Andrew Leigh

Competition And Consumer Amendment (Fair Go For Consumers And Small Business) Bill 2024
Second Reading Speech
House of Representatives, Thursday 15 February 2024

One of the summer's box office hits is Wonka—the prequel to Willy Wonka and the Chocolate Factory. Without giving too much away, it's the tale of how Willy Wonka takes on the chocolate cartel of Slugworth, Fickelgruber and Prodnose.

Between them, the cartel controls the chocolate market. Prices are kept high. Innovators are kept out. Big chocolate has the police in its pocket, and is willing to use every bitter trick to preserve its sweet control over the market.

For many Australian consumers, Wonka will resonate. In recent years, the Australian Competition and Consumer Commission has taken action against anticompetitive behaviour in pharmaceuticals, finance, waste disposal and building construction. When so-called competitors collude, the public pays the price.

As Wonka vividly shows, a lack of competition isn't just bad for consumers—like the chocolate-loving public. It's also bad for innovators, such as a new entrepreneur who uses giraffe milk. In the Australian economy, robust competition has been a major driver of economic growth. During the early-1990s, competition reforms helped unleash a surge of dynamism in the economy, leading to a rapid increase in productivity. Wage growth followed, and the income of the typical Australian household rose by around $5,000.Whether it is airlines, telecommunications, supermarkets, franchisees getting an unfair deal, or small businesses' cash flows suffering due to slow payments, we have seen too many examples of consumers and small businesses not getting a fair go.

Competition brings out the best from our companies. Innovation is more likely to emerge when firms test themselves against competitors, not when a monopolist dominates the market. Uncompetitive markets aren't just bad for growth; they're bad for fairness, too.

When consumers lack choice, prices tend to be higher, and service levels tend to be lower. When big business can push around small firms, suppliers suffer as well. When workers lack choice, wages can be lower.

Uncompetitive markets hurt the most vulnerable and worsen inequality. If you don't have a car, it's harder to shop around for the best deal. If getting a fair price from your supplier involves an annual phone call, then the well-heeled are more likely to make the call. It's no accident that payday lenders and door-to-door water cooler salespeople tend to proliferate in low-income communities.

Over recent decades, the problem of market concentration in Australia has become worse. Market concentration has risen. In 2001-02, the market share of the largest four firms averaged 41 per cent. By 2018-19, this figure had risen to 43 per cent. Price mark-ups have swelled. Meanwhile, the number of new firms with employees has fallen when measured as a share of the total pool of businesses.

These declines in market dynamism have coincided with a lousy period for productivity. In the decade before Labor took office, Australia recorded our worst productivity performance in the postwar era. Real wages flatlined. And, because earnings are the main source of income for most households, real household income growth was painfully sluggish.

But history shows us how competition reform can turbocharge competition. In 1992, Prime Minister Paul Keating tasked competition expert Fred Hilmer to lead reforms that would collaborate across federal, state and territory governments to boost competition.

In themselves, many of the reforms were small. In one case, a state law that banned bakers from starting their ovens before a particular hour in the morning was abolished.

But, by focusing attention on competition, the reforms added up. Assessing their impact in 2005, the Productivity Commission concluded that national competition policy had been a major driver of the 1990s surge in productivity.

That analysis estimated a permanent increase of 2.5 per cent in Australia's national income from competition reform. Today, that lift equates to around $50 billion a year, or around $5,000 for each and every household.

The challenges the Australian economy faces today are different from those of a generation ago.

We need to make the most of artificial intelligence and digitisation. It's vital to support the net zero transformation. We need to ensure that workers aren't unfairly prevented from shifting to a better job. And we must look after the most vulnerable.

Since coming to office, the Albanese government has been hard at work examining Australia's competition laws and policies.

We've increased the penalties for breaches of competition and consumer law. It's hard for small businesses to compete if larger companies use sneaky tactics to dominate the market. That's why Labor increased penalties for corporations engaging in anticompetitive behaviour from $10 million to $50 million, ensuring that the price for misconduct is high enough to deter unfair activity.

We've strengthened protections against unfair contract terms to help level the playing field in negotiations between big corporations and both small businesses and consumers. These reforms gave regulators the power to seek a court penalty for businesses that include unfair terms in standard form contracts. Small businesses and consumers often lack the resources and bargaining power to negotiate contracts, and previous laws against unfair terms did not provide adequate protections. While big business previously risked only an unfair term being declared void, our stronger protections mean that businesses can now face substantial penalties for using unfair terms and therefore will be motivated to ensure that their contracts are fair.We have appointed former competition minister Dr Craig Emerson to lead a review of the Food and Grocery Code of Conduct, to ensure that the supermarket sector is working as it should. With many families feeling the squeeze, it's vital that Australians pay fair prices at the checkout and suppliers get a fair price for their products. Dr Emerson will bring his wisdom and compassion to this vital area of economic reform.

