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

It is a difficult task to resume discussion about matters of state—however important the matters in relation to the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 may be—after the contributions that we have just witnessed in this place. I want to thank the members who have just recently made those contributions and acknowledge the spirit in which they have brought the interests, the views and the perspectives of their electorates before the House.

Before my contribution on the bill before the House was interrupted a little earlier on, I was quoting an extract from the Dawson review, which, if I can paraphrase that extract, essentially pointed to the consensus that had emerged from the various submissions that had been made to the Dawson review—a consensus on the point that cartel related activity was sufficiently reprehensible to be punishable by the imposition of a gaol sentence. Indeed, it is that view and that consensus that emerged from the Dawson review and formed the basis of a recommendation from that review, that the government is now implementing what was an election commitment, made prior to the last election, in relation to cartel related activity, which now involves a bill proposing criminal sanctions to be imposed in respect of those sorts of activities.

As I indicated earlier, it is not exceptional for us, in various areas of the law, to impose criminal sanctions where there is behaviour that is sufficiently reprehensible. It would seem that something we would do as a matter of course is ensure that the statutes that are on the books in this place represent and reflect widely held community views in relation to these matters. It is worth noting that the ACCC has been in support of these proposals and certainly made a submission at the time to the Dawson inquiry. I would like to quote a section from the ACCC’s submission, which said:

Hard-core cartels can be highly profitable for those involved and are difficult to detect. This makes the incentives high for businesses to engage in such fraudulent and clandestine conduct. It also makes it imperative that significant deterrents exist to counteract these incentives.

It is worth noting and understanding that, on the specific issue of deterrence and the deterrence value of those measures being proposed in this bill, the existing provisions in the law as it stands, which relate only to civil penalties, have given rise to a situation where, in the case of many corporations and many individuals guiding those corporations, decisions have been made to engage in activities that might otherwise be described as being uncompetitive, and they have done so on the basis that they have made a calculated risk and a calculated gamble that they may in fact get away with such activity. In the event that they are unable to get away with such activity, that calculated risk has factored in the cost of getting caught out. It is an unsatisfactory situation where a corporation and those guiding the direction of the corporation make a decision based upon this philosophy—that, even if they get caught out, that is a business judgment, a business risk, that they are prepared to factor into their operations.

When it comes to the question of deterrence, if the only stick with which the state has to defend the interests of consumers and small businesses is the civil penalties that currently exist within the act as it stands, clearly the deterrence value is not going to be as great as if the stick involved the criminal sanctions that are now proposed in the bill before us. It is regrettable that there are individuals driving corporations that would make those decisions, but I think that it is self-evident that those decisions have been made in the past. The very difficult nature of securing a prosecution in relation to these matters because of the highly secretive and clandestine nature of the discussions, actions, collaboration or collusion that might lead to cartel related activity has meant that over time there have been many organisations, businesses and individuals that have been prepared to take that risk. I suspect that their preparedness to do that will be greatly diminished if criminal sanctions are implemented, and it is in light of those criminal sanctions that I believe we will get much greater compliance with the law and a reduction in cartel related activities.

In highlighting and identifying the challenges and difficulties associated with catching individuals and organisations involved in these activities, we also need to ensure that we provide the regulators with the necessary powers to secure the evidence that is needed in order to commence effective prosecutions in relation to cartel related matters. It is in that vein that I support the telephone interception provisions of this bill. Of course, provisions of this nature are always provisions that the parliament needs to give much and close consideration to before introducing. But, given the particular nature of these offences, their very secretive nature and the way in which these crimes—if I can use that word—are carried out, if we are to have any chance of bringing the participants in these sorts of activities to justice, it is imperative that we have powers such as the telephone intercept powers that are proposed in this bill.

To complement those powers, having an effective means of showing and demonstrating leniency to whistleblowers—who may be the agents who first bring forward concerns that lead to the use of telephone intercept powers that ultimately uncover cartel related activity—needs to be a necessary and complementary component of any approach to tackling cartels. That is why this bill strikes a very reasonable balance between, on the one hand, increasing the sanctions, introducing criminal sanctions and providing a greater deterrence and, on the other hand, providing more and more effective powers for enforcement agencies and regulators to try and uncover the sort of conduct that is the target of the legislation. Combined with the whistleblower protection, which will hopefully provide further leads that will ultimately lead to authorities tracking down this activity, this will root out cartel related activity where it is present, and that is in the best interests of consumers, the economy generally and also small businesses.

Before I conclude, I wish to reflect upon a couple of comments that I have noted from interested parties that are not able to make a contribution to this debate in the parliament. I note the comments of Professor Paul Kerin, professorial fellow at the Melbourne Business School, who was quoted in the Australian on 26 January as saying:

Jail sentences would be even more valuable here than in the US. Our small markets and highly concentrated industries make price-fixing much easier. Jail sentences would make potential perpetrators think twice.

Apart from the obvious deterrence that comes with the criminal sanctions, I think we can see that there are particular reasons why, in the Australian market, these types of laws will have an even greater effect than they have in other areas where those laws are already in place. And it is not exceptional that we should be introducing these laws. They have been introduced in many countries around the world, and many of our key trading partners abide by these rules. I think it is important that we not only work collaboratively at the international level—as we have done in the past through the OECD—but that we implement laws domestically that reflect our participation in those forums internationally. I also note that Professor Bob Baxt, a partner at Freehills and former head of the Trade Practices Commission, made the comment:

What Chris Bowen has done is he’s taken the heat out of this issue immediately, rather than fluffing around like Peter Costello did.

