SUBJECTS: Public service back rubs, Cartels, Trade Practices Act, ACCC Small Business deputy
WEBSTER:
I wanted to talk to the Assistant Treasurer and Competition Minister Chris Bowen about this issue and another one which is much more important the promised crack down on big businesses, like the supermarket bullies who slash their prices to ruin their smaller rivals and run them out of town. Then jack the prices up again. Chris Bowen joins me on the line now. Good morning.
BOWEN:
Good morning Tim, Happy New Year.
WEBSTER:
Yeah you too and thanks for your time. Now firstly the backrubs, they were probably never justifiable, were they?
BOWEN:
Well that was our view in opposition and that remains our view in government. We're not talking about huge amounts of money in relation to the entire federal budget but we've taken the approach in opposition which will obviously continue in government that we need to have a very strict approach to government expenditure. Look, there are lots of public servants that work very, very hard and they need to be rewarded but we've taken the view that this is not an appropriate way of rewarding them and we're giving that message to the appropriate people.
WEBSTER:
Give them a pay rise and pay for their own back rub.
BOWEN:
Well, as I say there are lots of very hard working public servants but there are lots of very hard working people in my electorate working twelve hour shifts in factories as well who would love a back rub at the end of the day I am sure. But they don't get one. It's just about being really strict on government revenues, putting downward pressure on interest rates across the board. I am not saying this particular policy will do that but of course, across the board our savings when they all add up, are all about driving the taxpayers' dollar further and making sure that we are not spending more than we need to.
WEBSTER:
Yeah and really, before we leave that issue, I mean there was the thought that maybe our public servants would work better if they were a bit more relaxed at their computers after they had had their massage – a bit more pain free – but honestly, as you said, that applies to everybody in the workforce.
BOWEN:
It applies to everybody and its also important to note that not every public servant gets this. This is a very patchy across the commonwealth bureaucracy. So, some get it, some don't, some departments get it some agencies don't. Its really very ad hoc. Probably the simplest way of dealing with it is to say – it's best just to stop.
WEBSTER:
Absolutely. Now, much more important issue, and you've been proactive so far and I hope you continue to be – Cartels, the big business bullies who shut out their smaller rivals. What plans to you have to eradicate this very anti competitive behaviour?
BOWEN:
We've got a very strong program here Tim and it ranges across a number of areas. The first thing we will do is this. We believe that you need to have disincentives for cartel operations. Cartel is theft. It's stealing off consumers. In several countries around the world if you operate a cartel you go to prison. Five years, in Canada, Germany, Ireland, the United Kingdom. Ten years in the United States. So we'll legislate to have prison terms for cartel operations. Because the problem we've got is, businesses get together and they think, we could make a lot more money if we did this and even if we get caught, the fine will be potentially less than what we make so we cant really lose. But you've got the possibility of five years at Her Majesty's pleasure, you'll think a lot more closely about entering into those side deals.
WEBSTER:
You're quoted as saying this morning that the current trade practices act is all but useless. Why?
BOWEN:
Well, across the board, we've found that the courts have interpreted the Trade Practices Act in such a restrictive way that the ACCC really looks at a lot of cases and says, well we think this stinks, we think this is terrible behaviour but we just cant get a prosecution in the court. For example the High Court a few years ago, back in 2003, said if you have a big business which drives a small business under, by cutting their prices below cost, the ACCC has to be able to prove that that big business can make the money back later. That's a very, very hard thing to prove so we will legislate to remove that requirement. It's called the recoupment requirement. We would legislate to remove that and we'll really strengthen the appropriate sections of the Trade Practices Act and make it easier for the ACCC to bring these cases. We believe in competition, we believe in fair competition, we don't believe in big businesses or any other business being able to reduce their prices so low for a short period of time to drive everybody else out and then to be able to charge whatever they want.
WEBSTER:
And really, jail might straighten people up. As you know, Richard Pratt was fined with Visy Board for price fixing and it seemed like a lot of money, but to people like that it's almost a drop in the ocean.
