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Thursday, 25 June 1998
Page: 5487

Mr HOCKEY (10:02 AM) —I thank the honourable member for Fisher (Mr Slipper) for accommodating me in this instance. He did an excellent job in commenting on the review of the Australian Competition and Consumer Commission's annual report for 1996-97 by the House of Representatives Standing Committee on Financial Institutions and Public Administration.

This was, in fact, a very important report. I had the pleasure of participating in the public hearings of our committee, more especially when we had the opportunity to ask of the Chairman of the ACCC a number of questions, particularly in relation to the engagement of solicitors—legal representation—in the Foxtel-Australis media merger case.

This was a classic and unique example where we have an independent body from which the government has excised certain powers but, at the same time, has given it a vaster range of powers in relation particularly to competition policy, has given it independence and has provided it with a very wide range of options when it comes to the implementation of the government's competition policies, yet an organisation such as this makes some procedural errors and has within it inadequate checks and balances to ensure that it does not contravene basic operational standards that we would expect of a government agency.

In this specific case, the ACCC, on 14 October 1997, instituted proceedings in the Federal Court seeking an injunction to restrain the Foxtel-Australis media merger. Of course, the ACCC was basing that action on the concept that the merger would be likely to substantially prevent, hinder or lessen competition in pay TV, telephony markets, and so on, in Australia, which, of course, contravenes section 50 of the Trade Practices Act.

I would like to particularly focus at a later moment on the opening up of the local telephone service to competition. What was of particular concern to me in these hearings was that Bryan Frith reported in the Australian, on 31 October 1997, that:

. . . the instructing solicitor from the Government Solicitor's Office, was questioned about the role of Optus in the action.

He agreed—

That is, the government solicitor's office agreed—

that the ACCC had accepted legal resources and advice from Optus and that it had received evidence from Optus. It also expected that Optus would provide witnesses.

My anger and sense of frustration, in relation to the role of the ACCC in this matter, was focused on the fact that Optus were the financial beneficiaries of the legal action undertaken by the ACCC. Yet the ACCC was prepared to have truck with Optus providing legal resources at a discounted value to the ACCC in this case.

In relation to the government's role in certain areas, such as privatisation and contracting out, we say that, as a government, we cannot be both the predator and the gamekeeper. In relation to this specific case, it was quite clear from the perception point of view—if it was not actuality—that the ACCC was acting as both a predator and a gamekeeper, because its role is as a gamekeeper, yet it was accepting discounted legal services from Optus, who were the predator in relation to the Foxtel-Australis merger.

I had a significant problem with this. I believed that the office of the Australian Government Solicitor were culpable in relation to this matter, because they were the ones—even though they are the solicitors for the ACCC—that engaged Optus. They were the ones that provided the ACCC with some advice to indicate that there was no legal impediment to the ACCC engaging the legal services over Optus's solicitors, Gilbert and Tobin. What I found quite interesting was this, and it is listed as table 3.1, on page 19 of the report:

Professional fees charged by Gilbert & Tobin to the AGS for the two solicitors . . .

Mr Glass was charged for 17 days at $412 per day. Even before I came into this place, as a commercial lawyer I was charging my clients $350 per hour, yet Mr Glass, who is a highly respected partner, as I understand it, of Gilbert and Tobin, was charging $412 per day. Gilbert and Tobin must be the most lucrative law firm in Australia to engage for legal work if they are charging $412 per day. But whatever the case, we will accept that was the rate that was charged by Gilbert and Tobin, Optus's solicitors, to the Australian Government Solicitors for this work. In addition, a more junior solicitor, Mr Wheeler, was charging $316 per day. There is no way, from a legal perspective, that you could operate any law firm if you were charging $412 per day for a senior lawyer and $316 per day for a more junior lawyer.

