Which party has the best competition policy?
Posted by Julie Clarke on 15 August 2010
It may seem a bit of a no-brainer, but we should at least ask the question, especially as the new Government will be responsible for replacing current ACCC boss, Graeme Samuel, who will step down from his current position in 2011.
Labor has, of course, traditionally been much stronger on competition policy. The Whitlam Government introduced the TPA (which the Rudd/Gillard Government has re-named the CCA – effective 1 January 2011) and were responsible for the most significant reforms of the Act – the introduction of the National Competition Policy (including access regime) by the Keating Government and the criminalisation of cartel conduct by the current Government (despite its flaws and ultimately rushed implementation, they moved on it when the Liberal’s failed, despite Dawson recommendations and years of promises).
More recently, Labor recognised the flaws in the ‘Birdsville Amendment‘ introducing predatory pricing rules and unsuccessfully tried to amend them soon after the Rudd Government took office.
On the downside, it has conducted various recent reviews that have not really led anywhere. The creeping acquisition review was drawn out – two discussion papers were released, no real response/report produced, but rather a bill introduced which purported to address creeping acquisitions by amending the definition of market (widely thought unlikely to have any practical impact at all – and the bill has, in any event, lapsed following the calling of the election). In the end it’s a good thing that the Government didn’t proceed with most of the proposals mooted for creeping acquisitions (it was particularly pleasing that it killed off the Xenophon/Zumbo ‘Richmond Amendment‘), but it would have been preferable if they’d just reached the conclusion that either (a) there was no real problem with creeping acquisitions or (b) even if there was some limited problem with them, there was no practical way to implement meaningful reform. In the end, the proposed legislation appeared designed only to enable the ALP to claim that they had fulfilled another election promise. There is also an ongoing inquiry into the definition of ‘understanding’ in the TPA that appears to have fallen off the radar.
In addition, although the Rudd Government started with a dedicated Competition and Consumer Minister (Chris Bowen), the current Minister, Dr Emerson, although certainly qualified for the job, is also Minister for Small Business, Independent Contractors and the Service Economy and Minister Assisting the Finance Minister on Deregulation. As a result we tend to hear a bit less about competition policy than we might otherwise have with a dedicated Minister (although the same can be said of the Coalition in this respect).
Legislative drafting is also a bit nightmarish – although this is not necessarily unique to one party. Following a major review of consumer law provisions and a nationalisation of consumer policy (in itself to be welcomed) we now have an incredibly ‘messy’ Act – most consumer provisions now appear in a schedule, with lots of ’empty’ bits in the body of the Act and an insane numbering system for the competition law provisions (s 44ZZRD etc). That is not to mention the the highly verbose and technical language adopted in the provisions themselves. It would have been nice if the Government had at least taken the opportunity to do a tidy up and renumbering of the competition provisions, but ultimately that’s an issue of style over substance.
However, the fact that Dr Emerson is in the midst of a verbal stoush with Frank Zumbo and has even issued a press release listing what he describes as ‘Zumbo’s Zany Ideas’ makes Labor more appealing. Not because of the stoush per se, but because of the public recognition that the ‘Birdsville Amendment’ (which the Liberals passed under the Howard Government) and the Blacktown Amendment, Richmond Amendment, forced divestiture powers and unconscionable conduct reforms proposed by Zumbo are ‘Zany’ and don’t feature in Labor’s competition policy outlook. Although Zumbo claims Emerson’s criticism of his ideas is extraordinary and that there are better things the Minister could be doing, I find the reference to Zumbo’s policy ideas (which he has repeatedly promoted in public forums – particularly his various op-eds) perfectly appropriate and useful in assessing the Government’s position on various questions of policy. I might of thought Zumbo would have been more upset if the relevant minister had not taken any notice of his proposals; it would appear the problem is not Dr Emerson referring to the proposals, but rather his dismissal of them.
As a result, despite the rushed effort to get some legislation through and the lag-time associated with some other reviews, there appears at least to be a commitment to strong and sensible competition policy.
