Fair Play, Fair Competition and Economic Dynamism
COSBOA’S National Small Business Summit, Melbourne
Wednesday, 5 April 2023
I acknowledge the people of the Kulin Nations, the Traditional Custodians of the land on which we gather today.
I pay my respects to their Elders, extend that respect to other First Nations people present today, and commit myself, as a member of the Albanese Government, to the implementation in full of the Uluru Statement from the Heart.
I would also like to acknowledge COSBOA for inviting me to speak today.
I also recognise the work of today’s panellists: Bruce Billson, Stuart Clues, Will Day, Dominique Lamb and Mick Keogh.
Before we begin the panel discussion, ‘Thriving in a competitive economy’, we need to talk about printers.
For all the talk over recent decades about paperless offices, my guess is that your office, like mine, contains at least one printer.
For those of you who are leasing hardware and software from Fuji Xerox, you may have received notification that terms in your contract are now void.
Last August the Federal Court found 38 contract terms in 11 of Fuji Xerox’s small business contracts were void and unenforceable (ACCC 2022a).
The unfair contract terms included providing for automatic renewal, excessive exit fees and unilateral price increases.
As my fellow panellist Mick Keogh pointed out at the time, Fuji Xerox’s unfair contract terms allowed it to ‘leverage the significant power imbalance between it and small business customers to impose unnecessary and unjustifiable terms’.
Competition involves winners and losers. Some just play better than others on the day – noting the Raiders have a pretty good record against the Storm of late.
But like the football, there are rules to make competition fairer. And it’s the Government’s job to strengthen those rules and get the settings right.
So my brief remarks today will focus on three aspects of fairness – unfair contract terms, unfair trading practices, and market dynamism.
Unfair contract terms
For many small businesses, there’s no clearer example of unfairness than a big company handing you a standard form contract loaded with unfair terms and being told to ‘like it or lump it’.
One of the first things the Albanese Government did last year was strengthen unfair contract term protections. We prohibited the use of unfair terms in standard form contracts.
If companies put unfair terms in their contracts and a court finds they are unfair, they can now cop a penalty from the court (Collins and Leigh 2022).
Small Business Minister Julie Collins covered this in her speech yesterday so I won’t go into too much detail.
In short, these reforms to unfair contract term protections have introduced civil penalties. This means the ACCC and ASIC can now ask the court to fine big businesses that still try to pull one over.
On top of that, these reforms will apply to more Australian small businesses than before.
We widened the eligibility threshold.
If your business has fewer than 100 employees, you will be covered.
If your business has an annual turnover of less than $10 million, you will be covered.
These important reforms were passed through the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022, which I introduced late last year.
These reforms come into effect in November 2023.
They will make contracts better for you and help create a fairer economy.
Unfair trading practices
As well as strengthening the Australian Consumer Law (ACL) on unfair contracts, there is the matter of unfair trading practices which aren’t covered under the existing law.
A review of the ACL in 2017 found evidence of persistent unfair business practices and recommended exploring how an unfair trading prohibition could be adopted in Australia (Consumer Affairs Australia and New Zealand 2017).
Right now, the ACL bans several specific unfair trading practices, but there is no general ban on unfair trading practices.
Consumer ministers agreed to progress consideration of unfair practices in late 2020 (Ministers for Consumer Affairs 2020). Under the Albanese Government, this work is now being led by Assistant Treasurer Stephen Jones.
More recently, the ACCC digital platforms report on regulatory reform supported an economy-wide ban on unfair practices (ACCC 2022b).
This includes the digital space. Four in five Australian households made an online purchase last year, with total online spending topping $60 billion (Australia Post 2023).
This is a good thing for small businesses looking to expand their reach.
But, as the ACCC identified, there are concerns about digital platforms and possible consumer and competition harms.
Dark patterns are one concern.
Dark patterns are subtle design tricks used by companies on their websites.
These patterns deliberately trick users into doing things they did not mean to do. Or they discourage behaviour that’s bad for the company (Wired 2020).
You’ll know what I mean if you’ve ever tried to unsubscribe from a digital streaming service.
The Norwegian Consumer Council wrote a whole paper about this very topic. In a nod to Hotel California, the title of their paper was ‘You can log out, but you can never leave’ (Norwegian Consumer Council 2021).
The paper compared the process of signing up to Amazon Prime against the process of cancelling a subscription, stating that:
‘Consumers who want to leave the service are faced with a large number of hurdles, including complicated navigation menus, skewed wording, confusing choices, and repeated nudging’.
It’s just one of many potentially unfair dark patterns used by web designers.
The ACCC lists other concerning practices such as false reminders like low-stock warnings or false countdown timers (ACCC 2022b).
There’s also tricks like preselected add-ons or using illogical colours such as a red button for yes, and a green button for no (ACCC 2022b).
And there’s search engine manipulation, such as when food delivery companies impair the ability of restaurants to attract customers by ensuring the delivery company’s site appears above the restaurant’s in internet searches.
Unfair trading practices aren’t new.
The Australian Competition and Consumer Commission has acted against them under existing laws with mixed results.
In 2015, the Federal Court ordered AGL South Australia to pay a $780,000 penalty and refund 23,000 customers for making false and misleading representations about discounted energy plans (ACCC 2015).
More recently, the ACCC alleged Medibank had engaged in misleading conduct by making false representations to members about benefits in its health insurance policies.
