Summary: Whether it is labelling claims made about the honey on your toast or a takeover bid for the company that supplies your milk, the Competition and Consumer Act influences every business-to-business and business-to-consumer transaction in Australia.
The Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010 and has gone through many reviews, but the original principles of promoting efficiency and competition and protecting consumers from unfair practices remain.
Published: 23 February 2015
Transcript
Rod Sims: Hi I'm Rod Sims, Chairman of the Australian Competition and Consumer Commission. 2014 marks the 40th anniversary of the Competition and Consumer Act in Australia, originally known as the Trade Practices Act. This law has developed into a cornerstone of a successful and vibrant Australian economy.
The Act’s origins can be traced right back to 1906 when the fledgling Australian parliament passed the Australian Industries Preservation Act. In the 1960s a new trade practices law was introduced but was ultimately unsuccessful. It was these early interactions of competition and consumer law that set the scene for the then Attorney-General Lionel Murphy to introduce the Trade Practices Act of 1974. Forty years on the Competition and Consumer Act as it's now known protects and regulates so many different aspects of Australian society, from consumer goods to product safety, to vital infrastructure. If there's a market for a good or service, it is affected by the Act.
From its fledging days in 1974, the Competition and Consumer Act has gone from strength to strength. The success of the Act and the organisation is ultimately due to the tireless work, skill and professionalism of the many people involved in administering it and enforcing it over the years. The inaugural chairman of the Trade Practices Commission Ron Bannerman was a pioneering figure in this regard, as the original czar of Competition and Consumer law. Ron's leadership and expertise in his early days of the Act set the foundation for the successes that enjoyed in the preceding four decades. The story of competition and consumer law in Australia is a detailed one, full of many tribes, some, particularly early, failures, and everything that falls in between. The ACCC recently spoke with some of the key figures who helped shape and drive the Act and the organisation from those early days to where it is now. This is their story, we hope you enjoy it.
Graeme Samuel: In 1965 there was an attempt to set up a trade practices act, it was put in place by then Attorney-General Garfield Barwick and the Restrictive Trade Practices legislation, as it was called, it actually didn't meant an awful lot. In 1974, Lionel Murphy, who was then the Labor Attorney-General under the Whitlam Government, said we needed to address this, so Attorney General Lionel Murphy said the Restrictive Trade Practices Act that was in place at that stage was virtually meaningless. I'm going to bring in a new Trade Practices Act that will deal seriously with issues of competition and effectively say to business you are now to follow the pursuit of the disciplines of competition right across the board.
Tony Hartnell: The normal thing in Australia at that time was price-fixing. The normal thing was regulating the layers of distribution innovation, which is something that I aspired to for Australia was communism.
Hank Spier: Those very early days of the Trade Practice Commission were unbelievably busy and, building I had that this is all history, nothing happened, but this is where Maureen Brunt comes in of course. The Commission with smaller wires and inexperienced although it had this history behind it, ran countless competition cases, lost most, ran a lot of consumer protection cases, won most, but there were a lot of say authorisation and appeals to the Tribunal, and the Tribunal, which included Brunt, was exceptionally busy. A lot of these things that we now take for granted, the fact that you can in a pub, you can buy five or six brands of beer all came out of that, because before you could only buy one brand of beer. One brand of soft drink in a milk bar, service stations were confined to one brand of petrol, and one brand of oil and all those arrangements which were the norm, were broken down in that period.
Professor Maureen Brunt: One of the striking things was, first of all how novel the Act was, but secondly how it made an immediate impact. Absolutely immediate impact. So that after only 20 years the economy was transformed it’s an extraordinary thing. So that rather than restrictive practices not even being noticed, but just accepted as the normal Australian way of life, that was began to be seen that what was desirable was a competitive economy.
Roger Featherston: Back in the early 70s there were a lot of restrictive provisions, and that became apparent by the volume of authorisation applications and clearances that were put in when the Act was introduced. There was a an initial four-month window for people to lodge authorisation applications and clearance applications, where they got automatic protection until such time as the Commissioner processed those, and so one of the stories was that when that four-month period was about to expire in the 31st of January 1975, the Sydney office of the Commission remained open after five o'clock in order to receive last-minute applications. And at midnight the Regional Director covered over the clock so that they could continue to process them after midnight and still claim that they were processed on the 31st of January.
Russell Miller: Australia was a protected economy, high tariff barriers, and uncompetitive arrangements all over the place. Tied petrol stations, tied hotels, spare parts for copying machines, or motorcars you had to go to the manufacturer. There was price rigidity and that is of course the antithesis of an effective and efficient economy and Australia wasn't an effective and efficient economy.
