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Wednesday, 14 August 1974
Page: 914


Senator GREENWOOD (Victoria) -I move:

Leave out sub-clauses ( I ), (2) and (3), substitute the following sub-clauses:

(   I ) A contract in restraint of trade or commerce, whether made before or after the commencement of this sub-section, is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation but nothing in this sub-section renders unenforceable any provision in such a contract that is not in restraint of trade or commerce.

(2   ) A corporation shall not-

(a)   make a contract or arrangement, or enter into an understanding, in restraint of trade or commerce; or

(b)   give effect to a contract; arrangement or understanding that is in restraint of trade or commerce, whether the contract or arrangement was made or the understanding was entered into before or after the commencement of this sub-section, but nothing in this sub-section prevents a corporation enforcing or purporting to enforce any provision in a contract that is not in restraint of trade or commerce.

(3)   Subject to sub-section (3a), a contract, arrangement or understanding is not in restraint of trade or commerce for the purposes of this Act unless the restraint has or is likely to have a significant effect on competition between the parties to the contract, arrangement or understanding, or on competition between those parties or any of them, and other persons. (3a) A contract, arrangement or understanding fixing or controlling, or providing for the fixing or controlling of, the price for, or any discount, allowance or rebate in relation to, any goods or services supplied by the parties to the contract, arrangement or understanding, or by any of them, in competition, with each other, to persons not being parties to the contract, arrangement or understanding is in restraint of trade or commerce for the purposes of this Act unless the restraint has such a slight effect on competition between the parties to the contract, arrangement or understanding and on competition between those parties, or any of them, and other persons as to be insignificant '.

The amendment which the Opposition moves to clause 45 is designed to ameliorate the severity with which this clause would operate without some guidelines as to how it is to be interpreted. We commence, of course, in our examination of this clause with the 6 provisions which constitute the broad prohibitions which are the meat of this

Bill. Clause 45 as it stands at the moment provides in sub-clause ( 1 ) as follows:

A contract in restraint of trade or commerce that was made before the commencement of this sub-section is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation.

Sub-clause (2) states:

A corporation shall not-

(a)   make a contract or arrangement, or enter into an understanding, in restraint of trade or commerce; or

(b)   give effect to a contract, arrangement or undertaking that is in restraint of trade or commerce, whether the contract or arrangement was made or the understanding was entered into before or after the commencement of this sub-section.

So there are 2 provisions which generally indicate what are the comprehensive words of the prohibition. It might be said that this is the general catch-all provision with enormously wide ramifications. We seek initially to clarify a position which is on the threshold. Suppose there is an agreement of many provisions of many facets and one of those provisions is in restraint of trade and therefore is unenforceable or under proposed sub-section (2) is generally to be regarded as unlawful. What is to be the effect of that unenforceable provision or that unlawful provision upon all the other provisions of the agreement? For example, to use the customary type of situation in which restraint of trade has been examined in the courts up until now, if a person sells his business, receives a very considerable sum and agrees that for a period of, say, 5 years after the sale he will not carry on or enter into a similar business within, say, one mile of the place where he previously conducted his business, it may be that that is a clause which is in restraint of trade. But does that mean that all the other parts of the agreement are declared unenforceable or unlawful? Does it mean that the parties have to be put back in the position they were in before the contract started?

What is the general ability of the courts to sever the part of the contract which is bad from the part of the contract which is not contaminated? Is the whole contract unenforceable? Is the whole contract unlawful? These may seem to be lawyers' questions, but they are questions of immense practical importance to persons who may find themselves in a predicament. The Opposition regards both these clauses as unclear as to what the consequence will be. There is no doubt that a person who is affected could take his case to court and the courts would be able to lay down a rule. But that is expensive and it may be disastrous for the first person who has to go to the court to have the matter clarified. Therefore, we propose that the matter should be made quite clear. The purpose of inserting new sub-clauses ( 1 ) and (2) is to overcome that problem. Therefore, I have moved to leave out sub-clause ( 1 ) and substitute the following sub-clause:

(   1 ) A contract in restraint of trade or commerce, whether made before or after the commencement of this sub-section, is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation but nothing in this sub-section renders unenforceable any provision in such a contract that is not in restraint of trade or commerce.

