Jacinta Collins (Victoria, Australian Labor Party, Parliamentary Secretary for School Education and Workplace Relations) Share this | Link to this | Hansard source

I present a revised explanatory memorandum relating to the Competition and Consumer Amendment Bill (No. 1) 2011 and I move:

That these bills be now read a second time.

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

Leave granted.

The speeches read as follows—

AUSTRALIAN ENERGY MARKET AMENDMENT (NATIONAL ENERGY RETAIL LAW) BILL 2011

Under the oversight of the Council of Australian Governments, Australia has made significant progress over the last decade towards an efficient and effective national energy market, in particular in the development of uniform national energy laws for electricity and gas.

This Bill I am introducing today is part of the current Council of Australian Governments’ reform program under which non-economic regulation of the distribution and retail of gas and electricity will also be subject to the national energy institutions and regulatory arrangements.

The Australian Energy Market Amendment (National Energy Retail Law) Bill 2011 sees the Commonwealth take an important role in implementing the cooperative legislative regime for regulating retailers and distributors who sell and supply electricity and gas to retail customers. It is the final major component of the national energy market reform program agreed by the Council of Australian Governments in response to their 2002 Energy Market Review, ‘Towards a Truly National and Efficient Energy Market’ and set out in the Australian Energy Market Agreement.

The South Australian Parliament passed the National Energy Retail Law (South Australia) Bill 2010 (SA) on 9 March 2011. That Bill received Royal Assent on 17 March 2011. The National Energy Retail Law (South Australia) Act 2011 (SA) includes as its Schedule the National Energy Retail Law, which provides for rules and regulations to be made under that Law, called the National Energy Retail Rules and the National Energy Retail Regulations.

The National Energy Retail Law set out in the Schedule to the National Energy Retail Law (South Australia) Act 2011 (SA), and the Rules and Regulations to be made under it, are supported by amendments to the National Electricity Law and the National Gas Law included in the Statutes Amendment (National Energy Retail Law) Act 2011 (SA).

The South Australian Minister will also make rules which amend the National Electricity Rules and the National Gas Rules on two related matters. The first set of amendments are national rules which enable retail customers and property developers to seek new (or significant modifi­cations to existing) connections to electricity and gas distribution networks. The second set of amendments are new rules to set out the rights and obligations between distributors and retailers which are necessary to support the retail supply of energy to customers and include a credit support regime.

Together the National Energy Retail Law set out in the Schedule to the National Energy Retail Law (South Australia) Act 2011 (SA), the Rules and Regulations made under it and the consequential amendments to the national electricity and national gas regimes are known as the National Energy Customer Framework (the Customer Framework).

The Customer Framework will be applied in all jurisdictions which are part of the National Electricity Market, namely South Australia, Victoria, New South Wales, the Australian Capital Territory, Tasmania and Queensland as well as the Commonwealth, by application Acts. The Ministerial Council on Energy has agreed that jurisdictions will aim for a target uniform commencement date for the Customer Frame­work of 1 July 2012, noting that transitional legislative arrangements will be required to appropriately manage the transition process.

This Bill will amend the Australian Energy Market Act 2004 (Cth) to apply the National Energy Retail Law set out in the Schedule to the National Energy Retail Law (South Australia) Act 2011 (SA), and the Rules and Regulations made under it, as a law of the Commonwealth in Australia's offshore area (essentially, the area from three nautical miles offshore to the edge of the continental shelf). This Bill will therefore make the Australian Energy Market Act 2004 (Cth) the Commonwealth's 'application Act' for the new national energy retail regime.

The National Energy Retail Law will be under the jurisdiction of the Australian Energy Regulator as regulator and enforcement body and the Australian Energy Market Commission as rule maker. Its primary aims are to streamline regula­tory requirements, increase efficiency through regulatory harmonisation and maintain best practice consumer protection. As a result, the National Energy Retail Law is expected to facilitate an increase in retail competition by reducing regulatory complexity and lowering barriers to entry, as well as by encouraging consumers to participate in this competitive market by providing strong and equitable consu­mer protections across participating jurisdictions. Other key benefits of the National Energy Retail Law include an increase in efficiency and competition obtained through having national regulatory arrangements, a comprehensive suite of robust energy-specific consumer protections, and the establishment of a national Retailer of Last Resort framework.

The National Energy Retail Law incorporates an objective which mirrors the objectives in the National Electricity Law and the National Gas Law. The national energy retail objective is "to promote efficient investment in, and efficient operation and use of, energy services for the long term interests of consumers of energy with respect to price, quality, safety, reliability and security of supply of energy." The alignment between the objectives of the laws governing the various sectors of the energy markets is an important foundation for the regime.

