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Wednesday, 24 May 1972
Page: 1956


Senator GREENWOOD (VictoriaAttorneyGeneral) - by leave - The Government's review of restrictive trade practices and monopolisation has proceeded to the stage where I am able to inform the Senate of a number of important conclusions that the Government has reached. In this statement I shall indicate, in some detail and in advance of the Bill that the Government proposes to introduce, the conclusions that have been reached. The review of this legislation has been thorough and comprehensive. In the light of it the Government proposes to make some changes of great

Importance and a number of modifications to provisions of the existing legislation, which will increase the effectiveness of that legislation. The net effect of all the changes will be both to strengthen the legislation and to widen its scope.

The Government recognises the impact that the changes it is proposing will have on the future development of this country. It has accordingly concluded that before a Bill is prepared this statement of its proposals should be made to Parliament so that there will be an appropriate opportunity for the proposals to be studied and fully debated. The proposals that I will be outlining in this statement provide for firstly, a widening of the scope of the existing provisions to deal with monopolisation so as to enable monopoly conditions to be fully investigated when there is reason to believe that those conditions are not operating in the public interest; secondly, mergers - including takeovers - that are likely to reduce competition to be subject to inquiry and restraint when this is desirable in the public interest; thirdly, the establishment of a Monopolies Commission which will be separate from and will supplement the work of the Trade Practices Tribunal; fourthly, stronger provisions for the examination of examinable agreements which are registrable and the examinable practice of inducing refusal to deal; and finally, a general tightening up of the legislation in a number of other respects.

Before proceeding to indicate the Government's proposal in detail, I propose to advert to the Government's philosophy in regard to restrictive trade practices and monopolisation. The Government believes today - as it has always done - 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. In 1962 when announcing proposals that became the foundation of our present legislation, Sir Garfield Barwick pointed to the need to ensure the existence of competitive conditions, which, as he said, tend to initiative, resourcefulness, productive efficiency, high output and fair and reasonable prices to the consumer. Sir Garfield went on to point out, however, 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 Act that was passed in 1965 accordingly provided for practices which are restrictive of competition to be examinable to ascertain whether they are contrary to the public interest, and where found to be contrary to that interest to be prohibited.

In its basic approach to the subject of restrictive trade practices and monopolisation, the Government still adheres to the philosophy I have just described. Indeed, while the 1965 legislation has not unnaturally been the subject of considerable comment in the light of experience, it has been clear that its philosophical foundation has had general acceptance. Let me put that philosophy now into its 1972 economic context. The greatest menace confronting the Australian economy today is inflation. Excessively rising wages have been highlighted, correctly, as contributing greatly to the inflationary trend and the Government has acted, within its powers, to try to alert community consciousness to the problem and to persuade wage-fixing tribunals and employers to act responsibly when confronted by excessive wage demands. The balanced decision of the Commonwealth Conciliation and Arbitration Commission in the national wage case gives ground for hope that some headway can be made in resisting the inflationary tide.

The proposals outlined in this statement are an earnest of the Government's intentions to attack the basic causes of inflation wherever they may be found. Restrictive practices and monopolisation contribute importantly to inflation. There is no question about that. A competitive environment keeps businessmen on their toes; encourages innovation and trying to do better than the other fellow, and, it should be emphasised, through making the automatic passing on of increased costs more difficult, discourages soft attitudes towards excessive wage demands. Conversely, where practices severely limiting competition prevail, the resulting market power is, in effect, a power to pass on to consumers, through increased prices, costs which would not in a more competitive situation have been incurred at all. In addition, restrictive practices and monopolisation can of course lead to high price levels through their effect on the efficiency of the industries concerned or through profit levels that are higher than they otherwise would be.

Among other things, therefore, these proposals give the lie to those who say that the Government's anti-inflationary policies are directed only at the wage earner. Of course it would be idle to pretend that effecting these proposals, in themselves, will have marked effects on the price level in the short run. Rather, these proposals are aimed at creating conditions conducive to a more efficient allocation of resources and to higher levels of productivity over the long haul, with consequential beneficial effects on trends in prices and living standards. Increasing productivity is the most painless way for the economy, taken as a w'-"">'" to slow inflation and this is a basic objective of these proposals.

