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Tuesday, 22 February 1977


Mr Antony Whitlam (GRAYNDLER, NEW SOUTH WALES) - The Opposition welcomes the opportunity to debate this measure. As the honourable member for Port Adelaide (Mr Young) said, we find it odd that it comes before us for discussion in the form of a Bill on which debate is to be adjourned at the second reading stage without a vote on it and which, after the Parliament is prorogued and the new session commences, will be re-introduced with amendments, some perhaps suggested by members of this House and of course some suggested by persons outside the House. The whole atmosphere in which the Government has reviewed trade practices legislation has been less than satisfactory, very much as a result of the campaign rhetoric in which the Prime Minister (Mr Malcolm Fraser) and the Minister for Business and Consumer Affairs (Mr Howard) indulged in 1975. Both of them and other senior members of the present Government were at great pains to paint the Trade Practices Commission as one of the new octopuses of government set up by the Labor Government to strangle business and free enterprise. Since that time the responsibilities of office have moderated their views, and they have had to seek to move away from that extravagant rhetoric of the campaign trail. Nonetheless, the performance in office exhibits, I believe, a good deal of that prejudice which was spread in 1975. It is important that we look at the whole ambience of the review of trade practices, as the honourable member for Port Adelaide suggested. Where was the great public call for the review of this legislation? How many pieces of legislation do honourable members genuinely believe call for a major overhaul within 18 months of their passage and of their coming into operation?

There are many provisions in this legislation which are welcome. Most of them are very small. The major provisions are ones that I believe are altogether too premature or ones that ought not to be enacted.

The attitude of the Government towards the Trade Practices Commission has been disgraceful. The Commission has been consistently starved of staff and funds. Its opportunity to go out into the market place and find out what is happening has been circumscribed as a result of government activities. The argument which I can anticipate the Minister putting now is that the Commission has not been disadvantaged any more than any other department. To compare a fledgling statutory commission with the wellestablished department of State is, I believe, not to compare like with like. Plainly a new commission, to get itself established and to start its legislation working depends upon the support of the Government in terms of staff and finance. That has not been forthcoming.

The honourable member for Cowper (Mr Ian Robinson) said that the Opposition in this debate had not put forward any positive propositions. Let me say that we will be proposing several. I believe the honourable member for Port Adelaide made at least several substantial suggestions about the merger provisions of the Trade Practices Act. For my part, I want to put very plainly that the Opposition opposes completely the repeal of section 49 of the Trade Practices Act. Before I get to that, I would like to look at several other provisions. It is worth repeating what Attorney-General Murphy put very well, I believe, in 1974, when he had the carriage of this matter in the Senate, about the reason section 49 was introduced into this legislation. He said:

The provision aims to prevent unscrupulous suppliers from attempting to gain an unfair advantage over their competitors by discriminating among buyers and to prevent unscruplous buyers from using their economic power to exact discriminatory prices from suppliers to the disadvantage of less powerful buyers.

I think that everybody in this chamber would subscribe to that objective. The honourable member for Cowper, who spoke in such glowing terms about the value of free enterprise, would no doubt subscribe to it. We cannot look at simple predatory pricing, which will be covered by the monopolisation provisions to some extent. It is essential that we look, in the Australian context, in which we have such an oligopolistic market structure, at price discrimination.

During this debate we will no doubt receive many learned treatises about foreign Acts, particularly in the United States and in Britain. One of the Acts about which we will hear a lot is the Robinson-Patman Act of 1936 in the United States. I think it is important, when we do that, that we look at when that legislation was enactednamely, 1936- and for how long, over 40 years, it has been a subject of continuing debate in the United States. There is, I believe, a general acceptance that it has been useful in the area of price discrimination in the United States, but it certainly took, at the least, 25 to 30 years for that to come about. In looking at that time frame we have to look at the difficulties caused by an intervening war and at the post-war period when it was not relied on and when it was not a matter of great litigation, but I believe the essential justification for legislation on price discrimination remains as valid today as it was in the United States 40 years ago.


Mr Shipton - It is not justified.


