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Pin the tail on Costello: Treasurer's collective bargaining story exposed as fraud.

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The National Association of Retail Grocers of Australia said today the Federal Government’s collective bargaining notification proposal was a fraud.

The Federal Government’s response to the Dawson review of the Trade Practices Act pinned its credibility on the notification proposal as a sufficient sop to small business.

The Treasurer, Mr Costello, announced on April 16 that the Government would move to facilitate collective bargaining by small businesses in dealing with a big business. Contrary to statements being made by the Treasurer, the notification proposal will add little, if anything, to what small business already has. This is not the big win for small business from Dawson as trumpeted by the Government.

NARGA national spokesman Alan McKenzie said today that while the ACCC already had the power to authorise collective bargaining where a public benefit can be demonstrated, Mr Costello had said the Government would introduce the notification mechanism as a way to streamline the process.

A small business would be able to bargain together with other small businesses to negotiate individual transactions up to $3 million with a big business, subject to demonstrating public benefit.

“Closer examination, however, reveals that the proposal is a fraud,” Mr McKenzie said.

“First, it is important to realise that a notification process involving, say, 50 small businesses, each of which would have a $3 million ceiling under Mr Costello’s proposal, actually involves a total deal worth $150 million.

“It is far from clear that such an arrangement could be shown to have a public benefit or have insignificant anti-competitive impacts.

“The Dawson report refers to ‘a maximum amount per annum’ of $3 million per transaction, but that is not confirmed in Mr Costello’s announcement, so the actual timescale is left uncertain.

“The current authorisation process under the Trade Practices Act is not limited in any way by reference to a monetary ceiling - Mr Costello’s proposal is, in fact, more restrictive than the current situation.”

Mr McKenzie said transactions totalling $150 million, as in the example quoted, would be likely to bring about a substantial lessening of competition and have such an anti-competitive impact that it would not be possible to demonstrate a sufficient public benefit and therefore would not be authorised, let alone pass muster under the notification proposal.

“Clearly, the ACCC could not allow an arrangement to stand if it were anti-competitive and the anti-competitive impacts outweighed the public benefit,” Mr McKenzie said.

“Obviously, the more small businesses involved in an arrangement and the greater the part of a particular industry which is covered by it, the more likely it is that competition would be substantially lessened and the less likely a public benefit could be shown to outweigh the anti-competitive detriment.

“Since the public benefit test which currently applies to authorisations is to apply to the notification process, it is reasonable to assume that if a notification process were not able to satisfy the public benefit test, it would be unlikely to survive the authorisation process either.

“The notification process would produce no real improvement over the current arrangements,” Mr McKenzie said.

While there was uncertainty in relation to how small businesses would benefit from the notification proposal, there was even more uncertainty in relation to the types of big businesses which could be covered.

Mr McKenzie said Mr Costello’s announcement of the Government’s response to the Dawson report read in part:

“The Government … will develop a notification process for collective bargaining by small businesses dealing with large business….It will aim to provide an appropriate balance of power where small businesses are competing or dealing with businesses that have substantial market power.”

“This suggests that the notification process would be available only where small businesses were dealing with a company with a substantial degree of market power,” he said.

“But the High Court’s decision in relation to section 46 of the Trade Practices Act in the Boral case in February defined the concept of a substantial degree of market power in a very narrow way indeed - in effect, limiting the concept to monopolists or near-monopolists.

“Clearly, very few, if any, entities will have that substantial degree of market power and very few, if any, small businesses will benefit from collectively bargaining with them.

“It is now time for Mr Costello to come clean.

“He has tried to con small business with this spurious offer of collective bargaining notifications, but he has been found out.

“It is time for Mr Costello to accept what everybody in small business and many of his parliamentary colleagues know - the main game is reform of section 46. We don’t want to waste any more time on side shows.

“The High Court decision in the Boral case means that section 46 no longer protects small business from predatory pricing and other anti-competitive behaviour by multi-billion dollar corporations.

“That is the beginning and end of it. We now need urgent reform of section 46 of the Trade Practices Act,” Mr McKenzie said.

Further information: Alan McKenzie 0417 212 348