BILLS – Competition and Consumer Amendment (Divestiture Powers) Bill 2024 – Second Reading

I support divestiture powers and I support the Competition and Consumer Amendment (Divestiture Powers) Bill 2024. I support this bill because it fixes a huge gap that exists in our competition laws—a gap which limits the competitive pressures that exist in our economy and which, ultimately,
leads to poorer outcomes for all players in the supply chain, consumers of products of all different types and suppliers to those companies that have significant market power in our economy. I think it’s very important to start by highlighting that Australia is an outlier in the developed world when it comes to the powers that exist in our competition laws to take action against companies that misuse their market power. We would never—and this bill does not—seek to impose penalties to split up companies in the absence of misuse of market power. This bill, and other laws around the world like it, don’t apply to companies just because they’re big; they apply if they are big and then cause harm to other parties in the marketplace. We have laws against big companies doing harmful things. Section 46 of our Competition and Consumer Act is the main provision. There are others, but I’ll focus on section 46 because it’s relevant to this bill. It’s titled ‘Misuse of market power’, and it only applies to those companies which have a significant or dominant position in the market and which then do things that cause harm to other players in the market. There are of course, in our current laws, penalties that can apply to companies that contravene section 46. But, unlike other countries, we do not have this ultimate penalty that provides that, if this behaviour is particularly egregious and if this behaviour continues, then the company can be split up to create the long-term competitive pressures that have been allowed to thrive in other countries. I heard the Prime Minister, a few months ago, make the remarkable suggestion that Senator Nick McKim—my friend and colleague over there—is bringing forward a communist proposal. I think he mentioned it being a Marxist or communist proposal. Divestiture powers are apparently something that was brewed up in Marxist theory classes, which Senator McKim probably attended. At university, I sometimes engaged in those discussions. But it shows the complete lack of understanding by the Prime Minister of this very serious problem. Australians are suffering from a lack of competition in our supermarkets, banks and airlines. They’re suffering poor outcomes in all of those industries. Our farmers are suffering from abusive conduct by our major supermarkets, which I might get to later, yet the Prime Minister has not even the most basic understanding of competition law, and the different types of competition laws around. You can mount a reasonable argument against divestiture powers. You could mount a serious and reasonable argument against them, but claiming they are somehow inspired by Bolshevik regimes is absolutely absurd. I say that because, back in the 1980s, the United States used their divestiture powers in their Sherman and Clayton acts that have been on their books for well over a hundred years now to break up a company called AT&T into what became known as the nine Baby Bells. The company was split up into regional telephone companies across the United States. This divestiture action was overseen by that noted communist President Ronald Reagan! It’s the position of the Prime Minister that these divestiture powers are
somehow communist inspired, yet President Ronald Reagan, perhaps the greatest known defender of free markets and capitalism in modern times, was happy to preside over such a divestiture. I don’t know all the details of the AT&T case, but clearly the case was made in the courts that AT&T’s conduct was abusive and was causing poor outcomes for telecommunications consumers in the US, and that company got split up. It’s very rarely used. Another famous example in the US was Standard Oil. Standard Oil was split up much earlier, at the beginning of the 20th century. It was a huge company. The actions and conduct of the likes of John Rockefeller contributed to the Clayton and Sherman acts, which were eventually used to split up this very large conglomerate into a bunch of different companies that persist to this day with the likes of Chevron and ExxonMobil. They’re all the sons and daughters of that particular split. It didn’t hurt those companies; they’re pretty successful companies. I think Chevron was, at different times last year, the biggest company in the world. So it hasn’t hurt their shareholders and it’s been good for competition. In both those cases—particularly the telecommunications case—we were told that somehow if we were to take this action, if we were to put in the ultimate sanction and split up a company, it would be terrible for the economy and cause investors to flee; it would hurt our productivity. There were different types of claims made about how terrible this would be. Yet, after the 1980s split up of AT&T, the greatest increase in telecommunication innovation and productivity that the world has ever seen was unleashed. I’m not necessarily claiming that the split up of AT&T was the cause of those developments, but they occurred subsequent to that split up and were, effectively, a precursor
to the information age which we now know: the development of the internet, mobile phones, personal computers and graphical user interface operating systems. All of these things came after the split up of AT&T, which didn’t hurt that industry or that economy. Clearly, investors didn’t rush away. They rushed in, in a way, and there was competition—surprise, surprise! As I said, it was not necessarily the cause of it, but it probably helped to have that extra competition in telecommunication services and encouraged those countries that were hungry to go after new
markets that were emerging in mobile phones and internet et cetera. Likewise with the oil industry—I won’t go through all of that. The development of the oil industry didn’t slow down in the early 20th century when Standard Oil was split up. Instead, the split up led to much better outcomes for