Ihese proposals would, of course, complement the other measures which the Government has taken to improve the competitiveness and efficiency of operation of the economy. Honourable senators will recall that last year the trade practices legislation was amended to make the practice of resale price maintenance unlawful. Also, last year the Government set in hand a progressive review of the tariff, designed to ensure that the tariff rates on imports do not go beyond what is necessary to provide adequate protection for economic and efficient Australian production. Recently my colleague, the Minister for Trade and Industry (Mr Anthony), announced the steps the Government is taking to speed up this review. All of these measures and proposals have as their objective the more efficient operation and more effective development of our economy.

I referred earlier to the philosophy of the 1965 legislation. The questions that have arisen since the enactment of that legislation have related not to its philosophical foundation, but rather to the nature and effect of the particular provisions in the legislation. The main task of any legislation dealing with restrictive trade practices and monopolisation is to separate those practices that are against the public interest, so that they can be controlled, from those that are not. The for mulation of provisions to accomplish this task involves formidable problems particularly if, as is desirable, the task is to be carried out with due regard to the circumstances in which a particular practice operates but also with appropriate expedition.

The approach of the 1965 Act has been to provide for a system of case-by-case examination of agreements and practices within certain defined classes. These public interest examinations are conducted, in the first place, by the Commissioner of Trade Practices, who has the benefit, in the case of agreements, of the information in the Register of Trade Agreements. Where the Commissioner is of the opinion that an agreement or practice is contrary to the public interest, he is required to have consultations about the matter with the parties concerned. If those consultations do not result in satisfactory changes to suit the needs of the public interest the Commissioner is authorised to institute proceedings in the Trade Practices Tribunal, which then becomes responsible for determining, after a full investigation of the matter, whether the agreement or practice is in fact contrary to the public interest, and if so, for making appropriate orders to prevent its continuation. Under this casebycase approach the cardinal principle is that unless and until an agreement or practice has been considered and determined to be contrary to the public interest, it is not unlawful and may be continued without restraint.

The 1965 Act represented a big step forward in the control of restrictive practices and monopolisation in Australia. Its predecessor, the Australian Industries Preservation Act had proved ineffective partly because of difficulties of constitutional law, but also because the generality of the terms in which it was expressed had led to great uncertainty as to its application. The 1965 Act set out to cover only clearly defined classes of conduct and thus to reduce uncertainty to the minimum. But the Act had to be formulated without the benefit of reliable information on many aspects of the extent, the character and the effects of the practices being engaged in in Australia. By comparison, we are fortunate in 1972 in having a great deal of knowledge concerning these matters. We have the benefit of all the information in the Register of Trade Agreements, we have the benefit of the Commissioner's experience, covering consideration of many agreements and consultations with parties, and summarised in 4 annual reports that he has submitted. We have the benefit of knowing what in practice is involved in proceedings before the Trade Practices Tribunal, which, in a carefully reasoned decision, has determined that an agreement of considerable significance was contrary to the public interest. We now have, both in and out of government, expertise in this field that was almost non-existent before 1965. With this further knowledge and experience we are in a position to assess the appropriateness of the provisions in the 1965 legislation. We can see where changes can be made to improve the effectiveness of the existing provisions.

The 2 main conclusions that can be drawn at this stage are, firstly, that the Act does not go far enough in relation to the acquisition and use of dominant economic power, and, secondly, that the procedure for determining the public interest aspects of examinable agreements and practices needs to be reviewed to ensure that it is appropriate for all classes of such agreements and practices. I shall be elaborating on both these conclusions later in this statement. The first stage of the Government's review, which was instituted early in 1971, related to the practice known as resale price maintenance and, as honourable senators know, legislation prohibiting this practice was introduced and passed last year. The enactment of that legislation constituted a significant strengthening of the 1965 provisions, but the full impact of the abolition of this practice will not be felt until the Act is strengthened in other respects. The Senate will also recall that following the enactment of the resale price maintenance provisions, the High Court gave its decision in the case which has come to be known as the concrete pipes case. By that decision the High Court held substantial portions of the 1965 legislation to be invalid, but in so doing the High Court made it clear that the Commonwealth Parliament had adequate power under the so called corporations power of the Constitution to legislate with respect to restrictive trade practices and monopolies, in so far as corporations are involved.

