Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Monday, 15 June 2009
Page: 3188


Senator COONAN (9:15 PM) —I rise to speak on behalf of the coalition on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008. I think it is interesting to first take a look at what this legislation is aiming to address, which of course is cartels. A cartel is an anticompetitive arrangement between two or more businesses. In its simplest form, it is an agreement between competitors not to compete. Cartels disadvantage consumers because they reduce their choices and ultimately lead to higher prices. Here in Australia we are of course not immune to cartel operations. In recent years we have seen the application of civil penalties for cartels, most notably with the Visy case in Victoria, which related to alleged price-fixing behaviour. This case has been described as the most serious cartel case to have been ventilated in our country.

The mere existence of previous cartel operations indicates clearly that the penalties available have not been adequate in deterring serious cartel activity. Not only does our recent history indicate the existence of cartels but also in Australia we have some of the globe’s greatest concentrations of ownership, and this creates an environment that is potentially more conducive to the creation of cartels. A prime example of this is the retail sector—particularly in groceries, alcohol and hardware sales—which has been the focus of much debate about this sort of activity. Top of mind, of course, is the duopoly of Woolworths and Coles, who have cornered over 70 per cent of the Australian grocery market. While I hasten to say I am not suggesting for one moment that Coles and Woolies are running a cartel, this example indicates how close to home concentrations of ownership are for the Australian consumer and why it is important that we have vigilant laws that serve to deter the creation of cartels and ensure consumer protection.

The legislation before us this evening in the Senate gets tougher on hardcore or serious cartel conduct by the application of criminal sanctions in order to deter and detect criminal cartel conduct. It proposes to make it a criminal offence if a corporation makes or gives effect to a cartel provision—that is, conduct which can be described as price-fixing, restricting outputs in the production or supply chain, allocating customers, suppliers or territories, or bid rigging. The maximum penalties for offences under the new legislation will be, for an individual, a maximum jail term of 10 years imprisonment and a fine of $220,000 and, for a corporation, a fine that is the greater of $10 million and three times the value of the cartel.

When the coalition were in government we had identified the risks to the consumer that so-called hardcore cartels present. The need for tougher penalties, such as those described just now, was a key recommendation of the 2003 Dawson review of the Trade Practices Act. In supporting the passage of this bill through the Senate this evening, I am reinforcing, however, the coalition’s renewed commitment to the prevention and deterrence of serious cartel conduct in the future. We believe that the penalties will be a sufficient deterrent to businesses but, most particularly, will deter individuals.

It is important that this legislation is brought into effect, not only for the benefit of domestic consumers but also for Australia’s international relations and trade. Consistent legislation between different countries and trading partners in particular is important in a globalised world where businesses and cartels operate across various jurisdictions. The new legislation will ensure that Australia meets the OECD’s 1998 guidelines, which recommend that member nations ensure that their competition laws halt and deter hardcore cartels. It will also bring us into line with over 15 OECD nations, including the United States, Canada and the United Kingdom. These countries already have similar sanctions in place.

Having referred briefly to the reasons why we in the coalition believe this legislation is warranted, I would now like to mention the legislation itself. The recent Senate Standing Committee on Economics inquiry into this bill highlighted some concerns regarding the nature of the legislation we are considering. The first major concern identified is the lack of a definition of and mechanisms to distinguish criminal cartel conduct. Essentially the bill does not establish the exact point at which an activity goes beyond a civil cartel offence, dealing with anticompetitive conduct, and becomes a criminal cartel offence deserving of a jail term.

My concern here is that this creates uncertainty. How will the ACCC, the regulatory body responsible for identifying this activity, decide which matters will proceed to criminal prosecution and which will only be dealt with as a civil penalty? At what point does one identify that coordinated activity is actually hardcore cartel activity? There is a risk that even ordinary commercial transactions could be captured under the bill’s criminal offences, and this is a matter of some significance.

The Senate committee report has identified this weakness in the legislation as drafted, indicating that while the bill states:

... that a criminal cartel must have both a ‘physical’ and ‘fault’ element ... the physical element of a criminal cartel provision is not explained. The prosecutor therefore has only broad guideposts as to whether to treat an activity as a criminal, as opposed to a civil, offence. ... the bill thereby creates uncertainty as to which matters would proceed to criminal prosecution and which would only be dealt a civil penalty.

I believe we will need to agree that, while this situation is far from ideal, a simple approach to defining what is criminal and what is civil for these particular circumstances may never be resolved because so much will depend on the facts and circumstances of the particular situation at hand. In fact, the ACCC has foreshadowed these concerns, stating that ‘whether a particular conduct should be treated as criminal or civil will depend on the particular circumstances of the conduct’ under investigation.

