31 March 2015
Transcript - #2014036, 2015

Joint press conference with Professor Ian Harper, Melbourne

SUBJECT: Competition Policy Review

MINISTER BILLSON:

Ladies and gentlemen thank you for joining us today on a very important occasion. It represents the completion of a Coalition election commitment to activate an objective, evidence based examination of our competition policy, our competition laws and institutional framework.

And frankly what stands between us and our economy and achieving all of its potential and seeing that durable benefits are available for consumers.

We instigated this examination with some clear ideals in mind.

One, that our economy should support efficient businesses – big and small – to thrive and prosper and to offer enhanced value, better pricing, new offerings and the opportunity to delight customers here and internationally and to be competitive in a fair and healthy competitive environment in doing so.

Where that contest in the market place should be the determined on merit; not purely on the basis of economic muscle. That our economy and our nation and the opportunities we look to into the future will be enhanced by a competition framework that enables all of our enterprises to be their best. To ensure that consumers are getting their best outcomes from the choices they seek to make and the options available to them.

It has been some 22 years since a comprehensive review of this kind has been undertaken. So much has changed over that period. Our own population has changed, our region has changed, technology has changed in leaps and bounds that could never have been imagined at the time Professor Hilmer did his work.

That is why it was right and timely to undertake this objective, evidence based examination.

Open and transparent, fully engaging stakeholders and interest groups, drawing from them their insights and their views and their ambitions for the future. To enable an eminent panel to work through and distil that input, to help map out a plan for what the next steps are in enhancing the competitive framework for our nation- in terms of benefitting jobs and economic growth and benefits for consumers.

I was delighted that such an eminent panel was able to carry out this work. It has been the Government’s ambition to let the panel do its work, free of commentary and intrusion from Government, able to engage freely and fully with stakeholders and those with a view. We were very fortunate to have Professor Ian Harper available to lead this panel supported by an outstanding team of people that bring experience, wisdom and insight.

Peter Anderson from ACCI, Su McCluskey from the Regional Australia Institute and one of Australia’s most eminent competition laws Michael O’Bryan.

Their rigour, the analysis they brought to this task, the perspicacity they have displayed in looking forward at what is changing in the marketplace and in our position in it, and above all, being guided by those simple ideas of enabling our economy to be all that it can.

To be best placed to take advantage of the opportunities within our reach and to ensure that at the end of the day this framework delivers durable benefits for consumers. I was keen to have the panel have clear air. So today represents an opportunity for the panel not only to provide me on behalf of the Government with their final report, but actually to speak to the report so that they can conclude their work and the Government can respect and recognise the great rigour they have brought to their tasks.

I thank you for being a part of this process today. We will be embarking on an 8 to 10 week consultation process, where I will speak with my ministerial colleagues at a Commonwealth level but also engage states and territories because this, in so many respects, is a shared enterprise, a co-regulated area of the law and a policy environment where no one jurisdiction holds all the cards. We will then, after that consultation, shape our game plan to respond to the various recommendations. We anticipate some will be more able to be acted upon in a shorter time frame; others will involve much collaboration and consultation with the other jurisdictions and stakeholders involved. So I thank you for your interest today.

Some 22 years ago Professor Hilmer mapped out a pathway for improved competitiveness, business vitality and opportunity for our economy and a road map to ensure that consumers achieve durable benefits from that framework. Some 22 years later we now have the son of Hilmer – the Harper Review. Hilmer produced a 2.5 per cent increase in GDP for our country, higher living standards, more vibrant markets and great benefits for consumers. I am optimistic that this report maps out a road map where we can aspire to those same kinds of goals and outcomes for our economy and out citizens into the future.

It is an honour and a privilege and with gratitude I invite Professor Harper to the lectern and may I congratulate you Sir and your eminent panel for an outstanding piece of work that I look forward to working carefully through in collaboration with my colleagues and the states and territories.

Professor Harper.

PROFESSOR HARPER:

Minister, ladies and gentlemen, on behalf of my colleagues on the panel – Michael, Su and Peter – it is my privilege Minister this afternoon to be able to present you, on behalf of the Australian Government, with the final report of the Competition Policy Review.

