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Thursday, 12 October 1972
Page: 1511


Senator GREENWOOD (VictoriaAttorneyGeneral) - I move:

That the Bill be now read a second time.

This Bill is one of 2 measures to give effect to the proposals I announced on 24th May this year with respect to restrictive trade practices and monopolisation. The Bill provides for a number of amendments to the Restrictive Trade Practices Act 1971. The purpose of the amendments is to strengthen the operation of that Act so as to give effect to conclusions reached in the course of a thorough and comprehensive review of the legislation the Government has conducted. Before proceeding to explain the nature of the changes the Bill proposes I take the opportunity to recapitulate the Government's philosophy in regard to restrictive trade practices and monopolies, bearing as they do on the competitive climate of our economy.

The Government believes in a system of free enterprise under which citizens have as much freedom as possible to participate in the production and distribution of the nation's wealth. It believes that competitive conditions tend to initiative, resourcefulness, productive efficiency, high output and fair and reasonable prices to the consumer. But the Government does not subscribe to a doctrinaire view that all restrictions of competition are undesirable. On the contrary, it recognises that the lessening of competition may, in some aspects of the economy, be unavoidable and indeed be, not only consistent with but also a proper ingredient of, a truly free enterprise system. The Government also recognises that the nature of the legislative provisions to control restrictive trade practices in Australia must be attuned to the requirements of the size and character of our economy. We can certainly profit from the experience of other countries and from knowledge concerning their legislation. But it would be quite inappropriate for us to follow blindly the legislation of one country or another. The Government's present proposals are accordingly based on our own experience and are designed to meet our own needs.

Prior to 1965 the available information on the extent and the effects of restrictive trade practices in Australia was very limited. Since then, however, we have under the Trade Practices Act 1965 and under the present Act, which was passed following the High Court's decision in the concrete pipes case, steadily increased our knowledge and understanding of the agreements and practices being observed or followed. In the light of experience we have been able to assess the effectiveness of the 1965 legislation and to determine in what respects amendments are needed. The first stage of the Government's review related to the practice of resale price maintenance and, as honourable senators are aware, provisions for the control of that practice were enacted last year. The main purpose of the present Bill is to make more effective provision for the examination and control of what are referred to in the Act as examinable agreements and examinable practices. These are the classes of agreements and practices which are liable to be examined by the Commissioner of Trade Practices and where appropriate by the Trade Practices Tribunal, to ascertain whether they are contrary to the public interest. If such an agreement or practice is determined to be contrary to the public interest it can be restrained for the future. But unless and until such an agreement or practice is so restrained, it is not rendered unlawful by the Act.

The examinable agreements are defined in section 35 of the Act. A basic requirement is that the parties to these agreements are carrying on businesses which are, or should be, competing with each other. For this reason they are sometimes referred to as horizontal agreements. They are examinable agreements under section 35 if the parties agree amongst themselves that they will accept restrictions with respect to matters mentioned in the section. The most common type of restriction relates to price and related matters such as discounts and concessions. Other common restrictions provide for market sharing arrangements. Distribution arrangements are also concerned if they are agreed to between businesses at the same level of the distribution process. The observance of such restrictions is commonly reinforced by agreements to refuse to deal, that is, boycotts.

Examinable practices are defined in sections 36 and 37. Section 36 covers the practices of obtaining discriminatory terms, inducing refusal to deal and forcing another person's product. Section 37 relates exclusively to the examinable practice of monopolisation. The Act does not at present require that all examinable practices be brought forward for examination by the Trade Practices Tribunal. The only agreements and practices that are to be brought forward for the Tribunal's examination are those that the Commissioner has concluded are contrary to the public interest. In addition, where he has so concluded, the agreement or practice must be one in respect of which the compulsory consultation procedure has not resulted in abandonment or in a variation so as to make the agreement or practice acceptable in the public interest. Most of the examinable agreements, but none of the examinable practices, have to be registered with the Commissioner of Trade Practices. The sole purpose of the register is to ensure that relevant information is available to the Commissioner.

In my statement of 24th May 1972 I mentioned that as at 30th June 1971 there were some 3,311 horizontal agreements between groups of manufacturers, groups of wholesalers and groups of retailers. I pointed out that these are the agreements which tend to have the greatest impact on the competitive climate of the economy and that the Government has concluded that many of such agreements are likely to be found on examination to be contrary to the public interest. With these agreements 1 grouped the examinable practice of inducing a person to refuse to deal, which is covered by paragraphs (e), (f) and (g) of sub-section (1) of section 36. I pointed out that .this practice tends to be engaged in to force persons to become parties to or to comply with examinable agreements.