BOWEN:
Well this is the problem, you don't have enough disincentive in the system. You really need to have jail terms, we believe, to have that proper disincentive, to say well, somebody's got to stand up for the consumers and the government and the ACCC will and if you do this you run the risk of going to prison. It will be up to the judge at the end of the day but you'll run the risk of going to prison for very serious offences.
WEBSTER:
Alright, now every one of my listeners in their own suburb could tell me this same story because I could certainly tell it in mine in fact many I've lived in. When the big supermarkets move in, whether it's Coles, Woolies or even Aldi, and the little bloke on the corner who might be a tiny little IGA or whatever, a corner shop, just has to go because he can't compete. I just think that's sad for our country.
BOWEN:
Absolutely. As I say, we believe competition is the best way, and to have competition you need a range of players. We've said we would instruct the ACCC to have an inquiry into the grocery industry in particular and we'll be doing that. Great Britain just had one and they had some very interesting findings. There's a lot more players in the Great British industry, in the grocery industry than we have in Australia. They had some industry findings and I am sure the ACCC's inquiry when it takes place will have interesting findings too. We would embrace any measure which means we have more competition and the consumers are the winners out of that.
WEBSTER:
Ok, now what can you do to help small business in the fight against the big corporations without paying out huge amounts in court costs which of course they cant afford.
BOWEN:
Well, there are a number of things we can do and some of them I have already spoken about Tim. The other thing that we will do is – at the moment, if you want to take a big business on you have to go to the Federal Court. Now, for a small business that's very hard. If you believe a big business is intentionally driving you out of business so that they can then put their prices up later you've got to go to the Federal Court. That's a very expensive jurisdiction. So we'll make that at the Federal Magistrates Court which is cheaper and easier and generally more user friendly – available for those sorts of cases. That is part of our reform package. The others are, as I say, are removing that necessity to prove that the business can make the money back later. And we'll also have other, perhaps more minor measures – but at the end of the day they'll all add up – to make the ACCC's job on behalf of consumers easier.
WEBSTER:
Will there be a legal problem do you think in clarifying "taking advantage" what that means?
BOWEN:
Well that's very important. The act says it's an offence to take advantage of your market power. Now some courts have interpreted that literally, others have interpreted it more liberally and it's a problem again for the ACCC. How will the court define, "take advantage"? So we'll put the definition of take advantage in the law so it is very clear for judges what the Government's intention is by the term "take advantage". That will basically say, if you've got market power and you use that market power to effect another business, to drive them out of business or to damage them, intentionally then that will a breach of the act. So it will really clear up the system. These reforms are long over due Tim. The previous government didn't act. We need to act quickly and we will, because consumers, small business, really need the ACCC in there, on their side. The ACCC has been fighting with one arm tied behind them.
WEBSTER:
Oh absolutely. Before we go to the ACCC, what do you mean by tackling creeping acquisitions?
BOWEN:
One of the problems in the trade practices act is that, at the moment, if say, for example, Woolworths wanted to buy Coles, that would very clearly have the ability for the ACCC to come in and say, hang on, that would be just too much of a monopoly and you'd have too much power in the market. But if you've got a company which buys up, instead of buying the whole company, they might buy one store, every week for the next fifty weeks, at the end of the day you'd have the same effect but the ACCC would arguably have difficulty in acting because it would just be a step by step process. So we've said we'd legislate to give the ACCC the ability to intervene in that and we'll consult on the best way of doing it because it is a difficult and complex area. We'll give the ACCC power to regulate what are called creeping acquisitions. So that's a big company buying shops as they go.
WEBSTER:
Sounds good to me. And finally, you've felt the need and I think it's terrific to have people within the ACCC who have a small business background.
BOWEN:
Absolutely, in fairness this has been talked about for some time. The previous government said that they'd have a deputy chairman from a small business background. We'll legislate so that is the law, not just the Government's intention. We'll legislate to have the deputy chairman from a small business background and I'd hope to make an announcement on who that will be in the not too distant future.
WEBSTER:
Fantastic, thanks for talking to us. Appreciate it.
BOWEN:
Pleasure.