TREASURER:
I am today announcing an immediate inquiry into the price of petrol across Australia. The inquiry will take place under Part VIIA of the Trade Practices Act. I have previously written to the Chairman of the ACCC and informed him that the Government would give the ACCC any powers that it required to ensure that petrol was sold at the most competitive price across Australia. In response to that invitation, yesterday the Chairman of the ACCC – Graeme Samuel – wrote to me and said he believed an inquiry under Part VIIA of the Act should be undertaken and accordingly it will commence today.
Part VIIA of the Trade Practices Act gives the ACCC a broad range of powers, including taking evidence on oath or affirmation, compelling witnesses, a prohibition against witnesses refusing to answer questions, and will allow the ACCC to investigate the totality of the market and the way in which it is currently operating in Australia.
The inquiry will include but not be limited to, the current structure, the extent of competition, wholesale, retail and at the refinery, the determination of prices at each of these levels including the methodology for determining wholesale prices and current impediments to efficient petrol prices.
The reason why I have directed this inquiry is that the ACCC has reported that a margin has opened up between the Singapore benchmark price and the Australian retail price. The ACCC noticed that happened in January of this year and made comment, and indicated if it happened again, it would also alert the public and the Government.
The ACCC reported that it happened again last week. That is, a margin opened up between the Singapore benchmark price and the Australian retail price. And this inquiry is designed to get to the bottom of why that margin opened up. And if it finds that it opened up for any anti-competitive reason, to lead to the prosecution or legal action of any person who should be found to have contravened the Trade Practices Act as a consequence.
As I have said, this is a course that has been recommended by the Chairman of the Australian Competition and Consumer Commission, Graeme Samuel. I will release the correspondence which I received from him yesterday. I have acted on it immediately. This inquiry will start from today, it will report in October and it is designed to ensure that Australians get the most competitive petrol prices which can be obtained in the Australian market.
JOURNALIST:
Mr Costello, the president of the NRMA has already said this will just be more barking by the ACCC without any bite. What do you think about that?
TREASURER:
Well this is recommended by the ACCC itself. This is what it believes is the most desirable response, the most substantive response and the best way to actually get to the bottom of whether or not anti-competitive conduct has occurred. And the Government has acted upon the recommendation of the expert, the Chairman of the ACCC.
JOURNALIST:
But if it is not just a political stunt why are you announcing it rather than the ACCC Chairman?
TREASURER:
Because I have to give the notice. And I am announcing today I have given the notice.
JOURNALIST:
Aren’t you just reacting to Kevin Rudd’s petrol commissioner announcement last week?
TREASURER:
No.
JOURNALIST:
I mean, it’s, you mentioned it’s been since January when the ACCC first raised these issues and it is June now and (inaudible) issue?
TREASURER:
No, last week the ACCC pointed out it was an issue. The ACCC alerted the public in January that a margin had opened up and said if it happened again it would alert the public again. It happened again last week. And as a consequence of the statement of the ACCC last week, I wrote to Mr Samuel. I indicated to him that if he required any further powers to investigate this, the Government would act on it immediately. In response I received a letter from him yesterday requesting that a notice be issued to authorise a Part VIIA inquiry. I have issued that notice today. That is why I am announcing it today. It is the Minister that has to sign the notice.
JOURNALIST:
Treasurer over the years there’s been something like 40 various inquiries into petrol prices, why would this one be any different or bring any different light to the issue?
TREASURER:
Well this is because it is investigating the increase in the margin which occurred as recently as last week between the Australian retail price and the Singapore benchmark price. Now, petrol prices fluctuate because the price of oil fluctuates, because the exchange rate fluctuates, because the refined price fluctuates. And you will always have that going on. But the benchmark for Australian prices has been the Singapore price, where a lot of the world’s refining goes on. Now, the ACCC noticed that there was an increase in the margin between the Australian retail price and the Singapore price in January. It alerted the public and it said if it happened again it would alert the public again. It did happen again, it happened again in June and it alerted the public and it alerted the Government. And it is that widening, which occurred on at least two occasions in January and in June, that will be the subject of this investigation.
JOURNALIST:
What will the result of the investigation be? I mean, what can you do after the investigation (inaudible)?
TREASURER:
Well, if this investigation finds that the margin increased because there were anti-competitive practices, then the people who engaged in those practices can be prosecuted. And of course if it also finds that there has been some kind of structural change which has made the market less competitive, it can make recommendations in relation to that. But these are the matters that only the ACCC can get to the bottom of, with power to compel witnesses to give answers, to summon people before it and to report to the public on what the actual situation is.
JOURNALIST:
Will this inquiry be any tougher in any way than past inquiries?
TREASURER:
Well I think the last time that the ACCC did an inquiry was in 1996. And there hasn’t been an inquiry by the ACCC since then and what the ACCC will be able to do will be able to probe whether or not there have been any changes in the market, whether those changes in the market have led to less competitive outcomes or not. But this is why we have an expert commission to do these things.
JOURNALIST:
Who can we expect to see hauled up in front of this inquiry?
TREASURER:
That is a matter for the ACCC. It will be calling every person who it thinks is relevant.
JOURNALIST:
Is this a public inquiry, can you say (inaudible)?
TREASURER:
It will be public. There is provision under the Act if there is any evidence that has to be taken in-camera for that to be done, but other than that this is a public inquiry where the procedure will be determined by the ACCC.
JOURNALIST:
Has it got a deadline?
TREASURER:
Yes, the deadline for the finish is the 15th of October 2007.
JOURNALIST:
What are the potential penalties under that section of the Act, in terms of anti-competitive behaviour, like what…?
TREASURER:
Well, if you are found guilty of anti-competitive behaviour you can be liable for $10 million fines or triple the economic benefit that you obtained. So, technically speaking there is no limit. You can be up for triple the amount that you made. So there are very, very serious penalties – they are the maximums of course – very, very serious penalties indeed, if you are found to have breached the provisions which prevent anti-competitive conduct. All right, thank you very much.