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ECONOMICS LEGISLATION COMMITTEE
Australian Competition and Consumer Commission
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ECONOMICS LEGISLATION COMMITTEE
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ECONOMICS LEGISLATION COMMITTEE
(Senate-Thursday, 24 February 2011)
Australian Securities and Investment Commission
Department of the Treasury
Australian Taxation Office
Senator BOB BROWN
Australian Bureau of Statistics
Australian Competition and Consumer Commission
Australian Prudential Regulation Authority
Department of the Treasury
Australian Office of Financial Management
Commonwealth Grants Commission
- Australian Securities and Investment Commission
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Content WindowECONOMICS LEGISLATION COMMITTEE - 24/02/2011 - TREASURY PORTFOLIO - Australian Competition and Consumer Commission
CHAIR —I welcome the Australian Competition and Consumer Commission. Mr Samuel, do you have an opening statement?
Mr Samuel —No, thank you. We will move straight to questions.
Senator RYAN —Good afternoon, Mr Samuel. I just wanted to trace a couple of individual issues to see if the ACCC is anywhere on these. I will turn to the issue around the voluntary administration of the REDgroup—the booksellers group. I assume that you are aware of the media reports and the apparent instruction to gift cardholders about gift cards only effectively being redeemable by spending twice the value. So I assume it is that, if you spend a dollar, you get a dollar off your gift card. Are you aware of those?
Mr Samuel —Yes, we are.
Senator RYAN —Has the ACCC looked at that issue? Have you been in receipt of complaints on it?
Mr Samuel —We have looked at it briefly. Obviously, there were a number of phone calls made to our Infocentre last Friday. But, of course, this is a matter for the Australian Securities and Investments Commission because it relates to effectively a financial service, so it is part of the carve-out that occurred as a result of the Wallis inquiry.
Senator RYAN —So it is not something that the ACCC has anything to do with because of that carve-out?
Mr Samuel —That is correct.
Senator RYAN —Another issue I wanted to look at was the joint marketing of natural gas from the North West Shelf in Western Australia. I understand that the ACCC has acknowledged that the price of natural gas has increased sharply in Western Australia—or has increased—and that it is higher in the eastern states, although that is not the most important point, but that you do not consider that that is the result of the joint marketing arrangements.
Mr Samuel —That is correct, yes. The issue of the joint marketing arrangements, of course, was the subject of very detailed consideration as part of an authorisation application by the parties to the North West Shelf development. There has been a lot of material that has been produced on that and it is sitting on the public record in terms of the authorisation adjudications.
Senator RYAN —Are you aware of the recent comments attributed to the Woodside energy chief, Mr Don Voelte, in the Financial Review, where he said, ‘I couldn’t care less if we were forced to market separately. In fact, I think we should and I think prices would go down.’
Mr Samuel —I am certainly aware of the report of his reported comments. Equally, of course, there has been a media release that has been issued since by Woodside that suggests that Mr Voelte has no recollection of having made those comments. So we have a bit of a debate going on as to whether or not he made the comments.
Senator RYAN —What you do when you are in such a situation?
Mr Samuel —Keeping in mind that Woodside was one of the applicants for the authorisation, what we do is make inquiries, as in fact we did, to senior people at Woodside to assess the veracity of the reports in the Financial Review. Woodside put out a statement, as I have just indicated, that suggested that the reports were not in accordance with Mr Voelte’s recollections. In the event that one of the applicants—for example, Woodside—had changed its position in line with the reported comments attributed to Mr Voelte then, of course, we would consider those factors in perhaps reassessing the authorisation. But that would appear not to be the case in terms of the advice we have had from Woodside.
Senator RYAN —You are currently in legal action in the Federal Court with a couple of Sydney restaurants for breaching your inclusive pricing laws. That is ongoing?
Mr Samuel —Yes, in fact they are your inclusive pricing laws, but they are the ones that we administer.
Senator RYAN —I am sorry.
Mr Samuel —That is right—yes, we are. I am just not sure of what the status of those actions is at the present time. Mr Gregson, perhaps, can help.
Mr Gregson —We took a number of matters to court involving cafes or restaurants and the 53C legislation. The vast majority of those have actually concluded. Indeed, I believe all of them have. There was one that was close to being resolved. I am just a bit out of date, but I suspect that one is also now off the books.
Senator RYAN —Are you not taking action against anyone else? Is that because you are not aware of them or the complaints had not been made?
Mr Gregson —The ACCC has taken a number of actions in relation to complaints and concerns we have about compliance with 53C in this sector. Our actions range from warnings and education through to infringement notices that we have issued. The matters that have proceeded to court are the instances where we have issued infringement notices and the parties have not paid those infringement notices. So we continue to look at the complaints or information that comes to our attention and endeavour to deal with those with a view to compliance.
Senator RYAN —Does the ACCC have a view on whether or not the Productivity Commission’s recommendation should be followed to provide a carve-out for the catering or restaurant industry?
Mr Samuel —It is a matter for government, Senator—it is a matter of policy.
Senator RYAN —Can I turn quickly to fuel related issues. I thought I would do some other things before we turned to fuel. I understand that the Fuel Consultative Committee had its inaugural meeting in April last year. Do you have handy or can you take on notice the organisations or people that still take a place in those meetings?
Mr Samuel —Mr Pearson, do you have that detail?
Mr Pearson —No, we will take that on notice.
Senator RYAN —Is there a financial appropriation provided for this or has this come out of the ACCC’s—
Mr Pearson —It comes out of our budget. When individuals attend, I think all we do is provide coffee, some sandwiches and the room, so it is not the most expensive.
Senator RYAN —Is it possible to also provide me with an up-to-date list of who is on the committee and any changes that have taken place in the membership of that committee since 30 April?
Mr Pearson —That is no problem at all. We actually went to senior people and asked the most senior people from the representative petrol companies and from organisations such as the convenience store association, so they have all been attending. I just do not have the exact names with me right now.
