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Competition Law

Introduction-

The Abbot Coalition government, as a part of their election campaign, promised to review the competition policy of Australia in the year 2013. Under the direction of Prof. Ian Harper, the Harper Review was all about formulating the competition policies of Australia. This review was all about providing a more regularized and fair-competitive and productive market to the people of Australia. The review was focused on providing anti-competitive conduct, making micro-economic reform, and making the regulatory framework more flexible for the businesses to work in. A final report was unconfined by Prof. Ian on 31 March 2015, suggesting 56 recommendations in the Competition and Consumer Act 2010 (Cth) (CCA). On 24th November 2015, the Turnbull Government supported 39 out of the 56 recommendations.[1] These recommendations were focused on three arenas- competition policy, competition laws and competition institutions.[2] For the competition policy and competition institutions, the review came up with Productivity Commission who shall keep a check on the intellectual property rights and also discussed substituting the National Competition Council with The Australian Council for Competition Policy.[3] For the competition laws in the CCA, the Review endorsed alterations in the Act. It suggested for making the provisions under Part IV Division I be more streamlined, being recommendation 27 and to prohibit the misuse of market power under Section 46, being recommendation 30. It also suggested to prohibit the former price discrimination and repeal the price signalling provisions, being recommendation 29 and 31.

Issue That Leads to Make Recommendation 30 a.k.a in Section 46

Section 46 of the Act talked prohibited any corporation, with a central power in the market, meaning being an influencer, it takes benefit of that to-

  1. Damage its competitor
  2. Restricts the entry of new entrants
  3. Preventing any person to stand-up in competition against it

Section 46 (1AA) further prohibits such corporations from supplying any goods or services at a price which is less than its relevant cost to cover more market share and attract customers.

The Harper Review proposed legislation said that-

Section 46(1) should be altered by prohibiting any corporation with a central power of influencing the market from substantially lessening competition (SLC) if only it has any purpose. For this, the court should consider[4]-

  1. The extent to which the purpose could influence, or likely to influence the competition
  2. The extent to which the purpose could influence or likely to influence the competition by preventing, lessening, restricting or deterring any fair competition or any new entrant in the market.

That, Section 46(1AA) should be repealed. The authorization of the section must lie with the ACCC only. There shall be no variation in the remedies. The existing range is self-sufficient.[5] Until 1986, to determine whether a corporation had any substantive market power, so it was judged on the basis that whether the corporation could possibly influence or control the market. However, the current test to judge that is less arduous than the ‘substantial test’ control.[6] In,[7] Justice Gyles stated that the substantive market power must not be related to monopoly power. 

Initially, the government was satisfied with the given recommendation by the Review. In a Press Release on 16 March 2016, they showed their consent to adopt to the alterations as recommended in Section 46. The prohibition on Section 46(1) is eligible to capture predatory pricing conduct. It was after the case,[8] when ACCC suffered from huge losses and new provision was presented in 2007 to curb this. In this case, ACCC alleged that Boral Besser Masonry (BBM) and its parent company Boral come under the purview of Section 46 as they reduced their product's prices in order to oust their competitor C&M Brick. They asserted that BBM had a substantial market power for masonry products. The Trial court stated that BBM did have a substantial influence in the market and that their pricing was not all competitive. But this decision was upturned by High Court where they held that BBM did not have any substantial market power and even if they did, they did not abuse that power.[9]

History of the Legislation

Initially, the section was known from the term 'monopolisation.’ The section saw levels of amendment in 1977 under Swanson Committee, in 1984 under Green Paper, in 1992, then in 2006, in 2007 under the Birdsville Amendment, then in 2008, and then recently in 2015, when the Harper Review recommended changing the whole legislation.[10] It was again a series of judgements that lead the Review to change the legislation as the extent of misuse of market power had changed as per time. The first and foremost judgment was in 1989, in case,[11] where the court held that BHP had substantial market power and had a purpose why he was refusing Y-Bar to Qld Ware, so as to curb it to become a wholesaler or its competitor. Then in the case of 2001,[12] the court held that ‘taking advantage’ element was not there. Even though market power and anti-competitive elements were there but evidence showed there was business justification for that. In,[13]the court held that if a corporation threatens another one to compete if the latter one does not withdraw the competition, so that is not substantive market power. Similarly in a case,[14] the court held that if BBM did not have market power as it did not take advantage of it by predatory pricing.

Analysis-

The major hunch of the Review was to include the effects test in scrutinizing whether the corporation has any abuse of power in their hands or not. The earlier judgments are all focused on whether there is fair competition in the market rather than focusing on the part that whether the competitors are the victims or not. The Melway judgment or Rural Press ltd judgment, that is focused on whether the corporation exercised any abuse of their position or not. It is not related to the contention of the victim that predatory pricing or threatening to compete is going to eradicate and demotivate the new entrants from entering the market. Therefore, it was the review who recommended to change the legislation and look the purpose behind any act of the dominant. If the purpose shows that the dominant’s act is going eradicate the other competitor and is imposing unnecessary pressure on the competitor, then dominant is liable for substantive abuse of power and hence is penalized as per CCA.

