Economy

Big business bullies on the run… Retail tenants under the thumb… Ouch! petrol… Electricity up, now water… Big infrastructure spend in NSW budget… Low-paid pay rise?… Engineers = hen’s teeth

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Big business bullies on the run

SMEs will soon have greater legal firepower to fight unfair market practices by big business if legislation introduced by the Federal Government this morning is passed through Parliament.

The legislation is likely to be of greatest benefit to SMEs in retail, grocery and petrol, which are dominated by a few big players but that have not been blocked by legal hurdles from taking action under the Trade Practices Act against what they saw as anti-competitive conduct.

Under the Trade Practices Act it is necessary to prove that a business exercises “a substantial degree of market power” in order to prove that they have engaged in prohibited conduct such as predatory pricing. The new legislation will lower this threshold so that big business with less than absolute market power will face prosecution.

The bill also contains provision to prevent corporate groups working together to exercise market power and creates a new deputy commissioner for small business position within the Australian Competition and Consumer Commission.

Minister for Small Business, Fran Bailey, admits that in the past small businesses were reluctant to report bullying. “But now that they know the act has been amended to strengthen their position, they will be more likely to report (breaches.) Small business will have greater levels of protection.”

Bailey says adding a position at the second highest level with the authority of a deputy commissioner sends a clear message to the ACCC about where its priorities lie.

Council of Small Business Organisations of Australia chief executive Tony Steven says if passed, the new laws will be a big win for small business.

“We hope this will act as a serious deterrent to business carrying out abuse of market power, especially in the grocery, retail and petrol sectors,” Steven says.

It should also be easier for SMEs to take action on predatory pricing under the Government’s legislation, but the protection it provides is much weaker than that contained in a bill introduced by Family First Senator Steven Fielding on Monday.

Under Fielding’s proposal, conduct that has the “effect” of substantially lessening competition can be prosecuted, a lower hurdle than that set compared to the Government’s bill, under which it is necessary to prove that the purpose of anti-competitive behaviour by big business was to damage competitors.

Service Station Association chief executive Ron Bowden says it is vital that both the Government’s and Fielding’s legislation is passed.

Bailey says “Anyone who stands up in the senate and says they can not support it has absolutely no sympathy for small business whatsoever.”

– Mike Preston

 

Retail tenancy squeeze to come under the spotlight

A new inquiry into retail tenancy will hear evidence of widespread rent price gouging by big shopping centres with monopoly market powers, a key industry group says.

Retail and franchising lawyer at law firm Deacons, Stephen Giles, says he has seen retailers face rent increases of up to 200% at rent reviews.

“Tenants are at a huge negotiating disadvantage compared to landlords who have all the data at their fingertips, and they are not afraid to try and squeeze every last bit of juice from the lemon in rent negotiations,” Giles says.

The Federal Government yesterday announced that the Productivity Commission will conduct a six month inquiry into retail tenancy that will cover:

  • The structure and functioning of the retail tenancy market.
  • Any competitive, regulatory and access constraints on the market.
  • The extent of ‘information asymmetry’ between landlords and retail tenants.
  • Scope for reform of retail tenancy regulation.
  • The appropriateness and transparency of provisions in leases to determine rights when the lease ends and factors that are taken into account in determining rents.

It is common for small retailers to be forced to agree to massive rent increases by monopolistic shopping centre owners, Franchising Council of Australia chief executive Richard Evans says.

“Many franchisees are economic captives. Once they move into a shopping centre and spend money on fit-out and build up their customer base, it really is almost impossible for them to move, and that’s when landlords use what is really a monopoly power to manipulate them,” he says.

The huge information gap between tenants and landlords when it comes to lease negotiations and rent reviews is also a big problem, Evans says. Most tenants do not have access to market information, but are required to reveal their own turnover information to the landlord.

Giles says the inquiry should recommend legislation to give retailers greater security of tenure, better access to market information and a formal process to appeal where rents exceed a fair market rate.

What is your experience as a retail tenant in shopping centres? Do landlords have an unfair advantage? What should be done? Email [email protected]

– Mike Preston

 

Ouch, petrol!

The cost of petrol is likely to remain high until September after supply shortages in the US is expected to push oil prices higher.

Although petrol prices have fallen during the last week the relief will be short-term, with reports that crude oil prices on US markets are on the rise, hitting their highest point since last September.

The only bright light is that the corporate watchdog ACCC has been asked last week by Federal Treasurer Peter Costello to investigate collusion in the petrol industry.

– Amanda Gome

 

Electricity up, now water

Victorian businesses and households will be hit with rising water bills during the next five years to pay for the State Government’s $4.9 billion drought plan.

Victorian Premier Steve Bracks says the plan will include a $3 billion desalination plant, a $1 billion irrigation upgrade and $750 million for a pipeline to connect Melbourne with the Goulburn River system. Bracks says there should be a 50% increase in the state’s water supply within five years.

– Amanda Gome

 

$50 billion budget infrastructure plan for NSW

The NSW budget will deliver $50 billion to infrastructure projects and cuts to land tax and mortgage duty. But there is no cut in payroll tax.

The failure to cut payroll tax has disappointed many because NSW Premier Morris Iemma said before the election that he would like to cut the rate from 6%. He’s now saying that payroll tax would be something he would “address” within the next four years.

The big spending will go to a desalination plant, upgrades to the electricity network, water supply, ports and hospitals. There will be a surplus of $376 million in the next financial year, as the housing sector is expected to recover moderately and the jobs market will stay buoyant.

– Jacqui Walker

 

Who’s the boss?

John Kinghorn, the founder of RAMS Home Loans, is trying to sell RAMS for $1 billion, and his corporate advisers started pitching a float to institutional investors this week.

He told The Australian Financial Review he’s selling out to raise money for growth, and that it’s a pragmatic decision. “I love building businesses,” Kinghorn says. “I’m a lousy manager, so there comes a point where the best thing I can do is to get the hell out of there and let the right people manage the business.”

As one entrepreneur seeks to exit his business, another is stepping back in to the thick of things. Jerry Yang, co-founder of Yahoo!, has taken back control of the embattled tech company from Terry Semel.

Semel has been criticised for letting Google streak ahead of Yahoo! and for failing to respond quickly enough to the rise of social networking sites like MySpace and Facebook. Yang has said that one of his top priorities will be shaping Yahoo! into a company that “better monetises its audience”.

 

Hint of a pay rise for low-paid

In a speech to the National Press Club yesterday, Ian Harper, Australian Fair Pay Commissioner, hinted that low paid workers could expect another pay rise this year, according to a report in The Australian Financial Review.

His noting of the fact that the last rise has not affected inflation or unemployment, and that the wage price index did not spike in March, has been interpreted as a sign that workers could get another rise when he hands down his decision in two weeks.

Business groups have urged the Commissioner to keep in mind the recent tax cuts and welfare reform in making his decision.

– Jacqui Walker

 

Looking for engineers? Don’t bother

Leighton Holdings has given up trying to find skilled engineers and project managers in Australia as the skills shortage, particularly in the building industry deepens.

Leighton doesn’t even bother to advertise in Australia for engineers, and a spokesman says that bringing in migrants under 457 skilled migrants visas would not help the situation, a national skills summit in Canberra heard yesterday.

– Amanda Gome

 

 

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