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Thursday, 25 November 1965

Mr BOWEN (Parramatta) .- The first question to be answered in this debate must surely be: "Why do we need this Bill? " There has been no great public clamour for it, and I am not much impressed with the information that many of the advanced countries of the world have legislation such as this. We are a developing country. We need size in business. Economies of scale are a necessity if we are to become a large exporter of manufactured products. The fact that highly developed countries such as the United Kingdom, the United States of America, the European Common Market countries and Japan have legislation of this kind does not necessarily provide a reliable guide for us. I think that all these are matters which emphasise how careful we need to be not to interfere unnecessarily with business in our free enterprise economy.

It is clear, however, that there are in operation in this country restrictive agreements and restrictive practices which are contrary to the public interest. They bear harshly on the small and independent trader who is one of the most important and valuable sections of our community. Most of us have knowledge of such agreements and practices. Sir Garfield Barwick, when he was Attorney-General, prepared a list of them which he had published. Honorable members will be aware of those agreements and practices. In these circumstances the Government had an obligation to give a lead. It had to step in to prevent these restrictions and practices from hampering our free enterprise economy. I suggest that this is what the Bill before the House seeks to do. It seeks to free our economy from restrictions and practices which are wrong, but it does not seek simply to interfere with business needlessly. It is true that we already have in operation in this country the Australian Industries Preservation Act of 1906, but this has proved largely ineffective. Since the war there has been a number of cases brought under this legislation, but I believe that it lacks sufficient force to do what is required in modern times.

Is this Bill appropriate in its form? Before suggesting an answer to that question it may be useful to consider the two lines which have been followed in the world with this type of legislation. On the one hand there is the American Sherman Act of 1890. It may perhaps be instructive to read part of the short and simple provisions of that Act. Section 1 provides -

Every contract, combination in the form of trust or otherwise or conspiracy in restraint of trade or commerce among the several States or with foreign nations is hereby declared to be illegal . . .

Section 2 says-

Every person who shall monopolise or attempt to monopolise any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanour . . .

The basic principle adopted is that a contract or combination in restraint of trade is, per se, bad and illegal. Under section 2, size of itself is deemed to be bad. This approach provides a narrow issue in any particular case. It is an issue appropriate to be tried before the ordinary courts. Under that Act a breach leads to criminal proceedings and carries criminal consequences. It is no defence for a person charged under that Act to say: "Wait. This practice in which I am engaged is in the public interest ". If he could prove that, the practice would still be a breach of the law. This Act is not concerned with economics; it is concerned with those matters per se. The American courts, faced with this rather drastic provision, introduced a degree of modification by the rules they laid down. They introduced what has come to be called the " rule of reason ". They thought that no legislature could have intended to make criminal offences certain things which were clearly good. They modified the provisions, by judicial reasoning, to a degree, but only to a small degree. In 1914 the Clayton Act was passed creating more specific offences and the Federal Trade Commission was established as a regulatory agency independent of the Department of Justice which brought the prosecutions under the other Act. But the principle remained the same. Should we adopt that kind of law? Contrasted with it is the procedure followed in the United Kingdom. There the Monopolies and restrictive Practices (Inquiry and Control) Act was passed in 1948 and reveals an entirely different approach. Under this Act restraint, or size, is not per se bad, and each case must be decided on its merits after a full inquiry. It is only if it is found to be against the public interest that the statutory consequences follow. As honorable members no doubt know, since then there has been a separation between the restrictive practices side and the monopoly side, and in 1956 a restrictive practices court was established and then a monopolies commission, but the principles remained the same. In the United Kingdom the system is still administered in that way. When restraint of excessive size is challenged there, the businessman has an opportunity to show, if he can, that what he is doing is sound, efficient and not against the public interest.

In a choice between these two approaches it is necessary to consider what would be appropriate to our situation. The Australian Industries Preservation Act, which was based on the American thinking, has not proved effective here. The Government has chosen to follow mainly the ' second approach, and this- I suggest to honorable members, is the wise course. In business, as in life, things are not generally black or white. There is an infinite number of shades in between. Only an inquiry can determine whether a particular restraint or large size is bad. It must be determined not only in the interests of the individual person or company whose conduct is challenged but in the interests also of the nation. We do not wish officiously to prevent agreements or practices which lead to efficiency or to strength in our economy and which are good.

Mr. Speaker,may I say a word or two about the structure of the Bill but first perhaps digress to express my appreciation of the. procedure which the Government has followed in this case by introducing the Bill on 19th May and allowing time for representations to be made by everyone interested in the matter? I know that the Government has received a great many representations from responsible bodies, private citizens and companies and also quite a few from Government back benchers. These representations have undoubtedly all been carefully considered. The fact that the Attorney-General has announced that he will introduce no fewer than 45 amendments to the Bill shows that many of the representations have been adopted. In the case of those suggestions which have been rejected, I know that those who submitted them will appreciate that the ultimate decision in this matter must rest with the Government. But it is my belief that the 45 amendments which have been circulated amongst honorable members, and which the Attorney-General has foreshadowed, will greatly improve this Bill.

