Nick Xenophon (SA, Nick Xenophon Team) Share this | Hansard source

I can indicate on behalf of my colleagues that we support the second reading stage of the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 and we're broadly supportive of this bill. It's been a long time coming, and we do actually need to have strong competition laws in place to prevent abuses of market power. Otherwise, it becomes a free-for-all. Otherwise, dominant players can squash the smaller players, and we've seen evidence of that where a small business that is trying to break into a market can be squashed as a result of predatory pricing practices of bigger operators, because they can afford to do that. That is something that this bill goes some way in addressing.

This bill is a result of the extensive work undertaken by Professor Ian Harper and the review panel. The government ought to be congratulated for undertaking this review. It was the first significant review of this type for many years, and it's a review that has been a long time coming, because of concerns that our competition laws have not been working as effectively as they can be. The practical consequences of that have been set out very eloquently by the great Australian writer Malcolm Knox, the author of the book Supermarket Monsters: The Price of Coles and Woolworths' Dominance, which was published in 2015, a couple of years ago. I commend this book to anyone who's interested in seeing the practical consequences of what happens when you have one or two businesses having an extremely large market share, because that market share brings with it enormous market power, resulting in distortions in the market and problems for smaller operators to do with that.

Now, in relation to this particular piece of legislation, I welcome it. I know that the Nationals have had a significant role in pushing for the effects test, which I think is a good test that ought to be introduced—in fact, it's been long overdue—but I believe it needs to go further. It needs to go further, because the effects test essentially cannot be triggered unless there has been a substantial lessening of competition. Those words 'substantial lessening of competition', I believe, are inherently too restrictive. I think we need to look at what the Europeans have been doing for a number of years in the way they look at competition law. They look at the impact of competition in the marketplace, which looks at it from a broader perspective rather than a very narrow test—a hurdle that I feel would be quite difficult to get over in many circumstances.

We need to see how this bill will work, but, having said that, I believe we actually need to have access to justice for this bill to effectively work. It's no good having a piece of legislation with beneficial clauses in it unless people can access those clauses. It's no good having a law in place unless you can enforce that law effectively. As it currently stands, small-to-medium businesses with clear cases of abuse of market power against them are prevented in practical terms from pursuing those claims due to the impact an adverse legal costs order would have on the business in the event their case were to fail.

A costs order is an elephant in the room that particularly prevents companies that have a good case from pursuing it further. There's one retailer in South Australia—I don't think it's necessary to identify that retailer—who has said to me that he's regularly advised by his lawyers that they actually have a good case for abuse of market power in the current provisions, but the problem is that if they lose the case they will be subject to a multimillion dollar costs order against them, in addition to the very high costs of bringing a case forward. That is a problem that does not exist in the United States or Europe, because cost orders are not made in those jurisdictions in competition matters. It's instructive that in the home of capitalism, the United States, they do not exclude small businesses from access to the protection of their competition laws. Their laws go much further to protect competition than Australian laws do now, or as proposed in this bill.

The Harper review acknowledged the problems of access to justice but offered no practical solutions to them. I note that Senator Katy Gallagher had a bill in this parliament that passed the Senate last week. When I spoke to her about this, she was concerned that I would damn her with faint praise. Well, she will be damned with faint praise. No, I will be praising her with real praise, because that is a good piece of legislation that I hope can pass through both houses of parliament. It finally tackles issues of access to justice so that you don't get these monumental cost orders against a small or medium business taking on a giant corporation. And that's why that bill is so valuable. I think that bill is so good that I've incorporated the provisions of that bill into an amendment to this bill. I understand Labor is opposed to this bill, but I would be gobsmacked if Labor would effectively oppose their own provisions of their own bill in the amendment that I propose to move that will incorporate their access to justice provisions. The government's bill, as good as it is in parts, will not be truly effective unless you tackle the issue of access to justice, and that is something that needs to be dealt with.

The other issue that this bill does not address is something that Senator Canavan has previously raised, and I appreciate his support for this issue. We need to have divestiture powers. You need that sword of Damocles hanging over companies, because it isn't enough if it's simply a monetary penalty. There's nothing like the fear of divestiture to change the culture of a corporate company that could be abusing its market power.

As it currently stands, in the rare situation where a market power abuse finding has been found by a court, the court can order the company be restrained and also impose a large financial fine against a company. And that's problematic, because no amount of restraint or fine will bring back to life the hundreds of small businesses that have been wiped out by large companies' misuse of their market power. And the perpetrators of market abuse can be so large that the fine will be considered by the offending company as simply a cost of doing business. This bill proposes positive changes to the way in which market abuse is proved but it does nothing with respect to enhancing the remedies. That is why there ought to be an ability for a court, as a last resort, to order divesture, which, like the sword of Damocles, would serve as the ultimate threat. It makes sense that a court should have a remedy in its tool kit that makes it impossible for a serious or big business offender to offend again.

