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Wednesday, 15 August 2012
Page: 8739


Mr BILLSON (Dunkley) (15:42): There you have heard it. There you have heard the Labor line that there is no problem to be found anywhere in our competition laws. It is quite remarkable to hear the Assistant Treasurer. I remember having a debate with his predecessor in the then Prime Minister's seat when I was outlining the coalition's policy dealing with the need for a root and branch review of the competition framework and that was extremely well received. Then Dr Emerson, who was my opposite number at the time, ran the same line. He said that there was no problem to be found and that the Labor government was perfectly happy with the current set of arrangements. And there you have heard it again today from the Assistant Treasurer. He said: 'The existing framework is adequate.'

I cannot agree with that. In fact there are two absolute certainties in this competition space that I think we all might be able to agree on. One is that everything is not okay. I think we can agree on that. I think that is pretty clear. We see pressures in our marketplace day in and day out and some of those have been touched upon by earlier speakers. I think we can also agree that there is no single silver bullet to fix this. The member for Kennedy has outlined the etymology, if I can use that language, of some of the challenges that he sees, and I would like to add my account of some of the challenges that are also there.

I am absolutely certain that there is no single action that will address the issues that are here now. I think we can agree on those two things: that Labor is absolutely wrong in saying everything is peachy sweet about the current competition laws in Australia, that there is no problem to be found anywhere in the economy. I think we can also agree that there is no simple, single solution that will remedy the pressures and tensions that the coalition sees and has been identifying. That, I think, we can agree upon.

The proposition that is being put forward today by the member for Kennedy is that the government should be given some powers to intervene to divest in the two, as he calls them, supermarket giants. I should help the Assistant Treasurer: there already are powers in the competition law of Australia to deal with divestiture. They already exist. They exist to the extent that a merger or acquisition has been transacted without receiving the appropriate approval from the ACCC and that that would amount to an adverse impact on competition.

There are a whole lot of legal definitions that sit around it but if someone proceeds with a merger and acquisition and it has the effect of substantially reducing competition then there is a divestiture power available. So that power already exists. If an approved merger or acquisition proceeds, but some of the undertakings or terms under which it was given approval—given consent—are not adhered to then there is also a power for the ACCC to instigate divestiture.

So for those who are talking about divestiture power, there are already mechanics in the current law to deal with those things. That is not dissimilar from the laws that exist in other jurisdictions. There has been some talk about what happens in the UK. There is the same arrangement: if a merger or acquisition that has been progressed with has a detrimental impact on competition then there is a divestiture power. Under the antitrust laws in the United States it is the same as well. In that respect we are not so different.

Where we are different, though, is in the way in which two very dominant players in this supermarket space are able to work within the railroad tracks of the current law—therefore, not break the law—but, in effect, put pressure on a pro-competitive, pro-consumer, pro-economic prosperity future that we would hope for for the country. That is real. We see those pressures popping up in a number of places: the growing market concentration in key areas and the key impact these dominant players can then have over suppliers, where they exert pressure and have an influence that leads suppliers to make, in some cases, decisions that are against their own economic self-interest. Why? Because there is nowhere else to go.

That is not against the law. It is not helpful for our economy. It is not helpful for innovation and diversity and choice in our supply chain. I think it is not helpful for the durable interest of consumers in Australia, but at the moment it is not against the law. That is a problem with the law. It shows that the Labor reassurance that the existing framework is adequate is simply not right.

The provisions in section 46 relate to the misuse of market power. For those who want to lie awake at night, have a read of section 46. It was the provision that those reviews that have been relied upon by the Assistant Treasurer said would catch everything. If there was a kind of mischief going on from a dominant player in the market place, section 46 would be the answer. Yet reality has shown us that you need to be asleep to break those laws. The requirements to offend those laws are so steep, so demanding and so difficult to prove that there are very rare cases where a prosecution has been successfully brought. And where a prosecution has been brought the penalty is to be slapped with a wet lettuce leaf. So this omnipotent provision under section 46 dealing with misuse of market power, which promised so much, has not delivered what was promised. We think that requires examination.

Look at some of the mandatory codes. I concur with some of the views that the member for Kennedy pointed out. The horticultural code is a piece of fiction. It just does not achieve what it aims to achieve. We have seen problems with the grocery code and we see this in the franchising area as well. They have not lived up to the ambition that led to their formulation. In reality they have not had the impact that people had hoped for.

If you are a small business, a grower or a family enterprise seeking to access some of the remedies and sanctions to draw upon and activate some of the provisions in the current consumer law, your simple size can make that out of reach. You can be faced with a goliath of another party that you have some grievance with, and frankly you will run out of money before you get your case considered. This is unsatisfactory.

Aficionados can even look further. Some of the access regime that is currently in place does not lend itself well to trade exposed issues. Some 20 years ago this framework that we operate within now was formulated, and it has largely been unchanged since. Yet the marketplace has changed. Some of the ideas that Professor Hilmer contemplated two decades ago he thought would have certain effects when, in reality, they have proven not to perform in the way that he though they would.

The market share of the supermarket chains has been touched upon. That has continued to grow and it has created new challenges to the competitive landscape in Australia. It has put pressures on suppliers. It has enabled those dominant players to encourage people contributing supplies, services or goods to do things they otherwise would not do. They are now up against price points from international competitors.

I saw this when I was up to my calves in cow poo down near Colac talking to a dairy farmer. He was telling me, 'Bruce I've got the carbon tax and all these other pressures putting upward pressure on my costs, yet I have been told by my milk processor that I'm going to get 10 to 15 per cent less for my milk next year.' Why less? Because the supermarkets wanted to go down, down on their prices. What that was representing was down, down pressure on what the milk processor was being paid. And the milk processor, in turn, was passing that through to the dairy farmer.

What was the price point? The price point was an overseas competitive supply option. So they are basically being told, 'We'd love to keep taking your Australian grown stuff; we'd love to keep taking your milk, but for us to do so you need to compete with imported dairy inputs that really are your price point regardless of what it costs you to survive.'

Hilmer did not anticipate this. Twenty years ago you could not see those pressures. Twenty years ago you saw people advocate that section 49, the price discrimination period, be repealed. Why? Because section 46 would be the answer: it would solve all of these problems. You did not expect that a big business would go to their suppliers and say, 'We don't think Christmas is going to be as good for us as we thought. How about you take five per cent off your invoices? We'll pay you in three months.' They said—I am quoting them—'That will be an investment of mutual benefit to both our organisations.' What choices do you have? Where do you go?

This is where fair competition supports a productive and efficient economy. We are seeing behaviour at the moment that is not unlawful—it does not breach our highly prescriptive laws in this country—but it is certainly not pro-competitive. I have my doubts about whether that will support the long-term economic prospects of our nation and the durable interests of consumers to support innovation and choice. Surely, that is what competition laws should be supporting. We have highly prescriptive laws, some of the most codified laws anywhere on the planet. As long as businesses know those laws and work them hard—and in some cases game them—to stay between the railroad tracks of what is lawful and what is not, they can push on.

But is that what is going to support our long-term economic interests and durable benefits for our consumers? The coalition does not think so. That is why we needed a sober, objective, evidence based examination of the pressures on our competition laws in Australia—to look at what might work so the remedies are fit for the purpose and do what we anticipate, and to test what is going on internationally. In other jurisdictions the laws have the capacity to deal with these pressures; our laws do not. Laws in other jurisdictions are sharper and reflect the longer term interest. That is what the coalition is all about and that is what we should be supporting. (Time expired)