Alan Ducret: Everyone was aware that restrictive practices were everywhere in the economy, they were replete throughout the economy there would not be one sector untouched by conduct and if the public knew about it would have been outraged. There were a number of Royal Commissions in Tasmania or Western Australia for example, that had highlighted that it was just ubiquitous, it was everywhere, and that no one had any idea about just how bad these practices were. Consumers were paying through the nose for products; consumers were very badly done by in those days.
Graeme Samuel: I remember once actually sitting down at a small lunch and Sir Reginald Lancet was there, running Ansett Airlines as it was at the time. He said to me, what you think about the trade practice thing, I said well I think it's actually, it's a welcome thing in the Australian economy and Australian business, and what did he do, he blasted my head off.
Hank Spier: The Government of the day ran full page ads in all the national newspapers with cartoons basically saying this is a new Act and this is acting out what would happen if you did something wrong plus a series Q&A - major campaign.
Roger Featherstone: The Act did have a big impact initially, there's a lot of concern by business that this was going to, you know, sort of make life impossible for them. They quickly adapted but it did change a lot of the conduct that they previously had become used to engaging in, and so they did actually have to change their ways.
Tony Hartnell: One of the things that happened was Lionel Murphy decided the Trade Practices Commission, as I think it was then called, was too slow in bringing consumer actions so he decided to bring his own and as Attorney General he started a Section 53 action, as it was then known against Sharp Corporation. Halfway through that action he decided to go on the High Court, or someone decided he should go to the High Court and so I stepped into his shoes, so I became I think the first reported consumer action under the new newly minted Trade Practices Act. You'll find a reported case Hartnell and Sharp Corporation.
Dr Michael Schaper: Well over the 40 years that the Act’s been around, it's actually been inextricably linked to the small business sector. Now one of the things most people will not be aware of is that Australia's peak small business body, The Council of Small Business Organisations, has actually had its genesis in the Trade Practices Act. Surprisingly enough I came across some old archival material a couple of years ago, showing the formation of COSBOA, and actually pointed out that it was instigated by a variety of industry groups, in response to their views about the newly created Trade Practices Act, and how it would impact on small businesses.
Russell Miller: Shortly after the Act came into force in, in October 1974, the Whitlam government fell and the Fraser government then considered whether or not to repeal the Trade Practices Act completely. There was such antagonism from business, that there was strong pressure on the government to repeal the Act, so it was a very variant agnostic relationship at the start with business.
John Howard: I was appointed as the first ever Minister for Business and Consumer Affairs and that included the Trade Practices Act, and I undertook via the Swanson committee a review of the operation of the Act. The new Fraser government thought the act was too intrusive, too regulatory, rather too heavily modelled on the American system of antitrust laws, which might have been suitable for a much larger economy and coming out of that there were some significant changes. The other really big thing that I did in the trade practices area was to draft, and put through Parliament, the section, namely, 45(d), which brought the secondary boycott activities of unions within the reach of the Act. Previously, if a union imposed a secondary boycott it could do so with impunity, whereas if a company did so it was subjected to enormous penalties, and I thought, and the government of the day, thought that was wrong.
Russell Miller: Then we came to the 1980s, which was a time of consolidation. The empire struck back, I suppose you could say, the business won a few cases. In the meantime, we'd had some clarification of the law in relation to what competition meant, and what a market meant in the Tribunal.
Roger Featherstone: What we found in the early 80s, or mid-80s, when I was first in private practice was that the Act did fall into the doldrums a bit.
Paul Keating: In 1983, as Treasurer, I began effectively the internationalisation of the economy and that meant rolling back all the protections in the past starting with the exchange rate, opening up the financial markets, the product markets, and the labour market. Making it more supple, more responsive, more effective, more productive, and in this matrix of changes comes the question of competition.
Alan Ducret: People were challenging everything we did, so through that period it was it just was simply difficult. We had to grind our way through that period.
Hank Spier: Bob McComas became chairman, he was a very different creature. He was more into settlements, negotiation, which had its pros and cons, and I learned more from McComas than virtually any other chairman, particularly because, not because he was better, but he was came out of a private sector and he knew how they thought and how they worked and where the sore points, where weak points were and he taught us a lot in the mergers area.
Russell Miller: Bob McComas was a consolidating period, and then along came Bob Baxter as the chairman, and it was a time for expansion of the act, a time for testing.
