Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2004-2005-2006-2007
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TRADE PRACTICES AMENDMENT (SMALL BUSINESS PROTECTION)
BILL 2007
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Peter Costello MP)
Table of contents
General outline and financial impact ....................................................... 1
Chapter 1 Regulation Impact Statement ................................................ 3
Chapter 2 Notes on Clauses ................................................................ 11
General outline and financial impact
TRADE PRACTICES AMENDMENT (SMALL BUSINESS
PROTECTION) BILL 2007
OUTLINE
The Bill proposes amendments to Section 87 of the Trade Practices
Act 1974 (the Act) to enable the Australian Competition and Consumer
Commission (ACCC) to bring representative actions in respect of
contraventions of Sections 45D and 45E of the Act.
FINANCIAL IMPACT STATEMENT
The Bill has no financial impact on the Commonwealth Budget.
1
Chapter 1
Regulation Impact Statement
Secondary Boycotts -- Representative Actions by Australian
Competition and Consumer Commission
Problem
1.1 The problems addressed by this Bill are achieving consistency in
the application of the remedies and enforcement provisions of the Trade
Practices Act 1974 (the Act) and improving persons access to remedies
under the Act which, in turn, is to deter breaches of the Act.
1.2 On average, the ACCC received around 12 complaints each
financial year in relation to sections 45D and 45E between 2004-2005 and
2006-2007. There may be more businesses, affected by unlawful
secondary boycotts, who do not lodge their complaints with the ACCC.
Therefore, the exact number of persons affected by secondary boycotts is
unknown.
Current Situation
1.3 At present, subsections 87(1A) and 87(1B) of the Act allow the
Australian Consumer and Competition Commission (ACCC) to take
representative court actions in relation to all contraventions of Part IV
(restrictive trade practices) other than the secondary boycott provisions
(sections 45D and 45E). That is, the ACCC cannot take action on behalf
of persons who have suffered or are likely to suffer loss or damage due to
breaches of sections 45D and 45E.
1.4 A secondary boycott consists of persons that are indirectly
boycotting another person, preventing third parties from dealing with that
person. Sections 45D and 45E deal with two types of secondary boycotts.
1.5 Section 45D prohibits two or more persons from acting in
concert to hinder or prevent a third person from supplying or acquiring
goods or services from a fourth person if the purpose or likely effect of the
conduct is to cause substantial loss or damage to the business of the fourth
person. In this situation, the fourth person is the target of the boycott.
1.6 Section 45E prohibits a person from making an agreement with
a trade union for the purpose of preventing or hindering the supply or
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Trade Practices Amendment (Small Business Protection) Bill 2007
acquisition of goods or services between that person and the target of the
boycott.
1.7 Sections 45D and 45E were excluded from the operation of
subsections 87(1A) and 87(1B) as a result of the Senate debate on the
Trade Practices Amendment Bill (No.1) 2000. The Trade Practices
Amendment Bill (No.1) 2000, as introduced, allowed the ACCC to take
representative action in relation to all breaches of Part IV. However,
sections 45D and 45E were carved-out of that Bill. Essentially, the
opposition believed that sections 45D and 45E did not relate to
competition policy and should not be contained within the Act in the first
place. Therefore, it did not support the provisions being treated in the
same manner as all other restrictive trade practices provisions within
Part IV of the Act.
1.8 The Government, on the other hand, believes that sections 45D
and 45E are matters of competition policy. Specifically, competition is
adversely affected in the market in which the person, impacted by the
secondary boycott conduct, operates. Therefore, the Government believes
that sections 45D and 45E should not be treated differently to any other
provisions within Part IV. The Government accepted a carve-out of
sections 45D and 45E from the Trade Practices Amendment Bill
(No.1) 2000 to enable the passage of the rest of the provisions contained
within that bill. The Government now wants to fulfil the full intent of the
Trade Practices Amendment Bill (No.1) 2000 by allowing the ACCC to
take representative action in relation to all breaches of Part IV, including
secondary boycotts.
1.9 The Government's amendments do not create a new cause of
action. Sections 45D and 45E already prohibit unlawful secondary
boycotts. The Government's amendments enable persons affected by
unlawful secondary boycotts, to access the same procedural mechanisms
(including representative actions) available to persons affected by all other
provisions of Part IV.
1.10 The ACCC seeks to achieve compliance by business with the
provisions of the Act through a number of means, including informing
business and consumers about the rights and obligations created by the
Act, detecting possible contraventions of the Act, and addressing them
through administrative settlements and litigation. If the ACCC decides
that court action is warranted, it considers a number of issues to determine
whether it will bring a representative action including the number of
persons affected, the damage each person has suffered, the resources
available to those affected to bring their own action and the likelihood that
the action will succeed.
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Chapter 1 Regulation Impact Statement
1.11 Representative actions can remove many of the barriers
which ordinary people face when seeking to enforce their legal
rights and give the courts a more efficient process for dealing with
cases involving large numbers of people. Small businesses, in
particular, often do not have either the time or resources to
commence legal action.