The Australian Treasurer has directed the Australian Competition and Consumer Commission to investigate pricing and competition in the supermarket sector to ensure Australians are paying a fair price for their groceries.

This inquiry, the first of its kind in over a decade, will investigate the competitiveness of retail prices and allegations of price gouging in the supermarket sector. It's an important part of the government's broader efforts to boost competition and put downward pressure on the price of essentials for Australians. The Australian Competition and Consumer Commission will produce an interim report in 2024 and final report in early 2025 which will provide the government with findings and recommendations.

We will fund respected consumer group CHOICE to provide price transparency and comparison reports on a quarterly basis for three years. Starting from the second quarter of 2024, CHOICE will provide shoppers with better information on the comparative costs of grocery goods at different retailers, highlighting those charging the most and the least. The provision of this information will empower Australian consumers to make informed choices about food and grocery purchases.

We've established a Competition Taskforce located in the Commonwealth Treasury, to foster greater dynamism in the economy. Staffed by a crack team of competition experts and advised by a talented expert advisory panel, the taskforce's role is to produce practical policies that will boost competition and help fuel innovation and wage growth.

We need to ensure our competition policy settings are fit for purpose in the face of the big shifts underway in our economy, so we can make the most of digitalisation, the growth in services, the net-zero transformation, all while supporting our nation's most vulnerable.

The review will look at competition laws, policies and institutions to ensure they remain fit for purpose, with a focus on reforms that would increase productivity, reduce the cost of living and boost wages.

Among the Competition Taskforce's first priorities is to look at Australia's merger laws. When big firms join forces, the resulting entity has better economies of scale, which gives it the potential to benefit consumers. But if it wields significant market power, it can also drive up prices. At a time when many other countries are reviewing their merger codes, it's only sensible to consider whether Australia's laws need an update.

The taskforce is also examining 'non-compete clauses' and related terms that restrict workers from shifting to a better-paying job. Many workers have clauses in their employment contracts that make it harder for them to move to a better job. 'Non-compete clauses' used to apply only to well-heeled corporate executives, but in recent years, they're being used to prevent early childhood workers and hairdressers from shifting firms. When employees have fewer choices of where to work, they're less likely to earn a fair return for their labour. We'll have more to say on restraint-of-trade clauses in coming months.

More competition means better prices, which is why Labor committed at the last election to establishing a 'designated complaints' function within the Australian Competition and Consumer Commission. The Competition and Consumer Amendment (Fair Go for Consumers and Small Business) Bill 2024 delivers on this commitment, with designated complainants being able to raise significant or systemic complaints with the Australian Competition and Consumer Commission from July 2024.Consumer and small-business advocates have expressed the need for a consumer complaints framework that allows certain designated entities to bring evidence of significant or systemic market issues to the Australian Competition and Consumer Commission for consideration.

In cases of significant or systemic market issues affecting consumers and small businesses, it's often consumer and small-business advocates who play an important role in bringing publicity and attention to governments, policymakers and the community on serious and systemic issues impacting Australians.

This bill provides the framework to empower designated consumers and small-business advocates to bring forward evidence of significant or systemic market issues to the Australian Competition and Consumer Commission for a response in a timely and transparent way.

A range of entities may apply to the minister to be approved as a designated complainant, including a corporation, an individual, or an unincorporated association. This provides an opportunity for entities that represent the interests of consumers or small businesses in Australia to become designated complainants, regardless of the entity type.

Upon receiving a designated complaint, the Australian Competition and Consumer Commission will be required to assess the complaint and notify the designated complainant within 90 days of any action they intend to take.

If the Australian Competition and Consumer Commission proposes to act on a designated complaint, they must commence that action as soon as practicable and within six months. Any response by the Australian Competition and Consumer Commission will be based on their existing powers and functions under the Competition and Consumer Act 2010 and may include education, research, compliance and enforcement functions, or a combination of all of these.

The designated complaints function will promote transparency and accountability, with the minister and Australian Competition and Consumer Commission being required to publish certain information on the Department of the Treasury or Australian Competition and Consumer Commission website.

During stakeholder consultations a number of consumer and small-business advocates have indicated they support the establishment of a designated complaints function within the Australian Competition and Consumer Commission.

Full details of the measures are contained in the explanatory memorandum.