Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

by leave—I move amendments (1) and (2) on sheet 8775 revised:

(1) Clause 1, page 1 (line 13), omit "Energy".

(2) Schedule 1, item 1, page 28 (after line 19), after Part XICA, insert:

Part XICB—Egregious market misconduct

153ZE Simplified outline of this Part

  This Part sets out when a divestiture order may be made in relation to egregious market misconduct.

153ZF Interpretation

  In this Part:

associate has the same meaning as in the Foreign Acquisitions and Takeovers Act 1975.

egregious market misconduct has the meaning given by section 153ZG.

interest, in an asset or a security, has the same meaning as in the Foreign Acquisitions and Takeovers Act 1975.

153ZG Egregious market misconduct

  (1) A corporation engages in egregious market misconduct if:

  (a) the corporation engages in conduct that contravenes section 46 (misuse of market power); and

  (b) any of the following apply to the conduct:

     (i) the conduct has the purpose, or has or is likely to have the effect of, eliminating or substantially damaging a competitor of the corporation, or of a body corporate that is related to the corporation, in a market;

     (ii) the conduct has or is likely to have the effect of significantly diminishing the access consumers have to a good or service in a market;

     (iii) the conduct engaged in by the corporation is part of a systematic pattern of conduct.

  (2) In determining for the purposes of subparagraph (1) (b) (iii) whether the conduct engaged in by the corporation was part of a systematic pattern of conduct, regard must be had to the following:

  (a) the number of times (the relevant engagements) the corporation, or a body corporate that is related to the corporation, has engaged in the conduct;

  (b) the period over which the relevant engagements occurred.

  (3) Subsection (2) does not limit the matters to which regard may be had.

153ZH Divestiture orders for egregious market misconduct

  (1) The Court may, on the application of the Treasurer, the Commission or any other person, make an order under subsection (2) or (3) in relation to a body corporate if the Court is satisfied:

  (a) a corporation engaged in egregious market misconduct; and

  (b) the body corporate is the corporation or a body corporate that is related to the corporation; and

  (c) the order is a proportionate means of preventing the corporation, or any related body corporate, from engaging in that kind of misconduct in the future.

  (2) If the body corporate is not an authority of the Commonwealth or an authority of a State or Territory, the Court may order the body corporate to:

  (a) dispose of interests in securities or assets, other than to any of the following:

     (i) another body corporate that is related to the body corporate;

     (ii) an associate of the body corporate; and

  (b) comply with conditions (if any) specified in the order in accordance with subsection (7).

  (3) If the body corporate is an authority of the Commonwealth or an authority of a State or Territory, the Court may order the body corporate to:

  (a) dispose of interests in securities or assets to:

     (i) if the body corporate is an authority of the Commonwealth—an authority of the Commonwealth that is genuinely in competition with the body corporate in relation to which the order is made and that the Commonwealth has a controlling interest in that is equal to or greater than the controlling interest that the Commonwealth has in that body corporate; and

     (ii) if the body corporate is an authority of a State or Territory—an authority of that State or Territory that is genuinely in competition with the body corporate in relation to which the order is made and that the State or Territory has a controlling interest in that is equal to or greater than the controlling interest that the State or Territory has in that body corporate; and

     (b) comply with conditions (if any) specified in the order in accordance with subsection (7).

  (4) To avoid doubt, the Court cannot make an order under subsection (3) for the body corporate to dispose of interests in securities or assets otherwise than in accordance with paragraph (3) (a).

  (5) An order under subsection (2) or (3) must specify:

  (a) the interests in the securities and assets, or the kinds of interests in the securities and assets, that the body corporate must dispose of; and

  (b) the day by which the disposal must be made; and

  (c) any other matter that the Court considers necessary for the order to be effective.

  (6) The day by which the disposal must be made must be no earlier than 12 months after the day on which the order is made.

  (7) The order may specify conditions with which the body corporate must comply during the period between the making of the order and the disposal of an interest, if the Court is satisfied that those conditions are necessary to preserve any of the following:

  (a) the value of the interest;

  (b) in the case of an interest in an asset—the commercial operation of the asset.

