Significant changes to Australia’s Competition Law came into effect on 6 November 2017 in response to the recommendations made by the Competition Policy Review in 2015 (known as the ‘Harper Review’). Businesses should familiarise themselves with the new laws which govern misuse of market power, concerted practices and cartels.
New concerted practices prohibition
A new prohibition against ‘Concerted Practices’ that have the purpose, the effect or likely effect of substantially lessening competition has been introduced in section 46 of the Competition and Consumer Act 2010 (Cth). This is a new concept in Australian Competition Law. It is intended to target conduct that involves some level of cooperation between competitors, but is not a cartel and was not previously captured by the law because there is not a ‘contract, arrangement or understanding’ (as these had been defined by the Courts).
For ‘Concerted Practices’ to arise, it will not be necessary for there to be any direct contact or exchange of information (for example, it can occur where parties communicate indirectly through a third party). It is also not necessary that there is any obligation or expectation that those involved will act in a particular way. Furthermore, those engaged in the concerted practice do not need to be competitors or potential competitors, such as suppliers, distributors, industry associations and consultants could also engage in a concerted practice.
Businesses should be careful that they do not share information that could facilitate conduct by their competitors that could or is intended to have the effect of substantially lessening competition. The Explanatory Memorandum to the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) and the Australian Competition and Consumer Commission Interim Guidelines for Concerted Practices (currently under consultation) state that there is no requirement for reciprocity and that a ‘one way’ communication with a competitor may potentially be a Concerted Practice. It remains to be seen if the Court will take the same view.
Businesses should review their Competition Law Compliance Programs and materials to ensure their staff are informed about this change.
Amended misuse of market power prohibition
The prohibition against misuse of market power has been reformulated and broadened. Now the effect or likely effect of the alleged conduct will be considered, and it is no longer necessary to show that a corporation has ‘taken advantage’ of its market power for a prohibited purpose. Under the amended section 46, a corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose or has or is likely to have the effect, of substantially lessening competition in that or any other market.
Conduct which has the effect or likely effect of substantially lessening competition will breach section 46, even if this was not the purpose of the conduct. Businesses that have substantial market power should assess the effect/likely effect of their conduct on competition, particularly where they price below cost, introduced bundling or loyalty discounts, buy up potentially scarce inputs, or refused to supply a competitor. Businesses should continue to ensure they avoid making communications or statements that could be construed as demonstrating an anti-competitive purpose.
For more information, contact Rockliffs.