Introduction |
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Senate Inquiry |
On 25 June 2003, the Senate passed a motion
requiring the Economics References Committee to inquire into and report
on ‘whether the Trade Practices Act 1974 adequately protects
small businesses from anti-competitive or unfair conduct’. The Senate
Committee was required to have regard to the misuse of market power, unconscionable
conduct in business transactions and industry code provisions of the Trade
Practices Act 1974 (the Act). The Senate Committee’s report
was tabled on 1 March 2004. Government Senators provided a minority report. |
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Dawson Review |
The Review of the Competition Provisions
of the Trade Practices Act (the Dawson Review) reported to Government
in January 2003. At that time, the Dawson Review concluded that there
was no need to amend section 46 of the Act, which prohibits the misuse
of market power. The Government accepted this recommendation when it announced
its response to the Dawson Review on 16 April 2003. |
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Recentcase experience |
However, several important Trade Practices
Act cases have been considered since the Dawson Review provided its report
to Government. The cases have raised questions about the operation of
the Act.
The High Court has considered the application and interpretation of section
46 on two occasions, in Boral Besser Masonry Ltd v. ACCC [2003]
HCA 5 (Boral) and in Rural Press Ltd v. ACCC [2003] HCA
75 (Rural Press).
The Full Federal Court has also considered section 46 on two occasions,
in Universal Music Australia Pty Ltd v. ACCC [2003] FCAFC 193 and
in ACCC v. Australian Safeway Stores Pty Ltd [2003] FCAFC 149 (Safeway).
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TradePracticesAct 1974 |
The object of the Trade Practices Act 1974
is to enhance the welfare of Australians through the promotion of
competition and fair trading and provision for consumer protection.
The competition laws, including section46, are in Part IV of the Act.
PartIVA of the Act contains laws prohibiting unconscionable conduct,
including unconscionable conduct in business transactions. Part IVB of
the Act contains laws enabling the establishment of industry codes and
includes, in section 51AD, a law that prohibits the contravention of any
applicable industry code.
As outlined in the Government’s response to the recommendations
of the Dawson Review, the Government considers that the competition provisions
of the Trade Practices Act are designed to protect the competitive process
rather than a specific market structure or individual competitors. The
competition laws should also be distinguished from industry policy and
should not be seen as a means of achieving social outcomes unrelated to
the encouragement of competition, or of preserving businesses that are
not able to withstand competitive forces.
The Government considers it is appropriate for the Act to address issues
such as unconscionable conduct in business relationships, because the
promotion of fair trading enhances the welfare of Australians.
The Government also recognises the importance of small business to the
vigour of the Australian economy, and the contribution that small business
makes to the growth in employment and innovation.
Against this background, there are a number of measures which the Government
considers should be taken in the context of recommendations made in the
Senate Committee’s report. |
Misuse of Market
Power |
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Misuseofmarket power |
Section 46 of the Act prohibits corporations
with a substantial degree of market power from taking advantage of that
power for a proscribed purpose, that is, the purpose of eliminating or
substantially damaging a competitor, preventing the entry of a person
into a market, or deterring or preventing a person from engaging in competitive
conduct. |
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Substantialmarket power |
Only firms with a substantial degree of market
power are prohibited from taking advantage of that power for a proscribed
purpose. This is because firms that lack substantial market power are
rarely, if ever, able to single-handedly harm competition in an enduring
way. The prohibition therefore applies only to firms that meet the threshold
requirement of possessing substantial market power.
The Act was amended in 1986 to lower the threshold from a requirement
that a corporation be ‘in a position substantially to control a
market’ to a requirement that a corporation have ‘a substantial
degree of power in a market’. The type of power being referred to
is ‘market power’, that is, the ability to behave persistently
in a manner different from the behaviour that a competitive market would
enforce on a firm. Alternatively, market power may be described as the
ability of a firm to raise prices above the supply cost without rivals
taking away customers in due time, supply cost being the minimum costs
an efficient firm would incur in producing the product or supplying the
service.
The change to the lower threshold was motivated by a concern that the
previous threshold caught conduct only by a monopolist or monopsonist,
and that a lower threshold was necessary to capture corporations with
a sufficient degree of market power to seriously harm competition. As
the Second Reading Speech noted, the threshold was thus intended to capture
not only monopolists, but also major participants in oligopolistic markets
and, in some cases, leading firms in less concentrated markets.
