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STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS AND TRANSPORT
09/07/2008
Meat marketing

CHAIR —Welcome. Would you like to make a brief opening statement before we go to questions?

Mr Ridgway —If it would be helpful. I understand that the committee may have some questions about the ACCC’s role and function in relation to industry codes of conduct, both voluntary and mandatory. I can, if it would be helpful, provide a short opener to provide a bit of an explanation of that role.

CHAIR —That would be helpful.

Mr Ridgway —I am happy to do so. The ACCC administers the Trade Practices Act. Part IVB of the act deals with both mandatory and prescribed voluntary industry codes of conduct,. That part was added to the Trade Practices Act in 1988. At the moment the ACCC administers three mandatory codes of conduct—the franchising code, the horticulture code and the oil code of conduct. There are no prescribed voluntary codes of conduct in place at the moment.

The engagement of the Trade Practices Act with these mandatory codes of conduct results in the fact that the ACCC both administers and enforces those industry codes—as it does the Trade Practices Act. The sanctions, the remedies, available for contraventions of those codes under the Trade Practices Act apply to the extent of compensation orders, injunctions and other orders that are appropriate. There are currently no pecuniary penalties that apply to that part of the act.

It is my understanding that a prescribed voluntary industry code would not apply to the whole of a sector, as a mandatory industry code does, but to certain signatories to an industry code that may well be prescribed by the government. It would ensure that those organisations, companies, that subscribe to that prescribed voluntary code would themselves be subject to that code as law and the remedies available under the Trade Practices Act for contraventions of mandatory codes or codes specified under that part would also be available for contraventions of the prescribed voluntary code.

The commission also engages fairly extensively with industry for non-prescribed voluntary industry codes, or simply ‘voluntary industry codes’, in two significant ways. Firstly, in relation to the role of administering and enforcing the provisions of the Trade Practices Act that go to anti-competitive conduct, we ensure that, where an industry code has elements that may risk contravening the competition provisions, we are able to consider, under the public benefit test, whether the code should nonetheless be allowed to stand and be authorised by the ACCC, where the public benefit of such a code would outweigh the perceived anti-competitive impact. We have engaged with a number of industry codes on that basis. Perhaps the most well known of those recently would be the Medicines Australia industry code, which deals with promotional efforts and so forth by pharmaceutical companies. But we also engage with a range of other industry codes on that basis.

Separately, we provide some assistance to industry associations that wish to develop industry codes of conduct to engage in some self-regulatory behaviour to ensure that high standards of conduct in the industry sector are maintained. We provide advice on practical aspects of industry codes that are more likely than not to foster a successful outcome. That is probably it.

CHAIR —Thank you. I am sure there are going to be a number of questions.

Senator HEFFERNAN —The horticultural code—do you think you have sorted out the mafia in the markets?

Mr Ridgway —The ACCC has been fairly active in administering and enforcing the horticultural code. The committee may or may not be aware that we engaged in a significant range of educational activities initially, before the code was introduced and shortly after the code was introduced; we continue to be able to provide education and advice. We have also taken a number of traders to task in the sector recently.

Senator HEFFERNAN —What is ‘task’ code for?

Mr Ridgway —We have accepted some administrative undertakings. We have accepted some enforceable undertakings.

Senator HEFFERNAN —Can you give us an example of that?

Mr Ridgway —I would have to check for details.

Senator HEFFERNAN —You see, you are fluent bureaucratically but not practical, to me. You are very good with the bureaucratic spiel but, when it comes to touch and feel, I have not heard one thing you have said this morning that I could touch and feel.

Mr Ridgway —Okay. Perhaps I could in less bureaucratic language note that some traders—

Senator HEFFERNAN —I mean, we are dealing in the markets in Melbourne, for instance, where there are well-established mafia. I want to know what you have done about that.

