Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Trade Practices Amendment (Predatory Pricing) Bill 2007 will give small businesses much needed protection from a practice that threatens to destroy their livelihood.

This practice is employed by some big businesses and is called predatory pricing.

Predatory pricing is where powerful retailers drop their prices in one area to drive out competitors, before raising prices later on.

Not only are small businesses affected, with some forced to shut up shop because they can no longer compete, but Australian families suffer as well from higher prices in the long term.

Australian families, who are already struggling to make ends meet, are being ripped off as big business predators price independent supermarkets, pharmacies and petrol retailers out of the market. 

It is important to understand that many of Australia’s major retail markets are controlled by only two or three players.

For example, Coles and Woolworths have a thumping 80 per cent control of the grocery trade, and these two giants also dominate the petrol market.

They also have a strong presence in the non-prescription medicine and healthcare and toiletries market.

It is no wonder these supermarket giants reaped profits last year of up to five per cent, the highest in the world.

And it is no surprise that food prices in Australia are rising at double the inflation rate, making it even harder for families to survive and pay the bills.

It is interesting that this huge market dominance is not seen in other countries, which is why it is so important to stand up to big businesses destroying smaller rivals.

Family First has two constituent groups; Australian families and Australian small businesses. These groups do not have a strong enough voice in Canberra and Family First believes they need all the support they can get.

Because predatory pricing has such a negative impact both on small businesses and ultimately families through higher prices, Family First is introducing legislation to ensure smaller operators are protected from predatory pricing.

It is a joke that small business has been waiting for protection for over three years, since the Senate Economics References Committee recommended action.

Family First acknowledges that we cannot undo the market domination, but we can have laws that ensure genuine competition, which benefits small business and also families by delivering the lowest possible prices.

Family First’s legislation to amend the Trade Practices Act is similar to Canadian competition laws and outlaws predatory pricing which destroys competitors.

The Bill outlaws predatory pricing in three key concentrated markets which are very important to families.  These are the market for groceries, the market for the sale of fuel and the market for pharmaceutical products, proprietary medicines and toiletries.

There is a growing lack of competition in these markets and genuine concerns about corporations using their market or financial power unfairly.

The Family First bill would help restore a more competitive market by outlawing predatory pricing, so small businesses and families are better off.

There are a number of other concentrated markets where small businesses have similar problems and those industries may be listed in the future.

Under the Family First legislation it has to be shown that a corporation has either a “substantial degree of power in a market” or “substantial financial power”.

This strengthens the Trade Practices Act to cover corporations that may not have “substantial degree of power in a market” but do have the “financial power” to act in a predatory way.

It is worth pointing out that the 2004 Senate Committee on protecting small business heard evidence that a financial power test would be appropriate.

In the Family First Bill, where one of those two conditions, financial or market power, is met, a corporation is not allowed to offer goods or services for sale in a market at unreasonably low prices, with the purpose or effect of substantially lessening competition in that market or eliminating competitors.

It is important to stress that this does not prevent ordinary sales or discounting.

Family First is certainly not against price cutting, but when you undercut for extended periods of time with the purpose or effect of squeezing out a competitor that’s not on.

The Bill also adds an “effects test”, which means those corporations that do have “financial” or “market” power need to be careful in how they use that power so they do not substantially lessen competition or eliminate competitors.

The ACCC supported an effects test in evidence to the 2004 Senate Committee inquiry.

As I said earlier, Australian families are being slugged by big increases in food prices. Last year food inflation was almost 10 per cent, which is the second highest in the industrialised world. The latest inflation figures show that food prices are increasing at double the inflation rate.

How do we explain these statistics?

One of the major reasons is that the market is not working. There is not enough competition to keep prices as low as they should be and families are suffering because of it.

Families and small businesses are the victims of the market power being wielded by some of Australia’s retail giants who dominate key sectors. 

The system has got to change.  After all, most small businesses are family businesses.

In fact, a total of 97 per cent of businesses in Australia are small businesses, with fewer than 20 employees. And these small businesses employ 50 per cent of Australian workers, half the entire Australian workforce, or about 3.6 million people.

If small business can always be undercut, there is no point in them trying to compete with the supermarket giants.  They know they can never win a price war. It is no surprise that many small businesses shut down or are bought out by the big players.

On the other hand, if the law bans predatory pricing, it encourages small business to make efficiencies to compete.

Another reason Family First is so determined to protect smaller operators is because they are vital to local communities, particularly in regional Australia.

The loss of small shops can be devastating to a town, and particularly impacts on older and less mobile members of the community.

The equation is simple; you need competition to keep prices lower over time, so families get the best deals.

We all know that the supermarket giants sell their groceries at higher prices where there is no competitor in the area.

Family First is delighted to have support for this move against predatory pricing from a range of key small business groups, including the Pharmacy Guild, the Motor Traders Association of Australia, the Victorian Automobile Chamber of Commerce and others.

These groups recognise that Family First is championing the needs of small business because the Government has failed to give them the protection they need.

Family First asks the Government to support this Bill so small businesses can have genuine protection from predatory pricing and families can enjoy the lowest possible prices.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.