In light of the Boral case, some submissions to the Senate Committee
claimed that the majority judgements of the High Court implied that an
absolute freedom from competitive constraint was required before a corporation
met the ‘substantial degree of power in a market’ threshold.
This was said to have effectively restored the threshold to capture only
monopolists or near monopolists and that this was contrary to Parliament’s
intention in making the 1986 amendments to lower the threshold. |
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Recommendation 1: The Committee recommends
that the Act be amended to state that the threshold of “a substantial
degree of power in a market” is lower than the former threshold
of substantial control; and to include a declaratory provision outlining
matters to be considered by the courts for the purposes of determining
whether a company has a substantial degree of power in a market. Those
matters should be based upon the suggestions outlined by the ACCC in paragraph
2.16 of this report. |
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The suggestions outlined in paragraph 2.16
are that:
- The threshold of a “substantial degree of power in a market”
is lower than the former threshold of substantial control.
- The substantial market power threshold does not require a corporation
to have absolute freedom from constraint – it is sufficient if
the corporation is not constrained to a significant extent by competitors
or suppliers.
- More than one corporation can have a substantial degree of power
in a market.
- Evidence of a corporation’s behaviour in the market is relevant
to a determination of substantial market power.
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Government response |
The Government does not accept this recommendation.
The Government does not agree that the majority judgements in Boral
imply that a corporation must have absolute freedom from competitive constraint
before it will be found to have substantial market power. Nor does it
agree that the threshold has been returned to one of ‘substantial
control’.
Market power is a relative concept. As the majority judgements in Boral
note, matters of degree are involved. The majority judgement in the later
case of Safeway makes this especially clear. In that case, Safeway
was found to have substantial market power, even with around 16 per cent
market share. Safeway was clearly not a corporation in ‘substantial
control’ of the market, yet it was found to have misused its market
power.
The Government is also not satisfied that the proposed amendments would
clarify the operation of section 46. The Government notes that the first
proposal would have no legal effect and merely recites legislative history.
Far from clarifying the section, the second proposal — stating
in part that ‘it is sufficient if the corporation is not constrained
to a significant extent’ — would be likely to generate further
complexity and uncertainty by adding another layer of interpretation to
section 46.
The third proposal is redundant because both the courts (see, for example,
the majority judgement in Safeway) and the explanatory material
accompanying the 1986 amendments make it clear that more than one firm
may have substantial market power in a given market.
The fourth proposal is also unnecessary because firm behaviour is already
taken into account in assessing substantial market power. For example,
in Boral, the High Court considered whether the firm’s behaviour
operated as a strategic barrier to entry, thus bolstering its market power. |
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Taking advantage |
Section 46 prohibits corporations with a substantial
degree of market power from ‘taking advantage’ of that power
for a proscribed purpose.
Some submissions were made to the Senate Committee expressing concerns
about the application of the ‘take advantage’ element of section
46. In particular, these submissions claimed the High Court’s interpretation
of ‘take advantage’ in Rural Press had narrowed the
application of section 46. |
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Recommendation 2: The Committee recommends
that the Act be amended to include a declaratory provision outlining the
elements of “take advantage” for the purposes of section46(1).
This provision should be based upon the suggestions outlined in paragraph
2.28 of this report. |
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Paragraph 2.28 outlines a proposal to amend
section 46 to clarify that, in determining whether a corporation has taken
advantage of its market power, the courts should consider whether:
- the conduct of the corporation is materially facilitated by its substantial
degree of market power;
- the corporation engages in the conduct in reliance upon its substantial
degree of market power;
- the corporation would be likely to engage in the conduct if it lacked
a substantial degree of market power; or
- the conduct of the corporation is otherwise related to its substantial
degree of market power.
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Government response |
The Government does not accept this recommendation.
It is not accepted that the interpretation of ‘take advantage’
requires any statutory clarification.
While consideration of substantial market power involves a sophisticated
economic analysis, the ‘take advantage’ requirement in section46
simply establishes the requisite causal relationship between market power,
conduct and a proscribed purpose.
