Canavan Favours Divestiture Penalties to Deter Abuse of Market Power

The Competition and Consumer Act should be amended so corporations abusing market power could be broken up, Queensland Senator Matt Canavan argues in a just-published Senate committee report.

In suggesting stronger penalties to tame misuse of market power, Senator Canavan cited last year's Federal Court judgement that found Coles had gravely misused its bargaining power and lamented the fact the maximum possible penalty of $10 million imposed was "inadequate".

"Divestiture powers should be rarely used but they are the ultimate deterrent against companies with market power doing the wrong thing. Divestiture powers are a big stick, but we can't walk softly unless we carry a big stick,” Senator Canavan said.

"Those with market power have a privileged position in the market place and they should be held to higher responsibilities because of that position. 

"Divestiture powers exist in the United States, United Kingdom and Canada. Our lack of divestiture is a radical departure from world practice.

“Last year, the Federal Court concluded that Coles gravely misused its bargaining power. It found Coles demanded payments from suppliers to which it was not entitled by threatening to harm their business and withheld money from suppliers it had no right to withhold.

“The Court concluded that: 'Coles' practices, demands and threats were deliberate, orchestrated and relentless'.”

Senator Canavan has stated his support for divestiture powers in additional comments in a report published on Thursday (26/2/2015) by the cross-party Economics Legislation Committee on its inquiry into legislation proposed by independent Senator Nick Xenophon.

Such divestiture powers would mean that a corporation found to have misused its market power could be ordered to divest itself of parts of the business to reduce market power.

The proposed bill - the Competition and Consumer Amendment (Misuse of Market Power) Bill 2014 - would provide a range of increased penalties, including a divestiture provision. The Committee's majority recommendation in the report was that the bill should not be passed by the Senate.

The report is available on the Committee's website here http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Competition_Bill_2014/Report

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