Senate debates

Tuesday, 3 March 2015


Economics Legislation Committee, Intelligence and Security Committee, Foreign Affairs, Defence and Trade References Committee; Report

5:25 pm

Photo of Catryna BilykCatryna Bilyk (Tasmania, Australian Labor Party) Share this | | Hansard source

I move to take note of the Economics Legislation Committee report on the Competition and Consumer Amendment (Misuse of Market Power) Bill 2014, the Intelligence and Security Committee advisory report on the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014 and the government response to the Foreign Affairs, Defence and Trade References Committee report on the Korea-Australia Free Trade Agreement, and seek leave to continue my remarks.

Leave granted.

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

by leave—May I indicate that this was a referral to the Economics Legislation Committee by virtue of a bill that I introduced it the Senate? Effectively, this bill will provide for misuse of market power to carry with it the penalty of a company being forced to divest some or all of its assets.

It sounds like a radical solution, but it would be a last resort and it would be up to a court to do so. It does not trigger any constitutional issues in respect of just compensation under the Constitution, but it would be in line with Europe, Canada and the United States. It is very rarely used in those jurisdictions; in fact, I do not think it has ever been used in Europe or Canada. But it is there as a sort of sword of Damocles over corporations that abuse their market power. At the moment, simply getting a monetary penalty is not good enough. You actually need to have that additional penalty to change the culture—the ability of a court to break up a corporation in whole or in part.

I am disappointed that the majority report of the committee says we are not going to do that—we are not going to go down that path. I think there are some exciting things happening in competition law in the sense that the Harper review is looking at an effects test, which I think will be of particular benefit if it is set out in the form that many have advocated for it. Senator Canavan participated in that inquiry very capably—and I think we are lucky to have someone like Senator Canavan, given his previous work with the Productivity Commission on that committee.

The fact is that we have incredibly high levels of concentration in some sectors, particularly in the grocery sector. Virtually 80 per cent of that is controlled by two supermarket chains. The concern is that milk price wars and bread price wars actually squeeze out small operators and if there is an abuse of market power, which is very hard to prove under the current intent that is required in the legislation, very little can be done about it. Having a divestiture power in itself would actually change the culture of those big corporations that, from time to time, may do the wrong thing. It will change the culture of those corporations and it will change the way that they manage their risk to be much more cautious in the way that they go about their business.

I am not singling out any particular companies. I am saying that as a general principle that it would do so. That is what I believe it has done in Europe and in Canada, and in the United States, where they have much stronger anti-trust laws than we have here.

Now is the time to ratchet this up in terms of effective penalties, because we do not have effective penalties by simply having fines—which can be water off a duck's back when it comes to some large corporations. Consider that in our merger and acquisition clauses of competition and consumer law there is the ability to order divestiture of a company or of a company's assets—in other words, to de-merger it—if they breach their undertakings, for instance. It is not unprecedented. We need to go down this path because right now our competition law is simply too weak.

We have a situation where many independent grocers, for instance, would welcome this power. This would make a big difference in the way corporate Australia would operate. This would make a difference in a way that would be very positive for competition law in this country. It would still leave the discretion to the courts of the Commonwealth of Australia in order to determine whether that penalty would be appropriate or not. But at the moment I believe our regulators have one hand tied behind their backs because the courts do not have that power. Now is the time, while we are looking at competition law in this country, to consider that.

This issue will not go away. If divestiture powers do not get up in this round of reforms I am convinced that sooner rather than later there will be a demand for it, because our current competition laws are too weak in terms of the sanctions that are there. I hope that, if we had divestiture powers, they would hardly ever be used, but the mere fact that that would be on the statute books would be a very powerful disincentive to bad behaviour and abuse of market power by some of our largest corporations.

I seek leave to continue my remarks.

Leave granted; debate adjourned.