23 September 2014

Interview with Chris Ilsley, 6PR Perth Tonight

Note
SUBJECTS: ACCC Fuel Monitoring Report, Harper Competition Review, Small business

This is a transcript of Bruce Billson's interview with Chris Ilsley on 6PR Perth Tonight. The main topic of discussion was the ACCC's Fuel Monitoring Report.

CHRIS ILSLEY:

On the phone we have the Federal Minister for Small Business and Consumer Affairs Bruce Billson. The Minister has given the ACCC more powers, it says, to weed out fuel rorts, scams and discrepancies. According to the ACCC Chairman Rod Sims more consumer friendly reports would shine a “bloody great spotlight on suspected rorts”. Welcome along Minister, thank you very much for your time.

BRUCE BILLSON:

Chris great to speak with you and your Perth Tonight listeners.

CHRIS ILSLEY:

Now what are we going to do about this? Are we really going to have something that’s going to be effective, that is going to actually achieve results or are we seeing more, dare I say it, toothless tiger activities from our friends at the ACCC?

BRUCE BILLSON:

Well there is a bit going on. You’d be aware the ACCC has instigated some litigation involving some of the bigger supermarkets and our petrol retailers and the relationships there. So they’re exercising those powers but one of the things that they have been doing for some years is producing an Annual Fuel Monitoring Report. Now as gripping and as fascinating as it is, doing a 12 month retrospective on what happened to fuel prices, it hasn’t proved to be that useful for consumers because the histrionics aren’t really what they are concerned about, it’s knowing how to get good value for your motoring dollar, it’s about shining a spotlight on areas that really look to be irregular, if I could put it that way. For example, why are certain regional centres that are about the same distance away from a terminal and having similar volumes with remarkably different pricing? Why is it when the international benchmark for LPG prices goes up within a nanosecond the price at the bowser goes up but when it comes down internationally, the price benefits move at a glacial pace for motorists?

These are the kinds of things we want targeted directly and a more regular, more timely, more action orientated account of what’s happening in the fuel market and that should put the spotlight on the area that Mr Sims has referred to.

CHRIS ILSLEY:

At the risk of appearing that I too am gazing over my shoulders, why haven’t we had this sort of regulation for a long time?

BRUCE BILLSON:

What’s happened is for about seven years the ACCC has had what’s called a direction, that was put in place by the previous Government and that was for this annual fuel monitoring report. Now if you or I sat awake at night and wondered what was happening in the longer term on fuel pricing and things of that kind, it’s a useful piece of work. But in terms of equipping motorists with timely information that can help them get value for their motoring dollar or in targeting a particular area that seems really odd where there might be a margin creep going on with certain fuel types or other practices within the fuel market which you and I would probably agree are one step up from clairvoyance in trying to pick where the fuel prices are going. You know, why do they bolt up when the school holidays are on the way? These kinds of things that really annoy motorists and require closer examination…

CHRIS ILSLEY:

Why don’t we have effective regulation through the ACCC to prevent this kind of thing from happening? I mean we all know it’s happening, we’ve talked about it for years, the fact that it’s happening is as obvious as the nose on your and my face, yet funnily enough we don’t seem to have any effective regulation in this country to deal with it.

BRUCE BILLSON:

Yeah it’s interesting. They’ve got quite a tool kit for the ACCC and what often happens is things that go on that look really curious and quite irregular might not be unlawful and this is where we need this more regular monitoring and this targeted examination of where things look really odd.

The other thing that’s happening right now Chris is that we’ve tasked, as was our election commitment, an independent panel headed up by Professor Harper to make sure the toolkit available to the ACCC is fit for purpose and reflects new challenges and the changes in our economy, given that it’s been more than 20 years since the ACCC’s toolkit was examined. So there are things going on at a number of levels and this is part of our effort to make sure consumers get value and that the commission has the tools it needs to do its job.

