Family First Additional Comments
Provisions of the Trade Practices Legislation
Amendment Bill (No.1) 2007
FAMILY FIRST is convinced that the Trade Practices Act
needs to be strengthened to restore fair trading and competition to Australian
markets. There is a question as to whether the Government's proposed changes
are adequate.
FAMILY FIRST introduced its Trade
Practices Amendment (Predatory Pricing) Bill 2007 because of a concern that
anti-competitive conduct like predatory pricing can drive small businesses out
of the market and that small businesses are particularly vulnerable because of
their limited resources.
Fair competition will help to
ensure the lowest prices for families.
Small business has been
waiting for the Government's Trade Practices Legislation Amendment Bill
(No.1) 2007 for more than three years
since the Senate Economics References Committee recommended action.
The Government's Trade
Practices Legislation Amendment Bill (No.1) 2007
has support from many, but not all small businesses. There is also concern and
reluctant support from many groups representing big businesses and those
involved in trade practices law.
The Fair Trading Coalition
representing 30 small business member groups states that, while some of its
members want section 46 strengthened further, it:
... supports amendments to the Trade
Practices Act which seek to strengthen and clarify the operation of
sections 46 and 51AC [and that] ... predatory behaviour by large businesses is a
matter of significant concern to the Members of the Fair Trading Coalition and
the FTC supports the introduction of specific measures into the Trade
Practices Act to address predatory, and in particular predatory pricing,
behaviour.[2]
In addition, the Coalition
suggested that an important issue that must be addressed is "creeping
acquisitions", where markets become highly concentrated not by one-off
large purchases, but by small purchases shop by shop that do not attract the
attention of government regulators.[3]
A number of significant small
business groups such as the Council of Small Business
of Australia (COSBOA) and the National Association of Retail Grocers of
Australia (NARGA) did not make submissions to the inquiry, but COSBOA and NARGA
have stated their support for the Government's bill in media releases.[4]
COSBOA and NARGA have also
indicated they want the Government to go further with reforms than the current
bill.[5]
Not all groups or individuals
representing small businesses support the Government's bill. The Southern
Sydney Retailers Association declared the amendments "meaningless"[6] while University of New South
Wales Associate Professor Frank Zumbo
stated that he did not see any merit in the Government's bill.[7]
Professor Zumbo argued the Trade Practices Act needed to be
amended because it does not include definitions of 'substantial market power',
nor of 'take advantage', but the Government's bill does not do this:
Section 46 is intended to stop
firms with substantial market power from taking advantage of that power for an
anticompetitive purpose. In order for there to be a breach of section 46, the
firm must have substantial market power as defined by the courts or the
legislation, if that is appropriate.
As a result of a series of High
Court decisions a firm will not have substantial market power unless it has the
power to raise prices without losing business to rivals. This test—the ability
to raise prices without losing business to rivals—has become the key test for
substantial market power. It is highly restrictive, as few, if any, firms would
have the ability to raise prices without losing business to rivals ... This means
that section 46 is currently not operating as intended by parliament ... So,
unless the concept of substantial market power is appropriately defined,
section 46 will remain ineffective ...
There is a second threshold issue
of whether the firm has taken advantage of its substantial market power. Once
again as a result of a series of High Court decisions, that test of ‘take
advantage’ is also an onerous and restrictive test which basically comes down
to the proposition that if a firm could engage in the same conduct with or
without market power then engaging in that conduct is a ‘taking advantage’ for
the purposes of section 46.[8]
There is a notable divide in
evidence given between those who are concerned about the effect of the High
Court's recent decisions on making the legislation ineffective and those who
support the current situation.
For example, the Business
Council of Australia stated that "... it is not clear that the High Court's
position on section 46 is incorrect and our preference would be that no
additional regulation be imposed through changes to the Trade Practices Act
... we believe that the current legislation is effective."[9]
One submission suggested the
High Court's decision on the Boral case was correct and that action other than
changes to the Trade Practices Act might be of more help to small
businesses, such as "training subsidies, research grants, town
planning."[10]
Groups representing big
businesses gave grudging support to the Government's bill.
The Business Council of
Australia "... believes that amendments to section 46 are not required and
indeed would be detrimental ... [but] with a view to limiting any adverse
consequences flowing from amendments, the BCA is prepared to accept changes
that seek to clarify and codify the existing legislation, noting the risks
...".[11]
The Australian National
Retailers Association declared a similar reluctance for change[12] as did Coles[13]. Woolworths declared "no major objections" to the
Government's bill, apart from concerns about the predatory pricing provision.[14]
A number of submissions
argued that the Government's bill meant little practical change to the Trade
Practices Act. For example, Addisons Lawyers said section 46 does not need
change and that "many of the amendments to section 46 proposed in the
Government's Trade Practices Legislation Amendment Bill (No. 1) 2007,
whilst not objectionable, are simply a re-statement of the current law and add
little, if anything to the state of jurisprudence on the issue."[15]
The Law Council of Australia
also argued there should be no change to section 46, but recognising there is
political will for change, generally supports the Government's changes.[16]
FAMILY FIRST believes the Trade
Practices Act must be strengthened to protect small business by ensuring
fair competition. Small businesses are vital for competition, which ensures the
lowest prices for families.
FAMILY FIRST introduced the Trade
Practices Amendment (Predatory Pricing) Bill 2007 to give small businesses
much needed protection from predatory pricing, by ensuring competition and fair
trading. Fair competition will help to ensure the lowest
prices for families.
FAMILY FIRST acknowledges
that there are significant issues yet to be addressed to ensure fair
competition, including creeping acquisitions, defining substantial market
power, defining take advantage, unilateral variation of contracts and 'take it
or leave it' contracts.
Senator Steve Fielding
FAMILY FIRST Leader
FAMILY FIRST Senator for Victoria
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