Australian Small Business and Family Enterprise Ombudsman Bill 2015

I welcome the Greens' support for this measure, although I will make one comment on Senator Whish-Wilson's contribution. I know numbers are not the Greens strong suit, and they might not have noticed, but before the election the coalition—the Liberal and National parties—did not have the numbers. 

We did not have the numbers either here in the Senate or in the other place. As well-intentioned as I am sure Senator Whish-Wilson's private senator's bill was, at the time, and I was not a member of the Senate then so I cannot recall it, it would not have been able to be implemented by the government at the time. The only way we could have got to the place we are today, to do something like this, was for the Liberal and National parties to be elected at the last election, which fortunately we were. We were elected on a platform to introduce an ombudsman, and it is with great pleasure that I rise today to share my support for this initiative and welcome the fact that the government has brought it forward as an important way to help small businesses receive appropriate access to justice and redress through our competition system.

To start my comments today, I want to go back to when we did have an ombudsman. We actually had an ombudsman for some areas of our economy that will be impacted by this bill. A grocery ombudsman was established back in 2000, I believe. He was around for about five or six years. Last year I was fortunate enough to meet Mr Robert Gaussen, who was the Produce and Grocery Industry Ombudsman at the time. He also subsequently came and provided evidence to the economics committee about his work and what the effect of it was. I thought he gave very compelling evidence. He gave very compelling evidence to show why an ombudsman is an important tool in the competition workshop and an important way of providing a low-cost means for small businesses to access justice and bring matters to a head. At the time, Mr Gaussen told the Senate Standing Committee on Economics:

...any code of conduct that has no adequate enforcement regime will not be a successful code of conduct. The words that appear in this code—

which is the grocery code—

are good words. The content and intention of what is being described in this code are great, and they are needed and are long overdue. But there is no obligation on anyone to do anything, even if they sign up to it, because of the system under which there is no enforcement.

Mr Gaussen goes on to say:

The average cost for the ACCC to investigate, inquire into and manage disputes is massive, so there is no way in the world that they can provide, through their systems and the laws under which they have to operate, an effective enforcement regime. They are not resourced to do that. An ombudsman service, with referral capacity to the ACCC, provides that filter and at a much reduced price—and quickly. The key to disputes is speed.

I think that is a very important point. To resolve disputes—whether with my wife or with your contracting business—the key is speed. When I have a fight with my wife I try to resolve it as quickly as possible, because if you let matters fester that is when people start—

Senator Bilyk: "Happy wife, happy life."

Happy wife, happy life! Senator Bilyk, that is absolutely right. That is the anthem I operate under in my life—I try to, at least. Sometimes I go to bed without resolving those disputes, but I try the next morning to make sure I reflect on my behaviour—usually it is me at fault—and resolve that dispute and restore the relationship. I do not think it is any different in business either. If we can have an easy service, which allows people to resolve disputes quickly, they are more likely to continue on with a trusting and productive relationship, going forward, compared to having to rush off to court or make a complaint to the ACCC, in which case, clearly, people will start to bear a grudge on either side of the fence and positions become strengthened and put in concrete through that process. So this is a very important bill in that regard.

There are, of course, alternatives to an ombudsman, other than going to the ACCC or going to court directly. Many other codes of conduct and other dispute resolution frameworks in our country rely on mediators or arbitrators rather than an ombudsman. Indeed, the recently introduced and regulated Food and Grocery Industry Code of Conduct relies on mediation and arbitration. Last year we established a legislative instrument to do with bulk wheat export marketing. Similarly, the provisions of that rely on mediation and arbitration. They are a useful alternative dispute resolution process. But they have their own limitations as well. They are not as costly as the ACCC or a court action, but they still can be slow and expensive at times.

In the case of mediation they can sometimes, of course, not resolve a dispute, because there is no decision maker put in place. While mediation can sometimes be a useful way of resolving disputes it will not necessarily do so in all cases. Then there is arbitration, which is a higher level of dispute resolution. It does provide for a decision maker and a final conclusion to be made, but it can be quite costly these days, in particular. Most arbitration services now rely on third parties or contractors to be involved, which can be quite expensive.

