LAWS13015 PRINCIPLES OF COMMERCIAL LAW

Study Guide Week 4

Version 2.01 - 2016

LAWS 13015 Principles of Commercial Law: Study Guide Week 4 2016

From the Course Coordinator

Welcome to Topic 4 Restrictive Trade Practices, effectively a continuation of Australian Consumer Law. We are now concerned with anti-competitive practices that adversely affect the market, competitors in the market and consumers.

Dr Christopher Walshaw

I welcome your feedback and suggestions for future content. You can email me at c.walshaw@cqu.edu.au.

Christopher Walshaw, Course coordinator, Principles of Commercial Law

Discipline of Law

School of Business and Law

CQUniversity Australia

Bruce Highway, Rockhampton,

QLD 4701

Telephone: +61 07 49 23 2741

Facebook: https://www.facebook.com/CQU-Law-192901937531609/

iTunesU: Colleges and Universities> CQUniversity

Website: http://www.cqu.edu.au/law

LAWS 13015 Principles of Commercial Law: Study Guide Week 4 2016i

CONTENTS

RESTRICTIVE TRADE PRACTICES1

1Preview1

1.1Objectives1

1.2Prescribed reading1

1.3Additional reading2

1.4Key terms2

2Framework of the ACL and CC2

3Key concepts: market and competition3

4Cartel conduct4

4.1Contract, arrangement or understanding5

4.2Purpose and effect6

4.3Parties in competition6

4.4Circumstances not regarded as cartel conduct7

5Contracts, arrangements or understandings affecting competition7

5.1Activity 18

6Boycotts9

7Misuse of Market Power9

8Exclusive dealing9

9Resale price maintenance11

10Acquisitions substantially lessening competition12

11Statutory exceptions12

12Authorisation13

13Enforcement and remedies13

13.1Activity 214

14REVIEW14

14.1Tutorial Problems14

14.2Debrief14

LAWS 13019 Legal Apps: Study Guidei

LAWS 13015 Principles of Commercial Law: Study Guide Week 1 2016ii

RESTRICTIVE TRADE PRACTICESPreview

The restrictive trade practices provisions of the Competition and Consumer Act 2010 (CCA) Part IV are directed at conduct by corporations, for historical reasons.

However section 6 CCA extends the Acts operation to individuals (including sole traders, partnerships and other unincorporated bodies) engaged in interstate or overseas trade or commerce, trade or commerce within or involving the ACT or the NT, or dealings with the Commonwealth government.

The Competition Code (CC) is Schedule 1 of the Competition and Consumer Act 2010 (Cth). ACL refers to Australian Consumer Law.

Individuals are governed by the Competition Code (CC), which is Schedule 1 of the CCA. The CC replicates Part IV of the CCA. The same section numbers and content apply. In the web document referred to below you go to Volume_1 for the CCA and Part IV. For the CC you go to Volume_3, which begins with Schedule 1.

For convenience all references below will be to section numbers which are the same for the CCA and the CC and interchangeably reference is made to either the CCA or the CC.

This legislation is based on and largely incorporates the Trade Practices Act 1974 (Cth) and the Competition Policy Reform Act 1995 (Cth). Again by agreement between the States, Territory and Commonwealth there is one uniform law that governs competition in the market and in particular practices that are anti-competitive. Such practices adversely affect businesses and corporations as well as consumers. Comments already made at the commencement of Topic 3 apply.

It will be seen that case law interpreting and applying the previous legislation is still useful. Most of the key concepts have been retained and in the same words. Essentially this Topic is a tour through the most important provisions of the CC.

Objectives

After studying Topic 4 you should be able to:

Explain the framework and scope of Part IV ACL and the CC;

Describe the concepts of market and competition;

Describe the rules that affect anti-competitive practices and their respective applications;

List and explain the enforcement provisions and remedies for breach of the Competition Code.

Prescribed reading

Clive Turner and John Trone, Australian Commercial Law (30th ed, 2015) Ch 18 (Turner).

For this topic the Note is more comprehensive than Turner in a number of respects, which should become obvious to you. Also, the order of treatment of aspects of the topic is different in parts.

