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Tuesday, 22 February 1977
Page: 280

Mr YOUNG (Port Adelaide) -The Opposition welcomes the opportunity to discuss the Trade Practices Act as it now stands and the suggested amendments in the Bill now before the House. However, it may have been better- I put this to the Minister for Business and Consumer Affairs (Mr Howard)- if we had had the discussion surrounding the Swanson Committee report because I believe that may have been more helpful in the drafting of the legislation than the procedure which was followed. I make those points in relation to the comments by the Minister as to the way in which this legislation will be handled. As it is, of course, the Opposition finds itself brought into a debate on what is commonly called dead legislation. We are not aware of what further changes the Government proposes to make from its own side or from the submissions that it may have received over the Christmas recess, let alone the extent to which it may be prepared to listen to the legitimate arguments put by Opposition speakers. Let me say that on the matters now raised by the Minister- and this is the first indication we have had from the Government as to the way it intends to handle suggestions or submissions that have been put to it since this Bill was introduced- it may well be a very positive step for the Government to make the Opposition aware of the type of suggestions it is looking at in the form of amendments rather than the Opposition having to wait until the legislation is introduced because, as the Minister said in his second reading speech- and as most people have said when speaking on the subject of trade practicesit is indeed very complex legislation. I believe it would be in the interests of the Parliament, seeing that we do not have legislative committees, if we had some forewarning of the way in which the Government intends to proceed with legislation.

Let me say that the Labor Party has no reason to apologise for the trade practices legislation that it introduced during its term of office. It gave the average Australian citizen protection which he had been missing since Federation in the fields covered by the present Act. May I just say in very general terms that the present Government in our opinion has a very warped view on what action is going to activate the economy because whether we talk about the Prices Justification Tribunal or the Trade Practices Commission the Government somehow sees the relevant Acts rather as a monkey riding on the back of business and that all that is required is for someone to shift the monkey and business, and subsequently the economy, will again blossom

A sick economy cannot be boosted by hastily drafted legislation which sets out to draw the teeth of the Trade Practices Commission, thus reducing competition and acting against the very spirit of the Act. On this question let me just read from the last annual report of the Trade Practices Commission itself. I think it is very important for us to understand the process that we may be going through at the moment in terms of the relationship between what views the Government may have had prior to coming to office in 1975 and its promises specifically to business about what it would do with the trade practices legislation, the setting up of the Swanson Committee, its terms of reference and its relationship with the Government's intent and what the Commission had to say in its last annual report. There seem to me to be grey areas of great contradiction between the operations of the Commission, the way it sees its role, the work it was doing, the impact it was having and the role that is seen for it by the Government and the way in which the Swanson Committee itself was set up. On page 2 of the annual report of the Commission it says:

With the Act having brought, in its short life of a year and three-quarters, all the activity reported in last year's report and this one, there could be some tendency to think of the Act in immediate terms, when the truth is that the Act is essentially long-term legislation.

I think it very important for members of the Parliament and for the Parties in this Parliament to recognise and to accept that first proposition of the Commission itself, otherwise we are going to find ourselves continually harassed by people who are affected by the Trade Practices Act. They will be putting up submissions that we ought to have amending legislation every week that the Parliament sits. If we accept- and we on this side of the House do- that the Act is long term, then I think that the Government may be guilty of hurrying things along in order to overcome some of the economic problems it is now facing, and I want to touch on that later on in view of the terms of reference that were set down for the Swanson Committee in regard to the way in which that Committee may have tried to assist the Government to overcome the Government's problems with the economy.

I want to touch also on the very essence and spirit of the Act because I think it is important for everybody to get into perspective the reason why the Labor Government enforced the powers of this Parliament under the section of the Constitution which is the basis for trade practices legislation. The very essence and the very spirit of the Trade Practices Act is the competition. There may be those who argue- and according to the Swanson Committee report a lot of people would argue- that it is not achieving that at all but I doubt very much the credibility of those people who put forward that view to the Committee and who may argue that way in the Parliament. These are not the results we have seen- and which are available for everybody to see- since the commencement of the operations of the Commission.