Objective
1.12 The objective of the proposed amendments is to achieve
consistency in the application of the remedies and enforcement
provisions of the Act and improve people's access to remedies under
the Act which, in turn, is to deter breaches of the Act.
Options
Option 1 -- No Action
1.13 This option would involve no change to the current regulatory
regime.
Option 2 -- Education campaign
1.14 This option would involve the Government undertaking an
education campaign directed at informing businesses about their legal
rights and remedies under the Act in case they suffer loss or damage as a
result of secondary boycott conduct.
Option 3 -- Mediation
1.15 This option would involve a trained mediator helping the parties
to a dispute to reach agreement by assisting them to identify the issues in
dispute and to develop a mutually acceptable solution.
Option 4 -- Legislative Amendments
1.16 This option would involve legislative amendments to
subsections 87(1A) and 87(1B) of the Act to allow the ACCC to take
representative court actions in relation to all contraventions of Part IV,
including sections 45D and 45E.
Impact analysis (costs and benefits) of each of the options
1.17 Groups likely to be affected by the proposed regulatory
amendments include business, persons undertaking unlawful secondary
boycotts, consumers, the ACCC and the courts.
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Trade Practices Amendment (Small Business Protection) Bill 2007
Option 1 -- No action
1.18 Unlawful secondary boycotts are not addressed under industrial
relations legislation. Under the Act, the ACCC will continue to be able to
prosecute illegal conduct under sections 45D and 45E of the Act; however
penalties will be limited to pecuniary penalties, injunctions and associated
orders. The ACCC will not be able to bring action on behalf of persons,
including small businesses, affected by secondary boycotts.
1.19 Persons, who do not have the time or resources to commence
legal action, will be less able to recover loss or damages they have
suffered as a result of the unlawful secondary boycott conduct. It is also
less efficient and more costly for groups of small businesses, affected by
the unlawful secondary boycott conduct, to commence legal action
individually to seek compensation for any loss or damages suffered. A
group of small businesses could commence a private class action to seek
compensation for their losses which would be more efficient and the costs
could be shared. Nevertheless, private litigants bear the costs of the legal
action and they need to have the financial means to commence and sustain
a legal action. There will be inconsistencies in the administration of the
Act as the ACCC will be allowed to take representative action in relation
to all breaches of Part IV except for sections 45D and 45E.
Option 2 -- Education campaign
1.20 A person affected by unlawful secondary boycotts who is aware
of their legal rights as a result of an education campaign may be able to
negotiate a more beneficial outcome where there is a contravention of the
Act.
1.21 There would be significant costs for the Government associated
in conducting an education campaign. The costs would depend on the
scale and scope of such a campaign; however it is anticipated that the
campaign would need to be Australia wide and cover all business sectors.
Business and consumers may benefit from an increased awareness of legal
rights and remedies. However, small businesses are difficult to target as
part of an education campaign. Most small businesses are only likely to
seek the relevant information when they are affected by a secondary
boycott. Further, an education campaign is unlikely to address the costs
involved in Option 1. Persons who suffer loss or damage as result of
unlawful secondary boycotts, and who are unable to commence legal
action, will not be able to seek redress for that loss or damage.
Inefficiencies in the application of the Act and inconsistencies in the
administration of the Act by the ACCC will remain.
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Chapter 1 Regulation Impact Statement
Option 3 -- Mediation
1.22 Mediation is usually voluntary and can be a quick and
inexpensive mechanism for resolving disputes. It can help parties
avoid litigation or expedite settlement if litigation has commenced.
Most small claims courts and tribunals use mediation as the initial
step when dealing with complaints. Mediation is also available
through community justice centres and private dispute resolution
services.
1.23 Mediation will only be effective where the parties involved have
the authority to settle and be bound by any outcome. Therefore, in a
secondary boycott, all parties to the dispute will need to participate in
mediation and be willing to resolve the dispute. Without the willingness
of all parties to the dispute, a person who is impacted by the secondary
boycott conduct and is unable to commence legal action, will not be able
to seek redress for loss or damages suffered.
1.24 Inefficiencies in the application of the Act and inconsistencies in
the administration of the Act by the ACCC will remain. Mediation may
not assist persons, suffering loss or damages as a result of the unlawful
secondary boycott conduct, who seek immediate injunctive relief from
that conduct. That is, they will continue to suffer loss or a damage until
the mediation is successful.
Option 4 -- Legislative Amendments
1.25 Legislative amendments would enable the ACCC to take action
on behalf of persons who have suffered loss or damages as a result of
unlawful secondary boycotts. This would increase people's access to
redress under the Act. In some circumstances, it could also be more
efficient for the ACCC to take action on behalf of a group of small
businesses, affected by the unlawful secondary boycott conduct, rather
than for each business to commence individual legal action to seek
compensation for any loss or damages suffered. There will be increased
consistency in the administration of the Act as the ACCC will be allowed
to take representative action in relation to all breaches of Part IV,
including sections 45D and 45E. The requirement to compensate persons
suffering loss or damages as a result of the unlawful secondary boycott
conduct is also likely to act as a deterrent for persons engaging in that
conduct. This would improve compliance with the Act.