Senator RYAN —Can you also provide me with how many times it has met? Also, are there minutes or outcomes of the meeting that are publicly available? If so, are they produced by the ACCC?
Mr Pearson —There are some internal discussions, but one of the things that we attempted to do in bringing these people together was to try to get some discussion between basically supply and demand lobbyists, or the lobby groups representing groups, and ourselves. I would have to take that on notice. At this point, they are not public at this stage.
Mr Cassidy —In our annual report each year, we publish the details of each of our consultative committees, of which the fuel committee is one. Without going through every meeting and saying this is what was discussed here and this is what was discussed there, we give an outline of the issues that came up during the course of the meetings of that particular committee during the last year.
Senator RYAN —I want to turn to a couple of small business related issues specifically. In relation to what you call small-business related investigations or complaints from small business, does the commission have benchmarks in place with respect to time frames for completing such investigations?
Mr Samuel —I think it is fair to say that in respect of all investigations we have some benchmarks. I cannot give you the specifics of them, but suffice it to say that, where we can see damage being done, it is well recognised that it is appropriate to try to step in at the earliest possible opportunity to stop the damage being done, otherwise you can get to the extraordinary situation where you are conducting a detailed investigation over a period of two years and meanwhile the small business has gone out of business.
Senator RYAN —I appreciate that they are not in a form, but are those benchmarks something that you could take on notice and provide to the committee?
Mr Samuel —As I think I indicated in my opening response, it is not that they are benchmarks that can be described in specific quantitative terms, but they are qualitative benchmarks in the sense that there is a clear sensitivity and recognition that the failure to take immediate action, including interlocutory proceedings, can potentially lead to a very thorough investigation but a thorough investigation that is after the horse has bolted and it is too late to have any real impact.
Senator RYAN —Do you collect internal data on small business related investigations categorised by small business, effectively, and then the time taken for some sort of action or resolution? Is that possible with the data you collect?
Mr Gregson —Our database collects a number of different bits of information that would help us to identify small business issues. Of course, it is not always possible at the time you take a complaint to identify whether it is going to be small-business related, so they are not precise. We also do obviously find ways of identifying franchise matters or those matters that may involve unconscionable conduct in relation to the dealings of large business with small business. So we do have information that is available there and that assists us in determining the types of areas that we are going to focus our attention on in this sphere.
Senator RYAN —You have read my mind, because I wanted to ask you a quick question about franchising related to that. Has the commission received any formal complaints from mediators under the Franchising Code of Conduct regarding possible breaches of the dispute resolution processes?
Mr Gregson —I actually think this may have been an issue that was raised at a recent Senate estimates and we may have provided that answer on notice.
Senator RYAN —It could have been before my time in this portfolio. My apologies. If it has been, I am happy to be referred to it rather than ask you to restate it now.
Mr Gregson —It may be useful for us to refer to that to ensure that the answers are helpful and consistent.
Mr Ridgway —The ACCC does have some contact with individuals within the mediation community from time to time and we have had some feedback in relation to individual mediator perceptions about the processes they have undertaken. I do not have an immediate sense of a particular complaint related to the process or a particular matter at hand.
Senator RYAN —Could I ask you to take on notice whether you have received any complaints in relation to breaches of the dispute resolution process under the various codes in operation. I would be happy for you to take that on notice.
Mr Ridgway —Yes.
Senator RYAN —With respect to unconscionable conduct—I understand this question has been asked previously and I am seeking an update on it—can you indicate or take on notice how many cases the ACCC has commenced in relation to unconscionable conduct since we last appeared before estimates. If there is a more convenient reporting period I would be happy with that.
Mr Cassidy —I think the answer to that is one.
Senator RYAN —That makes it easy—easy to find, too. Can you also indicate whether you have commenced any predatory conduct related cases since the last estimates or, again, a similar reporting period?
Mr Gregson —We have not commenced any predatory pricing cases since last estimates.
Senator RYAN —I might have another colleague or two who might want to talk about this next issue, and there is a Senate inquiry on at the moment. Is the ACCC making a submission to the inquiry into the pricing of milk? I do not know the formal name of the inquiry.
CHAIR —The dairy inquiry.
Senator RYAN —Does the ACCC plan to make—
Mr Samuel —No, we are not in the process of making a submission.
Senator RYAN —Are you undertaking any activity with respect to that issue—what I would call the $2 price of milk issue—at the moment?
Mr Samuel —Yes, but obviously it is not appropriate for us to be commenting in detail, other than to say that to the extent that there may or may not be any potential breaches of the Trade Practices Act they are matters that we are examining. I do not want to say too much about this but I am not sure that there are matters that fall within the jurisdiction of the ACCC that would address some of the issues of concern that are being raised in relation to this matter as we read about it in the public press.
Senator RYAN —Sure. I appreciate the need to curtail your comments given what is going on at the moment. The final issue I want to raise—again following an issue from last estimates—is with respect to what has been referred to as the telco scam—or we might want to call it an alleged telco scam. How many complaints have you received up to now from small businesses caught up in this issue?
Mr Gregson —I do not have those precise figures but it is fair to say that we are aware of a large number of small businesses that have either complained to the ACCC or come to our attention through private litigation, lobby groups or indeed referrals through members of parliament. Those numbers are certainly not insignificant.
Senator RYAN —By ‘large’ and ‘not insignificant’, are we talking about a number closer to one with three zeroes, four zeroes or five zeroes behind it?
Mr Gregson —Perhaps we will take that on notice but, to try to give you an idea, it is certainly well above the 10s.
Senator RYAN —Sure. Since this was last raised has the ACCC commenced any further action? I understand you took some action in 2008 on this issue. Has any further action been commenced?
Mr Gregson —Those proceedings that were commenced in 2008 against 28 respondents continue. The hearing has been set down for March next year.