As the High Court noted so concisely in Queensland Wire Industries
Pty Ltd v. Broken Hill Proprietary Co Ltd (1989) 167 CLR 177, ‘take
advantage’ merely means ‘use’ and there is no requirement
to assess intent.
In Melway Publishing Pty Ltd v. Robert Hicks Pty Ltd (2001) 205
CLR 1, the High Court said that a corporation takes advantage of its market
power if it does something that is materially facilitated by the power,
even if that behaviour is not absolutely impossible without the power.
The High Court also underscored the need to accurately characterise the
causal relationship by assessing whether a corporation could ordinarily
engage in that conduct in the absence of market power.
In Rural Press, the leading judgement of the majority applied
‘take advantage’ by considering whether the corporation with
substantial market power could engage in the same conduct in the absence
of that power and by considering whether the conduct was materially facilitated
by that power. This is consistent with previous cases and, therefore,
there is nothing about the High Court’s application of ‘take
advantage’ in Rural Press that suggests a narrowing of section
46.
The Government therefore agrees with Government Senators that there is
no significant ambiguity in the meaning or application of ‘take
advantage’ and that the current interpretation does not hinder the
operation of section 46. |
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Predatory pricing |
The Boral case was the first opportunity
for the High Court to consider the issue of predatory pricing under section
46. In light of the High Court’s decision, some submissions were
made to the Senate Committee expressing concern about the ability of section
46 to address predatory pricing. |
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Recommendation 3: The Committee recommends
that the Act be amended to provide that, without limiting the generality
of section46, in determining whether a corporation has breached section46,
the courts may have regard to:
- the capacity of the corporation to sell a good or service below
its variable cost.
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The Committee recommends that the Act be
amended to state that:
- where the form of proscribed behaviour alleged under section46(1)
is predatory pricing, it is not necessary to demonstrate a capacity
to subsequently recoup the losses experienced as a result of that predatory
pricing strategy.
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Government response |
The Government accepts this recommendation
in part.
To provide further guidance to courts in the consideration of predatory
pricing cases, the Government agrees that section 46 should be amended
to ensure that the courts may consider below cost pricing when determining
whether a corporation has misused its market power. Costs are to be measured
in a manner determined by the courts in each case and below cost pricing
is not to be legally essential to a finding that a corporation has breached
section46.
However, the Government does not favour an amendment that examines a
corporation’s capacity to price below cost in isolation. Assessing
a firm’s capacity to engage in conduct is not the same as examining
whether the conduct was engaged in or not. The Government also does not
favour an amendment that refers to variable cost because it is not always
the most appropriate cost measure and because it can be difficult to routinely
quantify, potentially making compliance more expensive for corporations
that wish to ensure they are not engaging in predatory pricing.
The Government also considers that section 46 should be amended so that
a court may consider whether a corporation has a reasonable prospect or
expectation of recoupment as a relevant factor when assessing whether
a corporation has misused its market power. Although a reasonable prospect
of recoupment is not to be legally essential to a finding that a corporation
has breached section46, it often provides a good test of whether price-cutting
is predatory, asGovernment Senators noted. It is therefore appropriate
that the section clearly state that a reasonable prospect of recoupment
is a factor that may be taken into account. |
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Financial power |
Some submissions were made to the Senate Committee
expressing concerns about statements in Rural Press that distinguished
between a corporation’s market power and material and organisational
assets, which the Senate Committee describe as ‘financial power’. |
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Recommendation 4: The Committee recommends
that section 46 of the Act be amended to state that, in determining whether
or not a corporation has a substantial degree of power in a market for
the purpose of section46(1), the court may have regard to whether the
corporation has substantial financial power.
‘Financial power’ should be defined in terms of access
to financial, technical and business resources. |
Government response |
The Government does not accept this recommendation.
