House of Representatives Speech- Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008

Protecting competition in commercial markets is a matter which improves the welfare of all Australians. That is perhaps a self-evident statement but it is particularly important to remind ourselves of this at a time of global financial crisis, when shaken confidence in commercial markets and shaken confidence in trading practices needs to be bolstered in every possible way. This legislation, the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, which is very long overdue, will go some way towards ensuring that people can have confidence in the competitiveness of commercial markets, ensuring that Australians and those overseas who trade with our country can have confidence that the kinds of collusive practices, price-fixing practices and cartel behaviour which the bill is directed at and which the bill will criminalise are investigated and prevented by Australian law. There is no doubt that protecting competition ought to be a basic aim of economic policy and trade practices law in this country.

Protecting competition in commercial markets is a matter which improves the welfare of all Australians. That is perhaps a self-evident statement but it is particularly important to remind ourselves of this at a time of global financial crisis, when shaken confidence in commercial markets and shaken confidence in trading practices needs to be bolstered in every possible way. This legislation, the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, which is very long overdue, will go some way towards ensuring that people can have confidence in the competitiveness of commercial markets, ensuring that Australians and those overseas who trade with our country can have confidence that the kinds of collusive practices, price-fixing practices and cartel behaviour which the bill is directed at and which the bill will criminalise are investigated and prevented by Australian law. There is no doubt that protecting competition ought to be a basic aim of economic policy and trade practices law in this country.

I want to say something first about the genesis of the bill, because members will understand by looking at the genesis of the bill just how long overdue this legislation is. It has its genesis not, as some speakers in this debate have suggested, in the report of the Dawson committee, the Trade Practices Act review committee, which reported to the former Treasurer on 31 January 2003, but in a much earlier resolution of the OECD, an organisation of which of course Australia is a member, in 1998. It is a recommendation entitled ‘Recommendation of the Council concerning Effective Action against Hard Core Cartels’. The recommendation contains a particularly pithy summary of the reason why it was made by the OECD in 1998 which is worth drawing to members’ attention. I will read it:

Hard core cartels are the most egregious violations of competition law. They injure consumers in many countries by raising prices and restricting supply, thus making goods and services completely unavailable to some purchasers and unnecessarily expensive for others.

Effective action against hard core cartels is particularly important from an international perspective—because their distortion of world trade creates market power, waste and inefficiency in countries whose markets would otherwise be competitive—and particularly dependent upon cooperation—because they generally operate in secret, and relevant evidence may be located in many different countries.

This Council Recommendation recommends to member countries to ensure that their competition laws effectively halt and deter hard core cartels by providing for effective sanctions and adequate enforcement procedures and institutions to detect and remedy hard core cartels.

The actual recommendation itself is quite long but the key part of it relevant to this legislation is this resolution:

Member countries should ensure that their competition laws effectively halt and deter hard core cartels. In particular, their laws should provide for:

(a)   effective sanctions of a kind and at a level adequate to deter firms and individuals from participating in such cartels; and

(b)   enforcement procedures and institutions with powers adequate to detect and remedy hard core cartels, including powers to obtain documents and information and to impose penalties for non-compliance.

The recommendation included a definition of ‘hard core cartel’ which, for the information of members, I will also read:

a  ‘hard core cartel’ is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce …

To bring that to life, we have seen examples in recent years in this country, most notably a very public case involving cardboard box manufacturers in Australia which led to very large penalties being imposed in the Federal Court. We have seen other cases involving allegations of price-fixing behaviour in the retail petrol market, and numerous other examples of price-fixing and cartel-like conduct have been disclosed in recent years in Australia.

That recommendation of the OECD in 1998 regrettably came to an Australia governed by the former government, which demonstrated little or no interest in acting on that recommendation of the OECD. We had to wait until the former Treasurer announced terms of reference for a Trade Practices Act review committee in May of 2002, and that was in the face of repeated calls by people in the trade practices area, notably the former chairman of the Australian Competition and Consumer Commission, Professor Allan Fels, who called for criminal sanctions to be imposed for cartel conduct.

The Trade Practices Act review committee was finally established by the former government, some four years on from the OECD recommendation—proceeding at a glacial pace. The committee were a group of eminent Australians: former High Court judge Sir Daryl Dawson, Jillian Segal and Curt Rendall. They reported, after an extensive inquiry in which they received a large range of submissions, to the former Treasurer on 31 January 2003. In their report, they made it clear that they supported, in direct terms, the introduction of criminal sanctions for serious cartel behaviour.

Chapter 10 of their report deals with penalties and other remedies in the trade practices area. In that chapter, the committee quoted from the definition of ‘hard core conduct’ in the OECD recommendation that I have earlier referred to and, interestingly, they quoted from a then more recent report of the OECD from 2002, entitled Report on the nature and impact of hard core cartels and sanctions against cartels under national competition laws, which contained a survey that the Dawson committee quoted from. The survey was of OECD countries and other developed countries as to whether or not they had imposed, under their national law, penalties for cartel conduct or had criminalised cartel conduct. What is striking about it is that even in 2002, as the Dawson committee records in quoting from that 2002 OECD report, 23 of the then 30 member countries of the OECD had provided for fines or monetary penalties against firms, 13 countries had provided for fines or monetary penalties against individuals and nine countries had provided for terms of imprisonment. The survey in the 2002 report of the OECD went on to look at other countries’ records in imposing not only very, very large monetary penalties but, in a number of cases, terms of imprisonment. It was apparent that almost all of the countries with which Australia would like itself to be compared had legislated to bring in serious penalties or criminal sanctions for this kind of ‘hard core cartel conduct’, as it is referred to by the OECD. Canada, the United States, Germany, Japan and the United Kingdom had all legislated to introduce criminal sanctions and heavy penalties.