  1. Recommendation 24 and 33
  2. The reason why Harper review recommended recommendation 24 and 33

As for recommendation 24, it dates back to 1965 when originally under section 8 of the CCA where the Act intended to have harmony between the laws of the State and the Commonwealth through CCA. This means that along with the Federal Law, there was a role of CCA in it too. However, it did not explicitly apply to the levels of the government like federal, state or local. In 1977, the Fraser government presented The Trade Practices Amendment Act (TPA) and there the government was brought under the ambit of competition law. This lead to the recommendation in the Swanson Committee which said that TPA must be applicable on both public and private sectors and for all business and corporate activities. This enacted section 2A which bound the Crown in the right of Commonwealth. The term ‘businesses’ had nowhere been given any specific meaning and which was as per time left to the judicial bodies to interpret it. In a case,[15] CJ Gibbs held that the term must be interpreted widely but nevertheless, it shall be related to the facts of the case. In another case,[16] J Mason held that business means anything that is commercial and had been done for a continuous period of time and also must involve a succession of acts and not just one transaction.[17] Another case,[18] the court held that the term shall be interpreted in consonance with any commercial activity which a private person might indulge into under normal circumstances. As per J Hely in,[19] it was held what shall be commercial nature of business shall depend upon the facts of the case.

This happened until 1966 under TPA where Section 2A was applicable. Then section 2B was inserted which extended its reach to the States and Territories. This continued well when section 2A was budding the ambit of TPA. In,[20] the applicants bought a suit against the respondent and the Commissioner of Railways of State of Queensland. The court held that railways come under the purview of State governments but does not come under the of the Crown hence it was inappropriate to hold that railways should be included under the ambit of section 2A as the Parliament itself did not intend to interfere in the States law. Further, in a case,[21] held that the court shall bind the Crown only when in the context of permissible extrinsic aids it is intended. In 1993, the Hilmer Report, with the head being the then Prime Minister Keating, incorporated The National Competition Policy (NCP) Review, focusing on the exemptions in the trading structure of the country. Among the 150 recommendations, the report focused on the concern of the Commonwealth enjoying various advantages. It highlighted that the increase in privatisation, the non-competitive conducts seems to preserve in the privatisation too. Hence it recommended to-

  1. The NCP should be applicable on Commonwealth in the commercial transactions when taken in private firms
  2. TPA must exempt certain activities of the Commonwealth businesses
  3. The armour that the States and Territories take in the text of the Crown immunity, should be removed.

However, the impact of the report did not have much of the difference when applied. This report was limited to the extent of governmental application as it ignored the significant area of it, which was governmental procurement. For example, the Crown may indulge in delivery of infrastructure projects or demand for heavy educational and health systems but does not literally carry any business. And hence they are protected under Crown immunity. This was a major loophole due to which the Harper Review pointed the Recommendation 24. This lead to the Crown indulging in the distribution of public goods and services by contracting with the private sector and leasing out government-owned projects.[22] A very similar view was held in this case.[23]

Recommendation 33 which says repealing section 47 of CCA that prohibits various types of exclusive dealing. It is related to two types of anti-competitive vertical transactions[24]-

  1. The conditional supply or acquiring of goods and services. This means there is any pre-condition related to supply of goods and services like re-supply, and limiting the extent of new competitors to acquire the market share, etc
  2. Refusal the supply of goods and services like if a purchaser refuses for conditional supply.

This was recommended in lieu of various forms of full-line forcing that happened. So if the supply is based on a condition that the recipient shall not accept the goods from the competitor. Like in the case of,[25] Baxter indulged into a monopoly of sterile fluids but faced competition for PD fluids. So as per time, it formed an agreement with State Purchasing Authority (SPA's). Hence it offered products sometimes at high prices and other times at a very less rate in bundles. Hence it was held that its conduct was in violation of section 47 and it was practising SLC. Therefore the Review recommended that section 47 should be repealed completely and vertical restriction, including the third-line forcing and associated refusals as per section 45 and 46.

Should the Recommendation be Implemented as per The Review

As for recommendation 24, so yes it should be implemented the way it is recommended by the Review. Reason being, the unethical conduct of the governmental departments in order to have full control over the competition policies in the market tends to lure away the essence of CCA. The objective of CCA is to have pro-competition in the market with no containment of power in one hand. This goes for the governmental organisations as well that they do not show is actively participating in businesses but governs the supply and demands pattern of goods and services. 

As for recommendation 33, it should be implemented as per the Review if there has to be fair competition in the market. It is in consonance with section 46 aka recommendation 30 as this section talks about the misuse of market power which is another way that also impacts fair competition adversely. The government did not refuse to repeal section 47 wholly as they depended on their decision on whether they feel it is appropriate to amend section 46. However, section 47 has not been repealed except the part of ‘third line forcing.’