  (8) Without limiting the scope of subsection (7), those conditions may relate to any of the following:

  (a) the interest to be disposed;

  (b) if the interest is a share or other security in a body corporate—the exercise of rights attached to the share or other security.

  (9) If a body corporate disposes of interests in assets to another body corporate as required by an order made under this section, then for the purposes of paragraph 311(1) (d) or 768AD(1) (d) of the Fair Work Act 2009, there is taken to be a connection between the body corporate and the other body corporate as described in subsection 311(3) or 768AD(2), as the case may be, of that Act.

  Note: This means any employees of the body corporate who become employees of the other body corporate and satisfy paragraphs 311(1) (a) to (c) or 768AD(1) (a) to (c) will be transferring employees in relation to a transfer of business for the purposes of Part 2-8 or Part 6-3A of that Act.

153ZI Acquisition of property

  This Part has no effect to the extent (if any) to which its operation would result in the acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) otherwise than on just terms (within the meaning of that paragraph).

The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 opens up court-ordered divestitures for electricity retailers, to deal with misconduct. Once you accept the principle that it's relevant to one sector of the economy, you must then accept that it should apply to all sectors of the economy—anywhere where monopoly power or substantial market power exists and is being misused. That's what the Centre Alliance amendments do. They seek to enhance the bill to ensure that divestiture provisions apply universally across all Australian markets participating within the economy. This means that any business that engages in egregious market misconduct may be subject to having their business interests forcibly disposed of by a court.

Egregious market misconduct includes behaviour that has eliminated or is likely to eliminate or substantially damage a competitor, significantly diminish consumer access to a good or service or be part of a systematic pattern of misconduct. To determine a systematic pattern of misconduct, the court must consider the number of times a corporation has engaged in the conduct and the period of time over which the conduct was committed.

In the case where the controlling entity is owned by a state or territory government or the Commonwealth—and this is consistent with the amendments moved by the Labor Party—the entity can only be sold on to another government authority that is in genuine competition with the body corporate. This protects government owned entities from being forcibly privatised.

Where a court-ordered divestiture is made, the disposal of the security or asset must be made in 12 months from the date of the order. This ensures there is sufficient time to source a suitable purchaser and that the security or asset is not subject to a fire sale, where the asset is sold well below market rate due to an insufficient time frame. In addition, to ensure the security or asset does not diminish in value, the court may impose any condition necessary, when making an order, to preserve the value and the commercial operation of the asset. Further, any employee of the body corporate will become an employee of the acquiring company or body corporate. This protects existing employees of a divested company or body corporate as they become transferring employees to the company or body corporate.

These are very reasonable and sensible amendments. As I said, if you accept that divestiture is a reasonable proposition for the retail energy sector, it should apply across all sectors. Divestiture is not an unusual concept. I refer to the United States, the birthplace of capitalism, where the Sherman Act, from 1890, permits a court to deal with misconduct by using a court's restructuring powers. We haven't seen the US economy fall over, or a lack of investment, simply because they have divestiture laws. It is the same in the UK, where they have quite broad divestiture laws.

I say to the Nationals, whose constituents have to deal with the likes of Coles and Woolies, Glencore, Fonterra and perhaps even those water traders that are becoming dominant in the water market, with large volumes of water, and are exercising market power that is disruptive to other consumers or other entities playing in the space: if you're interested in better farmgate prices, you should be voting for these amendments.

The opposition are not normally focused on big business. Divestiture powers are associated with monopoly power being exercised or market power abuse, so we are talking about very large companies when we talk about these laws. The Labor Party should be voting for these amendments because these amendments will help to protect those smaller businesses and make them much more resilient, which of course makes employment much more secure. I understand this divestiture power is not something that would normally be exercised. We know that this parliament altered section 46 of the Competition and Consumer Act—I think it was in 2017. I am aware that the chairman of the ACCC is in fact looking at some cases in respect of section 46. It's a power that I suspect would not be used often, but its deterrent value is significant.