Additional reading

Russell V Miller, Australian Competition Law and Policy (2nd ed, 2012) (Miller).

Davenport and Parker, Business and Law in Australia (2012) Ch 18 (Davenport).

http://www.australiancompetitionlaw.org/index.html

http://www.accc.gov.au

http://thestateofcompetition.com.au/

Cases and links referred to below.

Key terms

The following are key terms for Topic 4.

Cartel a combination of businesses in the same market that enter into contracts or arrangements or understandings for the purpose of or which have the effect of price fixing, sharing a market, bid rigging or restricting supply or other anti-competitive practices. See: http://www.accc.gov.au/business/anti-competitive-behaviour/cartels

Competition the process by which producers or consumers of goods within a market compete with one another. See paragraph 3.0.

Market the product and geographic space in which competition takes place. See paragraph 3.0.

Primary Boycott occurs when two or more parties combine by refusing to supply goods or services to another party or refusing to acquire that other partys goods or services.

Secondary Boycott a boycott against a third party (with whom they usually have no dispute) in order to stop the third party from dealing with a fourth party (the target).

Framework of the ACL and CC

The following is an overview of the treatment of the Restrictive Trade Practices legislation in this Topic:

The concepts of market and competition

Cartel conduct

Contracts, arrangements or understandings affecting competition

Boycotts

Misuse of market power

Exclusive dealing

Resale price maintenance

Acquisitions substantially lessening competition

Statutory exceptions

Authorisation

Enforcement and remedies

Industry codes of conduct

The ACL is a document with which you should become familiar. The sections are relatively few and are set out in the table of contents. There are two divisions, the first dealing with cartel conduct and the second with other conduct that affects competition. Davenport contains a helpful Table of the prohibited practices (Ch 18.1 at 467-468).

Key concepts: market and competition

The CC is concerned with practices that reduce competition in the marketplace, usually in a market for specific goods or services. Most texts go straight to the prohibitions but I think it is worthwhile to have an understanding of the context and key concepts. There is an excellent treatment in Miller at 13-24; more extensively in the first five chapters.

As mentioned, this topic is intensely political and it is also based on ideas found in the field of economics: about how markets work best in the interests of Australia, and its businesses and consumers. It is accepted that regulations have a crucial part to play in achieving perceived social and economic goals. Competition is an essential driver of economic progress and the policy statement in s 2 CCA recognizes this:

The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

At heart is misuse of market power so as to substantially lessen competition, notably in the creation of market conditions that enable a trader to produce less and charge more. The legislation is short on information about the meaning of market and competition. I suggest that this is wise because each case will have its particular facts. Often expert evidence from economists is presented relevant to the particular case. Also there is little doubt that the Australian Competition and Consumer Protection Commission, the Australian Competition Tribunal (successor to the Trade Practices Tribunal) and the other Federal Courts have acquired considerable expertise in this field.

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As it happens two Queensland cases provide a foundation for any consideration of the concepts of market and competition. The first of these is Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481. QCMA was a flour-milling cooperative that operated five mills throughout Queensland. It made a takeover offer for Barnes Milling Ltd, which owned one mill in Queensland. Defiance, another major flour miller in Queensland with three mills, made a competing offer for Barnes. Both QCMA and Defiance sought merger authorizations from the Trade Practices Commission and both were refused. Both appealed unsuccessfully to the Trade Practices Tribunal. In respect of each appeal it was found that though the anti-competitive effects would be slight on balance the lack of substantial public benefit precluded approval.

This was the first contested merger case and it is notable that the Tribunal included the President, then Woodward J, and the distinguished Australian economist Professor Maureen Brunt. Their 1976 judgment continues to be authoritative. What they have to say about market is set out in Turner at [18.480].

Central is an identification of the relevant market. Inevitably there is a degree of value judgment. This was made clear in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, a leading case decided by the High Court and which approved QCMA. It is referred to in Turner at [18.480] with reference to Dawson J but the following observations of Mason CJ and Wilson J are also important (mentioned in Turner at [18.270]). The starting point is to appreciate that defining a market in abstract is of little utility. This is because the concept of market is an evaluative tool in a broader factual analysis necessary to determine whether there has been a contravention of the CC.

