Thursday, 28 August 2008
Trade Practices Legislation Amendment Bill 2008
Debate resumed from 26 June, on motion by Mr Bowen:
That this bill be now read a second time.
I rise to speak on the Trade Practices Legislation Amendment Bill 2008, which seeks to amend section 46 of the Trade Practices Act and includes provisions which would allow the Federal Magistrates Court to hear matters arising under section 46. I also note that the bill proposes to legislate that one of the ACCC’s deputy chairpersons have knowledge of or experience in small business matters, removes the threshold on unconscionable conduct cases under section 51AC of the Trade Practices Act, and clarifies the ACCC’s information gathering powers under section 155 of the Trade Practices Act.
Small business is the lifeblood of many small communities, both in city areas and in the bush. It also typifies what living in Australia is all about. We should be grateful that we live in a country where, if you choose to and have the motivation and commitment, you can work in a small business and determine your own destiny. It provides many opportunities and rewards for people who are prepared to work hard and believe in themselves. According to the ABS, in 2005-06 there were around 2.5 million small businesses in our country. These 2.5 million small businesses employ close to 3.8 million people, or just under half of the working population. Small businesses in that year paid $95 billion in wages, collected $840 billion in revenue and made an operating profit before tax of $108 billion. So the importance of the contribution that small business makes to the economy cannot be underestimated. Small business is indeed the engine room of our economy. Not only does the sector employ a significant portion of the work force, but it also fills many niche roles in communities in providing some of the most basic and essential requirements for everyday life, including plumbers, electricians, bakers, butchers, accountants, solicitors, doctors and chefs, to name but a few.
The strong economy that the coalition built over the last decade, under the stewardship of the former Treasurer and member for Higgins, helped to boost confidence in the small business sector, and small businesses thrived. In the 11 years that we were in government, we eliminated $96 billion of Labor debt, we prepared for the future by establishing the Future Fund to pay for the government’s unfunded superannuation liability, and we were positive and had a forward-looking approach to managing the economy. This government seems to be always looking backwards, looking for someone else to blame for the economic mess that it has caused in a relatively short period of time. When the coalition was in government, small business had confidence. It had confidence in the economy and, most importantly, it had confidence in the government. It had confidence that allowed it to invest in new capital and to employ new staff. There is no doubt that at the moment there are global factors impacting on our economy, including the US credit crunch and rising oil prices, but this government inherited an economy that was the envy of the world. We had low unemployment, low inflation and good prospects for growth. The government inherited an economy which was in great shape to withstand the current shock.
Under the coalition government, the economy withstood similar international shocks, including the September 11 attacks in 2001, the US recession, the SARS crisis and the Asian financial crisis. We endured all of those international events and yet we were still able to maintain confidence in the Australian business community. Australian business had confidence in the previous government to deal with those most difficult of international issues as well as issues and difficulties that arose in the domestic economy. Business as a whole, and small business in particular, has lost confidence in this government. It has lost confidence to move forward and make investment decisions and employ staff. Instead, we are seeing redundancies and workers put off, and casuals, particularly in the retail sector, are having their hours wound back.
Consider for a moment a few statistics. In the National Australia Bank monthly business survey, confidence remained steady at negative nine points in July, to be at its lowest level since September 2001. The measure has fallen 24 points since last June and 15 points since November 2007. In the NAB quarterly business confidence survey in the June quarter it fell four points to negative eight; this is the lowest reading since early 1991. The measure has fallen 18.9 points since last June and 13.8 points since December 2007. But perhaps the most damning indication of small business’s lack of confidence in the economy and in this government are the figures in the quarterly Sensis Business index. The August 2008 index just released shows that confidence amongst small and medium businesses fell to its lowest level since the inception of the index over 15 years ago. The business confidence indicator currently sits at a pathetic 24 per cent, which is less than half the level recorded this time last year. That demonstrates what this government has done in a very short period of time to business confidence in this country. And small business’s lack of confidence in this government has flowed through to consumers—hardly surprising, given that small business is such an important part of our community.