We think that makes perfectly clear what the result will be. The next amendment I have moved to clause 45 is in relation to sub-clause (2) . I have moved to leave out sub-clause (2) and substitute the following sub-clause:

(2)   A corporation shall not-

(a)   make a contract or arrangement, or enter into an understanding, in restraint of trade or commerce; or

(b)   give effect to a contract; arrangement or understanding that is in restraint of trade or commerce, whether the contract or arrangement was made or the understanding was entered into before or after the commencement of this sub-section, but nothing in this sub-section prevents a corporation enforcing or purporting to enforce any provision in a contract that is not in restraint of trade or commerce.

The Opposition's amendment in relation to those 2 sub-clauses is designed to clarify what is not clear. We suggest to the Senate that this is a tidying up provision which will be of assistance to those who have to work under the restraint which this legislation imposes. The purpose of the third amendment to clause 45 is to provide that contracts will not be in restraint of trade unless the restraint is likely to have a significant effect on competition. In this case I believe that there is a very clear difference not only in emphasis but also in effect between what is proposed by the Government and by the Opposition. I invite the Senate to look at what is contained in clause 45 (3) of the Bill. It states:

A contract, arrangement or understanding is not in restraint of trade or commerce Tor the purposes of this Act if the restraint has such a slight effect on competition between the parties to the contract, arrangement or understanding and on competition between those parties, or any of them, and other persons as to be insignificant.

The crucial words are: 'if the restraint has such a slight effect on competition . . . as to be insignificant'. The Opposition believes that that is a cumbersome, unsure and uncertain way of expressing what we are concerned to overcome. We believe that a contract in restraint of trade should not be regarded as unenforceable or unlawful unless it does have a significant effect on competition. That is the way the clause should be expressed. If the arrangement that is being entered into does not really affect competition or have a significant effect on competition, why should it be regarded as unlawful? Why should not the basic freedom of contract which is the lifeblood of our free enterprise system be able to operate as the parties to the agreement intend it to operate? If it is to be regarded as unlawful, it is unlawful because it does have a significant effect on competition, and that is clear. We believe that what we propose is a much better provision than the one which is proposed by the Government.

However, we recognise that there is a particular type of agreement in respect of which a different stance may be adopted. We have acknowledged from our reading of the reports of the Commissioner of Trade Practices presented under this legislation which the Government has so unjustly categorised as being so ineffectual that price fixing agreements are agreements which can virtually never be sustained in the public interest. The Commissioner's work in this area, I believe, has had an enormous impact throughout the business community. As a result of that impact, as far as I can understand, those many people who and organisations which have made representations to the Opposition, that the case for price fixing agreements in preference to the benefits which competition can provide cannot be sustained in the present economic climate. I believe that is one of the tremendous achievements which the pre-existing trade practices legislation has to its credit.

Therefore the second of the amendments which we have moved to this clause is designed to ensure that these price fixing agreements will be assumed to be in restraint of trade or commerce and will be declared by the legislation to be in restraint of trade or commerce and therefore unenforceable or prohibited unless they have such a slight effect on competition as to be insignificant. We keep to that sort of language which has been used. That is the purpose of the amendments which have been moved by the Government. We do not believe that the socalled de minimus provision which is to be applied in regard to price fixing agreements ought to be the general provision which applies to all agreements which are alleged to be in restraint of trade. There ought to be some guide as to what are agreements in restraint of trade. After all, this is what happened in America and the courts in America have brought down qualifications and refinements or what is called, I understand, the rule of reason', so that only certain types of contracts in restraint of trade are regarded as unenforceable or unlawful. We discussed this in the second reading debate.I do not know why the Government did not introduce into the Bill itself some guidelines as to what constitutes an agreement in restraint of trade. That is what happened in America but apparently it is not to be given to us in this Bill unless the Senate accepts some of the amendments which the Opposition is proposing. We believe that if we are going to have this type of legislation then as far as possible if ought to provide some guidelines or some certainty to those who have to operate under the legislation. They should not be left to make their own judgment according to the advice of the solicitors whom they have at their side every time they enter into an arrangement, which seems to be the position that many of the corporations are contemplating in the near future. For those reasons we have offered the amendments which have been moved.

There are 2 basic reasons. The first 2 clauses relate to severability and the other two indicate that a contract, arrangement or understanding is to be considered as being in restraint of trade only it it does not have and insignificant effect on competition and in the case of a price fixing arrangement only if it has a significant effect in the terms in which the Government has proposed.







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