Currently each jurisdictional regime has a different regulator that makes decisions and determinations for that jurisdiction. Under the new National Energy Retail Law, the regulation of all energy retail businesses will be undertaken by a single national regulator, the Australian Energy Regulator - a Commonwealth body. This Bill provides for the extension of the Australian Energy Regulator’s powers to regulate the retail energy market. The National Energy Retail Law therefore brings the whole energy supply chain – wholesale markets, transmission networks, distribution networks and now retail markets – under national regulation with the Australian Energy Regulator overseeing a robust compliance and enforcement regime across all participating jurisdictions. This crucial reform will lead to a more efficient and consistent regulatory decision-making process.

Under the National Energy Retail Law, the Australian Energy Regulator will exercise a range of regulatory functions and powers. These functions include administering a targeted compliance monitoring and enforcement regime. The enforcement regime in the National Energy Retail Law reflects and enhances the current enforcement regimes in the National Electricity Law and the National Gas Law to create a harmonised enforcement regime across the national legislative frameworks.

The National Energy Retail Law will give the Australian Energy Regulator a range of new functions and powers, suitable for the regulation of the energy retail regime. These include the power to accept enforceable undertakings from energy market participants for the first time. The national regulator will also have certain new approval functions and undertake performance monitoring and reporting functions specifically targeted to the retail energy market.

The proposed amendments to Commonwealth legislation provided for in this Bill will ensure that the Commonwealth bodies that are conferred with functions, powers and duties under the National Energy Retail Law (the Australian Energy Regulator and the Australian Competition Tribunal) are able to perform those functions and duties and exercise those powers from the commencement date. Our role in this Parliament is to facilitate this.

To this end, this Bill amends the Competition and Consumer Act 2010 (Cth) to explicitly allow the National Energy Retail Law, when applied as a law of a State or Territory, to confer functions and powers, and impose duties on these two Commonwealth bodies. This includes, in relation to the Australian Energy Regulator, functions, powers or duties conferred or imposed under 'local energy instruments'. These are subordinate instruments made under a State or Territory law that applies the National Energy Retail Law, the National Electricity Law or the National Gas Law in its own jurisdiction.

The Bill will also provide that decisions and instruments made by the Australian Energy Regulator for the purposes of the National Energy Retail Law before it commences, such as guidelines made in accordance with the retail consultation procedure set out in the National Energy Retail Rules, will be valid and effective from the commencement of the National Energy Retail Law in this jurisdiction. The amendment Acts of other jurisdictions will contain similar provisions. It is important to provide the Australian Energy Regulator with this legislative support, so that it can undertake essential activities necessary for the commencement of the new regulatory regime.

The involvement of the Australian Energy Regulator and the Australian Competition Tribunal is therefore an essential part of this cooperative scheme, and the Commonwealth must take the lead by legislating to provide for these functions and powers to be exercised. The South Australian parliament, and indeed parlia­ments in all participating jurisdictions, must see that the Commonwealth is committed to this cooperative scheme.

The amendments to the Administrative Decisions (Judicial Review) Act 1977 (Cth) contained in this Bill will ensure that decisions made by Commonwealth bodies, such as the Australian Energy Regulator and the Australian Competition Tribunal, under the National Energy Retail Law, when applied as State or Territory law are subject to judicial review by the Federal Court and Federal Magistrates Court.

In summary, the amendments I am introducing today represent a significant legislative step towards a truly national energy retail regime under a national energy regulator. This cooperative scheme will ensure that Australia enjoys strong energy customer protections and the benefits of competitive and efficient energy retail markets – both electricity and gas – whilst minimising the regulatory burden on industry. This Bill has the full support of my State and Territory colleagues on the Ministerial Council on Energy.

COMPETITION AND CONSUMER AMENDMENT BILL (NO. 1) 2011

The Gillard Government has been working since day one to build up competition in the banking system and get a better deal for consumers.

In December, the Government announced a comprehensive package of new reforms to empower families, support smaller lenders and secure the flow of credit to our economy.

These build on the decisive actions we took during the global financial crisis to preserve the competitive foundations of the banking system.

Our bank guarantees supported deposit funding for smaller lenders and enabled non-major banks to raise some $65 billion in wholesale funding.

Our $20 billion investment in Triple-A rated RMBS (Residential Mortgage-Backed Securities) continues to support this critical funding market which many smaller lenders rely heavily on.

All of this means loans are there when families need to buy a home, and credit is available when a small business wants to grow.

