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Monday, 15 September 2008
Page: 72

Senator BRANDIS (7:59 PM) —I rise to speak on the Trade Practices Legislation Amendment Bill 2008. The bill seeks to amend the act in five respects. First, and this is the issue that has attracted the most public comment, it seeks to alter—not, as has erroneously been said, to repeal but to alter—in an important respect the so-called Birdsville amendment, that is, the amendments that were introduced into section 46 of the act and the cognate provisions of the schedule to the act by section 46(1AA) and (1AB) last year. Secondly, the bill proposes to vest jurisdiction in relation to section 46 matters in the Federal Magistrates Court. Thirdly, the bill proposes to make it mandatory that one of the ACCC’s deputy chairmen must have knowledge of or experience in small business matters. Fourthly, the bill proposes to remove the $10 million threshold on unconscionable conduct proceedings under section 51AC. That was a threshold again established by the Trade Practices Legislation Amendment Bill 2007 when the threshold was raised from $3 million to $10 million. Under these amendments there will be no threshold required to invoke that jurisdiction. Finally, the bill seeks to clarify by extending temporally the powers of the ACCC after a notice under section 155 of the Trade Practices Act has issued. That amendment to section 155 is an amendment first recommended by the Senate Economics References Committee when it reviewed the effectiveness of the Trade Practices Act in protecting small business in 2004.

I say at once that the opposition supports the third, fourth and fifth of those categories of amendments, that is, the requirement that an ACCC deputy chairman must be a small business specialist, the removal of the $10 million threshold on unconscionable conduct proceedings and the reforms to section 155. Let me deal then with the two matters which the opposition will oppose.

The first is the amendments to the so-called Birdsville amendment which would remove the test of market share as the jurisdictional threshold for proceedings under section 46(1AA) in making a determination under the subsection and substitute the words ‘degree of power in a market’. The prohibition is on a corporation then not taking advantage of that power in that or any other market by supplying or offering to supply goods or services.

The Birdsville amendment, for which Senator Barnaby Joyce may be regarded as the progenitor, has attracted a great deal of excited commentary across all stakeholders in this debate whether it be the small business community, academic lawyers and economists who specialise in antitrust law, legal practitioners, business lobby groups representing both the so-called big end of town and the small business sector and others.

On 28 August this year Professor Stephen Corones, in an article published in the Australian Financial Review, subjected the Birdsville amendment to a scathing attack. At a conceptual level I happen to agree with everything that Professor Stephen Corones, who is one of the nation’s most respected specialists in this field, wrote—at a conceptual level. However, it is the opposition’s view that this question should be approached pragmatically. The Birdsville amendment was first introduced into the Trade Practices Act in September last year—but a year ago. In moving that amendment to the Trade Practices Act on behalf of the then government in the Senate I said that the government felt that it had got the balance right. In the year since it is simply not possible to make a determination as to whether the Birdsville amendment has had the effect which those who promoted its inclusion in the act believed that it would have simply because there has not been time. There has not been a sufficient passage of time in terms of conduct in the market tested by examinations by the ACCC, let alone litigated in the Federal Court, to see whether the Birdsville amendment works. Those like Professor Corones and many academic specialists who are scathing about the Birdsville amendment at a conceptual level failed to address the simple pragmatic consideration that, since the amendment is fresh to the act—and this is an act which, as anyone who is familiar with it will be well aware, generates its own jurisprudence, more so than most statutes do—it seems at least premature to be removing the key provisions of the Birdsville amendment, that is, the provision that stipulates substantial market share as a trigger in consideration at this time.

Let us remember what the Birdsville amendment sought to do. It sought to benefit small business by addressing the issue of predatory pricing by a corporation with a substantial share of a market. One of the problems that has bedevilled this legislation, as you would know, Mr Acting Deputy President Bishop, is that predatory pricing is itself an undefined term. It means different things to different people but never before did the act specify market share as a specific consideration which might trigger an inquiry into the existence or nonexistence of predatory pricing. It was part of the jurisprudence, it was part of considerations to which courts might have had regard, but there was no statutory mandate to do so. That was the reform the Birdsville amendment sought to effect.