Professor Bob Baxt: I was very pleasantly surprised when I got a call from the Attorney General's department in 1988 to become the third Chairman. We had a piece of legislation which government attempted to be enforced and so one of the first things that I did when I was invited to become Chairman was to say well one of the things I would like to do is to see whether the Commission could get involved in the famous Queensland Wire case. For a reason that I still don't understand the Commission refused to take on that case when the Queensland Wire company came to it against a client of this firm, that BHP as it was then, was engaging in misuse of market power by not supplying wine bar to this company. So one of the things that I asked Bob Alexander, who was the General Counsel of the Commission was to see whether we could intervene in the case, and we did we intervened in the case, unsuccessfully by law as the High Court judgement will tell you, but successfully because the arguments that Alan Goldberg and David Chevon ran on behalf of the Commission those arguments were taken up by the Queensland Wire company and we had the very, very famous and still the most significant case on the section 46.
Professor Maureen Brunt: What they did was to take the concepts in the Act, which was expressed in economic terms, they took these concepts and they expounded them so that they thought of the law of trade practices as being a mix of both economics and law.
Professor Bob Baxt: It was important to test the law because we won't find out whether the law works and we won't need all these calls for changes to the law if we had more opportunities of going to the courts, asking the courts to evaluate these provisions and finding out what's wrong with the provisions - if in fact there is something wrong with them. Then the reform process can start. So my aim was to try wherever possible and whatever it was justified to test the law.
Hank Spier: Then of course came the Fel’s era and Fel's era you know had national competition policy, though that started with Bob, had GST had Fels and Asha being media, you know, you know the old joke: don't get between Allan Fels and a camera.
Professor Allan Fels: So of course when I was Chair we tried to get a lot of publicity, but what was really more important than getting it was the step up in enforcement activity. The media loves a fight, so when there was a case on they took a high interest in it and we tried quite hard to explain to the public what was going on and what, how it would affect them and so on. So although we use the media, it was the underlying actions by the Commission and its staff and the Commissioners that had the effect, and if they hadn't been there, no amount of publicity would have changed the world.
Sarah Court: There was, you know, there's the list of the most powerful people in Australia, and I think Allan Fels was sort of third in that list after the Prime Minister and the deputy, you know the deputy leader. It was just an indication of just how heady it was back then in terms of his era.
Dr Jill Walker: He was put into the PSA with the mandate to, you know, to lift its profile and they'd appointed these media advisers and they were a complete disaster. So after that first media conference he sacked them and basically did it all himself. He eventually got, he had one media sort of employed media advisor after that but he got rid of all the consultants. It was just a you know he just knew how to tap into the public interest and get stuff in the papers and lift the profile of the organisation.
Bob Alexander: He went out of his way to engage with the media and he had the gift of being able to explain complex matters in simple language and get the message across on radio and on TV, TV particularly. So I think his ability to communicate the competition message on TV was the big factor in the profile of the Commission being raised in the 1990s.
Alan Ducret: It's interesting too, people make jokes about Allan and the media on how the most dangerous place on the planet was between Allan and the TV camera, but the fact is he did a fantastic job of pushing the work of the organisation.
Professor Allan Fels: I always remembered early on a rather amusing thing, I was jointly Chair of the Trade Practices Commission and Prices Surveillance Authority and I've just arrived at the TPC and I called what I thought would be a mega media conference. I was going to announce our priorities and goals for the next three years as they affected all business, all parts of the Act, and only one member of the media from BRW showed up. Anyway I got in my car I drove over to the Prices Surveillance Authority to announce what the new rules would be in regard to the removal of the one and two cent coins. This trivial matter is the biggest media conference ever in Australia, the longest, got the most publicity. Everyone was fascinated so I learnt a little bit of a lesson from that about how you have to give something concrete to the media and that they understand and they'll be interested rather than abstract priorities.
Sarah Court: The thing about doing legal work for the Commission that was so exciting was really the fact that you were working on matters that were on the front page of the paper. You sort of had that feeling that what you were doing really mattered, and I loved the enthusiasm and the passion that the Commission brought to its legal work. So unlike most Commonwealth clients that we were working for then, who wanted to be kept out of the newspapers and who were very concerned about, you know being seen, the ACCC was very concerned to make sure that its matters, so long as we won, were you know shouted from the rooftops. So it was an exciting place to do litigation work, no doubt about it.
Professor Fred Hilmer: We were pretty dark days in the late 80s, early 90s.
Dr Rhonda Smith: One of the issues there was Australia's level of productivity, and so the question then became – is there a potential to use competition law, and policy, to improve productivity, increase domestic competition, and therefore increase the ability to compete internationally. This was really the genesis of the Hilmer inquiry.