The August Roy Morgan consumer confidence rating is 90.1, the lowest since December 1991, down 1.9 points from July 2008 and 35.1 points lower than in August 2007. The August 2008 Westpac-Melbourne Institute consumer sentiment index is currently at 86.2 per cent, a recovery from the July result of 79, which was the lowest level since July 1992. However, the index is below 100, therefore showing negative sentiment, and is 22.4 points below the figure for August 2007. It has fallen by 24.3 percentage points since the last election in November 2007. The June 2008 Sensis Consumer report showed a net balance of 35 per cent of Australians reporting confidence in their financial prospects for the year ahead—about one in three Australians. That, for this government, is a shameful statistic. It is a fall of nine percentage points from last quarter, bringing confidence to the lowest point recorded since the start of the Sensis Consumer report in May 2004. Over the past six months, confidence levels amongst consumers have fallen by 26 percentage points. Only 22 per cent of Australian households believe that they are better off now compared to a year ago, down three percentage points in the past quarter. That is the lowest level recorded in the history of the Sensis Consumer report. Nearly 80 per cent of Australian households believe that they are no better off now than they were a year ago.
The reality is that this is a government that, in nine short months, has been able to turn around consumer and business confidence to a point where we are now at crisis level. We have businesses which are putting off young and older Australians—particularly those who are working in part-time or casual employment. Hours are being slashed and people are being made redundant. This is an unsustainable position for the Australian economy to be in. The fundamentals of this economy are strong. As I said earlier, we have demonstrated that because we paid down the $96 billion Labor debt. Imagine, in the current global crisis, if this government were weighing into the money market to fund that $96 billion government debt; it would be a shameful position to be in. Had the Labor Party, when they were in opposition over the last 11 years, been given their way when they voted against each of our measures to reduce that debt, then today they would themselves be saddled with a figure probably in excess of $96 billion.
So when this government goes around suggesting that the coalition opposition is irresponsible in relation to some measures which are before the other place at the moment, those claims ring completely hollow. They are completely hollow because we were the government of surplus budgets. Why did we have surplus budgets? We had surplus budgets to create excess funds to pay down that $96 billion Labor debt. We paid down that debt by 2006. Our position has always been, and remains to this day, that once the government has met its demands, once we have provided services to the constituents around this country, once we have been able to service all of our responsibilities, then surplus moneys should be given back to the Australian people because they represent an excess in what should have been collected from people in the first place.
This is a fundamental difference between this side of the House and the Labor government in this country. This is an opposition which believes in no new net taxes. This is a government which believes in new taxes; this is a government which introduced new taxes in the last budget in May this year. They introduced taxes which they did not have a mandate for but which they decided to introduce nonetheless. Some were introduced for ideological reasons and some were introduced because they were particularly concerned about where this economy was headed. They have demonstrated to the Australian people—particularly to a younger generation, who have never seen Labor manage the Australian economy before—in nine short months that this is a government, and that Labor are a party, that is incapable of managing this $1 trillion economy.
We as a coalition want to continue to provide support for small business because we believe that small business is the engine room of the Australian economy. Small business employs young people. Small business continues—mum and dad operations, microbusinesses, small businesses that are running local shops and cafes. They are what this Australian economy is about, and, if you have got a government that is out there slugging them at every opportunity, that is a bad outcome not just for them and for their families but for the Australian economy as well. It is why we took the position we did in relation to this particular bill before the House.
An amendment to this bill has been circulated in my name. We believe very strongly in continuing to support small business, which is doing it tough at the moment. Therefore, I move:
That all words after “That” be omitted with a view to substituting the following words:“while not declining to give the bill a second reading, the House recognises the impact on small business of the Government’s proposed changes to the ‘Birdsville Amendment’, and recognises that the Federal Court is the more appropriate Court to hear cases under section 46 of the Trade Practices Act, and the House calls on the Government to abandon its proposed changes to the ‘Birdsville Amendment’ and to similarly abandon its plans to allow the Federal Magistrates Court to hear section 46 cases”.
I certainly welcome the opportunity to speak on the Trade Practices Legislation Amendment Bill 2008. Can I say from the outset that this is a matter that is indeed very important because it affects the lives of so many people in this country, in particular the lives of people on low incomes and on pensions.
Before I get to the specifics of the bill, can I respond to some of the comments made by the shadow minister in respect of small business in this country. Let me assure him that I am one of the over two million people in this country who come from a small business background. I have been in small business pretty much since I left school. I think that it would be fair to say that I understand the difficulties, the hardships, the commitment and the risks that small business people take on in this country on a daily basis and their importance to the wellbeing of the economy of this country. The comments made about the support for small business by the previous government, when contrasted to the Rudd Labor government, I find almost laughable. As a person who was in small business, I was very much the recipient of all of the policies which the member opposite believes were good for small business.