Mr Ridgway —We have investigated a number of concerns that have been raised with us and, not speaking directly about traders in the Melbourne market but in other markets, such as in Western Australia, we have found evidence that suggests contraventions of the horticultural code and we have required the traders to fix up the errors that they have engaged in and to—

Senator HEFFERNAN —What would be an example of the errors?

Mr Ridgway —The code requires, for example, that terms of trade are publicly posted and that the traders engage with the growers that they trade with with horticultural produce agreements that are compliant as prescribed by the horticultural code. We have had indications that some of the trade in that sector has not been consistent with the requirements of the code.

Senator HEFFERNAN —But you are still talking bureaucracy. Give me an example. Does someone lob down there with a load of lettuce and get into trouble because he is not signed up to the mob, as it were? I know of instances of that, by the way. Give us an example. You have not touched anything yet. Give me an example of what you have discovered.

Mr Ridgway —Okay. The best example would be—and forgive me—

Senator HEFFERNAN —If you do not know the answer just say, ‘I don’t know’—just specifics.

Mr Ridgway —I might want to stay away from specifics so as not to misdirect the committee.

Senator HEFFERNAN —But you do not have to say in what state. You can say, ‘In a market in Australia this happened.’

Mr Ridgway —Okay. Generally, the mischief that we have seen so far has been that some of the wholesalers in the markets have not had in place the horticultural produce agreements that the code requires them to have in place. We have taken some of those traders to task. There have been other instances where the horticultural produce agreement itself has not been consistent with the requirements of the code. We have required those agreements and the templates that have been provided by the chambers of fruit and vegetable to be amended so that they comply, in our view, with the requirements of the code.

Senator HEFFERNAN —So to try and still get the answer to something that I can touch, have you discovered people that operate in the markets that do not disclose whether they are the agent or the reseller? That is what it comes down to. Blokes that go in there on a big day get dudded; there is no question about that.

Mr Ridgway —We have some matters under investigation at the moment that may go to that issue of whether or not the wholesaler is acting as a trader, a merchant or an agent. They are matters that are under consideration and I probably cannot go into any more detail about them at the moment.

CHAIR —We might come back to meat and the relevance of the horticultural code and, if there has been a harmonisation of meat, what your experiences have been briefly, which you have touched on.

Senator HEFFERNAN —The reason I brought that up is that I would not necessarily have much confidence in the ACCC being effective in a meat shop, because it is as big a rogue as the vegetable blokes.

Mr Ridgway —Was there a particular—

Senator HEFFERNAN —No, I am just passing over.

Senator FISHER —I would like to ask a couple more questions about the horticultural code to get an idea, if there were to be a role for the ACCC in respect of meat, of the sorts of advances the ACCC may or may not have been able to make in respect to horticulture to see whether they may or may not be applicable in respect of the meat sector. Regarding the nature of the alleged breaches of the horticultural code that the ACCC has been looking at, without disclosing anything, you have indicated the nature of one sort that is in respect of which a particular person is a wholesaler or an agent or something different. Can you give us examples of the nature of other allegations of breaches that the ACCC has been actively engaged in investigating?

Mr Ridgway —There were allegations regarding the opportunity provided by the horticulture code for certain existing written agreements to be grandfathered by the operation of that code and therefore exempt from its operation. Certain traders were asserting that they were relying on those grandfather agreements where the complainants were suggesting that they were not actually grandfather agreements in place and that, if that were the case, they were therefore in effect trading in contravention of the horticulture code.

Senator FISHER —Can you give us an example, without disclosing the specifics, of what sorts of things a grandfathering agreement might say, were it to exist—to give us a hands-on feel.

Mr Ridgway —Basically the code provides that, if there is a written agreement on or before 15 December 2006—I believe that is the date, but I would have to check the detail—regardless of the terms of that contract, to the extent that it continued to be in place between the parties, the requirements that are imposed by the code on those who do not have that agreement would not be imposed on those two parties. So the agreement could really be a matter of discretion between the two parties. That is basically it.