I do not want to reflect on the fluffing around of the member for Higgins. What I will say, however, is that the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs is not someone that fluffs around. As a consequence of his determination to not fluff around we have, in a very short space of time, seen legislation—bills brought before this House—that tackle something that even by their own admission members on all sides of this House have said is legislation that needs to be introduced. I am very pleased to see that it has now been introduced. I am even more pleased to see that it appears to have bipartisan support. This is legislation that will deliver real benefits to consumers and ensure that we have a market that is competitive, with integrity. (Time expired)

Sharman Stone (Murray, Liberal Party, Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 is supported by the coalition because it aims to curb the behaviour of competitors in a market where they manipulate prices, rig bids, restrict output or attempt to divide and share markets. Put simply, a cartel is an agreement between competitors not to compete. Such behaviour ultimately disadvantages the customers, reducing their choices and often also leading to higher prices. It squeezes their suppliers, particularly in their viability and capacity to innovate, and it can kill off other competitors, of course, who do not want to be—or cannot be—part of that dominating cartel.

The bill outlines that cartel type offences should no longer be described with the words ‘with the intention of dishonestly obtaining a benefit’. That concept of dishonesty has been replaced by the general principles of criminal responsibility applicable under the Commonwealth Criminal Code, which deal with intention, knowledge and belief. Thus this bill criminalises conduct that was already prohibited under existing prohibitions. Stamping out cartel behaviour is a very serious concern for any economy and any population of consumers, but it is particularly serious for Australian communities. We have some of the globe’s greatest concentrations of ownership in areas such as retail—and within retail, in groceries, alcohol and hardware sales.

The duopoly of Coles and Woolworths, for example, has cornered over 70 per cent of the Australian grocery market through successive small and larger acquisitions over time. As a consequence, suppliers to these big two have very little leverage. Each year, even more suppliers of fresh and manufactured grocery lines become price takers as the supermarkets continue to chase market share and supply chain control through their relentless pursuit of home brands. This has serious consequences for the viability of primary production and food manufacturing in Australia, as well as for all of the support industries which, together, take food from paddock to plate. I am talking about the irrigation infrastructure industries, the transport industries, all of those who are involved with packaging and logistics and, ultimately, all those who are marketing products.

There are also, of course, environmental consequences when you squeeze your suppliers so hard that they have to cut corners or simply drop back in the queue of supplying altogether. Every farmer knows that it is very difficult to be green when you are in the red. When farmers are pushed too far in price for product and are pushed into debt, all the environmental services farmers contribute to the community suffer, including the maintenance of fresh water, fresh air, biodiversity protection and protection of nutrients in the soil. None of those services can be delivered by a farm sector which is, every year, being squeezed harder and harder on price for its product. Vegetable and fruit producers in the Goulburn and Murray valleys in my electorate of Murray have not seen an increase in returns for fine, clean, green produce for decades, when you consider the costs that they have to bear and the virtually flat price they receive for produce.

There are also ever-increasing demands made by the duopoly for suppliers to increase packaging quality and quantity and in other ways to add value to the product—a stamp on the apple here, an extra section in the box there, the keeping of the product longer in the cool stores or the delivering of it within a five- or 10-minute slot. All of this additional value-adding to the supplier’s task comes, of course, at a cost to the supplier. They do not get the price back from the retailer to cover these additional costs. Complaints from suppliers are ineffectual when the message sent back down the line from the retailers is that there are others in the queue ready to sell to them anytime.

I have to say, too, that the transport sector is often given an impossible deadline or timeslot in bringing product to market—often they are owner-operator businesses and their margins are extremely thin. When you have an extremely concentrated retail sector—such as there is in the supermarket sector—and you may be asked to take products from, say, Shepparton to Sydney, with only 15 minutes leeway for on-time delivery. If you are held up on the way on the Hume—your logbooks are checked yet again and you miss that slot—that could be the end of your capacity to pay your hire-purchase and to survive in that owner-operated business.

The coalition tried to deal with this sort of market power leveraged against those in the upstream section of the value chain. We brought in regulations which tried to apportion blame for an accident, for example, on the parts of the value chain which were responsible for unrealistic deadlines or which were forcing dangerous practice in order for the business to comply with the demands of, say, very tight time frames of delivery. I am regularly told by my own transport industry—and we have one of the biggest regional transport sectors in Australia in the Murray and Goulburn valleys—that, even with that regulation, there is a danger to drivers, as they try their best to meet unrealistic deadlines, knowing that, if they do not, there will be another owner-operator transport business contracted for the next job.

In particular, we see the powers of the duopoly and the need to have very close scrutiny from the ACCC when we look at the dairy industry and its products in Australian supermarkets. The prices paid by the grocery retailers for dairy products do not reflect domestic demand or competition because, quite simply, there is hardly any domestic competition when you have only got two major retailers, who have prices set centrally across the country. The duopoly’s competition comes from the opportunity Australian dairy manufacturers have to alternatively supply the export markets—to survive in these highly corrupted, subsidised export markets. Right now, we are staring down the barrel of a collapse in prices and demand in those export markets for dairy products, so you can imagine the opportunities now available to our big retail duopoly to do whatever they like with the Australian dairy suppliers in terms of prices.

In an extraordinary article in Queensland Country Life on 6 February—just a week or so ago—Mark Phelps wrote that Woolworths would reduce milk prices by 11c a litre on all drinking milk products on 23 February—in a week or so. This will be ‘in line with the end of the dairy adjustment levy’. Surely, the owners, the shareholders of the duopoly are aware that the actual producers of market milk in Australia had a 50 per cent cut in the prices offered to them by their manufacturers several weeks ago. These prices are below the cost of production for most manufactured milk suppliers. This industry is high cost but highly efficient, and we have managed in Australia to retain self-sufficiency in supplying good, clean, healthy dairy products across the nation for the last 150 years or so. Unfortunately, without a price rise in our domestic market, without the retailers being prepared to pay a decent price to the Australian dairy manufacturers, we are looking at the loss of our market milk producers in Australia—in particular, the irrigated market milk producers in my electorate of Murray.