Competition means getting these loans at a fair price – that’s our objective.

Today I introduce amendments to the Competition and Consumer Act 2010 to crack down on anti-competitive price signalling and get a better deal for consumers in the banking system.

These laws will be initially targeted at the banking sector, because the ACCC has told us there is strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition.

We’ve been very clear all along that we would only extend these laws to other sectors of the economy after further detailed consideration, with a process to be followed, outlined in the regulations.

The ACCC advised me last year that it was concerned about the behaviour of ‘some of the banks in signalling in advance what their response will be to a change in interest rates by the Reserve Bank’.

In the Senate Economics References Committee’s banking competition inquiry, which reported in May 2011, the ACCC gave testimony that:

‘The problem with that sort of comment – the evil of it, if you like – is that it says to the competitors, “If you increase your interest rates I will follow”, which means you are signalling to the competitor that if they increase their interest rates they would not need to worry about being stuck out there on their own and losing market share’.

This type of anti-competitive price signalling can be just as harmful to Australian consumers as an explicit price fixing cartel.

However, there’s a gap in our competition law which has allowed the banks to escape the full force and discipline of competition.

The ACCC provided strong advice that banks were giving each other a ‘nod and a wink’ that they would raise their rates together.

However, because they weren’t actually writing it all down and signing in blood, or even agreeing verbally how they’d act – they’d get away with it.

This kind of conduct by the big end of town should never be allowed to continue when designed to dud Australian families.

That’s why we’re closing this gap in our competition law which is already dealt with in other major jurisdictions like the US, the UK and the EU.

That’s why we’re building on our 2009 reforms to strengthen Australia’s cartel laws, by banning signalling designed to keep interest rates higher.

Our tough new laws will give the ACCC the power to take action against banks who signal their prices to competitors to undermine competition.

Policy development process

The Government has been carefully developing competition policy in this area for some time, and monitoring global comparisons.

The OECD’s Roundtables on Facilitating Practices and Information Exchanges, in 2007 and 2010, have clearly highlighted the harm to consumers that can arise from anti-competitive price signalling.

Many stakeholders in Australia strongly agree that anti-competitive price signalling is not prevented by our existing competition law.

They’ve told us that this conduct is best targeted by providing new, specific prohibitions which prevent price signalling occurring.

This is precisely the approach we have taken to provide certainty to the business community whilst ensuring robust protection for consumers.

Amendments to Competition and Consumer Act 2010

This Bill is fundamentally about stamping out conspiratorial behaviour by the big banks which isn’t caught by our competition laws.

These tough new laws have two limbs.

First, the Bill gives the ACCC the power to take action against any bank which signals its pricing intentions to a competitor for the purpose of substantially lessening competition.

We’re cracking down on banks who purposefully signal to their competitors that they should all raise their mortgage rates together.

It’s inherently damaging to consumers for any bank to essentially say to its competitors “don’t worry – if you raise your mortgage rates then I won’t undercut you and take your customers”.

It allows banks to move their interest rates higher without the full discipline of competition – and at the expense of the consumer.

This anti-competitive behaviour is an unambiguously bad result for Australian families and small businesses.

The Bill allows a court to infer the real purpose a bank has in making such a statement — so there is no need for a 'smoking gun'.

Of course, we are not talking here about ordinary commercial communications.

Every Australian bank will be able to communicate with its customers, shareholders, market analysts, employees and other stakeholders in the ordinary course of business – just like they have always been able to.

What we are doing here is cracking down on the insidious practice of signalling between banks which is designed to undermine competition and which inevitably hurts consumers.

The second limb of the law will prevent banks from discussing their prices with each other behind closed doors, where doing so is not in the ordinary course of business.

I note that ‘ordinary course of business’ is a wide term, found elsewhere in the Competition and Consumer Act 2010 and in other laws. For the information of Parliament, it is not necessary that the person or company has engaged in the relevant conduct in the past, or for the conduct to have been regularly or routinely undertaken by that business, or other participants in the industry.

This prohibition is targeted at those disclosures which are the most clearly anti-competitive and which are most damaging to consumers.

For example, the ACCC could take action if one bank phones another bank privately to tell them about a planned mortgage interest rate rise.

Of course, the Bill recognises there will be situations where banks need to discuss pricing with their competitors in a private context.

Exceptions and defences

We recognise that businesses need certainty and appropriate guidance so that they can conduct legitimate activities on commercial timeframes – and keep providing services to customers.

That’s why we have worked closely with the ACCC since mid-2010 to carefully design these amendments, and have consulted extensively on draft legislation with the industry, legal experts and other stakeholders.