In order to avoid implicating legitimate discounting, which is of course in the interests of consumers, it provided that the corporation must have the purpose of damaging a competitor or of preventing the entry of a potential competitor in order to be in breach of the section, and that the conduct must also be carried on for a sustained period. The opposition, as the then government, introduced the amendment at the time and believed that the balance was right. In the less than one year since the act was amended, despite the lower threshold the floodgates of litigation did not open and nor did discounting cease or diminish in any measurable way, which was one of the concerns that many had expressed would be a consequence of stipulating market share in the act—the so-called chilling effect on competitive conduct.

There is simply no evidence that the amendment, despite the misgivings of the commentators, did have a chilling effect on conduct in the market and, in particular, on price competition. What it did do was send a message that small businesses had a recourse to the courts when faced with large and powerful competitors with the resources to crush them by sustained discounting engaged in for the purpose of eliminating or substantially damaging them. It could do this without the necessity to obtain complex economic evidence on market issues, market power and the conduct that would amount to a misuse of market power.

The opposition considers that removing the stipulations of the Birdsville amendment, or the key element of it, at this stage will send entirely the wrong message to the small business community and to the commercial community generally. So, with all due respect to the views of the academic commentators, we will be opposing that provision.

The other provisions we will be opposing are those provisions of the bill that seek to confer jurisdiction in relation to section 46 cases on the Federal Magistrates Court. The argument is made on behalf of the government that by transferring these cases to the Federal Magistrates Court it will make them easier to litigate, it will reduce costs and it will make justice more accessible, particularly to small business litigants. Each of those considerations is an illusion. In no respect will changing the jurisdictional forum in which these cases are litigated make the litigation any swifter or any cheaper.

Section 46 cases are inherently complex; they are among the most complex species of commercial litigation conducted by courts in this country, and the issues in a section 46 case do not change depending on which court hears the case. The legal issues, the economic issues and the evidence, including the expert evidence that it is necessary to lead in order to prove up a section 46 case, are the same no matter which court hears the case. So the suggestion that you will reduce the costs by bumping a section 46 case down to a lower court in the jurisdictional hierarchy is an observation that could not sensibly be made by anybody with the slightest familiarity with the way the judicial system works. In fact, on the contrary, there is a very grave risk that it could have the converse effect of increasing the cost of litigation, for one particular reason: in the 34 years since the Trade Practices Act has been part of the law of Australia, which is roughly the same length of time as the life of the Federal Court of Australia, the Federal Court has developed a high level of skill, competency and sophistication in dealing with section 46 cases. There is now, and has been for a long time now, a body of judges who sit on the Federal Court of Australia who are intimately familiar with this sometimes arcane area of the law and are highly skilled in the efficient conduct of complex cases of this kind. With all due respect to the very eminent men and women who sit on the Federal Magistrates Court, it could not be said—and I do not think it is sensibly urged—that they have the same level of institutional skill, knowledge and familiarity with these complex cases that the Federal Court judges do.

In transferring some section 46 cases to a non-expert, non-specialist court, if anything one risks prolonging those cases with the attendant consequences in relation to costs. I might add that anybody who knows of the habits of solicitors and barristers would not for a moment think that their fees would be any different if a matter of this kind were to be litigated in the Federal Magistrates Court rather than in the Federal Court of Australia.

I understand the argument. I understand the simple-minded belief that by litigating a case in a lower court you will make the litigation cheaper. You will not—not even slightly—because you will not change the complexity of the issues and you will not change the level of experience of the solicitors and the counsel who will be required to deal with and argue the cases, but you run the risk of prolonging them by having them dealt with by a non-expert rather than an expert tribunal. For that very practical reason, the opposition thinks that this is a wrong-headed and misconceived idea and we will be opposing those provisions as well.

I will also foreshadow the amendments that I have circulated in the chamber. In relation to the proposed amendments to sections 46(1AA) and 46(1AB), the opposition will be opposing items 1, 2 and 6 in schedule 1 and items 1, 2 and 6 in schedule 2. In relation to this simple-minded and wrong-headed proposal to vary the jurisdictional requirements of the courts that may deal with these matters, we will be opposing item 3 in schedule 1, item 3 in schedule 2 and items 1, 2, 3, 4, 9, 10 and 11 in schedule 3. We will be supporting the balance of the bill.