Earlier, I quoted Mr Robert Gaussen, who is the former grocery industry ombudsman. He appeared at a Senate Economics Committee hearing on the recently introduced Food and Grocery Industry Code of Conduct, which relies on mediation and arbitration. We heard evidence in the committee hearing that arbitration can these days be extremely costly. Mr Gaussen said that arbitration is overwhelmingly more expensive in today's years than even litigation, because the courts are now much quicker and more efficient in the time they take to resolve matters. Arbitrators might get one or two matters a year. They have very little practical experience in the area so they are learning from nought. Quite frankly—and Mr Gaussen said some of his close friends were arbitrators—they spin it out unnecessarily so because they are being paid a higher rate. It is a bad system. Most of them are on daily rates but some will get $2,500 to $8,500 a day. It is not bad work! But people have to pay that cost. It is normally shared between the businesses that are involved in the dispute. Often it will be a small business that is involved in the dispute, and they will potentially be up for $2,500 to $8,500 a day. It is quite expensive.

After we had heard that evidence, the committee asked Treasury to provide more information. Unfortunately Treasury had not calculated these costs when it did the regulatory impact statement for the Food and Grocery Industry Code of Conduct, but it did go away and get some information for our committee and it came back and said that professional fees varied, depending on the complexity of the case and the amount in dispute. They also varied between service providers. Treasury understands, based on consultation with a private mediation provider that typical mediation costs are in the order of $275 per hour for each party and that typical disputes resolved following around seven hours of mediation, so that the total cost is around $1,925 for each party, which, again, is quite an expensive way of resolving a dispute.

For some businesses that will not be an overbearing hurdle for them to resolve their dispute. Indeed, for a healthy business it probably should not be, at a couple of thousand dollars. The issue here is that many businesses, particularly small businesses that are involved in disputes are often at the very same time under cash flow pressures or perhaps even long-term operational issues. Because they are involved in a dispute they might not be getting paid by the relevant suppliers. They might be getting paid lower amounts of money than they believe are due to them. Therefore, even just a couple of thousand dollars, on average, could be too much a burden to bear.

That is why, in my view, it is important that we have an alternative cheap and low-cost way of resolving disputes, and an ombudsman allows us to do that. It allows us to do that because an ombudsman is something the Commonwealth government will fund. It will provide the ability for small businesses and others to come forward and have their disputes resolved in an easy and costless fashion.

Indeed, after finishing the Senate Economics Committee inquiry into the Food and Grocery Industry Code of Conduct, I concluded, along with some senators from the National Party, that we should have the grocery code ombudsman in place of the mediation and arbitration process in the grocery code. Relying on arbitration and mediation in the grocery code was not, in my view and that of the National Party senators, an effective way of dealing with the issues in this particular field. We have mediation and arbitration for bulk wheat exporting. That is a different market. You have grain traders who trade substantial amounts of grain and have a substantial amount of turnover who probably can afford to go through processes of this kind. The grocery code is dealing with a completely different class of businesses and operators, often businesses with very thin margins, small amounts of turnover in relative terms, and businesses that may be put under undue pressure from time to time.

I firmly believe that an ombudsman would be the best way to deal with issues in the grocery sector in particular. I commend the government for bringing forward this bill to provide for a low-cost way for small businesses generally to get access and resolve disputes—not specifically from the grocery code, as I would like to see, but generally for the small business sector. That will provide a way for the small businesses in our community to achieve more readily available redress.

This is a policy that the coalition took to the last election. It was part of our small business policy—and one of a number of initiatives at that election—to establish a small business and family enterprise ombudsman. This particular bill implements that commitment. It will do three things. It provides a Commonwealth-wide advocate for small businesses and family enterprises, someone who sits above all of the policy-making areas in this field, to provide a voice within government for small businesses. It will provide a concierge for dispute resolution and provide its own dispute resolution service. So it will allow small businesses an alternative way of coming forward. They can still, of course, go to the ACCC, they can still, of course, engage their own lawyers under private enforcement and law, and they can still seek to resolve disputes under the various codes of conduct that might apply in their sector. But they can also now access an alternative way of doing that, and that is only a good thing and should be supported. It will also, of course, contribute to development of small business policies more widely across the government.

We are a government that is about protecting small business, supporting small business, supporting people who want to take a risk in their lives, back themselves and be their own boss. I said in my maiden speech in this chamber that I want to have a country where people can, if they so choose, start their own business, have their own job, save for their own house and start their own family. Having economic security as part of small business is one aspect of achieving that. This legislation is only a small way of doing that but it fits into a broader context of supporting small business in our country through the recent tax changes we made in the budget, through the grocery code of conduct we have established and through the competition policy review that has recently concluded and the various changes that might come from that.