Market is an activity in various dimensions including:

Product, the type and range of goods or services;

Functional, the particular level at which the relevant organization operates, for example whether in manufacturing, carriage, wholesale or retail;

Geographic, the area covered by the relevant organization; and

Time, the period of time relevant to determining the particular market. Of interest here is the degree of substitutability of products as mentioned in QCMA.

All the above matters and more are found in the judgment of French J (now CJ, HCA) in the Federal Court of Australia in Singapore Airlines Ltd v Trapobane Tours WA Pty Ltd (1991) 33 FCR 158 and noted in Turner at [18.270] and [18.280]: http://www.austlii.edu.au/au/cases/cth/FCA/1991/621.html.

The case concerned package tours to overseas destinations. The court, in allowing an appeal, decided that the relevant market was for island holiday destinations and not just to the Maldives. The exposition of French J at [35]-[54] is recommended reading.

The Tribunal in QCMA provided helpful comments on how they view competition. They decline to provide a definition and instead explore some of the connotations of the term. This exploration is set out in full in Turner at [18.490] and is not repeated now. Professor Brunt had already written on the subject pointing out that a workable competitive industry has two characteristics: first, the industry is reasonably efficient and progressive and, second, the efficiency and progressiveness have been achieved through impersonal market pressures. See Miller at 23.

Competition is a process that is dynamic and often ruthless. A competitive market is expected to be tough or it is not a competitive market at all.

Cartel conduct

Division 1 of Part IV ACL and of the CC sets out parallel offences and civil penalty provisions relating to cartel conduct.

A person must not make, or give effect to, a contract, arrangement or understanding that contains a cartel provision.

A cartel provision is a provision relating to:

Pricefixing; or

Restricting outputs in the production and supply chain; or

Allocating customers, suppliers or territories; or

Bidrigging;

by parties that are, or would otherwise be, in competition with each other.

It is convenient to divide cartel conduct into two categories, the first relating to price-fixing and the second as to the other three categories: restricting outputs in the production and supply chain; or allocating customers, suppliers or territories; or bidrigging. In respect of the first category there is contravention in respect of either the purpose or effect of the conduct and in respect of the second category only if contravention is the purpose of the conduct.

Price-fixing conduct includes directly or indirectly fixing, controlling or maintaining the price of goods and services, or any discount, allowance, rebate or credit. There are many examples. The international air-freight cartel is a current example. Airlines, including Australian airlines, fixed fuel surcharges and have been obliged to pay billions of dollars in fines in an investigation that is still in progress. Domestic cartel cases are common and have involved petrol retailing, orthodontists and internet cafes to name a few. The concept of price-fixing is discussed in Miller at [6.80]. An important aspect is that the arrangement must provide for rather than be a mere exchange of information.

Cartel conduct in the second category includes arrangements for exclusive dealing, bid-rigging and collusive tendering. With regard to bids and tenders, s 44ZZRD (3) (c) describes five species of offending conduct.

It is necessary to consider the following elements of cartel conduct:

Contract, arrangement or understanding;

Purpose;

Likely effect;

Parties are in competition; and

Circumstances not regarded as cartel conduct.

Contract, arrangement or understanding

This element is also relevant to anti-competitive agreements, the subject of the next section. The trigger for establishing contravention is a finding that two or more competitors or potential competitors have made a contract or arrangement or come to an understanding. Most difficulty arises when the conduct does not amount to a contract or arrangement (both of which involve agreement and adoption of that agreement) but is alleged to be an understanding.

The difficulty is well illustrated by reference to retail prices. It is common for retailers to charge the same price for goods. That in itself does not mean their conduct is anticompetitive. Identity in price can be explained by market forces and other anticompetitive conduct such as the adverse economic effect of a price-cutting war. Central to open competition is the idea that a retailer is generally free to set and vary prices and in so doing will have regard to competitors prices. There has to be something more to prove contravention and that something more has vexed the ACCC. The courts require an understanding, a meeting of minds and a consensus in respect of a specific act or course of conduct.