I accordingly announced that the Government had concluded that there should be a stronger procedure for dealing with the examinable agreements that are registrable and the examinable practice of inducing refusal to deal. The present Bill gives effect to that decision. It will, in effect, provide for 2 streams of control - a stronger one for the agreements and practice I have just mentioned and one not greatly different from that already provided for the others. Under the stronger provisions all the agreements and practices to which the provisions apply will have to be brought forward by the Commissioner for public interest examination by the Trade Practices Tribunal. The Commissioner will no longer be required to form an opinion of his own that such an agreement is contrary to the public interest. There will, moreover, be no statutory requirement for consultations before the institution of proceedings, and a new public interest test will apply in lieu of that at present provided in section 50.

Before referring to the details of the new public interest test I would say a word or 2 about the proposal to omit the statutory requirement for consultations before proceedings. On the face of it there appears to be much to commend a system which provided opportunity for businessmen to consult with a view to adjusting their ways so as to make them compatible with the public interest. But experience has shown that in this context the consultative process often tends to be used rather as a means for defeating or delaying the purposes of the Act. Moreover, if an agreement is to be given a clearance as being compatible with the public interest, the clearance should desirably be given openly by the Tribunal and not in the secrecy that the Commissioner is by the terms of the Act required to observe.

The public interest criteria in the stronger provisions are set out in proposed section 49D, which is in clause 11 of the Bill. These criteria are in accordance with the proposals in my statement of 24th May 1972, apart from some drafting refinements. In order to establish that an agreement or practice is not contrary to the public interest under these provisions the parties will need to establish one or other of the specified grounds of justification. The main ground is that the agreement or practice results, or is likely to result, in a specific and substantial benefit to the public as producers, consumers or users of goods or services being a benefit that would not otherwise be available.

As has been observed in relation to the announced proposals, no comparable ground related directly to the interests of producers is being proposed. But it should not be overlooked that it is generally in the interests of consumers that producers should be strong, efficient and viable. In this way it will be possible for account to be taken of the interests of producers. But what the criteria do not do is to provide for a restrictive practice to be justified merely on the ground that it is advantageous to the producer irrespective of whether it has, or is likely to have, a beneficial effect in meeting the needs of the public. Other grounds of justification included in subsection (1) of proposed section 49D will cover agreements that are necessary for health considerations, agreements needed to enable the parties to compete effectively with other persons or for the effective operation of other acceptable agreements or practices. There is also an express provision to cover agreements and practices that do not restrict competition to a significant extent. If any of the specified grounds of justification is established it will be open to the Tribunal to determine that an agreement or practice is contrary to public interest if it is satisfied that such a determination is warranted. A conclusion that such a determination was warranted would be based on some established detriment to the public or to persons other than the parties to the agreement or practice.

The procedure for examinable agreements and examinable practices that will not be subject to the stronger provisions I have outlined will be basically the same as that provided in the Act at present. This procedure with 2 modifications will continue to apply in relation to those examinable agreements that are not subject to registration and also to the examinable practices of obtaining discriminatory terms and forcing another person's product. One of the modifications to this procedure relates to the existing requirement that before instituting proceedings the Commissioner must form his own opinion that the agreement or practice is contrary to the public interest. This has proved to be a time consuming process and which is subsequently duplicated by the determination that the Tribunal makes. It is not proposed to require that all agreements and practices subject to this procedure should be brought forward for examination by the Tribunal, but the Bill will make it unnecessary for the Commissioner to reach an opinion of his own on the matter. It will authorise him to institute proceedings if it appears to him to be desirable to have the Tribunal determine whether the agreement or practice is contrary to the public interest.

The other modification to this procedure will be the omission of the present statutory obligation on the Commissioner to consult with parties before instituting proceedings. I have already referred to this consultative process in the context of the stronger provisions. In the context of the procedure I am now outlining there will be scope for discussions between the Commissioner and the parties because the Commissioner will not be under an obligation to institute proceedings in all cases. The Commissioner can, I am sure, be relied upon to act responsibly in such matters. There is no need to subject him to a statutory obligation to consult which might be used by some parties to defeat or delay the operation of the Act. The Bill does not vary the public interest criteria for agreements and practices subject to this procedure. The only amendments proposed to section 50 will remove provisions mat were needed for its application to the examinable practice of monopolisation.