The response of the former government continued with the same glacial pace. It was not until two years after receiving that report from the Dawson committee that the former Treasurer, the member for Higgins, on 2 February 2005, announced his intention that the government would amend the Trade Practices Act to introduce criminal penalties for serious cartel conduct. A little bit later, there was an announcement made by the former Treasurer and the member for McEwen in her then ministerial capacity to the effect that an amendment to the Trade Practices Act was being prepared. They actually went so far as to give it a name—it was said that there was going to be a Trade Practices Amendment (Cartel Conduct) Bill 2005 and that that bill was being prepared—but, of course, the bill was never introduced. Nothing more was heard from the former government about its enthusiasm for acting on the recommendations of the Dawson committee. Nothing more was heard about its intention to act on what was getting to be a pretty old recommendation of the OECD, having been made back in 1998. It, regrettably, became typical of the former government in its last term and, indeed, even in its second last term that matters which were urgent, which were pressing and which there had been calls nationally and internationally for action on were met with a complete lack of action.

By contrast, the Rudd government is acting on an election commitment made in 2007 that, if elected, the government would introduce legislation to criminalise cartel conduct. That is precisely what the Rudd government did. On 11 January 2008, some 1½ months after being elected, the Minister for Competition Policy and Consumer Affairs published an exposure draft of the bill which is now before the House, together with a discussion paper issued by Treasury. This was intended, as the minister has made clear in his second reading speech, to provide a basis for consultation with interested parties through the course of 2008. Consultation took place through 2008 with economists, trade practices experts, lawyers and industry. They are consultations that I had some small part in, and I can say very directly what thorough consultations they were. That, of course, led in turn to the introduction of this bill by the Assistant Treasurer on 3 December last year.

The support of those opposite, as reflected in the two speeches that we have heard from the member for Pearce and the member for Cowper, is, of course, welcome. It is, however, support that is a little less than full. Both of those speakers, the member for Cowper and the member for Pearce, have simply said that they support what they described as the ‘broad thrust’ of this legislation. The bill having been referred to the Senate Standing Committee on Economics, they say that the opposition is awaiting the report of that Senate committee before announcing what its position is. Extraordinarily, you would have to say that that present enthusiasm—if, in truth, it can be properly described as enthusiasm, as it is heavily qualified—for legislation to criminalise cartel conduct does not compare well with what I have just recounted to the House: the desultory approach of the former government to acting on what all Australians would regard as a very serious matter.

I was struck by the comments made by the member for Pearce this morning—the major and first part of her speech having been delivered before being interrupted last night—that reflect some level of concern for the civil rights of Australians, which she said were a reason that there should be yet further delay in the introduction of this kind of legislation. I would have to say that it is a pity that her party did not reflect the same level of concern for the civil rights of Australians at, for example, the time of the introduction of the antiterror legislation in 2003, which included—as did subsequent amendments of antiterror legislation—such alarming provisions as the introduction of strict liability offences carrying life imprisonment. But perhaps it depends on the area in which this parliament is being asked to legislate, with attitudes on legislation which concerns commercial conduct differing from the attitudes reflected by those opposite in respect of more ordinary civil rights of Australians—being, in some respects, those affected by the antiterror legislation.

The need for this legislation is clear. It has been a long time in preparation, and it is alarming to hear from those opposite the suggestion, as was made by the member for Pearce, that this legislation is being rushed. This legislation has been called for since 1998 and is the subject of the clearest possible recommendations of the Dawson committee, which delivered its report to the then Treasurer on 31 January 2003. It is a bill that has been the subject of an exposure draft since January last year and has been the subject of extensive consultation through 2008. Yet the member for Pearce comes into this House and says that the bill is being rushed.

So, too, one could point to the apparent enthusiasm—or perhaps it is more feigned enthusiasm—by the member for Cowper, who correctly observed that this legislation brings Australia into line with the United States, Canada and the United Kingdom, which, as he says, are countries that have similar sanctions in place. The member for Cowper was moved to say that this is very important legislation, which of course we agree with. He said again, towards the end of his speech, that the bill not only puts us in line with Canada, the US and the UK but also meets community expectations. But, again, we are left with ‘supporting the thrust of the legislation’. That is the opposition’s position, and they await the outcome of the Senate inquiry.

This legislation, it has to be accepted, is difficult legislation. That is reflected in a very unusual submission that was made by the Law Council of Australia. Normally, the Law Council—as with most bodies—makes submissions to government inquiries and to ministers which adopt a single position. In one very important aspect of this bill, the Law Council of Australia offered a split submission, particularly in respect of the aspect of the exposure draft of the bill which incorporated in the offence a dishonesty provision. The bill that is now before the House has removed, at the urging of many, many of the submitters, that dishonesty component. But the fact that one section of the Law Council thought that it should stay in and the other thought that it should stay out shows that this certainly is a matter on which minds may differ. Many submissions have been made to the Senate Standing Committee on Economics as well, and no doubt the report of that Senate committee will provide some consideration of and instructive recommendations on that difficult question.

This legislation is long overdue. It is legislation which the former government should have introduced many years ago. This legislation—as is the case with very much of the legislation that this government has been able to introduce in the parliament—is legislation which I commend to the House.