Presentation to Business Centre "Sm a ll Business & the Tra d e Pra ctices Act" 23 February 20 0 1 Radisson Playford, Adelaide Professor Allan Fels Chairm an Australian Com petition & Consum er Com m ission Introduction The impact of the Trade Practices Act and the Australian Competition and Consumer Commission (the Commission) has increased significantly during the past decade. In my discussion with you today, I would like to convey the significance of the Trade Practices Act for that most vital group in the business community – small business. Some matters I would like to cover are: ? Why we have a Trade Practices Act ? Recent developments in Mergers policy ? Small Business and the Trade Practices Act Why A Trade Practices Act? Most people are aware of some of the things the Commission does. These are based around the Trade Practices Act. The object of the Act is to enhance the welfare of Australians with the promotion of competition and consumer protection through fair and informed markets. The role of the Commission is to apply the Act properly without fear or favour, for the benefits of consumers of all kinds throughout Australian including: ? Household consumers ? Small, medium and big business ? Farmers ? Local State and Federal Governments All people, especially in rural and regional Australian have an interest in being supplied competitive and efficiently at reasonable prices and where they are selling goods to sell to buyers who have to compete for their product. The broad objective of the Act is to allow each business to compete on its merits, makings its own decisions and treating consumers fairly. The Act provided two main objectives of achieving this objective:
? Preventing anti-competitive conduct, thereby encouraging competition and efficiency in business, resulting in a greater choice for consumers in price, quality and service ? Prohibits unfair trading practices to safeguard consumers from exploitation through misleading and deceptive conduct and other sharp selling practices, and preventing unethical businesses from gaining an unfair advantage of their rivals. Rig hts a nd Resp onsib ilities und er the Tra d e Pra ctices Act The Act and its implementation by the Commission is a two edged sword for business. It offers protection from, but demands avoidance of involvement in: ? Price fixing ? Market sharing ? Boycotts ? Misusing market powers ? Exclusive dealings ? Refusal to supply ? Resale price maintenance ? Misleading or deceptive conduct ? False and misleading representation ? Unconscionable conduct In addition the Act has provisions covering a role for the Commission in respect of authorising voluntary codes of conduct and the promotion of competition in the area of former public utilities. The role of the Commission is to apply the Act properly, without fear or favour to anyone, no matter how powerful economically or politically, for the benefit of consumers of all kinds everywhere in Australia, including household consumers; small, medium and big business; farmers; local, state and federal governments; and all people everywhere, in capital cities, country towns and farms. All have an interest in being supplied competitively and efficiently at low prices with good service; and where they sell, to sell to buyers who have to compete for their output. Small business benefits from the enforcement action taken by the Commission. The Act prohibits anti-competitive mergers, outlaws cartels, markets sharing and price fixing, and the misuse of market power – all of which frequently work to the detriment of small firms. ACCC Priorities Given all the functions and given the reach of the Act across all sectors, how does the Commission determine its priorities?
First, the Commission is not involved in debates about the future of statutory marketing boards, Australia Post or the like. It has made no submissions to the inquiries. Only very occasionally does the Commission enter policy debates most often with the support and encouragement of the government of the day. For example, the Commission’s promotion of the arguments for reforms in the compact disc market has been encouraged by the present government and by the relevant Ministers in the previous government. Second, the Commission is mainly concerned, so far as competition policy is concerned, with the non-traded goods and services market. Much of the work that it would otherwise need to do in the traded goods and services market is being accomplished by import competition now that tariffs and other forms of import protection have been reduced. Third, within the non-traded goods and services sector the Commission’s principal focus is on the less competitive parts of that broad sector. Fourth, the Commission does not favour detailed regulatory processes and outcomes and seeks to minimise them. For example in recent years there has been a drastic cutback in the role of prices surveillance. A few years ago some seventy-five companies had to pre-notify prices under the provisions of the Prices Surveillance Act 1983 . Now the number is around two. Deregulation of petrol prices, the most important area of notification, has been recommended to the government. Finally, The Commission continues to publish its priorities and it follows internal processes to keep it focussed on areas of highest priority. All people, especially in rural and regional Australian have an interest in being supplied competitive and efficiently at reasonable prices and where they are selling goods to sell to buyers who have to compete for their product. Competition law and policy took off in the early 1990’s and it was due to the fact that: ? The Act took on more serious dimension in terms of fines increasing from a maximum $250,000 to a maximum of $10 Million per offence per corporation. ? The Commission began to enforce consumer protection provisions more vigorously with a series of more high profile cases and other action in areas such as life assurance and telecommunications. ? There was a strengthening of the merger law with the merger test being changed from one of "dominance" to one of "substantial lessening of competition" bringing it into line with North American practice. ? Since 1995 the Act has been extended to apply to incorporated businesses trading within states and exemptions from the Act by State and Federal law were drastically cut back.
? There was a transfer of responsibility for the Trade Practices Act from the Attorney General’s Department to the more powerful Department of Treasury and, ? Cases and actions taken by the Commission have received publicity which has had a significant effect on awareness of the community, business and policy makers about the nature and importance by the Trade Practices law and competition. The Commission has a dual role as: ? A provider of education and information for business and consumers in relation to compliance with the Act. ? A national enforcement agency. It is this latter role that gains most of this ACCC publicity. But it is the information and support role especially to small business that is gaining momentum as the means of securing wider business understanding and acceptance of good Trade Practices compliance. The Commission is involved currently in 46 cases before the courts. There are a number of international cartels, which are attracting Commission attention and are likely to end up in court. For example over a period of 8 or 9 years, virtually all the multinational major vitamin producers around the world shared markets and fixed prices. Prices rose about 75% during that period most of it attributed to the price fixing. The main impact has been in the animal feed industry. I would emphasise that Australian owned firms were not involved. The multinationals have already been fined around a billion dollars in the US and there is an expectation of penalties to flow on here in Australia. However the majority of the Commissions actions do not end up in court but result in court enforceable undertakings being provided by the offending party or other forms of mediated settlement. Intercha ng e Fee Ca se The Commission is continuing to pursue its case against the National Australia Bank for price fixing in relation to credit card interchange fees. We have acknowledged that there may be a case to authorise the setting of interchange fees under the Act if they are based on legitimate costs and are set in a transparent and accountable manner. However, if the banks are not prepared to seek authorisation for a regime that meets these requirements, the Commission has no choice but to continue with legal action to enforce the Act. The Commission has held discussions with the banks to try to find ways to resolve these issues. The Commission also believes there is a need to examine the rules governing access to the credit card schemes. These discussions are continuing, however the Commission will require the banks to adopt reforms that adequately address each of our concerns about interchange fees and access before the Commission can consider ending the litigation.
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