very worth while. The idea of aligning the maximum term of imprisonment of 10 years or a maximum fine of A$220,000 for an individual is a good thing. It lines us up with our OECD-friendly neighbours and our competitors. For a corporation, a fine is imposed that is either $10 million or three times the value of the benefit from the cartel, whichever is the greater, or, where that value cannot be determined, 10 per cent of the annual turnover is required. I think that is a very worthwhile reform in the circumstances. It sends a very clear message to individuals and corporations not to engage in this sort of behaviour.

The government has decided that the offences will no longer include the words ‘with the intention of dishonestly obtaining a benefit’ and has decided to adopt a more liberal and widespread approach to make it easier for prosecution. Instead, the government has adopted fault elements under the Criminal Code in the legislation: intention, knowledge and belief. They are aspects of the criminal law which are known throughout Australia and I applaud that particular provision.

There are many anticartel provisions in this legislation. There are parallel civil prohibitions as well and also a strengthening of telephone interception powers because cartels engage in very secretive arrangements. It is extremely difficult to discover cartel arrangements and it is hard to get the evidence. I spoke last week in relation to the Telecommunications Interception Legislation Amendment Bill (No. 2) 2008 because that allowed Queensland, my home state, to join in the same type of law enforcement that we see elsewhere. For a long time the Howard government opposed the requests of the Beattie and Bligh Labor governments to allow Queensland to come into the 21st century when it comes to telecommunications interception, simply because—as I understand it—there were objections to the public interest monitor.

But now, allied with the trade practices amendments we are dealing with today, we see telephone interception powers which will be nationwide and which will allow police services—for example, the Queensland Crime and Misconduct Commission and the Queensland Police Service in my home state—to investigate and have the kinds of powers that are necessary to get around the cloak of secrecy that so many individuals and corporations engage in when they try to rip off the Australian public.

I am pleased that, allied with the legislation before the House today, last week we dealt with the telecommunications interception legislation. The other bill which is so critical to what I would describe as a code which is being established—a new legislative framework or architecture—is the bill which we discussed last week and also this week: the Federal Court of Australia Amendment (Criminal Jurisdiction) Bill 2008. That particular piece of legislation, which is integral to the whole framework of the legislation that we are considering to deal with cartels in this country, was all about giving the Federal Court of Australia the criminal law jurisdiction which is necessary to deal with cartels. That was a long overdue reform and it allows the Federal Court of Australia to deal with indictable criminal offences, serious criminal behaviour and serious anticompetitive behaviour by cartels. It is a great legislative reform and it allows the Federal Court of Australia, which has significant expertise in cartel conduct in civil jurisdiction, to deal with this area in criminal law.

The Federal Court of Australia has a significant body of jurisprudence and history of case law in this country, and also the precedent to deal with this type of matter. Having a uniform set of procedures in criminal law, rather than a referral to the various sets of state rules and procedures in criminal law, is a very wise move by the Rudd Labor government and I applaud that particular legislation, which is integral to the legislation that is before the House today.

There are additional measures that the Rudd Labor government has taken to bring forward the prosecution of cartel behaviour. It was a Labor government which brought in the Trade Practices Act and it is Labor that really believes in free enterprise—Labor believes in free markets and we believe in free trade. We believe that it is necessary to prohibit cartels. Too often our media, even our police and our various directors of public prosecution focus on blue-collar crime in this country. It is sensational and easy to report. Media outlets show good pickies—if I can put it like that—on the Channel 9, Channel 7 and Channel 10 news on Sunday nights, but white-collar criminal cases are not particularly interesting because all you see are people walking into courts. You do not see—I will put it bluntly—the blood and guts that you would see in blue-collar crime. You just do not see it.

But it irks and irritates the Australian public that the big fish seem to get away with so much. It is very important that we have this type of legislation. If you go to the magistrate’s court in any particular part of this country you see lots of people with drink-driving, drug or stealing offences. They are facing criminal charges in a magistrate’s court or a court of petty sessions across this country. Too often, we do not have the big guys, the big corporations—the big fish. They seem to escape the net. We are rebuilding the net with this legislation and the two other pieces of legislation. We are actually building a great net that is going to capture cartel behaviour and we will legislate for the benefit of the Australian public.

That is why I support this bill and why I think that this bill will send a message to those individuals and corporations who engage in this type of behaviour. It is why this bill says a lot about where we are as a country and what an educative process it will be for the Australian public to see this type of legislation on the statute books and enforced properly for the benefit of the Australian community. I commend the bill to the House.

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

In bringing forward the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, the government is essentially strengthening free market competition in Australia. This is perhaps surprising given the Prime Minister’s rhetorical attack last week on the ideology of the free market while attempting to convince us to plunge Australia deeply into debt as a means of addressing the economic crisis. I have studied economics sufficiently to know that a free market is not to be demonised; indeed, a free market is the essence of what makes successful economies work. A free market is a market in which the prices of goods and services are arranged completely by the mutual consent of sellers and buyers. That is the basis of all economics that my university degree taught me—unfettered supply and demand are the basis of economics.

A free market does not mean one which is free of government intervention and regulation. Indeed, I wholeheartedly believe the government should play a key role in facilitating market competition—not just the basic functioning of maintaining the legal system and protecting property rights but by ensuring it is also free of private force and fraud. This is the basis of the Trade Practices Act, originally made law by a coalition government and continually amended over the years. It was a coalition government that had to amend sections 45D and E. I could not go on without mentioning that, given the minister presently on duty at the table: the Minister for Resources and Energy. These amendments were to ensure that unions were not allowed to restrict the free market. Labor of course was opposed to this at the time.

Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

Or employers.

Patrick Secker (Barker, Liberal Party) Share this | Link to this | Hansard source

Exactly. Where two or more businesses reach a formal or informal agreement to limit competition among themselves—for example, by fixing similar prices or agreeing on separate marketing areas—they are said to form a cartel. Cartel conduct refers to contracts, arrangements or understandings between competitors to fix prices or share markets, to control output or rig bids. Such conduct harms consumers, businesses and the economy by increasing prices and reducing choice, service, innovation and efficiencies. The aim of cartel collusion is to increase individual members’ profits by reducing and restricting competition. Hardcore categories—not a term I am entirely comfortable with, but it is the one used in this legislation—of cartel conduct universally involve price fixing, output restrictions, market allocation and bid rigging.

I recently read a feature article in the Washington Post describing the squads of assassins working for multinational drug cartels—some of them former military and counterdrug personnel, highly trained, who have turned murder into an almost assembly-line duty in Juarez in Mexico and other fought-over drug trafficking battlegrounds. For the most part, these squads of assassins are used by cartels against one another battling over turf. Thankfully, in Australia cartels do not have such a deadly modus operandi.

Graeme Samuel, Chairman of the Australian Competition and Consumer Commission—another investment banker in a previous life—endows cartels with the term ‘well-dressed thieves’. While not deadly as in the Mexico case, the harmful effects of hardcore cartels are well understood. Consumers benefit from competition through lower prices and better products and services. When competitors agree to forgo competition for collusion, consumers lose those benefits. The competitive process of a free market only works when competitors set prices independently. When competitors agree to forgo competition for collusion, consumers again lose those benefits.

Secret cartel agreements are a direct assault on the principles of competition. Indeed, hardcore cartels are the most serious and harmful violations of competition law. They injure consumers by raising prices and restricting supply. They create market power, waste and inefficiency in countries whose markets would otherwise be competitive. A cartel shelters its members from full exposure to market forces, reducing pressures on them to control costs and to innovate—all adversely affecting efficiency in a market economy. Cartels harm consumers and damage economies. A successful cartel raises prices above the competitive level and reduces output—again, basic supply and demand so well understood from economics.

Consumers pay the cartel price, thereby unknowingly transferring wealth to the cartel operators. Cartels are generally considered among the most serious competition infringements, and competition authorities around the world are increasing their efforts to pursue cartel offences, both domestically and internationally.

Identifying and breaking up cartels is an important part of the competition policy overseen by antitrust watchdogs in most countries, although proving the existence of a cartel is rarely easy as cartel companies are usually not so careless as to put agreements to collude on paper.

The OECD’s competition committee conducted a survey of cartel cases with its members between 1996 and 2000 in an attempt to learn more about the harm from cartels. The amount of commerce affected by just 16 large cartel cases reported in the OECD survey exceeded US$55 billion worldwide. The OECD survey showed that the cartel mark-up can vary significantly across cases, but in some it can be very large, as much as 50 per cent or more, and the report concluded that the magnitude of harm from cartels is many billions of dollars annually.

The report of the 2003 review of competition provisions of the Trade Practices Act by the Trade Practices Act review committee, commissioned by the Howard government and chaired by Sir Daryl Dawson, known as the Dawson report, was released in April 2003. The Dawson review concluded that criminal penalties were an effective deterrent to serious cartel behaviour but noted that one of the critical issues in drafting penalties for any such offence would be identifying the elements of cartel behaviour that would differentiate a criminal offence from a civil breach. This bill is therefore one response to the Dawson report, introducing criminal penalties for serious cartel conduct. The bill makes the distinction by providing that a person commits an offence only if they make or give effect to a CAU that contains a cartel provision with the intention of dishonestly obtaining a benefit.

Antitrust breaches are not always easy to identify and are frequently hard to distinguish from robust competition. Indeed, a few years ago Microsoft ran into trouble largely because it bundled its web browser with the Windows operating system and was duly found to have violated antitrust law. Yet bundling is a common business practice that can be entirely legitimate. To put this concept in its most simple terms, a breakfast restaurant can bundle items such as eggs, bacon and sausages onto a plate and sell it for less than the sum of the individual constituent parts, but this is certainly not dishonest. It is often tricky, too, to draw the line between healthy discounting and predatory pricing. Loyalty discounts are widely used in business and have benefits for consumers and suppliers alike; conversely, loyalty schemes can be used to keep rivals out of the market and preserve an incumbent’s monopoly.

I raise these examples to show the difficulty in saying for sure whether the actions of businesses are harmful to consumers and the care we must take as legislators to determine and define the term ‘dishonesty’, as this legislation does. The last thing we want is for Australian businesses to be confused or genuinely unclear on what is permissible such that the threat of heavy criminal law sentencing makes them wary of competing aggressively.

Australia has quite a record of applying civil penalties for price fixing. In November 2007 the Visy group of companies was fined a record $36 million for price fixing in the cardboard market. That case created quite a stir, not just because of the record fine but also because the judge said that every Australian had been harmed by the cartel each time they bought goods that had been moved in cardboard boxes. Other examples were the August 2008 agreement by Qantas to pay $20 million to settle the Australian liability for its involvement in an international freight-price-fixing cartel; the 2005 fixing of retail prices of petrol in the Ballarat area of Victoria; and 2004 price fixing in the abalone industry, also in Victoria. Indeed, in my own state of South Australia the Australian Competition and Consumer Commission instituted proceedings in the Federal Court against timber companies for price fixing and attempted price fixing of timber-estimating services in contravention of the Trade Practices Act 1974.

It is not in dispute that cartel conduct is comparable to other criminal conduct such as theft and fraud and, as such, warrants criminal sanctions. Following the line of the judge’s comments in the Visy case, it can be concluded that cartel conduct is comparable to theft because the perpetrators are robbing the community and consumers who purchased the goods and services affected by the cartel conduct. I recall recently seeing it described as ‘theft with a briefcase’. But, as I said earlier, we must get the dishonesty test right so as to deter actions such as those of Visy, Qantas, the abalone and petrol industries, the timber merchants and so on—all significantly different in the nature of their business activities—while at the same time not frightening out of business those corporations or individuals who are acting quite legally and competitively.

The principal purpose of sanctions against cartels is deterrence, but I question the need to make this a criminal action rather than a civil action as is presently prescribed and where successful action has occurred. At the very least, the penalty should take away the value of financial gains that would otherwise accrue to the cartel members and the inflation that would have been applied based on the risk factor of discovery and sanction. Calculating cartel gains for the purpose of arriving at an appropriate fine is difficult, and it is equally difficult to factor in a value of the probability of detection. Strong financial sanctions provide an incentive for cartel members to defect from their conspiracy and cooperate with the investigating authorities, and strong sanctions make leniency programs work.

A number of OECD countries have imposed very large fines, the equivalent of tens or hundreds of millions of dollars, against organisations in cartel cases. This bill prescribes for individuals a maximum jail term of 10 years and/or maximum fines of $220,000 and for corporations a fine that is the greater of $10 million, three times the value of the benefit from the cartel or 10 per cent of its annual turnover. I note that the member for Blair said that the penalty of 10 years is the same as that in the US. But their legal system is different from ours. The penalty in the US is often used in plea bargaining, a practice quite different from that here in Australia, so that comparison is not as valid as one might ordinarily think.