This has proved particularly controversial in respect of petrol pricing and the ACCC is now seeking an amendment to the legislation so that understandings that do not require commitment are caught. They would seek to prohibit price signalling and private price disclosures. The EU uses the phrase concerted practices and Canada uses conspiracy. Would these changes make any difference?

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See Apco Service Stations Pty Ltd v ACCC (2005) 159 FCR 452 and ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794. These cases are recommended reading. See also Miller at Ch 7.

http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/161.html

http://www.austlii.edu.au/au/cases/cth/federal_ct/2007/794.html and the note:

http://www.australiancompetitionlaw.org/cases/leahy.html

Purpose and effect

Purpose is also relevant to the other restrictive trade practices. Purpose is artificial when dealing with corporations and a statement of purpose is unlikely to be persuasive. The concern is with the end in view inferred from the nature of the arrangement. Of course there may be a number of purposes.

The term likely to have the effect permits the court to look not only at what has been established on the facts, but also to infer what were likely to be the consequences. And likely has been defined to include a possibility that is not remote. Obviously effect is easier to prove than purpose.

Parties in competition

The parties to the understanding must be in competition with each other in the same market. A manufacturer may not be in the same market as a retailer or carrier. What has already been said about market applies.

ACCC v ANZ Ltd [2013] FCA 1206, [2015] FCAFC 103 is a recent case in point. The ACCC alleged that in 2004 ANZ had required Mortgage Refunds Pty Ltd to agree to limit the amount of refund it could provide in respect of arranging ANZ home loans. The agreed limit to any refund it paid to its customers of $600 would allow ANZ branches to match the deal if they chose to waive the ANZ loan establishment fee. This, the ACCC alleged, constituted price fixing unders 45because 'ANZ and Mortgage Refunds were competitors in the market for the provision of loan arrangement services.' The Federal Court at trial dismissed this claim, finding that ANZ and Mortgage Refunds were not competitors and, as a result, the conduct did not constitute price fixing. Mortgage Refunds was, instead, an intermediary. An appeal was dismissed on 31 July 2015.

Another case concerning price fixing that may be heard by the HCA is Flight Centre Ltd v ACCC [2013] FCA 1313, [2015] FCAFC 104.

Circumstances not regarded as cartel conduct

Recommended price agreements, co-operative buying and selling, and joint ventures are exempt: ss 44ZZRD (6) (11), 44ZZRV, 44ZZRO and 44ZZRP. See also Miller at [6.120]-[6.150].

Contracts, arrangements or understandings affecting competition

The general prohibition in s 45 affects contracts made before commencement of the CCA and CC and contracts, arrangements or understandings after commencement.

There are two overlapping prohibitions against:

an exclusionary provision; or

a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition.

Substantially lessening competition is a key element throughout the relevant legislation. Of course this is in respect of:

An identified relevant market; and

In respect of conduct that lessens competition in that market or would be likely to do so; and

The lessening was substantial; or

If not, the purpose of the conduct was to substantially lessen competition.

This check-list is relevant to most of the prohibitions.

Already we have covered some of the aspects of s 45 and it remains to indicate instances of conduct that may come within this prohibition.

EXCLUSIONARY PROVISIONS prevent, restrict or limit the supply of goods or services. Note that exclusionary provisions are prohibited whether or not they have the purpose or effect of substantially lessening competition. An example that has two sides to it, arising from the exclusion of teams in a revamped smaller competition is noted in Turner at [18.110] and [18.120].

Market sharing agreements provide classic examples of arrangements that substantially lessen competition. Of concern are restrictions to freedoms to supply, and/or to acquire, goods and services in the market generally. Examples are noted in Turner at [18.70]-[18.90].

Travel agents booked international flights for their customers using a database which listed fares available through various airlines. Travel agents were paid a commission for published fares listed on this database. Airlines also sold fares through their own websites. Often the airlines would sell fares at a cheaper price on their own websites than were available through the database. A firm of travel agents sent emails to three different airlines seeking to dissuade them from offering fares at a lower price than was available on the travel agent database.