Let me quote again from the annual report in relation to what the Commission sees as its role:

As competition is so central to the Act, is may be useful to quote what the Trade Practices Tribunal had to say, when discussing competition in general terms in its only decision so far on the merits of an authorisation case taken to it on review from the Commission (the Barnes Milling merger case, see Chapter 3): 'Competition may be valued for many reasons as serving economic, social and political goals. But in identifying the existence of competition in particlar industries or markets, we must focus upon its economic role as a device for controlling the disposition of society's resources. Thus we think of competition as a mechanism for discovery of market information and for enforcement of business decisions in the light of this information. It is a mechanism, first, for firms discovering the kinds of goods and services the community wants and the manner in which these may be supplied in the cheapest possible way. Prices and profits are the signals which register the play of these forces of demand and supply. At the same time, competition is a mechanism of enforcement: firms disregard these signals at their peril, being fully aware that there are other firms, either currently in existence or as yet unborn, which would be only too willing to encroach upon their market share and ultimately supplant them.

So I believe that if we are fiddling with the role of the Commission to enhance competition within our community then the Government should come out and say so. If it is trying to enforce the role of competition and in so doing using the Commission then all it is doing is enforcing what we sought to be the role of the Commission when the legislation was first introduced. This is not something that is peculiar just to Australia. The United States Attorney-General's National Committee to Study the Anti-trust Laws- and this has been incorporated, I would have thought quite consciously, by the Commission in its annual report- had this to say:

The basic characteristic of effective competition in the economic sense is that no one seller, and no group of sellers acting in concert, has the power to choose its level of profits by giving less and charging more.

So these sorts of sentiments that have been expressed both in this report and in the United States are sentiments which the Labor Party endorses wholeheartedly. Let me get back to my criticism of the Government in its desire perhaps to try to patch up a sick economy by diluting the powers or the role of the Commission. A sick economy is absolutely no excuse for such decision making. The second point I wish to make is .that tearing the Trade Practices Act into another arm of harsh industrial law will invite turmoil into industry. Obviously these sections which have been incorporated into the amending legislation have triggered off a great deal more comment within the Labor movement than most other sections- in fact, any other section. The honourable member for Gellibrand (Mr Willis) as the Opposition spokesman on these matters will be going into detail on what he sees to be perhaps the constitutional right of the Government to do so and the practical nonsense of the Government trying to use the Trade Practices Act to solve these problems.

All the warning signs on this question are there. They have come from the Opposition, from the Australian Council of Trade Unions and from business people who have stopped to think about the ramifications of such a clumsy attempt at union bashing. Of course, there will be honourable members opposite who will charge that the Labor Party is forced to support the trade union movement come hell or high water. I assure the House that it is not so. Nor is it true to say that unions support the Australian Labor Party on all occasions or endorse all its policy pronouncements. Each has its own identity. Each makes its own decisions.

Mr Shipton - You do at pre-selection time.

Mr YOUNG - We certainly do not shirk our responsibilities. What is true is that the Labor Opposition and the Australian trade union movement have joined together to condemn this clumsy attempt to widen the scope to industrial relations. The second string to the Government's bow is its attempt to camouflage its incompetence in handling the economy and to blame the trade unions for everything that goes wrong. It is both a snide and, in the long term, a divisive manoeuvre which will set groups within our community on a senseless collision course. It is the opinion of the Opposition that there is no justification for writing into the Trade Practices Act provisions which, by their very nature, will cause more problems than they solve. I sincerely hope that the Government will see the legitimacy of our case at the conclusion of this debate. As I said earlier, this legislation springs directly from the Swanson Committee report handed to the Government on 20 August 1976. In what was almost a totally unique situation, the most vehement criticism of the report came from the Trade Practices Commission itself. In a document released on 21 September 1976, the Trade Practices Commission made public its own view on the effects of the Committee's recommendations. I refer to the views of the Trade Practices Commission as reported by Richard Ackland in the Australian Financial Review of that date. He quotes at length from the views of the Trade Practices Commission itself. He says:

In a prepared study of the Trade Practices Act review committee's report, the commission also argues that the recommendations could effectively destroy much of the work it has done on ridding industries of illegal exclusive dealing arrangements.