Senator RYAN —March 2012?
Mr Gregson —Correct. That is timetabling that is set by the court. We continue to go through the processes of that matter.
Senator RYAN —So it would be fair to say that sometimes—referring to the need for urgency that you referred to, Mr Samuel—the courts may be part of the time factors to be taken into account rather than the ACCC. It seems like a relatively long period from 2008 to a hearing in 2012, even by my knowledge of the court system.
Mr Samuel —That is the nature of the court process. It is totally outside our control.
Senator RYAN —I appreciate that.
Mr Gregson —Beyond that matter, the ACCC is obviously turning its mind to other ways in which it can address the concerns that have been raised in this space.
Senator RYAN —In a previous answer to a question, you outlined that you have been involved in ongoing discussions with a number of financial institutions about their positions on the pursuit of the completion of the relevant finance concerns. Are those discussions ongoing or have there been outcomes?
Mr Samuel —It is fair to say that discussions are ongoing, although there have been some outcomes. That does not give you much of a satisfactory answer. I think we need to understand that given the nature of the court process, which Mr Gregson has already outlined, and given some of the limitations on the ability or power of the ACCC to commence its own actions as distinct from being an intervener in private actions by being able to invoke the provisions of section 73 of the Competition and Consumer Act—I was going to say the Trade Practices Act; I presume it is the same section but I will stand corrected on that—
Senator RYAN —We are all waiting for our reprint, too.
Mr Samuel —There is a very good iPad app, actually, that will show you the conversion from one section to another.
Senator RYAN —There is?
Mr Samuel —Unfortunately I have not got it in front of me at the present time. There is that element of intervention in respect of private actions under section 73 and then there is the process of some interaction—at a reasonably high level, I would have to say—with some of the major financiers. But in the event it will probably take the completion of successful court action—either the 2008 action, which as Mr Gregson has indicated will not be heard until 2012, or intervention in privately instituted proceedings where the ACCC may intervene—to bring about some outcomes and some adjudication in respect of the application of section 73. I doubt whether until that has actually occurred we will be able to get some serious outcomes with some of the more recalcitrant of those in the financial—
Senator RYAN —Are you serious—is there actually an iPad app that does that?
Mr Samuel —Does the convert?
Senator RYAN —Yes.
Mr Samuel —Yes. ACLC, it is, if you have a look—and you can use it for your iPhone as well.
Senator RYAN —That will actually make life a lot easier for some of us.
Mr Samuel —I tell you, for the chairman of the organisation it is a great facility.
Senator RYAN —Did the ACCC develop that?
Mr Samuel —No, it was developed by a proprietary group—by Thomson Reuters, I think.
Senator RYAN —Well, there you go. It will be the highest selling item on the iTunes store soon, I imagine.
Mr Samuel —That might be the most useful information you get from this whole hearing, Senator.
Senator RYAN —Can you tell us how many small businesses you have assisted with private proceedings in this regard? Is that something you can get data on? If you do not have it handy, I understand.
Mr Gregson —In terms of assisting them, we have had contact with a number of businesses and we have turned our minds to whether those proceedings are a vehicle for our intervention. I have to say that given that the ACCC is not in control of those proceedings in any sense it is at times a bit of a moving feast as to the ones that may be the most suitable for possible intervention. But we have had contact with a number of businesses, either because they have approached us or because we have approached them to seek details of their cases.
Senator RYAN —Sure. Again, I understand that the criteria for intervention would be, I imagine, less of a moving feast than the cases you are intervening in; that would depend partly on their status, on how they were going. What sort of criteria do you use for that?
Mr Gregson —The ACCC does actually publish guidelines that set out the general types of matters that we take into account as to whether we should intervene. They generally boil down to whether they are in the public interest, whether they are better suited to private action and whether there are core principles that we should be involved in as the regulator. And we are certainly interested in these matters given that, as we say, we accept the seriousness and the nature of the concerns raised. The key issue for us, though, is finding the right vehicle—and that has been a moving feast.
Senator RYAN —That is why I was wondering. I know that the principles are broad so that people have a sense of trying to apply them through their own circumstances. Do have sort of a subset of principles that are developed in response to an issue about which you have had very many complaints—as you have in this instance?
Mr Gregson —We very much look at the specifics—
Senator RYAN —If they are the sorts of things you cannot release, I am quite happy for you to say so too.
Mr Gregson —There are certainly no guidelines, Senator, but we look at the particular matter and determine whether that is a good vehicle. We have a look at this stage it is up to in the proceedings and whether the issues that we are interested in are at the forefront before the court in that matter or whether they are ancillary. They are the types of things that we would have regard to.
Mr Samuel —I think it is fair to say that we are interested to find an avenue to get an outcome in the court process that will make it much easier for us then to tackle some of the more difficult or recalcitrant of the financiers that we have been endeavouring to deal with over the last 12 months to bring about a successful outcome in this area.
Senator MILNE —I just want to ask a question in the light of the concerns that are going on currently in the dairy industry and that have been going on for some time—in particular, around the Competition and Consumer Act and the adequacy of anti price discrimination and whether in fact that is captured adequately post the Boral case. Given that the milk companies have admitted that whole milk, either home brand or branded—this is just whole milk products, not low-fat milk products—is the same whether it is in a home brand packet or a branded package, can you tell me whether it is price discrimination when different prices are charged for the same product in different packaging?
Mr Samuel —No, it is not. But when you talk about price discrimination and then you refer to Boral, I think we need to clarify. The price discrimination, as you describe it, provisions of the Trade Practices Act were repealed back in 1995 or thereabouts as a result of the Hilmer competition policy report. There is nothing to prevent retailers from selling products that might look similar or might be of a similar content at different prices. Of course, we are aware, as I am sure that you are, that the difference in price between generic branded or home branded products and the branded product are very much related to some of the marketing elements of the branded product.
