Bruce Billson, as we’ve noted before, is regarded as one of the heroes of the Federal Government. He has a long list of achievements for small business to his name, including the small business tax package announced in the May Budget. He is presently guiding through Parliament the Bill to extend unfair contract-term protections to small business contracts. With the tabling of the Bill in June, Billson noted that the Government had met each of its small business election commitments.
The latest addition to his policy armoury is the creation of the position of the Australian Small Business and Family Enterprise Ombudsman, established by specific legislation that has just been passed by the Federal Parliament.
The Small Business and Family Ombudsman, as opposed to a Commissioner (we’ll get to that later), was earmarked in the Coalition’s Policy for Small Business for the September 2013 election. The Policy stated that the Coalition would “create a Small Business and Family Enterprise Ombudsman with real power”.
The then Labor Government had already appointed a Small Business Commissioner, who commenced on 2 January 2013. The person in that role, and who remains in the position today, is former solicitor and barrister, Mark Brennan. Brennan, who was appointed by the then Minister, Brendan O’Connor, was the Victorian Small Business Commissioner from 2003–2010. Since then, other state jurisdictions have followed suit, with Commissioners appointed in Western Australia, New South Wales, and South Australia. According to the Coalition’s policy, however, Labor had failed to give the position “any power or useful role”. Rather, it was a “symbolic sop to the small business community”.
This message of giving the position “power” has been a constant in the Government’s language. When the Government outlined its legislative approach for the Ombudsman in August 2014, it was a matter of “real power” and a “powerful asset in the small business community”. Similarly, the Minister’s media statement to coincide with the tabling of the Bill into Parliament on 3 June suggests he believes that “the hard-working women and men of Australian small business will be pleased to see that the model settled on has real power”. Labor’s “symbolic sop” is being replaced with “real power”.
The Australian Small Business and Family Enterprise Ombudsman Bill 2015 is now law, so it’s worth considering what the new Ombudsman, with “real power”, could mean for our sector. The first point is obvious, but critical, in that the current Commissioner role is non-statutory, which leads to suggestions that it lacks teeth. As the Minister said in his second-reading speech on the Bill: “The Ombudsman will be much more, and will have strong, legislated powers”. The legislative underpinning for the role is, itself, a big selling point.
A relevant point is also the fact that the position is being given the much stronger title of ‘Ombudsman’, as opposed to ‘Commissioner’. One has to question, with the new legislative powers now being locked in: why not maintain the current title of Commissioner?
One explanation is that an Ombudsman has a high level of public trust and confidence, and is seen as a safeguard for the public interest. However, the Small Business and Family Enterprise Ombudsman position isn’t actually like a typical Ombudsman, such as the Commonwealth Ombudsman. This point hasn’t gone unnoticed or unchallenged. It its submission to the Senate Legal and Constitutional Affairs Legislation Committee in July 2015, the Australian and New Zealand Ombudsman Association expressed its “continuing concerns” with “the use of the term Ombudsman for an office which is explicitly an advocate”. The Association also submitted that “an Ombudsman must not be an advocate for any special interest group, agency or company”.
It’s a moot point. The Association’s website has a section on the “use and misuse of the term”, which states that “if the concept of Ombudsman is applied inappropriately, public confidence in the role and independence of the Ombudsman institution is at risk of being undermined and diminished”. The Association therefore recommended a title of Commissioner or Advocate, which was obviously rejected.
We made a submission on similar grounds, and also argued the title would get confused with the well-known lingo and network of Commissioners across other jurisdictions.
Another possible reason for the title is that Ombudsmen are generally focused on ‘people’ who believe they have received unfair treatment. The Ombudsman Association provides that the primary role is “to deal with complaints from citizens and consumers”. This fits neatly with Minister Billson’s ongoing narrative and justification for the Government’s policy approach, such as his reference to the “hard-working men and women of small business”. This distinguishes small businesspeople from big businesses. This is the same reasoning for the Government’s proposed extension of consumer-unfair contract-term protections to small business.
Let’s now consider some of the ‘real powers’ of the position.
The Bill gives the Ombudsman powers for two principal functions, to:
- “advocate for small business and family enterprises in relation to relevant legislation, policies and practices” (i.e. the ‘advocacy function’), and
- “give assistance in relation to the relevant actions if requested to do so” (i.e. the ‘assistance function’).
The Ombudsman does not have dispute resolution as a core function (another reason why the Ombudsman Association had concerns with the proposal), but will, rather, provide a facilitated or ‘concierge’ service for resolving disputes.