The Federal Court held that these emails contravened s 45 in conjunction with s 45A of the Competition and Consumer Act 2010 (Cth). The emails were an attempt to induce the airlines to conclude a prohibited agreement or understanding with the purpose or likely effect of substantially lessening competition: at [161]. The emails constituted an attempt to induce the making of an agreement directed to the end of removing air fare differentiation so as to eliminate or reduce competition by a substitute, an airline, for the retail or distribution margin for distribution and booking services: Australian Competition and Consumer Commission v Flight Centre Ltd (No 2) (2013) 307 ALR 209 at [197].

The Federal Court subsequently imposed a combined pecuniary penalty of $11 million for the contraventions. The involvement of higher management in one contravention required a higher penalty: at [45]. All of the contraventions arose from attempts. Had these attempts been successful, the penalty would have been higher: Australian Competition and Consumer Commission v Flight Centre Ltd (No 3) [2014] ATPR 42-462; [2014] FCA 292 at [60].

Section 45 is a general prohibition that may be superseded by the specific prohibitions that follow it and to which we turn following Activity 1.

Activity 1

1.1 Consider the two News Ltd rugby league cases set out in Turner at [18.110] and [18.130] and with reference to s 45, identify and explain two similarities and four differences between the two cases.

[Effort 20 min]

1.2 Choose the correct answer to the following multiple choice question:

Which of the following practices are prohibited under the Act?

Exclusive dealings;

Boycotts;

Misuse of market power;

Covenants affecting competition;

All of the above.

Answers to Activity 1

1.1

Similarities:

They both concern provisions in a contract, arrangement or understanding between two or more corporations that are competitive with each other;

The issue was whether or not the purpose was anti-competitive; and

In both cases a subjective test of what the parties sought to achieve was adopted in both cases.

Differences:

In the 1996 case the commitment agreements and loyalty agreements were held to contain exclusionary provisions because they were entered into for the purpose of preventing the supply by clubs of teams to another competition unless approved; and

In the 2003 case it was held there was no intent to exclude any particular club that is all clubs had the chance of being part of the super league. See Gleeson CJ at [27].

1.2

Answer: (e)

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Boycotts

Boycotts are prohibited by s 45. A boycott occurs where there is concerted action between two or more parties for the purpose of hindering or preventing a third party (the target), such as a potential customer or supplier, from dealing or otherwise doing business in a market. See Turner [18.170].

Both primary and secondary boycotts are prohibited. A primary boycott occurs where two or more persons or corporations directly boycott the products or services of the target. This arises from an exclusionary provision that is absolutely prohibited by s 45 (2).

A secondary boycott is an indirect boycott. The concerted action is for the purpose of hindering or preventing a third party (the target), such as a potential customer or supplier, from dealing or otherwise doing business with a fourth party (the indirect target).

With regard to a secondary boycott there are elaborate rules as application and a number of specific exceptions, notably in respect of work place and environmental protection actions: ss 45D and 45DD.

Misuse of Market Power

Pursuant to s 46 a corporation or person with a substantial degree of power in a market must not use that power for a proscribed purpose, namely:

Eliminating or substantially damaging a competitor; or

Preventing new entrants into a market; or

Deterring or preventing a person from engaging in competitive conduct in that or any other market.

Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, referred to above, concerned an earlier equivalent of s 46 and is noted in Turner at [18.190] and in respect of this topic there is an extensive discussion which is recommended and can be found at [18.180]-[18.300].

As mentioned above identification of the relevant market is essential as a first step, followed by a consideration of whether or not at the time of the relevant conduct there was a substantial degree of power in that market, a matter not easily established.

The trans-Tasman market is specifically included.

Authorization is not possible in respect of misuse of market power, unlike the conduct found under other heads.

Exclusive dealing

Section 47 prohibits the supply or acquisition of goods and services subject to a restrictive condition; or the refusal to supply or acquire goods or services for a restrictive reason where this has the purpose or likely effect of substantially lessening competition. There are three main sorts of relevant restrictions (which are clarified below):

Product restrictions that limit the ability of a reseller to deal with products, for instance: solus contracts, requirements contracts, full line forcing and third line forcing;

Customer restrictions that impose restrictions on resellers in terms of the customers they are able to sell to; and

Geographical restrictions that impose restrictions on the places where the reseller may sell the products supplied.