Some of the commission's most difficult and important cases have arisen in the exclusive dealing area, namely the petroleum and brewing industries, and with the building societies' tied insurance schemes.

The commission says that the committee's proposed new registration procedure for exclusive dealing could destroy much of its attempts to get a workable level of competition in these and other industries.

The Commission went on to say:

The Swanson report, in expressing sympathy for the small family business that wants to be taken over, says nothing of the interest of the rival small business which will be confronted with a merged and much larger rival and perhaps be isolated in the market.

I think there is much more to be said on the question of mergers and I intend to touch on this subject at length later in the debate to point out that I think that the Government is making an enormous mistake in focusing all the attention on the target company which may be below the $3m threshold level which has been set, and in completely ignoring the level of the company that may be the takeover company itself. I think in those respects quite legitimate arguments have been raised. The Opposition applauds the very constructive and public spirited manner in which the Commission let its views be known and rejects completely the suggestion made by opponents of the Commission that it was not entitled to make its views public. Criticisms were made of the Trade Practices Commission following publication of its outspokenness, and the Opposition rejects those views that would suppress the views of the Trade Practices Commission. The Opposition realises, of course, that the Government has not included all the recommendations of the Swanson Committee, but as the Minister for Business and Consumer Affairs (Mr Howard) referred in his second reading speech to further legislation and further discussion, the Opposition has no alternative but to recognise the dominance of the Swanson mentality over Government legislation in this area.

I wish to turn now to some of the terms of reference and the very sketchy way in which I believe the Committee dealt with some of these questions and perhaps the loaded way in which the terms of reference were set. I do not wish to refer to them all but I want to refer to some of them. Term of reference 1(b) states: whether the Act is causing unintended difficulties or unnecessary costs to the Australian public, including Australian business.

In the final clause in its summary, the Committee had the following to say:

Finally we should note our belief that many but not all of the costs to which we have been referred have been costs of a 'once only' nature- usually legal and professional costsassociated with the process of becoming familiar with the legislation and ordering affairs to fit with its rules. These costs will, of course, tend to fall, the longer the Act is in operation and more fully understood.

The point here, if ore relates that back to what the Trade Practices Commission said about the long term nature of this operation, is of course, that, there may be immediate complaint about the companies adjusting to authorities like the Trade Practices Commission, the Prices Justification Tribunal or the Industries Assistance Commission. But surely no one argues seriously that there is no need for their existence. It is an impossible task to set up an authority like the Trade Practices Commission and expect that the nature of its operation will be as cheap- if we want to use that term- or that the costs will be as little in its immediate term of operation as they will be in the years hence. I think that the Government asking companies to come forward and complain about the cost of going to the Trade Practices Commission was really only inviting a red herring of criticism of the Trade Practices Commission itself, a view which we on this side of the House would, of course, reject.

The second term of reference to which I want to pay some attention is 1 (C), which states: whether in the current economic circumstances of Australia the operation of any part of the Act inhibits, or is likely to inhibit, economic recovery contrary to the economic objectives of the Government.