We have a retailer—in this case it is Woolworths—boasting about dropping its milk prices in its supermarkets by 11c a litre on 23 February. We wonder what consumers will say when the dairy suppliers of manufactured milk go to the wall and all of the product in the future is from New Zealand or maybe from China. It is a prospect that I find daunting and a prospect that must make states like Victoria shudder, given that exports of dairy powder, for example, have been Victoria’s biggest agricultural export out of Geelong for many, many years.

So I am very concerned about the concentration of power that exists in Australia in the retail sector—particularly in relation to groceries and food production—about the consequences of there not being enough competition within Australia in food and beverages markets, about the consequences for the environment and about the consequences for rural communities who depend on the work generated by paddock-to-plate production. I am concerned that there does not seem to be any conscience when it comes to the big duopoly in relation to the long-term security and wellbeing of their Australian suppliers. There seems to be no sense that the consumer might want to continue to have a choice of Australian product as well as imported no-name brands from heaven knows where. We have seen food contamination scares internationally which should make every parent shudder. Australia’s food production is so highly regulated, so clean, that we can guarantee Australians a healthy eating future, but I am concerned that our duopoly in the grocery supermarket line has no such similar, or common, view.

We are also going to have to be very careful about concentrated power in areas like water sale and delivery. In Victoria, for example, our irrigated agriculturalists have no choice when it comes to who sells them their water and how that water is managed. The prices go up exponentially and the service does not necessarily match at all the price rises that are occurring. And, of course, in irrigated agriculture in northern Victoria, you pay for water that you cannot receive due to the drought. I think it is very important for the federal government and the states to look at cases where state owned authorities—in this case, irrigation authorities—hold monopolies at the expense of true innovation in delivery and where there is not world best practice, when, in the case of Victoria, they just have to look over the border into New South Wales to see how much better irrigation authorities can do when they are stakeholder owned and driven.

In making these remarks I want to say that we do appreciate the work of the ACCC and we watch their performance and behaviour carefully. There has been concern in the past that they were not really serious about cartel-like behaviour. Obviously, we need them to be strong and we need to be quite confident at all times that they behave and work with true authority and in a non-partisan way.

I also commend this bill in that it adds provisions which will help in detecting cartel behaviour—for example, telephone interceptions. I certainly believe that we must be very careful about protecting the so-called whistleblowers, who often expose themselves to real peer group sanction and public opprobrium when they tell the truth about cartel type behaviour. Very often, these whistleblowers are not adequately protected, yet they are the real heroes when it comes to exposing practices which damage the community at large or to smaller sectors. I commend this bill to the House. It deals with important issues not only for the Australian economy but also, in particular, for Australian suppliers of raw and manufactured product into our markets. It is extremely important that we watch, carefully regulate when we can and, indeed, apply greater sanctions if it appears that concentration of ownership or cartel behaviour occurs to an even greater extent in the future.

Daryl Melham (Banks, Australian Labor Party) Share this | Link to this | Hansard source

I rise to say a few words on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. At the outset I want to quote from the second reading speech of the Minister for Competition Policy and Consumer Affairs because I think it quite neatly sums up what the bill is about:

Cartels are widely condemned as the most egregious forms of anticompetitive behaviour. At its heart, a cartel is an agreement between competitors not to compete. Cartel conduct harms consumers, businesses and the economy by increasing prices, reducing choice and distorting innovation processes.

This bill makes much needed changes to the Trade Practices Act, because it will bring Australia into line with its major trading partners and developed nations. The Dawson review into this matter recommended the introduction of criminal penalties in Australia. That is a big but very important step, as people who engage in this conduct should be subject to criminal penalties and not civil penalties alone because of the cost of that conduct to the general community.

Interestingly, the Dawson review also recognised that there is growing international experience showing that criminal sanctions are effective in deterring serious cartel conduct. The deterrence effect of a penalty is often quoted in court but, in relation to these particular matters, it is now recognised and stated in the Dawson review that criminal penalties can, in effect, deter this sort of conduct and stop it from happening. Of course, those engaged in it obviously do not like the prospect of going to jail. If it is a civil penalty they might be able to pay their way out. So weighing up a civil penalty, if caught, against the conduct and what it reaps might be an option for them. Labor did commit, in the lead-up to the 2007 federal election, that it would introduce this legislation, and extensive consultation has occurred over the past 12 months.

The matters that I want to concentrate on go to penalties. The government gave extensive consideration to the appropriate jail term. Originally, the maximum term stated in the draft exposure bill in January was five years imprisonment. However, in this bill it has been increased to a 10-year jail term, which, as the minister said in his second reading speech, ‘better reflects the seriousness of the crime’. His speech also stated:

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 as having the world’s longest jail terms for this serious crime.

In relation to civil penalties there is also a maximum $500,000 penalty for individuals and a penalty consistent with the maximum criminal fine for corporations. I think 10 years is appropriate for this sort of conduct. When I was appearing as a legal aid solicitor and legal aid barrister in New South Wales, I can tell you that break, enter and steal offences attracted much more serious maximum penalties than this—and for quite small amounts. So, if you actually go to the criminal statute books, I think you will see that 10 years is about the right balance in relation to this. That does not mean to say that you have to send people to jail for 10 years; that is the maximum penalty. I note that, if there is a penalty under this bill of 12 months or less, it can be substituted for a fine in relation to the matter.

I also want to talk about some of the things that were consulted on in terms of the powers that are allowed to be used to, in effect, detect cartels. I go to the Parliamentary Library’s briefing paper in relation to this, the Bills Digest, because, again, it gives a good summary. On page 10 it says:

The amendments to the TPA proposed by this Bill would make a cartel offence a relevant offence under the Surveillance Devices Act.

