Thursday, 11 May 2017
Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017; Second Reading
The Competition and Consumer Legislation Amendment (Small Business Access to Justice) Bill 2017 is about making sure our competition laws are better enforced by giving small business better access to justice. Labor wants to empower small business private litigants to bring litigation under part 4 of the Competition and Consumer Act without the burden of prohibitive legal fees. This bill represents a policy that we took to the last election. Since its inception the Trade Practices Act 1974, now the Competition and Consumer Act 2010, has had section 46. This is a key component of Australia's competition laws. It is designed to prevent firms with substantial market power from deliberately using that power to eliminate or substantially damage a competitor, prevent the entry of a competitor or to deter or prevent competition. Businesses have the legal right to take action under section 46 if a competitor is engaged in anticompetitive conduct. However, at the moment this is hard for small and medium-size businesses to do, even when there is a clear breach of our competition laws. We all know that the larger players have the money, the lawyers and the capacity to fight these cases. In some instances they have an incentive to drag these cases out. Even where the small business has a strong case they worry that if they lose or if they have to fold they could face huge legal bills. This means that smaller players are discouraged from taking action to enforce Australia's competition laws and, through this, they are discouraged from accessing justice.
There is a concern that there is an uneven playing field between large and small businesses in Australia. The Australian Competition and Consumer Commission has taken action in this space, although it has been suggested that this is insufficient relative to the number of allegations. The issue is addressed by the Harper competition review, which found small business access to remedies to be wanting, stating:
From submissions and consultations with small business, the Panel is convinced that there are significant barriers to small business taking private action to enforce the competition laws.
This bill will address the difficulties small businesses face in getting justice under Australia's competition law. It does this by two measures. First, it allows judges in the Federal Court to waive liability for costs to small business private litigants bringing these cases. We know that all too often small businesses do not take the big end of town to task, despite the fact that they may have a strong case. This is simply because they cannot afford to risk the costs of going to court, especially when their cash flow is already tight.
We on this side of the chamber want to make sure that small and medium businesses are on the same level playing field in our justice system as big business. This bill will do exactly that. It will be up to the judge whether a no-adverse-costs order is warranted. This empowers the small business owner with the knowledge that they will be able to argue their case without fear of a huge legal bill at the conclusion. If the application is not approved, they can then make a decision knowing that they are proceeding at their own risk. Either way, they will have greater up-front knowledge and certainty about the impact of proceeding with the competition case.
The second element of the bill is that small businesses will be able to go to the Ombudsman to get early assistance to find out whether they should consider going for these new no-adverse-costs orders. The legislation would allow the Australian Small Business and Family Enterprise Ombudsman to provide professional assistance as to whether the no-adverse-costs order is likely to be granted. This is to assist in the process of a private litigant requesting a no-adverse-costs order. While this will not be legally binding, the ombudsman will assist small businesses to better understand their prospects of successful action under the Competition and Consumer Act. The small business ombudsman, Kate Carnell has commented on this bill. She has said:
Regarding anti-competitive behaviour, the ASBFEO office remains committed to ensuring small businesses have every opportunity to compete on a level playing field. Labor's proposal regarding a 'no adverse costs order' has merit, and deserves serious consideration by all sides of politics.
This bill represents a practical change for small businesses and is in the public interest. By allowing private litigants to better bring action under the Competition and Consumer Act, anticompetitive behaviour by powerful interests will be better mitigated, helping to support Australia's competition policy framework. This is a sensible proposal to provide some support for small businesses without damaging competition in the process.