Senator FISHER —So that is the nature of another sort of allegation. Chair, I am not sure how much time I have.

CHAIR —You have plenty of time.

Senator FISHER —Could you continue with examples of allegations of breaches that the ACCC has been actively engaged in in the horticultural sector. My next question then will be: what sort of analogies do you see, if any, between the horticultural sector and the meat sector in terms of a potential role for the ACCC?

Mr Ridgway —I think I might have to take that question on the details of other breaches on notice, if that is okay. It is just that we do have a range of them and it has been some time.

Senator FISHER —Thank you. In so doing, I would ask that you also provide further particulars. These are the sorts of allegations that the ACC has been investigating.

Mr Ridgway —Yes.

Senator FISHER —Over a period of time, how many complaints have you received, how many have you investigated, how many have you proceeded to prosecution or otherwise, how many convictions have you had and what has been the outcome—essentially the standard data that you may have provided to estimates in the past.

Mr Ridgway —Sure.

Senator FISHER —Moving now to the meat sector: do you see, hypothetically to begin with, a potential role for the ACCC in terms of lamb marketing?

Mr Ridgway —To the extent that I am familiar with the issues being considered by the committee, the Trade Practices Act obviously already has provisions that prohibit misleading or deceptive conduct. To the extent that there are concerns about products being wrongly labelled and therefore arguably misrepresentations being made about the nature of that product, the ACCC already has a role that complements the work of the state licensing authorities and so forth.

Senator HEFFERNAN —If they supervise it. If they do their job, you can do your job.

Mr Ridgway —Indeed. The act is there to assist in the broad where there is misleading or deceptive conduct.

Senator HEFFERNAN —But you cannot do your job unless they do their job.

Mr Ridgway —If we had direct evidence—

Senator HEFFERNAN —But you do not have.

Mr Ridgway —No, we do not. We have had only one complaint in the last two years that I know of relating to this sort of issue. Although we pursued it to some degree, there was just a lack of evidence to substantiate it. So we do actually carry that role. But that is probably the short answer.

Senator FISHER —You are getting back on notice in respect of the allegations raised in the horticultural sector, but have you investigated allegations of misdescription in the horticultural sector? Is that an issue in the horticultural sector and have you investigated allegations to that end?

Mr Ridgway —The short answer is no. The obligations imposed by the horticulture code go to issues of transparency in the supply chain between growers and wholesalers and certainty of return.

Senator FISHER —Are there any other sectors which have codes of whatever sort whether it is mandated. You said there are no prescribed voluntary. You have referred to some industry codes. Are there any other sectors with codes of a sort in which the ACCC is or has been involved where misdescription or mislabelling has been the subject of complaint and is an issue?

Mr Ridgway —Not in the mandatory codes. The mandatory codes that are in place at the moment all deal with supply chain relationships between large and small traders in each of the sectors that those codes apply to. With the voluntary industry codes, the one that comes to mind would be the supermarket scanning code, which is not exactly an issue of misdescription but an issue of a self-regulatory code that deals with discrepancies between—

Senator FISHER —Mistakes.

Mr Ridgway —Price at the check-out and price on the shelf, and that code provides for certain remedies to be available to consumers in the event that an error occurs.

CHAIR —Is there a big-stick approach if someone does not follow the guide or code?

Mr Ridgway —The ACCC together with the fair trading agencies—the consumer affairs bureaus around the country—all have a regular process of monitoring, and there is some surveying of those issues.

CHAIR —Do you have a legislative bat that you can whack them around the head with if they step out of line? You do not?

Mr Ridgway —I suppose the short answer is: if someone represents that they are complying with the code and they do not actually comply with the code then that is arguably a misrepresentation. We would have to look at it on case by case basis to see what the representation was and what the conduct was.

Senator HEFFERNAN —Are Woolworths and Coles excluded or included?

Senator FISHER —In the supermarket code are you talking about?