The penalties in this bill are in my view severe, but where do we draw the line in the allowance for the chairman of the ACCC to make a decision about what is a hardcore cartel and what is not? Does an agreement by stock owners and stock agents to have a minimum price at stock sales constitute a cartel? Because that happens at virtually every stud animal sale in the country. I am not convinced that this legislation answers that question. What action is to be taken over the worldwide diamond cartel that restricts supply and stabilises diamond prices? I doubt whether this legislation will address that. What action is to be taken over OPEC, a very famous worldwide cartel that organises oil prices and supply and demand—although, as we have seen, with quite variable prices. Again these questions remain unanswered, perhaps because we are powerless against such cartels.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

Cartel operations certainly undermine the market and they are certainly detrimental to consumers. Consumers suffer, small business suffers and the community as a whole suffers as a consequence of cartel behaviour. Cartel behaviour is where organisations will group together by agreement with a view to determining pricing, and that pricing could be input pricing or sale pricing—in other words, cartels will operate to exclude proper competition. One thing I would have thought had been reasonably consistent on both sides of the House is the view that supports and promotes competition as the basis for delivering the best results for consumers, the people in our electorates who we all represent. Manipulating prices and manipulating what the customers can receive or restricting supply—in other words, rigging the market—can only operate to the absolute detriment of the people who we represent and the market itself. It is for that reason that in the lead-up to the last election Labor was very firm in ramping up its position on the Trade Practices Act to address the issue of cartel behaviour, with a view to imposing jail sentences for those who were found to be guilty of such behaviour, because cartel behaviour is a scourge on our society; it is and should be regarded as a criminal offence.

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 makes it a criminal offence for corporations to make a contract arrangement or understanding that will contain provisions on fixed prices, restrict imports or divide or restrict the actual interplay of the market itself. The bill includes a maximum 10-year jail term for offences and also amends the Telecommunications (Interception and Access) Act 1979 to enable telecommunication interception powers to be used in addition to other available tools to investigate breaches of cartel offences.

As I said earlier, the reason for operation of cartels is to undermine the free flow of our market economy, and as a consequence it should be at the forefront of the mind of every member of this place that we must get this particular position right if we are truly to represent the free market economy for this country. Cartels have occurred in the past, and the previous speaker in this debate gave a number of examples of that. He went on to give a number of examples of cartel-like behaviour that occurs internationally. Unrestricted I am absolutely confident that cartel behaviour will once again emerge if there is a profit to be made. The whole basis of cartel behaviour in the first place is to extract a greater profit for those who actually participate in the cartel arrangement.

In Australia you can go to jail for relatively minor stealing offences. I do not say that in any way to demean our criminal justice system, but, having regard to what I suppose is relatively minor, we can compare that to the situation at the moment where people can actually be the beneficiaries of stealing or accumulating millions upon millions of dollars from consumers. At the moment such people face fines and face corporate action but do not face the harsh realities of our criminal justice system and, as a consequence, avoid jail sentences. This bill goes a long way towards addressing that.

After lengthy consultations with the community and experts in the field, the final draft legislation provides a term of up to 10 years in jail for such cartel behaviour. That means, by the way, that it is now up there with some of the toughest provisions in the world. A maximum 10-year jail term brings this into line with provisions in the United States and the current jail terms for other corporate crimes as well. This legislation needs to be tough. It needs to send a message in the clearest possible terms that you had better think twice about being involved in cartel behaviour and ripping off Australians, because we are committed to doing something about it. We are committed to actually punishing those who are found to have participated in these actions with what would be regarded by consumers as the appropriate penalty.

We are here in this parliament representing those very consumers. We want to protect those people who are the victims of cartel behaviour. That is why in the lead-up to the 2007 election Labor committed to implementing the Dawson review recommendations, and that is specifically to introduce jail terms for serious cartel behaviour. Not that we wish to be political about this, Mr Deputy Speaker, but I think it is a matter of record that the former Treasurer and member for Higgins had once committed to introducing this important reform into the Trade Practices Act but somewhere in his period of office as Treasurer it seemed to be overlooked. For all the time of the Howard government—despite its having a position which I understood was a mandate but maybe not, and despite having a commitment to introduce jail sentences for serious cartel behaviour—that never ever eventuated. On the other hand, throughout that whole period members opposite will recall that, in debate after debate in this place on the Trade Practices Act, and particularly with reference to the Dawson inquiry, the Labor Party has always had a strong and supportive position on any legislation that would criminalise cartel behaviour.

Back in 2003 the Dawson committee review into the operations of the Trade Practices Act recommended the introduction of jail terms for serious cartel conduct. It was one of a few recommendations that was actually made arising out of that review. As I said, the previous government sat on its hands while the rest of the world updated their laws in relation to the fight against anticompetitive behaviour. Other countries across the globe have already instituted such measures. The United States, the United Kingdom, Norway, France, Germany, Israel, Taiwan and Canada have already instituted jail terms for serious cartel conduct, and it is about time the opposition supported this policy. As I understood it, it was at one stage the policy of the former government but it never came to fruition. So we welcome their support on this occasion.

The OECD on 25 March 1998 instituted an anticartel program with the adoption of the recommendations of the council concerning effective action against hardcore cartels. The OECD defined hardcore cartel conduct as anticompetitive agreements, anticompetitive concerted practice, anticompetitive arrangements by competitors to fix prices, to make rigged bids, to establish input restrictions or quotas or share or divide markets by allocating customers, suppliers, territories or lines of commerce. The OECD condemned hardcore cartel behaviour as a most egregious violation of competition law and called on all OECD members to ensure that their laws adequately prohibited such cartels and that they provide for effective sanctions, enforcement procedures and investigative tools with which to combat them.

The government has decided to increase the maximum penalties for cartel behaviour to 10 years to send a very clear message to those who may participate or seek to participate in cartel conduct. The maximum penalties for the offences are for individuals a maximum term of imprisonment of 10 years and/or a maximum fine of $220,000. For corporations it is a fine that is greater than $10 million or three times the value of the benefit from the cartel or, where the value cannot be determined, 10 per cent of the annual turnover. This government gave extensive consideration to the jail term. As members will recall, in the draft exposure bill released last year five years was being recommended. However, through consultation I think reflecting what the community view is with respect to cartel or cartel-like behaviour, the decision was made to increase that to a 10-year term as it better reflects the seriousness of the crime. In addition to that, it brings it in line with and makes it more consistent with other criminal law related to corporate related offences. A maximum 10-year prison sentence already exists for directors who wilfully defraud or deceive a body corporate, or for directors who fraudulently appropriate the property of a body corporate. The proposed 10-year jail term will also put Australia on par with the United States in having the world’s toughest provisions in respect of cartel behaviour.

There is a second aspect of this relating to the civil penalties that apply. They will move to a maximum of $500,000 for individuals and a penalty consistent with the maximum criminal fine for corporations. The Australian Competition and Consumer Commission will investigate all matters and be responsible as the law enforcement body, if you like, to investigate cartel-like behaviour in conjunction with other appropriate law enforcement bodies. They will actually run the brief of investigation. The Commonwealth Director of Public Prosecutions will be responsible for determining and physically making the prosecution of such behaviour.

That brings me to another aspect of this bill: the tools of investigation. Determining cartel arrangements is always going to be difficult. Cartels are normally a secretive exercise at best. They are not something where people advertise what they do, regardless of the fact that they might be wearing pinstriped suits. They are organised relatively covertly because of their need to avoid detection.

One of the biggest tools that we have at present for detecting serious and organised crime is telephone interception powers. Telephone interception provisions have been used by all states and territories and, as a consequence of a bill that passed this House last week, the Queensland police are now also able to access telephone interception powers in respect of serious and organised crime. As I say, the use of telecommunication interception powers is one of the most significant developments in law enforcement investigations.

Accordingly, this bill makes an amendment to the Telecommunications (Interception and Access) Act 1979 to enable the ACCC to seek to use intercepted material in relation to cartel investigations. That does not give the ACCC the power to initiate telecommunication interception, whether of telephone, email or SMS. It allows them to receive evidence that may develop from investigations of the Australian Crime Commission, the Australian Federal Police or other agencies that have access to that act, and to use that material in formulating the brief of evidence for making a prosecution under this act. That is certainly a significant development, and it shows not only that this government is clear in its position on and condemnation of cartel-like behaviour but that we are giving those agencies responsible for detecting such behaviour all the necessary tools to detect, investigate and prosecute those responsible.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

I rise to make comment on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. The government has introduced this bill to act as a deterrent to price fixing. Criminalising cartels will bring Australia into line with the United States, Canada and the United Kingdom, who have had similar sanctions in place for quite some time. Consequently, the coalition looks to support the bill.

The bill makes it an offence for a corporation to make or give effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict outputs, divide or share markets or rig bids. The government has prescribed a maximum jail term of 10 years to send a clear message about such outrageously wide cartel conduct. The penalty for the offences is, for an individual, a maximum term of imprisonment of 10 years and/or a maximum fine of $220,000 or, for a corporation, a fine that is the greater of $10 million or three times the value of their benefit from the cartel or, where the value cannot be determined, 10 per cent of annual turnover.

The government, though, through speakers from the government side, have attempted to use this to indicate their support for free trade and a free market. The issue with this statement is that it flies in stark contradiction to a range of actions over the preceding weeks. Our Prime Minister—who has morphed from a fiscal conservative into a Christian democrat and now into a social democrat—in his 7,000-word expose on the evils of neoliberalism and free trade, would simply fly in the face of what members of his party have indicated here this morning. Neoliberalism is apparently the cause and the raison d’etre for all ills within our current economic circumstances, according to the Prime Minister’s somewhat wonkish 7,000-word treatise. He fails to explain, though, why the Deputy Prime Minister stood up at a world forum to explain that our banking system was the envy of the world. So much for the failures of so-called neoliberalism, as they are described by this chameleon of a Prime Minister, who changes so rapidly from a social democrat to an economic conservative to something else! The question is: what will he become next? Will it begin with ‘M’ and end in ‘arxist’?

We have seen a department of deregulation put forward with the intent of trying to convince the people that this government is about further deregulating the market, yet in the 7,000-word treatise all we have seen is an attempt to reregulate because of the evils of neoliberalism. Somehow the Prime Minister forgot to indicate in his article that, of the 16 banks in the world with an AA rating, four are our four big banks and that, if the rest of the world had followed the regulatory environment put in place by the Howard market, there would have been very little fallout from a global financial crisis. We would not have seen the massive subprime loans, since under our regulation less than one per cent of loans were subprime, whereas, of the $2 trillion lent in 2006 by US banks, up to 25 per cent of loans were subprime. If the rest of the world had followed our lead in the reregulation that we had put in place, especially the pillars including the establishment of APRA out of ASIC in 1998 and the true independence of the Reserve Bank, there would not have been bank failures, because the gross negligence of these widely disparate derivative products would not have been permitted. If the rest of the world had followed our regulatory lead, the economies of the world would not be heading into recession at the rapid rate they are.

Our sense of the balance between regulation and free trade and the balance between bureaucratic red tape—which is still too high for my liking, coming from a small business environment—and regulation, combined with incentive and opportunity for entrepreneurialism, was the right one. Our economy, with its zero debt—prior to the Rudd government coming in to spend it all with their spending spree—and our regulatory structures were the envy of the world. If only the rest of the world had followed our lead. So forgive me, Mr Deputy Speaker, if I take the 7,000-word essay on neoliberalism and throw it in the bin, where it belongs. We are now faced with an era of big government and big spending—because the government are here to save the day, apparently. It would be nice if the government stopped spending money—and stopped racking up $9½ thousand for every man, woman and child—on many unproductive measures as part of their spending spree. For government members to use this bill as an example of their love for, delight in and embracing of free trade is a mockery at best and a complete sham at worst.

But back to the bill. The idea was first floated for the cartel provisions in 2002 under the Howard government. On 2 February 2005, the member for Higgins, the former Treasurer, Peter Costello, announced his intention that the government would amend the Trade Practices Act to introduce criminal penalties for serious cartel conduct. The Howard government had this on the agenda and on the radar for a number of years. The Trade Practices Act sets out a range of definitions of cartel conduct. It does this through a number of sections, although not overtly. This bill will specifically pertain to serious and hardcore cartel conduct. It has become necessary. As the OECD has now defined hardcore cartels and given businesses the opportunity to operate in a truly global marketplace, to align Australia’s laws with those of our OECD cousins does make a degree of sense, particularly to prevent cartels crossing international borders.

It is argued that the measures in this bill meet community expectations that a tough line should be taken with regard to cartel conduct. It certainly formed part of the Rudd government’s pre-election commitments—this is noted—and, as the final draft exposure bill reads, will place us in line with those other nations. The government believes that the new legislation will enable a proportional response to cartel conduct. Criminal investigations and prosecutions will be targeted at serious cartel conduct. The key elements of the bill include parallel criminal and civil prohibitions, a maximum jail term of 10 years, the criminal cartel offence no longer requiring proof of any dishonesty, telephone intercept powers being used to investigate suspected criminal cartel offences, and proceeds of criminal cartels able to be seized under the proceeds of crime legislation.

The only caution that should be offered in taking the cartel provisions into the Criminal Code is the challenge on who to charge. Do we go after the chairman of a company or its board of directors? Do we go after the CEO or the senior staff? Do we go after the head of purchasing, who should have known what the purchasing provisions were and what prices were being charged? Do we go after the head of logistics, who should have known where goods and services were moving to if indeed there was cartel activity occurring? Do we go after the head of strategy, who would apparently have had to sign off on it? Do we go after the chief financial officer and the core financial staff? Or, frankly, do you take the lot on?