consumers, much greater competition, and massive expansion of automobile transport in the US and around the world. It’s not just in the United States. These laws exist in Europe, in Canada and in many other countries; they’ve had long experience with these laws. It’s not something new or innovative. What is here before us today is something in the great tradition of English common law countries, which do seek to sometimes codify particular penalties like this in their laws and build on the experience of like-minded countries that have had success with such laws. Clearly these laws have been very successful in those other countries. They’ve persisted through multiple different political administrations. They have been used sparingly but used to great success, as I’ve outlined. They are being used again to look at the likes of Facebook and Google. While many of those actions haven’t been successful through the courts, they clearly have had a role in reining in the likes of Facebook and Google, where we of course have issues. So this is very sensible, and I don’t quite understand the controversy here in this country. Maybe it’s because our large businesses have a very large influence over this place. We are often accused of being motivated by other means. There are a lot of good lobbyists from those companies, and they seem to be able to confuse us here—we who are a long way away from those other countries that have had great experience with these laws. I want to come to specific examples of misconduct, about why these laws are needed so much. As I said, these laws would build on the great tradition of English common law countries if they were adopted here, and no doubt they would be properly applied by our courts. In recent times there has been particularly egregious conduct by our major supermarkets, in particular. We’ve had banking royal commissions that have exposed similar conduct. People have been shocked by the actions of corporations who seemingly feel they are unrestrained by basic ethical conduct requirements. There was a case brought by the ACCC around 13 years ago, in 2011—well, the conduct was in 2011 but the case was brought many years later, so it’s around 10 years old. Back then, the ACCC did some great work and was able to subpoena a bunch of documents from both Coles and Woolworths, but I’m going to concentrate on Coles in
the limited time I have. The ACCC uncovered that Coles had these events with their managers which they called ‘profit days’. Apparently, after a few months or almost a year of looking at their clients, if they were making enough profit on a particular line item, they would have a day when all their managers would go out and try to get more money from their suppliers. It was no more complicated than that. I’ll highlight one particular case where Coles managers decided they had a profit gap with a company called Oates. Many people would have bought bins or brooms with the Oates brand name on them. They reckoned they had a profit gap of $326,590 with Oates. To be clear, this was the gap between what Coles expected to make on Oates products and what they actually made. It was their mistake. They found that gap. They then wrote to Oates and asked them to pay $326,590. They were as bold as that: ‘Just give us that money; we need that money.’ Oates,
as you would expect, inquired: ‘Why are you asking us to pay that? What contractual term gives rise to this particular invoice you’ve levied for hundreds of thousands of dollars?’ Coles gave no explanation under the contract about why they were demanding this money, apart from the fact that, on 24 June 2011, Coles managers wrote in an email to Oates that Coles, and I quote, was ‘not prepared to work collaboratively with Oates’ for the next year if Oates did not rectify the Oates purported profit gap. This is blackmail. It’s got to be called out for what it is. It is blackmail. It is the most unethical, egregious corporate conduct you could ever consider, that a small company like Oates would be stood over by a large company and told: ‘Hey, look, we think we need another $300,000 from you. You’ve got a nice business here. It would be a shame if something happened to it. Give us some money.’ Eventually, Oates did cough up. A number of emails went back and forth, and eventually they offered to make a payment of $224,000. I think they eventually negotiated to raise it to $246,400 to keep their business alive. That was found by the Federal Court to be unconscionable conduct. The problem was that Coles was fined a grand total of $10 million for that infraction. This company has a turnover of many billions of dollars and it was fined $10 million. Justice Gordon actually said, ‘The current maximum penalties are arguably inadequate for a corporation the size of Coles.’ That’s somewhat of an understatement, but everyone would agree that it was a massively inadequate fine. We need a bigger stick here. We need something that responds to such egregious misconduct with at least the threat of something happening that is much more significant, because clearly our corporations do not feel restrained right now by the current laws to stop them from engaging in that kind of conduct. I have highlighted one, but this
occurred to multiple companies. Woolworths engaged in very similar conduct as well. It only came to light because the ACCC went through a rigorous process of demanding these documents under the information powers we have given them. We can’t have a system that relies on the ACCC going around to every business, trying to check every email or communication on a year-by-year basis.
We have to have a better structure in place that incentivises good ethical conduct from our major businesses. That’s why this is so important. Section 46 is not used very often. The idea that these laws would make huge changes to the Australian economy is just not held up by the fact that, in the first 30 years of section 46, only 15 cases were brought to the Federal Court or High Court. Over the last few years, the National Party made some changes with the effects test. That’s been hugely successful. There have been six cases in the first four years of its operation. I don’t have data post 2021. I haven’t been able to find it. In the first four years of those changes, six cases were brought, after 15 cases in 30 years. Five of those six were private actions; they weren’t brought by the ACCC. That’s great. That’s exactly what we wanted to encourage—private litigation—so that we can get better resolution for businesses. This is a very, very sensible change that I’m happy to support and get behind. It’s long past time that we do this as a nation. We can see there’s a bit of heat and light at the moment—a bit of pressure on Coles and Woolworths—and they’re obviously trying to show that they’re giving discounts to the Australian people. But do you know how they’re giving a lot of those discounts? They’re buying food from other countries. They’re screwing over our farmers behind the scenes while people can’t see. We know that’s happening right now. Then they have the temerity to offer and take credit for the discounts, when the discounts you’re getting are being paid for by our farmers. Let’s back our farmers. Let’s back our consumers. Let’s join the rest of the world and have a decent competition act that has reasonable penalties for poor behaviour.