The ACCC lost its claim even though the Federal Court said Medibank had acted ‘harshly’ and ‘unfairly’ (ACCC 2018).
In another case, the ACCC was unsuccessful in bringing action against a VET FEE-HELP diploma provider that used door-to-door sales in disadvantaged communities, promising students a free laptop, and promising that the courses were free if the students’ earnings stayed low. That behaviour didn’t breach the ACL.
Meanwhile, the Italian Competition Authority fined Facebook €10 million for misleading conduct on data protection.
Italy operates under European Union law, where unfair trading practices are banned. The EU laws prohibit misleading action and omissions, and aggressive commercial practices.
Many other countries such as the UK, US and Singapore prohibit unfair trading practices. The US banned unfair trading practices in 1938. Today, the provision is being used to protect Americans against unfair practices that would not have been dreamed of eight decades ago.
The Albanese Government is looking at international jurisdictions, and the recommendations of our agencies, to shape Australia’s competition and consumer laws.
We’re considering the ACCC’s recommendations in its ongoing reports into digital platform services.
In September last year, Commonwealth, state and territory consumer ministers announced we would consult on proposed unfair trading reforms to ensure Australia has the right regulations in place.
Whatever path we take on this important area of consumer law, we know that competition depends on strong safeguards for Australian households and small businesses.
They’re meshed together in our laws, regulation and in practice.
When laws allow a firm to get away with ripping off consumers it can create the wrong competition incentives.
Other firms in the market see bad behaviour go unpunished and protect their own patch by employing the same dodgy tactics.
Soon enough there’s a race to the bottom in dodginess.
The ACCC saw this happen in the 2010s when electricity retailers engaged in door-to-door selling.
The ACCC said the retailers knew the sales tactics were resulting in bad behaviour but refused to address it for fear of losing out to their competitors (Sims 2018).
Consumer protections – and strong enforcement and compliance of them – improves consumer wellbeing.
And let’s not forget that small businesses are often consumers too.
But consumer protections also foster effective competition.
They help drive a race to the top in service quality.
Fair Competition and Market Dynamism
But that race to the top can only occur if there is enough competition.
Since my appointment as Assistant Minister for Competition, I’ve delivered a series of speeches on the decline in market dynamism in Australia.
Thanks to new data, we are now able to analyse the economy at a fine-grained level and look at changes over time.
This reveals a troubling picture.
In the decades leading up to the pandemic, the new business start-up rate declined. Setting aside non-employing small businesses, the new business startup rate was lower in the 2010s than the 2000s.
In most industries, market concentration has risen. As everyone in small business knows, a few big firms now dominate most major markets.
In the mid-1980s, the top five listed Australian firms were Westpac, CBA, NAB, BHP and ANZ. Four decades later, the top five are Westpac, CBA, NAB, BHP and CSL.
Economic ministers Jim Chalmers, Julie Collins, Stephen Jones and Katy Gallagher are keenly interested in the role that competition reform can play in boosting productivity.
Additionally, our colleague Daniel Mulino is chairing a House of Representatives’ inquiry into promoting economic dynamism, competition and business formation.
As I said earlier, whether it’s the sporting field or any other arena, fairness is a fundamental Australian value.
As a small business, you come up against bigger opponents, bigger suppliers and bigger business customers.
But it doesn’t faze you so long as one condition is met: everyone is on a level playing field.
When the playing field is tilted – like it was in unfair contracts, like it was when independent mechanics couldn’t get access to a vehicle’s digital information – we’ve taken action to correct it.
The Government values the fair go, fair play, and yes – fair competition.
It’s good for startups, good for business productivity, and it’s good for Australia.
* My thanks to the officials in the Australian Treasury's Structural Analysis Branch for invaluable assistance in preparing these remarks.
ACCC (Australian Competition & Consumer Commission) (2015) AGL SA ordered to pay $700,000 penalty and to offer refunds to consumers for false or misleading discount representations, accessed March 2023. (media release 29 April 2015)
ACCC (Australian Competition & Consumer Commission) (2018) Full Federal Court dismisses ACCC appeal against Medibank, accessed March 2023. (media release 20 December 2018)
ACCC (Australian Competition & Consumer Commission) (2022a) 38 contract terms in 11 Fuji small business contracts declared unfair and void, accessed March 2023. (media release 12 August 2022)
ACCC (Australian Competition & Consumer Commission) (2022b) Digital platforms services inquiry: Interim report No. 5 – Regulatory reform, accessed March 2023.
Australia Post, 2023 Inside Australian Online Shopping: eCommerce Industry Report, accessed March 2023.
Collins J and Leigh A (2022) Opinion piece: Policy banning unfair contracts will shield SMEs from exploitation, accessed March 2023. (The Australian 9 August 2022)
Consumer Affairs Australia and New Zealand (2017) Australian Consumer Law Review: Final Report, accessed March 2023.
Ministers for Consumer Affairs (2020) Meeting of Ministers for Consumer Affairs Friday 6 November 2020 (Communiqué), accessed March 2023.
Norwegian Consumer Council (2021) You can log out, but you can never leave, accessed March 2023.
Ravenscraft E (2020) Wired, How to spot – and avoid – dark patterns on the web, accessed March 2023.
Sims R (2018) Companies behaving badly? Giblin Lecture (speech), ACCC, accessed March 2023.