CHRIS ILSLEY:

So if something isn’t illegal or if there isn’t some sort of regulation to keep people honest, if they look at you and say ‘yeah we’re doing it so get stuffed.’ What are we going to do about it?

BRUCE BILLSON:

Well that’s what this inquiry, this tasking on particular areas of concern is about so that where the response might be as you characterise it, a stick it up your jumper when they maybe aren’t doing the right thing but aren’t breaking the law, that’s the kind of insights that we need to make sure that policy and the laws are up to scratch.

You’ve seen some action instigated about the sharing of petrol prices between retailers so they know almost to the minute what’s going on and what their competitors are doing. If you and I were running a petrol station we might edge up our prices by half a cent per litre and we might watch to see whether our competitors do the same. Then there is this crab walk up at fuel prices and which tools up the fuel retailers with a whole lot of information the motorist doesn’t have and that’s the sort of thing that needs to be examined and that’s what the ACCC is pursuing.

CHRIS ILSLEY:

What have been the effects of reigning in the shopper dockets with the major supermarket retailers?

BRUCE BILLSON:

We’ve had some preliminary information from the independent operators and their peak body, the Australian Petroleum and Convenience Marketing Authority, it’s a long word but they basically operate within the independent sector. They think about a billion litres of fuel is now being sold through the independents, it’s strengthened competition and it’s also enabled those smaller businesses to compete where those dockets are now within the margin of a reasonable profit.

What was happening before was that some of those discount dockets were huge and not able to be funded from within the fuel retailing business, money was being shovelled out of one part of another business in the supermarkets into the fuel area, that was wiping out independent retailers and then when the competitors were gone, you know what happens to prices…

CHRIS ILSLEY:

This is the whole point I was trying to make and this is where I believe our competition laws and policies are grossly ineffective in this country. The big question – why were the two major supermarkets even allowed to diversify into fuel anyway? They shouldn’t have been allowed to get into the fuel business. The regulations and the regulator should never have allowed them to go there in the first place.

BRUCE BILLSON:

Well four years I have been campaigning for this root and branch review. That’s what the Abbott team took to the past two elections that we needed to have an independent, objective, sober evaluation of whether our competition laws, the policy, the institutions…

CHRIS ILSLEY:

Minister with the greatest respect we didn’t need another review to tell us what we already knew. The question really is why were the major supermarkets even allowed to get into fuel retailing.

BRUCE BILLSON:

May I reciprocate the greatest respect comment and say with the greatest respect there are lots of observations that are shared around this topic but very little constructive practical action about what practical change you would make. That’s why we have said well what are the…

CHRIS ILSLEY:

Well the observation I’ve made here which I don’t believe you needed a committee to examine is that the major supermarkets should not have been allowed to get into fuel retailing.

BRUCE BILLSON:

Well a whole bunch of us have those observations Chris. What’s important and what your listeners and consumers want to know…

CHRIS ILSLEY:

Well the market share was already big enough. All you’re doing is allowing them to diversify into another area and increase their already market dominant market share.

BRUCE BILLSON:

The issue that is before us is those observations are insightful but what’s the action that you actually take? How do you change the law? How do you get those changes done in such a way that they have the impact of supporting consumers and supporting value for money and our economy?

CHRIS ILSLEY:

May I make a suggestion?

BRUCE BILLSON:

Yes sure.

CHRIS ILSLEY:

If you have a look at two acts in the United States. One of them is the Sherman Act of 1984 and the other is the Clayton Act of 1914. They might give you some idea of competition policy and also how to prevent people becoming market dominant. That’s a real problem in this country. The market dominance of the supermarket chains and what are they doing, going into fuel. They will get into other areas next and there doesn’t seem to be any regulation to control it and fuel prices are clearly being influenced by that.