Given the prescribed function to advocate for small business, we find it difficult to regard the position or office as having a neutral or objective starting point.
A further concern is the expansive definition of small business, which is a business that “at a particular time in a financial year” has fewer than 100 employees, or either revenue for the previous financial year of $5,000,000 or less, or revenue of $5,000,000 or less in the current financial year if the business did not operate in the previous year.
This means the Ombudsman’s powers and functions cover businesses that are clearly medium-scale (i.e. bigger than ‘small’) enterprises.
By comparison, the Government’s proposed ‘Unfair Contract Terms’ legislation which, at the time of writing, is before a Senate Committee, rightly prescribes a small business as having fewer than 20 employees. The Australian Bureau of Statistics describes medium enterprises as having 20 employees or more but less than 200 employees. Based on the concerns with the functions and scope of the position, a critical issue is who will be the person who fulfils the role.
In our experience, working with such offices across various jurisdictions can be positive, but success depends heavily on the willingness to be neutral, objective and consultative. This will be important for the Ombudsman, particularly in relation to a further area of concern, which is the power for the Ombudsman to conduct inquiries, which forms part of the ‘Commonwealth-wide’ advocacy function.
The legislative power to conduct inquiries into the “effect of relevant legislation, policies and practice on small businesses and family enterprises” includes the “past, present or proposed policies or practices of constitutional corporations”. This could include the policies and practices of shopping centre companies. This power includes an ability to require information and documents to be provided.
Apart from this power being based around a small business advocacy function, it is a further cause for concern, given the Government already has at its disposal independent agencies that are able to undertake inquiries. This includes the Productivity Commission and Australian Competition and Consumer Commission. Why would the Government need another body to conduct inquiries? As SCN readers would know, these existing bodies have undertaken various inquiries into our sector. In addition to the ACCC’s grocery price inquiry in 2008, since August 2008 the Productivity Commission has released four reports relating to the retail sector, totaling 1855 pages and comprising 44 findings and recommendations.
However, many of these findings and recommendations remain idle.
We don’t need more inquiries, or possible platforms to parade well-worn prejudices about retail issues and to bash landlords. We need execution.
As Eric Beecher, Executive Chairman of Private Media (publisher of Crikey) said in a column about a recent reform summit, but which is relevant to policy reform in general: “What’s missing isn’t policy ideas; it’s execution … otherwise, it all ends in hot air. It ends like the story of modern Australia – lots of talk, rhetoric, goodwill, newspaper marketing hype and no practical outcomes.”
A worthy and already identified opportunity the new Ombudsman could tackle is a national retail leasing code to replace existing state and territory legislation. This could benefit our sector, including small businesses which make up much of the 65,000 specialty tenancies. Such a code has been recommended by two Parliamentary inquiries and the Productivity Commission, but no action has been taken.
The first, the Reid Report of 1997 (Finding a Balance: Towards Fair Trading in Australia), recommended a uniform retail tenancy code, and this was repeated in the 1999 Baird Inquiry (Fair Market or Market Failure). The Productivity Commission in 2008 suggested an industry-developed national code of practice for shopping centres, in recognition that “retail tenancy within shopping centres often involves quite different arrangements to retail tenancy in other settings”. Envisaging the code as a means of reducing detailed regulation, the Commission suggested this should be a voluntary code (in the sense that any retail landlord or tenant could agree to adhere to its provisions) although for those who ‘sign up’ to the code, it would be enforceable under the Competition and Consumer Act, as is the case with the Franchising Code of Practice. The Federal Government at the time endorsed the Commission’s recommendation.
In addition, we have recent recommendations from the Senate Economic Reference Committee in its inquiry into a national retail leasing framework. The Committee recommended that a previous National Retail Tenancy Working Group be re-established to develop a national disclosure statement, and that “the Commonwealth take on a greater leadership role in encouraging the states and territories to move towards a harmonised approach through the COAG process”.
At the time of writing, the Government is yet to respond to this recommendation.
Even a national, harmonised disclosure statement would be a positive outcome.
As we said to that Senate Committee in the opening line of our submission: “A national approach to retail leasing arrangements makes eminent sense.” Of course, this would need to be in lieu of existing legislation and codes, to avoid becoming simply an additional layer of regulation, which would only bring complexity, duplication and unnecessary red tape and compliance costs.
A national retail leasing code could be a sensible start for the new Ombudsman to try and facilitate with other jurisdictions and relevant stakeholders. A sensible code could increase competition, facilitate harmonisation and reduce business costs. That would be great for all stakeholders involved – not just small business.