And, it was in pursuance of the guidance thus given by the High Court with respect to the corporations power that the legislation presently operating, that is, the Restrictive Trade Practices Act 1971, was drafted. But, as was made clear when the Bill for that Act was introduced, it was intended as holding legislation only. It was intended as legislation to overcome the constitutional defects disclosed in the concrete pipes case, and to hold the position until the strengthening legislation now proposed could be passed. The Government's consideration of the provisions to be included in this strengthening legislation has, of course, taken account of the Commonwealth's constitutional powers as disclosed in the concrete pipes decision. For example, provisions relating to mergers, which in 1965 would have been regarded as being of doubtful constitutional validity, are now possible and have been included.

MONOPOLISATION

Mr Deputy President,when the Restrictive Trade Practices Bill 1971 was before the Senate certain amendments were moved to the provisions in its dealing with monopolisation. Those amendments were unsatisfactory and the Government refused to accept them. They would have provided offences for ill-defined forms of conduct and would have given rise to many questions of interpretation, and of their relationship to other provisions that relate to examinable practices. In refusing to accept the amendments, however, the Government indicated that it was giving full consideration to monoplisation in the course of the review of the legislation then in progress. The Government has now given this matter careful consideration. At the outset a basic question arises. Is it appropriate in Australia, having regard to the limited size of our economy, that we should prohibit, as is done in the United States of America, any deliberate acquisition or assertion of monopoly power? Or should we adhere to the alternative approach provided in our existing examinable practice of monopolisation, which is concerned only with certain kinds of abuses of monopoly power? For reasons that I shall mention shortly the Government has concluded that in present circumstances neither of these approaches is entirely satisfactory for the Australian economy and that the appropriate course is to adopt the desirable features of both approaches, as has been done in the United Kingdom.

Where economic power is concentrated in the hands of a few businesses in an industry, those businesses may not be subject to normal competitive pressures and in the absence of those pressures there is a possibility that the conduct of the businesses will be inimical to the public interest. Businesses in a dominant position in an industry may also be able to use that position to inhibit the growth of competition. On the other hand, concentration of power may be desirable in certain industries in order that economies of scale and other benefits may be realised. In a number of industries the size of our economy may not be sufficient to support more than one, or a very small number, of businesses that are efficient by overseas standards. For this reason, the Government believes that a drastic prohibition of monopolisation on a general basis as has been provided for in the United States of America would be inappropriate for this country.

The Government believes that the primary need is for the legislation to make provision for the control of abuses of monopoly power. But the Government also believes that the legislation should provide for particular acquisitions of monopoly power to be prevented if it appears after due inquiry they are likely, by reason of their anti-competitive effects, to be against the public interest. The Government has concluded moreover that monopolisation inquiries should not be confined, as they are by our existing legislation, to certain defined classes of conduct. It believes that the provisions should be in terms that are wide enough to cover all forms of abuse of monopoly power.

The responsibility for instituting monopolisation inquiries of the kind that the Government is proposing and for taking remedial action in the light of such inquiries will be a very important one. The Government has concluded that it is a responsibility that should rest with the Government. That is to say, monopolisation will cease to be dealt with as an examinable practice for which proceedings in the Trade Practices Tribunal may be instituted by the Commissioner of Trade Practices, and provision will be made instead for the Government to be able to refer monopolisation matters to an investigating body for inquiry and report back to the Government. The investigating body for this purpose will be a new monopolies commission. The monopolies commission will be constituted by members with a wide variety of experience and qualifications so as to ensure that the Government receives the best possible advice on these important matters. The commission will have a fulltime chairman, assisted by other members appointed on a part time basis.

The Monopolies Commission will be essentially an administrative body to advise the Government. While the Commission will to a large extent control its own procedures, those procedures will inevitably differ in certain basic respects from the procedures of the Trade Practices Tribunal. In the Trade Practices Tribunal the Commissioner of Trade Practices initiates proceedings and he is thereafter a party to the proceedings, which are adversary in character. That is to say, the Commissioner and the parties to the agreement or practice in question are opposed to one another and it is for the Tribunal to make the necessary determination. This procedure will not be appropriate for the proposed Monopolies Commission because its role will be to inquire and report rather than to determine. The Monopolies Commission will be left free to determine its own working procedures. It will be able to gather its own information, call for written submissions or hold public hearings as it may think appropriate. The Commission will be provided with appropriate staff to enable it to conduct its inquiries effectively. The Government believes that the type of inquiry that the Monopolies Commission will conduct will be more appropriate for the wide-ranging matters that will fall for its consideration, and also more expeditious than the adversary type of procedure. Expedition in such big inquiries is of course a most important consideration. The matters that will be able to be referred to the Monopolies Commission will not be closely defined. The Government will be able to refer to the Commission any question whether monopoly conditions are operating in a manner that is contrary to the public interest. Amongst other things, it will be possible in appropriate circumstances to have the Commission consider practices such as exclusive dealing, full-line forcing and refusal to supply that may be operating in an industry in which monopoly conditions prevail. For the purpose of the legislation monopoly conditions will exist if one third of the relevant market is concentrated in the hands of a single business or a number of businesses which are acting in such a way as to restrict competition.