Senator HEFFERNAN —Are they in or out?

Mr Ridgway —My understanding is that Woolworths—

Senator FISHER —That might have been a rhetorical question, Mr Ridgway.

Senator HEFFERNAN —Are they excluded from the horticultural code?

Mr Ridgway —At the moment the horticultural code does not apply to retailers; it applies to wholesalers.

Senator FISHER —Can I continue my line of questioning please, Senator? Mr Ridgway, you have not inappropriately said there are higher level powers in the Trade Practices Act dealing with mislabelling. There is a supermarket code that deals specifically with mispricing. I want to explore for a minute why there would have been considered to be the need to have a supermarket code that deals with a sort of mistake when presumably there are already higher level powers for the ACCC to regulate a supermarket operator that mispriced. So are there already those higher level powers? Why was it considered necessary to nonetheless provide them in a supermarket code?

Mr Ridgway —I should perhaps clarify: the supermarket code is entirely a voluntary code of conduct; it is not something that is administered by the ACCC.

Senator FISHER —Nonetheless, the industry must have considered it necessary or appropriate.

Mr Ridgway —Yes. Although its genesis predates my work with the ACCC, I understand that, at the time it was introduced in I think about 1995-96, the industry was in the process of introducing scanner technology into retail supermarkets and there was some concern by industry that there would be a question of consumer confidence in that scanning technology. So the initiative came from a suborganisation of the Australian Retailers Association—it was a sort of supermarket industry association—to generate and develop this code of conduct to give consumers confidence in that new technology.

Senator FISHER —Indeed, which may be an appropriate signal that some wished to send, for example, in terms of lamb marketing. My final question on this issue, I think, is: in your view, does the fact that supermarket pricing is subject to a voluntary code give the ACCC additional powers in respect of alleged breaches by supermarkets in terms of pricing than the ACCC would otherwise have had were the code not in existence?

Mr Ridgway —To the extent that the industry signatories to the supermarket scanning code or any other voluntary code hold themselves to be maintaining a standard of conduct in some detail in the way that they manage their dealings with consumers, the operation of the Trade Practices Act, with its misleading or deceptive conduct provisions, can basically act as a mechanism to keep them to that undertaking. If they say they will do something but then do something else, arguably, they have contravened the act.

The obligations imposed or self-imposed by industry in those codes do not necessarily extend the powers of the ACCC or the range, but they do provide some practical application of the principles of the act to a degree. For example, with the supermarket scanning, while the Trade Practices Act applies that if there is representation as to a price to a consumer but then that price is not delivered, arguably—and this has been an issue that has been tested to a degree in some of the lower courts by some of the fair trading agencies—there is a risk that they are engaging in misleading conduct and the act would capture that. But the code provides a mechanism that basically says specifically: this is what the trader will do in the event that that error occurs. It enables the consumer to secure redress and remedy immediately without requiring the engagement of the regulator or the courts to get that outcome. Practically, with the low price and high volume of consumer products in supermarkets, it provides a practical adjunct to the act.

Senator FISHER —Is it making a practical difference, do you think, in supermarket retailing? Is it getting runs on the ground?

Mr Ridgway —I do not have the data to hand. My understanding is that those supermarkets that participate in the scheme hold it fairly closely as an important part of their consumer service. There are some questions, I understand, by us a little and fair trading agencies as to whether other traders who are not signatories to that code might improve consumer outcomes by considering joining up to the code.

Senator HEFFERNAN —So are the bulk of the retailers in or out? Are Coles, Woolworths, Aldi and Superbarn in?

Mr Ridgway —The large retailers are generally in. The smaller retailers are generally not.

Senator HEFFERNAN —Who is not in?

Mr Ridgway —Because it is a voluntary code, I do not have the details to hand.

Senator HEFFERNAN —But they are not in the horticultural code, are they?

Mr Ridgway —No.