When you refer to Boral, of course, we are referring much more to issues of predatory pricing and misuse of market power. I think that, where reference is made to the ACCC in more recent times in relation to the dairy industry issues and the pricing of milk, that reference is being made with particular focus on whether or not the major retailers and other retailers in this area are engaging in predatory pricing. I think, as I indicated in an earlier question asked by Senator Ryan, it is probably not appropriate for us to comment on those matters in this arena in the sense that we do not comment upon matters that we may or may not be currently investigating.
I think it is perhaps also appropriate to note that, as I think our grocery inquiry indicated—and there is a significant chapter on the whole dairy and milk processing chain—there are several steps in the processing chain, from the dairy farm right through to the supermarket shelves. It is perhaps just worth reflecting back on that chapter in the grocery inquiry as to the various elements of that chain that can impact upon the price of milk at the retail level and equally on the price of milk that the farmer receives at the farm gate.
Senator MILNE —That is precisely the concern—that this is becoming more and more of a make-or-break issue for the farmers because the farm gate price is being driven lower and lower, to unsustainable levels, and being sold below the cost of production for them. Is the Competition and Consumer Act adequate to deal with the issues that are being faced by the farmers at the moment when it comes to issues like predatory pricing and anti price discrimination? Do we have an adequate act?
Mr Samuel —When it comes to issues of predatory pricing, of course, we have two provisions of section 46, including the now infamous Birdsville amendment. I would have to say to you that that amendment on any analysis, subject to ultimate testing in the courts, goes a long way to covering issues of potential predatory pricing. But there are a number of aspects of that have to be dealt with, including whether or not products are being sold below cost for a sustained period and then with the relevant purpose—the relevant purpose being to do damage to or destroy a competitor in one or more or other markets. So there are issues involving that, but we do need to remember that between the retailer and the farmer are processors. It may well be that the issue is not so much the retail price of milk that is being charged to the consumer that may be the centre of the potential problem for the dairy farmer; it may well be that the relationship between the dairy farmer and the processor is the issue.
Some of the focus of more recent times on Coles, Woolworths, the IGA group, ALDI and the like may be—and I have to emphasise the word ‘may’—misplaced and misdirected, and it may well be that it is the relationship between the farmer and the processor that becomes a relevant factor. In that context—and we are getting into the dairy inquiry, which I think is in about two weeks time—I just note a couple of reports in the last couple of days where Coles has indicated that, with respect to its Western Australian processors—that is, Fonterra—it is, as from 23 February, increasing the price per litre by five cents. There was a report by John Durie in this morning’s Australian that suggested—and I have to rely on the report—that Fonterra was indicating that that extra five cents that Coles will pay Fonterra will be retained by Fonterra; it will not be passed through to the farmer. That is not a matter that we can necessarily influence. That is a matter of the relationship between the dairy farmer and Fonterra. They are the sorts of issues that may well come out in analysis under the dairy inquiry.
Senator MILNE —I might ask you about the adequacy of the legislation again in that inquiry.
Mr Samuel —I think I have indicated that the legislation in the context of predatory pricing we think—
Senator MILNE —Is adequate?
Mr Samuel —is very thorough indeed.
Mr Cassidy —It is probably worth mentioning that, following the Boral High Court case, this committee had an inquiry that focused a lot on section 46. It is fair to say that each of the changes that we were advocating to section 46 in that inquiry has subsequently been made. It was done in a couple of tranches, but each of the changes we recommended at the time has been made to section 46.
Mr Samuel —We have had one successful outcome in respect of section 46 in the Cabcharge case. It was adjudicated on by the Federal Court last year with a very successful outcome in terms of both the court interpretation of section 46 and at the same time the penalties imposed.
Senator EGGLESTON —Can I make a comment on the Western Australian dairy situation. There are only 160 dairy farmers left in the south of Western Australia, so this is really quite a critical matter for them. That industry’s future is very much under a question mark, I think. What I would like to ask you about is the definition of ‘flood insurance’. I had a major insurance company come to see me in Perth last week that had been concerned with the Queensland flood situation. They said that, in 2008, you declined to issue an authorisation on a definition of flood insurance. As I understand now, the head of the Commonwealth Bank and the minister—Minister Shorten of the Federal government—are concerned with developing a definition of flood insurance. Would you like to advise the committee whether or not the reservations you held in 2008 are still pertinent or do you think that you can be persuaded to accept a definition as being acceptable?
Mr Samuel —It depends on what the definition is. The 2008 authorisation decision was made on the basis of three or four specific matters. The first was that the definition that was proposed by the Insurance Council introduced a range of new concepts which we, ASIC, the Insurance Brokers Association and the consumer groups believed would cause more confusion than it would provide certainty. It introduced new legal concepts and it was not, in our view or in the view of the other bodies that I have mentioned, including ASIC, the insurance brokers and the consumer groups, going to lead to certainty.
The second element of it was that the flood definition that was proposed by the Insurance Council was intended to be entirely voluntary and capable of amendment. So it was hardly a standard definition. It was a definition that was being proposed which was capable of variation by each and every insurance company as they saw fit, either by adding exclusions or amending or doing as they saw fit. So it was hardly a standard definition.
The third element that we were concerned about was that there was not, in our view, a significant proposal by the Insurance Council or the insurers to market the impact of the definition, other than to provide a link to some page on the Insurance Council’s website that might have explained what the definition was about. We did not think that was going to be an adequate means of providing some increased certainty to consumers in terms of flood definition.
Then there was another element of it, which was that—and we need to consider this equally today—you can have all the standard definitions you like but, if the standard definition is being used as a means of defining where cover will be excluded rather than included, it does not actually achieve much other than to provide some certainty as to when cover will be excluded. There was no indication as to how it might be used. In fact, the suggestion was that with some insurers it might well be used as a means of excluding cover under a standard definition of flood as distinct from including cover.