The issue of who to charge within a criminal court is significant and serious. And, whilst the intent of the bill is to ensure that corporations deliberately engaging in serious and significant cartel operations should be held responsible and accountable for their actions, it is important to ensure that the people directly responsible, who knew about what was occurring, are those who face the criminal prosecution. The challenge of who to charge will be a significant challenge when this law is first put in place in the courts of the country.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to speak on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. There is no doubt that everybody in this place would be opposed to the formation of cartels and would be supportive of government action, regulation and laws to prevent cartels from not only forming and operating but also, at their most criminal level, robbing people of their income. So I do not think it would be of surprise in this place that there would be broad support not only in the parliament but also in the community for action to take place in terms of cartel conduct and that that action should form the basis of having not only decent regulation and laws that provide for the abolition of such practices but also pecuniary penalties—and I would suggest that they be very serious penalties.

Often the message that needs to be sent to those who might want to rob people, to rip people off, to do the wrong things, to be anticompetitive, to set up cartels and to engage in other forms of anticompetitive behaviour is that they should understand that, if they do practise those behaviours, the penalties will be very serious—that there are pecuniary penalties and they face long jail terms. I think it is a fair and appropriate way to deal with white-collar crime and what is criminal behaviour from a range of people, regardless of their position or status in life or in the company within which they operate.

I note the previous speaker’s concern as to who you would take on. The member for Fadden, the previous speaker, asked whether you take on the lot—core staff, individual staff, CFOs, company directors, chief executive officers, managing directors and so forth. I do not know that that, in itself, is so much an issue. I think who you take on is quite simple. It is those people who actually made the decisions and took on that behaviour—the ones who created the circumstance. So it is the decision makers. They are the people you take on. And they are the people you send the message to, to ensure that cartel type behaviour does not go on.

I think it is also fair to say that cartels are an undesirable element of society across a whole range of activities and areas. At the worst level there are drug organisations and there is money laundering, criminal behaviour and people trafficking—all of the uglier sides of humanity where cartels operate. They also operate in a range of less insidious areas such as simple anticompetitive behaviour, whether or not in the fuel retailing sector. I am sure there are many different views in terms of how that operates. There have been investigations in the past by the ACCC and others and certainly by the community, which is concerned about the rigging of prices—petrol prices or the price of anything else—and there are other forms and other types of cartels. A cartel really is any type of anticompetitive arrangement between two or more businesses to fix prices, reduce competition, rig bids with collusive tendering, establish output restrictions or quotas, or basically manipulate markets to their advantage in an uncompetitive manner in order to receive some sort of advantage by dividing up markets and customers and doing a range of other things.

Not all of those practices are anticompetitive or collusive necessarily. There are arrangements in place which mean that sometimes some of those behaviours are not necessarily in the form of a cartel. It is good, though, that, after many years, particularly in the past decade, and after a lot of words, investigations, reports and discussions with previous holders of office in this place about what to do, at least some movement is forthcoming. There is some movement forward and the Rudd government will take on some of this difficult terrain and put in place legislation to deal with that. It can be done in a range of ways, and that is what this bill is about. I do not see this bill as some sort of closing off of the loops, which would forever prevent cartels from operating and would prevent anticompetitive behaviour, but I see it as a step forward, as a signal to business and industry, as well as to consumers, to understand that in the end we are on their side. We want to make sure that people pay fair prices and that there is fair competition as much as is possible to level out the playing fields, whether in retail—fuel or food retailing, or any other type of retailing—service provision or whatever the case might be.

That is why this Rudd Labor government is committed to criminalising this anticompetitive cartel type behaviour. It is understandable that in Australia you can go to jail for stealing relatively minor amounts of money, but you will not go to jail if you are a company executive who colludes with a competitor, setting artificial prices or locking out a competitor—maybe forcing them to go out of business and costing them money and jobs—and artificially setting high prices and basically stealing millions of dollars from ordinary Australian consumers. This is not just. There ought to be a way to deal with company executives who make very conscious decisions about their behaviour without considering what that behaviour will cause and create or who it will hurt and who it will impact on.

After lengthy consultations with the community and with a range of experts in the field, this legislation provides for jail terms of up to 10 years for such cartel behaviour and conduct as I described before. In global terms, that means that this bill puts Australia in line with some of the toughest regimes in the world when dealing with cartels. Up to 10 years is a significant penalty that I believe will go some way to being a very strong guide and indicator, to officers of companies and people who might assist others in cartel type behaviour, that this really is not on, that it is not acceptable, that it does attract penalty, that it is something that the Commonwealth and its agencies are focused on and that there are tough penalties if you get caught. The maximum 10-year jail terms will bring us in line with the United States’ current jail terms for corporate crimes of a similar nature.

This legislation needs to be tough. It needs to send the clearest message possible that, if individuals are involved in an international cartel ripping off Australians, if they are involved in a locally based cartel arrangement or if they are involved in any of this type of conduct or behaviour, there is a serious penalty for that behaviour. Sadly, I have to say that, coming to government in the past 12 months, we find ourselves having to deal with so many areas of policy where the previous government failed to act. It was not a failure of knowledge or a lack of demand from the community, from ordinary Australians, from experts or from reports; it was just a failure to act. While we heard the rhetoric about the importance of small business, the importance of being supportive of doing all we could for small business and all the rest of it, in real terms what we found was just a failure to act. That in itself is a crime. It is a crime to just sit back and allow businesses to fail, because this is what we are talking about in the end.

Anticompetitive behaviour—the locking out of small businesses, the driving of prices and business to the point where you drive one of your competitors out of business by cartel type behaviour—is a crime, and we in this place should always be conscious to do everything we can about it. We need to take some form of action, whether or not we get it right every single time and whether or not what we do fixes the problem immediately. We need to be more than just words. This bill moves in that direction. The people who stand to be hurt the most, those who are the losers if we do not act, are the Australian public—the consumers, the small businesses, the medium enterprises, those people out there who have staked their life savings on establishing a business and who are then driven out by some cartel behaviour from a larger competitor, those who find themselves with no avenue of redress and those who find themselves with no regulatory framework to assist them. The amendments and changes in this bill will provide people with those mechanisms.

Back in 2003, to be specific, the Dawson committee review into the operation of the Trade Practices Act recommended the introduction of jail terms for serious cartel conduct. It was a good recommendation—it was also a good report. It made that recommendation for good reason: it is a necessary step and is something that must be in place. This was one of the few recommendations for change to arise out of that review, but it was a very, very important one.

While the previous government sat on their hands, we are certainly willing to take on the fight against anticompetitive behaviours, against cartels, and we are willing to send a signal to the community that we are on the side of consumers and that there ought to be a fair and proper playing field. The absence of criminal sanctions for cartel behaviour was most notable in the Visy case, which related to price fixing. The cartel came to light following a request from Amcor to the Australian Competition and Consumer Commission for immunity from prosecution. Following the disclosure of the existence of the cartel, the ACCC brought an action in the Federal Court alleging that, between January 2000 and October 2004, certain officers of companies in the Visy group engaged in price fixing and market sharing with companies in the Amcor group, which was contrary to section 45 of the Trade Practices Act. On 2 November 2007 the Federal Court found that Visy, a listed Australian manufacturer of packaging, had committed 69 contraventions of the Trade Practices Act. In his judgment, Justice Heerey was critical of the cartel. He said:

Had it not been accidentally exposed, it would probably still be flourishing. It was run from the highest level in Visy … It was carefully and deliberately concealed. It was operated by men who were fully aware of its seriously unlawful nature.

I will add to that by saying that, while I have mentioned Visy here, it is certainly not the only company that has been either involved in or investigated with regard to cartel type behaviour. There are companies and organisations that feel they can operate in this manner with impunity. In terms of their actions and the way they structure their business, they feel that somehow they are not part of moral, ethical, legal or other systems that mean they should not help themselves to the till, as it were. This legislation sends them a clear signal that we do not agree, that it is not lawful and that, beyond it not being lawful, it actually attracts some huge penalties, including jail. The court fined the Visy group of companies $36 million, including separate pecuniary penalties for the former chief executive and the former general manager. It is quite a serious penalty. As I have said, this bill will go further towards making it clear that there are very serious penalties now in place to prevent that type of behaviour.

The United States, the United Kingdom, Norway, France, Germany, Israel, Taiwan and Canada already have jail terms in place for serious cartel conduct, although that does not mean they actually prevent it. One of the great tragedies is that they do not necessarily prevent it. But in a law-abiding country, where we believe in the rule of law, we must all take responsibility and do the right thing. If we do not, sometimes there are small penalties and sometimes there are very large penalties. In the case of what we are doing here, there will be very large penalties. That is the clear message of this legislation. The message I want to get out in the few words I have to say on this is that basically companies will not be able to buy their way out of behaviour they have operated in line with for some time. Certain companies need to understand that there will be a much more serious penalty than a monetary penalty—that is, going to jail and losing your freedom—so I am very supportive of this bill.

I also want to commend the minister, the Hon. Chris Bowen, Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, for taking on this area. It is probably an undesirable area to take on, in some ways. It is a tough area in which to try to ensure that the right thing happens—to make sure you provide the right regulatory framework and that at the same time you do not create an anticompetitive marketplace by bringing in rules designed specifically to prevent it in the first place. I think we are conscious of that, and we are conscious of criticism that may appear. Certainly I am conscious of some of the nuances in trying to deal with very complex issues and often structures and arrangements that are easily concealed, which people may instinctively understand and know exist but would find it almost impossible to prove in a court of law or at some reasonable level.

It is tough for us, as legislators, to strike a balance between a strong regulatory framework, penalties and making sure we prevent anticompetitive behaviour—behaviour involving robbing people for monetary gain—and creating a robust, fair and competitive environment where companies feel free to make arrangements to compete fairly and hard in terms of being the best in the sector, the best in the market or whatever they want to achieve. That includes the fluctuation of prices, being able to compete on prices and being able to set lower prices and drive competitors down. So you need to strike a balance. I am very conscious in my mind of the necessary requirements to get it right.

I understand that in this place the pendulum swings. Sometimes it swings a little bit too much either way, and it is very hard to get it spot-on in the middle. But I am confident that what we have done here today with this bill will get the pendulum very close to a position of sending strong messages about strong penalties without, at the same time, creating an environment which in itself would exacerbate any problems that currently exist or creating loopholes and regulatory advantage for others who might see some sort of advantage in the new legislation. I think that we have got the balance right, that we are on the right track and that we have sent the right signals. I applaud the minister responsible for his efforts in this area.

On a more local level, I have been an advocate of consumer rights for some time—as probably every member in this House is in some capacity. On a day-to-day basis, we deal with ordinary Australians who come to us for help. They come to us for help when laws or regulations have failed them, when business has failed them or where people who have a lot more power than them have failed them. When they come to us for help, it is frustrating—and I know I share this frustration with many in this place—that we do not have the mechanisms available to us to assist those people and get them proper redress.

Often, when people come to us with a problem—whether it is anticompetitive behaviour, whether they are a small business or an individual—they have been ripped off or robbed in some way. You know they are right. They can prove they are right. You know the company did the wrong thing, you know what the company did is completely unethical, immoral and wrong, or you know they have breached some regulation or code, but there just is not any capacity to whack them. And that is what you want to do. In the end, you want to be able to say to these people, ‘Well, you got away with it for long enough; you’re not going to get away with it anymore.’ To me, it does not matter which sector that is in—whether it is in fuel retailing or food retailing—or what the business might be. If you feel you have a cartel type capacity and the right and if you go down these paths, we will come after you. We will come after you with a very, very big stick. And that is 10 years in jail—some serious penalties—for individuals and organisations alike. I think the message ought to be clear and loud. This bill gives that message and I support it completely.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

Mr Acting Speaker, I also—

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

I am ‘Deputy Speaker’; I am not acting.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

Plenty are! Thank you, Mr Deputy Speaker. I also rise to strongly support the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 and its fellow legislation, the Federal Court of Australia Amendment (Criminal Jurisdiction) Bill 2008, which is passing through the other place. This is important legislation for all of us in the people’s chamber if we are here truly representing people’s interests. We were all elected by around 90,000 to 100,000 people; you can change the word ‘people’ to ‘consumers’. All of them are victims of theft and fraud at the higher end of business under the banner of cartel behaviour. The 150 members in this chamber should be and are sending a very strong message through this legislation that cartel behaviour is, hopefully, no more.

I strongly support this legislation not only for the impact it will have on local communities at the consumer end of the market, such as those on the mid-North Coast of New South Wales—with the theft at the checkout till that comes with cartel behaviour—but also for the many small businesses within the region I represent. It is a region in which 95 per cent of the business community is in micro small business—with fewer than five employees—without the united strength and lobbying and advocacy abilities to take on many of these issues. Therefore, it is the role of this place, and it is the role of government, to advocate and lobby and put in place good public policy that supports those many good people who are working very hard on the front line of the many small businesses, particularly in regional communities such as mine. Cartel behaviour impacts directly on them in the price they have to pay for products, which they are then passing on to consumers.