Senator HEFFERNAN —But isn’t that just a glaring example of bullshit? You said that the wholesalers are in the horticultural code; right?

Mr Ridgway —Yes.

Senator HEFFERNAN —But what if you bypass the wholesaler, as Coles and Woolies do, and just buy direct? They escape your scrutiny.

Mr Ridgway —The horticultural code deals with an issue in the supply chain between the grower and the wholesaler.

Senator HEFFERNAN —Yes, but the idea of it is to protect the poor bloody grower from unscrupulous conduct with market power, yet the greatest market power in the marketplace is not subject to your scrutiny.

Mr Ridgway —The retailers are not subject to the code—

Senator O’BRIEN —They might be subject to the scrutiny, but they are not subject to the code.

Senator HEFFERNAN —They are not subject to the code, and the code is all about producers getting dudded when they front up to sell their produce, and the greatest buyers of the product are excluded from the scrutiny of the ACCC. Do you agree?

Senator O’BRIEN —And the industry representatives said they agreed with that.

Senator HEFFERNAN —Anyhow, I guess the same will apply in the meat market, because those same people who have 80 per cent of the market power in the supermarkets buy direct.

Mr Ridgway —The application of a code is a matter for the policy agency—

Senator HEFFERNAN —I appreciate that, but you are just wasting your time, as it were, as an effective tool if 80 per cent of the market bypasses you. You pick up the small fry. What about the complaints that Aldi have made about Woolies and Coles trying to get into shopping centres and the pressure that is put on the owner of the shopping centre and other retail outlets in the shopping centre. For instance—I will not name anyone—a big supermarket provider in a large supermarket centre says, ‘If you let that bloke in there, either I want my rent halved or I’m going to leave.’ What do you do about that stuff?

Mr Ridgway —The issues that you are alluding to are, as I understand it, matters that fall within the terms of reference of the grocery inquiry that is currently being undertaken by the ACCC.

Senator HEFFERNAN —But I am asking you whether, under the present authority of the ACCC, there is anything you can do about it. It seems to me that you have reams of bureaucratic mission statements, which you are demonstrating this morning—very effectively, and I congratulate you on your submission—but there is not much in there that you can touch and feel.

Mr Ridgway —The ACCC has the powers of the Trade Practices Act to administer, as it deals with allegations of anti-competitive conduct or misleading or deceptive conduct. To the extent that they apply to all traders in the marketplace, all corporations, the large retailers are subject to the Trade Practices Act. As a regulator, we generally need to deal with specifics and the facts of a particular matter so that we can engage, I guess, more meaningfully with concerns. I am not sure whether that is helpful but, to the extent that the large retailers are corporations—

Senator HEFFERNAN —I surrender.

CHAIR —If there are no other questions, I will just throw one at you, if I could. For the record, I think voluntary codes of conduct for those that enter into them are honourable, but unfortunately the ratbags get away with blue murder—and it does not matter what industry we are talking about, we know that. But if there were harmonisation of standards around the country and there were a mandatory code, how would the ACCC regulate it?

Mr Ridgway —If there were a mandatory code under the Trade Practices Act, if that is the nature of the question—

CHAIR —It is.

Mr Ridgway —we would administer it in the same way that we administer other—we would identify what the mischief is, which I think is reasonably apparent. We would put a fair bit of effort into bringing various members of the regulated community, the traders, up to date on and aware of their obligations before the code would commence. Once the code commenced, we would go through the process of dealing with concerns as and when they arose. Without any detail of what such a code would have—it is a bit difficult to talk in the hypothetical—we would bring to bear our enforcement and investigation powers as we do with other provisions of the TPA.

Senator HEFFERNAN —But would you have the authority to go into the abattoirs, or would you leave that to Safe Meat and the various state supervising bodies and just act on their reports?

