15 June 2011

Competition and Consumer Legislation Amendment Bill 2011 - Second Reading Speech, Parliament House, Canberra


The Competition and Consumer Legislation Amendment Bill 2011 will give effect to two important reforms to strengthen and clarify our competition and consumer laws.

First, the Bill will enact laws to deal with creeping acquisitions by amending section 50 of the Competition and Consumer Act 2010 (CCA).

The amendments will give greater clarity to the provisions regulating mergers and acquisitions. They will ensure the Australian Competition and Consumer Commission (ACCC) and the courts have the power to reject mergers and acquisitions that would substantially lessen competition in any local, regional or national market.

The Bill also enhances and simplifies the unconscionable conduct provisions of the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001.

The unconscionable conduct amendments are central to the implementation of uniform consumer laws throughout Australia. They were agreed by the Ministerial Council on Consumer Affairs (now the COAG Legislative and Governance Forum on Consumer Affairs) at its meeting in Perth on 30 April 2010.

These amendments clarify the Parliament's intention as to how the unconscionable conduct law should apply. They will place the ACCC and the Australian Securities and Investments Commission (ASIC) in a better position to take more effective enforcement action.

I would like to recognise the valuable work of my predecessor, the former Minister for Competition and Consumer Affairs, the Hon Dr Craig Emerson MP, in developing this Bill prior to its previous introduction.

The Government previously introduced this Bill into the Parliament on 27 May 2010. The Bill was referred to the Senate Economics Committee, which recommended that the Bill be passed.

The Bill passed the House of Representatives on 24 June 2010 and was awaiting introduction into the Senate when the 2010 Election was called, causing the Bill to lapse.

Creeping Acquisitions

Creeping acquisitions are a series of small-scale acquisitions that, individually, do not substantially lessen competition in a market, but collectively may do so over time.

Concerns about creeping acquisitions were raised in the context of the ACCC's report arising out of the inquiry into the competitiveness of retail prices for standard groceries. In its report, while noting that such acquisitions do not appear to be a significant current concern in the supermarket retail sector, the ACCC expressed its support for the introduction of a general creeping acquisitions law.

Subsequently the Government undertook extensive public consultations in 2008 and 2009 to seek the community's views on possible reform options. Through its consultations, the government identified two amendments which would clarify the operation of section 50 to confirm that the ACCC's current interpretation, as set out in its November 2008 publication, Merger Guidelines, is correct.

The first amendment in the Bill will amend subsections 50(1) and (2) of the Competition and Consumer Act to replace references to 'a market' with references to 'any market'. This amendment will clarify the ability of the ACCC or a court to consider multiple markets when assessing mergers and acquisitions.

The amendment will clarify that businesses cannot challenge a decision to block a proposed acquisition on the grounds that the substantial lessening of competition identified was in one or more markets other than the primary market relevant to the merger or acquisition.

The ACCC and the courts will be able to consider the totality of the competitive effects resulting from an acquisition, including impacts in upstream and downstream markets, not just impacts in 'a market'.

The Bill also amends subsection 50(6) of the Competition and Consumer Act. That subsection has the effect of limiting the scope of section 50 to acquisitions in markets that are 'substantial' in a state or territory or region of Australia.

The amendment to this subsection will provide greater certainty regarding the current practice of the ACCC of considering acquisitions in local markets. The Merger Guidelines state that the 'substantiality criterion' can be satisfied in many ways, including by the number of customers, total sales or the geographical size of the market.

The Merger Guidelines do not have the force of law. While the interpretation of the ACCC of subsection 50(6) has not been tested in the courts, it was considered by Justice French in his 2003 decision in the Federal Court in the case of Australian Gas Lighting Company v ACCC.

While expressing no conclusive view, his Honour left open the possibility that whether a market is considered 'substantial' under subsection 50(6) may be determined with reference to Australia as a whole. If this view were to become established in law through legal precedent, then it could well preclude acquisitions in geographically confined markets from being considered under section 50. This would prevent the application of section 50 to local markets where creeping acquisitions have been identified as a concern.

The Bill deletes the word 'substantial' from subsection 50(6). This removes the risk highlighted by Justice French that a court could in the future adopt the view that acquisitions in geographically confined markets may not be considered substantial and therefore not fall within the scope of section 50.

The government's amendment to section 50 will remove that possibility, allowing the ACCC or a court to continue to examine acquisitions in all markets, including in relatively small, local markets.

Together, these amendments will strengthen the acquisitions provisions of the Competition and Consumer Act under section 50 by clarifying the scope of the law and increasing certainty around its application to markets where creeping acquisitions have been a concern.

In addition to these amendments, when announcing the way it would respond to concerns about creeping acquisitions, the government also confirmed the power of the ACCC to act in relation to the acquisition of greenfield sites. The ACCC already considers it has the power to review acquisitions of greenfield sites whether through purchase or lease. However, if the ACCC is challenged on this in the future, the government has stated it will not hesitate to confirm this power.

These amendments were agreed with the States and Territories under the intergovernmental Conduct Code Agreement 1995.

Unconscionable conduct

The amendments the Bill will make to the unconscionable conduct provisions of the Australian Consumer Law are the product of a recommendation of the Senate Economics Legislation Committee, which inquired into the statutory definition of unconscionable conduct in 2009.

The Senate Economics Committee recommended that the government set up an inquiry process to determine whether examples or a statement of principles would enhance the unconscionable conduct provisions of the Australian Consumer Law.

