Ron Boswell (Queensland, National Party) Share this | Hansard source

This is a big day for small business. The amendment that the government is putting through, and which has Barnaby Joyce’s fingerprints on it, is one of the biggest breakthroughs for small business that I have seen in my time in parliament, and it deserves the support of all senators. It would be absolutely churlish of anyone to say that this has not gone far enough. I do not believe that. This is just about the panacea for small business. It is very important because, as Senator Joyce has said, if we want an egalitarian society—which Australia is well noted for—with a bit of poverty on one end and a bit of wealth on the other but with an overwhelming middle class, then that has to be supported by a strong small business community. Whether it be retail trade, engineering, manufacturing or whatever, small business definitely underpins the egalitarian society of this nation.

My view has always been that you have to have competition—it is healthy for the consumer and it is healthy for the economy in the long term. If we have manipulation or control of a market by one or two larger players, without competition and without competition being provided by small business, it will eventually lead to higher prices, less range, less innovation and less opportunity for producers to sell their products. We have seen a number of trade practices amendments come through this house over the past few years, and we have always tried to maintain that balance. We amended the Trade Practices Act in 2006 with the Dawson reforms, which introduced a faster, cheaper system of collective bargaining for small businesses with their suppliers and buyers and provided them with a new formal merger process which big business had been asking for. That was when this legislation became a goer and was supported in this chamber. After the Dawson reforms there was agreement on the legislation that came through this chamber to amend section 46. But those changes were not as significant as the changes that we are making today.

In my 24 years in the Senate, there has been no more contentious issue than the misuse of market power under section 46 of the Trade Practices Act. Misuse of market power is where a business holds an advantage in market power over its competitors and uses that market power to unfairly compete with other businesses. A classic example of that was the Boral decision. That was where the whole of section 46 changed and got out of whack. Boral undercut a particular block maker—I was involved in this—and the block maker went to the ACCC. The ACCC took Boral to court and Boral won; the ACCC appealed and won. Boral then took the ACCC to the High Court and won, and then the whole of section 46 was knocked out of whack. Since that time, as Senator Joyce and others have said, there has not been another predatory pricing case before the ACCC.

So this amendment will bring back the balance in the misuse of market power. I will just explain what it means. A classic example of misuse of market power is the practice of predatory pricing where a larger competitor prices a product or service below cost price for a sustained period for the purpose of driving competitors out of the market. Predatory pricing can end in ruin for the targeted business or in the bigger company buying the smaller company out and absorbing it, often burying the innovation and the new technology it had begun to produce—a new product, design, production or method of operation.

That is exactly what happened in the Boral case. A particular brickmaking operation designed a new machine which worked three times as fast as previous ones and was able to reduce the cost of the Besser blocks or whatever. Then Boral decided to take them on. To cut a long story short, Boral ended up buying this particular brickmaker out after trying to predatory price him out of the market. Predatory pricing and other misuse of market power actions to drive out a competitor are poison for the Australian consumer. Not only do they reduce competition in the marketplace, which we aim to encourage and promote, but they also reduce innovation and the essential search for business efficiencies, which have been the hallmark of small businesses forever.

Small business remains an integral part of the Australian economy. Certainly, it has an importance for rural and regional areas, where it is the backbone of local communities and towns. It is the employer and contributor to the local footy club, the local scout group. Small business is always good for a touch: when the scouts, the football club or the basketball club come around, the first port of call is the local shop and it is always good for a donation. So it is very important to the National Party.

You cannot expect business just to be there; it has to grow from something. It just does not become big business overnight. Big businesses start from a seed; an oak tree grows from an acorn. The existing legislation envisages that new, internationally competitive business will just come into existence without encouraging, nourishing and providing fair protection for small business not only in the regions but also in the cities. It just will not happen. We have an effective trade practices regime that relies on three basic premises. One is effective merger laws and we have those. In 1986 the Labor Party changed that. When Chris Schacht was the Minister for Small Business, I asked him to change the merger laws. He was a great mate of mine, and I said to him, ‘Chris, you’ve given Keating 23 votes; call in your IOUs and change the merger test.’ And that is what he did. He was a great believer in small business, and we were great mates. I said to him at the time: ‘You cannot just create small business; it has to grow. You cannot just have a monopoly test’—and that is what we had. You had to have a monopoly before section 46 would cut in. We changed that act to say, ‘You cannot substantially lessen competition in a substantial market.’ It was called the Chris Schacht amendment. I always claim victory for that, because I said to him: ‘Chris, you’ve just given Keating 23 votes in his leadership challenge. He is now the new Prime Minister, call your IOU in.’

We have effective merger laws and we have effective laws against cartels and pricing. We have very effective laws against predatory pricing and the misuse of market power, as a result of corporations possessing substantial market power. I do not believe you can go any further than this amendment. Small business must think it is Christmas today. We have negotiated and dealt with changes to the merger process through the Dawson reforms. We have maintained the strong mergers test in section 50 of the Trade Practices Act that Chris Schacht and I colluded to bring forward, which states that you cannot lessen competition in a substantial market.

We have a strong law and penalties against cartel behaviour which have been further strengthened under the coalition government, and legislation is imminent to strengthen them even further. The Treasurer has recently introduced a bill to allow the ACCC to take court action to access compensation for victims of secondary boycotts, and now we are going to revisit section 46. Section 46 must be available as a working remedy for small business in a form which reflects the intention of the 1986 test. The intention of the last change to section 46 in 1986 was to ensure that it was not just a monopoly business that could be prosecuted for misuse of its market power under the Trade Practices Act—and full credit to Mr Duffy, who I think was the Attorney-General at the time. I had an interesting interlude with Mr Duffy. I said to him, ‘You have to be able to get a small business to grow.’ He said, ‘You’re right; I can never buy Bulla yoghurt in the shops and I love Bulla yoghurt.’ I said, ‘That’s because Bulla is small and it can’t get on the shelves, and Bulla will be bought out if you don’t change section 46.’ Bulla yoghurt was one of the mediums that we got section 46 changed through.

However, the High Court decision in the Boral case changed all that and knocked it back. I raised this issue time and again in the party room with Senator Brandis, who is a noted trade practices lawyer. The Brandis committee was set up, which Senator Joyce has given accolades to. It brought down recommendations, and that is how this legislation came before the House. A number of us in the party room kept raising this issue, saying: ‘Since the Boral decision, section 46 is rendered useless. You have to be a monopoly.’ It is almost like Qantas attacking Cairns Air with two Barons or something like that. That is an example of the way it would work.

Debate interrupted.