This is also important legislation from a theoretical point of view. We have heard speakers here talk about political and economic theorists such as Adam Smith. It is well known that cartel behaviour is the antithesis of the market economy. It is a reality that we live in a market economy. There is political debate flying around at the moment about various interpretations of the ideologies of the market economy we live in: whether it is a welfare capitalist state or whether it is a neoliberal state. The reality is that Australia is a market economy and, therefore, one of the greatest offences under competition laws that could take place is cartel behaviour at the top end. It has at times had me wondering why Australia does not place the same significance on cartel behaviour as other jurisdictions in the world do. I have wondered whether it is our penal background, whether it is the larrikinism of trying to beat the taxman. I am not sure why we do not en masse see this as the offence that it is against all of us. We only need to look at some of the high-profile cases of the last 18 months and then look at the social pages of last weekend and we will see people who are self-confessed in cartel behaviour enjoying the social scenes and the A-list parties in the various capital cities. It is business as usual in many cases on that front.

People should be angry—people should be filthy—that they are fundamentally getting ripped off by cartel behaviour. Good, hardworking small business operators should be angry that they are getting ripped off by cartel behaviour. I hope members use the debate about this legislation as an opportunity to educate the community—with supporting comments in newsletters or local media—that this behaviour is the antithesis of the market and a rip-off for all of us. I hope that in the future, through that, there is better identification of people who are doing the wrong thing and who are living on the profits of what is fundamentally theft.

I am very supportive of this legislation in regard to the penalties attached. I have listened closely to some of the previous speakers and have been a little surprised at the attempt to walk both sides of the argument, that there is a need to somehow strike a balance and that there is somehow an antibusiness element to this legislation. I would strongly disagree with that. This is very much a pro-business piece of legislation because it allows business to operate in the free market and to operate transparently, with accountability, through the competition chain.

There are several prongs to a good, effective regime. That is why, whilst I am full of praise that this legislation is here and it is passing through this chamber and, hopefully, it will send strong educative messages to the community and business, I also hope government does not forget the complementary prongs that go with it. Firstly, there must be a really clear definition and there must be education within the business community. This cannot just be a series of what on paper are fairly punitive but welcome laws. Secondly, I would hope the soft hand of government goes with that, and that is educating the business community about the clear definitions of cartel behaviour—price rigging, price fixing, collusion—compared to good, robust competitive behaviour, alongside the hard hand as well.

Thirdly, along with good penalties and good education within the business community—and I am asking the government to strongly consider this—is the element of effective institutions which are well equipped to detect, investigate and prosecute cartels. We now have upped the ante significantly with the passing of these two pieces of legislation to the criminal jurisdiction. The standard of proof goes up. Cases in regard to cartel behaviour are already long, complex and difficult. By its very nature it is a secretive business that is going on within the concept of collusion, so it involves hard work to actually prosecute. That is where I would ask government to strongly consider the specialisation, in regard to the concept of the equivalent of the untouchables, within the various agencies and institutions in chasing cartel behaviour.

I do think we are now at that point where, on behalf of people and small business, that specialisation within the various law enforcement agencies involved in taking this through to prosecution would be of value and would make a significant difference. As I mentioned before, we lag the world in lifting the standard of cartel behaviour. Whilst our laws sit very nicely and the penalties attached to them are very comparable with other standards in an international comparison, what is also coming through from some of that international evidence is that some agencies use the laws well and follow through to prosecution. However, there are other agencies which are not using those laws well, which do not have that strong enforcement arm and which are lax on taking these issues through to prosecution.

It raises the very obvious point: if we are going to bite the bullet on this issue, let’s back it up and let’s make these laws mean something and get some practical resolutions to the many issues that have already been talked about in this debate. All of us as local members get many complaints from people about the perception and the anecdotal evidence of cartel-like behaviour from the consumer end. There is that frustration, whether it is about dominance in the marketplace by petrol companies, supermarkets or whatever. It is anecdotal, but it is front-line consumer frustration. But now that we have set a very clear standard I hope government marries that with some good, strong law enforcement agencies backing these laws. I would hope it marries it alongside good education within the general business community as to what is and what is not cartel behaviour. If it is a genuine three-pronged attack on cartel behaviour—I hope it is not just a case of ticking a box—then more power to this place.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

In response to the comment by the honourable member for Lyne that people should be filthy about cartel behaviour, I can assure him that people are filthy about it—and he knows this—particularly those of us who are consumers, and that includes small business and the over 10,000 small businesses that I have registered in the seat of Page. It is about the protection of them, as well as the protection of them as individual consumers. I also want to respond to the member’s comment about, in effect, putting in place effective architecture to allow investigation and prosecution to proceed. I concur with some of the comments that he made about the intention of this bill and the intention as stated by the responsible minister for competition behaviour, the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen. I want to respond at the outset to his contribution. It was a very interesting and informed contribution and I thank him.

I rise in support of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. In so doing, I wish to thank the minister for two very specific things. The first is honouring the Australian Labor Party’s election commitment to introduce offences that criminalise cartel conduct. The second is, importantly, giving added protection to consumers by criminalising serious cartel conduct. I would like to make some general comments about consumers and consumerism in this debate.

The Rudd government has a commitment to ensuring that consumers are empowered in the market place; hence the advent of schemes such as Fuelwatch and GroceryWatch as well as other measures and this bill amending the Trade Practices Act. Empowering consumers requires government action and it requires it in key ways. Empowering consumers gives consumers the tools to both monitor and respond to businesses’ behaviour that is not in our individual, collective or commercial interest. Such behaviour may give us inflated prices, which is not good for the market, or rapidly rising prices and may include not passing on market fluctuations. Hence the need for monitoring schemes. Monitoring schemes are imperfect tools in an imperfect market, but they are tools that are necessary and they are one key part of what I call the armoury in the price and price-fixing wars. These schemes ensure that market distortions do not exist and give protection to consumers.

As a society, we do not fully see ourselves as consumers; hence there is sometimes a discord between what we are advocating, what is being advanced and how we see ourselves. Talking about ourselves as consumers is rather utilitarian, but we are consumers. The consumer is not a modern phenomenon but a rather ancient one. What is new—and when I say ‘new’ I do not mean new as of this week but new in a general and modern sense—are consumer protection and empowerment policies. The Rudd government has a strong commitment to those policies. This bill also brings consumer protection into contract commercial business law, which for centuries was largely left unfettered and untrammelled to operate in the market, and that does result in market distortions and anticompetitive behaviour. This bill is also about anticompetitive behaviour, some of which is already prohibited in the Trade Practices Act. That is what this bill addresses.

Some months ago I bought some wine from a local bottle shop owner—yes, I confess!—in a small town in my electorate. I shop as I move around my electorate; it is my little way of spreading a few dollars across the electorate and it is also my way of finding another way of engaging with the local small business owners—I sort of get to yarn with them. While buying the wine, the bottle shop owner told me that the franchisee of a larger bottle shop operation—and I am not going to name names here—had a discussion with him about agreeing on certain prices for certain items. That sort of behaviour could clearly fall into the anticompetitive behaviour that we are talking about. He said that he told them—and I will not repeat the exact words—to ‘shove off’ and that he was not into that sort of behaviour. He told them that he would run his business as a good local businessman. He did not want to engage in that. When we move around our electorates we could all exchange various stories like that. Such behaviour can sound rather innocuous but is actually stealing—and it is stealing in a way that also rips us off. Its intent and design is purely to cheat us, the consumers. It is wrong ethically and now, if it fits the element of the new offence that this bill incorporates into the Trade Practices Act, it is going to be wrong legally. That is the important aspect of this bill.

I will now turn to the offences, the elements, the investigatory and prosecutorial process, the defences and the consultation process of the bill. I know that the consultation process has been extensively covered, but I would like to say that it was a very effective consultation process. The consultation process went on over the last 12 months. All the relevant stakeholders were consulted and had an opportunity to comment and there was a draft exposure bill. The offence itself is as follows: ‘If a corporation makes or gives effect to a contract arrangement or understanding between competitors that contains a provision to fix prices, restricts outputs, divide or share markets or rig bids and includes the sum fault elements that apply under the criminal code of intention and knowledge or belief.’ The latter is important, and from what I have read a change from the draft exposure bill was the intent of dishonestly obtaining a benefit. This is the current burden of proof, and it puts it beyond reasonable doubt, which is really important when we are talking about criminal behaviour. That means that serious and in some cases serial offenders will be caught. I will make a general comment here about law-makers, and that is that we sometimes have a propensity to stray into wanting to import civil burdens of proof into criminal offences. That has happened before and is something that we should never do lightly. In fact, it is a practice that I eschew. It weakens a fundamental plank of our justice system that is at the root of our government system—that is, the rule of law. We as law-makers should be ever mindful of and vigilant in this.

An individual will now receive a maximum jail term of 10 years, in step with other criminal sanctions in the Trade Practices Act, and a maximum monetary sanction of $220,000. For a corporation there will be a maximum monetary sanction of $10 million or three times the value of the benefit from the cartel or, where value cannot be so determined, 10 per cent of annual turnover. This brings our jurisdiction in line with other OECD countries, our trading partners and our ally, the US.

The amending bill also introduces corresponding civil prohibitions. Importantly, though, it makes sure that double jeopardy is covered in that civil proceedings will be postponed if criminal proceedings are afoot. If the prosecution is effected, the civil proceedings will be terminated. That is a very important provision in the act. It further introduces telephone interception powers so that the cloak of secrecy—or the wink and nod approach, as I call it—over cartel criminal behaviour can be penetrated.

The Telecommunications (Interception and Access) Act 1979 will be accordingly amended. I approve of this, but want to put on record my reservation about telephone interception. This is a general reservation that cuts across all areas: commerce matters, personal matters; in effect, just all areas. I also have a general reservation about privacy across all areas. Our modern society is rather devoid of privacy in practice, with the propensity to grant telephone interception access in all matters. Sometimes we can be too quick to impugn without closer scrutiny—not here—and again, this is my general comment. I heard a contribution from one of the opposition speakers who was talking about this very issue. I know that when we look at areas like anti-terrorism they were not as quick to make sure that those protections were in place. A scrutiny of bills committee that scrutinised liberties and rights—and these are rights of a civilised society—could do a lot to ensure the rule of law and just have a general second look in these areas.

I note that the ACCC will have the power and authority to investigate and that the Commonwealth Director of Public Prosecutions will, correctly, have the power to prosecute. I also note—and I forget the terminology in the legislation—there will be something like a standard operating procedure, which I call an SOP; a document made public that will articulate the way those two sets of powers and authorities will operate. That investigative power is a big power to have and I have no doubt that the ACCC has the competence to carry that out.

I say to my honourable colleagues, the opposition, that they did sit on their hands on this bill. They failed to act to give the necessary protections to consumers. The Dawson review that was commissioned by their government in 2003, and which was chaired by the eminent Hon. Sir Daryl Dawson, recommended such changes to the criminal offence of cartels but it was left to linger. It is no use leaving situations like this to linger because they are too hard, or too complex or this and that have to be weighed up. That is what we do all the time in this chamber. This was just left there but we have picked it up and run with it. We have made sure that these protections will be put in place for consumers. It will give better effect to commercial operations, particularly to small business, and it is legislation that is long overdue. I commend this bill to the House.

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

In rising to speak to the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 I place on the record that I have always opposed converting civil offences into criminal offences. This bill is not allowing us to argue whether cartels are good or bad. Clearly, cartels are bad. They are also illegal. The question is: what do you do about the illegality? Do you think that civil penalties are sufficient or should it be turned into a criminal offence, thereby placing people in jail for up to 10 years as the bill proposes? From my point of view I can see no good argument to convert a civil offence into a criminal offence, particularly in the way this bill proposes.

When the bill was first proposed in 2005, it at least had a dishonesty clause in it that made it necessary to prove that there was a dishonest intent. That has been removed from this bill and there is really no good reason given for it except, I think, that this government does not really trust juries. You could say that the main criticism of the dishonesty provision is shown by this quote from the Scrutiny of Bills Committee Alert Digest:

The main criticism of the ‘dishonesty’ test is that it requires a jury to make a moral assessment by putting themselves in the position of a hypothetical ordinary person and assessing whether, according to the standards of ordinary people, the relevant conduct was dishonest. In addition, the test requires the jury to assess whether the defendant knew that his or her acts were dishonest according to the standards of ordinary people. This moral assessment has the potential to result in inconsistent outcomes.

Dare I say it: in the criminal jurisdiction we get so-called inconsistent outcomes every day of the week. Anybody who listens to talkback radio will hear precisely that, when they will hear what they think are similar circumstances, be it for murder, be it for robbery, be it for any criminal offence that is seemingly inconsistent in its outcome. So to dismiss the dishonesty test on that basis to me is fallacious.