Minister as you know this has been 12 months in the making. You commissioned us a little shy of 12 months ago and we believe we have worked meticulously as a team over the past 12 months to produce an issues paper. Then last September a draft version of this report and now as I say the final report of the Competition Policy Review.

Minister as you asked in the Terms of Reference that you gave to the panel; this is a review of Australia’s competition policies, laws and institutions with a clear focus on Australian consumers. We have 56 recommendations in the final report and those 56 recommendations are aimed at reinvigorating and extending competition within our economy to drive innovation and productivity for Australia.

In the wake of the mining boom we need a new source of productivity growth to ensure that living standards for Australians continue to grow as you have just been indicating Minister.

We believe that these 56 recommendations in the final report will assist your Government to deliver on that promised increase in productivity over time. Minister you also asked in the Terms of Reference that we would review Australia’s competition framework in order to determine how fit for purpose it is for the future that is unfolding all around us.

Again, in your opening remarks you point to the changes that are occurring through globalisation of the Australian economy, through the ageing of our population and through the ineluctable advance of digital technology.

Australia’s competition law and our policies and frameworks as you point out are at least two decades old now and there is much about our landscape, particularly our future prospects, which are very different from the outlook that Professor Hilmer and his colleagues had in the early 1990’s. These regulations and laws and policies have served Australia extremely well.

In fact, in all the submissions that we have received and all of the meetings that we have held over the past 12 months there wasn’t a single Australian, not one, who suggested that our competition framework – our policies, laws and institutions – were fundamentally flawed and needed to be changed.

They have served Australia well. But times are changing and we have therefore turned our attention in this final report to changes which can ensure that our competition framework – policies, laws and institutions – are robust for the next 20 years. At least as much as they were for the previous 20 years.

Minister, this report is the result of widespread consultation as you asked us to do. I am pleased to be able to inform you that throughout this process we have received upwards of nearly 1,000 submissions; roughly 350 to the issues paper and around 650 to the draft report. And Minister that process has brought forward a wide range of views from people right across the economy, and we have benefited mightily from taking on board those suggestions and that analysis in this report.

All of those submissions, you will find at least those that are available for public release which is the great bulk of them, available on the website that we have for this report.

In addition to the submissions there have been public meetings; I have addressed public meetings along with my colleagues on the panel in every capital city in this country and also in regional areas we have done the same. We met individually with over 150 different groups.

So we have brought together in this final report, if I may say so, the collective wisdom of a large number of Australians and I can assure you Minister that the recommendations that we have put forward in this final report have had the benefit of those discussions and that analysis as we have sought to road test our ideas around the country.

Minister it is a privilege for my colleagues and I to be able to serve the Australian people in this important way and on behalf of them – Michael, Su and Peter and myself – can I thank you Minister for the privilege of allowing us to serve the Government in this way.

There are 56 recommendations in the final report Minister; we commend them all to the Australian Government.

MINISTER BILLSON:

Should we have the hand over here if you may? Colleagues, would you like to come over and join us?

Thank you panel. Are there any questions?

QUESTION:

Minister, have you had a chance to digest what’s in the report as yet and do you think it has gone far enough to deal with competition issues in the retail supply chain – with Coles and Woolworths the supermarket duopoly – given that you have also come out with a Code of Conduct there in recent time?

MINISTER BILLSON:

Yes, I feel it has made a very good case about where the law has capacity and needs to be exercised and there are some points about provisions of the law that can be fine-tuned and calibrated and I welcome the Professor to speak to those.

It also makes the point that Codes have an important role to play. The law identifies where unlawful conduct may occur, that of itself does not always guarantee healthy and fair competition, and Codes can represent some terrific bumper rails within which vigorous commercial interactions can take place but not overstep what is fair and reasonable in a competitive environment.

So a particular area of focus has been in the area of supermarkets. Another area of focus was in retail fuel and the like. The panel has arrived at some conclusions, I can see how they have argued those and they have also recognised there are other areas of initiative and progress, unfair contract terms, Food and Grocery Code that you touched on, recent case history around misuse of market power; all informing that work to make sure suppliers that are efficient have the opportunity to thrive and prosper in an area of our economy where there are some very strong dominant players.