What I found of most interest, however, is that the office of the Australian Government Solicitor, who are the solicitors to the ACCC and who had engaged a Gilbert and Tobin partner at, say, $412 per day, were charging the ACCC $250 per hour. They were charging their client $250 per hour plus an amount to be agreed with the ACCC to cover the AGS's cost of employing those solicitors. That is a middleman fee if ever I have seen one. The poor old ACCC is copping the blast. I am going to actually express some sympathy for the ACCC in this instance. I am feeling very generous today. The ACCC was being charged $250 per hour by the Australian Government Solicitor for legal services rendered by Gilbert and Tobin, and the Australian Government Solicitor was paying Gilbert and Tobin around $412 per day for a partner of Gilbert and Tobin. It does not stack up—what a surprise!

Serious questions need to be asked of the Australian Government Solicitor. For example, are their on-costs so significant that they need to charge, say, $2,500 per day and yet pay someone else $412 per day when that someone else is providing all the legal advice? They are flow-on costs of up to 500 per cent in order to engage legal representation. The ACCC and the Australian Government Solicitor undertook to our committee that this sort of scenario would not occur in the future, given that it has proved extremely embarrassing. Also they believe there may be a perception that there was a conflict of interest—that having Optus provide discounted legal support to a government agency when that government agency was taking legal action against Optus's main commercial rivals was perceived to be a conflict of interest. It was—quite clearly. It distressed me, and I think it distressed most of the members of the committee, that it took our investigations, together with the investigations of Bryan Frith of the Australian and various other interested parties, to discover that this was the case, and it was regrettable that such an event should occur.

In the short time I have left, I do want to say something about competition policy, because there is a growing mood amongst some political heroes in Australia—

Mr Slipper —Or heroines.

Mr HOCKEY —or heroines—that we dump competition policy. I particularly refer to the comments by the Premier of New South Wales, Bob Carr, and also the former Premier of Queensland, Rob Borbidge.

Mr Quick —He's not the former Premier yet.

Mr HOCKEY —I expect he will be, and I am being careful. Their comments add nothing to the national debate about the benefits of competition policy. Why? The fundamental problem with competition policy is that Australians and consumers are not seeing the tangible benefit of competition policy, because the benefits of competition policy are not readily identifiable as a new piece of infrastructure here, a new building over there or something that they can touch and feel and look at. It comes through in cheaper prices for STD phone calls; it comes through in cheaper prices for consumables in the fruit and vegetable section of Woolworths; it comes through in cheaper prices in relation to public transport; and it comes through in cheaper prices in a range of goods in a range of areas. But, for many Australians, they cannot identify what the tangible benefits are.

I have to give credit to the Labor Party because they are the ones that have relentlessly been pushing competition policy in Australia over the last 13 years. Before we were elected to government the Labor Party was there pushing it relentlessly. Members of that party are amongst the strongest advocates for competition policy, and I think they are right. Good on them. They are now starting to distance themselves from it, and that is regrettable. They have to come back on the train, so to speak, come on the journey with us.

A recent Economist study, reported in May, indicated that we had the very best competition laws in the world. The benefits of competition are that we are a lean, focused nation that is ready to accept the opportunities provided to us, not only in Asia but with the deregulation of international trade. If we have lean, hungry companies in Australia that are ready to access international markets, we will bring wealth back to Australia, we will create more jobs in Australia, and we will make our country as prosperous as it should be.

The fundamental point is that, as a government, we have to sell competition policy better; we have to sell the benefits of competition policy to the public; we need to focus on what it really means in terms of exports. You have economic neanderthals like the member for Oxley (Ms Hanson) and her entourage crossing the country saying that we need to stop the imports of pig meat. Yet people do not see that if we stop imports, we stop exports, and if we stop exports, we close down Australian jobs, like nothing anyone has ever seen. It is a simple equation. Competition policy means that we can create more export oriented jobs, and that means we have got jobs into the future in uncertain times.

The ACCC needs to focus more attention on selling to the Australian people the benefits of competition, the benefits of all the pain that we have gone through. The main challenge ahead in relation to local telephony, which I was hoping to get onto but I have not had the chance, is that one of the most costly pieces of infrastructure for small business is local telephony and yet, in an area such as that, the opportunity is going to be grand into the future. (Time expired)