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Wednesday, 8 December 1976

Mr HOWARD (Bennelong) (Minister for Business and Consumer Affairs) - I move:

That the Bill be now read a second time.

In April this year the Government established a committee to review the Trade Practices Act. That committee reported last August and the report was immediately made public. This Bill implements certain recommendations of that committee. It is the intention of the Government that the Bill be exposed at this time to allow detailed examination of its provisions by all interested persons. We invite submissions on any aspect of the Bill.

Restrictive Trade Practices and Mergers

The Trade Practices Act will continue to deal with anti-competitive agreements, monopolisation, exclusive dealing, resale price maintenance and anti-competitive mergers. As I will outline later, this Bill makes some adjustments to the laws on these matters and, importantly, to the procedures for their administrative adjudication. However, the Government has accepted the recommendation of the review committee that the prohibition of price discrimination be repealed. That prohibition has worked to inhibit price flexibility, and has not encouraged competition. In fact the review committee stated that this law has actually been used as a pretext to abolish discounts and effectively raise prices.

The law on anti-competitive agreements is altered by this Bill, substantially as recommended by the review committee. This should clarify the operation of the law. The test of restraint of trade- with its undesirable common law connotations- has been omitted. The previous differing tests of competitive effect has been eliminated in favour of a single test. The

Bill prohibits collusive price agreements and collective boycotts. However, except for price agreements for goods, which are prohibited outright, these matters may be granted authorisation if a net public benefit is shown to exist. The Government has not adopted the recommendation of the review committee that price agreements for services be prohibited outright. In some service industries, price agreements may be considered analogous to the determination of wage and salary levels.

The Bill recognises the special contribution of joint ventures to the economy of Australia. In particular, it recognises that joint decisions as to the marketing of the joint venture product- including pricing decisions- are often inseparable from the decision to establish the joint venture in the first place. Appropriate distinctions are made in the prohibition and authorisation sections of the Bill. In substance, the relevant question is now whether the joint venture as a whole substantially lessens competition in a market Even in that event a joint venture will still be able to seek authorisation on public benefit grounds. This Bill also places joint acquisition schemes in a more favourable position. Such schemes have played an important role in containing price increases to the consumer, particularly in retail industries.

The law of monopolisation is clarified by this Bill. It makes it clear that only purposive conduct by a market dominating concern comes within the prohibition. It also states expressly that capital investment can never, of itself, constitute monopolisation. Section 47 of the Act, that is the general prohibition of exclusive dealing, has been restructured as recommended by the review committee. A distinction has now been drawn between normal commercial requirements contracts and requirements contracts which have been entered into for an anti-competitive purpose. The Bill provides immunity for exclusive dealing conduct notified to the Trade Practices Commission, until the Commission makes a positive determination that the conduct is both anti-competitive and without net public benefit. This procedure is available either as an alternative to, or in addition to, authorisation. The new procedure of notification for exclusive dealing recognises the concern of the business community as to the backwash of section 47 casting legal doubts on ordinary commercial contracts not intended to be dealt with by the Trade Practices Act.

The Government has generally adopted the recommendations of the review committee concerning the use of land as a means of effecting restrictive trade practices. Those recommendations particularly related to the use of covenants running with the land and the use of leases and licences of land containing restrictive provisions. These matters are expressly included within the scope of this Bill. The present Act has been criticised as being unduly harsh on mergers involving the acquisition of small companies. For example, it has been criticised as severely ham.pering a small businessman seeking to sell his usiness and retire. It has also been criticised as being unnecessarily concerned with insignificant corporate acquisitions. This Bill provides a threshold test of $3m annual turnover by the company being acquired. Mergers involving the acquisition of companies with a lesser turnover would be exempted from the Trade Practices Act, unless the acquisition was part of a systematic pattern to acquire a number of companies in an industry.

In addition the Bill implements the preelection undertaking of the coalition parties to remove the discretionary power of the Minister under the Act to compel the grant of the authorisation of a merger by the Commission.

Commission Procedures for Restrictive Trade Practices

Experience has shown that the clearance procedure provided by the present law has involved the Trade Practices Commission very closely in the daily operations of Australian business. Whatever justification this may have had in the early days of the legislation has now disappeared. To continue the clearance procedure would perpetuate unnecessary interference by Government in the exercise of individual initiative. This Bill abolishes the clearance procedure, except in relation to mergers, to which special considerations apply. The authorisation test in the present law has been widely criticised as unnecessarily harsh. The review committee recommended that the test be altered to reflect a simple balance between benefits and detriments to the public flowing from the conduct. The Government supports this simple, but highly desirable, change which will bring a better perspective to the application of trade practices aw.