Professor would you like to add anything?

PROFESSOR HARPER:

Thanks Minister. Our approach to all of the issues here was economy-wide. We did not set out to focus on any particular sector of the Australian economy but to devise a set of principles which would guide the reforms we have recommended to the Government in the interest of promoting competition for the benefit of consumers right across the economy. So indeed aspects of supermarket issues that were put forward to us in submissions, we believe have been addressed through the general provisions and changes we recommended to the Government. There are specific aspects of those; some are more relevant than others but we believe we have taken that on board in the recommendations we have put to the Minister.

QUESTION:

Minister, what is the prospect of getting any of these reforms through given you are struggling to get your existing budget measures through, you are facing another budget, you have an election next year… you can understand the public’s scepticism about any of these reforms actually being implemented.

MINISTER BILLSON:

No I can’t understand the scepticism about that. Since the election of the Abbott Government we have effectively reformed and strengthened the Franchising Code – that is done.

The Food and Grocery Code is something that has been talked about for many years – that is in the Parliament now.

Unfair contract terms protections, another important measure that people thought would never get done- well that is now currently being consulted with states and territories.

The Right to Repair in the areas of the motor industry; who owns the IP to these modern technologically sophisticated motor vehicles. There is progress there as well, so perhaps I am more optimistic than some. There is a need to go through an effective and engaging collaboration and consultative process with States and Territories. This is an area that is largely co-regulated and therefore changes need to be worked through with the States and Territories but I think this report maps out clearly the case for change and shows great thoughtfulness in the competing arguments about what the nature of that change should be.

In some areas States and Territories have their own capacity to bring about change and that is encouraged in the report’s recommendations, things in their own economies that have separate and specific regulatory arrangements that might not stand the test of being pro-competitive and pro-consumer.

So there are a number of moving parts. We do need to collaborate on them. Some of the legislative changes, they are more closely in our gift to implement, and there is quite an appetite to work through those.

QUESTION:

Can you be specific at all? I think you’ve ruled out the changes around pharmacies, I think you have said that that is something you would not do. The changes around taxi sharing and so on, that seems to be largely a State based issue.

MINISTER BILLSON:

Well the taxi sharing issue is one for, taxis are regulated at a State level and I know different jurisdictions are handling ride sharing and new service providers that are effectively working around traditional regulatory arrangements to have passengers having their needs met. So that is in that space. In the pharmacy area we are engaged in a consultation on the next pharmacy agreement.

One of the issues that is highlighted in here is the need to be mindful of what may, at first glance, appear to be anti-competitive but may have some other public policy justification and the report recommends a careful weighing of those interests- so there are 56 recommendations in here.

We will need to work thoughtfully through them all and collaborate quite widely but the appetite is there to ensure that changes can support our goal of improving productivity in our economy. And the Intergenerational Report every other discussion at the moment has recognised the need for that, here are some recommendations to take out some ‘gumming up’ of the economy that stands in the way of achieving our full economic potential.

QUESTION:

Just one more specifically about, in the final report the panel recommend about the industrial relations system, secondary boycotts and increase of penalties- is that reform the Government would be willing to consider?

MINISTER BILLSON:

Well that is an area we have recognised needing examination because there is an overlap. Industrial Relations system effectively overlaps the competition law. Now, there is some confusion about where the ball rests so I think the clarification that is urged in this report is a very wise recommendation.

QUESTION:

Do you think you need divestiture powers to deal with the market power abuses in the retail supply chains of Coles and Woolworths or is that a crackpot idea?

MINISTER BILLSON:

No, I mean, there has been a range of, and Professor, you can probably talk to this as well because I know there has been a lot of people advocating divestiture as a public policy instrument. I am not aware of any jurisdiction in the world where a Government or a competition regulator can unilaterally direct the divestment of a business or a change in its shape or structure.

Overwhelmingly that occurs where there has been egregious breaches of the law and where the sanction is thought to be so needing to be proportionate to the breach that divestiture is brought forward.

Or in the case of our law where our merger and acquisition proposition has been brought forward on certain terms and conditions that have not been upheld or do not accurately reflect the circumstances.

