It is a great pleasure to support the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016. This bill represents a triumph not only for the Deputy Prime Minister but also for the National Party. It is also a triumph for small businesses, including primary producers who do business with large corporations. This bill is a game changer, ushering in a new section 46 and a new era for competition law in Australia with the effects test. It is a reform that was born of the Harper review into competition policy that was commissioned in 2014. That review found that section 46 did not adequately prevent the misuse of market power. Specifically, the 'take advantage' element of section 46 was found wanting in being able to distinguish competitive from anti-competitive conduct and thereby being able to identify a misuse of market power. In other words, the current section 46 is simply not doing what it was designed to. It is ineffective.
The Harper review also found that the focus of the section on prohibiting conduct if a corporation acted with the purpose of damaging a competitor was inconsistent with the overriding policy objective of the act, which is to protect competition and not individual competitors. Competition itself is, after all, not bad thing. It brings with it innovation, better service and lower prices, which should not be discouraged. But it stands to reason that, by its very nature, competition itself will result in some competitors being harmed. The new proposed section 46 aims to enhance and promote competition.
Not only is the current section 46 ineffective but the ACCC's record in enforcing it is mixed at best, and the win/loss record starts to look even worse when the ACCC's record in contested cases is taken into account. Private section 46 cases have been few and far between, and few of those have been successful. One of the reasons there have been so few of them is because section 46 actions can be David-and-Goliath affairs. If you are a David going up against a Goliath in a section 46 case, you need an iron will.
In fact, the last successful private section 46 action was the case of NT Power, which successfully took on the Northern Territory government's Power and Water Authority and Gasgo for access to transmission and electricity infrastructure. After NT Power lost in the Federal Court and then lost a Federal Court appeal, the case ended in a great come-from-behind victory in the High Court. I know quite bit about that case because, as a youngish solicitor, I had the good fortune to be a part of NT Power's legal team when the case was run in Darwin, and I am here to tell you that section 46 cases are tough ones to get over the line. As I said previously, you need a client with an iron will because taking on the big end of town is not easy. The old 'bury them in tens of thousands of discovered documents, often served at the last minute and during the hearing' trick is one such strategy that I have personally seen deployed. There can be a lot of rain in Darwin but, when you are litigating against the big end of town, it can rain documents as well in a section 46 case.
The fact that section 46 cases are so hard to run and even harder to win makes it even more surprising that the Labor Party have squibbed on real reform of that section. Their so called 'access to justice' proposal does nothing to make it easier for small businesses to run and win a section 46 case. All it does is allow an applicant to make an application at some point in proceedings for the respondent to be liable for the applicant's costs if certain criteria are fulfilled. The proposal is worthless without meaningful reform to section 46.
You can just hear the lawyer's advice to a small business contemplating initiating a section 46 action under Labor's regime. It would go something like: 'Only the brave and the few have ever initiated section 46 actions, and only the fewer still have ever won one. So the odds are stacked against you but, if you are brave enough to give it a go at some point, under Labor's reforms you may be able to make an application for a costs order at some point during the proceedings. We're not sure when. We're not sure how. We'll just have to give it a go and for hope for the best.' The reality is that the chances of any such application for that type of order succeeding under the current regime would be remote. Labor's proposal amounts to window-dressing, pure and simple.
I should point out that the junior counsel on the NT Power case was none other than Alister Henskens, now SC and MP, being the New South Wales member for Ku-ring-gai, and the partner with carriage of that case was renowned litigator Antony Riordan from Colin Biggers & Paisley. He was the original architect of that section 46 action. I know that both are watching the passage of this bill with great interest.
This new and improved section 46 will better target anti-competitive conduct whilst supporting pro-competitive conduct and will greatly simplify the provision. It will prohibit a corporation with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in: that market; markets in which the corporation itself, or a related body corporate, supplies or acquires goods or services or is likely to supply or acquire goods or services; or markets in which the corporation is indirectly supplying or acquiring goods or services or is likely to supply or acquire goods or services. The new section 46 will make it very clear that large corporations with a substantial degree of market power are going to have to think very carefully about the way in which they operate for fear of falling foul of this section.