Although the ACCC is not a law enforcement officer under the Surveillance Devices Act, the amendments in this Bill would allow the Australian Federal Police to obtain a surveillance device warrant to aid in the investigation of alleged cartel conduct by, for example, monitoring conversations between cartelists, and to communicate the information obtained under the warrant to the ACCC.

Further, it says:

The proposed amendments to the Telecommunications (Interception and Access) Act 1979 (TIAA) will enable the ACCC to request the Australian Federal Police to obtain a telecommunications intercept warrant to investigate criminal cartel offences. The rationale for the amendments was elucidated in the submission to Treasury of the Law Council of Australia as follows:

Cartels are by their nature secretive. There are particular evidentiary difficulties with cartel offences as cartel participants generally seek to avoid documenting their arrangements, and endeavour to conceal cartel communications. Telecommunication systems (including the Internet) are an increasingly common and prevalent method of communication.

Interception warrants, particularly used in conjunction with an informant, could be a useful resource in ongoing cartel offence investigations, in those cases where cartel communications are predominately made over telecommunications systems including in relation to the implementation phase.

When it was first introduced, the Telecommunications (Interception and Access) Act applied to a very small range of offences—the most serious of offences on the statute book—and there were assurances that it would be limited in its use. But there is no doubt that as time has passed more and more offences have come under that particular statute. In this instance, it was a big call by the Law Council of Australia to concede that it is appropriate to use the act to stop cartel activity.

There is a recognition that in terms of intercepts per person—and I remember producing some figures when I was shadow minister for justice—Australia is probably the most intercepted country in the world, certainly more so than the United States of America. Interception is now a cheap way for law enforcement agencies to monitor activity and obtain evidence that can be used in court. It also means that you do not necessarily require an informant in the first instance or someone who can be discredited. Interception is another method that, once this bill is passed and it is communicated that interception is out there, will in my opinion act as a deterrent, because those who have engaged in this activity will not be able to do anything other than be apprehensive that their conversations can be recorded and used in direct evidence against them in proving this particular conduct.

When it comes to the criminal offence—and I will finish on this because I did not particularly want to speak for the full 20 minutes—in relation to fault elements, section 5.1(1) of the Criminal Code provides that:

A fault element for a particular physical element may be intention, knowledge, recklessness or negligence.

What we are doing here in moving to the Criminal Code is picking up the standard criminal definitions in relation to whether a matter constitutes criminal conduct. We are not talking about strict liability or anything like that. It goes to intention, knowledge, recklessness or negligence. In my considered opinion, this sort of conduct fits squarely within conduct that can be classed as criminal, and it should be dealt with as such. We as a parliament should not resile from the fact that at times we do bring ourselves to situations where we create new offences that carry prison terms because the conduct cannot be sanctioned or treated with kid gloves. For too long this sort of conduct has retained its identity as a civil offence when quite frankly it is a criminal offence. It is greed, it is manipulating the community and it should be dealt with as a crime. So I applaud the minister for bringing this material forward. This bill will go a long way to hopefully stopping this sort of conduct or putting these people on notice that if you do this then you are going to end up with a criminal conviction and everything that flows with it.

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

I too am pleased to be able to speak on what is a significant piece of legislation and an amendment to the current Trade Practices Act, the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. One of my great hobbies in life is musicals, particularly directing them. I have a particular interest in a current musical that you might not be aware of called The Scarlet Pimpernel, which has a history of very chequered reviews. Listening to the songs and reading the script of The Scarlet Pimpernel certainly reminds me of highwaymen and highway robbery. This legislation effectively deals with that very thing.

In the same vein as the former speaker and the member for Lyne earlier today, I think we ought to call this what it is—that is, robbery and, in many instances, daylight robbery. Yet the irony is that it is done in the dark. It is done secretively and covertly and is often done over a great period of time. It is very difficult to detect. We know it exists but it is very difficult to prove. It is robbery and it affects not just the consumer—that is, everybody—but also businesses in general and small businesses in particular. I found it interesting and perhaps surprising that, when some members on the other side said that they were supporting this legislation, they said they feared that its implementation may be injurious to small businesses and legitimate business. I am not a lawyer by any means, but my cursory reading of the legislation tells me that it has taken this into account and has sought to get a compromise between tracking and prosecuting those who are guilty of outright major theft and protecting normal competitive practices. That is what it is designed to do.

What exactly is it that we are talking about when we say ‘cartel conduct’? It is not something that is just off in the ether and it is not something—contrary to claims from the opposite side—that we have only become interested in because of some high-profile cases in this country recently. These were high-profile cases that could not be charged with criminal offences but only with civil offences. So what is meant by it? I turn to the Australian Competition and Consumer Commission, which defines cartel conduct as essentially an anticompetitive arrangement between two or more businesses. The Organisation for Economic Cooperation and Development—the OECD, as we know it—defines hardcore cartel conduct more narrowly, and I think it is worth putting on the record:

… an anti-competitive agreement, anti-competitive concerted practice, or anti-competitive 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.

That is a relatively comprehensive definition of what we mean by cartel conduct. That is at the basis of this legislation and the amendments contained within it.

Currently, part IV of the Trade Practices Act relates to restrictive trade practices. Although it does not specifically use the word ‘cartel’, it already contains provisions spread across a number of sections which regulate anticompetitive conduct between two or more businesses. It does this by dividing the conduct into one of two categories, and I would like to share these with you. Firstly, there is conduct which is of itself—referred to as ‘per se’—regarded as anticompetitive. This conduct is prohibited, regardless of whether it has the purpose, effect or likely effect of substantially lessening competition. The rationale behind a per se prohibition is that the conduct prohibited is so likely to be detrimental to economic welfare and so unlikely to be beneficial that it should be proscribed without further inquiry. In short, it is of its nature anticompetitive. Secondly, there is other conduct which is subject to a competition test.