So here the matter is, let us be clear on what the law provides for, section 46 – there has been plenty of discussion about it. We need to make sure the law is fit for purpose and some changes have been proposed here and with some strong sanctions attached to them.

The idea of divestiture as part of that sanctions toolkit is not what is recommended in this report but I know it was advocated to the panel throughout its deliberations.

Professor?

PROFFESOR HARPER:

Yes, thanks Minister. We did, obviously, consider all these propositions that were put to us and divestiture was one option that was raised by a number of submissions.

When we investigated, I think it would be fair to say, we found, as the Minister has indicated that where the possibility for divestiture does exist, for example in the United States, it is extremely rarely used.

One of the things that we had, Minister as you know, was an international conference during the process to which we invited a number of international experts and one of them was very familiar with the United States Competition Law, a gentleman from Cornell University. And he made that point quite clear to us that yes the power exists but it is very rarely used because the consequences of using that power can be extremely unpredictable.

One of the things he would not want to do necessarily is to break a company up only to find that none of the broken up companies becomes viable and, you know, the punishment does not fit the crime, if I could put it that way.

The other thing that we fell back on I think Minister, in our thinking about this is was, in the end if there really is a very strong case based upon egregious behaviour, as the Minister has indicated, this is not beyond the Parliament to order a divestiture or break up.

So we have, if you like, an ultimate defence in the Parliament itself but short of that we did not believe that divestiture was necessary and, as the Minister has indicated, there are plenty of provisions short of that that can perform the disciplinary role we think is needed.

Michael, would you want to add to that? Michael is the legal expert on the panel.

MICHAEL O’BRYAN QC:

No, I think you have covered it Ian.

MINISTER BILLSON:

That would be a first for a press conference where someone has not taken the opportunity to speak. So, are there any other questions? Yes ma’am.

QUESTION:

Yes, how does the effects test, as it stands today, in its final form, how is it going to help small businesses stand up to those with substantial market power and who are, obviously, influencing and occasions of bullying in certain cases?

MINISTER BILLSON:

Section 46 I have characterised, in some cases, is a hunting dog that will not leave the porch. As it is currently drafted, it promises much but in many occurrences has fallen short of what I feel the lawmakers anticipated and what many in the market place believed it should achieve.

Now I will hand over to, this might be a good opportunity for Michael because the redrafting that is proposed does bring into the reach, effects not just purpose and the repots seeks to weigh pro-competitive outcomes that may exist for certain kinds of conduct against anti-competitive outcomes and encouraging in exploration of that where there is a belief that a misuse of market power breach has occurred.

But I might hand over to you Michael if you would like to talk briefly – or Professor?

PROFFESOR HARPER:

Thanks very much Minister. Section 46 and our proposed changes both in the draft report and in the final one I suspect, certainly in the draft, were amongst the most commented on of any of the changes that we have recommended in the area of the law.

Our approach in thinking about section 46 commences with the observation that as the law presently stands, section 46 is the only part of our Competition and Consumer Act, the only part that directs attention to the impact of conduct on a competitor as opposed to the competitive process. So it is the one part that says, effectively, that it is an offence to engage in conduct, if you have market power, for the purpose of harming a competitor.

As out of step with the rest of the Act, and certainly given the changes that we are expecting the Australian economy to encounter in the future and which we are already going through, the panel did not think it was appropriate at all that a business with market power should get caught up with the law simply because competitors are damaged.

Competitors do get damaged during the process of competition that is in part what the competitive process is about. But there is a very positive side to the competitive process, it is a two edged sword, and that balancing act, focussing on the competitive process and its impact is where the rest of the Act generally takes you.

Whether it is a merger or whether it is other sorts of behaviour. Whether there is a purpose, effect or likely effect of substantially lessening competition in a market, in other words, the focus is on the competitive process and in determining that the court, generally speaking, seeks to balance pro-competitive against anti-competitive aspects.

All we have sought to do here is to import that same logic, that same framework into section 46. So that it lines up with the rest of the Act.

What that also does, on the way past, is to eliminate ambiguities in the way the present Act works of ambiguities which many lawyers pointed out, really have made the workability of the Act very difficult.

That is where I would perhaps invite you, Michael to speak a little about how we manage through these recommendations, if the Government takes them on, to side step concerns about take advantage and such like.