On 5 November 2009, Minister Emerson convened an expert panel to consider the issues raised in the Senate Economics Committee inquiry. Professor Bryan Horrigan, Mr Ray Steinwall and Mr David Lieberman—all of them experts in competition and consumer law and distinguished in their professional fields—agreed to serve on the panel.

The government is grateful for the work of the panel—which included many hours on top of their already busy schedules. In its work, the panel was assisted by officials from the Treasury and the Department of Innovation, Industry, Science and Research.

The government is also grateful to those who made submissions to both the Senate committee and to the expert panel. This helped to ensure the range of perspectives that exist in relation to this issue were understood.

The expert panel found that the unconscionable conduct provisions have been regularly enforced since their inception, and that the case law is still developing.

Having said that, the panel also noted that the provisions are not easily understood and could be clearer for businesses, consumers, enforcement agencies and the courts. However, the panel found that a list of examples of unconscionable conduct would not be helpful. Indeed, the panel said such a list might give rise to misguided expectations about the scope and application of the law to specific factual scenarios.

Instead, it recommended the inclusion of some interpretative principles in the unconscionable conduct provisions. The government has adopted all of the panel's recommendations concerning unconscionable conduct, including the introduction of interpretative principles.

The first principle will deal with concerns that the practical application of the equitable concept of unconscionable conduct is too narrow when applied to business and consumer relationships. Courts have tended to stick closely to the traditional equitable concept when applying the statutory prohibitions contained in sections 21 and 22 of the Australian Consumer Law (formerly, sections 51AB and 51AC of the Trade Practices Act) and sections 12CB and 12CC of the ASIC Act.

For example, the common law required victims of unconscionable conduct to establish that they were at a 'special disadvantage' through factors like infirmity, age or a difficulty understanding English, before a court would recognise that unconscionable conduct had occurred. The present statutory prohibitions on unconscionable conduct sought to remove limitations such as these on the ability of people to seek redress when subjected to unconscionable conduct.

The Bill amends the law to make it clear that the prohibition is not limited to the equitable or common law doctrines of unconscionable conduct. The courts should not limit the application of the provisions by reference to ancient common-law doctrines that are not part of the statute.

The second interpretative principle will clarify that courts can examine the terms and the manner and extent to which the contract is carried out. This principle makes it clear that unconscionable conduct is not limited to the bargaining practices leading to the formation of a contract.

Unconscionable conduct can also be apparent in the way in which a party exercises its rights under a contract or in the way in which a party behaves once a contract is made. It can also apply to the way in which contracts are renewed, renegotiated or terminated.

This interpretative principle will ensure that any unconscionable conduct—not just that occurring before contracts are made—is subject to the full force of the law.

The final interpretative principle to be introduced by the Bill is that the prohibition on unconscionable conduct applies to systemic conduct or patterns of behaviour and that there is no need to identify a person at a disadvantage in order to attract the prohibition.

Unconscionable conduct is not limited to individual transactions or events. A pattern of systematic conduct or patterns of behaviour occurring over a period of time—which might include an accumulation of minor incidents—can also amount to unconscionable conduct.

This interpretative principle ensures that conduct, rather than individual transactions or events, is the focus of the provisions.

Further, as the focus is on the conduct rather than the victim, this principle reinforces the point being made in the first interpretative principle that there is no need to identify a person who is at a disadvantage in order to enforce the prohibition.

Other amendments

The Bill will also remove the distinction in the existing provisions between unconscionable conduct that affects businesses and that which affects consumers.

It combines the existing sections 21 and 22 of the Australian Consumer Law and sections 12CB and 12CC of the ASIC Act, respectively, into one section and rationalises their drafting to apply a single set of specific factors which the court may consider.

This amendment will eliminate the potential that the concept of unconscionable conduct in the two existing provisions could diverge, through a false assumption that the existence of two provisions signals a distinction in policy. Any divergence has the potential to lead to confusion, and the distinction should be removed before any such notion develops.

The amendments will also ensure that a single, cogent body of legal precedent can develop around the statutory concept of unconscionable conduct as it applies to both consumers and businesses.

The application of the Australian Consumer Law as a law of the Commonwealth and of the states and the territories has many advantages, one of which is that it can be enforced by courts at all levels in a consistent fashion.

In some states and territories the courts, including lower courts and tribunals, will be applying the prohibition on unconscionable conduct for the first time. Providing clarity in the interpretation of these provisions will do much to ensure the consistent application of our new, national consumer law across Australia.

I can also inform the House that the Ministerial Council for Corporations was consulted in relation to the amendments to the laws in the national corporate regulation scheme, namely the amendments to the ASIC Act, and they have been approved as required under the Corporations Agreement.

I should also note that the Bill corrects a small number of drafting errors in the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010.


Together the amendments contained in this Bill will bring greater clarity and certainty to the application of key provisions of our competition and consumer laws.

The amendments to section 50 will ensure that the ACCC and the courts can assess the totality of the competitive effects associated with acquisitions which occur in geographically confined, local markets.

The amendments to the unconscionable conduct provisions will ensure there is a much clearer understanding of the conduct that these provisions have always been intended to address. The amendments will protect Australian small businesses, but without creating market distortions which would only reduce their competitiveness and their resilience.

The amendments will protect consumers by ensuring that competition is protected and fostered. They will strengthen the prohibition against conduct that is designed to stifle competition through the imperceptible development of market dominance or through unconscionable business conduct.