Address to the Australian Government Solicitor Civil Regulation Conference
WEDNESDAY, 2 NOVEMBER 2022
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I acknowledge the Gadigal people, the Traditional Custodians of the land on which we meet, and pay my respects to their Elders past and present.
Congratulations to the Australian Government Solicitor (AGS) for getting this conference back up and running after some challenging years for events.
The best part of being Assistant Minister is that I get the opportunity to meet some amazingly dedicated people and this group is no exception.
With everyone here today, I want to acknowledge the mountain of work you do acting on behalf of the regulators.
I am told that this team undertakes significant work for regulators including the Australian Competition and Consumer Commission, the Australian Securities and Investments Commission and AUSTRAC.
Competition law cases are rarely straightforward. There’s a reason that a competition offshoot of the CSI series is yet to grace our screens. That said, if anyone is planning to produce CSI: Cartel-Busting, I’ll be inviting Gina Cass-Gottlieb around to my office to watch the first season.
Nonetheless competition cases are of enormous importance.
They’re often complex.
They’re often hard fought.
And win or lose, judgments can have far-reaching consequences for the economy.
Take the air cargo cartel litigation, which I understand AGS worked on over a number of years.
Proceedings against 15 international airlines started between 2008 and 2010.
As well as the contested litigation, AGS helped mediate outcomes (AGS 2013) and, in total, penalties of $132.5 million were ordered by the Court (ACCC 2021).
The High Court ruled in the ACCC's favour in June 2017.
A long, long road.
But the case had major implications on how a market is defined and whether conduct occurs in a market in Australia (ACCC 2017).
Your expertise in landmark cases such as this is extremely valuable.
The Albanese Government believes good competition is the bedrock of our economy.
Like Adam Smith and countless economists since, we recognise that competitive markets are vital to ensuring that the consumers and workers get a fair deal.
We also know the danger that unchecked monopolists pose to our economy and our democracy.
Giving evidence to the US Senate recently, the Department of Justice’s top antitrust enforcer Jonathan Kanter quoted Senator Sherman’s warning that ‘if the concentrated powers of [a monopoly] are entrusted to a single man, it is a kingly prerogative, inconsistent with our form of government.’
Kanter went on to say ‘Yet we now know many such people who enjoy power over key markets, causing tremendous damage to our small businesses, the free flow of news and information, and the competitiveness and vitality of our national economy.’ (Kanter 2022)
Greater competition means better prices.
It means more choice.
It means more innovation.
Competition prevents monopolists exploiting their ‘kingly prerogative’ and harming democracy.
Our job in government is to get settings right.
So today I want to focus on the changes we’re making to improve Australia’s competition and consumer laws.
The Australian Constitution does not confer a specific legislative power on the Commonwealth to make laws with respect to competition.
Instead, the Competition and Consumer Act 2010 principally relies on the Commonwealth’s power to make laws with respect to corporations. Certain other powers – such as the trade and commerce power, territories power, and communications power – also provide some constitutional support.
Additionally, co-operation with the states and territories has been important in ensuring that the law applies to unincorporated entities.
The constitutional separation of judicial and executive powers has also influenced how our competition law has developed.
Administrative bodies such as the ACCC are constitutionally prohibited from exercising judicial power. This means it is the courts that are ultimately asked to make conclusive and enforceable decisions about breaches of the competition law and determine the penalty that should apply.
History paints a bleak picture of what the Australian economy was like before strong and effective competition laws.
In July 1974, Attorney General in the Whitlam Government, Lionel Murphy, introduced the Trade Practices Bill into Parliament.
Laying down the law, Murphy described an economy where restrictive trade practices had long been rife (Murphy 1974).
Always a passionate force, he wrote of ‘artificially high’ prices, and ‘economic dominance’ interfering ‘with the interplay of competitive forces’ (Murphy 1974).
He described ‘discriminatory action against small businesses, exploitation of consumers and feather-bedding of industries’ (Murphy 1974).
Murphy wrote ‘In consumer transactions unfair practices are widespread’ (Murphy 1974).