Unlike some other international jurisdictions, competition litigation in Australia is primarily by public in nature. In the United States, about 10 private cases are brought for each public case. In Australia, the ratio is about one private case for every three public cases. There are certainly a number of disincentives to bringing private litigation under the Competition and Consumer Act. The primary consideration is the potential liability of opposing costs, in the situation where an applicant loses a case. When the misuse of market power is considered, the opposing costs are likely to be large given the reliance on solicitors and barristers, as well as competition experts. Further, defendants in these types of cases tend to be both wealthy and powerful. This is distinct from litigants who, given the nature of their grievance, tend to be less powerful. We think this bill is an important step to improving competition, strengthening enforcement of our competition laws and giving small business greater access to justice. We think this is an area where enabling small and medium businesses to take action here would lead to a more competitive economy, more opportunities for small business and better outcomes for consumers.
Some have linked an effects test to this bill. Labor is opposed to the effects test. However, we know that other parties in this chamber have a different position on it. This bill is separate from the effects test. It ensures that when action is taken under Australia's competition laws, the playing field is more even between small and large businesses. I want to make it clear that this is a measure that both those in favour of the effects test and those against the effects test can support. This bill simply allows better access to competition laws for small and medium businesses. Labor certainly support strong competition policy; however, we are opposed to an effects test because we have serious concerns about its impact on competition. 'Effects test' is shorthand for a test that looks at whether conduct engaged in by a firm with a substantial degree of market power has the purpose, effect or likely effect of substantially lessening competition. This is dangerous economic policy. In our view, the effects test creates a legal risk for a business every time it seeks to lower prices for its customers. We believe that consumers are the losers under the effects test. The effects test risks making businesses afraid to compete, which ultimately, in the long run, hurts consumers.
There have been many inquiries into Australia's competition laws. Since 1974 at least 10 inquiries have considered the proposal of an effects test and have rejected it. Apart from Professor Harper's review, only one other inquiry has ever recommended it. In submissions to the Harper review, the effects test has been described as 'legally unworkable', something that 'will chill competition' and something that 'will create uncertainty for business'. We believe that it will deter investment by adding new layers of red tape and will not help competition.
We believe that this bill is a better approach to competition law, by making sure that small and medium businesses have greater access to justice, and are not discouraged from taking action under our competition laws where they have a good case. However, as I have said, the access to justice policy in this bill is distinct from the effects test. It can be supported by those in favour of the effects test—the government's position—and by those opposed to the effects test. It complements the competition laws in Australia by allowing greater access to them.
We know that small businesses make up 97 per cent of businesses in Australia and they are the engine room of the economy. They employ almost five million people and contribute in excess of $343 billion to the economy every year. This scale simply cannot be ignored. That is why we would have liked to have seen Malcolm Turnbull and Scott Morrison put more of a focus on small and medium businesses in this budget instead of focusing on the big end of town. Small businesses are crucial to Australia's economy, and the budget that we have just seen confirms that the priority for this government is very much the big end of town over those working hard to grow their businesses and to create more jobs in their communities. When small businesses receive the support they need then they are able to grow, which in turn creates jobs and allows them to contribute more to the national economy.
Unfortunately, from our point of view, this budget is a missed opportunity. It has not addressed some of the most significant issues for small business. For example, it has not addressed issues including rising energy costs, delays in payments times and the delays in the rollout of the NBN. These are issues that are consistently and constantly raised with me by small businesses across Australia. We did welcome the decision to extend for one year the small business instant asset write-off. However, we are disappointed that the government has not acted to stimulate jobs or growth or to address the all-important issue of cash flow for businesses. Waiting for payments for supplies or services delivered is debilitating for small businesses right across Australia, and this budget, from my reading of it, has made no effort to address the 'payment terms' problem exposed in the Small Business and Family Enterprise Ombudsman's recent report into the practice.
In order to compete in a global economy, small businesses need access to high-speed internet to grow their business and sell their products. But, again, this budget provides no solutions for Malcolm Turnbull's substandard National Broadband Network. This inaction simply makes it inevitable that Australian small businesses will continue to struggle with one of the slowest and most expensive internet services in the developed world.