What responsibility do any of these authorities have for the running of the economy of this country? Their task covered by their charter concerns what they are to do by the law and within the law. To say to them: 'Are you inhibiting or are you likely to inhibit economic recovery ' seems to me to be going well outside the competence of the members of the Committee to give advice to the Government that perhaps the Trade Practices Commission was in some way slowing down economic recovery in this country. I cannot see the legitimacy of giving the Committee a term of reference regarding the general economic question. The reason I raise this point is not because the Committee itself, in its final analysis, accepted that it was inhibiting economic recovery. As I have said, I do not think it was competent to make that judgment. The Committee made the same judgment by saying that it did not think it was so competent. All I am saying is that in making terms of reference such as this, the Government was quite consciously drawing unnecessary criticism of the operations of the Trade Practices Commission. Anybody who went to that Committee and put forward a case that it was in fact inhibiting economic recovery had that case rejected. I would like to hear the Minister perhaps substantiate the reason that was put in the terms of reference and whether, in fact, some of these things did not tend to camouflage the real work of the Committee.

It is also important to understand, first of all, that we on this side of the House have a quite different point of view from that of the Government as to the operations of the Trade Practices Commission and under whose responsibility it should lie. It is well known, of course, that under the Labor Government the Trade Practices Commission was part of the Attorney-General's Department. As we have said in this Parliament, that is where it would be returned under future Labor governments, because these sorts of fields, when placed in business, are not part of business or supplemented by business; they are dominated by business. The Committee was dominated by business. Its views are dominated by business. But the trade practices operations are not necessarily set up to look after business; they are set up to see that business operates in the competitive spirit which is in the best interests of the Australian consumer. So I think that in some of these things the relationship between the Committee and its views and those of the Department and the Government are quite different from the views that may be held on this side of the House. The Committee's third term of reference reads:

The Committee is asked to report on the effect of the Act on small businesses and to assess whether small business could and should be awarded special treatment by the Act.

The charge has been made in respect of the Committee, both by the Trade Practices Commission and by small business people- I understand that the Minister has already received delegations of small business people- that many small business groups did not go before the Swanson Committee to argue against the existence of clauses. They were quite happy with the way in which they were operating. But, to their dismay, because they did not appear and because those who did appear apparently held a different point of view, and because the Committee felt it was operating within its charter, they found that a section with which they were vitally interested was not just amended but in fact was repealed. I think the Government is going to have to look seriously at this question of the operations of the Act as they affect small businesses. I understand that my colleague the honourable member for Grayndler (Mr Antony Whitlam) will be speaking on the question of price discrimination later in the debate. The real teeth of the present Act lies in section 4, and obviously it is attracting most of our attention in this debate. It certainly attracts a great deal- the vast majority- of criticism that is made of the operations of the Trade Practices Commission.

The other speakers from this side of the House will raise different questions. We have tried to avoid repeating arguments or treading on each other's ground so that the Minister does get from this debate what he claims the Government is seeking. In the time remaining to me I want to deal with the question of mergers because I think it is important that we put up our arguments against what the Government in this Bill has accepted as being logic. But we hope, between now and the proroguing of the Parliament and the introduction of a new Bill, it will accept that that has been a very bad suggestion. I want to refer to what the Trade Practices Commission said about the structure of industry and what it had to say about mergers in its last annual report:

There has been criticism of the significance of structure in the Commission's work. It is put in 2 ways. First it is said that the Commission denies clearance to mergers because it pays too much attention to structure and not enough to conduct and performance. Then it is said that the Commission impedes the work of the Industries Assistance Commission towards scale economy that can only come from increasing the concentration in an industry. The Commission rejects both criticisms.

Incidentally, I failed to locate any detailed criticism that the IAC may have made about the operations of the Trade Practices Commission, and I think it would be a legitimate exercise of the Government, if there is a clash between these 2 bodies and their roles, not merely to present us with a case to say that there is a clash between the roles of these 2 authorities but rather to present us with evidence and not straight off the top of the head suggestions that perhaps that is the case. The Commission went on to say:

The second criticism was rejected in last year's report, but is still raised. The fact is that the Commission does not stand in the way of scale economy that is being encouraged by the IAC. Indeed scale economy is of prime importance whether or not the IAC has been concerned in the matter. The approach for both is by way of reducing restrictions on competition to the minimum necessary- in one case through the application of the Trade Practices Act to domestic competition and in the other by the application of tariff policy to import competition.