As Government Senators noted, if this recommendation were to be adopted,
it would considerably extend the scope of section 46 to a degree that
is both uncertain and undesirable. This is because ‘financial power’
(that is, access to financial, technical and business resources) is simply
not the same as market power. |
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Leveraging market power |
Section 46 does not explicitly state whether
the market in which substantial market power is misused must be the same
as the market in which that market power is established. Some submissions
to the Senate Committee raised concerns about the lack of comment by the
High Court on this point in Rural Press. This is significant because,
in that case, the Full Federal Court implied that section 46 requires
the establishment of substantial market power, and its misuse, to occur
in the same market. |
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Recommendation 5: The Committee recommends
that section 46 be amended to state that a corporation which has a substantial
degree of power in a market shall not take advantage of that power, in
that or any other market, for any proscribed purpose in relation to
that or any other market. |
Government response |
The Government accepts this recommendation.
The Government agrees that section 46 should be amended as recommended.
It is entirely appropriate for section 46 to proscribe the leveraging
of substantial market power from one market into another. |
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Co-ordinated market power |
Corporations may obtain market power in their
own right or as a consequence of their interactions with other corporations
in the market. Subsection 46(2) of the Act recognises, for example, that
the market power of a corporation should not be assessed in isolation
of any related subsidiaries or holding companies in the same corporate
group.
Some submissions to the Senate Committee questioned the court’s
ability to take account of interactions between a corporation and other
firms in a market, where those firms are not related to the corporation,
that is, where they are not in the same corporate group. |
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Recommendation 6: The Committee recommends
that section 46 be amended to clarify that a company may be considered
to have obtained a substantial degree of market power by virtue of its
ability to act in concert (whether as a result of a formal agreement or
understanding, or otherwise) with another company. |
Government response |
The Government accepts this recommendation
in part. The Government agrees that section 46 should be amended so that,
in assessing whether a corporation has ‘a substantial degree of
power in a market’, a court may take account of any market power
the corporation has that results from contracts arrangements or understandings
with others. This amendment amounts to a statutory restatement of the
principle set out by Justice Lockhart in Dowling v. Dalgety Australia
Limited and Others (1992) 34 FCR 109. |
Unconscionable Conduct
in Business Transactions |
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Unconscionable conductinbusiness transactions |
Part IVA of the Act prohibits corporations
from engaging in unconscionable conduct in their transactions with both
consumers (section 51AB) and business consumers (section 51AC).
While the Senate Committee identified several issues in its consideration
of unconscionable conduct, it concluded that section 51AC is a relatively
new section that has not yet had time to develop a significant body of
jurisprudence. Submissions that proposed amendment, therefore, stemmed
from the premise that the current section is ineffective at protecting
small business. The Senate Committee accepted that this premise has not
yet been proven.
The Senate Committee did, however, accept that the case had been made
for some minor changes to section 51AC. |
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$3 million threshold |
The protection offered to business consumers
by section 51AC is subject to two limitations. Firstly, listed public
companies are not protected by section51AC. Secondly, the section does
not apply where the supply or acquisition of goods is at a price greater
than $3 million, as noted in subsections51AC(9) and 51AC(10). |
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Recommendation 7: The Committee recommends
that subsections 51AC(9) and 51AC(10) of the Act be repealed. |
Government response |
The Government does not accept this recommendation.
At the time of enactment, in 1998, the Government intended to limit the
protection afforded by section51AC to small businesses. This was achieved
by limiting access to the protection to prices not exceeding $3 million
(originally $1 million) for the supply or acquisition of goods. Removal
of the cap would broaden the focus of the provision in a way unintended
by the Government.
The Government does, however, accept that the $3 million cap is too low
for some small businesses and therefore agrees with the recommendation
of Government Senators that the cap for section 51AC should be raised
to $10million. |
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Unilateral variation of contracts |
To identify if a corporation has engaged in
unconscionable conduct in business transactions, the court can have regard
to a non-exhaustive list of factors. Subsections51AC(3) and 51AC(4) provide
similar lists that are tailored for business consumers that either supply
or acquire the goods or services in question.
The non-exhaustive list includes factors such as the relative strengths
of the bargaining positions of each party, whether any undue influence
or pressure was applied and the extent to which there was an opportunity
to negotiate the terms and conditions of acquisition or supply.
Some submissions argued before the Senate Committee that the use of a
unilateral variation term was unconscionable. Some companies in their
contracts maintain the right to vary some aspect of the arrangement without
consulting the other party to the contract. The Senate Committee accepted
that there may be circumstances where a corporation’s maintenance
of the right to vary the terms of the contract unilaterally is efficient
and in the interests of competition. They expressed reservations, therefore,
about prohibiting unilateral contract terms and identified a middle ground.