Consultation
1.26 The proposed legislative amendments have their origins in the
original bill, Trade Practices Amendment Bill (No.1) 2000, which sought
to allow the ACCC to take representative action in relation to all breaches
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Trade Practices Amendment (Small Business Protection) Bill 2007
of Part IV. The amendments proposed by that bill were subject to broad
consultation and there was public support for the changes. The Australian
Law Reform Commission Report No 68: Compliance with the Trade
Practices Act 1974 and the report by the Joint Select Committee on the
Retailing Sector, Fair Market or Market Failure supported the reforms.
The cost of taking legal action as being a substantial impediment to
business (particularly small business) and consumers accessing
appropriate legal remedies under the Act was well-documented as part of
this consultation process. Allowing the ACCC to take representative
action on behalf of persons who have suffered as a result of a breach of
the Act would assist persons facing prohibitive legal costs.
1.27 The Government informed the public of its intention to amend
the Act in its 2004 election policy `Flexibility and Productivity in the
Workplace: the Key to Jobs'. A joint Media Release, on
22 February 2007, by the Minister for Small Business and Tourism and
the Treasurer confirmed the introduction of the proposed amendments. In
addition, the Treasurer referred to the Government's proposed reforms in
his speech at the Pastoralists and Graziers Association of Western
Australia Centenary Convention in February 2007. The Minister for
Small Business and Tourism informed peak small business groups of the
Government's proposed amendments, at the March 2007 National Small
Business Forum.
1.28 The Office of Small Business, the Department of Prime Minister
and Cabinet, the Department of Employment and Workplace Relations
and the ACCC have been consulted on the proposed changes.
Conclusion and recommended option
1.29 If there is no action, the ACCC will continue to be limited in the
remedies it is able to seek in relation to unlawful secondary boycotts.
Persons, who do not have the time or resources to commence legal action,
may be less able to recover loss or damages they have suffered as a result
of the unlawful secondary boycott conduct. The potential inefficiencies
created through each person, affected by the secondary boycott conduct,
commencing individual legal action to seek compensation for any loss or
damages suffered will remain. There will be inconsistencies in the
administration of the Act as the ACCC will not be allowed to take
representative action in relation to sections 45D and 45E of the Act but
can do so for all other contraventions of Part IV.
1.30 An education campaign may inform individuals of their legal
rights however; it will be a costly task for the Government and will not
address the problems of persons obtaining redress under the Act and
inconsistencies and inefficiencies in the administration of the Act.
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Chapter 1 Regulation Impact Statement
Similarly, because of its voluntary nature, mediation may not address the
current problems.
1.31 The preferred option is to amend the Act to allow the
ACCC to bring representative actions in respect of contraventions
of sections 45D and 45E of the Act. It will achieve consistency in
the application of the remedies and enforcement provisions of the
Act and improve people's access to remedies under the Act which,
in turn, is to deter breaches of the Act.
Implementation and review
1.32 Implementation of the preferred option will occur through this
Bill. The Act is subject to continuing evaluation and assessment by the
Treasury to ensure its continued effectiveness.
9
Chapter 2
Notes on Clauses
Clause 1 -- Short title
2.1 This is a formal provision specifying the short title of the Act.
Clause 2 -- Commencement
2.2 Clause 2 specifies that the Act is to commence on the day on
which it receives Royal Assent.
Clause 3 -- Schedule
2.3 Clause 3 specifies that the Trade Practices Act 1974 is amended
as set out in the Schedule.
Schedule 1
Item 1 -- Paragraph 87(1A)(b)
2.4 This item removes the words `(other than section 45D or 45E)'
from Paragraph 87(1A)(b) of the Trade Practices Act 1974 (the Act). The
effect of this change is to enable the Australian Consumer and
Competition Commission (ACCC) to seek orders from the Federal Court
on behalf of one or more persons who have suffered, or are likely to
suffer, loss or damage by conduct of another person where the conduct
engaged in is in contravention of sections 45D or 45E.
2.5 This change removes the current limitation in section 87(1A(b)
of the Act, under which the ACCC is able to seek such orders for all
contraventions of Part IV of the Act other than sections 45D or 45E.
Item 2 -- Paragraph 87(1B)(a)
2.6 This item would remove the words `(other than section 45D or
45E)' from Paragraph 87(1B)(a) of the Act, which prescribes the
conditions the ACCC must satisfy before they may commence a
representative action on behalf of a person or persons who have suffered
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Trade Practices Amendment (Small Business Protection) Bill 2007
loss or damage, or are likely to suffer loss or damage, as a result of
conduct in contravention of the Act.
2.7 This change would allow the ACCC to initiate representative
actions in respect of breaches of sections 45D and 45E. The ACCC may
currently initiate such representative actions in relation to all
contraventions of Part IV of the Act, other than sections 45D and 45E.
Item 3 - Application
2.8 Item 3 makes it clear that the ACCC may only bring actions for
compensation or representative actions for contraventions of Sections 45D
and 45E in relation to conduct that occurred on or after the
commencement of the amendment.
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