The remedy of divesture has been available in the home of capitalism, the United States, for nearly 100 years. The US competition laws were born out of a community call to break up Standard Oil, which was misusing its market power in the oil refinery sector. With divesture written into the market power abuse statutes, the boards of big businesses will think more than twice before proceeding to misuse their market power against competitors. I am thankful for the support that Senator Canavan gave me when I introduced a bill to this effect several years ago. It didn't have much support from the major parties, but Senator Canavan, in a very sensible, erudite additional comment to that report, supported the bill for the reasons that I've outlined.

In relation to the position the Australian Greens have negotiated, I want to say at the outset that I do have enormous regard for Senator Whish-Wilson and the work that he has done and I'm sorry I didn't have a chance to speak to Senator Whish-Wilson previously. But I am disappointed that there weren't further amendments in relation to divesture, that there weren't further amendments in relation to abuses of market power, but also in relation to access to justice, which I think is very important. But I'm hoping that there will be another opportunity, sooner rather than later, to do that. I think there has been an opportunity lost here. I say that respectfully but with a great sense of disappointment because I think Senator Whish-Wilson and I share similar concerns about small and medium businesses being given a fair go in this country.

In relation to the amendments circulated by Senator Whish-Wilson on behalf of the Greens, this amendment relates to the government's proposal to repeal part XIB of the Competition and Consumer Act. The amendment will retain the existing enforcement powers that relate to the telecommunications industry. It is something I've raised on more than one occasion with the chairman of the ACCC, Mr Rod Sims. The repeal of part XIB was the subject of criticism of various telecommunications companies. While Telstra agreed with the proposal that part XIB provisions were are no longer necessary or appropriate given the amendments to section 46, Vodafone—VHA—expressed strong opposition to the repeal under divisions 2 and 3 under part XIB characterising the proposed amendments as unnecessary and premature.

During Senate Estimates in March this year I asked the chairman of the ACCC, Mr Sims, about the utility of part XIB in light of the amendments being made to section 46. He said there's a particular part of XIB that was put in place when the ACCC was having a lot of issues with Telstra and that they were very strong powers in terms of its ability to issue competition notices and fine them $1 million a day. The ACCC just felt that with where the telecommunications market is now, if the current section 46 changes go through then the ACCC has got all the adequate powers. So the other things we're looking at are different sorts of issues. Mr Sims went on to state that the ACCC does not judge that there is any reason to have the industry different to other markets and state that competition in the telecommunications sector, I think it is fair to say, has a long and complicated history.

In 2010, I moved amendments to strengthen the provisions of the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill. That bill set a framework for either a voluntary structural separation or compulsory functional separation of Telstra and put in place a number of safeguards with regard to access competition and consumers, something I negotiated with then Minister Conroy. The key issue with respect to whether the Senate ought to pass the amendment was whether part XIB has served its purpose or whether the existing regime should be retained to act as a strong deterrent to anti-competitive conduct in the telecommunications sector.

The last competition notice was issued in April 2006, but this does not mean that part XIB has not been playing an important role. It is my view that the ability of the ACCC to issue a competition notice has been acting as a sufficient deterrent and should continue to operate within what is a dynamic telecommunications sector—or rather, a market is the sector, but it's a dynamic market as well.

Further, the ACCC is currently conducting a market study of the communications sector. The study will allow the ACCC to consider a wide range of interrelated developments that have been raised by the industry and go to the effective functioning of the market. It will inform how the ACCC will undertake its role in parts XIB and XIC of the Competition and Consumer Act to facilitate markets that provide consumers with a choice of products at a price and quality that meet their needs and circumstances. I do not believe it is appropriate to repeal part XIB prior to this market study concluding. I will review the report once it is completed, in order to ascertain if part XIB should remain in its current form.

I can indicate that I and my colleagues will support the amendments circulated by Senator Whish-Wilson. I do have more to say, Deputy President, but my voice is giving way on me—which I'm sure is something that my colleagues are very pleased to hear! So I will try and save my voice for the committee stages of this bill.

We support the second reading of this bill. We believe it can be improved. We believe there has been an opportunity lost in terms of further reforms. In particular, in relation to the issue of the abuse of market power, the threshold for substantial listing of competition I fear will be too high. But the general principle of an effects test is a good one, and that is why we want to see this bill go through—hopefully, with amendments that will strengthen it and make it much more effective.