Let me highlight one particular difference that I have noticed in the short time since the Rudd Labor government was elected—that is, the commitment of millions of dollars around Australia to support local business enterprise centres. This is the first time that a federal government has in fact invested money into the support of business enterprise centres, which in turn have been established for the sole purpose of supporting small businesses in local communities. I certainly welcome the commitment of the federal government and in particular I welcome the commitment of the federal Rudd Labor government of $1 million each to the Tea Tree Gully business enterprise centre and the Salisbury business enterprise centre, both of which support the local businesses in my electorate. I will go further: not only do they support those businesses but also, having been personally involved with both of them and with that small business sector, they are very much welcomed by the small businesses in my community because of the support that they provide. So, when members opposite talk about their support for small businesses, where were they in supporting the very organisation that was established for the very purpose of supporting small business? They were nowhere to be seen. Sometimes if you want to make a stand, you need to match your rhetoric with real commitments and in this case with real dollars.
I will turn to the bill itself. It is an important piece of legislation because, as the member opposite quite rightly pointed out, Australians are indeed struggling in many cases. Cost of living pressures are certainly issues that this government are very conscious of and they are matters that we will be addressing as a result of a number of policies that the Rudd Labor government have introduced. This is in fact one of those policies. This bill will assist in keeping down costs for consumers by ensuring healthy market competition, and healthy market competition in turn means the following: firstly, lower prices for consumers; secondly, more product choice for consumers; and, thirdly, the survival and even growth of small and medium sized business and the consequential employment and economic benefits that come with it. As I said from the outset, the importance of this bill flows right through Australian society.
Not surprisingly, amendments proposed in this bill have been welcomed by the Motor Trades Association of Australia, the Australian Retailers Association, the Council of Small Business Organisations of Australia and the Australian Competition and Consumer Commission. I would have thought that all of those bodies, which represent a lot of the small businesses in this country, would have an interest in what the government does and that they would express that interest honestly. For them to come out and support this bill gives me an incredible amount of faith that we as a government are indeed heading in the right direction in supporting business in this country.
It is interesting that Australia has for years espoused and encouraged free markets and deregulation of business. But free markets can have opposing effects. Professor Allan Fels has said this about free markets:
So long as there are markets there will be the challenge of competition for market players, and so long as human nature remains unchanged, some participants will be tempted to act in anticompetitive or misleading and deceptive ways. Hence, there will always be a need for competitive law. Indeed, as more markets become deregulated, the greater is the need for it in these markets since the desire to undo the pro-competitive effects of deregulation can be high. That is why these days the Act—
he is referring to the Trade Practices Act—
and the ACCC are of importance in preventing outbreaks of anticompetitive behaviours, whether through collusion, anticompetitive mergers, abuse of monopoly power, or unfair trading, in every sector, whether it be agriculture, manufacturing, construction, mining, distribution, transport, energy, communications or services. Without a firmly applied law, the competitive thrust of the economy would be quickly lost, and much harm done to its performance; public harm would replace public value.
That statement sums up some of the concerns about the deregulation process and how it needs to be managed.
We have on one hand a situation where prices are sometimes brought down, while on the other hand we deal with the predatory pricing and monopolies which ultimately drive prices up. We have examples of that in our petrol market, in banking and in grocery prices. There are, of course, other sectors which have equally been engaged in similar activities, but the banking, fuel and grocery sectors have in recent times been the subject of considerable public disquiet and angst amongst Australians. That is because we all rely on their services and their products. As I said in my first speech in this place, those three sectors in the financial year ending June 2007 made a combined profit of almost $22 billion. Not surprisingly, Australians are calling for government intervention to control the very markets we have deregulated.
One of the responses by the government, both state and federal, has been the appointment of a growing number of ombudsmen, commissioners and other government-regulating bodies. We now have at the national level the Telecommunications Industry Ombudsman, the Private Health Insurance Ombudsman, the Banking and Financial Services Ombudsman, the Produce and Grocery Industry Ombudsman, the Workplace Ombudsman and perhaps others that I have missed out. These are all in addition to the ombudsmen and regulating bodies established by all of the state governments throughout Australia. So I hope I make my case clear that, whilst on one hand deregulation can have a beneficial effect, it can also have a detrimental effect which requires government intervention.