Mr Ridgway —Generally, the powers of the ACCC to secure information that is not in the public domain require that we believe there has been a contravention of the law, so we would generally, in common language, have to have a reason to believe that securing certain information from those premises would assist us in investigating a matter we believe—

Senator HEFFERNAN —Gaining that knowledge, would you take the complaint from an operator, a supplier, a supervising authority—any of those bodies? If I am a meat buyer and selling lamb and I reckon someone is selling hogget and I ring up the ACCC, can you do anything about it, under the proposal?

Mr Ridgway —If that were the case—and again it is quite hypothetical—and we believed that a particular trader or member of the community, however best described, had information that would assist our investigation, we would be able to seek that information. We would have to have a reason to believe that a contravention had occurred.

Senator HEFFERNAN —Could you go in and test that information? If Safe Meat in New South Wales supervises an abattoir set-up, can you go in over the top of them?

Mr Ridgway —I would have to be more familiar with what their role is, I think, to comment.

Senator FISHER —Mr Ridgway, I actually enjoyed your initial submission where you outlined the structure and powers available to the ACCC under the Trade Practices Act. I understand that there are mandated codes and I understand what they entail. You referred to prescribed voluntary codes and I think said that, however, at this stage there are not any.

Mr Ridgway —That is correct.

Senator FISHER —Then I understand you to have described industry codes—for example, one applying in the medical sector—and then you talked about voluntary industry codes. Again I understand the concept of the fourth category: voluntary industry codes. However, can you please expand in a little more detail on the difference between a prescribed voluntary code and a mandated code and also the industry code that applies in the medical sector, which, if I understand you correctly, is a third category, if you like, of industry code, according to your description?

Mr Ridgway —I am happy to respond. Maybe to clarify the last point first, the code in the medical sector is a voluntary code; it is not of a different character.

Senator FISHER —Thank you; understood.

Mr Ridgway —Distinguishing between prescribed voluntary codes and mandatory codes, mandatory codes apply across an entire sector and industry, as described by the government as it brings the code into being. For example, the franchising code applies to all franchise traders in Australia and the horticulture code applies to all wholesalers and growers in the supply chain. With a prescribed voluntary code, the framework provides that certain traders within an industry may be subject to a code once they subscribe, but it would not be intended to apply to all traders in that particular sector. So, using the franchising sector as an example, if there were a prescribed voluntary code, it would apply to only those franchisors that sign up to the code and agree to be bound by it. There is of course a question of what incentive traders would have to sign up to a prescribed voluntary code. I think that has been explored once or twice, but that is probably a question that would need to be considered.

Senator FISHER —Of course—all that and some other factors as well. Is that the only difference between a mandatory code and a prescribed code? Of course, it is a significant difference, but is that the difference?

Mr Ridgway —That is the significant difference. Once a trader subjects themselves by becoming a signatory to a prescribed voluntary code—and I have to talk again in the hypothetical, because we do not have a practical example to work from—they would be bound. The contraventions of the code would bring to bear the remedies available for contraventions of industry codes generally, which involve court orders, compensation orders, injunctions and so forth, which would not apply generally to a voluntary code but do apply to mandatory codes. The other difference of course is that, under a prescribed voluntary code, the trader will have a process by which they can unsubscribe or remove themselves from the code. That process is specified by the minister or by the government—both how they become subscribed and how they leave the operation of the code.

Senator SIEWERT —When you talk about a prescribed voluntary code, does that mean it would come under your bailiwick?

Mr Ridgway —That is correct.

Senator SIEWERT —And if it is just a voluntary code, it does not?

Mr Ridgway —Voluntary codes do not come directly to be enforced by the ACCC. That is correct. Perhaps I can extend a tiny bit: one voluntary code that might actually be on point to the question of misdescription and that is a code of conduct for the jewellery industry sector that was in place for some time. There are a number of provisions within that code, which is not current at the moment, but there is some consideration of renewing that code. Where certain representations or certain practices in the jewellery sector in retailing are addressed directly with certain kinds of requirements of traders who engage in that conduct.