In considering questions of the public interest in relation to monopolisation the Monopolies Commission will bc required to have regard to relevant considerations generally along the lines of those that the Trade Practices Tribunal is at present required by section 50 to take into account in the course of its inquiries, although the provisions of that section will need to be adapted to render them appropriate for the type of inquiry that the Commission will undertake. The Commission will be required to report whether the monopoly conditions do in fact exist and whether they are operating, or may be expected to operate, contrary to the public interest. Where the Commission reports that monopoly conditions are operating or may be expected to operate contrary to the public interest, it will be required to report its conclusions and also to recommend action to remedy the situation disclosed in its report. It is proposed that the report will, upon receipt by the Minister, be tabled in Parliament, subject to the omission of information which, by reason of its confidential character, would be likely substantially to damage legitimate business interests.

The Government notes that in the relevant United Kingdom legislation there are wide powers under which action can be taken following upon consideration of a report of the Commission. It is proposed that the Government will be empowered to take certain action along the lines available in the United Kingdom by way of orders subject to parliamentary supervision. Where, for example, the Commission has identified a particular type of practice or arrangement which is operating against the public interest, the Government will be able by such an order to render that practice or arrangement unlawful. In form an order will be similar to a restraining order which the Trade Practices Tribunal in monopolisation cases is already empowered to make. In some circumstances, however, satisfactory remedial action may necessitate more than the mere restraint of particular practices and arrangements. Positive action to effect changes may be called for. The nature of such action will be apparent only in the light of a particular report, and specific powers cannot therefore be conferred in advance. In those matters it will be appropriate for the Government to decide on any formal remedial action that should be taken.

I think I should add that experience under similar provisions in the United Kingdom has shown that resort to formal orders to remedy unsatisfactory situations disclosed by reports of the Monopolies Commission is seldom necessary. In most cases appropriate remedial action is taken as a result of consultations with the Government. But against the possibility that such consultations may not always prove effective the legislation will need to provide for the making of formal orders. A breach of a formal order will be restrainable by an injunction and will give rise to a liability for damages.

MERGERS

A great many of the mergers of business enterprises which take place in this country do not operate against the public interest. Some may result in positive advantages in the form of economies of scale and more efficient utilisation of resources. Others may have no effect one way or another on the public interest. But mergers do tend to result in greater concentration of economic power and they can therefore in particular instances lead to an undesirable lessening of competition. It is with these mergers, and these alone, that the Government is concerned in the context of the proposals I am outlining in this statement. The Government has concluded that if there is reason to believe that the lessening of competition likely to result from a merger will be detrimental to the public interest, it will be appropriate for the likely effects of the merger on the public interest to be examined in depth and if necessary for the merger to be stopped. In such circumstances it will be better to prevent the reduction of competition that would result from the merger than to have to deal later with possible abuses of monopoly power that may result from it. The Government's present proposals accordingly provide for the inclusion in the legislation of provisions which will enable mergers to be examined on this selective basis.

The proposals are not concerned with overseas investment as such. The issues that are raised by such investment are canvassed in the Treasury paper on overseas investment in Australia which has been tabled by my colleague, the Treasurer (Mr Snedden), and the matter is under consideration by the Government. However, the proposed provisions will apply equally to Australian-owned companies and overseas-owned companies. Under these provisions the Monopolies Commission will be empowered to consider the public interest aspect of merger proposals referred to it by the Government. The Government will be empowered to refer a merger that would result in or accentuate monopoly conditions defined in the manner I have already indicated. The Government will also be empowered to refer a merger in which the net value of the assets being taken over exceeds $5m. The Government will thus be able to refer to the Monopolies Commission not only a merger between competing enterprises but also a significant merger between enterprises at different levels of production or distribution or in different lines of business. Such a merger can sometimes result in undesirable reduction of competition even though it does not create or accentuate monopoly conditions, and it is desirable therefore that it should be possible to subject it to scrutiny by the Monopolies Commission.