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Recommendation 8: The Committee recommends
that subsections 51AC(3) and 51AC(4) of the Act be amended to include
‘whether the supplier (in subsection 51AC(3)) or acquirer (in subsection
51AC(4)) imposed or utilised contract terms allowing the unilateral variation
of any contract between the supplier and business consumer, or the small
business supplier and acquirer.’ |
Government response |
The Government accepts this recommendation.
It accepts that the imposition or utilisation of a unilateral right of
variation may be an indication that unconscionable conduct has occurred
in the bargaining process. The Government also supports the conclusion
that unilateral variation clauses do not always indicate that unconscionable
conduct has occurred. In some cases these clauses may be indicative of
healthy competition.
The Government therefore agrees that subsections 51AC(3) and 51AC(4)
of the Act should be amended so that courts may have regard to the imposition
or utilisation of contract terms that allow for the unilateral variation
of any contract between the supplier and business consumer, or the small
business supplier and an acquirer of goods or services, in determining
if unconscionable conduct has occurred. |
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Applicationof PartIVA to governments |
Recommendation 9: The Committee recommends
that subsection 2B(1) of the Act be amended so that it is clear that Part
IVA of the Act applies to the Commonwealth Government; and that the Government
consult with the States and Territories with a view to amending subsection
2B(1) of the Act, so that Part IVA of the Act applies to State, Territory
and local governments. |
Government response |
The Government accepts this recommendation
in circumstances where governments are carrying on a business. This recommendation
has three parts. First, that subsection 2B(1) be amended to make it clear
that the Commonwealth Government is bound by Part IVA of the Act; second,
that the Commonwealth Government enter into consultations with the States
and Territories to amend subsection 2B(1) to ensure that States and Territories
are bound by Part IVA; and third, to amend the Act to ensure that local
governments are bound by Part IVA.
The Government accepts that it should be clear the Commonwealth is bound
by Part IVA (the first part of recommendation 9), but notes that alteration
of the Act is unnecessary. Section 2A states that the Commonwealth is
bound by all provisions of the Act in circumstances where it is carrying
on a business. This includes Part IVA. Amendment of the Act would, therefore,
appear unnecessary.
The Government accepts the principle expressed in the second part of
this recommendation. Binding States and Territories to Part IVA of the
Act creates certainty for business in their dealings with that level of
government. This will be progressed through negotiations between the Commonwealth
and the States and Territories.
The Government accepts the principle expressed in the third part of this
recommendation. Binding local governments to Part IVA of the Act creates
certainty for business in their dealings with local government. The Commonwealth
Government proposes to amend section 2D to remove the current exemption
that local government bodies have from Part IV of the Act. The Government
will give further consideration to ensuring local governments are also
subject to Part IVA of the Act. |
Other Issues for
Small Business |
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Retailtenancy agreements |
Some submissions to the Senate Committee argued
that where a retail tenant is required, as a term of their lease, to keep
their lease conditions secret, the landlord has engaged in unconscionable
conduct. The Senate Committee accepted that there may be circumstances
where it is in the interests of both parties to keep the details of the
lease secret, but noted that these were likely to be the exception rather
than the rule. The Senate Committee noted that a tenant should be free
to discuss the terms of their tenancy if they wished to do so. |
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Recommendation 10: The Committee recommends
that the Commonwealth Government negotiate with State and Territory governments,
with a view to introducing measures which would prohibit retail lease
provisions compelling tenants to keep their tenancy terms and conditions
secret. |
Government response |
The Government does not accept this recommendation.
It is a fundamental principle of the law of contract that parties are
free to negotiate the terms of the contract, including a lease. Prohibiting
secrecy clauses would violate this principle of contract law. Furthermore,
if retail tenancy arrangements need regulating, it is a matter for State
and Territory governments, rather than the Commonwealth Government. |
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Collective bargaining forsmall business |
The Government has accepted a Dawson Review
recommendation that the Act be amended to introduce a notification process
for small business seeking to collectively bargain. The notification process
will provide a speedier and simpler process to enable small businesses
to obtain immunity under the Act for otherwise unlawful collective bargaining.