The failure to meet some of those contraventions as well as being a contravention of the code is also misleading or deceptive conduct under the TPA. So the code, a bit like the supermarket scanning code, provides a practical and detailed adjunct to the operation of the broader Trade Practices Act and it provides some practical information for traders on how their obligations manifest themselves in their sector.

Senator FISHER —That is a voluntary code in the jewellery sector.

Mr Ridgway —Yes.

Senator FISHER —It is whether opals are doublets or triplets and whether gem stones are what they are described to be—that sort of thing?

Mr Ridgway —That is going in the direction of the issues, yes. There are issues of valuations and representations as to pricing and so forth as well.

Senator FISHER —Which ultimately, arguably, could have an analogy in lamb marketing because it is about description and it is price. How long has that code been in existence in the jewellery sector?

Mr Ridgway —As I understand it, at the national level, it was introduced I believe in 1995 and it was in operation for quite a few years. More recently, the industry has moved more towards operating from guidelines provided by the ACCC as to what are practical implications of the act for their business. As I said, I believe there is a process underway within the sector to consider refreshing the industry code approach.

Senator FISHER —Have the misdescription—for want of a better word—provisions been in that code since its inception in 1995?

Mr Ridgway —Broadly, yes. The code was introduced to deal with a range of issues that go to representation to consumers of the products in that industry.

CHAIR —It is a national code?

Mr Ridgway —Yes. It initiated as a code within New South Wales and then it was picked up nationally about three years later.

Senator FISHER —Aside from obviously providing some guidance, albeit self-imposed, to the industry about what is proper description and what is not plus other things, has that code provided the ACCC an assistance with enforcing the higher level powers that the ACCC has under the Trade Practices Act in respect of misdescription and, if so, how?

Mr Ridgway —The short answer is I believe yes and to the degree that the administration committee of the code deals with a range of complaints and concerns that come often from competitors of identifying conduct by their competitors that they believe contravenes the code and to the extent that it marries up with the Trade Practices Act, therefore the Trade Practices Act. The code administration committee engages in a process of bringing that trader to improve their behaviour and so forth. If the trader is not responsive then the code committee can and has brought the issues to the attention of the ACCC so that we bring the regulatory powers that we have under the Trade Practices Act to bear and we can, if necessary, secure a court based outcome if the trader is unwilling to fix up their wrong conduct.

Senator FISHER —That court based outcome would still necessarily be based upon the normal rules of law. So the added edge that the ACCC gets from the existence, in this respect, of the voluntary code in the jewellery sector would be what? Would it include increased notification to the ACCC of alleged misdescription examples? Is it more than that. I guess it does include that? But is it more than that? Because you are still going to have to prove that someone was guilty of breaching the Trade Practices Act.

Mr Ridgway —That is correct. Practically, the benefit would be that those traders that subscribe are actively encouraged by their own industry association, often the association administering the code, to ensure that their practices are consistent with the requirements of the code and to the extent that the code aligns with the Trade Practices Act therefore consistent with the law. So there is a proactive compliance initiative by the industry to ensure that the legal requirements are being met. I guess the backstop function, in a way, of the ACCC in these circumstances is that where a trader subscribing to the code does not comply then that information is either dealt with immediately by the administration committee and/or brought to the attention and dealt with by the ACCC. So it really provides a bolster for the broader work of the ACCC in that regard.

Senator FISHER —So I guess you are springboarding, if you like, an increased climate of compliance from the sector but the sector itself has determined that it will implement this arrangement, and of course it would not necessarily be so in other sectors, including the meat sector.

Can I ask one more question about the mandatory codes, and I am sorry if my colleagues know the history. But how does a mandatory code come about and how have those mandatory codes come about? Has industry come to the ACCC? Have we had inquiries? How do they come about?