Professor Fred Hilmer: I got a call one day, I can tell you where I was; I was at Thredbo with my young kids at the time on a skiing holiday and my status at the lodge went up when the woman called out that the Prime Minister's office was on the phone for you. I think it was Peter Harris and Rod Sims, who at the time were working for Paul Keating, and they said would you be interested in chairing an inquiry into competition. The work of the Competition Review that I chaired was in part a look at the Act but we recommended relatively few changes, we tidied up the Act, because we concluded the Act isn't the problem. The problem is other legislation and then the structure of public monopolies and the way in which natural monopolies were regulated, none of which was in the Act.
Paul Keating: We had the competition in the traded goods sector of the economy but not in the non-traded goods sector and the non-traded goods sector of course was a sector controlled by the state's electricity, gas, water, ports, and railways – there were never any competition for that. You know, you can't compete with the Melbourne, Sydney rail freight rates by buying a locomotive from China, I mean you can't compete on electricity and water by buying a can of water from China. In other words in the non-traded goods sector, where there cannot be trade, it was important that we opened up the state business enterprises to this sort of competition, and to enterprises more generally, by a Trade Practices Act with real teeth, and by a genuine national competition policy signed on to by all the players, including the states as well as the Commonwealth.
Delia Rickard: So that was around the time that we were picked up the access regimes, so one of the things I remember very much was saying okay well that's the competition side and we did a lot of work to say well what will the consumer issues be here, because it was a new space for all of us. We were all used to having one utility provider for each area and it wasn't a big consumer protection issue so suddenly issues like prices and how you compare, and quality of service, all became issues that which we took a close interest in so it was an exciting time.
Cristina Cifuentes: It really did recognise that competition was essential to productivity, and that you did have these big infrastructure projects that just weren't, it wasn't economically viable to replicate them you know, you're not going to get multiple businesses creating telecommunications networks and what have you, and so it was bringing that sort of productivity and competition elements together and saying well how do we address the situation where there isn't competition, there never will be, you can't create competition, you can't enforce competition, and so it was taking all that and saying well we need to create a regime that would replicate what would the outcomes be like if there was competition. So it was quite a watershed in that senses it was a turning point.
Dr Jill Walker: Hilmer was a defining moment in in history and, in a lot of ways, early in the history in this space because it was it heralded the broader application of the Act.
Cristina Cifuentes: If you ask people about the economic regulation side of it, it will draw a blank, which I actually think is really interesting, because it tends to be the areas of the act in a sense, or the regulatory structure, that touch most people's lives.
Dr Rhonda Smith: I think one of the things that happen post Hilmer was that it was a period of education. And so one of the roles of the Commissioners was actually almost the roadshow type role where we spent a lot of time on the road going around to the different states and different organisations within the states, talking to them about the nature of the Act and where they fitted into the Act.
Dr Michael Schaper: So, mid-1990s was a huge change because that actually brings in all of the businesses effectively under the ambit of the Act for the very first time, and interestingly enough also brings in the professions as well, which is an area that traditionally had been excluded.
Rod Sims: The Hilmer reforms are all about extending the act to parts of the economy that it didn't previously cover, particularly unincorporated enterprises and professionals and also the part 3a infrastructure provisions, and of course bringing together the Trade Practices Commission and the Prices Surveillance Authority into the ACCC.
Paul Keating: We're dealing with a clearly national economy, not six state economies, the national economy, and therefore just simply you know made sense to have a uniform national regime, with the transparent application of principles, and to have states sign on to that as well. So, it seemed to me a reasonable… Now, getting the states to sign on was very difficult because they all had particular interests, particularly when they got around their own business enterprises, but be as it may, through a long and tortuous process, we finally get the states to sign on, and from that comes of course the competition payments, and you know if they if they did the trick for me I'd give them a lump of sugar. In other words, they did pro-competitive things in the grants we would share the productivity benefit. A national productivity benefit, we would share equitably with any state, which oversaw the kind of changes we regarded as important to lift broad productivity.
Dr Rhonda Smith: I think you could have stopped almost anybody in the street at that stage and ask those questions about competition policy in general terms, and what you should have got was a very positive approach to competition policy.
Hank Spier: What really gave the Commission I think the greatest boost ever and, even though it's gone down a bit since then, I think in terms of product perception, was GST. I mean the photo of the Chairman was on a brochure, was given to every household in Australia.
Professor Allan Fels: The whole GST saga, that was incredibly high profile and a little bit risky for the Commission, but everyone's interested in what prices they pay for everything.