If this Bill is passed, in my opinion it should provide a workable system for controlling bad agreements and practices with a minimum of interference with business provided it is wisely and efficiently administered. That means that -great importance must attach to the selection of the commissioner and members of the tribunal whose duty it will be to carry the provisions of the Bill into effect. Undoubtedly if a sound commissioner and competent members are appointed to the tribunal the provisions of this Bill are adequate to deal with the field which it seeks to reach. I am not one of those who believe that the Bill in its present form has been watered down to a point where it will not have force. That is not the position.

The second-reading debate on this Bill is not the occasion to speak in detail on the provisions of the Bill or on the amendments which have been proposed. That is a matter better left to the Committee stage. But perhaps I might remind honorable members that the Bill makes only two types of practice illegal - collusive bidding and collusive tendering. It makes five types of agreements and four types of practices examinable. Examinable agreements must be registered unless broadly they relate simply to the provision of services, but no examinable practices need be registered. There has been some criticism from honorable members on the other side of the House because examinable practices need not now be registered. Under the proposals put forward by Sir Garfield Barwick in 1962 examinable practices would have had to be registered. Undoubtedly businessmen were fearful that this would lay upon them an immense administrative burden, as they would be required to reduce their practices to written form in an adequate manner and then register them. That feature has been eliminated in this Bill. Only the agreements need be registered, but it is apparent that, if in the course of time it is found by experience that examinable practices are escaping scrutiny, because they are not registered and because citizens who are affected adversely by them are not calling them to the attention of the Commissioner, it might become necessary to make them registerable. I doubt whether that situation will arise, but if it does, undoubtedly the Act could be amended.

If the Act is amended to make practices registerable, it is of some significance to consider that this will occur at a time when we have the scheme in actual operation.

We will then have a commissioner with experience behind him; we will have an experienced tribunal and a business community which I hope by then will have sufficient confidence in the system and its administration to have no fear of excessive or unwise interference. At that stage if practices are made examinable I would not expect the hampering or disturbance of business that might occur if the whole thing were done at this one stage. I should mention that one of the examinable practices is that of monopolisation. In all of the systems around the world this has been found to be a difficult subject with which to deal adequately and fairly. I myself had serious misgivings about clause 37 - the monopoly provision - as it appeared in the original bill. I believe that the new clause 37, which the Attorney-General proposes to introduce as an amendment, will be found to be a considerable improvement on the original form of the clause. It will rest with the Commissioner to examine agreements and practices and to determine whether in his opinion they are contrary to public interest. If he finds that they are, it becomes his responsibility to refer them to the tribunal. But before he does this, he is obliged by the Bill to hold a consultation with the parties, if they wish to have it, to see whether they are prepared to modify their agreement or practice so as to eliminate those elements which the Commissioner considers are contrary to the public interest.

This is a useful provision which we have copied from the American system. This presupposes an informal consultation with " cards on the table ". I believe that businessmen will find that this type of inquiry will be one which they are prepared to adopt, one to which they are prepared to come with a frank disclosure of their position, and one which will save them from the cost and trouble of a formal inquiry before the tribunal. Under the Bill as it was introduced in May, what took place at this consultation no doubt could have been recorded and the transcript tendered later against the parties concerned as constituting admissions, if the matter still came before the tribunal. This seemed to be an undesirable feature. I was pleased to see in the amendments the Attorney-General has provided that, if the parties so wish, this consultation may be conducted without pre judice. No doubt, the Commissioner will have information in his mind after he has consulted with the parties. But he will not be able to tender simply a transcript of what they say in the consultation to use as evidence against them. This is a desirable amendment.

Those matters which are referred to the tribunal will be investigated to see whether they are against public interest. Clearly, two things are important at this point: First, the constitution of the tribunal, and, secondly, the guide lines for determining whether a particular agreement or practice is contrary to public interest. As to the first of these matters, I commend the Government for its decision, reflected in the proposed amendments, that it will appoint as presidents persons who are judges and will have as lay members of the tribunal persons who are on a panel and who do not have to give up all other activities for a period of appointment of seven years simply to serve on a tribunal. It would seem probable that better lay members will be obtained from the business community if they do not have to leave entirely their business for a period of seven years.

Mr Clyde Cameron - Should not the consumers have representatives on the tribunal?

Mr BOWEN - Well, everybody cannot be represented - exporters, producers, distributors, consumers. Indeed, I think everybody is a consumer in one way or another. It is obvious that those qualifications which are specified in the Bill are appropriate with one possible exception. I would not, myself, have favoured including persons from public administration. However, I suggest to honorable members that the other qualifications specified in the Bill are correct for lay members.