I would also like to say that I am not interested in hearing these quotes from Mr Samuel, which I am hearing frequently, as to why this criminal change should occur. Since he has taken on the job of head of the ACCC, Mr Samuel, I think, has shown that he has no interest at all in the needs of small business and has been obsessed with criminally prosecuting those whom he personally wishes to punish. This has been amply demonstrated by the way criminal proceedings have been engineered against Mr Richard Pratt and by the way he defended the current government’s pathetic Fuelwatch scheme. He has no concern for small business issues. I will go on to those, particularly third line forcing and how decisions impact on individuals—in fact, there is a crusade to see this become a criminal offence.

The bill decides that we have to have a distinction between types of cartels. We are going to have hardcore cartel conduct and we are still going to have civil offences. The bill does not define what hardcore cartel conduct is, but the explanatory memorandum refers to the OECD definition, which says:

… an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.

Pretty broad, really. It could capture quite a lot of arrangements that people might enter into. What about a group of doctors who are operating, say, four separate practices? They decide that they want to assist one another by having someone on duty all the time so that somebody in need of medical attention can actually get medical attention and the other doctors can have a rest. But they might agree that they will all charge the same price whether they are on or off. That is cartel-like behaviour. They too could be subject to being in jail for up to 10 years, if it is decided that that meets the definition of hardcore cartel-like behaviour. Guess who makes the decision? The ACCC. There is a memorandum of understanding between the ACCC and the DPP, and it is the ACCC who will decide and cull out which cases it thinks might be the right ones to prosecute and will then go to the DPP. That is not my idea of the way criminal cases should be decided upon for prosecution.

A lot of comparisons have been made between cartel-like behaviour and theft. But there is no ACCC to decide if someone commits an act of theft. There is no third party over here that is going to make the decision whether or not it is criminal behaviour. It is something that is investigated by police and if there is a case made out it goes to the DPP, and the DPP decides whether the prosecution will take place or not. So we are not really comparing apples with apples; we are comparing apples with oranges.

Looking at the Bills Digest, it has a nice summary of ‘A quick guide to the criminal cartel provisions’. It says:

1. The criminal cartel provisions only relate to conduct which is described as price fixing; restricting outputs in the production or supply chain; allocating customers, suppliers or territories or bid-rigging.

2. Any other anti-competitive conduct which is already regulated by the TPA is not intended to be caught by the new provisions.

3. Even if a provision of a CAU—

contract arrangement or understanding—

relates to the above conduct it will not be a ‘cartel provision’ unless it also satisfies the ‘purpose/effect condition’ or the ‘purpose condition’ and the ‘competition condition’.

For a civil penalty, it says:

1. The civil penalty provisions only relate to conduct which is described as price fixing; restricting outputs in the production or supply chain; allocating customers, suppliers or territories or bid-rigging.

2. Any other anti-competitive conduct which is already regulated by the TPA is not intended to be caught by the new provisions.

And on it goes:

4. There are two civil offences—the making of a CAU which contains a cartel provision and the giving effect to a cartel provision contained in a CAU.

Under the existing law, you can actually involve yourself in some price-fixing arrangements if you are in a joint venture, and that is a legitimate defence. But under these new provisions there will not be any such defence, but there will be the provision of the ACCC to authorise joint venturers to enter into collusive type arrangements. More power to the ACCC. The ACCC is becoming a very powerful body and we are investing these powers allegedly in one person—unelected, appointed by a government of the day. There is not much recourse to judge his decisions to see whether they are good or bad.

Another anticompetitive practice that is illegal is third line forcing. The Trade Practices Act says so. But you can engage in third line forcing if you get permission from the ACCC, under an exemption in the Trade Practices Act, to do so. Coles and Woolworths both have exemptions from the third line forcing provisions of the Trade Practices Act to have shopper dockets, and we heard from a contributor to this debate this morning that they now account for 44 per cent of all petrol sales in this country. They are technically in breach of the Trade Practices Act but they are given an exemption so that they can engage in that behaviour. My guess is that when the original exemption was granted nobody really saw the monster that it could grow into, with the independents being forced out of business.

As you and I and everybody else know, Madam Deputy Speaker Moylan, a subject of constant discussion is petrol prices and whether there is any collusive behaviour going on between the oil companies. We get report after report that says no, that could not be the case. People continually ask questions about Coles and Woolworths and their impact on the price of foodstuffs. We always get a report that says, ‘No, this is just fine,’ but when you do comparisons between the way food prices have risen in this country and the way they have risen in other countries of like nature you find that ours are way out of kilter and far higher.

So it is a very grey area; yet we have this determination to make it a criminal offence—to put somebody in jail, which will somehow mean that we will have a more competitive market. I, quite frankly, do not believe that. I think that financial penalties for this behaviour can be a quite adequate remedy. If we consider that they are not high enough, make them higher; make them such an imposition that they cannot be considered—in the words of some who want to see this become a criminal act rather than remain a civil offence with only a financial penalty paid—just ‘a cost of doing business’. How cynical is that? If the penalty is not adequate and can be judged a cost of doing business then increase it so that it becomes a cost that cannot be borne.

I have heard many members in this debate say, ‘They’ve got it in other countries, so we ought to have it here.’ I have never been impressed by that argument. We should always consider what is good for Australia, what will make our markets better. Every day we have people going out and buying engagement rings for their fiancees and thinking that the value of that diamond ring will be something they can count on. Why is that so? It is because there is a cartel in diamonds operating. Do we kick up a fuss about that on a regular basis? No. OPEC is a cartel but it is far too big for us to take on, so we just have to live with it. Within our own jurisdiction, dealing with our own companies, we are going to turn business people today into criminals tomorrow—when the big players in cartels simply are too big for us to touch.

I oppose this legislation because I would always oppose such legislation, whether it were to be introduced by us or whether it were to be introduced by this government. But I will say this: at least the legislation that was to be introduced back in 2005, when we were in government, had a dishonesty test. This government has chosen to remove it. There is only one reason that somebody would choose to remove it, and that is that they think it will be easier to get a conviction—that you will not have to trust in the good sense of a jury to make a decision as to whether there was a dishonest intent: ‘No, we cannot trust the jury; we might not get a conviction. So we had better remove it.’

I think that today, when this bill passes the House, will be a sad day. I do not think the bill will enhance competition in the market. I do not think it will send to people who would engage in cartel-like behaviour any more serious a message than they have now. But I do think that we are placing an enormous amount of trust in the ability of the ACCC and one man to make decisions, because although you might say the ACCC is broader than the person who heads it it is quite clear, if you look at it empirically, he is the one who has much sway. I think that to place all this on someone without any proper scrutiny as to whether the decisions he is making are good or bad makes for bad law.

Brett Raguse (Forde, Australian Labor Party) Share this | Link to this | Hansard source

It is interesting to hear the views of the member for Mackellar. I understand her concerns but I suggest that some of her accusations are unfounded. A number of the members this morning, including the member for Barker and the member for Fadden, talked about this debate as being something to do with the government’s economic stimulus package. It is not. The member for Fadden in fact tried to make it a debate about neoliberalism. It is not. The member for Mackellar seems to think there is some conspiracy with the ACCC. It is not about that at all.

In fact, this debate is about behaviour that we have known about for a long time and that in business circles and the community has always been of concern. The member for Mackellar herself suggested that there are a range of activities that should be outlawed. With regard to the issue of whether there should be civil or criminal penalties, in the debate today I will talk about some of the penalties that exist for individuals who knowingly—though perhaps unwillingly sometimes—make arrangements to take money, remembering that many representatives of large companies are on some sort of bonus payment system but that unlawfully getting money from other people is stealing. When bank robbers steal money they face criminal charges; it should be likewise for what we are talking about here today.

Just to bring us back to the amendments as they stand, the now Rudd government committed to introducing legislation that would criminalise cartels. The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 will make changes to the Trade Practices Act 1974 and will operate to deter cartel conduct by widening the range of regulatory responses available. The bill will also bring Australia into line with our major trading partners such as the United States and the United Kingdom. Much of this bill has its origins in the 2003 review of the competition provisions of the Trade Practices Act that was chaired by Sir Daryl Dawson. The review acknowledged the growing international experience that showed that having criminal sanctions in place is an effective deterrent against serious cartel conduct. The Dawson review also recommended the introduction of penalties.

A cartel is an arrangement or understanding between parties that restricts dealings and competition. There does not need to be a formal written agreement between the competitors—there rarely is—there only needs to be an understanding. In some cases, as the member for Page recently said, it can be no more than a wink and a nod. Cartels undermine the forces of the market economy and divide markets, rig tender bids, and deprive other businesses and essentially consumers. Companies that collude in fixing prices are robbing business. We are in a free market and cartels do not subscribe to the ethos of business and competitive markets.

Competition is essential in ensuring that consumers can get the best product or service for the lowest possible price. Competition also enhances our productivity, which in turn enhances our standard of living. At the Cracking Cartels: International and Australian Developments convention held in November 2004, Graeme Samuel, Chairman of Australian Competition and Consumer Commission, the ACCC, described cartels as a cancer on our economy and as insidious and damaging behaviour. It is generally accepted that cartels in Australia cost businesses, taxpayers and consumers billions of dollars in higher prices. Cartels also have the effect of constraining innovation through their support of inefficient production processes.

A number of cartels have been exposed in Australia in markets generating billions of dollars each year. If you consider this information in light of recent international studies which have found that the average life of a cartel is about six years, a cartel increases the prices of affected goods or services by an average of 10 per cent. Essentially a cartel is an agreement not to compete. Cartels only benefit those involved in the cartel. This affects consumers, businesses and the economy at a time when we least need it. We are all affected by cartels through a lack of freedom to choose and the increasing prices that ensue.

I am proud to say that the Rudd government has taken a strong stance on cartels and will not stand for them. The government and the ACCC need these laws in place to tackle cartels, a serious crime. But we also need the right prevention strategy in place. The minister in fact highlighted that cartels have been an issue for some time. The previous government committed to introducing this legislation but later reneged on this essential reform. While the rest of the world re-evaluated and updated their laws against anticompetitive behaviour the former government did not. Hearing the speech of the member for Mackellar, I maybe understand some of the reasoning behind that—but it was unfounded and untrue. The Rudd government is now delivering. The ACCC gave 15 separate warnings to the previous government, and unfortunately it was ignored. The ACCC gave warnings about the need for reform, and in particular the need for jail terms to be introduced for company executives who were involved in cartel conduct. I would like to commend the Minister for Competition Policy and Consumer Affairs for bringing forward this important legislation. I would also like to commend the minister for his extensive consultation process with stakeholders.

The key amendments in this bill are best explained in six categories. Firstly, the cartel provisions. The bill provides a definition of the term ‘cartel provision’ that will apply under the new criminal and civil prohibitions. In summary, a provision of contract arrangement or understanding can be a cartel provision if it concerns price-fixing, sharing or allocating a customer base, restricting supply or rigging a tender process. If at least two parties are involved or are likely to be in competition with each other then there may be a breach of the new provisions. Secondly, there are offences and civil penalties. The bill provides that a corporation commits an indictable offence if it makes or gives effect to an agreement that contains a cartel provision. The prosecution will be required to prove that the corporation knew or believed that the agreement contained a cartel provision. Individuals can be liable for a contravention of the new offence in one of two ways: they can be an accessory to the committing of an offence under the accessorial liability framework in the Trade Practices Act and they can also be held directly liable for the offences as provided for in the schedule to this act. The schedule offences mirror those in the act and are applied as a law of each state and territory through application legislation in those jurisdictions. The ACCC will be responsible for investigating suspected breaches of criminal cartel offences while the Commonwealth Director of Public Prosecutions will be responsible for their prosecution. A memorandum of understanding between the ACCC and the DPP will detail the responsibilities of each agency in criminal investigation and prosecution of serious cartel conduct cases.

Thirdly, the amendments detail penalties—jail terms, fines and pecuniary penalties. The maximum penalties that will apply for a breach of the government’s provision will be substantial. This reflects the government’s view of the serious harm caused to Australian consumers, businesses and markets by hardcore cartel conduct. Individuals face a maximum jail term on conviction of 10 years and a fine of 2,000 penalty points—currently $220,000. For corporations the maximum fine will be the greater of $10 million or three times the value of the benefit obtained as a result of committing the offence. Where that benefit cannot be determined, the maximum fine will be 10 per cent of the corporation’s annual turnover. A maximum 10-year prison sentence already exists for directors who wilfully defraud or deceive a body corporate or for directors who fraudulently appropriate the property of a body corporate. The proposed 10-year jail term will put Australia on par with the United States as having the world’s longest jail terms for this serious crime.

Under the civil penalty provisions there will be a maximum $500,000 penalty for individuals and a penalty consistent with the maximum criminal fine for corporations. Fourthly, the amendments list exceptions. The Trade Practices Act currently provides a number of exceptions and defences to the prohibitions against anticompetitive behaviour. I think the member for Mackellar should probably have read about the exceptions, because they certainly cover a number of the cases that she spoke about and had some concerns about.

Similarly, the bill provides for specific exceptions to new prohibitions and they fall into six categories: conduct notified under the collective bargaining regime in the act; contracts containing cartel provisions subject to the notification provisions or a grant of authorisation; contract arrangements or understandings between related bodies corporate; joint ventures contained in contracts; anti-overlap exceptions; and the price of goods or services collectively acquired and the joint advertising of the price for resupply. The exceptions are intended to ensure that the prohibitions do not prevent legitimate business activities that are beneficial to the economy or in the public interest.

