Peter Costello

Media Releases

Major Package of Trade Practices Act Reforms

NO.052

MAJOR PACKAGE OF TRADE PRACTICES ACT REFORMS

The Treasurer announced today a major package of amendments to the Trade Practices Act 1974 (the Act) to improve the operation of fundamental provisions in the Act and to enhance administrative processes that have a major impact on business, particularly small business.

Consultation with the States and Territories on relevant changes announced today have also commenced, as required by the intergovernmental Conduct Code Agreement.

Introduction of Dawson Package of Amendments to the Act

Legislation to implement the majority of the recommendations of the Review of the Competition Provisions of the Trade Practices Act (Dawson Review) will be introduced before Parliament rises this month.

The Dawson Review was the most comprehensive review of the competition provisions of the Act for over a decade and provided an opportunity for business and other interested parties to participate in a thorough consultation process.

The Australian Government sought and received the support of the States and Territories for the draft Bill as required by the intergovernmental Conduct Code Agreement.

The Dawson Review found that the competition provisions of the Act have served Australians well. However, the Review recommended a series of changes, largely directed at improving administrative processes, to enhance the timeliness, transparency and overall accountability of Australia’s competition regulation.

New merger processes

The Bill will establish a voluntary formal merger clearance system — to operate in parallel with the existing informal merger clearance system — and provide for merger authorisation applications to be considered by the Australian Competition Tribunal.

While the Dawson Review found that the informal system of merger clearance conducted by the Australian Competition and Consumer Commission (ACCC) can be quick, inexpensive and flexible in many circumstances, it identified a lack of certainty for business as a clear disadvantage:

  • There is no statutory time limit on the ACCC’s informal system;
  • The absence of an appeals mechanism may allow the extraction of undertakings that go beyond the competition concerns of a merger;
  • The lack of a legal requirement for the ACCC to provide reasons for its decisions prevents the development of a body of precedent; and
  • There is no certainty of immunity from later legal action even if the ACCC has granted informal merger clearance.

The informal system will continue to answer the needs of straightforward mergers. Parties to more complex mergers can utilise the informal system to address ACCC concerns but, when they are ready to proceed, the formal system will provide the certainty of legislated time limits, require disclosure of reasons, allow the applicant to appeal to the Australian Competition Tribunal, and provide immunity from legal action should the clearance be granted.

Non-merger authorisation processes

The Bill imposes time limits on the ACCC for the consideration of non-merger authorisation applications and provides the ACCC with the discretion to waive, or reduce the filing fee in appropriate circumstances.

Joint ventures

The Bill provides a joint venture defence to the exclusionary and price-fixing provisions. This means that while cartel conduct will continue to be prohibited outright, genuine joint ventures will be considered on the basis of a competition test.

Increased penalties for breach of the competition provisions

The Bill introduces higher penalties for breaching the competition provisions, as a means of better deterring corporations from engaging in anti-competitive behaviour. The maximum fine for corporations will be the greater of $10 million or three times the value of the benefit from the anti-competitive conduct, or where the value cannot be determined, 10 per cent of the annual turnover of the body corporate and all its related bodies (if any).

Benefits for Small Business

Notification process for collective bargaining by small business with big business

As part of the Bill, the Government will reduce the regulatory burden on small business by introducing a notification process for collective bargaining by small business as an alternative to the authorisation process. It also provides that third parties can make a collective bargaining notification on behalf of a group of small businesses with a specific target.

To ensure collective bargaining benefits for small businesses dealing with large businesses, there is a transaction limit of $3 million in any 12 month period. However, the Government recognises that there are businesses with high turnover and small profit margins which should have a higher transaction limit and the Bill provides that a higher limit can be set by regulation. The Government considers there would be a range of businesses suitable for a higher limit, these could include motor vehicle dealers, motor vehicle repairers, petrol station owners and some agricultural businesses. The Minister for Small Business and Tourism will develop proposals for the Government’s consideration in respect of these regulations.

The Treasurer, in consultation with both the Minister for Small Business and Tourism and the Australian Competition and Consumer Commission, will determine the fee for collective bargaining for small business in the regulations. The Australian Government accepts the Dawson Review comment that “if a fee is to be charged for notification, it should be substantially less than the fee charged for an application for authorisation”, which is currently $7,500.

Government Response to the Senate Inquiry into ‘The effectiveness of the Trade Practices Act 1974 in protecting small business’

The Government will also table today its response to the Senate Inquiry into ‘The effectiveness of the Trade Practices Act 1974 in protecting small business’. Eight of the 17 recommendations made by the Senate Inquiry have been accepted by the Government, either in full or in part. The remaining recommendations were not accepted because they were either unnecessary or because they are ill conceived and inappropriate.

The Government response is guided by the findings of the Government Senators. Their suggested changes have been largely accepted by the Government, with modifications to some proposals to clarify their impact.

Most changes are directed at clarifying the prohibition on the misuse of market power and extending the application of the prohibition of unconscionable conduct in business transactions in sections 46 and 51AC of the Trade Practices Act 1974.

The Government considers that section 46 should be amended to provide some additional guidance to courts in the consideration of predatory pricing cases. Section 46 should also be amended to ensure it can stop anti competitive leveraging of market power by firms and to ensure arrangements between firms are taken into account in the assessment of market power.

The Government also considers that section 51AC should be amended so that it applies to the supply or acquisition of goods or services by businesses priced up to a value of $10 million. The section should also be amended to make it clear that courts are able to consider terms enabling a unilateral variation of a contract when they are assessing unconscionable conduct.

The Government has not accepted the proposal to allow the ACCC to use its coercive information gathering powers after interlocutory court proceedings have started. The Government considers the extensive existing powers of courts to compel corporations to disclose information before trial to be adequate.

The full text of the response may be found at www.treasurer.gov.au.

CANBERRA
23 June 2004

Contact: David Alexander
02 6277 7340

23 Jun 2004

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