The Bill introduced in the House in March had a number of specific exceptions, for example in relation to, continuous disclosure obligations, joint ventures, and disclosures to acquirers or suppliers of goods or services.

In the House, the Government moved amendments so that further exceptions are provided that give clear guidance to business about what conduct is, and is not, subject to the prohibitions.

More specifically, an additional exception will provide banks with certainty that certain disclosures made in the context of corporate workout arrangements will not be subject to the private disclosure of pricing information prohibition.

The Government recognises that it is important that banks assist financially distressed businesses in avoiding insolvency. A new, explicit exception will be provided for banks that make certain private disclosures of price related information to a competitor if the purpose of the disclosure is for considering whether or not to take measures to return a borrower to solvency, or to avoid or reduce the risk of the borrower becoming insolvent.

Also, an exception from the outright prohibition has been provided for in relation to syndicated lending arrangements, which may not otherwise have been exempt from this prohibition through the application of the joint venture exception. This exception provides lenders surety that they can continue to engage in discussions for the purposes of syndicated loan arrangements.

In addition, the Government has provided an exception for distribution arrangements related to consumer credit arrangements. To provide businesses with certainty, this exception draws upon existing, defined terms in the National Consumer Credit Protection Act 2009.

This means that banks will be able to go ahead and get on with the business of lending provided they aren’t being anti-competitive.

The Bill contains arrangements for banks to seek immunity where their conduct provides a net public benefit to the community.

This allows legitimate conduct to occur where it’s not covered by one of the other explicit exemptions - some of which I’ve just mentioned.

Following consultation with the business community, the Bill now includes a ‘notification’ regime to meet shorter commercial timeframes.

Where a bank can demonstrate a net public benefit, they can obtain immunity by describing the conduct to the ACCC in a notice.

The ACCC then has a limited period of 14 days to respond if it has any concerns about the proposed behaviour.

This is significantly faster and more cost effective than the ‘authorisation’ process that we had originally discussed with the business community.

Conclusion

The Bill I introduce today strikes an appro­priate balance between allowing legitimate or pro-competitive conduct, and cracking down on anti-competitive price signalling which harms consumers.

This important reform will help to ensure that banks can no longer avoid the full forces of competition in the marketplace.

The Gillard Government is absolutely committed to getting a better deal for Australian families and small businesses in the banking system.

The laws I introduce today are an important part of that.

COMPETITION AND CONSUMER LEGISLATION AMENDMENT BILL 2011

Introduction

The Competition and Consumer Legislation Amendment Bill 2011 will give effect to two important reforms to strengthen and clarify our competition and consumer laws.

First, the Bill will enact laws to deal with creeping acquisitions by amending section 50 of the Competition and Consumer Act 2010 (CCA).

The amendments will give greater clarity to the provisions regulating mergers and acquisi­tions. They will ensure the Australian Compe­tition and Consumer Commission (ACCC) and the courts have the power to reject mergers and acquisitions that would substantially lessen competition in any local, regional or national market.

The Bill also enhances and simplifies the unconscionable conduct provisions of the Austra­lian Consumer Law and the Australian Securities and Investments Commission Act 2001.

The unconscionable conduct amendments are central to the implementation of uniform consumer laws throughout Australia. They were agreed by the Ministerial Council on Consumer Affairs (now the COAG Legislative and Governance Forum on Consumer Affairs) at its meeting in Perth on 30 April 2010.

These amendments clarify the Parliament’s intention as to how the unconscionable conduct law should apply. They will place the ACCC and the Australian Securities and Investments Commission (ASIC) in a better position to take more effective enforcement action.

I would like to recognise the valuable work of my predecessor, the former Minister for Competi­tion and Consumer Affairs, the Hon Dr Craig Emerson MP, in developing this Bill prior to its previous introduction.

The Government previously introduced this Bill into the Parliament on 27 May 2010. The Bill was referred to the Senate Economics Committee, which recommended that the Bill be passed.

The Bill passed the House of Representatives on 24 June 2010 and was awaiting introduction into the Senate when the 2010 Election was called, causing the Bill to lapse.

Creeping Acquisitions

Creeping acquisitions are a series of small-scale acquisitions that, individually, do not substantially lessen competition in a market, but collectively may do so over time.

Concerns about creeping acquisitions were raised in the context of the ACCC’s report of the inquiry into the competitiveness of retail prices for standard groceries. In its report, while noting that such acquisitions do not appear to be a significant current concern in the supermarket retail sector, the ACCC expressed its support for the introduction of a general creeping acquisitions law.