7:30 Report: Down to the nitty-gritty what will be cheaper after the GST and what will cost more.
John Howard: Well the ACCC provided a lot of reassurance to people that there would be no exploitation by the unscrupulous in the transition to the GST and most companies played the game there's no doubt about that, but it was reassuring to smaller traders, to consumers, that the ACCC was there, and we found both the treasure and I found the work of Allan Fels very helpful in that context.
Russell Miller: It enabled the Commission to be seen as the protector of consumers.
Alan Ducret: At the same time, as we were starting to lift our work back into our traditional work again, of course we have a change of chair and Allan leaves, Graham comes.
Graeme Samuel: The new Commission came into place and we set in place very early in the piece five fundamental principles of operation, and there are principles that became deeply imbued in the culture of the organisation. There are principles that related to timeliness of dealing with matters, fairness in dealing with matters, consistency in dealing with matters, and then confidentiality so the people could approach the Commission with confidential issues and not read about it the next day in the newspaper. And then transparency, which was transparency as to how we dealt with matters when they did become public and they've made us very accountable to the public at large.
Bob Alexander: Comparing with the old days in the 1970s when we were so careful and we weren't rushed. From 2001 on-wards we were rushed, and the Chairman Fels and then Graeme Samuel wanted action and so the pressure was right on to be careful but quick.
Sarah Court: When I first was appointed as a member, that was in the middle of 2008, and we were right at the end of the Visy-Amcor cartel litigation, those penalties and things had just been awarded, so there's no doubt in my mind that Visy-Amcor cartel prosecution was one of the watershed moments.
Graeme Samuel: I think probably the most telling moment was not long after the 37 million dollar fine had been paid in the Visy settlement, a leading company director in Melbourne saw me at a Christmas party and she said to me, she said, you are the talk of every boardroom in Australia at the moment, what do you mean, they said this Visy-Amcor matter has got everybody thinking about what they're doing and whether they may be getting themselves into a situation where they're potentially facing cartel prosecution. Of course the consequence of that cartel, and a lot of the work we did was to bring about something that is quite unique in this country and that is the criminalisation of cartels, because for once an economic crime led to jail sentences.
Question time 12 March 2008: Mr. Speaker on January the 11th I released draft legislation to introduce jail terms for cartel conduct in Australia. The legislation provides for jail terms of up to five years for serious cartel conduct.
Brian Cassidy: We were worried that without it though we didn't have the deterrence that you needed, particularly with cartels, which were very difficult to detect, and it can be difficult to prosecute.
Sarah Court: For me, the biggest changes in the time that I've been at the Commission, so the last six years or so, have been the Australian Consumer Law provision so, I mean they really have marked a very significant change I think, in how corporate Australia behaves.
Delia Rickard: What I do think the ACL has led to though, is much greater and better cooperation and coordination between states, territories and the Commonwealth and we now have these bodies under the ACL that coordinate education work, policy work, enforcement work, product safety work, we share it out so it's a much, much less duplication of resources, much better coordination and I think that makes us much more effective.
Brian Cassidy: There was a sort of a uniforming unity of the law rather than having different laws in different states, but then without multiple regulator model simply because a lot of consumer law issues are local regional type issues where the states are much better placed to deal with those.
Graeme Samuel: You can't understand why on the one hand you would say if you breach competition law, you're going to be penalised potentially with jail sentences, but if you lie, if you engage in effectively fraudulent behaviour, and selling your products or services to consumers, you had no financial penalty – and fortunately that changed.
Rod Sims: When I arrived here, I really wanted to make sure we made full use of the ACL and that probably meant we tipped our resources more into consumer issues, a little bit less, by definition when you do more of one you do less of the other, a little bit less of competition. We're redressing that balance now, but the consumer law was, the changes there were absolutely fundamental. The organisation that I came into is a very powerful, professional organisation that owes a lot, not just to the previous Chairs of the organisation, but also the people in the organisation.
Hello Tiwi Islands, my name is Rod and I'm the Chairman of the ACCC.
In terms of the things I'm trying to do though, that matter to me, it's really trying to make sure that people have faith that a market economy works for them.
Brian Cassidy: I think the Act, even back in the, you know, we first came into being back in '74, I think the Act is one of those really important pieces of legislation and, along with it, the Commission is a really important organisation both as a result of changes made to law and changes made to the institution, but also as a result of what happened out there in the broader world. I think the ACCC as an institution, and the law it administers, have become you know always was important, we've come much more important in the economic fabric of Australia.