So, if something was put to us today it would need to address those issues. It would need to address the issue of consumer information, of providing a definition that was clear and not going to lead to greater uncertainty and new legal concepts, and of providing a definition that could not be varied, at least by any process of diminishing the extent of the definition—it might well be varied by providing enhancements by various insurance companies in terms of additional cover beyond that of the standard definition. And then, fundamentally, if we were considering the public benefit associated with the standard definition, we might want to look at a set of circumstances, or a code of conduct in a sense, that basically said insured persons, consumers, will need to have drawn to their attention in the clearest possible terms what the impact of this definition is in respect of their individual policy. It may well be a front-page cover sheet that says, ‘You are covered for flood—and ‘flood’ for this purpose means the following …’ It may even go far as saying ‘You, the insured, acknowledge that you have read this and you understand it’.
It is that sort of thing. If we want a degree of certainty then it needs to show a level of public benefit that would offset any anticompetitive detriments flowing from it. I would have to say to you that, if the same proposal were put up as was put up in 2008, I would be surprised if we did not have the same objections, along with ASIC, the insurance brokers and the consumer groups.
Senator EGGLESTON —That is a very interesting answer. I am told that about a third of Australia’s hazard insurance relates to flood claims. Obviously, there is a problem in the sense that it seems very much that if people do not have insurance the government may well come along and compensate them anyway for their losses, and probably a broader based insurance scheme would encourage more people to take out insurance rather than assuming they will be helped out by the government, either state or federal, after some problem occurs. But there is clearly also very much a difference between the amounts of research various insurance companies put into what is offered to the public. The particular company that was talking to me does detailed studies of the levels of previous floods in various areas and specifically relates an insurance to an address rather than a broader basis. Will you be seeking to be involved with the Insurance Council and the government in coming up with a definition which you might be able to provide authorisation for?
Mr Samuel —We are very much in a receiving/reactive role. It is entirely a matter for government as to whether they wish the ACCC to be involved, and of course it is for the Insurance Council to approach us for authorisation of a standard definition if they reach the position of having agreed one amongst their various members. All I can indicate is that we reached a decision in 2008 but the reasons for that decision were very clear and they would be, I would have thought, matters that the Insurance Council would want to take into consideration in determining whether they were going to submit a new proposal to the ACCC. Keep in mind that the ACCC, I repeat, was not Robinson Crusoe on this—it took into account significant submissions that were made by ASIC, which has primary responsibility for the insurance industry; the Insurance Brokers Association, which would have a fair bit to do with both consumers and insurance companies; and a number of consumer groups. So we will wait with interest as to whether we are approached by the Insurance Council and to see what they propose.
Senator EGGLESTON —It is in the public good to have this sort of insurance, you would agree. It is a glaring deficiency, I think, in the kind of coverage and security that the community have. I would hope that the views you expressed in 2008 are taken into consideration both by the government and by the ICA. Thank you.
Senator XENOPHON —Mr Samuel, further to Senator Eggleston’s line of questioning, would the problem with flood insurance contracts be solved if insurance contracts came within the purview of unfair contracts legislation?
Mr Samuel —I do not think we have given consideration to that. It is of course a matter of policy for government, so it would not be appropriate for us to comment, but I would have to say to you I do not think we have given consideration to that. You must remember from my response to the last question from Senator Eggleston that we are very much in a reactive position—that is, we have no role to play in this area unless we are approached for an authorisation of a standard definition. In that event, we then consider whether there are sufficient public benefits flowing from the arrangements relating to the standard definition to offset any anticompetitive detriments. That is the authorisation test. But the provisions of the Insurance Act and the administration of that, which of course is primarily undertaken by ASIC, are matters of policy that are outside our jurisdiction.
Senator XENOPHON —We will be having the dairy inquiry soon, but there are some matters that I think are pertinent to ask about now. We have seen the Coles ads with ‘Down, down; prices are down’—I do not know whether it is Status Quo or Deep Purple. I do not know whether anyone could help me as to which song it was borrowed from. Senator Sherry knows.
Senator Sherry —I know the song but I cannot remember the name of it. It is a great song.
Senator XENOPHON —Status Quo or Deep Purple—it is one of the two.
Senator Sherry —It is very effective, actually.
Mr Samuel —You could get that on your iPad as well if you had iTunes.
Senator Sherry —I could listen to the ad, unfortunately.
Senator XENOPHON —I can play it for you, Minister. Mr Samuel, you made reference to predatory pricing and I think you said ‘the infamous Birdsville amendment’.
Mr Samuel —That was for the benefit of Senator Joyce, who is not here at the moment.
Senator XENOPHON —He is not here, but I am sure he is here in spirit. And Professor Zumbo is probably here in spirit as well.
Senator Sherry —I notice you are being provocative even when he is not here.
Senator CAMERON —He might be in a river somewhere with that Toyota.
Senator XENOPHON —I do not think this is helping me or Mr Samuel! Are there any cases being looked at in the context of the Birdsville amendment with respect to any breaches of that amendment?
Mr Samuel —The answer is yes. Actually, you have caught me from left field because it is normally Senator Joyce who asks these questions. But yes, there are—
Senator XENOPHON —He is channelling through me right now.
Mr Samuel —The issue of predatory pricing is constantly on our radar screen. Mr Gregson could give you the exact numbers, but there are matters that are being examined at the moment that relate to the issue of predatory pricing.
Senator XENOPHON —Can I have those notice? I do not have much time and I want to ask about some broader issues in relation to the Coles ad—‘Down, down; prices are down’. I think the ad goes on to say ‘and they are staying down’. I think that rings a bell. When someone advertises in those terms, saying ‘prices are down and they are staying down’, that obviously does not mean from here till eternity, but there must be a reasonable time frame, must there not? You cannot just push prices down for a week or two. If you make a promise to consumers, what does ‘they are staying down’ mean?