In accordance with the announced proposals the Bill provides for the omission of all provisions in this Act relating to the examinable practice of monopolisation. This is on the basis that more comprehensive provision in regard to monopilisation is contained in a Bill to establish a monopolies commission. I had hoped, originally, to introduce that Bill at the same time as the present Bill but, as the drafting of the Bill is not yet finalised, I propose to introduce the Bill next week. Having outlined the 2 proceedures provided for in the present Bill to deal with examinable agreements and examinable practices I now indicate some changes proposed in regard to the scope of the definition of examinable agreements and to the obligation to register certain examinable agreements. An examinable agreement is defined in section 35 of the Act. The definition covers an agreement between competitors to require their customers to observe specific prices for the resale of goods - that is to say horizontal agreement for resale price maintenance - but it is not clear that it covers agreements between competitors with respect to the prices that are to be recommended to their customers as resale prices. This situation is rectified. I should add, however, that the means by which this is done will not prevent a supplier when acting unilaterally from recommending resale prices in the manner specified in Part VII of the Act.

The definition of examinable agreements is also expanded to cover agreements by which parties are obliged to furnish information about their prices and matters closely related to prices. They will also include agreements under which a party is obliged to make recommendations with respect to terms or conditions of dealing, to quantities or kinds of goods that may be produced or the persons who may be dealt with. The intention that the class of examinable agreements will be extended to cover both price information agreements and agreements by which the parties undertake to make recommendations to each other was indicated in the proposals which I have earlier outlined in the Senate. The Bill gives effect to that intention. Recommendations made in pursuance of collective agreements have, in practice, much the same restrictive effect on price competition as an actual agreement between competitors to impose price restrictions.

Similarly, experience has shown that the purpose of provisions directed at agreements by which the parties accept price restrictions can be defeated by replacing those agreements with agreements by which parties undertake to notify each other of the prices they intend to charge. The effect of such an agreement is, in practice, virtually the same as if the parties agreed to conform to the prices notified. The Bill therefore provides that agreements of the character I have mentioned should be examinable in the same way as other agreements within section 35. Agreements relating exclusively to exports are to be taken out of the definition of examinable agreements by clause 6 (d) of the Bill. The need for this exemption stems from the introduction of the stronger procedure I have already outlined, particularly as i: is compulsory under that procedure for all agreements to which it applies to be brought forward for examination by the Tribunal.

The reports of the Commissioner of Trade Practices have drawn attention to the fact that a large number of agreements, which has referred to as distribution agreements, are at present subject to the registration requirements. These are agreements between a supplier and his distributors and resellers, The reason why some of these agreements are at present required to be registered is that the supplier to some extent carries on business in competition with his distributors and resellers. In many cases the extent of this competition is not significant. It is desirable that, in appropriate cases, such agreements should continue to be examinable, but it would be inappropriate that they should be subject to compulsory examination in all cases under the proposed stronger provisions. The Bill provides in clause 10 for certain kinds of distribution agreements to be exempt from registration and it will follow automatically that the agreements so exempted will not be subject to the stronger examination procedure. This exemption is confined to agreements the parties to which comprise two persons only, neither of which is a trade association. Examples of agreements that will be within the exemption are agreements for exclusive dealing, whether mutual or otherwise, and area franchises. The exemption will in no way detract from the illegality of resale price maintenance under Part VII of the Act.

I turn now to one or 2 miscellaneous provisions that have been included in the Bill. Clause 20(c) of the Bill relates to the definition of resale price maintenance in section 66. In his 5th annual report the Commissioner of Trade Practices drew attention to the possibility of a minimum advertised price being used as a substitute for a minimum selling price. The Bill will remove such possibility. Clause 22 proposes the inclusion of a provision which will make it clear that it is for the parties wishing to rely on the fact that they are related to each other to establish that fact in proceedings in the Tribunal or in a court. Clause 23 provides a regulationmaking power which will enable agreements made in pursuance of or for the purposes of inter-governmental agreements to be exempted from the operation of the Act. The need for this provision again stems from the compulsory examination requirements being introduced in the stronger examination procedure.

Finally, I point out that clause 4 provides for the Act to draw upon constitutional powers in addition to the corporations power which at present is the source of constitutional power for the existing legislation. The clause has been drafted witu close regard to the views expressed by the High Court in the concrete pipes case. The clause is to ensure that the Act applies to as large a proportion of all restrictive agreements and practices operating in Australia as the Commonwealth's constitutional power may permit. The Bill does not use the reference which was made by the Tasmanian Parliament in respect of the 1965 legislation - but, as I have informed the Attorney-General of Tasmania, a reference will be sought from Tasmania next year when the legislation has been passed. The State of Western Australia has also evinced an interest in making a reference to support the operation of the Commonwealth legislation in that State.

As I have indicated to the Senate, the Government regards it as important that there should be adequate opportunity for the detailed provisions of this Bill to be properly studied and assessed. The Government believes that the Bill should not be passed through the Parliament without there being an adequate period for those affected by its provisions to give consideration to what is proposed and, if it is so desired, to make appropriate representations to the Government and to members of the Parliament. Accordingly the Government does not propose that the Bill be passed in the current sittings of Parliament. I commend the Bill to the Senate.







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