I note that this legislation has gone through the regulatory impact statement process. This has shown that it will lead to a net reduction in the regulatory burden facing businesses by a small amount: 0.007 million per year. I suppose that is only $7,000—I am getting a nod from some advisers. It is a small amount of money but it is a net reduction in regulatory burden because this will be an easier way to resolve disputes. It will produce broader economic benefits across the economy, not just in terms of red tape, of around $18 million per year. So it is something that should be supported, and I commend the government for it.

In the time remaining I will say a little more about the government's small business agenda. As we saw in the budget, this government is about supporting small businesses, particularly making sure that they face a lower tax burden over time, with both the reduction in the corporate tax rate for small businesses and the granting of a tax rebate for small businesses that are not incorporated, which will help to achieve that. The more than $3 billion worth of savings in depreciation allowances that we have implemented in the budget has been a great stimulus for our economy, again supporting small businesses that want to invest in our economy. We want to support people who take a risk, invest in their business, invest in our country and invest in creating more jobs for all Australians, and we have been able to achieve that.

Late last year the Harper review reported. That was a broad look at competition policy across our policymaking landscape. I will particularly focus on some conclusions of that report that relate to these bills and their objective of supporting small business. We have various competition laws in Australia that seek to restrain the ability of large corporations to act in a dominant and abusive way in marketplaces. We have a good competition law but—just as I said on corporate tax earlier that we have a good tax system—that does not mean that it cannot be made better.

Senator Whish-Wilson: "Bring on section 46."

I thank Senator Whish-Wilson. I was just about to come to section 46. The centrepiece of our law which seeks to restrain the activities of dominant firms or firms with a significant degree of market power is section 46. The jurisprudence around section 46 has evolved over time. I would argue—and I agree with the Harper review—that the jurisprudence has evolved to an extent which effectively means that actions under section 46 have very limited ability to succeed. The courts' interpretation of the 'taking advantage' test is a hypothetical one and one that, as an economist, I would say helps economists put their kids through college but does not help small businesses take action in court. Recent cases on Rural Press and Melways that have come to the court on section 46 have involved long, arduous and technical debates about economic structures, particularly of markets and particularly hypothetical structures in those markets, and it has proven very difficult for plaintiffs to prove and take successful action on that. It is also the case that the 'purposes' test as it is currently drafted is out of kilter with the rest of the world. Most other countries, at least in western and English-speaking countries with a common law background similar to ours, have adopted codified laws which make it an offence for a dominant firm to act in a way that has the effect of being anticompetitive in some way, shape or form as defined.

The Harper review has made some detailed recommendations as to how we could finetune our law to introduce an 'effects' test, to remove that 'taking advantage' test which has proven so problematic and, relatedly, to adjust the proscribed purposes under section 46 to make it a more comprehensive test of a substantial lessening of competition. I know that the government is considering its response to the Harper review at this point. I am on record in this chamber as supporting the general thrust of the Harper review recommendations. I think it has clearly identified a problem in our existing law and jurisprudence and a problem that deserves some response.

Senator Whish-Wilson: "Bring us some legislation."

I am sure that the government in due course, after due consideration of the Harper review, will bring a response forward, and I look forward to that. Returning to the bills before us, they should be supported by this chamber because they add to the avenues that small businesses can access to get a better deal for themselves. They will provide small businesses with a lower cost way of resolving disputes and they will reduce the burden that is placed on our regulators and the business sector more generally in resolving those disputes. As I said earlier, that is an important attribute because it will help resolve disputes quickly, cheaply and efficiently. That is the same approach I take to my marriage. If it is good enough for me and my wife, I think it is good enough for our small business sector that we try to resolve disputes quickly, cheaply and efficiently. I think this bill will help do that. Senator Cormann was not here to hear my earlier contribution about my marital difficulties from time to time. Suffice to say I have a very strong marriage thanks to the fact that I do try to resolve disputes quickly, and I think this bill will help the small businesses of our country achieve the same result. They do need to have productive relationships with bigger businesses. Small businesses are not islands. They often do rely on contracting with larger businesses. They do face difficulties in that regard. Anything we can do that will build the trust and confidence for them to have those relationships, to invest in their own businesses and to develop stronger and more productive relationships with other businesses will be good for our economy. It will be good for jobs, it will be good for investment, and it should be supported by this chamber.

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