Mr Samuel —As best I can recall, those ads—and I am not a watcher of ads generally; fast-forward works very well on the recording—indicate that the pricing that is being applied to these milk products will not be on a ‘specials’ basis but will be for some significant or sustained period. That would appear to be the case. At this point of time, we have not seen them out for long enough to be able to determine whether or not they are going to be cut short. But I think there are some representatives of Coles at the back here that you might want to ask. They can give you the answer.
Senator XENOPHON —We will be able to ask them during the inquiry, I think. They are not part of the estimates process.
Senator Sherry —And they are not part of the ACCC.
Senator XENOPHON —Is it not unreasonable for the ACCC to ask, ‘You have made these representations; what do you say is the time frame in which you will have these prices down’?
Mr Samuel —No, I think it would be more reasonable for us to ask, if they were cut short at a particular point of time, whether or not the reference to them staying down was misleading and deceptive.
Senator XENOPHON —But isn’t it a twin-edged sword though? The conundrum is that, if those prices are kept down for a considerable period and there is evidence that milk is being sold below cost, that then brings in issues of predatory pricing and the Birdsville amendment, doesn’t it?
Mr Samuel —Absolutely, but that is why I have indicated that they use the words that, if the prices stay down for a reasonably long period of time, one of the tests of the Birdsville amendment—that is, sustained period—may well be satisfied. But there are several other tests that need to be satisfied, including substantial share of the market, sale below relevant cost and having a predatory purpose.
Senator XENOPHON —But, if Coles were to say, ‘Look, we say that this is going to be for at least the next six months’, wouldn’t that be evidence of potential predatory pricing if you can show that the milk was being sold below cost?
Mr Samuel —It would certainly be an indication of an intention to sell a particular price for a sustained period. Then we would have to take into account the other tests relating to predatory pricing which I have just outlined—substantial market share, selling below relevant cost and having the predatory purpose in the three paragraphs, (a), (b) and (c), of section 46(1AA). I should say that we are well aware of those issues, we are well sensitive to those issues and I think some answers I gave before to—
Senator XENOPHON —Senator Milne. I know. But this is a variation on that. Would you be concerned if advertised specials at Coles were not real discounts—in other words, there was evidence that prices were either jacked up before a sale to give the impression of a sale or, alternatively, other prices in the shopping basket went up? So, in other words, the margins on milk may be down, but the margins on others would be increased.
Mr Samuel —Let me deal with those two separate issues there. The first issue you raised is that it is not a genuine discount because the price had been jacked up and then discounted. That is what we call was-is selling and marketing. As you would be aware, because we have talked about this previously in Senate estimates hearings, we have taken a number of cases on where retailers of products have sold products with an apparent discount when in fact it has not been a real discount at all. Either the products were never sold at the previous price or else they had been jacked up to give the appearance of a discount. The separate question you have asked, though, is a different question altogether—
Senator XENOPHON —Absolutely, it is.
Mr Samuel —and that is discounting one product and then, as you are suggesting, raising the price of other products to compensate. That is a far more complex issue and I am not sure there are any provisions of the Trade Practices Act or the Competition and Consumer Act that I would be aware of that would deal with that particular scenario that you have described as the second part of your question.
Mr Cassidy —It would depend a bit on what the representation was. If the representation just related to the particular goods in question and then the prices of other goods went up to offset that then it probably does not run foul of the act. If the representation was a more general one then maybe there is an issue. It would depend on what the particular representation was.
Senator XENOPHON —But does the ACCC have power to ask about the margins on other goods where the margins have been increased on other goods, for instance?
Mr Samuel —No, because, as Mr Cassidy has indicated, if the representation is that the price of product —say, milk—will be reduced and will stay down and that is the totality of the representation then the fact that prices of other products might have been increased would not be within the scope or ambit of the CCA—the Competition and Consumer Act—and would not be the subject of inquiry by the ACCC.
Senator XENOPHON —Even if it means that, in the average shopping basket, people may not be any better off, for instance?
Mr Samuel —But if the representation is about product A—milk—and it is not about the total price of the shopping basket then there has been no representation made as to the price of the shopping basket.
Senator XENOPHON —So it is all in the representations, basically?
Mr Samuel —That is correct.
Senator XENOPHON —Just on airport car parks, your recent report found, I think, that JFK and Heathrow are cheap as chips compared to Sydney and Melbourne airports. They might not be earning monopoly rents from aeronautical services. What actions can you take or are we stuck with a deal that was done to privatise the airports—and Senator Sherry had nothing to do with that, I should add.
Senator Sherry —I did, actually.
Senator XENOPHON —Did you? You were a culprit?
Senator Sherry —That is another story. It was a long time ago. I will tell you privately one day.
Senator XENOPHON —Okay.
Senator Sherry —I would also point out that the car parking at Devonport airport is a dollar forever. So there is great value at Devonport airport. I know it is not a favourite—
Senator XENOPHON —That is a reason to visit, Senator Sherry.
Senator Sherry —It is one of the reasons for living in the great state of Tasmania.
Senator CAMERON —It is a bit of a long walk to the Sydney international terminal, though!
Senator Sherry —And a swim.
Mr Samuel —I trust that the reference to it being a dollar forever is not an indication that it will be a sale below cost for a sustained period. But, in answer to your question, Senator: we have been given, since the privatisation period, which was about 2002, the task of monitoring the airport in terms of both the aeronautical service charges, their other charges and then I think, from about two years ago or thereabouts, the airport car parking charges. At the same time, we monitor the quality of service provided for those aspects of the airports that are run by the airports themselves as distinct from the terminals that are run particularly by Qantas, which runs its own terminals. There is nothing else that we can do in that context than provide our annual report, which is what we do. What happens after that is a matter for government. You would be aware, of course, that this is now a matter that is being reviewed by the Productivity Commission. I think they are due to report on this whole issue some time towards the latter part of this year.