The Government proposes that a merger will be liable to be referred at any time within 3 months of notification of it having been given to the Government or of the making of a public announcement concerning it. The Government does not propose that there should be a system under which all proposed mergers would need to be formally notified or registered. Such a system would not accord with the Government's view that only selected mergers of particular concern will need to be referred to the Commission. Where the Government is considering whether it should refer a particular merger for inquiry it will consult the parties to the merger with a view to obtaining all relevant information as quickly as possible.

Inquiries by the Monopolies Commission into mergers will be similar to inquiries into monopolisation. In considering whether a merger is likely to operate to the detriment of the public interest the Commission will be required to have regard to the likely consequence of the reduction of competition that will be involved but it will also have regard to benefits expected to flow from the merger. If the Monopolies Commission reports that in its opinion a merger is likely to operate against the public interest and the merger has not already been consummated the Government will be able by order to prohibit the merger from taking place. Such an order will be subject to parliamentary approval. If the merger has already been consummated the Government will be able to require the enterprise concerned to take appropriate divestiture action. An order requiring such divestiture action will have to be approved by both Houses of Parliament before it takes effect. It is proposed to include in the legislation a power which will enable the Government to prohibit a merger from proceeding while it is under consideration by the Monopolies Commission. I would not expect that a need to exercise this power would often arise. But the power should be available so that it can be used when necessary to prevent action which may prejudice an inquiry or impede the taking of remedial action after the inquiry. Quite apart from this power I would expect that parties to merger proposals will often wish to know the outcome of the Commission's inquiry before going ahead with their proposals.

The Government is conscious of the need in the interests of all persons concerned in mergers to keep uncertainty to the minimum. Merger inquiries by the Monopolies Commission will accordingly be required to be completed within as short a period as is practicable. In the United Kingdom such an inquiry must generally be completed within 6 months and in practice inquiries have often been completed in much shorter periods. It is proposed that our legislation will contain requirements in this regard similar to those in the United Kingdom legislation. The Government also proposes to establish administrative arrangements under which the parties to a proposed merger that has been publicly announced may seek and where practicable obtain a speedy intimation as to whether the merger will be referred to the Monopolies Commission. Such intimations will not be possible in respect of mergers that have not been publicly announced because it will not in such cases be possible to have regard to the views of all persons concerned. Nor will it be possible to provide for intimations to be given that would prevent a reference being made if the Government were subsequently to receive relevant information not supplied to it before the intimation was given. In practice, however, the system I have described for the giving of these intimations, which will be similar to one that has operated for some years in the United Kingdom, should do much to keep uncertainty to the minimum.

ENQUIRIES INTO COMMONLYADOPTED PRACTICES

The main functions of the Monopolies Commission will be those that I have mentioned, that is, to conduct enquiries into particular monopoly conditions and proposed mergers. However, the experience that the Commission obtains in these inquiries will be very considerable, and there could be occasions when it would be most advantageous for the Government to take advantage of this experience by arranging for the Commission to undertake broader enquiries. In the United Kingdom the Government has obtained the advice of its Monopolies Commission in this way in regard to several matters. I mention in particular the Commission's report in 1955 on collective discrimination, which was the basis of legislation the following year providing for the registration and examination of collective agreements. The Government proposes that the Monopolies Commission in Australia will be empowered, on request from the Government, to undertake similar inquiries into commonly-adopted practices. The purpose of these inquiries will be to assist in determining the need for and nature of specific legislation with respect to practices that are common in industry.

EXAMINABLE AGREEMENTS AND EXAMINABLE PRACTICES

The 1965 Act adopted the approach that certain agreements and practices should be examinable to ascertain whether or not they are contrary to the public interest. This approach was based on the recognition that not all agreements or practices restricting competition are against the public interest and that the determination of the question of whether or not a particular agreement or practice was against the public interest could only be made after an inquiry into its operation in the relevant industry.

To this approach the Government proposes to adhere. It proposes however to make important changes which will reflect the conclusions which are to be drawn from our experience of the legislation.

Existing Procedures

To appreciate the nature of the changes the Government proposes with respect to the agreements and practices which are at present subject to the scrutiny of the Commissioner, it is desirable for me to outline the existing procedures. I have already mentioned that the Act at present adopts a case-by-case approach to the examination of agreements and practices to determine whether they are contrary to the public interest. Unless and until an agreement or practice has been considered and determined by the Trade Practices Tribunal to be contrary to the public interest it is not unlawful and may be continued without restraint. The agreements and practices which are subject to such examination are referred to by the Act as examinable agreements and examinable practices. I shall indicate the nature of these agreements and practices shortly.