Fifthly, there is enforcement. One issue the government consulted widely on was the application of telecommunications interception regimes to the new offences. Cartels pose particular problems for enforcement agencies because they often involve multiple parties operating in secret with limited documentary evidence and enhanced reliance on oral communication. In these circumstances the discovery and proof of a cartel can be difficult, with regulators often taking on proceedings without the benefit of direct evidence of cartel conduct. While we say that, I do understand the concerns of the member for Page about this type of monitoring. Essentially it is also the notion of a wink and a nod, and somewhere along the line interception to understand what conversations are taking place can be of some value.

After consideration of the issues involved, the government decided that applying the telecommunications interception regime was appropriate. In addition to the benefits this will provide for the detection and prosecution of illegal cartel conduct; the use of telecommunications interception powers can be a means of finding evidence of the directing minds behind corporate criminal behaviour. Further, the bill makes amendments to ensure that the search, seizure and information-gathering powers of the Trade Practices Act are better aligned with equivalent provisions in the Crimes Act.

Sixthly, there are the additional measures. Other arrangements supplement the cartel conduct measures contained in this bill. These include giving the Federal Court jurisdiction, together with the state and territory Supreme Courts, to deal with the new offences. This will be the first time the Federal Court has been given indictable criminal jurisdiction, recognising the expertise the Federal Court has developed in dealing with cartel conduct as a result of hearing civil cases under the existing provisions of the Trade Practices Act. The Director of Public Prosecutions and the ACCC will enter into a formal, publicly available memorandum of understanding to establish procedures for the investigation of a cartel offence and the circumstances in which the ACCC will refer the case to the DPP for prosecution.

If we take the issues surrounding cartel activity back to our own electorates and those people that we represent, I have spoken many times in this chamber about the diverse nature of the electorate of Forde but in this case I refer to the small business operators, many thousands of them who make up substantially the electorate of Forde. These are building contractors, retailers, service industry providers, who are all hurt by this sort of cartel activity that certainly puts an unnecessary burden on the way that they run their business. The nature of cartel activity means that many people do not know that it is actually occurring. Quite often we all get suspicious about certain price regimes and about how a certain type of marketing occurs. It is terrible for small business.

I should say that the opposition have always suggested that they are the party of business. In this case we on the government side support small business, as we do all business. This is an important piece of legislation simply because people who are in that vulnerable situation can be protected. The legislation proves that the Labor government will protect both small business and consumers, and that is why it is so important that we proceed with haste with this particular bill.

When we talk about productivity measures across industry, different governments at different times have imposed different legislation or processes on small business and the business sector, whether it is about increasing productivity, efficient business practice, structural adjustment or labour market reforms. When it comes to cartels, it is insidious because no-one follows the rules. It is very much about people making their own deals to the benefit of individuals. I make the point that there are a large number of companies who have been caught up in this type of activity where their representatives, without naming those major companies, have in recent times had certain convictions. Reputation affects everyone. It affects the customers and also executives and workers who work within certain companies. I should mention one notable case in Queensland that took almost 10 years to try and convict. It was to do with certain cartel activity amongst concrete providers in some dealings between 1989 and 1994, five years of activity that essentially fixed prices on concrete being provided to public works in Queensland. It was a major case with a lot of publicity and it took 10 years to get to a conviction, where the outcome was penalties of over $20 million shared between three major providers of concrete.

In South-East Queensland and certainly in my electorate this sort of activity does take away local business. Those contracts to government at the time were so insidious in the way that they had been arranged, involving public investment in infrastructure in Queensland between 1989 and 1994, and a lot of money went into cartel activities. The proof was very difficult. The evidence to put this into court proved that there were over 50 meetings. The individuals involved knew that this was cartel activity but they very much thumbed their noses at the authorities because they did not believe that they would be caught. Under our legislation, these sorts of convictions can occur very quickly. We can gather the information more readily and there are specific subsets now that will prove that the activities are illegal and we can take those to trial.

While the particular case in Queensland was successfully tried, there are very few considering the amount of cartel activity that we all suspect is occurring. I again remind the member for Mackellar that it comes to the point where the criminal component of this particular legislation is essential because we have not been able to convict those individuals who actually sit behind and drive this sort of activity, those who bring into disrepute not only the companies they work for but also other workers within those organisations. I remind the member for Mackellar that if an executive in a company makes a deal with an executive in another company and those people are on bonus payments or benefits, essentially they are stealing money; there is no other way to describe it. So I think the Criminal Code plays a part in how we deal with this sort of activity.

In my concluding remarks, I say that the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 honours an election commitment by what is now the Rudd government. Cartel conduct is theft and previously has not been treated as a severe crime. Adding a jail term for committing a cartel offence sends a clear message: commit the crime and do the time. This amendment is long overdue and also works on a prevention strategy with the ACCC and the Commonwealth DPP. At the end of the day, this is about protecting consumers, particularly in our current economic situation. It is important to provide and stimulate competition. For these reasons, I commend the bill to the House.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

I rise to speak on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. It never ceases to amaze me how facile and superficial the approach in this place is on issue after issue. There is no depth of understanding. There is no effort made to even come remotely close to the situation that exists. People have been watching too much television. They want to run around all the time and find some bloke with his hands in the cookie jar. That is not the way it works. The way it works is that, if you own 85 per cent of the marketplace, you can do what you like. There is a lovely name for it. It is not called ‘collusion’; it is called ‘conscious parallelism’. If Woolworths know that Coles are charging 293c a dozen for eggs, they would be bloody mugs if they charged 291c a dozen for eggs, because that might just touch off a bit of a price war, mightn’t it?

One of my relatives owned a very big supermarket, and he said: ‘They never compete against us on price, but their lady comes down every morning and checks out our prices. She just walks in with a notebook and jots down all our prices. So long as we are not being naughty, if they want a price war, of course they’ll blow us clean out of the water, but they don’t work that way; it doesn’t suit them to work that way. They know that in the end we will go under and they will prosper.’ I do not like using people’s names without their permission, but in the particular town to which I am referring they did eventually go under and were bought out, luckily for them, by Coles. So now we have Woolworths, Coles and nobody else, whereas 15 years ago we had three locally owned supermarkets.

What this means in a town the size of, for example, my home town of Charters Towers is that when we wanted a professional rugby league player I took one block, another person took another block and a third person took another block, and we would come back with enough money to pay the salary for a rugby league player for that year, which was about $50,000. We would have no trouble in raising that. If we did that now in Charters Towers, we would not be able to raise $2,000. None of those businesses are left. They have all gone. The business all resides in the Woolworths and Coles that sit in Charters Towers.

Successive governments are responsible. I am not blaming the current government—they have only been there for 12 months—but the Labor government of Mr Keating have got plenty to answer for. He was the architect of economic rationalism. He was the architect, founder and father of it all. Let us have a quick look at his handiwork—and, I must say, the last government continued his work magnificently well. The story starts in 1991, when Woolworths and Coles had 50.5 per cent of the Australian market. That is all they had. At that point in time they were not powerful enough to take the government on. We can say that it will be a pretty courageous government that will take them on now.

There are four faces up on Mount Rushmore. There are George Washington, Thomas Jefferson and Abraham Lincoln, of course. But the fourth one was not one of the founding fathers, nor did he abolish slavery and keep together the United States. No. What was he up there for? I will tell you what he was up there for: because he took on Rockefeller. He blasted Standard Oil of New Jersey into 23 separate companies. The man had most extraordinary courage, tenacity and belief in morality. He had made his name as a crime fighter in New York. He was Theodore Roosevelt. Amongst his many other attributes, he was one of the few people in history to stand up to the big corporations.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

He was a trust buster.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

It was called trust-busting legislation, and it broke Standard Oil of New Jersey up into 23 companies. Fifteen of those companies were still amongst the top 20 companies in the world in size; that will give you some idea of the dominance.

But in Australia this place had an inquiry. The ALP were on that inquiry; it was obviously dominated by the Liberal Party, who were in government then. The Democrats and, of course, the National Party were on that inquiry. Do you know what the inquiry came up with? It was that there was a bit of a problem. I do not think anyone will question what I am saying here. Fair market or market failure? is the name of the report, often referred to as the Baird report. It says, ‘There is a bit of a problem here and we can address it by doing certain things.’ Most of them involved hitting Woolworths and Coles over the wrists with a piece of wet lettuce. They were laughable.

They cannot be excused, because that very interesting document lays out the situation in other countries. I have just come in from the floods, so I have not had time to refresh my memory on this, but, if my memory serves me correctly, the nearest country to us in centrality and concentration of ownership was the United Kingdom. Three companies there had 25 per cent of the market. At the time this report was released, two companies had 68 per cent of the market in Australia. In no other country did the big two have even 15 per cent of the market, even in America, with Wal-Mart. So there was no excuse for those people. Their names will be remembered in the history of this nation with contempt, and so will the names of every person who served in this parliament then. Unfortunately, one of them happened to be me, but at least I will go down on the record as saying that this is wrong. There is no small business left in this country. They want everything. They have taken the florists. They have taken the butchers’ shops. They are after the newsagencies, and they have half got the newsagencies. They are after the chemists’ shops. There is nothing left. There is no room for anybody else in this society.

We have the hypocrisy of the people sitting on the opposition benches, coming in here over the last 12 years and preaching about how they look after small business. They presided over the death of small business in this country. Much worse still—and the chickens are coming home to roost now—they presided over the death of the farmers in this country. Whilst we can say that the supreme architect of all of this was Mr Keating, Mr Costello was his child—in every philosophical sense of the word—and it would be a disgrace if he were brought back into this place with his reputation.

But let me be very, very specific. In 1992, before the deregulation of the egg industry, consumers paid 185c a dozen for eggs. By 2002, the price had risen to 293c a dozen. Does that speak of a free market system? I do not think so. Whilst the price for consumers had gone up nearly 100 per cent, the price to the farmers did not go up at all—it actually went down. There are those in this place who would say, ‘CPI rose in that period.’ Well, it did not rise for the poor farmers; it went down for them. So the people in the middle—and I am not saying that Woolworths and Coles got all of it—picked up an extra $300 million a year. People ask, ‘Where’s all this coming from?’ And I say, ‘Follow the money trail; that will tell you where it came from.’

They deregulated sugar. They deregulated us. In 1994-96, before the deregulation, consumers paid $201 a tonne. After deregulation, consumers paid $232 a tonne in 2001-02. By the way, these are average figures and I am not cherry-picking dates. These are average figures for a two- or three-year period. Did the price to the farmers go up 20 per cent? No, it dropped from $498 a tonne down to $279 a tonne. So the price to the farmers dropped in half, and another $350 million a year was picked up by Mr Piggy-in-the-Middle—and ‘piggy’ is probably the right word to use.

Now let me come to milk. The last speaker praised Mr Samuel. Well, well, well, praise for Mr Samuel. There would not be a small business man or a farmer in this country who would not spit on Mr Samuel. If I use strong language, I always say that the good Lord took to the moneychangers in the temple with a stick. These would make the moneychangers in the temple look like kindergarten teachers. But I will come back to milk. Prior to deregulation, the farmers got 53c a litre in New South Wales and Queensland. In Victoria, it happened over a longer period of time; it was a much more complex happening—and it was worse in Western Australia. So for New South Wales and Queensland—which is more than half of the Australian market—the price to the farmers dropped from 53c a litre down to 34c a litre. One of the reasons that the honourable member sitting beside me here secured 65 per cent of the votes is that he had the guts to stand up and say, ‘Mr National Party, you have betrayed us and you have betrayed my industry and my people.’ Whilst the price to the farmer dropped from 53c down to 34c, at the same time the price to the consumer rose 41c—from 115.5c a litre to 156.5c a litre. In the dairy industry, that was a figure of over $1,000 million a year.

So piggy-in-the-middle, with the great deregulation that was going to help the consumers of Australia, picked up nearly $2,000 million a year. I cannot remember what the CEO got as a bonus, because the shares went up as they were making all this extra money. There is not a decent person in this country whose nostrils are not violated by the smell that comes from what is taking place here. And we have this piece of rubbish that we are dealing with here today. If you think that you are going to find anyone with a smoking gun, good luck to you, son, but I am sure it will not be Mr ACCC Samuel that will be looking for any smoking gun. He will be out there putting the smoke up so we cannot find the gun.

In fairness to the new government, one of the first things the Prime Minister did was take them on. It was pretty courageous—he took them on before the election. I want to praise him for that. It is the first time that I have heard anyone in this place take a stick to Woolworths and Coles. They took a big stick back to him—and good on him for standing his ground. We had an inquiry but, unfortunately, it was carried out by the ACCC. What a joke! A staffer of mine and I spent a week of our lives preparing, but I knew—in fact, I put out a press release about it—it was an absolute waste of time. What a farce it was! Mr Samuel came out and told us that there was no problem with the milk deregulation. I have just given you the figures—$1,000 million a year of extra profit went into the pockets of two or three people. And he says that there is no problem! But that is a story for another day.