A "solus agreement" is an agreement or arrangement between a wholesaler and a person who is or proposes to become a retailer under which the person undertakes to purchase goods for a specified period from the wholesaler and not to purchase those goods from any other wholesaler.

A business engages in full-line forcing when it refuses to supply its product unless the buyer agrees:

not to buy products from a competitor,

not to resupply products acquired from a competitor, or

not to resupply its product to a particular place.

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TPC v Massey Ferguson (Australia) Pty Ltd (1983) 67 FLR 364 is a good example. MF offered to supply tractors to a dealer on the condition that the dealer did not stock a competitors products. In addition MF twice refused to supply dealers because they had bought elsewhere. The court held that the relevant market was the wholesale supply of tractors in Australia and that MFs conduct had the likely effect of substantially lessening competition in that market.

Third-line forcing occurs when a business makes the supply of its product to a customer conditional upon the customer also purchasing the product of another business.

A classic example is a travel agent requiring a customer to take out travel insurance with a nominated insurer. Cases that provide other examples of third-line forcing are noted in Turner at [18.330]-18.350].

Again, a key component of liable conduct is the likely effect of substantially lessening competition. However in respect of third-line forcing there is an absolute prohibition and it is not necessary to prove that element.

Further the notification procedure that provides an interim defence (noted in Turner at [18.390]) is not available in respect of third-line forcing.

You should be aware of the leading cases Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 and Outboard Marine Pty Ltd v Hecar Investments (No 6) Pty Ltd [1982] FCA 265 both noted in Turner and the ACCC cases website.

Resale price maintenance

A business engages in resale price maintenance in breach of s 48 if it:

Imposes a minimum price upon resellers of its product;

Sets a price that retailers are likely to understand is a minimum price;

Agrees with retailers that they will not advertise its product below a specified price;

Induces a retailer not to discount its product; or

Threatens to refuse supply to a retailer to force them to comply with any of the above.

We are concerned here with a form of vertical price fixing as distinguished from price fixing amongst competitors that is called horizontal price fixing. Vertical price fixing is generally found in respect of branded goods (labels) and the Adidas track suit case provides a good example: TPC v Dunlop Australia Pty Ltd (1980) 30 ALR 469 (noted in Turner at [18.420]).

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Retail price maintenance does not include:

A recommended price;

A maximum price; or

The practice of loss leader selling (selling a product at less than cost in order to attract customers if certain conditions noted in Turner at [18.430] are met).

Acquisitions substantially lessening competition

A corporation cannot directly or indirectly acquire shares in the capital of a body corporate, or acquire the assets of a corporation or natural person, where the acquisition would have the effect, or is likely to have the effect, of substantially lessening competition in a market: s 50 (1).

A person cannot directly or indirectly acquire shares in the capital of a corporation or assets of a corporation if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market: s 50 (2).

Market is defined as a substantial market for goods and services in Australia, a State, a Territory, or a region of Australia: s 50 (6). Section 50A is concerned with acquisitions occurring outside Australia that have anti-competitive effects within Australia.

Section 50 (3)sets out a non-exclusive list of the matters that must be taken into account for the purpose of determining whether the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market:

1. The actual and potential level of import competition in the market;

The height of barriers to entry to the market;

The level of concentration in the market;

The degree of countervailing power in the market;

The likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins;

The extent to which substitutes are available in the market or are likely to be available in the market;

The dynamic characteristics of the market, including growth, innovation and product differentiation;

The likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor; and

The nature and extent of vertical integration in the market.

There is a formal merger clearance process found at: http://www.accc.gov.au/business/mergers

There is a framework for the assessment of mergers by the ACCC in the light of s 50. Key is the effect the proposed merger would have on the market: in substantially lessening competition in the relevant market. The procedures for clearance and authorisation are summarized in Turner at [18.459].