Mr Antony Whitlam (GRAYNDLER, NEW SOUTH WALES) -The honourable member for Higgins has interjected to say that it is not justified. He belongs to a political Party which in 1974 opposed every provision in the Trade Practices Bill, not simply that provision which ended up as section 49. Section 49 is a difficult section. If one looks at the guidelines published, at material emanating from the Trade Practices Commission, one will see that the section certainly has caused the Commission a great deal of trouble. I have no doubt that it has also caused all firms a great deal of difficulty in interpretation and in applying it to their market situation. Of course it has, but so have so many other sections of the Trade Practices Act. The Act set out to create new rules for the conduct of business in Australia, rules which were designed to ensure healthier competition in the market place throughout the country. After a very limited period, since this provision came into force only in February 1975, I believe that for the Government to have made up its mind as recently as last year that it would repeal the section is altogether too premature.

Let us look at the basis upon which the Government has decided to repeal section 49 which deals with price discrimination. The Minister, in his second reading speech, said*.

That prohibition has worked to inhibit price flexibility, and has not encouraged competition.

I think there is no evidence that it has inhibited price flexibility. I do not believe that the Swanson Committee provides any evidence. There is the alternative argument. It may not be able to be established at this point that it has encouraged price flexibility. For the Minister to say that it has not encouraged competition is nonsense. If one looks at any standard text on trade practices in Australia one will see that no cases have been decided on this section. How can we know whether it is working? The compass which the section seeks to cover is rather limited. These are the only reasons which the Minister gave for the Government's decision. The next reason which the Minister gave, I believe, is less than completely stated. The Minister said:

In fact the review committee stated that this law has actually been used as a pretext to abolish discounts and effectively raise prices.

That is not what the Swanson Committee said. I have my arguments with members of that Committee, but I believe that in general the document which they have produced is a useful discussion document for looking at this difficult area of competition law. Undoubtedly the weakest chapter is chapter 7. I want to look now at the question about which the Minister talked, the pretext of abolishing discounts. This is what the Swanson Committee said in paragraph 7. 12: . . . when section 49 came into effect, some suppliers, either through ignorance or desire to do so, took the law to mean that they were required to charge similar prices to all customers or at least to competing customers. This led to price rigidity, which was the subject of comment by a number of submissions, and the reduction in or abolition of many discounts which in turn resulted in overall price increases.

So far so good. That supports what the Minister said. The Swanson Committee also said:

Some of the discounts which were abolished or reduced at that time were substantial. Apart from that initial round of increases of price, the Committee is unable to determine what the net effect has been since that time of the operation of this section on the general level of prices.

Let us compare the 2 statements. The Minister, in justifying the Government's decision to repeal section 49, said that this law had actually been used as a pretext to abolish discounts and effectively raise prices. The Swanson Committee, upon which the Minister purports to rely, says: ... the Committee is unable to determine what the net effect has been since that time of operation of this section on the general level of prices.

So the Minister has not only argued it skimpily but also I believe he has been very very loose in dealing with the Committee's report as a basis for his decision.

The House would also I believe do well to have regard when considering section 49 to the considered remarks of the Trade Practices Commission. The honourable member for Port Adelaide referred earlier to the comments that the Commission made in relation to the Swanson Committee's report. It is true, as he says, that quite unusually people thought that everybody ought to be able to participate in this great debate on trade practices law except the experts themselves- except the Trade Practices Commission. Let us look at what the Trade Practices Commission had to say. The Commission states, I think perhaps rather better than the Minister did, what can be argued as the case against section 49. It was put like this: . . . that price discrimination brings price flexibility, and that price flexibility is at the very heart of competitive behaviour.

That is how the Commission thinks it can put the best face on the argument to repeal section 49. The Commission went on to concede that that is a powerful argument. But it says there is a contrary argument. It states:

Put shortly, it is that a law controlling price discrimination will have a long term influence on structural trends that will be pro-competitive by ensuring survival of small business interests that can continue to compete.

That long term trend is so important. This whole area of competition law with which we are dealing is not something in which we will see rapid changes in market place behaviour since the Trade Practices Act came into operation, both in 1974 and certain provisions such as that relating to price discrimination in 1975. What is important and what everyone on this side of the House says in relation to all Government measures relating to the economy is that, of course, we must look at the long term effect. That is what the Commission said in relation to price discrimination. From that we can see that the Commission is stating clearly that it regards any decision to repeal section 49 as being premature. I think we are indebted to the Commission for stating so plainly in these circumstances its attitude on that question.

