The deal done last week between the Australian Democrats and the federal government to introduce choice in superannuation highlights a little recognised reality about the Australian economy: the interaction between industrial relations and competition laws limits the extent to which a free market is allowed to operate.
It works like this. Section 51 of the Trade Practices Act excludes "employment" matters from the reach of the act. In a 1996 report, the National Competition Council accepted that industrial relations laws legalise price fixing and collusive activity which would ordinarily be illegal under trade practices law. However, in the workplace such activity is declared acceptable on public interest grounds.
For any matter to be freed from competition laws, all that needs happen is for the matter to be inserted into an industrial instrument, an award, enterprise bargaining agreement or other order.
This is the case with superannuation which is enshrined in many awards and enterprise agreements as an employee entitlement but with an additional hook of nominating the fund. The outcome is that not only is the entitlement to super an "employment" matter but the fund restriction is also an "employment" item thus free from competition laws.
This effectively legalises "third line forcing", which is normally illegal under non-employment contracts and considered highly damaging of free market functioning.
For example a contract to purchase a car cannot, as a condition of the purchase, also require the buyer to take finance through a specified lender. Awards require employees, as a condition of their employment, to use the services of specified super funds.
A worker as an employee is given rights but the same worker, as a consumer of super funds services, is denied normal consumer rights.
The outcome has been the delivery of special privilege to nominated commercial businesses, in this instance principally industry funds often controlled through union and employer association trust connections and employer-controlled funds.
This legalised denial of consumer choice has wide implications for free markets. If, for example, a construction superannuation fund were effectively controlled through building union connections, building unions could exert considerable industrial muscle to frustrate projects not financed through their preferred super fund. Such potential market manipulation would be near impossible to identify, let alone prove.
Last week's choice in super fund legislation returns to workers some of the consumer rights denied them because TPA employment exemptions have been exploited through definitional manipulation under industrial relations. But even as that legislation passed federal parliament, the Australian Industrial Relations Commission was deep into procedural consideration of Victorian attempts to introduce "common rule" awards.
If successful, some 400,000 plus Victorian workers currently award free will have robbed from them the super fund choice they currently enjoy when these new awards are imposed mandating particular funds. Private superannuation funds are objecting. The workers don't have a say.
It's an unaddressed public policy mess that denies consumer their rights. The TPA employment exemption provisions represent a gap in competition laws which is routinely leveraged open through the industrial relations system. Consumers have rights which should be secure, regardless of work engagement legal status. These consumer rights are the bedrock of free markets.
The NCC reasoned in 1996 that price-fixing and collusion delivered by employment TPA exemptions are managed through state and federal industrial relations legislation and tribunals. Yet employment legislation does not impose on tribunals obligations to take account of competition and consumer protection issues in their deliberations and decisions.
The Australian Consumer and Competition Commission is mostly a neutered observer in these matters. A recent Industrial Relations Commission decision found that a particular agreement between a union and an employer was an agreement between the two parties to breach the TPA, but that this was not illegal. The ACCC has withdrawn from investigation of the case.
The policy dilemma is that businesses allegedly could not function if their employee relations processes were subject to the TPA. However, over the last decade industrial tribunals have creatively expanded the definition of employment to now embrace a vast range of business-commercial issues, thus eroding consumer rights and distorting free-market functioning. Superannuation is only one example.
It's a critical public policy issue that needs extensive and open debate.
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