BRUCE BILLSON:

The Sherman Act basically says aspire to be a monopolist but don’t ever behave like one. It’s a good piece of statute but what’s happened in the United States is over a century there has been separate court action, much of which has been taken by the private sector to point to changes in commercial strategies that amount to behaving like a monopolist.

Our law in Australia is quite different. It’s a black letter law that actually seeks to describe the kind of anti-competitive conduct that is unlawful. So it’s a different framework, a different schemer. That’s why we have this Harper Review because what you’re describing is a distinctly different approach to regulating competition or in the United States, the antitrust laws.

In Europe it’s very much a principles based approach Chris where they set out certain parameters and if you’ve breached those parameters they say on the surface we think you’re behaving anti-competitively, you come and tell us where you’ve got a legitimate business justification for your conduct and how it’s not damaging consumers.

So they are different arrangements and that’s why this review that we’ve instigated…

CHRIS ILSLEY:

They may be different arrangements Minister but what they do is they stop, in those areas, companies becoming dominant like Coles and Woolworths have here.

BRUCE BILLSON:

No….

CHRIS ILSLEY:

If we don’t do something in the next 20 to 30 years, the only effective companies we will have in this country will be Coles and Woolworths because they would have diversified into so many different areas that they will become absolutely market dominant.

BRUCE BILLSON:

I think you’re wrong there Chris. Those laws don’t stop people moving into other areas. What those laws do is stop strong dominant players behaving as if they are monopolists. There is quite a difference there, they don’t concentrate on size, they focus on conduct and a big business has a responsibility to make sure it’s not behaving as a monopolist, that’s the construct of the law in the United States. So it doesn’t actually say ‘you shall not do X, Y and Z’ it says don’t behave like a monopolist. If you behave like a monopolist there are antitrust laws in place to curtail that behaviour and in some cases reverse it…

CHRIS ILSLEY:

We don’t have any effective laws like that to stop the two majors behaving that way here do we?

BRUCE BILLSON:

What we have in our country is a broad provision called the misuse of market power provisions. It’s section 46. I’ve described it previously as a hunting dog that won’t leave the porch. It sees to do many things but in practice it hasn’t lived up to its billing. That’s another reason why we’ve had the Harper Review. It’s currently undertaking an examination of what changes you would make to that law within the legal system and the antitrust approach that operates in Australia to give it the teeth so it can deal with the misuse of market behaviour. That draft report has been released. Your listeners and stakeholders are encouraged to make a contribution and to share their view on what they think the future should look like up until about the middle of November.

So I think we are on the same page about the need for change. What we’re doing is being methodical and thoughtful about the nature of that change so that we don’t end up with what we think is a silver bullet solution that doesn’t achieve anything and then people will wonder why the homework wasn’t done properly in the first place.

CHRIS ILSLEY:

What’s going to happen when you try and get laws like this through the Senate? How do you rate your chances?

BRUCE BILLSON:

I’m reasonably optimistic. The majority of the cross benchers claim that they are supportive of effective and healthy competition in the marketplace. I’m hopeful given that that interest is there, given that a number are very focused on supporting enterprising Australians wanting to have a go to create employment opportunities, growth and prosperity for our country. I hope we’ll be able to show them that what’s proposed once, that’s finalised, adds to the vitality of our economy and our livelihood prospects for the future.

But you know as well as I do Chris, that’ll be an interesting conversation to have at that time and hopefully we’ll earn the support because we have argued there is a need for change and that’s why we’ve set about this objective process.

CHRIS ILSLEY:

In all the conversations we’ve had this evening I reckon that bit is going to prove most challenging.

BRUCE BILLSON:

I reckon it might be character building but we are up for it because I know my work’s done when this is the best country to start and grow a small business and we are not there yet but that’s where I put my efforts every day.

CHRIS ILSLEY:

Bruce Billson is the Federal Minister for Small Business and Consumer Affairs. Thank you very much for your time.

BRUCE BILLSON:

Chris good to chat and best wishes to you and your Perth Tonight listeners.