I noticed with interest that some on the other side—in particular, the member for Pearce, for whom I have great admiration—finished her very well constructed speech of support for this legislation by defending the former government’s record on trying to tackle cartel operations. I found it extraordinary because she was defending the member for Higgins, the former Prime Minister, Mr John Howard, and those opposite for their history of procrastination on this issue over many years and their tardy record in doing something constructive and real about the Trade Practices Act and dealing with cartels. Those opposite can lean back and lazily say, ‘Oh, this has been too difficult.’ They criticise the current minister, the Minister for Competition Policy and Consumer Affairs, who is sitting at the table now listening intently to my speech rather than to those opposite. He has been criticised for rushing legislation into this House to deal with this most serious matter. In fact, the current minister—and I give him all credit in this; he has a tremendous capacity, ability and future in our Australian parliament, and thank heavens for that—has a precedent to work from because the legacy and history of people seeking to do something more constructive about this is quite long.

I know that the member for New England, who will follow me, will be able to give us a more detailed history of this. I take you back to the Dawson report of 2003, which was a highly comprehensive inquiry which effectively called for the criminalisation of cartel conduct. That was in 2003, so that is a fair time to hold your breath. In 2005 the response from the current member for Higgins was that the government in which he was Treasurer would amend the Trade Practices Act to introduce criminal penalties for serious cartel conduct. That was in 2005, which was two years after 2003—everything was happening with haste, as we can see. The bill, in fact, was never introduced in 2005. I wonder why; I wonder what was at the back of this.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Was it in 2006?

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

Well, let us move on. In a doorstop interview on 9 October 2007, the then Prime Minister, the Hon. John Howard, stated that the coalition would continue to examine the strength of the trade practices law and make further changes if they were needed. However, he stated that he would not make any commitment beyond that. We know what happened to that. In the meantime there have been serious cases of cartel misconduct recorded in this community. Some members opposite claim that our hastiness in beating towards creating legislation to criminalise cartel conduct was based on a personal vendetta against some of those who were taking part in and found to be guilty of these malpractices. This was between 2000 and 2004.

In 2007, another company was severely penalised for such conduct. We made a commitment in 2007 that we would advance the legislation. The minister has carried out that promise. Contrary to what others have said—particularly the member for Pearce, who claimed in an extraordinary finish to her speech that the minister was forced to rush the legislation—my understanding, and I am not a lawyer or an accountant, indeed far from it, is that we have had a period of consultation, we have circulated a Treasury discussion paper and we have had other discussions with major agencies throughout the government over 12 months. Because of those consultations, the minister made changes to the amendments which are before us today. This is hardly a rushed piece of legislation.

The Labor Party made a commitment based on the history of a poor legacy in relation to criminalising what is highway robbery in this country. The legislation before us deals with that in a balanced, measured way. Indeed, and let us not forget this, it follows the example of many other countries, in fact—again, I am not an accountant—15 OECD countries and others, including the United States, Great Britain, Canada, Norway, France, Germany, Israel, Taiwan and so forth. It is not as if we have invented the wheel, indeed we have not even reinvented it. What we have done is to hopefully make it work and run more smoothly than it has in the past.

I congratulate the minister. I congratulate this government on behalf of my community, which I must say has felt the detrimental effects of what looks like collusion, often, in terms of paying major prices for major commodities, which unfortunately are controlled by very few players in the market.

The penalties that have been introduced in relation to this legislation I believe are appropriate. I believe they will act as a deterrent, as they must, and that individuals cannot escape their responsibility, particularly in relation to decisions that are made which are of an anticompetitive nature. I realise and I understand that there are sensitivities in terms of trying to balance the rights of individuals and their privacy and the need to intercept and get proof of cartel conduct of this anticompetitive nature. I believe the legislation has the balance right. I know the minister has given a commitment to monitor the legislation as it goes into practice, and I think that is absolutely important in this case.

I thank the minister. I thank the government for fulfilling its election promise. I think this is going to act as a strong deterrent. We join many around the globe in trying to tackle what is highway robbery in our economy. It is not fair. It is anticompetitive. It is anticonsumer. It is anti small business. I thank the House.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Firstly, I would like to congratulate the member for Braddon on a very good speech. It was a little short on logic, content and argument, nonetheless one of his better contributions to the House. I would like to make a contribution on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 before the House. I am pleased the minister is in the chamber because there are a number of things that he really does need to hear. I noticed he was not in the chamber when the member for Kennedy spoke.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I was listening, though.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

He may have been able to hear the member for Kennedy outside the chamber. I refer him to the member for Kennedy’s contribution because he made some important points in terms of market power and anticompetitive behaviour, particularly in relation to the market dominance of the two major retailers—Woolworths and Coles. The member for Kennedy referred to the market dominance of major retailers in other parts of the world, particularly the UK. I think I am right in saying that the two major retailers in Australia have about 85 per cent of the market, which is a very dominant position. The member for Kennedy made the point that the next in line in terms of dominance are three companies in the United Kingdom that between them have something like 24 per cent of the market share. He then referred to other nations as well.

I think those issues are extremely important, and I listened intently in my office to the member for Murray’s contribution when she made reference to some of these issues. We are a small nation in terms of population but in a large geographical area. Our agricultural sector oversupplies, but it is an important component of world trade and very important in terms of our economy. That market dominance and the capacity for agriculture to exist in that environment into the future, where that dominating power over price can be exhibited, is very important. We all know about the anticompetitive practices that occur overseas; we like to refer to free trade but there is no free trade. In fact, only in the last week we have seen the European Community looking at instigating certain market protection mechanisms in relation to butter. So there is a range of anticompetitive activity happening both globally and, regrettably, domestically.