He thought consumers were ill equipped at a time when marketing was starting to occur on a more ‘organised basis’ (Murphy 1974).
The Trade Practices Act – now known as the Competition and Consumer Act – made cartels illegal, and prohibited the misuse of market power, exclusive dealing, agreements that substantially lessen competition and anti-competitive mergers (Leigh 2018).
Looking back, we have a great deal to thank Lionel Murphy for.
Consumer protection was given a stringent legislative basis, prohibiting misleading and deceptive conduct, mandating product safety and giving consumers the power to bring actions in court (Leigh 2018).
Hilmer Review and National Competition Policy
A lot has changed over the decades, not just the fashions but also our approach to competition policy.
A key moment was the 1993 Hilmer Report and the National Competition Policy reforms that followed in 1995 (Leigh 2022b).
As part of the reforms, governments:
• reviewed around 1800 restrictive laws and regulations
• established a competitive national electricity market, and
• subjected monopoly pricing to greater scrutiny.
The reforms also extended the competition law to all businesses across the economy.
The Hilmer reforms and National Competition Policy were one reason for the 1990s productivity surge. On one estimate, the average household today is $5,000 a year better off as a result of these reforms.
Dawson Review and Cartel Criminalisation
Approximately ten years after the Hilmer review, a committee led by Sir Daryl Dawson undertook an independent review of the competition law. Among other changes, the Committee recommended the introduction of criminal sanctions for hard-core cartel behaviour, including imprisonment.
Recognising the harm that cartels can do to consumers, businesses and the economy, a bill criminalising serious cartel conduct was introduced by the Rudd Government, passing both Houses in June 2009. These changes helped bring Australia into line with its major trading partners and developed nations (Bowen 2008).
Harper Review and Legislative Complexity
Then, in 2014, the Competition Policy Review panel (led by Professor Ian Harper) undertook a comprehensive review of Australia’s competition laws and policy.
A key focus was to identify impediments across the economy that restrict competition and reduce productivity.
The review Panel, in considering the operation of Australia’s competition laws, concluded that some parts of the Act were unfit for purpose and unnecessarily complex, imposing costs on the economy and businesses.
Much of the Harper Review was not implemented by the former government, though they did enact an effects test, the impact of which remains to be seen in practice.
Competition in Australia today
In recent decades, there have been significant changes in the Australian economy.
The job-switching rate has fallen.
The business start-up rate has declined.
The largest firms have increased their market share.
Mark-ups have increased.
In my view this all suggests that the Australian economy has become less competitive (Leigh 2022a).
Over recent decades, competition policy in Australia has been influenced by the ‘Chicago School’ approach, which took a relatively relaxed attitude to market dominance (Triggs & Leigh 2019).
However, a new approach has emerged.
The ‘New Brandeis Movement’ holds that excessive market concentration can harm consumers and dampen dynamism.
Too much market concentration, it argues, can lead to a less innovative and more sluggish economy.
Earlier this year, I travelled to Washington DC to meet with some of the key policymakers who epitomise this movement.
Senator Amy Klobuchar, author of Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age, is pushing in the Senate for a bill that would bar technology platforms from prioritising their own services over their rivals’ services.
Lina Khan, author of ‘Amazon's Antitrust Paradox’, heads the Federal Trade Commission, which is targeting acquisitions by digital platforms.
Tim Wu, author of The Curse of Bigness, helped President Biden draft an Executive Order on a whole-of-government effort to promote competition in the American economy.
Australia should not ignore this marked shift in the way that senior US officials are regarding competition policy.
Competition policy should be one of the factors that we consider when implementing regulation, given regulatory costs for new businesses are larger relative to their size.
Linking workers with new jobs faster will also encourage competition and dynamism, which we recognised through our Jobs and Skills Summit held in September this year and the white paper that will follow.
More work is needed to better understand if any policies can and should be used to boost competition and productivity growth.
More broadly, a range of important reviews may provide insights on our economy and the challenges we face.
For example, the ACCC will release its next digital platforms inquiry report shortly, which will likely recommend addressing some of the competition issues in this sector.