It is intended that the collective bargaining be with large businesses,
where the likely benefit to the public will outweigh any likely detriment
from the arrangement. The notification process will be limited to small
businesses by requiring the value of the transactions that each individual
business is engaged in to $3million or less (variable by regulation).
Some submissions to the Senate Committee proposed that the collective
bargaining legislation allow the boycotting of the business being bargained
with and not impose a $3 million threshold. |
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Recommendation 11: The Committee recommends
that the Government immediately bring forward legislation to introduce
a collective bargaining notification scheme, including the right to boycott,
and excluding the proposed $3 million threshold for notifications. |
Government response |
The Government accepts this recommendation
in part. Legislation will shortly be introduced to the Parliament to implement
a small business collective bargaining notification process. That notification
process will have a threshold of $3 million for each individual business
and will allow, in the appropriate circumstance, for an ability to boycott. |
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Creeping acquisitions |
The term ‘creeping acquisitions’
is generally used to describe the acquisition of a number of individual
assets or businesses over time that may have a cumulative effect upon
the acquiring firm’s market share. Some submissions to the Senate
Committee raised concerns that the prohibition on anti-competitive mergers
in section 50 of the Act may not be capable of addressing the cumulative
effect of such a strategy on competition in the relevant market. This
is said to be case because each individual acquisition would not substantially
lessen competition in the relevant market, even though, if the acquisitions
had all been made by the same firm at the one time, they may have done
so. |
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Recommendation 12: The Committee considers
that provisions should be introduced into the Act to ensure that the ACCC
has powers to prevent creeping acquisitions which substantially lessen
competition in a market. |
Government response |
The Government does not accept this recommendation.
The Dawson Review considered the issue of ‘creeping acquisitions’
in detail and concluded that the Act, in its present form, is adequate
to consider ‘creeping acquisitions’ in so far as they raise
questions of competition. The Dawson Review noted that concentrated markets
may be highly competitive and that the purpose of competition law is to
promote competition rather than to protect a particular market structure
or particular competitors or classes of competitor.
Further, there is considerable uncertainty as to whether ‘creeping
acquisitions’ in general (as opposed to a specific acquisition)
do substantially lessen competition and cause economic detriment. |
Enforcement of the
Trade Practices Act |
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Divestiture |
Divestiture involves the forced sale of some
or all of the assets of a corporation. Section 81 of the Act allows a
court to order divestiture of unlawfully acquired shares or other assets
in the context of a merger or other acquisition that contravenes section
50 (that is, if the merger or other acquisition substantially lessens
competition in a relevant market). Some submissions to the inquiry proposed
that divestiture be available as a remedy in other contexts, particularly
misuse of market power cases. |
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Recommendation 13: The Committee recommends
that subsection 81(1) of the Act be amended so that section 81 can be
applied where a corporation is found to have contravened section 46, section
46A , or any new section introduced to regulate creeping acquisitions. |
Government response |
The Government does not accept this recommendation.
As the Dawson Review noted, applying divestiture to misuse of market power
cases is inappropriate for conceptual and practical reasons.
Conceptually, divestiture may be an appropriate remedy in the context
of a merger or other acquisition because it directly addresses the conduct
(the acquisition of shares or other assets) that gives rise to a breach
of the Act. Incontrast, divestiture is not an appropriate remedy in misuse
of market power cases because there is no clear nexus between the unlawful
conduct and the assets of the corporation. Inmisuse of market power cases,
the conduct that gives rise to a breach of the Act is the taking advantage
of market power for a proscribed purpose, not the possession of shares
or other assets. Therefore, attempting to identify assets to be divested
so as to remedy a misuse of market power would be inappropriate.
In addition, in practical terms, courts in those jurisdictions that allow
divestiture in misuse of market power type cases have noted the difficulties
in ‘unscrambling’ a corporation without greatly harming the
efficiency of a viable market participant.