It seems to me that that is a very legitimate case put forward by the Trade Practices Commission. It says in no uncertain terms that it does not believe it is interfering with or presenting itself as any sort of hurdle to the operations of the IAC. It seems to me that the charter of both authorities work towards the one objective, although along different roads, and that there is no need for there to be any great clash. But let us have a further look at this matter because the Government, in its terms of reference, put forward the very neat suggestion that perhaps the Committee should have a look at a threshold, without stipulating what it ought to be. Nevertheless, it was not an original committee idea. The Government suggested the idea to the Committee. The Committee must have been terribly enthusiastic about it because it seems to me that it could not have taken the suggestion much further without roping in the Broken Hill Pty Co. Ltd and a few of the other major companies by establishing such a very high criterion and by ignoring the operations of the companies that may be involved in the takeover. In its report the Committee, in a very scanty way and, I must say, in a not very well argued way, suggests the reason why it accepted a threshold test. The Committee 's report states:

Most submissions expressly or impliedly regarded the continuation of merger provisions as necessary but sought substantial changes in the law and its operation. Others sought the abolition of this pan of the law altogether.

I remind honourable members that the Trade Practices Commission said in its criticism that if you abolish a section altogether you might as well close down the Trade Practices Commission. Nevertheless, there were those people who went along with the Committee and argued for the abolition of this part of the Act. The Committee went on to say:

The first question which we consider is the need for any merger control as pan of the Trade Practices Act.

In our view, there are 2 main reasons for including merger provisions in any competition policy law:

(a)   merger provisions are necessary to prevent the possibility of achieving, by merger, anti-competitive results prohibited elsewhere in the same law;

(b)   merger provisions ensure that the control of significant capital assets in the community does not change hands in circumstances that disregard any anti-competitive effects of the change.

It seems to me- I have said this previously- that the Committee was trying to determine what constitutes a small business. I disregard completely the very shallow proposal that this sort of thing allows a small businessman to sell out so that he and his family can live without worry for the rest of their days. I am talking of a small business as being one which has a turnover of less than $3m. How the Committee or the Government could ignore completely the company which was doing the taking over is completely beyond me. How they could ignore the anticompetitive factors which would be part of that takeover is also beyond me, because there could be many cases- there were many prior to the introduction of this legislation- of small businesses being taken over in circumstances where a certain element of competition was eradicated from the community. No doubt by setting this threshold the same thing can apply. If the Government were sincere about the threshold test it would also apply the threshold test to the company doing the taking over. Let us have a look at the turnover of such a company, and let us have a look at where it operates and at what impact its having an additional company added to its list will have on the community. I think those things also are important.

In order to see what the Trade Practices Commission had to say about these things, let me quote from its very brief review of the Swanson Committee report:

There may be real doubts whether a threshold system can be satisfactorily grafted on to the Act at all, given its approach of stating principles of general application and its emphasis on competition that the Committee more than once endorses . . .

The very presence of a statutory threshold is likely to affect market conduct. For example, merger activity could be stimulated at the expense of competitive activity. There might be encouragement of mergers in some cases as a legitimate alternative to arrangements that might contravene sections 45 or 47. There could be moves to take over small but fast growing companies that are offering increasing competition, but have not yet reached the threshold. Large companies complain from time to time about the competition small companies provide whether it be because of lower overheads, specialisation, or simply because they are more directly managed. Even in manufacturing industry, small companies can have surprising importance. In some industries the disappearance of only a few small companies would leave the large companies in total control.

Elsewhere in its criticism the Trade Practices Commission states that to take this work away from the Commission- to disregard the impact upon small companies- would take away a certain specialist element within the Commission that is able to understand industry totally. I ask the Minister to consider the suggestions that will be made by following Opposition speakers.

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