All changes made to the description and title of this division.

View division | Edit description

Change Division
senate vote 2017-08-14#4

Edited by mackay staff

on 2023-11-03 10:20:36


  • Bills — Competition and Consumer Amendment (Misuse of Market Power) Bill 2017; in Committee
  • Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 - in Committee - Adverse costs orders


  • <p class="speaker">Sue Lines</p>
  • <p>The question is that the bill stand as printed.</p>
  • The majority voted against an [amendment]( introduced by South Australian Senator [Nick Xenophon](, which means it failed.
  • ### What do these amendments do?
  • Senator Xenophon [explained that](
  • > *This relates to adverse costs orders. As I indicated in my second reading contribution, no matter how good a piece of legislation is—and I think it is fair to say that this has good elements, but I believe it should have gone further. Notwithstanding that, we need an ability to have real access to justice for competition law in this country. As I indicated previously, there are many businesses who get advice from their lawyer saying there has been an abuse of market power—predatory pricing or whatever the breach may be—but the lawyer then advises their client, 'By the way, if you want to take this to court, you'll be spending a couple of million dollars and you might be up for an adverse cost order in the millions of dollars.' An adverse cost order could be $5 million, $10 million or $15 million, depending on the complexity of the case, because these can be complex matters.*
  • <p class="speaker">Nick Xenophon</p>
  • <p>Chair, I have some amendments, and I will get your guidance as to how they are to be dealt with. I think I'm the first on the circulated amendments sheet. I'm happy to deal with those as you wish. I won't be proceeding with some amendments, so I will be guided by you as to whether it's appropriate that I firstly withdraw a particular amendment that's on the running sheet. In respect of amendment (1)&#8212;and I'm not sure if there's an amended sheet to that effect, but I will be guided by you as to whether it's appropriate that the amendments are dealt with at this point in time, given the running sheet in respect of the bill.</p>
  • <p>The CHAIR: Senator Xenophon, are you indicating that you don't want to move (1) because (2) is linked to it?</p>
  • <p>Yes, that's right. So, in terms of sheet 8139, I seek leave for what is referred to in item 1A to be withdrawn, but I seek leave still to proceed with item 1B, which is the amendment after section 80C.</p>
  • <p>Leave granted.</p>
  • <p>The CHAIR: Senator Xenophon has removed item 1A. Senator Xenophon, are you now seeking to move item 1B and amendment (2) together, on sheet 8139?</p>
  • <p>No, because&#8212;and I apologise, Chair&#8212;</p>
  • <p>The CHAIR: That's OK.</p>
  • <p>I can explain this: in relation to subsection 2, that relates to 51(3) after the amendments to do with item 1A. I only want to move the amendment on the original sheet that is headed '1B After section 80AC,' which starts off with 'Insert: 80AD Divestiture where contravention of section 46' down to subclause 6. The amendment (2) on the original sheet relates directly to the amendment that I do not wish to proceed with. So, it only deals with the issue&#8212;sorry, Chair, I understand there is a fresh amendment and I apologise&#8212;</p>
  • <p>The CHAIR: Okay, Senator Xenophon: you're amending section 1 and seeking to move that?</p>
  • <p>It's on sheet 8139, revised and hot off the presses. While that is being circulated, can I just indicate that the reason I'm not proceeding with that earlier amendment is that it was drafted at a time when there was a damage-to-competitors clause considered by the Harper review. It's no longer necessary, particularly with the rewording of the legislation&#8212;</p>
  • <p>The CHAIR: Senator Xenophon, with regard to your voice, you've sought leave on that and leave was granted so I think it's understood. So it's probably best if you save your voice for the things you really want to move!</p>
  • <p>Thank you. I thank Senator Whish-Wilson for the Strepsil. I'm not sure which Strepsil it is, but I won't consume it until I've sat down. I move:</p>
  • <p class="italic">Amendment No. (1) on sheet 8139 revised.</p>
  • <p>It relates to divestiture, and that includes a whole range of provisions in terms of adverse cost orders, assistance where there may be&#8212;sorry, let's just stick with divesture. I will deal with adverse costs shortly because&#8212;</p>
  • <p>The CHAIR: What you are seeking to do is to move No. (1) on sheet 8139 as revised?</p>
  • <p>That's right. It relates, as I indicated in my second reading contribution, to the issue of divestiture powers.</p>
  • <p class="speaker">Mathias Cormann</p>
  • <p>The government will not be supporting this amendment. The Harper review, like the Dawson and Harmer reviews before it, considered and recommended against establishing divestiture as a remedy to address misuse of market power concerns. At these reviews, each concluded that the existing range of available remedies is sufficient to deter misusers of market power and to compensate parties harmed by such conduct. Divestiture is not appropriate for breaches or misuse of market power as it would not target the conduct of concern.</p>
  • <p>But divestiture is currently available as a remedy for mergers and acquisitions which breach the Competition and Consumer Act. This is appropriate because the remedy directly targets and unwinds the transaction which breached the act. This would not be the case for section 46, where divestiture would at best be a blunt weapon which would not directly address the conduct of concern. The courts would then need to engage in the difficult task of restructuring what may be a highly-integrated firm to achieve this reduction in size. Moreover, there would be a high risk of unintended consequences&#8212;for example, a business or parts of it becoming uncompetitive or even unviable, which would be detrimental to consumer welfare.</p>
  • <p>As I've indicated in various reviews in this space&#8212;most recently the Harper Review but before it the Dawson and Harmer reviews&#8212;all looked at this and all recommended against it.</p>