The second concern identified in the report is the nature of the joint venture defence. There are two arguments focused on this area of concern. Some critics claim the defence is too narrow and will limit legitimate business activities. This means commercial arrangements and conduct that are not currently prohibited under the Trade Practices Act might be inadvertently captured as cartel conduct. On the other hand, some who have looked carefully at this believe that the joint venture defence is too broad and would allow illegitimate cartel conduct to go unpunished. This means the joint venture defence will provide a shield for illegitimate cartel conduct.

The Senate report examines these issues in great detail, describing all manner of existing joint business arrangements and potential joint ventures and how they will be affected by the proposed legislation. While it aims to address each of these individual concerns, as a whole the mere existence of this number of concerns and different situations between businesses that are in some form of joint venture indicates how difficult it will be to identify and prosecute criminal cartel conduct in the future, particularly in relation to those parties that participate in joint venture agreements or that operate with coordinated activity. The only clarity that I have been able to glean from this is that consistent application of the legislation threatens to be murky. It is most likely that once again this part of the cartel investigation will be best settled based on the facts of each particular case.

The third concern is the level of discretion and potentially the extra workload that will be incumbent upon the ACCC who, as I mentioned earlier, have been given responsibility for determining which alleged cartel activities to pursue criminally and to forward information on to the Commonwealth Director of Public Prosecutions. The ACCC has emphasised that the bill provides persons with the capacity to seek authorisation from them if they wish to engage in coordinated activity without legally binding agreements and in circumstances not involving joint production or supply. While this measure allows for those who might engage in activity that is coordinated but not a cartel, it highlights that the bill’s joint venture defences would shift a heavy burden onto the ACCC to conduct an authorisation process for all joint ventures not formed through a contract and not engaged in activities relating to the production and supply of goods and services.

The Senate committee report has also addressed these concerns, indicating that the claim that the bill would give the ACCC too much discretion in determining the pursuit of criminal cartel cases is overstated. The ACCC currently exercises discretion on a range of trade practice related matters which require it to investigate activities and to assess possible breaches of the act based on all the relevant circumstances. Because this bill has been a long time in the making—or at least the consideration of the issues has had a very long gestation—I have taken the time to highlight these three concerns as they all point to the fact that, in the first instance, the success of this bill in bringing criminal cartel activity as a matter of law will be subject to interpretation and action taken by the ACCC. As pointed out in the Senate committee report:

... Treasury emphasised the importance of giving the ACCC flexibility to investigate a matter on civil grounds, but with the option of going down the criminal path where appropriate.

The bill certainly provides this flexibility. The question is whether it provides too much to the point where the business community and the public at large could not be sure what will and what should guide the ACCC in pursuing criminal cartel investigations. In this instance, I welcome the Senate committee’s recommendation that, following the passage of this bill, the ACCC publish guidelines on what is and is not acceptable activity in relation to cartels. I believe that is very important. This requirement should help to address the concerns I have just indicated. It is a recommendation that I think is very germane to the consideration of this bill.

Perhaps of greatest concern is whether we have achieved the right balance—we hear a lot about getting the balance right. Again, I refer to the committee report, which states:

The bill’s undisputed strength is in establishing criminal offences and penalties for cartel conduct and providing the regulator with the flexibility needed to successfully prosecute such cases. Its weakness is this flexibility creates a level of uncertainty.

Clarity and certainty is vital if proposed legislation is to be an effective deterrent against cartel activity—indeed any activity to be the subject of legislation. Without deterring day-to-day business activity there is obvious concern that the bill in its current format is struggling in some areas to meet those requirements. However, trying to get the balance right, the other side to this argument which I believe should prevail and guide us is that this is such a complex area that it can only be investigated and addressed as the law develops on a case-by-case basis.

So, while I think it is fair to say that the legislation might be somewhat woolly, it is a situation that I think requires us to look at the bigger picture. We would not want to see this legislation delayed, particularly as the inherent nature of the many different permutations that can arise between two businesses operating together, or indeed in competition with one another, is such that it could be almost impossible to be able to nail down or define with precision and exact rulings what can be defined as criminal behaviour.

Whilst I certainly have misgivings as to some of the provisions in this legislation that we have under consideration, I do think that as a matter of principle it is important that the opposition signify our support for the bill and also indicate that we hold the view that a hard line must be taken against cartel conduct. Cartel behaviour is nothing less than theft from the Australian consumer. I think this bill has the potential to even the ledger. It is another step to ensure consumers get the best product or service for the best price. Given that cartels may operate across jurisdictions, it is also important and indeed advantageous that the Australian laws are harmonised with those of other major economies. However, such is the nature of the legislation that its successful implementation is very much a work in progress and it will only be established as individual cases come forward and the law is applied. I think it is very important that we all carefully monitor how this law is applied. Under those circumstances, I commend the bill to the Senate.