Subsequently the Government undertook extensive public consultations in 2008 and 2009 to seek the community’s views on possible reform options. Through its consultations, the government identified two amendments which would clarify the operation of section 50 as applying in the way it is currently interpreted by the ACCC, as set out in its November 2008 publication, Merger Guidelines.

The first amendment in the Bill will amend subsections 50(1) and (2) of the Competition and Consumer Act to replace references to ‘a market’ with references to ‘any market’. This amendment will clarify the ability of the ACCC or a court to consider multiple markets when assessing mergers and acquisitions.

The amendment will clarify that businesses cannot challenge a decision to block a proposed acquisition on the grounds that the substantial lessening of competition identified was in one or more markets other than the primary market relevant to the merger or acquisition.

The ACCC and the courts will be able to consider the totality of the competitive effects resulting from an acquisition, including impacts in upstream and downstream markets, not just impacts in ‘a market’.

The Bill also amends subsection 50(6) of the Competition and Consumer Act. That subsection has the effect of limiting the scope of section 50 to acquisitions in markets that are ‘substantial’ in a state or territory or region of Australia.

The amendment to this subsection will provide greater certainty regarding the current practice of the ACCC of considering acquisitions in local markets. The Merger Guidelines state that the ‘substantiality criterion’ can be satisfied in many ways, including by the number of customers, total sales or the geographical size of the market.

The Merger Guidelines do not have the force of law. While the interpretation of the ACCC of subsection 50(6) has not been tested by the courts, it was considered by Justice French in his 2003 decision in the Federal Court in the case of Australian Gas Lighting Company v ACCC.

While expressing no conclusive view, his Honour left open the possibility that whether a market is considered ‘substantial’ under subsect­ion 50(6) may be determined with reference to Australia as a whole. If this view were to become established in law through the accumulated weight of legal precedent over time, then it could well preclude acquisitions in geographically confined markets from being considered under section 50. This would prevent the application of section 50 to local markets where creeping acquisitions have been identified as a concern.

The Bill deletes the word ‘substantial’ from subsection 50(6). This removes the risk highlighted by Justice French that a court could in the future adopt the view that acquisitions in geographically confined markets may not be considered substantial and therefore not fall within the scope of section 50.

The government’s amendment to section 50 will remove that possibility, allowing the ACCC or a court to continue to examine acquisitions in all markets, including in relatively small, local markets.

Together, these amendments will strengthen the acquisitions provisions of the Competition and Consumer Act under section 50 by clarifying the scope of the law and increasing certainty around its application to markets where creeping acquisitions have been a concern.

In addition to these amendments, when announcing the way it would respond to concerns about creeping acquisitions, the government also confirmed the power of the ACCC to act in relation to the acquisition of greenfield sites.

The ACCC already considers it has the power to review acquisitions of greenfield sites whether through purchase or lease. However, if the ACCC is challenged on this in the future, the government has stated it will not hesitate to confirm this power.

These amendments were agreed with the States and Territories under the intergovern­mental Conduct Code Agreement 1995.

Unconscionable conduct

The amendments the Bill will make to the unconscionable conduct provisions of the Australian Consumer Law are the product of a recommendation of the Senate Economics Legislation Committee, which inquired into the statutory definition of unconscionable conduct in 2009.

The Senate Economics Committee recommended that the government set up an inquiry process to determine whether examples or a statement of principles would enhance the unconscionable conduct provisions of the Australian Consumer Law.

On 5 November 2009, Minister Emerson convened an expert panel to consider the issues raised in the Senate Economics Committee inquiry. Professor Bryan Horrigan, Mr Ray Steinwall and Mr David Lieberman—all of them experts in competition and consumer law and distinguished in their professional fields—agreed to serve on the panel.

The government is grateful for the work of the panel—which included many hours on top of their already busy schedules. In its work, the panel was assisted by officials from the Treasury and the Department of Innovation, Industry, Science and Research.

The government is also grateful to those who made submissions to both the Senate committee and to the expert panel. This helped to ensure the range of perspectives that exist in relation to this issue were understood.

The expert panel found that the unconscion­able conduct provisions have been regularly enforced since their inception, and that the case law is still developing.

Having said that, the panel also noted that the provisions are not easily understood and could be clearer for businesses, consumers, enforcement agencies and the courts. However, the panel found that a list of examples of unconscionable conduct would not be helpful. Indeed, the panel said such a list might give rise to misguided expectations about the scope and application of the law to specific factual scenarios.

Instead, it recommended the inclusion of some interpretative principles in the unconscionable conduct provisions. The government has adopted all of the panel’s recommendations concerning unconscionable conduc