MICHAEL O’BRYAN QC:

Thanks Ian. Everyone can see how excited he is about competition law, which is terrific! Not that I am not. But I can only improve marginally on what Ian has said.

The one thing that you want, and this is of market power or monopolisation provision to do, is to enable courts to strike down anti-competitive conduct but not strike down pro-competitive conduct.

It is the view of the panel that the current framing of our law makes that distinction difficult.

Our recommendation is to draft the law much more simply so that it does prohibit conduct but firms with market power that substantially lessened competition, inviting the court to go directly to the heart of the problem and to distinguish between conduct that is anti-competitive, engaged in by firms with market power, as opposed to conduct that is pro-competitive and knowing the distinction.

We have made one change since our draft report. In our draft report we also recommended a defence to be part of the law as well. We received a lot of comments upon that defence and the comments by and large were fairly negative to the defence that we framed.

We have reconsidered that, we have taken that on board. We have now altered that recommendation. We are recommending some principles guidance for the courts to take into account.

The draft provision that we recommend invites the court to consider those aspects of the conduct that might be engaged in that are pro-competitive and those aspects that are anti-competitive.

We think that that will work well and we think it will make cases easier for small firms to bring but most importantly it will make it easier for the courts to hear arguments about the essential question – is this behaviour anti-competitive in essence or pro-competitive in essence? And that is what the debate before courts ought to be.

QUESTION:

Minister, do you support the recommendation to set up a new body to oversee and drive these changes and then monitor them?

And putting pharmacy to one side, are there any other of the 56 recommendations that you see as being problematic for the Government to support?

MINISTER BILLSON:

Well I am trying not to give a running commentary on each of the recommendations. I know this must be gripping television, carrying live a discussion about competition law. This is probably something that none of us anticipated but thank you for the tease.

No, I won’t give a commentary on all of the recommendations. I will point to a couple. You talked about some of the institutional arrangements – the National Competition Council was a very important driver and, I suppose, agency to make the case for competition policy reform and renovation. A lot of that function that the NCC used to have, and that leadership role, has now diminished.

The panel makes an important case to replace it with an institution that can make the case that good competition policy and staying the course with competition reform delivers benefits for our economy and our consumers. But to keep making that case in such a way, free of the concern that was expressed that when the ACCC makes a case in a particular area, it may be stepping over its regulatory reach. So that policy catalyst and keeping the focus there is what the agency’s foreshadowed role is in the recommendations.

I think that is a pretty good point. It is a point I have been making – where are the champions of competition policy? Why is this not a more regular conversation in the economic journals and also in the day to day lives of people? I think that is a good recommendation.

Our instincts generally are for smaller Government, so here we are losing one agency and the proposition is to propose another one with a sharpened focus that takes account of where we are at now in our economic and competition policy cycle.

There is also a recommendation there relating to infrastructure access and pricing, about filleting that out from the ACCC and let the ACCC focus on competition and consumer protection measures. That is an interesting recommendation.

I need to get my mind through that one and consult on that one to see whether that adds greater utility to the institutional arrangement that we have at the present time and that is part of the consultations that will be happening over the coming weeks because it involves the States and Territories as well.

PROFFESOR HARPER:

If I could just make one further point, Minister if I may, in respect of the proposed Australian Council for Competition Policy; a couple of points.

Firstly, the success of the Hilmer reforms was very much due to the fact that there was the former National Competition Council to drive those reforms.

We very much thought that a reinvigorated body was necessary to drive these reforms as well. But the ACCP, as opposed to the NCC, the ACCP is supposed to be a national body – that is to say not a Commonwealth body.

The Minister made the point before that many of the recommendations in this report are able to be implemented either by the Commonwealth in accompany with the States or by the States acting unilaterally or together without the Commonwealth. And the ACCP is designed to be a body which represents if you like all of the jurisdictions, they all have representation there and that body becomes an overarching coordinating council for work that is done right across the Commonwealth.

Comparing the outcomes of different trials, looking at the experience of different groups, encouraging one another to move on with the sorts of reforms that are being discussed here.

That is the difference with the NCC and it was put to us quite strongly by the State Governments that this would be a very valuable thing for them.