In the past I have been, if anything, critical of the Commission for being somewhat timorous in putting forward proposals or, certainly in criticising the Government. Perhaps I can interpolate here that I think one of the more reprehensible actions of the Commission- I know that this is something in which I have the support of persons such as the honourable member for Holt (Mr Yates)- is its decision to anticipate the passage by this Parliament of legislation proposed by the Government. I refer here to the proposed treatment of public hearings of authorisation applications. The Government proposes to do away with public hearings by the Commission. The Trade Practices Commission, it would appear, has gone along with the Government's decision on the basis that it anticipates that the Parliament will agree with the Government. That is altogether too premature. Certain newspaper commentators have drawn attention to this. I am only surprised that the commentators in the Australian Financial Review overlook the fact that this is a continuing attitude of the Government towards supposedly independent statutory bodies. Last year when the Government amended the Prices Justification Act the same thing happened. The Government proposed certain new procedures in relation to the workings of the Prices Justification Tribunal and that Tribunal fell over on its back and said: 'All right, we will anticipate the passage of those procedures by the Parliament and go along with them anyhow'. If we get a tribunal presided over by a judge to go along with the Government with that kind of reprehensible behaviour I do not suppose we can expect a higher standard of independence from a commission headed by a man who was a civil servant.

I revert to the question of section 49 and the way in which the Swanson Committee came to its very tentatively argued conclusion. The Trade Practices Commission refers particularly to the fact that it believes that in making its recommendations on the question of price discrimination the Swanson Committee very likely went beyond its term of reference. In doing that the Commission points to the fact that the Committee gave some weight to the fact that small business had made very few submissions in favour of the continuance of section 49 and that certain business firms which could be identified as being part of what one calls small business had in fact proposed that section 49 should be repealed. The Trade Practices Commission made the very good point- it is one worth repeating- that it may not fairly have been anticipated by small business that the Swanson Committee would be even having regard to this question. For the Committee then to place any reliance upon the fact that certain parties had not come up with submissions is very poor evidence indeed.

I want to come back to what the Swanson Committee says because its conclusion on this matter is nowhere near as firmly stated as the Minister would have us believe. At paragraph 7.20 which is headed 'Conclusion' the Committee states:

The Committee considers that in the Australian context the conduct of a large buyer who is endeavouring to secure price cutting in his favour, whether it be discriminatory or not, may be more pro-competitive than anti-competitive.

The Committee says 'may', and it is arguing on an empirical basis which is altogether inadequate. If the Minister when he accepted that recommendation of the Committee- that very tentatively stated recommendation by the Committee to abolish section 49- was in any doubt about the attitude of small business to section 49, I am sure that he has been left in none since. If he has been lobbied as effectively as members of the Opposition have by various small business groups, particularly by organisations of small independent retailers, he will know that there is now a very grave disquiet out there in the market place about the Government's intentions in relation to the section. It is instructive to look at some of these approaches. I hold in my hand a submission from the Confectionery and Mixed Business Association of Australia. This organisation has provided to all honourable members- I know because I have a copy of what it sent to the Minister- a most tightly argued proposition that the very survival of small business, which I suggest is something about which we hear from the Government supporters quite often, is at stake, at least in respect of the retail sphere, if section 49 is abolished. I ask all honourable members to have some regard for the prospects of the survival of those sturdy independent yeomanry when they come to consider this matter and particularly when they consider it again next year. I ask them to have regard for the smaller man, the man in the corner store, the man who is not merely a manager but who owns his business, the man who puts his capital at risk. This is the sort of man whom honourable members opposite talk about all the time. Do not let us have any of this talk about Labor being anti-business. Labor introduced the Trade Practices Act in 1974 to promote competition in business and to ensure the survival of healthy competition in Australia.

I believe that there is no proposition, including the frivolous one in relation to union boycotts which the honourable member for Gellibrand (Mr Willis) will deal with, that the Government has placed in this piece of legislation that is less deserving of the House's support than the proposition to repeal section 49. To do so now is premature. It would mean that we would deprive ourselves of the opportunity to have expert surveillance of a significant part of market behaviour which can work through to the advantage of all consumers and to the advantage of Australian industry generally.







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