As we heard earlier, there has been opposition to this bill from some notably large corporations. But as Chairman of the ACCC, Rod Sims, recently stated to The Australian Financial Review:
Companies that want to compete on their merits have nothing to fear. Only those who wish to exclude their competitors and damage the competitive process will need to re-examine their conduct.
He has also described the claim that the changes will lead to a rise in prices as 'nonsense' because, as he has pointed out, consumers clearly benefit from more competition.
Besides the ACCC, the calls for reform have had strong support from a number of key organisations, including: the National Farmers' Federation; the Institute of Public Accountants, which described the reforms as a sensible and long-overdue improvement; Master Grocers Australia; the Queensland Dairyfarmers Organisation; the Australian Chamber of Commerce and Industry; the Small and Medium Enterprise Business Law Committee of the Law Council of Australia; the Australian Small Business and Family Enterprise Ombudsman; the Australian Hotels Association; AUSVEG; and the Australian Dairy Farmers. In the latter's submission to the Senate Economics Legislation Committee it wrote that it:
… congratulates the federal government on working to provide more transparency and fairness in the market through legislation such as the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016.
This legislation will help ensure that farmers, processors and consumers are not adversely impacted by the actions of those who hold significant market power in Australia.
Very well said. So, in a practical sense, who does this bill assist?
Mr Deputy Speaker, you do not have to look very far, or drive very far, in my electorate to find those who have been crying out for reform in this area—I speak, of course, of the apple and cherry growers of Calare. For many years, they have been making the case for change in this field. Local orchardist Guy Gaeta is one such voice and one such farmer. In fact, he has been calling for reform in this field for so long, he could hardly believe that a government finally had the courage and determination to bring these changes in. Many growers are forced to sell their fruit to big retailers who have a very substantial amount of market power. Growers have felt for a long time that big retailers are able to dictate prices for their fruit, and that they are forced to sell at prices that are unacceptably low. They do not believe that the treatment they have received is fair or that that the current system is transparent. There were hundreds of orchards in Orange decades ago, but now we are down to about 30. That is largely because the sons and daughters of orchardists have left the land, because they could not see a future. This leads to a lessening of competition. In some years, the prices on offer have been so low that growers have questioned whether it was even worth harvesting their crop. When you put it to our orchardists that a bill like this one will lead to higher prices, they laugh in disbelief and point to the—often huge—margins that retailers are able to put on the wholesale price of their produce.
This issue is one of the reasons growers in our areas are pushing so hard to gain access to new markets overseas. In fact, there was a delegation to this parliament last week letting the government know that that is exactly what is needed: better export protocols and better access. Our primary producers in Calare are small-business people; all they want is a system that is both fair and transparent. We have some wonderful orchardists in our area: Peter West and Tim and Jayne West from Balmoral near Orange; Tim Hall from Melrose at Nashdale; Bernard and Fiona Hall from Caernarvon, blazing the trail for exports; Daniel, Jamie and Nina McClymont; Ian and Pru Pearce, Robert and Jeannie Pearce, and also Ross Pearce of Mirrabooka near Orange; Sophie Jones of Hillside Harvest; James Sweetapple—he makes some great wine, but is also a great cherry producer; Kelvin Price of Kelanvale near Borenore; Michael and Kim Cunial at Carinya at Nashdale; Joe Caltabiano at Omaroo near Orange; Zac and Thelma Rossi; Peter and Robyn Vardanega from Prospect Orchard near Nashdale; and Graeme and Anne Eastwood from Rose Farm near Nashdale.
It is not just the orchardists who will gain protection and relief through this provision; other primary producers such as grape growers and dairy farmers could also conceivably benefit from these reforms. Any small business that bears the brunt of misuse of market power could also benefit. Smaller and independent grocery stores are yet another example. Associate Professor Julie Clarke of Deakin Law School stated in her submission to the Senate Standing Committee on Economics in January this year about this bill that:
… its passage will implement a long-overdue improvement to a core element of Australia's competition law.
I agree. And I am proud that it has been the Nationals who have been driving this landmark reform. I congratulate the Deputy Prime Minister for his dogged pursuit of this historic change, and I commend this bill to the House. Let the new era of competition law in Australia begin.