Mr Ridgway —Broadly, in each of the cases, the franchising, the horticulture and the oil sectors, there have been regimes in place in some cases for a number of years on a voluntary basis to address issues of concern in that sector. In each of these cases there has been some question about the utility of those voluntary regimes by governments of the day. And there has been a case made in each of those under the regulatory impact statement process to assert that there is benefit in bringing a mandatory code to bear in light of the concerns associated with the voluntary regime. That is it in a nutshell.

Senator FISHER —Ultimately, that has to be shown if a mandatory comes to pass at the end, but I guess I am more interested in the catalyst. For example, if Senator Heffernan’s concerns about essentially retailers being left out of the horticultural code were to be addressed—well they could be addressed by the horticultural industry code, but there would need to be a process to bring that to bear and so whether that would be, for example, the industry coming to the government or—

Mr Ridgway —In short, the codes respond to the mischief that is identified by the policy agency or the government agency that is relevant and the code framework is developed to address those perceived mischiefs. The question of whether a particular trader is or is not subject to the code arguably goes to whether or not they were seen to be part of the mischief that was being addressed by the agency at the time.

Senator HEFFERNAN —The point I was trying to make is that, if you are in modern retailing, the big fellows tend to go direct to the feedlots et cetera. They do that in all states. In Victoria, if you had a similar arrangement to the horticulture code and they were excluded, the bulk of the meat that is sold is sold through Woolies and Coles. In Victoria, the supervision of lamb is not to the same level of scrutiny as in New South Wales. In New South Wales they look in every mouth; in Victoria they are only obliged to, if they do, look in five per cent of the mouths, which is just an exercise in bloody bullshit. But, if you exclude the major resellers, you leave the market open to what—it just will not work.

Mr Ridgway —It really is, as I say, a question of policy about which traders the code will apply to.

Senator HEFFERNAN —Like Qantas and the CASA thing, they do a lot of it, and Woolies and Coles want to protect their label; there is no doubt about that. But, if they are buying from one or two particular abattoirs in Victoria that we know about, when they buy their lamb from them and their branded lamb, we know, because of the way it is supervised, that not necessarily are Woolies getting lamb and there is not much they can do about it if this is branded ‘lamb’.

Mr Ridgway —And that really goes to the issue of the regulatory impact statement—the process of making a case to say that this mischief is on foot and it is sufficient to warrant some intervention on a mandatory basis and that these particular traders may well be—

Senator HEFFERNAN —It would be reasonable to assume that, if there were a complaint—which we took evidence of at this hearing a couple of weeks ago—in a particular abattoir in Victoria. Who were they? Not MLA but Safe Meat?

CHAIR —AUS-MEAT.

Senator HEFFERNAN —AUS-MEAT. They reported the fact that they had discovered a bucket of heads—in amongst what was allegedly lamb a whole lot of hogget heads. For you to operate to actually be able to do anything about that, you would have to have a paper trail. They did it by ringing up the Safe Meat mob in Victoria and saying, ‘Oh, by the way, out here at’—wherever it was—’we have just discovered some hogget branded as lamb,’ but other than the phone call there was no evidence. It is just not a fair dinkum process at the present time.

Mr Ridgway —There are practical issues associated with investigating any matter. We just obviously have to secure the evidence that we would need to show—

Senator HEFFERNAN —So, if we were making recommendations to include you in the process, we would also want to make some recommendations on the reporting process et cetera.

Senator FISHER —Chair, may I ask Mr Ridgway a question on notice?

CHAIR —Yes, of course.

Senator FISHER —Thank you. In respect of the jewellery industry voluntary code, I am interested in whatever lessons the committee can learn for the lamb marking sector from the existence of that code and the assistance that it may or may not provided the ACCC in terms of addressing what might be a misdescription in that sector and the extent to which similar lessons could apply to the lamb marketing sector. Any further information that the ACCC can provide in that respect please provide.

Mr Ridgway —We can do that.

CHAIR —The committee thanks you for your assistance today.

 [11.06 am]