This Bill also provides a right for discussions with the Trade Practices Commission before the determination of authorisation applications or exclusive dealing notifications. The lack of direct contact between the Commission, applicants and other interested persons has been a major deficiency in the operation of the law to date. The availability of such discussions, which the review committee recommended should be a matter of right, is essential. Public hearings before the Trade Practices Commission in authorisation matters are abolished. The heavy cost of these hearings- both to parties and to the Commission itself- is not warranted. The possibility remains for a full public hearing before the Trade Practices Tribunal on appeal.

Actions of Employees

The present wide exemption for restrictive practices by employees is substantially modified by this Bill. The exemption is now to be limited to matters of remuneration, conditions of employment, and hours and working conditions. In addition, the Bill prohibits secondary boycotts by employees which substantially damage the business of a corporation. These boycotts have been used by some trade unions in this country to dictate the business arrangements of independent businessmen. In some instances these boycotts have resulted in higher prices to the consumer. The most common instance of a secondary boycott occurs where a group of employees collectively acts for the purpose of interfering with supply of goods and/or services by their employer to a company.

Honourable members will be aware of instances of this occurring in respect of petrol and bread deliveries. In addition, it has occurred in the stevedoring industry where employees of a port authority have interfered with container deliveries to particular companies and most recently in Sydney where employees of a newsprint supplier interfered with deliveries to John Fairfax and Sons Ltd. Under the Bill, businesses affected will have a similar redress against employee secondary boycotts as they already have against boycotts organised by other companies. The Government recognises that some sections of the community might argue that provisions of this nature should be included in other Commonwealth legislation such as the Conciliation and Arbitration Act. The Government retains an open mind as to which legislation is the relevant one and will be particularly interested in submissions or comments it might receive on this issue.

Consumer Protection

The review committee recommended that the present provisions of Part V of the Act should generally continue to operate, subject to certain improvements. The Bill provides for these changes. The definition of consumer has been changed in a way which will give small businesses a measure of protection which they previously did not have. The conditions and warranties implied by Division 2 of Part V of the Act will now be implied into a wider range of transactions. The present Act is pointedly deficient in protecting consumers in land transactions. Major abuses have occurred in the past in relation to the promotion and sale of land- particularly major subdivisions promoted on an interstate basis. The Bill extends protection to the consumer in these matters. At present there is no quick method for the Government to ban the sale of unsafe consumer products produced in Australia. The marketing of unsafe products is a major concern of the community. Provision is now made in this Bill for the making of orders banning the sale of unsafe goods.

The Government considers that the present sanctions and remedies for consumer protection contraventions are unsatisfactory. The Bill makes a number of important changes in this area. The penalty of imprisonment is abolished. More appropriate defences are provided. The court may now make a wider range of corrective orders designed to assist the consumer in a practical way. For example, the court may order affirmative disclosure, corrective advertising or repair of goods. The review committee recommended substantially greater involvement by State government agencies in the administration of the consumer protection part of the Trade Practices Act. It was considered that consumer complaints could best be handled on a local basis, through State consumer protection agencies and State courts. The Government is also of this view and is currently discussing the proposals in detail with State governments. In the meantime no provision has been made for these matters in the Bill.

An area of major concern to Australian business has been the multiplicity of State and Commonwealth laws implying non-excludable terms into consumer transactions. The review committee considered this multiplicity to be a source of cost and confusion to Australian business. It recommended that the Commonwealth legislate in the area so as to cover the field to a significant degree. The Government has accepted this recommendation in principle and will naturally explore proposals for its implementation with State governments. Indeed, the recommendation has already been discussed by a meeting of Commonwealth and State Ministers. The review committee also recommended that the Trade Practices Act be extended to provide for manufacturers to be liable directly to consumers for breach of implied terms in consumer contracts.

Some State laws already provide for such liability. The Government has accepted this recommendation in principle and is examining details of its implementation.

Government Activities

Governments are increasingly involved in commercial activities, often in direct competition with private enterprise. It is anomalous that the Trade Practices Act should apply to private enterprise and not to government enterprise of a commercial nature. The Government has decided in principle that its commercial operations should be subject to the same restraints of the Trade Practices Act as apply to like operations of private enterprise. It is recognised, however, that some exceptions on national interest grounds might have to be made to this general rule. At present an interdepartmental committee is examining the detailed implementation of this proposal. Appropriate provisions will be inserted into this Bill to give effect to this policy before the Bill is finally enacted.

Other Matters

The review committee made recommendations on a number of matters which are not contained in the present Bill and which I have not mentioned previously in this speech. I note, in particular, the recommendations on the rights of franchisees, the liability of financiers for breach of consumer conditions and warranties, and the application of the Act to professional activities. The Government has taken no decision on these matters, pending further study of them. In the case of professional activities there is an obvious question of constitutional power. This is a matter which will need to be discussed with State governments. At the start of this speech I indicated that this Bill has been introduced at this time to allow study of its provisions by interested persons and members of this Parliament. I emphasise that the Government does not intend to rush into amending this technical legislation without adequate consultation with and study by the community. I commend the Bill to the House.

Debate (on motion by Mr Lionel Bowen) adjourned.

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