Of all of those regulating bodies, the one regulator that is most relied upon to ensure fair standards of business conduct is, of course, the Australian Competition and Consumer Commission, which has brought together the now superseded Trade Practices Commission and the Prices Surveillance Authority. The Trade Practices Act, in its modern form, was introduced in 1974 and it has certainly had influence in regulating business practices in this country. But its content has clearly been constrained by court interpretation of the act. In recognition of that, in June 2003 the Senate Economics References Committee established a review into the effectiveness of the Trade Practices Act. The committee completed its review in 2004 and recommended amendments to the act which I believe would have assisted in defining the term ‘taking advantage’ of the market power. It is my understanding that the Howard government rejected the Senate committee recommendation to amend the act but, in a last-minute desperate attempt to be seen to be protecting consumers, the Howard government supported what has since been referred to as the Birdsville amendment.
The problem with the Birdsville amendment is, as I understand it, twofold. Firstly, terms such as ‘substantial market share’, ‘sustained period’ and ‘relevant cost’ have not been defined in the act and, therefore, are open to interpretation. I would have thought that, if you were going to amend an act and rely on a specific term, the first thing you would have done is define what that term is in the interpretation of the act so that there would not be any ambiguity or confusion. Without having done that, it seems to me that the argument that those terms are difficult to define and are open to interpretation by the court is valid. In fact, I would like to quote one of the submissions which came from Office Choice Ltd when it submitted to that Senate Economics References Committee back in 2004 on the question of market share. Office Choice Ltd said:
OCL has a further concern regarding the failure of Section 46 or indeed the entire Act to adequately define ‘market share’. The ACCC’s present methodology for determining a company’s market share is to review the total value of the market in relation to the share the company holds in that market.
For instance, if the total value of a market is estimated at $4 billion and a company holds a $800 million share in that market, the ACCC would determine the company’s market share to be 20 per cent.
However, OCL believes that this measurement is too general and fails to take into account geographical factors. OCL members are widely dispersed throughout metropolitan and regional areas. In many cases, one of the larger industry players holds 100 per cent market share in some areas, resulting in a monopoly situation and higher prices for consumers.
That is a very clear example of how attempting to define a term which the act would otherwise rely on can cause all sorts of problems. Let me just take that point one step further. When these matters ultimately go to court, they are matters that affect millions and millions of dollars and, in some cases, billions of dollars. Not surprisingly, therefore, they will be matters for which both the ACCC and the defendant are going to employ the best possible lawyers available in this country. Clearly, you will end up with (a) a case which will take months and months, if not years, to determine and (b) a case in which you need to ensure that the original legislation is absolutely clear if it is going to be effective. In this case, the Birdsville amendment certainly was not clear.
So we do not know if the Birdsville amendment, as well intentioned as it was—and I certainly give credit to those who proposed it that their intention was good—would have the desired effect. There is a substantial body of opinion which says that the Birdsville amendment will in fact cause problems in the courts and will not clarify the situation. The Birdsville amendment—and this is the second point—could actually be counterproductive for consumers. At a time when consumers need government support more than ever before, that is the last thing we want. Under the Birdsville amendment, there are concerns about any form of discounting, in that it could be seen as being contrary to the act and therefore challenged in court.
I want to quote something from the Liberal Party press release that was issued on Tuesday, 26 August 2008. The Liberal Party said:
Birdsville was only enacted at the end of 2007. It needs time to work and to be tested in the judicial system …
I give them credit for acknowledging that it needs time to be tested. They are in fact supporting the very point I am making, and that is that the amendment has never been tested in the court and it needs to be tested in order to find out whether it is effective. My view is that, given the advice that has been provided, when the final test comes it will not stand up and will be dismissed. The Liberal Party talk about being supporters of small and medium sized businesses in this country. It was in 2003 that the Boral case, which precipitated the Senate reference group looking into the effectiveness of the Trade Practices Act, was determined, and it is now 2008. It has taken five years to get from one point to another, to try and provide certainty for consumers and small businesses in this country. They say we now have an act and we should give it time to see if it works. We know full well that, as soon as the ACCC or any other party goes to court, it will be caught up in the court system, and it is likely that consumers will have to wait another five years before we make the proper decision to introduce the appropriate legislation. So I find it absolutely absurd to be arguing the case that we need time to see whether or not this Birdsville amendment ought to be supported. It makes more sense to acknowledge the problems that are likely to arise as a result of it and respond to them, which is exactly what the government is doing so that consumers and business continue to have a fair degree of certainty into the future.