In light of the Government’s response to recommendation 12, it
is not necessary to comment on the application of a divestiture power
to ‘creeping acquisitions’. |
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Ceaseanddesist orders |
Some submissions to the Senate Committee proposed
that the ACCC be provided with the power to issue cease and desist orders,
modelled on similar powers provided to the Commerce Commission in New
Zealand. It is said that these orders would compel a corporation to cease
and desist from engaging in anti-competitive conduct. |
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Recommendation 14: The Committee recommends
that the Act be amended to provide for cease and desist orders, modelled
on the orders provided for in sections 74A to 74D of the Commerce Act
1986 (NZ), appropriately modified to conform with Australian constitutional
law. |
Government response |
The Government does not accept this recommendation.
The Dawson Review examined the need for a power to make cease and desist
orders, and found that there was no justification for its introduction.
Specifically, it was not clear to the Dawson Review why the existing
process of obtaining an interim injunction was inadequate. Further, the
Dawson Review noted that even if a constitutionally valid power were able
to be granted to the ACCC to issue cease and desist orders, it was not
clear that such orders would be any speedier or more efficient than an
interim injunction. |
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Investigative powers |
Section 155 empowers the ACCC to compel parties
to provide documents and other evidence relevant to investigations into
possible contraventions of the Act. The Federal Court has ruled that these
powers are to cease once legal proceedings have commenced. The ACCC contended
to the Senate Committee that its investigations of alleged anti-competitive
conduct are hindered following its application to the court for an interim
injunction to stop the conduct. Specifically, there is said to be a trade-off
between being able to obtain an injunction quickly to prevent further
anti-competitive conduct and the inability of the ACCC to compel responses
from some witnesses after injunctive proceedings commence, with the potential
weakening of the ACCC’s case due to the unavailability or destruction
of evidence. The ACCC proposed that it be given the ability to use its
section 155 powers after the grant of an interim injunction, but prior
to the commencement of substantive proceedings. |
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Recommendation 15: The Committee recommends
that section 155 of the Act should be amended to enable the ACCC to seek
the permission of the court (whether as part of a warrant application
or otherwise) for the continued use of its powers under section 155 after
the commencement of injunctive proceedings. The use of section 155 powers
should cease prior to the commencement of substantive proceedings. |
Government response |
The Government does not accept this recommendation.
The court has very extensive powers to compel the exchange of information
in preparation for trial. It is not accepted that these powers are inadequate.
The Government notes that the Dawson Review came to the same conclusion
when it considered a similar proposal.
The power of courts to compel the exchange of information in Trade Practices
Act cases was strengthened significantly in Trade Practices Commission
v. Abbco Ice Works Pty Ltd (1994) 123 ALR 503. As a result of this
case, corporations were denied the right to claim the privilege against
self-exposure to a penalty during pre-trial court processes. Therefore,
corporations are already able to be forced to answer questions or hand
over documentary evidence to the ACCC, even if it will result in the corporation
being found in breach of the Act and liable to very substantial financial
penalties and other orders. |
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ACCC budget |
Recommendation 16: The Committee recommends
that the ACCC should be adequately funded to undertake its role as the
principal litigant in section 46 and section 51AC cases. |
Government response |
The Government accepts the recommendation
but does not accept the suggestion that the ACCC is inadequately funded.
In the 2004-05 Budget, the Government has provided the ACCC with an additional
$46.7million over four years and a $22.0million equity injection in
2004-05, to enable the ACCC to effectively deal with an increased number
of matters and to maintain its level of service delivery. |
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Federal Magistrates Court jurisdiction
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The Federal Magistrates Court currently has
jurisdiction to hear consumer protection and product safety and product
information cases under the Act. Submissions to the Senate Committee noted
that the jurisdiction of the Federal Magistrates Court could be extended,
noting that this forum may provide for speedier and cheaper resolution
of disputes. |
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Recommendation 17: The Committee recommends
that the jurisdiction of the Federal Magistrates Court be extended to
enable it to deal with Misuse of Market Power (sections46 and46A, where
cases rely upon section83), Contravention of Industry Codes (section51AD)
and Unconscionable Conduct (Part IVA). |
Government response |
The Government agrees that legislation should
be amended to enable the Federal Magistrates Court to consider proceedings
relating to Part IVA and Part IVB. However, the Government considers that
section 46 and section 46A cases are likely to raise issues that are complex
and that are more appropriately considered by the Federal Court. |