When the report came out and said there was no problem, I went down to the local supermarket. The nearest one to us here at Parliament House is a Coles supermarket, and the price for eggs was $4.85 a dozen. The farmer got $1.40. I have been into egg plants. It does not cost a lot of money to transport and sell eggs. They are put in a little box and then put on the shelf. There is no cost there in transportation and storage, but there is a mark-up of about 300 per cent. We worked in clothing, and sometimes my aunty, who I love very much, would put the price up 70 per cent. I would say, ‘When daddy comes home he will not be pleased!’ But she would say, ‘Oh, Bobby—these are fashion goods.’ We would argue and fight about a 70 per cent mark-up. But the mark-up in the supermarket was not on fashionable clothing. This was a mark-up on foodstuffs—of 270 per cent! That is nearly a 300 per cent mark-up—and we are sitting here talking about ‘finding a smoking gun’. There is a nuclear explosion taking place out there; you do not need to go looking for a smoking gun. So, on eggs, there is nearly a 300 per cent difference. On potatoes, the farmers get 62c and the potatoes sell for $2.46. That is 400 per cent higher, so, again, a 300 per cent margin.

Here I must pay tribute to the Sunrise program and David Koch because he interviewed me, with all these figures, and then he interviewed Mr Samuel. Mr Samuel said, ‘You don’t understand that it is a very costly transfer from the farm gate to the shelves,’ and Kochie focused the camera on a bunch of potatoes! I mean, how much does it cost to take a bunch of potatoes—a lot of them grown only a couple of hundred kilometres from Sydney—down to Sydney and put them on the shelves? Potatoes do not go bad; they are not a perishable commodity. But, for anyone who watched it, the Australian people owe a great debt of gratitude to Mr Koch and the program because you could not have watched it without laughing. Mr Samuel just seemed to keep making a bigger and bigger fool of himself. He kept saying, ‘I am not a spokesman for Woolworths and Coles, you know.’ And, every time he said it, Shakespeare’s words seemed to leap out on the screen: methinks he protests too much!

With sugar, the farmers and the processors combined get 39c—about 32c goes to the farmers and about 7c to the processors—yet the price on the shelves is $1.35. Need I tell you that is a 300 per cent mark-up? With milk, it is 65c—51c to the farmer and about 5c for packaging—and the price on the shelves is $1.99. Again, that is 300 per cent higher.

In the fashion trade, in clothing stores, there is a reason for such a mark-up: after a year you have to get everything off the shelves because it is all out of fashion. But 40 or 50 per cent were the sorts of margins that we were working with, so one nearly dies of shock when one comes to the margins that one finds here. One just has to recoil in shock.

I did not cherry-pick those items. I also had bread and steak. If you think about it, they are six commodities that every Australian would buy. They are also the major items in the basket of goods which is the CPI. There are 24 items in the CPI; those are the six major ones. I could not get the figures on the beef and bread, for reasons I will not bore the House with—it is much too complicated. But this is very interesting: three of those items are under statutory marketing arrangements or ‘orderly marketing’, if you like. ‘Orderly’ is a good word for it because in North Queensland, where a million Australians live, we send half of our milk down to Brisbane and half the milk that we consume is brought up from Brisbane! If that is not madness, I do not know what is. But that is the way that it is. So three of those items were under orderly statutory marketing arrangements. When they were under orderly marketing arrangements, the mark-up was not between 200 per cent and 300 per cent; the mark-up averaged 80 per cent. When people sat down and said, ‘What is a fair thing for the retailer to charge?’— (Time expired)

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I have just listened to the member for Kennedy and, whilst I have to say that I agree with much of what he said—perhaps not all—I am not sure whether he supports the bill or not. But I rise to speak in support of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. This bill establishes criminal penalties for serious cartel conduct, with maximum criminal penalties for individuals of a 10-year jail term and/or a fine of $220,000. For corporations, the penalties will be fines mirroring the existing maximum pecuniary penalties for breaches of the civil penalty provision—that being the greater of $10 million, or three times the benefit obtained if this can be determined or, otherwise, 10 per cent of annual turnover.

Criminalisation of serious cartel conduct, along with other provisions in this bill, brings Australia into line with a number of other countries in curbing cartel behaviour. This legislation is long overdue and comes more than 10 years after the Organisation for Economic Cooperation and Development initiated an anticartel program. Whilst serious cartel conduct is already prohibited under existing provisions of the Trade Practices Act, criminal sanctions do not apply, despite the previous government having had nine years since the 1998 OECD anticartel program was initiated. I noticed earlier in the debate that both the member for Isaacs and the member for Blair made this point very eloquently.

Criminalising serious cartel conduct is an important deterrent in such actions. It is clear that the previous government had absolutely no intention to ever introduce such legislation, even though they went through the charade of having the Trade Practices Act review committee, chaired by Sir Daryl Dawson, conduct a review of the competition provisions of the Trade Practices Act.

That review, known as the Dawson report, was released in April 2003 and recommended, amongst other things, that criminal sanctions should be imposed for serious cartel behaviour. The responsible minister at the time was the member for Higgins, who, despite announcing on 2 February 2005 that the Trade Practices Act would be amended to include criminal penalties for serious cartel conduct, never followed through with his announcement. He was obviously overridden by the Prime Minister of the day. It is clear from listening to a number of opposition speakers on this matter that there would have been considerable opposition to the introduction of criminal penalties by other members of the previous government. So I am not surprised that the member for Higgins was never able to get the legislation up in this parliament. In fact, he never even got to the point of introducing it to parliament.

Cartel conduct transcends state and national borders. Globalisation and the dominance of powerful corporations and transnationals have made market manipulation much easier but far more difficult to prosecute. I note that the previous chairperson of the ACCC, Professor Allan Fels, made comments about that in publications that he put out. When markets are manipulated by powerful players, consumers are ripped off and less influential business competitors are often squeezed out of the market. In turn, that leads to an even greater dominance of the market by the larger entities, and ultimately greater consumer exploitation occurs, so much so that collusion can then occur without a word ever even being spoken, with dominant market players often having an unwritten understanding to not undercut each other. The member for Forde referred to that kind of behaviour as sometimes just a wink and a nod. He is absolutely right.

These are very difficult allegations to prove. Even with the new legislation, it will be very difficult to do so. I particularly therefore welcome the new provisions in the bill relating to the protection of whistleblowers and the ability to carry out phone tapping. It is highly likely that the exposure and successful prosecution of criminal cartel conduct will be reliant on one or both of these two provisions.

I also note that the government took on board concerns about the ‘dishonesty’ test in the draft legislation and has amended the bill accordingly. In view of the fact that many of the dominant market players are multinational companies, I also welcome the application of the Extradition Act to serious cartel conduct matters. There will no doubt be occasions on which extradition proceedings will be instigated.

Regrettably one of the key frustrations relating to this legislation is that, given the multinational nature of industry and business in Australia, serious cartel conduct may well result from activities in countries which either do not have criminal cartel conduct legislation in place or in which in any case it would be impossible for Australia to launch successful prosecutions.

The OECD definition of hardcore cartel conduct is:

… an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids … establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce …

This brings into focus many activities which will be the subject of ACCC scrutiny.

In recent years the major supermarket chains—and I note the member for Kennedy made a number of points about the major supermarket chains—the large oil companies and the major banks have all been the subject of considerable public disquiet and government scrutiny over their respective business practices. There is, however, as much likelihood that serious cartel conduct is occurring across many other business sectors and going unnoticed. There are so many examples of goods or services for which the supply chain is limited, where the prices charged are excessive and where collusion is highly likely.

I noted with interest that the Australian Competition and Consumer Commission, in the report of its inquiry into the price of unleaded petrol, proposed amendments to section 45 of the Trade Practices Act so as to clarify the interpretation of the term ‘understanding’. The ACCC expressed concerns that, over time, court decisions had narrowed the conduct that is caught by the term ‘understanding’, used in section 45 of the Trade Practices Act. The ACCC noted that, in many investigations, it will not have direct evidence of the making of an arrangement or understanding and must ask the court to infer the existence of an agreement from the factual circumstances surrounding it. I welcome the release, on 8 January 2009 by the Minister for Competition Policy and Consumer Affairs, of a discussion paper calling for submissions on the meaning and proof of the term ‘understanding’ in the Trade Practices Act. The review of the term ‘understanding’ complements this bill.

With respect to many essential goods and services, there is no price competition but only marketing competition. For consumers, choices are all too often made no longer on price differentiation but rather on marketing differentiation. In many other cases, there is no choice at all because there is only one supplier of the product because an arrangement is in place. The practice of having sole distribution rights for goods and services also raises questions about fairness in the marketplace.

Whatever form it takes, whatever goods or services are provided, abuse of market power is nothing less than theft and greed, with billions of dollars each year being ripped off from consumers around the world. Regrettably, some of the most obvious examples of cartel behaviour are beyond the reach of this legislation. The Organisation of the Petroleum Exporting Countries, otherwise known as OPEC, openly and unashamedly colludes to set oil prices and control the supply of crude oil. It is my understanding that the recent increase in the price of LPG has nothing to do with production costs or wholesale or retail margins but rather is to do with the oil producers bumping up LPG prices in order to push up crude oil prices, which, as we all know, have significantly fallen in recent months.

As a country that produces substantial quantities of oil and LPG, Australia needs to extricate itself from the Singapore Mogas prices and the Saudi Aramco price-selling regimes. But serious hardcore cartel behaviour is by no means confined to the oil industry. Over the years, investigations here in Australia by the ACCC and by its counterparts overseas have exposed serious market manipulation in the freight industry, the airline industry, building products, the pharmaceutical industry, the food industry, the agricultural industry, power generation and manufacturing—and there are probably others. This is only the tip of the iceberg. How many other sectors, including many of the professional service providers, collude through their legitimate professional or industry associations to set their fees and charges and to control entry into their profession? To quote Professor Allan Fels:

Sadly, the gains of cartel behaviour are so large and the likelihood of detention so small, some companies will still risk their hands—and their reputations and, perhaps, their livelihoods.

Given that since the OECD report of 1998 only 15 countries have criminalised serious cartel conduct, and of those only 11 countries apply a prison term, one can only speculate on the level of influence global corporations have on government policy. I would prefer to believe that the reluctance by other governments to act is because of the great difficulty in successfully prosecuting serious cartel conduct.

This legislation is another important step in stamping out serious cartel conduct and delivers on another Rudd government election commitment. It complements other amendments to the Trade Practices Act relating to the misuse of market power, unconscionable conduct and clarity in pricing. I also note that this bill has been the subject of considerable public consultation and that many constructive submissions were received from the legal, business and consumer sectors. The bill has also been referred to the Senate Standing Committee on Economics for report by 20 February 2009.

It was the Whitlam Labor government in 1974 that brought in the Trade Practices Act in its modern form in order to protect consumers and small business. I just want to stress that point on small business again. Other speakers have done so. As a person who operated a small business for a long time, I fully understand the competitive market that small business finds itself in. Time and time again, opposition members come into this chamber and would have you believe that theirs is the party that represents and supports small business in this country. Nothing is further from the truth. The member for Kennedy I believe quite eloquently exposed that very fact.

If you want to support small business, one of the most important things that you can do is enforce the provisions of the Trade Practices Act and consumer legislation in this country. It is only through enforcing those provisions that small business will survive. It is only through enforcing those provisions that small business will remain competitive. We can all refer to examples of where larger industries or larger businesses came into the marketplace for a while and undercut the small business operators to the point where they could not survive anymore. Once they were out of the market, we saw an escalation in the prices of the goods and services that they provide. We continue to see it today. That is how markets are manipulated.

It was the Whitlam Labor government in 1974 that brought in this legislation. It is 35 years later that the Rudd government is updating it and bringing it in line with the market of today. It is the Rudd government that is quite truly standing up for small business in this country. At the same time, whilst the government stands up for small business and supports not only the small businesses but the local communities that rely on those small businesses, it is also about standing up for the rights of the consumers.

Before being elected to this place and since having been elected to this place, time and time again I have been approached by both consumers and small business operators about their frustration with the manipulation of the retail market and sometimes the wholesale market. It is a frustrating position to be in when you know it is occurring but there is little that can be done about it. This legislation may not be the answer to the prayers of all of those people who want the government to act, but it is certainly an important step in the right direction, a step that will ensure that there is going to be more fairness in the market for both consumers and small businesses. It is legislation that is long, long overdue, and I commend it to the House.

Jamie Briggs (Mayo, Liberal Party) Share this | Link to this | Hansard source

I rise to support my colleagues on this side of the House in supporting the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. Obviously we believe that cartel behaviour can damage consumers throughout our country. During our time in government—and we can go back in history on this if we like—we strengthened and increased the powers of the ACCC to deal with this type of behaviour. Again, I am thankful, as are many other members, particularly those on the back benches, for the work that the Parliamentary Library do and the notes that they prepare for bills such as this. I will read from the background notes in relation to the Trade Practices Amendment Bill 2008:

The Organisation for Economic Co-operation and Development (OECD) defines ‘hard-core’ cartel conduct more narrowly as:

‘… an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids  (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.’