  • <p class="speaker">Katy Gallagher</p>
  • <p>Labor won't be supporting this part of the Nick Xenophon Team's amendment. We note that the divestiture provisions are an extension of comments Senator Xenophon has made in the past.</p>
  • <p>The potential for repeat offenders of anticompetitive conduct is certainly a concern Labor shares. Labor has a proposed reformulation of how base penalties under the Competition and Consumer Act are calculated. We took that to the last election and we have recommitted ourselves to it.</p>
  • <p>Labor has proposed that Australia adopt a European Union-type penalty system for anticompetitive conduct, which is based on 30 per cent of the annual sales of the relevant product or service multiplied by the number of years the infringement took place, capped at 10 per cent of annual turnover. This would have both a punitive effect on culprits and a disincentive effect on potential culprits. We also note that this is a considerable departure from the status of the Competition and Consumer Act and that the amendment itself would warrant further scrutiny. A divestiture power that judges may apply would be a change to Australian competition laws on a large scale. As such, the measure itself would need to be considered on its own merits rather than in tandem with the proposed effects test. Normally a measure of this scale would be better suited to an in-depth inquiry conducted by a body such as the Productivity Commission. Further to that, drafting would require extensive consultation with extensive stakeholder collaboration. We won't be supporting this section of Senator Xenophon's amendment tonight.</p>
  • <p class="speaker">Peter Whish-Wilson</p>
  • <p>I would like to start by noting Senator Xenophon's been nothing if not consistent on this over a long period of time. The Australian Greens would certainly like to continue the conversation on this with Senator Xenophon. The proposal in the amendment, which allows courts to make divestiture orders and enables courts to break up serious or repeat big business offenders, is an appealing one. I know the Harper Review didn't recommend it and instead suggested the power reside with parliament, but I would like to note that this is a very significant change in what's being proposed here tonight, and that warrants careful and stand-alone consideration, not just being a rider to this bill. This chance to change competition law, which we've got in front of us&#8212;on section 46&#8212;is critically important. Senator Xenophon, I've done a little bit of reading on the trust-busting legislation in the US. It's not used as often as people perhaps think it is, but nevertheless it's certainly something that interests me, and I would say to you tonight we will keep an open mind on it if it can be brought to this place with separate legislation.</p>
  • <p>As it is before us tonight, I'm not going to mince my words. If supporting this risks the other legislation going down&#8212;and the government said clearly tonight that they won't support it&#8212;then we won't be in a position to support this tonight. We would recommend that you bring this back to the Senate in the form of a private member's bill, and we'll give it due consideration.</p>
  • <p class="speaker">Nick Xenophon</p>
  • <p>I did.</p>
  • <p class="speaker">Peter Whish-Wilson</p>
  • <p>Well, do it again.</p>
  • <p class="speaker">Nick Xenophon</p>
  • <p>Can I just thank my colleagues from the government, the opposition and the Australian Greens for at least stating their position on this. I won't be seeking to divide on this. I understand where the numbers lie on this. But I will just make this point to Senator Cormann, respectfully. The fact that we have a merger and acquisitions power that allows for divestiture within the mergers and acquisitions context indicates that the power does exist and the concept of divestiture is not a novel one in the context of competition law in this country. It's a point that can be made to the opposition and to the Australian Greens. I believe the time will come when divestiture will be seen as an appropriate last-resort remedy where divestiture doesn't mean the whole company is broken up. It could be that, in one state or one marketplace where a company has behaved particularly egregiously and abused its market power, the court should have the right to say, 'You will be broken up in that particular market.' That to me is in some respects more targeted and more nuanced, in a sense, than having an approach where it's just an across-the-board 30 per cent fine or a 10 per cent fine on their turnover&#8212;which I'm not opposing from what the opposition is proposing. I think this should be in the toolkit of the courts.</p>
  • <p>In Europe, they do have divestiture powers. The reason you don't hear about them is that they're not used very often. It is a last-resort power and, as Senator Whish-Wilson said, they're not used much in the US, because it does change the culture of corporations. If a corporation realises and understands that it can be broken up in whole or in part by abusing its market power, that makes a difference to the culture of that corporation and their conduct in the way they deal with smaller companies down the supply chain. That to me would have a very beneficial and powerful role in changing corporate culture in this country in terms of the abuse of market power.</p>
  • <p>I am grateful to my colleagues for having the courtesy to indicate why they don't support this. My prediction is that eventually in this place we will have a divestiture power and it will be a good thing for competition law, for the conduct of businesses in this country and for competition and the chance it will give for small businesses and medium businesses to have a level playing field against the big guys.</p>
  • <p>Question negatived.</p>
  • <p>Proceedings suspended from 18:30 to 19:30</p>
  • <p>I have another amendment to move&#8212;I think now is the appropriate time&#8212;and, insofar as I need to, I seek leave to move that amendment.</p>
  • <p class="speaker">John Williams</p>
  • <p>You do not need leave. Continue, please.</p>
  • <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>