Next year, the Productivity Commission will hand down its five-yearly productivity review, which provides an opportunity to explore issues of declining market dynamism.
Increasing maximum penalties
Meanwhile, the Competition and Consumer Act continues to evolve.
In September, I introduced the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 to Parliament.
The Bill increases maximum competition and consumer penalties from $10 million to $50 million.
It also increases the turnover‑based penalty.
It goes from 10 per cent of annual turnover to 30 per cent of turnover for the period the breach took place.
Higher penalties will promote greater competition and better corporate behaviour.
This will ensure the price for misconduct is high enough to deter unfair activity that stifles competition and harms consumers.
It will make sure penalties aren’t merely another cost of doing business.
To increase accountability, maximum penalties for individuals will also increase from $500,000 to $2.5 million.
Unfair contract terms
Stronger deterrence is also critical to protect against unfair contract terms.
Say a big cleaning firm has a thousand small business customers (Collins 2022).
The big firm writes terms in its standard contracts allowing it to increase prices.
To make things worse, the contract said that if the small businesses don’t like the price rises, they have to pay huge penalties to cancel the contract.
Smaller companies often lack the resources and bargaining power to negotiate terms in standard form contracts.
And existing laws haven't stopped the use of unfair terms.
As the laws currently stands, contract terms found by a court to be unfair are unenforceable, but they're not illegal.
That's why the government will outlaw unfair contract terms.
If companies put unfair terms in their contracts and a court finds they are unfair, then they can expect to cop a penalty.
The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 gives courts the power to impose a civil penalty.
On top of that, more businesses will be protected.
We’re increasing the eligibility threshold from less than 20 employees to less than 100 employees.
We’re also introducing an annual turnover threshold of less than $10 million as an alternative test for determining eligibility.
These reforms are a long time coming.
They help improve small business confidence and protect consumers.
The bill has now passed both houses of parliament, and I am looking forward to it soon becoming law.
Thank you again for the opportunity to speak with you.
Today, I have outlined the Government’s perspective on competition.
Where we are coming from, our strong traditions.
The significant changes underway.
And the challenges ahead.
I appreciate that you argue the case for competition, and ultimately for consumers, day-in and day-out.
It’s challenging and important work – competition and effective regulation is critical for our economy.
ACCC (2017) High Court rules in ACCC's favour in air cargo cartel case [Media Release issued 14 June 2017] Australian Competition and Consumer Commission, accessed October 2022.
ACCC (2021) Garuda drops appeal, to pay $19m price fixing penalty in instalments [Media release issued 20 April 2021] Australian Competition and Consumer Commission, accessed October 2022.
AGS (2013) ACCC air cargo litigation Australian Government Solicitor, accessed October 2022.
Bowen C (2008) Second Reading Speech, Trade Practices Amendment (Cartel and Other Measures) Bill 2008.
Collins J & Leigh A (2022) Labor policy will stop small businesses getting taken to the cleaners, The Australian, 9 August 2022.
Kanter J (2022) Assistant Attorney General Jonathan Kanter of the Antitrust Division Testifies Before the Senate Judiciary Committee Hearing on Competition Policy, Antitrust, and Consumer Rights, Washington, DC, 20 September 2022
Leigh A (2018) Competition policy and inequality: Building on Lionel Murphy’s legacy Speech 31 October 2018, Australian National University, Canberra, accessed October 2022.
Leigh A (2022a) FH Gruen Lecture, Speech 25 August 2022 Australian National University, Canberra, accessed October 2022.
Leigh A (2022b) A zippier economy: lessons from the 1992 Hilmer competition reforms, Speech 17 October 2022, Sydney Ideas, University of Sydney, accessed October 2022.
Murphy L (1974) Second Reading Speech, Trade Practices Bill 1974.
Triggs A & Leigh A (2019) A Giant Problem: The Influence of the Chicago School on Australian Competition Law, Economic Dynamism and Inequality, Federal Law Review 2019, Vol. 47(4) 696–714.
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