Three cheers for a hung parliament

Federally, we have seen a mixed bag from the Rudd/Gillard Government. While we had the Fuelwatch and GroceryChoice debacles overseen by Chris Bowen, it is interesting that Bowen did try to push for small businesses to be covered by laws against unfair contract terms. Sadly, that push was brought to sudden halt by Craig Emerson, the latest “Dr No” in the small business policy arena.

For small businesses, farmers and consumers there have been far too many MPs with lots of praise or excuses, but with little or no real follow up action. These MPs often dominate the two major parties and that’s why a hung Parliament is such a welcome change. This is especially so if the independents start calling for effective competition and consumer laws.

No doubt the independents will be approached with many a suggestion for law reform and that’s where it gets really exciting. We have all seen the considerable contribution made by Independent Senator Nick Xenophon as one of the Senators to hold the balance of power. Like him or not Senator Xenophon has been able to work with all sides of politics to move the debate forward on key policy questions.

That’s exactly the role the lower house independents can play. Like them or not they have a unique ability for the time being to move the debate forward on the full range of policy matters. In fact, the independents will have the ability to make the minority government of the day think twice if it fails to make tough decisions or it chooses to go soft on key issues.

In short, the minority government, whether it be Labor or Liberal/National, will be accountable to the lower house independents. If nothing else that dampens the power of the faceless power brokers. A minority government means that the faceless power brokers won’t be able to just rely on party or factional discipline to drive home a position or to stop worthy law reforms.

In the competition and consumer law area one can only hope that we finally have a real debate about the poor state of our competition laws. We have some of the most concentrated markets in the world, with concentration levels reminiscent of communist regimes.

At the heart of the debate is the need for effective competition and consumers laws. What does that involve? For regular readers of this author’s writings the call for new laws drawn from the United States and United Kingdom won’t come as any surprise. Those US and UK laws can, of course, be backed up with some home grown proposals.

The following list is a convenient summary of some of the possible steps that can be taken to deliver effective competition and consumer laws.

First, we need to retain and enforce the Birdsville Amendment against predatory pricing. The Birdsville Amendment prevents a company with a substantial market share from selling below cost for a sustained period for an anti-competitive purpose. Predatory pricing is a very simple but effective practice designed to remove competitors from the market with the ultimate goal of raising prices when the competitors are gone.

Effective laws against anti-competitive price discrimination drawing on UK and US precedents are also needed. Such laws would deal with anti-competitive price discrimination at the wholesale level and with geographic price discrimination at the retail level.

Creeping acquisitions of independents and development sites by large and powerful companies like Coles and Woolworths also needs to be tackled. Creeping acquisitions can destroy competition by stealth. Once the competition is gone prices will rise.

A tough anti-merger law is critical given that the existing anti-merger law allows all but a few mergers to proceed. That ultimately explains why we have such highly concentrated markets. A tough anti-merger law needs to be backed up by a general divestiture power based on UK and US precedents to break up large and powerful companies that act anti-competitively.

Greater use can be made of mandatory codes of conduct under the Trade Practices Act to set out standards of appropriate conduct by companies such as Coles and Woolworths towards farmers. Mandatory codes of conduct need to be backed up with financial penalties for breaches of such Codes and with effective laws against unconscionable conduct. Restoring small business’ and farmers’ access to laws against unfair contract terms would be valuable in allowing legal challenges to contract terms that are excessively one-sided.

Finally, it would be more than appropriate to undertake an independent review of the ACCC’s effectiveness as any strengthening of our competition and consumer laws should not be allowed to be undermined by a weak or ineffectual ACCC.

Clearly, there are a range of initiatives that could be pursued to deliver the best possible competitive outcome for consumers, small businesses and farmers. With the major parties needing the support of the independents to govern one can only hope that we will now have the robust and productive discussion on competition issues that is so often missing when a government has a clear majority.