The budget also leaves small businesses to fend for themselves on increasing energy prices. We have seen a complete absence of leadership from the top of this government on energy policy. This has a real impact on small businesses. In the last six months it has been mentioned to me at almost every meeting I have had with small business. As the contracts that they have to enter into for the next three years or so arrive, some businesses have raised with me the prospect that their annual energy bill is going from, say, $20,000 a year to $90,000 a year. I do not know how the government expects small businesses to absorb that kind of increase in a year. There is no response to this from the government. The lack of any consistent national policy, move to an emissions intensity scheme or investment certainty that is required around renewables is a policy void that is impacting on small businesses. They are raising it with me. They are extremely concerned and they want to see a response from the government, and it was absent in this year's budget. Wholesale power prices have doubled under this budget, and it looks like small businesses and households will continue to have to pay the price for this government's head-in-the-sand approach to delivering a national energy policy.
This bill before us today is all about levelling the playing field when it comes to access to justice for small business. We have consulted on this bill. It was a policy that we took to the last election. My predecessor in this position, Michelle Rowland, consulted heavily on this with a range of small-business stakeholders. Since taking up this portfolio, I too have met with not just industry associations but small and medium business owners themselves to talk through Labor's policy in this regard.
I have to say that, at the small business level, the effects test itself has not been raised with me as a top priority. On the issue of creating a level playing field—this perception, rightly, and wrongly at times perhaps, that small business does not get treated fairly is certainly one that is alive and thriving in the small business community, and I think there is a lot of merit to that argument. There is no doubt that small businesses want to see some improvements to the legislation around creating a level playing field, and the feedback that we have got from stakeholders of this bill supports it. Even those stakeholders who support the effects test also want to see this legislation get through; they see it as complementary too. And, for those that support an effects test, it is not necessarily an either/or scenario. We believe that this is the best way to go, and we do not support an effects test, which is why we have developed this legislation to deal with the issue of a level playing field and have that debate here.
Certainly, small businesses think access to justice is a difficulty for them, as well as the affordability of access to justice, which is why this bill goes particularly to that point. Many have raised with me examples of where they would have considered pursuing legal action or just taking legal advice, but the costs of that and the risks to their business resulted in them deciding to just cop it, ignore it or move on. That is exactly what this bill tries to address.
There have been very concerning stories around small-business loans, for example, This has come up across my portfolio into financial services, and small-business loans are something that I think we need to do further work on. We note that there is an initiative in the budget around a streamlined complaints mechanism which will allow small-business complaints, particularly about their loan arrangements, to be considered. We are having a look at the detail of that over the next few days and we will have some questions about it at estimates.
But there is no doubt that there have been some extremely concerning stories about small businesses doing all the right things, meeting their loan obligations, making all their repayments, and then quite unfairly losing their businesses because of the actions of particular banks. I have spent a fair bit of time with people who have gone from being extremely successful business owners with long histories in the business community, with good records as employers and as contributors to the community, to having the rug essentially pulled out from under them—through, seemingly, no fault of their own—and having to refinance their loans or having their loans called in, and it has absolutely crippled them. In some instances, it has bankrupted them. Not only has the bank taken their business; it has taken their house. It has taken their super. In some instances, the banks have taken everything and left them destitute. We saw another example of that on 60 Minutes on Sunday night, with the case of the Maloneys.
I think as parliamentary leaders of the country we must look at every way we can make sure that small-business owners are not placed in that position, because there should be protections there, or, if they are, that there are protections provided to get a fair hearing, to be treated fairly at all times and to make sure that, if it gets to the point where there is a dispute, that dispute is heard quickly and, where able, there is compensation for harm that is caused. The Small Business and Family Enterprise Ombudsman has looked into this and made some comments on it. This is something that we need to pursue further. Of course, our position would be around a banking royal commission, but what I am saying in terms of running alongside this bill is that there are other ways that we need to look at making sure that small business is being given a fair go. We cannot take our eye off the ball. This does one thing, but there are many other ways that we need to support small businesses and make sure that they are treated fairly, treated with respect, and that their contribution to the community is acknowledged and they are not treated badly, particularly by the banks.