Bibliography for Transfer Practices Amendment Act

Legislations-

Transfer Practices Amendment Act

Competition and Consumer Protection Act of 2010

Case Laws-

ACCC v Baxter Healthcare [2005] FCA 581 (16 May 2005) (first instance); [2006] FCAFC 128 (24 August 2006) (on derivative immunity); [2007] HCA 38 (29 August 2007) (on derivative immunity); [2008] FCAFC 141 (11 August 2008) (on sections 46 and 47); [2010] FCA 929 (26 August 2010) (on penalties)

GEC Marconi Systems v BHP-IT (2003) 128 FCR 1

Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169

Hope v Bathurst City Council (1980) 144 CLR 1

Smith v Capewell (1979) 142 CLR 509, 517

New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54, 

Paramedical Services Pty Ltd v Ambulance Service of New South Wales [1999] FCA 548

Bradken Consolidated Limited v Broken Hill Proprietary Company Limited (1979) 145 CLR 107

Bropho v Western Australia (1990) 171 CLR 1

Queensland Wire Industries v BHP (1989) 167 CLR 177 (High Court)

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13 (High Court)

Rural Press Ltd v ACCC [2003] HCA 75 (High Court)

ACCC v Baxter Healthcare Pty Ltd [2008] FCAFC 141

Boral Besser Masonry Ltd v ACCC (2003) 215 CLR 374

Online Articles-

Justice John Griffiths, ‘Application of the Australian Consumer Law to Government Commercial Activities.’ (September 2016) < https://www.fedcourt.gov.au/digital-law-library/judges-speeches/justice-griffiths/griffiths-j-20160916#_ftnref31>

Australian Consumer Law, ‘Exclusive dealing.’ (November 2019) <https://www.australiancompetitionlaw.info/law/exclusive-dealing >

Australian Consumer Law, ‘Boral Besser Masonry Ltd v ACCC.’ (2020) <https://www.australiancompetitionlaw.org/cases/boral.html>

Australian Consumer Law, ‘Competition Policy Review (Harper Review) Misuse of Market Power.’ (November 2017) <https://www.australiancompetitionlaw.org/reports/2015harper-mmp.html >

Australian Consumer Law, 'Misuse of market power.' (November 2017) <https://www.australiancompetitionlaw.org/law/mmp/index.html>

Paul Davidson, ‘Government response to the Harper Competition Policy Review: A quick guide.’ (September 2016) <https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/HarperCompetition>

Nicholas Owczarek, ‘Fit for the purpose: The Harper review and competition law reform.’ (2020) <http://thebrief.muls.org/fit-for-purpose-the-harper-review-and-competition-law-reform >

[1] Paul Davidson, ‘Government response to the Harper Competition Policy Review: A quick guide.’ (September 2016) <https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/HarperCompetition>

[2] Nicholas Owczarek, ‘Fit for the purpose: The Harper review and competition law reform.’ (2020) <http://thebrief.muls.org/fit-for-purpose-the-harper-review-and-competition-law-reform >

[3] Ibid 2

[4] Australian Consumer Law, ‘Competition Policy Review (Harper Review) Misuse of Market Power.’ (November 2017) <https://www.australiancompetitionlaw.org/reports/2015harper-mmp.html >

[5] Ibid 4

[6] Australian Consumer Law, 'Misuse of market power.' (November 2017) <https://www.australiancompetitionlaw.org/law/mmp/index.html>

[7] ACCC v Baxter Healthcare Pty Ltd [2008] FCAFC 141

[8] Boral Besser Masonry Ltd v ACCC (2003) 215 CLR 374

[9] Australian Consumer Law, ‘Boral Besser Masonry Ltd v ACCC.’ (2020) <https://www.australiancompetitionlaw.org/cases/boral.html>

[10] Ibid 6

[11] Queensland Wire Industries v BHP (1989) 167 CLR 177 (High Court)

[12] Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13 (High Court) 

[13] Rural Press Ltd v ACCC [2003] HCA 75 (High Court) 

[14] Ibid 8

[15] Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169

[16] Hope v Bathurst City Council (1980) 144 CLR 1

[17] Smith v Capewell (1979) 142 CLR 509, 517

[18] New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54, 

[19] Paramedical Services Pty Ltd v Ambulance Service of New South Wales [1999] FCA 548

[20] Bradken Consolidated Limited v Broken Hill Proprietary Company Limited (1979) 145 CLR 107.

[21] Bropho v Western Australia (1990) 171 CLR 1

[22] Justice John Griffiths, ‘Application of the Australian Consumer Law to Government Commercial Activities.’ (September 2016) < https://www.fedcourt.gov.au/digital-law-library/judges-speeches/justice-griffiths/griffiths-j-20160916#_ftnref31>

[23] GEC Marconi Systems v BHP-IT (2003) 128 FCR 1

[24] Australian Consumer Law, ‘Exclusive dealing.’ (November 2019) <https://www.australiancompetitionlaw.info/law/exclusive-dealing >

[25] ACCC v Baxter Healthcare [2005] FCA 581 (16 May 2005) (first instance); [2006] FCAFC 128 (24 August 2006) (on derivative immunity); [2007] HCA 38 (29 August 2007) (on derivative immunity); [2008] FCAFC 141 (11 August 2008) (on sections 46 and 47); [2010] FCA 929 (26 August 2010) (on penalties)

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