The Liberals say they will review the Trade Practices Act … again. Frank Zumbo claims this is long overdue, but there is little support for that proposition among experts and details are lacking on the purpose of the proposed review. In this respect, Zumbo suggests that Australia has one of the ‘weakest competition policies in the world’, especially compared with the US which he suggests has one of the strongest. It’s not at all clear on what basis he makes such an absurd claim (for example, one of his suggestions is that Australia introduce price discrimination laws like the US – perhaps he has not checked to see how frequently such laws are actually enforced in the US and what this might say about genuine concern over such conduct). Zumbo further claims it’s been 10 years since a major review – however the Dawson Review (initiated by the Howard Government) Committee only reported in 2003, it took years for most proposed reforms to be implemented by the Liberal Government and it took until the Rudd Government for criminal penalties (recommended by Dawson) to be implemented (effective from 2009). In the meantime there have also been many reviews into other aspects of competition policy. Thus, while there’s scope for some tweaking, it’s time to let the current reforms settle in before any major review becomes worthwhile (unless the review is confined to repealing the Birdsville amendment and renumbering the provisions – I’d be all for that). In this respect, see John Durie’s analysis of the proposed review, concluding that “If the review was aimed at simplifying the law rather than being a smokescreen for fictitious, unenforceable or contradictory small-business gifts, then maybe Hockey is on to something”. The fear is, however, that the proposed review would be directed toward benefiting small business, which is not (and should not be) the purpose of competition policy.
On the upside, the Liberals did eventually implement many of the Dawson Committee proposals. They also, like the Government, opposed the Richmond Amendment proposal. However, they do favor continued efforts to legislate against ‘creeping acquisitions’ and, speaking in Parliament, shadow competition Minister Bruce Billson, made favorable references to the drafter of the Richmond Amendment, Frank Zumbo, and his small-business agenda, stating: ‘I talk with academic experts of considerable stature and insight such as Professor Zumbo’. Zumbo is, however, the only academic of whom I am aware that is pushing this agenda. Billson’s remark, in the same speech, that he could ‘only think of one occasion where it has been asserted that there is no need to examine these issues’ might suggest that he’s been speaking to a fairly narrow range of interest groups; perhaps I have too, for I cannot think of an occasion in which I have spoken to a competition law or economics expert (practitioner/academic) where it has been asserted that there is a need to re-examine this issue.
In addition, despite initiating the last major review, there appears a lukewarm commitment by the coalition to implementing meaningful (or sensible) change in competition policy. The last piece of ‘competition policy’ implemented under the Howard Government was the Birdsville Amendment (drafted by Zumbo and introduced at the behest of Barnaby Joyce following a visit to the now infamous Birdsville pub). When discussing the Bill, Joyce seemed convinced that competition policy (and this bill in particular) was all about protecting small business and went to great lengths to explain his motives, stating in part (I kid you not)
“It might be a joke, but I use the example that even Jesus Christ, when he was looking for disciples, went and found small business people. He went out and found fishermen. Even just looking at that as an example, he found people who had the freedom to make their own decisions on whether to stay or go; they did what they wished. It is a very important point. I do not know how he would go if he turned up today and he had to stand at the back of a queue at a major bank and scream to people to listen to a message. That is also part of why I have such an entrenched fervour for the protection of small business. It is a key thing that we need to look to.
Within the National Party there is one thing that is unique about all of us, every senator who sits in here. We are all small business people, the whole lot of us … Finally—and I hear some people denigrating me, which I do not think is needed—I would also like to acknowledge the support and the hard work of Professor Zumbo. I do not feel that he is welded to any political group. I believe that he has a belief in small business. When I read him in the Australian Financial Review I see that he understands legislation and the Trade Practices Act like nobody else I know. … he has been a great advocate for small business. I … hope the Senate gives strong support to this bill … I look forward in the future to progressing other issues pertaining to small business”
Competition policy is not about ‘protecting small business’ at all cost (it may protect small business from anti-competitive tactics employed by its rivals, but it is not designed to protect small business where they lost custom due to inefficiency) and this bill (and its motives) set a frightening precedent. The Birdsville Amendment on predatory pricing is bad law. So far no real damage appears to have been done (because the provision has never been tested), but the fact of its introduction suggests more pandering to interest groups (or particular politicians) than any sensible policy direction – and the coalition compounded this with their opposition to a subsequent amendment bill introduced by the Labor party (which would have removed the inappropriate reference to market share introduced by the Birdsville bill).
Government’s obviously aren’t elected on competition policy alone, but if they were you would have to think Labor would have the numbers.