To the government, I know you're the proponent of big business, but we need to recognise the changing nature of the economy. We need to recognise that it's quite normal in business today to try and scale up to get scale of economy. Inherent in doing so, you end up gaining market power. We see this right across the economy. We've got the big banks. We've got the Bunningses of this world that have now replaced all of those corner hardware stores. We've got Coles and Woolies, who don't just have a monopoly in the groceries area; we now see them with petrol stations, credit cards, insurance for your house, car and pet, and mobile phones. In the health sector now we have organisations in South Australia like Bupa, which is effectively the dominant or the only healthcare provider. They have a monopoly grip on the market. We know the government has been trying to deal with gas prices, but on the east coast we have companies like APA Group, which owns a significant portion of the pipelines on the east coast. As I mentioned before, we've got water traders and big irrigators. We've got poles and wires companies, often foreign owned, now owning large chunks of critical infrastructure and utilities. So that's the trend, I say to government. That is the trend—we are seeing companies scaling up and inherently gaining market power. I'm not suggesting any of the companies I've mentioned have been involved in abuse; I'll leave that for others to decide. But it is becoming the norm, and we need to have tools in place to deal with monopoly power or significant market power being exercised.

That's what these amendments seek to do. The government recognises that divestiture powers should apply to the electricity retail sector. There's no explanation as to why it wouldn't apply right across the economy. It would be a good measure, particularly in the changing business climate that I have mentioned.

Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Link to this | Hansard source

The government will be opposing these amendments. The forced divestiture components of the legislation are designed to apply only to electricity markets and to misconduct specifically in electricity markets, which can, of course, lead to blackouts, destruction of businesses and potentially loss of life. The amendments proposed by Senator Patrick would expand divestiture powers to misuse of market power under section 46 of the Competition and Consumer Act by any type of business. The government will not broaden this legislation. The courts can already impose significant penalties for contravention of section 46, including fines of up to $10 million and injunctions to prevent people from engaging in certain conduct. The measures in the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill, including the forced divestiture powers as a last resort, are specifically designed to deal with the impact and the consequences of misconduct in the electricity market.

Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

Labor will be opposing the amendments moved by Senator Patrick. These amendments would see the proposed divestment laws expanded to all sectors of the economy. To be honest, as somebody who sat through the Senate inquiries for both pieces of legislation—the forerunner in the last parliament and then this legislation—it was hard to find a supporter for these powers being applied within the energy sector, let alone across the entire economy. Labor is not convinced that the approach recommended by Senator Patrick would actually work or that it would benefit consumers. Certainly no analysis or modelling on that proposal has been undertaken, nor was the case made in the Senate inquiry process, nor has the case been made by any review undertaken by any of the economic institutions, nor has it been made by any of the relevant agencies. On that basis, we will not be supporting the amendments.

Perin Davey (NSW, National Party) Share this | Link to this | Hansard source

I rise to very quickly explain to the chamber why the Nationals will not be supporting the amendments put by Senator Patrick. While Senator Patrick quite rightly points out the issues facing farmers with farmgate prices and dealing with the monopoly powers of the retailers, we do not believe that a blanket approach such as that being put forward by Senator Patrick, without proper investigation and without proper review, will succeed in achieving the outcomes that we want.

We look forward to working with Senator Patrick to have a look at how we can address the market monopoly powers of the retailers. We have already undertaken and established the ACCC review into water to make sure that there is no market manipulation in the water market. You cannot apply a blanket approach. The issues happening in the water market are not necessarily the same issues that are happening in retailing or power. This bill today is specifically about power and dealing with the power market and divestiture in power companies. We support the bill as it is put. We do not support these amendments, despite their good intentions.

Sarah Hanson-Young (SA, Australian Greens) Share this | Link to this | Hansard source

I will just put on the record that the Australian Greens are supporting these amendments from Senator Patrick. We sympathise with a number of the points and arguments that he has made, but suffice to say, if it is good enough for the electricity market and the energy market, why would we not be considering other areas where we need intervention and proper protection for consumers? The interesting aspect of this is that one of the reasons why we now have both the government and the opposition voting down this amendment and saying, 'Oh, no, we can't have this in any other sector,' is that this bill is not even going to deliver what the government is promising. It has nothing to do with low electricity prices and everything to do with coal burning for longer.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendments be agreed to.