If we come to the question of guide lines as to what is in the public interest, this is set out in clause 50 of the Bill. Honorable members will be familiar with the general structure of that clause. The tribunal is to take as the basis of its consideration the principle that the preservation and encouragement of competition are desirable in the public interest. But the tribunal is directed then to weigh against that the matters set out in sub-clause (2.) A very wide variety of matters is set out in sub-clause (2.) in six lettered paragraphs. To take the first of them, we find that the matters that are to be taken into account in accordance with this provision include -

(a)   the needs and interests of consumers, employees, producers, distributors, importers, exporters, proprietors and investors.

That is only the first of the six categories. Without going into the others, it is apparent that if the tribunal is obliged to consider the weight of all the interests specified in clause 50 (2.) the inquiry will be an extremely long and wide ranging one.

Mr Whittorn - Costly, too.

Mr BOWEN - Yes. It will be costly. I think this will prove a weakness in the Bill by requiring too wide an inquiry. I would have preferred to see a provision that the tribunal should consider only those matters in clause 50 (2.) which the defendant nominated in writing filed with the tribunal and served on the appropriate parties. This, at least, would have provided clear issues and would have confined the inquiry within reasonable limits. However, the Government has decided to leave clause 50 in its present form. No doubt experience will show whether in the course of time any amendment to this clause is necessary.

There is provision for ari appeal from the tribunal to a review division consisting of three presidential members. It is easy to see that these will be persons who are, in fact, judges. So far, so good. But it will be seen when one looks at the section relating to appeals that the review division cannot give a decision on the case. It can consider it only. If it thinks it is wrong in relation to any one of the three specified heads, it may send the case back to the tribunal for further consideration and decision. The modern trend is against preventing an appeal tribunal from giving whatever decision would have been correct in the circumstances. To send a case up to a review division and then send it back to a tribunal means three hearings. They may be of different lengths but there are certainly three hearings instead of one. It is a matter for serious consideration whether the review division should not be empowered to deal with the matter and to give the decision which it thinks appropriate.

May I say a word about the constitutional position? The power to enact this Bill is found in three provisions in the Commonwealth Constitution. The first is to be found in placitum (i) of section 51 which gives the Commonwealth power to legislate with respect to trade and commerce with other countries and among the States. Placitum (xx.) of section 51 gives the Commonwealth power to legislate with respect to foreign corporations and trading or financial corporations formed within the limits of the Commonwealth. Finally, there is section 122 which gives the Commonwealth power to legislate with respect to Territories. The power with respect to Territories is a plenary power. It is clear that the Bill when passed will operate with full force in the Territories. The power with respect to corporations appears to be used in an endeavour to enable the Commonwealth to control the operations of those corporations in purely intrastate trade and commerce. Certainly, all corporations would be covered already without reference to that head of power in relation to interstate activities. It was held in the case of Huddart, Parker and Co. Pty. Ltd. v. Moorehead, in 1909. as reported in Volume VIII of " Commonwealth Law Reports" at page 330 in a matter, which arose under the Australian Industries Preservation Act, that this power in placitum (xx.) did not enable the Commonwealth Parliament to govern corporations in respect of intrastate agreements or restraints. The ambit of the operation of this law is a matter that causes some concern. The power under paragraph (i.) of section 51 is well known and covers fully the interstate trade position; but we know from the operations of the Australian Industries Preservation Act that there is a risk that persons, whose agreements and restraints are intended to be reached by this law, may seek to organise their agreements and restraints on a purely intrastate basis and so escape its operation.

Honorable members will recall that Sir Garfield Barwick had the idea of seeking complementary legislation, which was to be passed by the various States and the Commonwealth, to cover this situation. The appropriate provisions appear in the Bill. I think it is a matter for regret that none of the States so far appears to have indicated that it will pass such complementary legislation. A question on the notice paper seeks to ascertain how far there was consultation on the form of this Bill with the various

States before it was introduced on 19th May. The practical operation of the Bill may be affected, if it is not supported by legislation passed by the States. If, as has been announced, Victoria will not pass such legislation, it is difficult to see how New South Wales, for instance, could do so without suffering at least some damage from the resulting flight of business across the border. This is a matter that may limit the practical operation of the law.

I believe that the Bill, insofar as it does operate, will achieve three purposes. First, it will protect the smaller, independent trader, who is undoubtedly important for Australia's future. Secondly, it will set standards and these will be standards for business that may be expected to deter people from activities which, although highly profitable to them, would be damaging to other traders and to Australia. The success of the law may be judged not only by the number of cases that are brought under it and concluded but also by the extent to which it is found to be unnecessary to invoke its provisions. The mere presence of an effective law of this type on the statute book leads people to refrain to a great extent from engaging in wrong agreements and practices. Thirdly, I believe that if these practices and these agreements are not subjected to controls of the type set forth in this Bill events might ultimately force the Parliament to adopt much less desirable methods of dealing with them, such as price control or other socialistic measures. In accordance with liberal principles, the Bill seeks to restrain agreements or practices that are contrary to the public interest but otherwise to leave business free to exert under the spur of competition its very great power for the development of this country.

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