It is interesting to note the effect of creeping acquisitions. Acquisitions that may not offend s 50 may have the cumulative effect of so offending. Consequently there are proposals to amend the legislation by removing the word substantially and allowing assessment of the totality of competitive effects.

A leading case is ACCC v Metcash Trading Limited [2011] FCA 967 noted in Turner at [18.451] and see the articles set out in fn 9.

Statutory exceptions

There are a number of exceptions to the operation of the restrictive trade practices provisions of the Act: s 51.

In deciding if there has been a contravention of the restrictive trade practices provisions, generally no regard is to be had to conduct specifically authorised, or approved by, or by regulation under, Commonwealth, State or Territory legislation (other than legislation relating to patents, trademarks, designs or copyright) provided the authorising provision specifically refers to the CCA 2010. See Turner at [18.500].

Authorisation

The CCA allows for authorisation of impugned restrictive trade practices except for misuse of market power in breach of s 46: ss 88-91. Authorisation is granted by the ACCC or on appeal by the Australian Competition Tribunal or an appellate court.

There are two tests (s 90):

Test 1 considers whether the public benefit outweighs the detriment constituted by the lessening of competition; and

Test 2 considers whether the public benefit outweighs any likely public detriment, ie it is not limited to detrimental effects on competition.

In respect of cartel conduct authorisation is possible under Test 1 or Test 2; and in respect of boycotts, resale price maintenance and acquisitions under Test 2. See Turner at [18.510].

Enforcement and remedies

Pursuant to s 75 a person, including a body corporate, involved in a contravention includes a person who:

Has contravened;

Has aided, abetted, counselled or procured the contravention;

Has induced, whether by threats or promises or otherwise, the contravention;

Has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

Has conspired with others to effect the contravention.

The maximum pecuniary penalties are intended to deter breaches: $500,000 for individuals and $10 million for corporations. In addition the penalty may be three times the value of the benefit of the contravention and 10% of annual turnover.

A check list of factors relevant to fixing has been set out by French J in TPC v CSR Ltd (1991) ATPR 41-076 and can be found in Turner at [18.530].

Of interest is the system of agreed penalties, which has operated successfully and in respect of cartel conduct there is an incentive to co-operate and particularly to blow the whistle and so take advantage of the leniency policy. There are also usual extensive powers to order injunctions, damages, divest shares, disqualify from management and amend contracts as well as to make ancillary orders. See Turner at [18.600]-[18.670].

An important matter that should not be overlooked is s 95AZNwhich prohibits any person from providing false or misleading information, even where negligent, as to whether the information is false or misleading in a material particular. Professional advisors should be aware of this.

In ACCC v Ticketek Pty Ltd [2011] FCA 1489 a penalty of $2.5m was imposed for abuse of market power and in ACCC v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617 $36m for admission of cartel conduct.

Activity 2

2.1

A wholesaler tells a retailer that it can sell at any price, but must not advertise a discounted price. Is this:

1. Price fixing;

Resale price maintenance;

A secondary boycott;

Not prohibited.

Answer: (b)

Choose one of the above and explain in a few sentences why.

2.2

Which of the following are considered when determining whether an acquisition will markedly lessen competition?

1. Level of import potential to the market;

Height of barriers to entry to the market;

Characteristics of the market;

All of the above.

Answer: (d)

2012 Thomson Reuters (Professional) Australia Limited

REVIEWTutorial Problems

Problem 7

What is the goal of the restrictive trade practices provisions? Is it economic efficiency?

[Effort 20 mins]

Problem 8

There has been drastic discounting in the sale of industrial cleaning chemicals. During an industry lunch a director of one of the main suppliers suggested that the answer was to agree to price at 10 per cent above cost. There was general consensus but they made it clear that there could be no agreement. Subsequently the price war ended and all firms charged at 10 per cent above cost. Has there been contravention of the CCA?

[Effort 30 mins]

Debrief

In Topic 4 you have:

Learned the framework and scope of Part IV ACL and the CC.

An understanding of the importance and nature of market and competition.

An understanding of the rules relating anti-competitive conduct.

An appreciation of the importance of such rules to all commercial activities

LAWS 13015 Principles of Commercial Law: Study Guide Week 4 201615