On the process of implementation, again the Minister earlier on made the point that a number of these recommendations would require the States agreement or in fact are to be carried by the States because they are within their jurisdictions.

Can I point out that in this final report, we have taken the whole question of implementation extremely seriously. This is not just a report filled with ideas and proposals and possibilities.

There is a very full chapter on implementation which is wholly new compared with the draft report. That chapter on implementation spells out a road map, giving priorities, assigning different reforms to different levels of Government and giving the suggested timings.

We have gone down to the level in an appendix of actually producing model, legislative provisions, that is draft legislation, which could be considered particularly by the Commonwealth in regard to changes proposed here for the CCA.

So it is a question of – yes, here is the idea, look this is what it actually could look like in black and white, to give you a sense not just of the concept but the draftsman’s drawings so you can actually see what it might look like if it were put into the law.

Implementation is a very important part of what we have recommended here in this final report.

QUESTION:

Minister, let me go for a question that was asked before but how much stomach do you have for a fight in this area? Because a lot of these things which rest power away from those, like the taxi industry, into the hands of consumers is obviously a good thing and will be popular but each hurdle is going to be you buddying up against a vested interest.

MINISTER BILLSON:

Look there is an appetite to implement a reform agenda of this kind. We have got to work through the specifics of these particular recommendations, recognising that in some areas of the economy long established arrangements have been to the advantage of some but may be to the detriment of many. That is always a challenging space to implement reform and that is why consultation is important.

The panel has recognised in some of the more contentious areas a thoughtful transition strategy may need to be accompanied by whatever decision is finally taken. So I am not expecting everybody will be out there chanting ‘Let’s have every recommendation implemented!’

I am sure there will be people as has been drawn out through the consultative process that have quite a different view. But we need to re-energise competition policy in our economy.

The momentum has waned and the gains to consumers and to the economy of the Hilmer reforms are in some respects that momentum has drifted away.

This report will be crucial about putting what is needed next up in bright lights so that everyone can see what an objective, evidence based assessment of the next action steps look like and I imagine the Electorate will hold us accountable to our performance and the new institutional arrangements that Professor Harper has outlined also has a role in commentary and I suppose a scorecard on reform appetite and I expect it will not just be the Commonwealth that is getting scored.

It will be the States and Territories as well and I am hopeful consumers say we have got a view to be factored in here as well in addition to those with the very close vested interest in these policy areas.

QUESTION:

Are you comfortable or can you tell us a bit about the process of how this will link in with the Agricultural White Paper and whether or not areas like collective bargaining, do you think, may get hold of by the National Party in terms of agricultural exports

MINISTER BILLSON:

I am very comfortable about the process. The Agricultural White Paper process has been a distillation of input and thoughts that have come forward and that has been a very collaborative process.

In relation to competition policy issues this is the main game, this will set the framework. Some of the recommendations go to those points.

The panel and Professor Harper have recommended a refinement and recalibration of the collective bargaining machinery so that it is more useable so that we do not have to know every participant to get going, that the likely counter parties can be a number not just one. But if participants come in and out you don’t need to start the process all over again.

They are enormous disincentives to use collective bargaining; we saw that in dairy in the south west of Western Australia. There is also a proposition to take it a step further, to offer collective boycott as a machinery that is available to smaller parties that combine in order to engage with much larger parties.

In the small business space the access to remedies is a real focus of the report bearing in mind that if the final adjudication is in the court for many small businesses you will be broke, homeless and probably lost your mojo as well as your business well before the matter is determined in the courts.

Here there was a clear recognition that those sorts of remedies need to be able to be activated in a more timely way. The value of state based small business commissioners.

The Government’s initiative for a small business and family enterprise ombudsman to get an alternative dispute resolution pathway in place so that we can resolve differences and everyone can get back to business and that is in everybody’s interest. Because in many cases if a matter ends up in the court. Often the small parties are on the back foot before that even begins.

So there is a range of things in there that I think will complement the work in the agricultural white paper.

Our focus is on economy wide measures primarily, these will have great utility to a number of particular sectors given the nature of those industries and those economies.

Thank you ladies and gentlemen, thank you for your interest today.