Senator XENOPHON —But, when you hear stories of people trying to offer alternative parking and the valet type parking arrangements down the road, and they put up barriers so that you cannot park and all sorts of things like that, isn’t that something that the ACCC could look at because it is there? Many would say that it is there to block competition.
Mr Samuel —I think we can look at it, but I am not sure that we have any power under the law to do anything about that. That is the nature of the way that the airports are structured. In many respects, it is the nature of what occurs where you have a monopoly position. We have opined on that in our successive airport monitoring reports. There is not a lot that we can do.
Senator XENOPHON —So consumers will keep getting gouged for those sorts of services.
Mr Samuel —I would not like to use those expressions, but what we have indicated—
Senator XENOPHON —Ripped off?
Mr Samuel —is that there is a suggestion and there would be clear indications that monopoly rents are being charged and that monopoly type outcomes in terms of quality of service are occurring, particularly with respect to Sydney airport.
Senator XENOPHON —But you cannot do anything about it under the current law?
Mr Samuel —There is not a thing we can do. This is a matter, I think, to be addressed to the Productivity Commission in terms of its current review of airport regulation.
Senator PRATT —At September estimates I asked the ACCC about an investigation of breast imaging technology that marketers purported detects breast cancer—a claim for which, as I understand it, there is very little scientific evidence. You advised that you were taking it seriously and were in the early stages of looking at the issue. I would like to know where the ACCC’s inquiries on that issue may be up to.
Mr Gregson —I think it was with me that you had the exchange at the last Senate estimates. We remain committed to looking at those issues as a priority. As you are aware, we have, in my view, a very sound position that we do not comment on matters that may or may not be under investigation. I would rather not touch on the specifics of each particular trader. We continue to identify representations made in the marketplace. We continue to talk with those stakeholders that you may be talking to in terms of concerns raised. Indeed, we have approached some traders in relation to those matters. We have also seen an evolution of the representations that are made in the marketplace by some traders. That is obviously something we are tracking to see through. These are complex medical issues as well and some of the representations are not black and white. So it is not always possible to form an immediate view about what we can do about them. But they continue to be a high priority and we have a team of investigators looking at those.
Senator CORMANN —Referring to the information released through FOI on internal Treasury analysis in relation to banking matters—this relates to powers of the ACCC—are aware of what the references to the ACCC were in that advice?
Mr Samuel —I am not sure. I think it would be helpful if you would just supply it.
Senator CORMANN —It sets out those powers you have in three broad categories: general research powers, independent investigative powers and the ministerially directed prices surveillance powers. My questions are in that context. Are you undertaking any investigations at present of financial institutions in Australia for suspected breaches of part IV of the Trade Practices Act? I am not asking you to name anyone; I am just asking whether you are currently conducting any investigations.
Mr Samuel —Senator, I do not think we can give any details of any matters that we may or may not be investigating in relation to this area. That is not to imply that we are and not to imply that we are not; it is just that it is not appropriate for us to give any details on those issues. You would be aware—and our records would indicate—that one or two matters currently before the courts relate to part IV matters concerning one or other of the major trading banks, but beyond that I really cannot comment any more.
Senator CORMANN —Do you have a ministerial direction at present to conduct any prices surveillance on Australian financial institutions?
Mr Samuel —No.
Senator CORMANN —Are you doing any general research into Australian financial institutions?
Mr Samuel —We have undertaken some significant general research as an appendage to the work that we have had to do in relation to prospective mergers of financial institutions in Australia and, as a result, we have gathered together a reasonable database of knowledge on the whole issue of competition in the banking market and in the financial market, and particularly what has occurred over the past two or three years.
Senator CORMANN —There is a Treasury document setting out these options. Are they the only powers the ACCC has in that space? Is that an accurate reflection or is there something missing?
Mr Samuel —I think that about summarises it, Senator. But of course in relation to the banking and financial institutions market we do not have specific powers or responsibilities; they rather rest with the other three organisations: ASIC, APRA and the Reserve Bank. Our primary role in this area has tended to be in relation to mergers in more recent times. In the past, it was in dealing with the payments system and the like—although that is primarily now handled by the Reserve Bank.
Senator WILLIAMS —Mr Samuel, do you have an application before you in regard to the Australian Wheat Board, in relation to CBH and Cargill?
Mr Pearson —Senator, we have had contact with AWB concerning the port undertakings. I am not sure whether that is what you are referring to.
Mr Grimwade —In addition, we are looking at a proposed acquisition by Cargill of AWB’s commodity business.
Senator WILLIAMS —Is there also a proposal from CBH?
Mr Chadwick —There is an exclusive dealing notification that CBH lodged in 2008 relating to the transport and storage of grain, which we are currently reviewing. The commission issued a draft notice late last year indicating its intention to revoke that notification.
Senator WILLIAMS —So you could say that both Cargill and CBH are pursuing taking over AWB?
Mr Chadwick —No, sorry; the notification is purely about the way CBH operates its transport and storage. It does not relate to any other companies.
Senator WILLIAMS —Okay. Mr Samuel, I do not know whether you are the right man or the right agency to answer this. I believe there is a company called Veda that used to be the CRAA—credit ratings. If you applied for a loan or a credit card or anything, the bank or finance institution would contact the CRAA and get a reference on you. If you did not pay your phone bill or your power bill you would get black marks. Are you familiar with what I am referring to?
Mr Samuel —No, I am not but I suspect that that is because this would fall within the jurisdiction of the Australian Securities and Investments Commission rather than the ACCC.
Senator WILLIAMS —I actually did run it past them at one stage and they did not think so. It might be something for APRA. Minister, would you be able to give me any guidance there?