All proceedings in the Trade Practices Tribunal to obtain a public interest determination are initiated by the Commissioner of Trade Practices. Before he initiates such proceedings in respect of an agreement or practice he is required to examine the agreement or practice with a view to forming an opinion whether it is contrary to the public interest. If his opinion is that it is contrary to the public interest, he is first required to have consultations about the matter with the parties concerned. If those consultations do not result in changes which render proceedings before the Tribunal unnecessary, the Commissioner is then authorised to institute proceedings to obtain a public interest determination by the Tribunal. If the Tribunal determines that an agreement or practice is contrary to the public interest, it may make appropriate orders to prevent its continuance.

In considering whether an examinable agreement or examinable practice is contrary to the public interest the Trade Practices Tribunal is required to make a balancing judgment in accordance with section SO. On the one hand that section requires the Tribunal to take as the basis of its consideration the principle that the preservation and encouragement of competition are desirable in the public interest. On the other hand the Tribunal must take into account beneficial effects that might be based on any of the matters set out in sub-section (2) of the section. Sub-section (2) sets out a large range of matters, with the consequence that provision is made for inquiries of a particularly wide-ranging character, which tend to be lengthy. Examinable agreements are defined in section 35. Shortly expressed these are agreements between businesses which are or should be competing with each other. They are anticompetitive agreements by which the parties agree amongst themselves that in conducting their businesses they will accept restrictions of one or more of the kinds specified 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 covered if they are agreed 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.

The 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 to which I have already referred. It will be appreciated that under the procedures I have outlined not all examinable agreements and examinable practices have to 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 and in respect of which the compulsory consultation procedure has not resulted in abandonment or in a variation which has made the agreement or practice acceptable in the public interest. The Act provides for the keeping of a Register of Trade Agreements. The purpose of this Register is to provide the Commissioner with most of the information he needs to perform his functions. All examinable agreements have to be registered except those exclusively concerned with what are commonly referred to as pure' services. The agreements that are exempted from registration on this ground are set out in sub-section (2) of section 41. No practices as opposed to agreements have to be registered.

Whether These Procedures Appropriate

We are now in a position in which we can assess in the light of experience the appropriateness of the procedures I have outlined for examinable agreements and examinable practices. We now have the benefit of the information from the Register of Trade Agreements. We know how many registrable agreements there are and the nature of the restrictions in them. We have the benefit of 4 Annual Reports by the Commissioner of Trade Practices and a decision by the Trade Practices Tribunal with respect to one agreement. We also have the benefit of further experience under comparable legislation of other countries with respect to such agreements. The tables on page 15 of the Commissioner's Fourth Annual Report disclose that the total number of registered agreements as at 30th June 1971 was 13,276. The agreements which tend to have the greatest impact on the competitive climate of the economy are those which are mainly horizontal in their operation, that is, agreements between groups of manufacturers, groups of wholesalers or between groups of retailers. As at 30th June 1971, there were some 3,311 of these horizontal agreements.

The Government has concluded that many of the agreements on the Register of Trade Agreements are likely to be found on examination to be contrary to the public interest. The Government has reached this conclusion on the information that is now available to it concerning these agreements in Australia and on the experience of other countries with respect to such agreements. 1 mention in particular the experience in the United Kingdom with respect to such agreements. In that country some 2,700 agreements were registered. In only 10 cases in which their public interest implications were examined by the Restrictive Practices Court were agreements found to be compatible with the public interest. The agreements involved in 22 contested cases were determined to be contrary to the public interest, and in the light of those decisions attempts to justify many other agreements on the Register were abandoned. In Australia our experience with respect to such agreements is of course more limited. However, the Government now has information available to it as to the number of the agreements that are involved and the nature of the restrictions in them. The only such agreement that has been considered by the Trade Practices Tribunal was found to be contrary to the public interest.