I commend the minister for this legislation, which looks at the various penalties for cartel behaviour—where that behaviour can be discovered. I do not think this bill will uncover very much in terms of market pressure and market power between various players, whether they be in the retail sector, whether they be in the agricultural sector or whether they be in the energy sector. But I do think it is an attempt to improve on what has happened in the past. I agree with the member for Braddon, who has now left the chamber, that there was a certain neglect of this issue by the previous government and I think that if one were prepared to analyse the money trail in relation to some of the major companies then one could probably see why that trail was not followed in the past.

The member for Kennedy made some very good points about the mark-up on basic food products, and the figure of 300 per cent kept coming up as the difference between the farm gate price and the retail price. He used the example of the egg, where there is not a lot of value adding—the chook lays it, someone picks it up and puts it in a box and they transport it to the retail sector. He also used the example of the potato, which does not have high costs between the paddock and the plate. The mark-ups on these things—milk is another example—are all very similar; the difference between the farm gate price and the price to the consumer is something like 300 per cent. He indicated that, where various marketing mechanisms had been withdrawn, in certain areas the price to the farmer had actually gone down and the price to the consumer had gone up, under the guise of some sort of competition that was supposedly taking place. I think this legislation attempts to get at some of those issues.

The member for Braddon mentioned that the minister will be monitoring those issues, and I congratulate him for that and wish him well. But there are instances out there now that are very difficult to tie down. Maybe that is why the member for Higgins never went there—it was too hard to do. I will give just one instance. Some months back, oil was US$140 per barrel and we were paying $1.70, $1.80 or $1.90 per litre for diesel at the bowser. The price of oil has now dropped to somewhere in the vicinity of US$40 per barrel and the price of diesel is down to somewhere near $1.25 or $1.30. The price has not dropped nearly far enough in relation to the barrel price. Some suggest this is because of the influence of China or the demands of the Indian market; that the Singapore barrel price or some other barrel price is impacting it—it is very hard to explain but they would not suggest that there is any market collusion or market power driving it. I have written to the ACCC on behalf of constituents and asked: can you explain why there has been a collapse in the barrel price but the price of fuel, both petrol and diesel, has not gone down in proportion, when it went up quite quickly when the demand-driven barrel price reached $140?

The other question that is asked quite often—and I am sure the minister has had this question asked of him—is why diesel is dearer than petrol when it costs less to produce. In some country towns it is 20c per litre dearer than unleaded petrol. Here again we have a difficulty that government policy is going to have to deal with. A lot of people have been encouraged into more efficient diesel engines; in fact, there were certain incentives to do it in some cases. A lot of people were encouraged to go into LPG. A lot of people are being encouraged by the current government to move into more fuel-efficient vehicles and renewable energy sources—to look at solar energy and a whole range of other technologies. Then the market plays this odd game in which a fuel that is cheaper to produce costs more to buy—a fuel that governments in the past encouraged people to move into because it was more fuel-efficient and the economy was better. But, if you are running at 20c per litre dearer at the bowser, the economics start to kick in. Even though the economy of the engine might be better, the economy of the pocket is quite dramatically affected.

When you write to the ACCC and ask: how is all that happening—as a constituent of mine came in and asked: why is that happening—the answer you get is that it is happening because it can happen, because the fuel companies can charge what they like. They are in a competitive market and they can charge what they like. Competition in that sense means they can bid the price up whereas most of us would think—and this was the case when most of the deregulation took place before neoliberalism died in recent weeks—competition was about bidding price down. What we see now is that where there are fewer and fewer players in the market—and I am talking about the fuel market now but this applies to other areas in the energy business—they are bidding the price up. We saw this in the Japanese coal market some years back where everybody used to go to compete on the price of coal.

So I would say to the minister on these issues that, even though there is no allegation of cartel behaviour there, there are allegations, and I think quite strong ones, of market collusion and the capacity for a relatively small number of players—whether it be in the retail sector or in the fuel sector—to actually drive the price to where they want it rather than where it delivers a reasonable profit to the seller. I think it is a fairly weak answer from the ACCC to say to the people of Australia that the price of diesel is 20c a litre more than the price of unleaded petrol because it can be. As I said earlier, in a relatively large land area and with a relatively small population, we need diesel to transport our goods and services around the nation. So I would suggest to the minister that, maybe in his monitoring process, he has a closer look at what is happening in the fuel business in terms of the way in which international conglomerates seem to dominate that particular market. We have had a slump in the global price. We are told that there is a slump in demand in China and India for almost everything but the price of diesel is still reflecting a very buoyant global economy. I think there are some questions that do need to be answered there.

Another area of energy that the minister may be interested in, and where I believe there are a number of mixed messages being sent, is in the area of renewable fuel. I have spoken about this before. We have these mixed messages coming out of government. We have one message which says, ‘We believe there is climate change occurring.’ I believe there is climate change occurring, and I have a private member’s bill before the House at the moment. We are told that we should encourage people to move to more renewable and environmentally-friendly energy sources. In fact under the stimulus package, which I have supported in the parliament, 2.7 million homes are going to be encouraged to put pink batts in the roof. Over time that will save energy and will have an impact in terms of emissions. There are a number of positive things there. The government was encouraging solar energy and then put a limit on the income of the participants in that scheme. This is part of the mixed messages that people are getting.