I want to comment briefly on another point that the Liberal Party made in their press release. They said:
The only businesses that will get caught by Birdsville will be those who are ‘predatory pricing’, or in other words, selling goods below cost with the intent to substantially damage or eliminate their competition.
Mr Deputy Speaker, as a small business person, I can tell you that if any business sells goods at a lower than normal cost, other than when there is a clearance sale or something like that on, it is quite logical that they are doing that to increase their market share. As soon as you increase your market share, aren’t you substantially damaging your competition? Again, I cannot understand the logic of that particular line, because, frankly, there is no logic to it.
Let me return to the issue of the basic cost of living, which I was speaking on earlier. I point out that in the 10 years from 1996, according to an OECD survey, grocery prices in Australia increased by 43.6 per cent compared with 25 per cent in the US and Canada, 11.6 per cent in the UK and between 10 and 20 per cent in other European countries. The noticeable differences between Australia and other OECD countries, including the USA, is that in Australia the two major grocery retailers together control around 80 per cent of the market. That is a much higher market share than by the dominant retailers in any other OECD country.
A recent survey that was carried out by the National Seniors Association showed that, in my own home state of South Australia, grocery prices in the last 12 months have increased by 5.57 per cent compared to a national average of 4.23 per cent. Of course, there will be a whole range of reasons as to why that is so. One of the underlying reasons grocery prices in South Australia have increased above and beyond those of the rest of Australia is a lack of, or restriction on, real competition. Interestingly, in South Australia we do not have the grocery retailer Aldi, which, in a recent Choice survey, was reported to have costed a basket of 33 essential grocery items at $55.70, compared with $105.43 for the same goods at Woolworths. That highlights the difference it makes when you have real competition in the marketplace.
Just as important is that increased grocery prices are linked to increases in fuel prices and increases in interest rates and bank fees. So consumers not only pay increased petrol prices at the bowser and increased interest rates on their own loans but add to fuel company and bank profits every time they purchase their groceries. Both the large banks and the oil companies warrant special attention when it comes to consumer protection legislation. The banks, for example, were quick to increase interest rates as soon as the Reserve Bank gave them the green light. In fact, they went further and increased interest rates even when the Reserve Bank did not give them the green light. Now they are saying that they may not pass on the full reductions if the Reserve Bank cuts the official bank rate. Not only should they reduce rates in line with the Reserve Bank rates but they should reduce them by any additional amount that they previously increased them above the official Reserve Bank rate. They have the capacity to do that, as the latest end-of-financial-year profits show. Perhaps they are cashing up in preparation for losses they might incur as the global financial crisis permeates through Australia over the years ahead. Banking is typically an example of where government intervention is necessary to protect consumers. Banks should not have the right to make consumers pay for the banks’ own mismanagement of their affairs or make obscene profits for their shareholders just because they can.
The fuel companies are an equally interesting sector. When crude oil prices were increasing on a daily basis, so too were petrol prices increasing at the bowser for consumers on almost a daily basis. When crude oil prices started to fall there appeared to be— (Time expired)
If those here wish to cast their minds back some nine months ago, they will remember how the Prime Minister rode into Canberra, supposedly as the white knight that was going to save Australia. He painted himself as a hero for everyman and someone who was going to look after the economy, especially small business. As we sit here debating changes to this act in the Trade Practices Legislation Amendment Bill 2008 and in relation to the Birdsville amendment, in a bill the coalition introduced less than a year ago, the Prime Minister seems to be living proof of the saying: ‘You either die a hero or you live long enough to see yourself become a villain.’ Changing the Birdsville amendment will certainly make him an enemy of Australia’s small business operators.
The provisions of part IV of the Trade Practices Act, which include section 46, prohibit various trade practices that tend to prevent or lessen competition in an Australian market for goods and services. They lay down rules which, as interpreted by the courts from time to time, restrain anticompetitive behaviour and promote competition in the marketplace. Section 46 has been the subject of a number of formal inquiries and resultant amendments. As it stands, section 46(1) provides:
(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:
- eliminating or substantially damaging a competitor of the corporation …
- preventing the entry of a person into that or any other market; or
- deterring or preventing a person from engaging in competitive conduct in that or any other market.