The Government has also concluded that, on the basis of experience, the present examinable practice of inducing a person to refuse to deal - which is at present covered by paragraphs (e), (f) and (g) of sub-section (1) of section 36 - is likely in most instances to be contrary to the public interest, lt is a practice which tends to be engaged in in order to force persons to become parties to or to comply with examinable agreements. The Government has accordingly 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. For the other examinable agreements, that is those relating exclusively to 'pure* services, and the examinable practices of obtaining discriminatory terms and forcing another person's product, the same need for a stronger approach does not exist, but there is a need for certain changes to be made to speed up the action that has to be taken before the institution of proceedings in the Tribunal. In particular, changes are needed to the provisions requiring the Commissioner to form bis own public interest opinion and to engage in consultations. As I have mentioned earlier, the Government proposes to make special provision for monopolisation inquiries before a new Monopolies Commission and in consequence to omit the existing provisions which provide for monopolisation to be dealt with as an examinable practice.

Proposals for registrable agreements and practice of inducing refusal to deal.

At the outset I should point out that some of the agreements that are at present on the register are thought to be probably not subject to registration. Particulars of these agreements have been furnished to the Commissioner for registration in order to avoid any possible liability, without resolving the legal question of whether they are in fact subject to registration. The fact that the agreements have been placed on the register will not operate to their prejudice under the present proposals. Their liability to be referred to the Tribunal under the stronger provisions will depend on whether the Commissioner, after due consideration, has reason to believe that they are in fact subject to registration. The new procedure will provide for all agreements and practices to which it applies to be brought forward for examination by the Trade Practices Tribunal. There will be no need for the Commissioner to form a prior opinion of his own that such an agreement or practice is contrary to the public interest; nor will the Commissioner be required to engage in any consultations with the parties to the agreements. As it will be the Commissioner's function to institute proceedings in respect of all of these agreements and practices, his discretion in regard to the institution of such proceedings will be confined to the order in which he brings particular agreements and practices forward for consideration. Some agreements and practices are, of course, of much greater significance than others, and considerations such as this will be proper matters for the Commissioner to take into account when he is deciding which ones should be brought forward first.

The first step in proceedings before the Tribunal will be for the Commissioner to establish the existence of the agreement or practice in question and that it is an agreement or practice to which the new procedure applies. When the Commissioner has done this the Tribunal will have power to restrain the continuance of the agreement or practice unless the parties to it establish that it is not contrary to the public interest. In order to do this the parties will have to establish the existence of one or other of several grounds specified in the legislation. These grounds will need to be drafted with precision, but it is proposed that they be to the following effect:

(a)   the agreement or practice confers specific and substantial benefits or advantages on purchasers, consumers or users;

(b)   the agreement or practice protects the public against physical injury;

(c)   the agreement or practice enables the parties to it to compete more effectively against larger businesses which are not parties to the agreement or practice;

(d)   the agreement or practice is necessary to support another agreement or practice that is either not examinable or if examinable has been found to be compatible with the public interest; or that

(e)   the agreement or practice does not restrict or discourage competition in Australia to any material degree.

If one or more of these grounds is established the Tribunal will need, in addition, to be satisfied that the agreement or practice would not result in a preponderant detriment to the public interest. These grounds will make proper provision for those agreements or practices that either have beneficial effects or have a negligible impact one way or the other on the public interest. But they will ensure that other agreements covered by the new procedure are identified as speedily as possible and thereafter discontinued. The matters which sub-section (5.) of section 35 at present requires to be disregarded in determining whether an agreement is an examinable agreement will, of course, continue to be disregarded for this purpose. Additionally, it will be provided that agreements which are exclusively concerned with the export trade will be disregarded.

Under the new procedure the ambit of an inquiry by the Tribunal will be restricted to appropriate matters and this will assist materially in preventing inquiries from being unnecessarily lengthy. Moreover, by requiring all of the agreements to which the new procedure applies to be examined by the Trade Practices Tribunal we will ensure that there will be within a relatively short period of time a number of decisions of the Tribunal which will afford guidance to the parties to other agreements and practices. It necessary, the number of members of the Tribunal and the staff of the Commissioner will be increased. Parties will have this guidance when considering whether they should attempt to establish in proceedings before the Tribunal that their agreements or practices are compatible with the public interest and whether they should enter into new agreements. On the basis of the United Kingdom experience it can reasonably be expected that the parties to a number of such agreements and practices will conclude that such proceedings would not be worthwhile and they will choose instead to terminate the agreements or practices.