In terms of the liquid fuel market—and, Mr Deputy Speaker Scott, you would be well aware of these issues because I know there is a facility in your electorate that has recently been opened—we are trying to encourage people into renewable fuel sources, ethanol and biodiesel for instance. But there is subtle pressure at government level and at industry level, probably more at industry level than at government level but the two are linked in terms of pressure points, where the suggestion is that these industries should not promote themselves too far and should not invest too much because we may well in fact tax them at some future date. People would know that the dirty fuels, in terms of the environment, oil based fuels, are taxed in this country at an excise rate of 38c a litre. There is this subtle message out there, even from some within the farm sector, that says, ‘Why should we subsidise a renewable fuel? Why shouldn’t they pay the same taxes as a non-renewable fuel?’ I think there is an onus on the government to actually address that issue, because to suggest, as some have, that the removal of a tax is in fact a subsidy sends a very ordinary message in terms of trying to encourage people not only to value-add to a product or to import substitute but also to move to more sustainable energy use in the future.

So I say to the minister that, in some of these issues, there are mixed messages still out there. The legislation that is before the House in theory does look as though it may do something. The monitoring that the minister will have to perform and the process of reporting back to the House will be very interesting to see the progress of this particular piece of legislation. There have been a few instances in this new parliament where remedies to readily identifiable problems such as the price of fuel—Fuelwatch I name as one; GroceryWatch is another—on the surface react to the demands of the community, who want something done about the price of fuel or the price of groceries to make sure that people are not ripping them off. This particular legislation will not go to the heart of those issues. But I think the government has to look very seriously at getting to the heart of those issues and the diesel unleaded petrol issue that I referred to earlier. That is what the community is wanting government to do—not put in place gimmicks that look as though they have identified the problem and they are going to fix it. We have had two failures in terms of that in the last 12 months. I just hope that this cartel-monitoring mechanism is not going to be a third one in that particular process.

I will be supporting the legislation because I believe the penalties that have been put in place, even though relatively light in some cases, could in fact discourage some activity in terms of market power collusion, particularly in smaller and medium-sized businesses. I think in a lot of cases, as has been shown in the past, many of the major global players would see the penalties here as relatively minor and something that they would be quite prepared to pay if they can get away with it for a considerable period of time. I thank the House for its attention.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

in reply—I thank all honourable members who participated in this debate today on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. In 1998 the OECD recommended that member nations ensure that their competition laws halt and deter hard-core cartels. In 2003 the Review of the Competition Provisions of the Trade Practices Act, otherwise known as the Dawson review, recommended the introduction into Australian law of criminal penalties for serious cartel conduct. The Dawson review concluded and recommended as such that criminal penalties were an effective deterrent to serious cartel behaviour. The introduction of this bill into parliament demonstrates our commitment to prevent and deter serious cartel conduct. It brings Australia into line with over 15 OECD nations that provide for criminal sanctions for such conduct.

This bill is overdue. Many honourable members have made that observation. It would have been better if it had been introduced by the previous government in response to the Dawson review. The Dawson review reported in 2003, almost six years ago to the day, at the end of January 2003. In turn, the Dawson review was in response to the 1998 recommendation of the OECD. So for 10 years we have been talking about this issue. The previous government announced that they would implement the decision of the Dawson review. They did that in 2005. It took them two years to consider the results of the Dawson review. The previous Treasurer, the member for Higgins, then announced that he would implement the legislation. Draft legislation was prepared but it was never released, never introduced. The previous government squibbed, reneged, on their commitment. The member for Fadden said the previous government had had this on their radar for some time. He was saying that that was a good thing. Well, they had it on their radar but they never pulled the trigger; they never brought the legislation to the House. They never implemented the very serious recommendations of the Dawson review.

This government has listened carefully to concerns around the trade practices community and industry around this bill. This is a complex piece of public policy to deal with. There are nuanced questions to be approached. While the bill is modelled on international proposals and the OECD model, there are of course changes necessary to ensure its effective operation in the Australian context. We have acted quickly but also very cautiously. I released for public comment in January last year the legislation that was prepared for the previous government. We then instigated a roundtable of trade practices experts—criminal lawyers, trade practices lawyers, academics and practitioners—to help us work through some of the nuanced issues. I met with that panel extensively. One of the members was the honourable member for Isaacs, Mark Dreyfus QC, and other members I acknowledged in my second reading speech. We made very considerable changes to the first draft legislation and then released the final legislation late last year. On 3 December the government referred the bill to the Senate Economics Committee for inquiry and report, which is appropriate for a big and complex piece of legislation which has nuanced issues to consider.

I would like to turn to some of the issues raised by honourable members during the course of the debate. I thank all who contributed from the other side, from the government and from the cross benches. I think all three Independents contributed to this debate. The member for Cowper led for the opposition and supported the broad thrust of the legislation, which I welcome. It does represent a considerable change of approach from the opposition given their reluctance to move on this issue during their time in government, but I do welcome their support. The honourable member for Cowper legitimately raised issues relating to the joint venture defence. It is a complex and nuanced issue. The Senate inquiry instigated by the government has received submissions expressing concern that the joint venture defence is too narrow and would limit legitimate business activities. Similarly the Senate committee has received submissions saying that the joint venture defence is too broad and would allow illegitimate cartel conduct to go unpunished. That underlines just how complex this issue is, and it is something that we spent a considerable amount of time on and I personally spent a considerable amount of time working through.

I found compelling the evidence of the Canadian experience, where the joint venture defence is broadly drafted and has been used, in the views of many, to provide a shield for illegitimate cartel conduct. We need to be careful that in drafting defences we do not allow illegitimate and what should be illegal cartel conduct to be hidden under the guise of a joint venture. I said throughout the drafting process that I was open to sensible suggestions, and I continue to remain open to any sensible suggestions. I think we have got the balance right but, if there are sensible suggestions which come out of the Senate process, of course I will consider them and take them on board. But it is a complex and nuanced issue and we have spent a considerable amount of time working on it, and I think the government have largely got the balance right.