We currently have provisions in the Trade Practices Act which of course have quite significant civil penalties for this type of behaviour. In recent years, we have seen these used quite publicly. They were highlighted in the Visy case in Victoria, which related to alleged price-fixing behaviour and of which it was found guilty in 2007, I think. There has also been much press interest and interest from people in the community about major organisations in the consumer area, such as supermarkets and petrol outlets, and claims in relation to whether they have engaged in behaviour which would lead to suggestions of price-fixing or cartel behaviour.

This of course gets to the nub of the issue: when does it become price-fixing, when does it become cartel behaviour and how can the intent behind it be differentiated? It is that issue that makes it very difficult for policy makers and for courts to implement. And while we support this bill and the measures—I note that the former Treasurer went a long way in moving down this track for criminal prohibitions—I have concerns about increasing the emphasis on criminal prohibitions. What we are really talking about here is the old Theodore Roosevelt maxim, which is: speak softly and carry a big stick. That is what this is really about; it is about giving the ACCC the power to threaten criminal prosecution.

I suspect in the next 10 years we will not see any criminal prosecutions under this act. I might be wrong. The member for Makin will probably disagree with me, and I am sure there is an Adelaide radio talkback host who would disagree with me very quickly—and senators as well. I suspect what we will see is the ability to use it as part of the negotiations to push for a settlement, as the ATO does. This is a tactic some would argue has been successfully used in certain cases to get an outcome which otherwise would have taken the courts years to decide. But I guess my concern is that that power is there.

The member for Makin talked about small business. What I am concerned about is that a government agency with this sort of power can act vexatiously with discretion. I do have genuine concerns about that. What we are talking about here are different shades of grey. If we have clear examples of cartel behaviour, that is different. But I think even in the most recent example of alleged price-fixing cartel behaviour in Melbourne, the most high-profile example, there are some of us on this side of this House—I know there are some on the government benches as well—who share a concern about the level of ferocity with which the agency has pursued a certain individual in that case. The concern I have with this bill—again, I indicate the opposition is supporting this and I support this bill—is that creating that additional stick or extra length on the stick means you encourage this type of vexatious pursuit of individuals at times. That concerns me for a couple of reasons relating to small business. I think there is a concern for the ability of small business to defend itself against government. The case we are talking about is not a small business. It is a very big business with a very rich, powerful player, who is able to defend himself, I might add, and has done so very thoroughly. But I have concerns about giving the government far too much ability to pursue people to the point of putting them out of business.

The other aspect of this that concerns me—this is where I will disagree with the other side of the House; I am sure they will disagree with me—is industrial manslaughter type legislation, where you are holding people criminally responsible for actions potentially outside of their control. We do this through civil provisions, but to take that next step to criminal law has a whole set of implications which changes people’s lives. That is where we, as policy makers, need to be very cautious. It is all very well to spout the rhetoric that we need to crack down on people who rip Australians off and take advantage of their privileged positions in the marketplace and so forth. I accept all of that. However, criminal proceedings are a step above. They change people’s lives whether they are found guilty or not guilty.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

That’s why there are trials.

Jamie Briggs (Mayo, Liberal Party) Share this | Link to this | Hansard source

That is true. I agree with the member for Wakefield: that is why there are trials and that is how the justice system works, of course. But I am sure he will agree with me that even the accusation, the scent of it, still sticks whether you are found guilty or not guilty. That is where I am just simply raising concerns.

I do not think in our country that we should be discouraging good people from getting into high positions in business. As much as we rail against excesses and so forth, we should be encouraging young Australians to pursue business opportunities and to be entrepreneurial. We need to be careful. Members can scoff, but we, as policy makers, do need to be careful that we do not create a situation where we are putting good people off because the threat of criminal litigation is so much greater than that of civil litigation.

On that note, I will sum up. I will not hold the House up much longer. I am interested in the member for Wakefield’s contribution, as always—both on this bill and on these days when we are not into partisan attacks. I will refrain from any sort of partisan attack today. We support the bill, as we have previously indicated. However, I just add a note of caution about the level of power or the size of the stick that we give to government in pursuing small business people and large business people in this country.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, which is greatly needed and long overdue. I say to the member for Mayo that this is about stopping illegal conduct, not about stopping entrepreneurialism. Cartels undermine the very idea of a competitive economy. They keep prices at artificial levels, they lock people out of markets, they stifle innovation, they prevent moves towards efficiency and productivity and they enrich those who collude. They are hostile to the public interest, they are hostile to the Australian consumer and they are hostile to the Australian businessman and businesswoman.

As Professor Paul Kerin has observed, in small markets like the Australian economy the opportunities for collusion are much more available than in larger economies. It is much easier to collude in Australia than it is in the US. I think that is something that the man or woman in the street also knows. So it is important that we act and that we act with enough force to push the message home that this behaviour is completely unacceptable.

Cartel conduct is effectively extortion—often to the tune of millions of dollars. I cannot for the life of me see why a car thief, a bank robber or a person practising extortion should go to prison while company executives can walk free after colluding with each other to set artificially high prices and to enrich themselves in the process. Professor Allan Fels quite rightly points out that conduct of this nature is not a victimless crime. The victims are real people who are being cheated out of real money. This government will not stand by and watch Australians being exploited by white collar criminals intent on extortion by stealth. We will act.

This legislation is about punishing those people who do the wrong thing, but it is also about deterrence. It is about sending a message to Australian consumers that they do not have to put up with cartels any longer and also to individuals, whether they are based in Australia or overseas, that if you collude in this way then you are a criminal pure and simple, and the government agencies will take action against you. We make absolutely no apology for the fact that this legislation is amongst the toughest in the world. It establishes criminal penalties for serious cartel conduct. The penalties for these offences are: for an individual, a maximum term of imprisonment of up to 10 years and a maximum fine of $220,000; and, for a corporation, a fine that is the greater of $10 million or three times the value of the benefit from the cartel or, where the value cannot be determined, 10 per cent of the annual turnover.

Importantly, the bill allows for telecommunications interception as well as other measures to be used as an investigative tool against those who are suspected of collusion and also for the protection of whistleblowers who assist the ACCC in their investigations. These are important provisions because they deter people from acting and they also give the ACCC an ability to adequately investigate cartels.

These provisions will bring us into line with similar provisions in the United States. The United States is, of course, famous for its antitrust provisions, first introduced by President Teddy Roosevelt. The member for Kennedy also referred to Roosevelt; it did scare me a little that the member for Kennedy and I both went to Roosevelt when we were looking at this bill. Roosevelt said in 1911:

Not only should any huge corporation which has gained its position by unfair methods, and by interference with the rights of others, by demoralizing and corrupt practices, in short, by sheer baseness and wrong doing, be broken up, but it should be made the business of some administrative government body, by constant supervision, to see that it does not come together again, save under such strict control as shall insure the community against all repetition of bad conduct.

That was in 1911. Trust busting was part of a great campaign in the public interest, so I think it is timely that nearly 100 years later Australia is finally putting these provisions into our competition law. I think it is absolutely necessary, particularly when you look at the history of these sorts of practices.

The Dawson review into the competition provisions of the Trade Practices Act was completed in 2003 and recommended that cartel behaviour should, for the first time, be punished with criminal sanctions. Since then, the ACCC has issued warnings on 15 separate occasions that this sort of legislation was both necessary and urgent and that it would enable us to better deal with criminals at home and to cooperate with law enforcement agencies around the world.

The Labor Party heard these warnings and the Rudd government has stuck to its promise to introduce legislation within 12 months of coming to office. We hope that the parliament will take the opportunity to make up for lost time, support this bill and give Australian consumers the protections they deserve. After years of indecisiveness and inaction, and after an inordinate amount of consultation, it is now time to act.

When the government released its draft bill last year, the ACCC Chairman, Graeme Samuel, who has been referred to in other contributions, welcomed it and said that it was ‘a high point for 2008’. He told the Age newspaper that the legislation:

… brings us into the big league … It enables us to co-operate a lot more effectively with other regulators around the world.

The government is now taking action to make sure that these criminals are punished and that potential criminals are deterred from undertaking cartel conduct. Most importantly, we are ensuring that Australian consumers are protected and that Australian businesses are allowed to function in a truly prosperous and competitive environment. I commend the bill to the House.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 and to echo the comments of those speakers who have come before me in relation to the matters that are contained within the bill. Clearly, the point has been made consistently, and I wish to reinforce the point, that cartels are, in many respects, one of the great evils when it comes to anticompetitive activity within the marketplace. Cartels, of their nature, undermine the integrity of the marketplace and run counter to efficient outcomes within the marketplace.

It is essential that we have a robust regulatory regime in place to ensure the proper operation of the market, and that is why it has been well recognised throughout market economies over many years—and the member for Wakefield certainly emphasised this point—that there is a very significant and important role for government to play in intervening in the marketplace to set the parameters and to create the rules of the game, the rules of operation and the rules under which trade will occur so as to ensure that the market and its participants, or their interests, are not being compromised throughout its operation in the ordinary course of events.

I saw a quote from Warren Pengilley, who wrote an article titled ‘The law of collusion: aftermath of the Geelong petrol price-fixing case’, which appeared in the Law Society Journal. Mr Pengilley—and I think that this really encapsulates the essence of laws designed to combat the activities of cartels—stated:

The law regards each marketplace competitor as being responsible for its own pricing decisions. The result of each competitor making its own decision will deliver, so economic competition theory runs, the best market outcome. This is because each competitor will seek to maximise its profit and make such decisions as are necessary to achieve this end. Conduct which complies with this concept is not illegal. It is when competitors seek to subvert this concept by making arrangements between themselves on agreed outcomes that the law steps in.

The comments that were made earlier by the member for Mayo are, I think, to some extent rebutted by the extract that I have just quoted. The member for Mayo was indicating that he holds a concern that entrepreneurial effort and entrepreneurial zeal will be discouraged by the introduction of criminal sanctions for those participants convicted of their involvement in cartel related activities. But it is an important process to follow through that there has to be a conviction, and of course the burden of proof in criminal matters, which continues to be the case in these matters, will be one of ‘beyond reasonable doubt’. Clearly, the offence needs to be made out, and it is only after it has been made out that those who have been engaged in the sort of activity that Mr Pengilley has so aptly described will then be dealt with according to the criminal law and the sanctions that are proposed within this bill.

The question that needs to be asked in relation to this debate is: why should matters such as these—that is, cartel related activities—be treated differently to other offences and other activities that effectively have the same substantive economic outcome? To clarify the comparison I am drawing: there are many instances in which individuals will seek to profit from others by doing things that effectively amount to stealing. We need to understand that collusion and the various activities that might be involved in cartel related activities amount to theft. It may not appear that there are victims, but there are victims of the crimes that we are contemplating in the course of discussing this bill. The victims are consumers. The victims are small businesses. Victims are right throughout the economy. Whilst to some extent they may be faceless and to some extent they may not even be aware that they are victims at the time when they are deprived of the money that these cartel related activities essentially rob them of—notwithstanding that—they are victims. It is in that context that we need to reflect upon the fact that these proposed criminal sanctions are essentially about recognising the gravity of these offences and the gravity of these activities. To participate in cartel related activities is essentially to participate in theft. The proceeds of the crime come from the larger amounts of money that consumers, small businesses and other individuals and participants throughout the marketplace are required to contribute in meeting the increased prices that flow through from these cartel related activities.

I think it is worth reflecting upon some of the acts and some of the offences that are currently on the statute books, not necessarily in relation to the Commonwealth parliament. In my home state of New South Wales, there is an offence, for example, under the Crimes Act, of ‘directors et cetera cheating or defrauding’. That is section 176A of the Crimes Act. That section reads:

Whosoever, being a director, officer, or member, of any body corporate or public company, cheats or defrauds, or does or omits to do any act with intent to cheat or defraud, the body corporate or company or any person in his or her dealings with the body corporate or company shall be liable to imprisonment for 10 years.

It strikes me that this offence, which is on the statute books in New South Wales and has been there for many years, is not seen to be a particularly exceptional offence. I have certainly never been approached by anyone petitioning me to either effect any change to this offence or to lobby others to do so. Essentially, I think that is because there is, right across the community, a consensus that activities of this sort are reprehensible, and it is because they are reprehensible that the law, through the imposition of criminal sanctions, seeks to deter those activities. It strikes me as rather strange to hear particularly those from the other side suggesting that sanctions of this sort should not be imposed in relation to those matters that might emerge from cartel related activities.

It is worth noting that these particular proposals have a long history. We can go back to the many discussions at the international level through the OECD. We can look closer to home at the Dawson review, and the many valuable submissions that I have seen that were made as part of that review. The Dawson review concluded—and I think this is of particular significance to the comments that I have just made—at page 19:

There was general agreement in the submissions made to the Committee that, notwithstanding the difficulty in arriving at an appropriate definition of serious or hard-core cartel conduct, it is sufficiently reprehensible to be punishable by the imposition of a gaol sentence.

It is that very element of there being a community consensus, a broad consensus—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The debate is interrupted in accordance with the motion of earlier today.