There are 2 respects in which it is proposed to widen the class of agreements which are subject to examination. In each respect this widening will ensure that the class of examinable agreements includes agreements which really have the same objectives as those already covered. If these new examinable agreements are also registrable they will be subject to the new procedure I have outlined. In the first place the class of examinable agreements will be extended to cover what are commonly called price information agreements. Experience both here and in other countries 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 the 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. Price information agreements were covered by the United Kingdom's restrictive trade practices legislation in 1968 and the Government has concluded that they should be treated under our proposed legislation as if they were agreements for price restrictions. The other widening of the class of examinable agreements will cover agreements by which the parties undertake to make recommendations to each other in regard to matters of the kind mentioned in sub-section (2) of section 35. An agreement to make recommendations to each other in regard to such matters will normally achieve the same result as an agreement by which the parties agree to accept restrictions in regard to those matters. In some cases, an agreement to make such recommendations might in fact have implicit in it an understanding that the parties will conform to the recommendations, and in that event it would be covered already by reason of the definition of 'agreement' in section 138. But experience has shown that the position in regard to recommendation agreements is not as satisfactory as it might be and the Government accordingly now proposes to make it clear that they are covered.

Proposals for other examinable agreements and examinable practices

Those examinable agreements and examinable practices which are not to be subject to the now approach I have described will continue to be subject to the public interest test provided in section 50- However, 2 changes are proposed in regard to the steps that have to be taken before proceedings in respect of such an agreement or practice are instituted in the Tribunal. One of these changes will be to dispense with the need for the Commissioner of Trade Practices to form his own opinion that the agreement or practice is contrary to the public interest. The formation of such an opinion necessarily involves a good deal of time, and in the long run it is still necessary for the Tribunal to double up on the function and reach its own conclusions on the matter. The Government accordingly proposes to empower the Commissioner to institute proceedings in respect of such an agreement or practice if it appears to him to be desirable that the question whether the agreement or practice is contrary to the public interest be determined by the Tribunal.

The other change with respect to such agreements is that, as in the case of the agreements and practices that are to be subject to the stronger approach, the provisions in section 48 for statutory consultations with the parties before institution of proceedings will be omitted. The provisions for these statutory consultations have given rise to difficulties, particularly when arrangements reached in the consultations have not subsequently been observed. The Government has concluded that the more appropriate course is to remove the statutory obligations for the Commissioner to carry on these consultations and to leave it to the Commissioner to decide in the circumstances of particular cases whether and to what extent communication with the parties is desirable before proceedings are instituted.

CONSTITUTIONAL SCOPE OF LEGISLATION

It will be recalled that the present Act was passed as a holding measure following the decision of the High Court in the case known as the Concrete Pipes Case. By that decision the High Court held that, due to the way in which the 1965 Act had sought to use all the constitutional powers believed to be available to sustain the legislation, it was open to legal objection. When introducing the Bill for the present Act I pointed out that the provisions in it, other than those relating to overseas cargo shipping, were based entirely on the corporations power. I mentioned that this exclusive reliance on the corporations power was to facilitate the drafting and thereby to avoid undesirable delay in the introduction of the Bill. However, I went on to say that provisions drawing upon other powers had been deferred for consideration in connection with the proposed strengthening legislation. In this connection I mentioned particularly the reference of power from Tasmania. Consistently with what I indicated on that occasion the Government proposes that the new legislation will not be based entirely on the corporations power, but will draw on such other powers as are available. This will be done in a way that will not give rise to the defects the High Court found to exist in the 1965 Act.

OVERSEAS CARGO SHIPPING PROVISIONS

Overseas cargo shipping is the subject of separate provisions in Part XII of the Act, which is administered by my colleague, the Minister for Trade and Industry (Mr

Anthony). My colleague has already indicated that certain changes will be made to these provisions. The statement I have made has no bearing on the overseas cargo shipping provisions.

Mr Acting Deputy President,the changes 1 have outlined in this statement are being proposed after a most thorough and painstaking review of the existing legislation, in the light of experience since that legislation was enacted. The proposals also take account of the guidance the High Court has recently given as to the Commonwealth's powers to legislate in this field in pursuance of the corporations power. Many proposals of importance are involved. The Government believes that the changes will greatly improve the effectiveness of the legislation - that they will do much to preserve and encourage competition and thereby benefit our free enterprise system and our way of life generally. Tt is not desirable, however, that changes of this nature should be made without first affording the Parliament and interested persons generally opportunity to study the proposals and to make their views known. This statement will serve the purpose of making the Government's proposals known. The Bill to implement, the proposals will be introduced as soon as practicable after there has been reasonable opportunity for them to be studied and assessed.

I move:

That the Senate take note of the statement.

Debate interrupted.







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