Senator Sherry —I would have thought, like Mr Samuel, it was ASIC, not APRA, because I would not have thought it was a prudentially regulated—
Senator WILLIAMS —I have been informed that there is no watchdog, no-one overlooking that industry at all—and if they make mistakes, so what. I have a close friend who applied for a credit card many years ago and it was wrongly reported that this person had not paid a $120 account. And now I am getting information that they are going to not only track whether you pay accounts or have blacklistings but also at what time you pay your accounts and how big the accounts are. There is talk now, I know, in the finance world about getting more information. I am just concerned that we do not have any watchdog over that industry whatsoever—that they are just a free dog, basically.
Mr Samuel —I am not sure that there is no watchdog, Senator, but I would have to say to you that since the carve-out of financial services from the ACCC’s jurisdiction which followed on from the Wallis inquiry—I stand to be corrected but I think you will find this—that issue is entirely within the jurisdiction of ASIC.
Senator WILLIAMS —I will put a question on notice to Mr D’Aloisio at ASIC and see if he can help me.
Senator Sherry —Why don’t I take the question on notice for the minister and the parliamentary secretary?
Senator WILLIAMS —That would be good, Minister.
Senator Sherry —We will get some advice on this matter as to who oversights the area. It is an interesting point, Senator.
Senator WILLIAMS —That would be great. If there is a court case, I think the situation is that when the media say ‘Senator Sherry said this’ and it is wrong, the blame goes back to Senator Sherry and not to the media. There is an ‘out’ there whereby the media cannot be sued or whatever or held accountable—
Senator Sherry —Somewhat like a credit rating agency.
Senator WILLIAMS —Yes. If the CRAA or Veda come under the same criterion as the media, I am just concerned that there is no oversight whatsoever of that industry. It is a big industry and a growing industry. I believe that with many loan applications, whether they be for credit cards or home loans or whatever, the computer does so much of the work these days and may be getting wrong information from these credit information people. If they have got it wrong, who is saying to them ‘Why have you got it wrong and what are you going to do about correcting it?’ That is my concern.
I will move on to something you would be familiar with, Mr Samuel: fuel prices. I know of one independent fuel station, for example, that might be paying a terminal gate price of $1.30—just guessing figures—while the big dealers down the road, Coles and Woolworths, are selling at $1.26, below his terminal gate price, and then he has to freight it from Newcastle to his service station. What do you do about that when the big end of town are selling at 4c or 5c less than the small player pays as the terminal gate price?
Mr Samuel —We are getting into the area of predatory pricing again. Suffice to say that we are well aware of and well sensitive to some of the issues that are raised there. But I would have to say to you that at this point in time, despite many investigations into this area, we have not yet been able to establish that there is any evidence of predatory pricing involved. We must remember that the terminal gate price paid by retailer A is not necessarily an indication of predatory pricing by retailer B, who can sell below that terminal gate price, because it may well be that retailer B is acquiring its fuel at a lower price—and predatory pricing involves selling below its own relevant costs, not selling below the relevant costs of some other party.
Senator WILLIAMS —Or there may be kickbacks later. I know that probably 10 years ago rural outlets might have been selling Roundup, for example, for $105 a 20-litre drum and paying $100 for it but at the end of the year Monsanto would give them a kickback according to how many drums they actually sold. Perhaps that exists in the fuel industry as well.
Mr Samuel —Those issues would not have escaped our attention, Senator; that is all I can say.
Senator WILLIAMS —Truth in pricing is perhaps required.
Senator McGAURAN —I just want to pick up on an issue that Senator Williams just raised, because it has come to mind. A critical issue to the final, total deregulation of the wheat market was port access, as you well know, particularly for the Australian Wheat Board because, as we know, there are port monopolies held by two or three companies whose names escape me—CBH was one, definitely. Therefore, the legislation and the acceptance by the parliament of deregulation of wheat, except in the National Party, was on the grounds of access to ports and fair trade—in particular, I come back again to the Australian Wheat Board—and ship placements and all of those sorts of things. Are we able to get a quick overview of the status of the access to ports for companies such as AWB? I know that the groups were meant to submit to you their plans, for want of a better word—
Mr Samuel —Their undertakings.
Senator McGAURAN —It has been some time now. It should all be locked away and fair trade should be operating.
Mr Pearson —We actually have three major undertakings. We went through an initial consultation. We are now going back to the market and we have commenced discussions with the operators of the terminals and some discussion with the market. We will be getting additional information from the market for the next round of undertakings. The initial ones were time limited. At this stage, we are probably looking at 12 months, perhaps, of market inquiries for all three undertakings, although they will be done as separate processes.
Senator McGAURAN —It is certainly a long and dragged-out affair, which may not be your fault. Even so, with getting these final undertakings, isn’t there a status report on how it is all operating now? Have you had complaints from AWB that, while this long talk session and planning are going on, they are being blocked at the ports or not?
Mr Pearson —No, we have not. The initial undertaking assessment was actually cut short. We cut short and cut out what we would normally do for a full-blown undertaking because of the fact that this was an industry that was deregulating. There were questions about the extent that we needed to do a full-blown undertaking inquiry. So it was actually cut short. We took into account what we saw as the major issues to do with discrimination, access, ports, stems and so on. We have had some complaints. We have investigated, and many of those are purely technical or they are commercial issues. At this stage, without actually going into it, we have actually had a couple of marketers who have complained about certain aspects of port stems. There is nothing that we have seen at this stage that would require additional work, although I think in South Australia some information went up on the website which concerned some issues there with information that was put out to the market, which they then corrected. So, at this stage, I think our view is that it is working well. It would be interesting to see what happens with the market concerns now. We have not seen any evidence of blocking at this stage. Nobody has brought us any. I am more than happy for people to bring that to us.
Senator McGAURAN —That is very encouraging.
Mr Samuel —Suffice it to say that, as the undertakings are being reviewed in the ensuing months, any of these issues that may be causing concern will come to light.
Senator McGAURAN —Thank you.
CHAIR —I thank the ACCC for coming along this afternoon.