The honourable member for Pearce in her contribution questioned the 10-year jail term and said that she thought 10 years was too long, which I found, I must say, surprising and disappointing. There are a number of offences, as the member for Lindsay pointed out, with 10-year jail terms. There is a 10-year prison sentence for directors who wilfully defraud or deceive a body corporate and for directors who fraudulently appropriate the property of a body corporate. These are very serious corporate offences, and cartel conduct is among these most serious corporate offences and should therefore be dealt with as such. So I strongly reject the criticisms of the member for Pearce that 10 years is too long a jail term and that we should have embraced seven years. I think it is a good thing that Australia will have equally the longest jail terms in the world, with the United States, for serious cartel conduct. There is much evidence that, when people are contemplating operating a cartel, the biggest disincentive is not a fine, because that is a cost of doing business; it is the prospect of losing their liberty—of being imprisoned for a very considerable amount of time. Ten years sends that message.

I have to turn to the contribution of the honourable member for Mackellar. I have to say in all seriousness that it was a particularly unfortunate contribution. This is a very serious matter, and I found the honourable member for Mackellar’s contribution—I do not say this lightly, and I have already thanked the opposition for their support—particularly unfortunate. She did a number of things. She attacked the chairman of the ACCC. We are used to that and the chairman of the ACCC is used to that; I do not think he will lose any sleep over that. She attacked his integrity. But what she also did was to ignore the longstanding convention of the House of Representatives that members do not comment on cases before the courts—the sub judice rule. We are all tempted to do it from time to time; sensible members resist. For the honourable member for Mackellar to do that in a criminal case—and House of Representatives practice makes it clear that honourable members should be particularly careful in criminal cases—is something that the honourable member should reflect on. The Leader of the Opposition should reflect on her behaviour in this matter and should deal with the honourable member for Mackellar’s contribution, which was particularly unfortunate.

The honourable member for Mackellar made it clear that she opposes this legislation. Despite the fact that the opposition is supporting it, the honourable member for Mackellar said on a number of occasions that she opposes this legislation. Presumably she opposed the recommendation of the shadow minister in the joint party room, and I have no doubt that she opposed the previous government in this matter. Perhaps that is one of the reasons the previous government did not act—because some on the other side hold these views.

The honourable member for Mackellar said that financial penalties are quite adequate and that there should not be a jail term for cartel conduct. We could not disagree more strongly. The honourable member for Mackellar has shown that she is completely out of touch with the impacts that cartel conduct has on the Australian people. The honourable member for Mackellar has shown that she is soft on cartels. The honourable member for Mackellar appears to believe that cartel conduct is legitimate business activity, and she should be condemned for her contribution, which is one of the most outrageous contributions in this House I have heard in my relatively brief time in the House. It was the most outrageous contribution I have heard in the House in four years, and I would encourage the Leader of the Opposition to deal with the honourable member for Mackellar for breaching the sub judice convention, personally attacking the integrity of the chairman of the ACCC and completely ignoring the longstanding convention of the House of Representatives.

As I say, this is an important piece of legislation. Serious cartel behaviour is theft from consumers and is dealt with as such in the legislation. I understand that cartel cases are difficult to prove and notoriously hard to prosecute. Accordingly, it is appropriate that the legislation be well drafted. What the contributions from the honourable members opposite are notable for, as much as for what they say, is what they do not say. I do not mean that as a criticism, because it shows that we have reached a level of agreement in the House about some of these issues that, frankly, I expected to be more controversial. We thought deeply about giving the ACCC the power of telephone tapping, in conjunction with the Federal Police in the Federal Court, and I made the decision to recommend to the cabinet that we give the ACCC and the Federal Police those powers. I thought it might be controversial. The honourable member for Cowper expressed support for that, which I welcome. We also removed the necessity which was in the legislation prepared for the previous government to prove the intent to act dishonestly. Again, I found compelling the evidence from the United Kingdom when I met with the chairman of the United Kingdom Competition Commission partly to discuss these matters, which have made prosecutions in the United Kingdom very difficult indeed. Again, with the exception of the honourable member for Mackellar, I do not believe that any honourable member on the other side criticised that decision, which I welcome.

I will deal with the comments of the honourable member for New England, which I am sure he would agree were not particularly germane to the bill before us but which were nevertheless important. I will not deal with them in detail, because that would be appropriate at a different time, but I welcome his support for this bill. I am in the process of arranging for the Petrol Commissioner to brief honourable members on both sides, and I will arrange for the Petrol Commissioner to brief the honourable member for New England and his colleagues on the cross benches on the current situation in relation to petrol prices—the impact of the reduction in the Australian dollar and how that intersects with world oil prices and also with diesel—because I think he raises legitimate points. He is quite right that they also get raised with me on a regular basis inside and outside the House, and I understand his concern and the concern of other honourable members. I think it would be beneficial to have a briefing from the Petrol Commissioner, whom I obviously speak to on a very regular basis. He keeps me apprised of movements in the market, and I think it would be of benefit to honourable members to receive that briefing.

As I said, serious cartel behaviour is theft from the Australian consumers—theft which we will not tolerate and theft by the powerful from the powerless. This bill evens the ledger. It is another step to ensure that competition is not just a construct or a theory but a reality in the Australian market. Competition is the key means for ensuring that consumers get the best product or service for the lowest price. It also protects those businesses doing the right thing—businesses out there working hard, putting in tenders, reducing their prices to try and get business, and not colluding with the people who should be their competitors. Businesses doing the right thing deserve to know that businesses doing the wrong thing will be dealt with in the strictest possible way. The bill delivers on our commitment to introduce this legislation within 12 months of taking office but, as I say, we have done that in a cautious and considered way and with full consultation. There are some who think it goes too far and there are some who think it does not go far enough, but I think we have struck the right balance and so I commend this very important piece of legislation to the House.

Question agreed to.

Bill read a second time.