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Thursday, 26 November 2009
Page: 8957

Senator XENOPHON (9:59 AM) —I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

Senator XENOPHON —I table the explanatory memorandum and seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

I am very pleased to introduce the Trade Practices Amendment (Material Lessening of Competition—Richmond Amendment) Bill 2009, or Richmond Amendment.

This Bill seeks to strengthen the Trade Practices Act to protect competition in Australia by tightening the test for proposed mergers or acquisitions, and to prevent so-called ‘creeping acquisitions’.

The Richmond Amendment takes its name from the Adelaide suburb of West Richmond, where, for the last twenty years, William and Samira Fares have owned and operated their independent United service station.

Now, they face losing their business because Woolworths has sought to open a service station of their own, right next door.

Under current laws, Woolworths can use their deep pockets to offer fuel at prices that are below cost or which undercut hard working independent petrol retailers like the Fares. Woolworths can even choose to operate their station at a loss, knowing that once the Fares are out of business, Woolies can once again raise their prices.

With no local competition to force Woolies to moderate their prices, residents of West Richmond will end up paying at the pump for Australia’s lax competition laws.

The Fares are not alone. Across the country, in all sectors, we are seeing large corporations increasing their market share and using their power to push smaller, independent operators out.

This means a bad deal for small businesses, and a bad deal for consumers.

I have previously spoken about the proposed Woolworths/Danks takeover, the Caltex/Mobil takeover, the Westpac/St George takeover and the Commonwealth/BankWest takeover. The ACCC has allowed both the Woolworths/Danks and Westpac/St George takeovers to go ahead, effectively saying that these deals will not substantially reduce competition in their respective sectors.

We now know that the recent spate of acquisitions by the four major banks has stifled competition in the Australian banking sector to the detriment of consumers. These banking acquisitions have been allowed to occur under our current weak anti-merger laws.

I note, however, that the ACCC did request that Woolworths and Danks enter into a legal undertaking to try and restrain a Woolworths-owned Danks from discriminating between the independents that it supplies. This undertaking does not however prevent Woolworths from discriminating on wholesale prices between its own Woolworths branded hardware stores and the independents that a Woolworths Danks will supply.

The Mobil/Caltex takeover is still under review.

In these cases, the ACCC applies the ‘substantial lessening of competition’ test to determine if a proposed merger or acquisition will have the effect of lessening competition in a market.

Unfortunately, the threshold included in the test is far too onerous and high.

Using this test, the ACCC approves approximately 97 percent of mergers it considers.

This has resulted in Australia having some of the most highly concentrated markets in the world.

In Australia, Woolworths and Coles together own approximately 44 percent of the petrol market, and 80 percent of the dry packaged grocery market. In petrol, Woolworths, Coles and the major oil companies control 93% of the retail petrol market.

Under the Richmond Amendment, a new test will be applied to prohibit any acquisition or merger that will have the effect, or is likely to have the effect, of ‘materially’ lessening competition in a market.

This Amendment also seeks to limit creeping acquisitions, where large corporations get around competition law by acquiring assets in a piecemeal manner. Individually, these acquisitions may not substantially lessen competition, but over time may lead to a larger market share and a reduction in competition.

In May 2009, the then Minister for Competition Policy and Consumer Affairs, the Hon. Chris Bowen, outlined a proposal for dealing with creeping acquisitions.

With all due respect to the Government, this proposal does not go far enough.

It states that a corporation would have to have a substantial market power before it would be prevented from acquiring assets that would, or would be likely to, enhance that corporation’s market power.

The Act states that, in order for a corporation to be defined as having a ‘substantial market power’, that corporation must prove it has the ability to raise prices without losing business to its rivals.

This effectively means that a corporation must have a monopoly, or near monopoly, of a market before it is prohibited by the Government’s proposal.

Instead, the Richmond Amendment would prevent any corporations with a ‘substantial market share’ from engaging in the practice of creeping acquisitions. In effect, the Amendment would put restraints on corporations before they ever reach the stage of becoming a monopoly, the stage where the Government’s proposal would finally come into effect.

For small business owners like the Fares, these changes could make all the difference. They would prevent Woolworths from acquiring the land next door to build their service station, and from continuing to do this in other areas, as a way of gradually increasing their already-powerful market share.

This amendment levels the playing field, and gives small businesses the protection they need from the anti-competitive acquisition strategies of the large and powerful corporations that dominate our markets.

We need to enhance competition in Australia. We have already seen one outcome of market dominance with OECD data listing Australia’s grocery prices among the fastest growing in the developed world.

I would like to thank Associate Professor Frank Zumbo from the University of New South Wales for his assistance with the drafting of the Richmond Amendment.

Competition is important, for small businesses who deserve a fair go, and for consumers who deserve a fair deal.

Senator XENOPHON —I seek leave to continue my remarks later.

Leave granted; debate adjourned.