Restraints of trade and dominance in Australia: overview

A Q&A guide to restraints of trade and dominance in Australia.

The Q&A gives a succinct overview of restraints of trade, monopolies and abuses of market power in Australia. In particular, it covers the regulatory authorities and the regulatory framework, the scope of rules, exemptions, exclusions, statutes of limitation, notification, investigations, penalties and enforcement, third party damages claims, EU law, joint ventures and proposals for reform.

For information on merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in Australia, visit Merger control in Australia: overview.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.

Michele Laidlaw and Johanna Croser, Johnson Winter & Slattery
Contents

Restraints of trade

Scope of rules

1. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

Restrictive agreements and practices are regulated under the Competition and Consumer Act 2010 (CCA). The following conduct is prohibited per se (outright):

  • Cartel conduct (Part IV, Division 1, CCA): a civil and criminal prohibition against making or giving effect to a contract, arrangement or understanding between two or more actual or potential competitors that contains a cartel provision. A cartel provision includes four forms of cartel conduct, that is, price fixing, market sharing, restricting output and bid rigging. An activity is considered price fixing when it has the "purpose or effect" of price fixing. The other three forms of conduct are only prohibited if they have the specified purpose.

  • Price signalling (Division 1A, CCA): a prohibition against private disclosures of pricing information to competitors, where that disclosure is not in the ordinary course of business. This prohibition currently only applies to the banking sector.

  • Exclusionary provisions (sections 45 and 4D, CCA): a prohibition against making or giving effect to a contract, arrangement or understanding between two or more actual or potential competitors that contains a provision that has the purpose of preventing, restricting or limiting the supply or acquisition of goods or services to or from particular persons or classes of persons.

  • Third line forcing (section 47, CCA): a prohibition against the supply of goods or services on the condition that the purchaser acquires separate goods or services from a third party.

  • Resale price maintenance (section 48, CCA): a prohibition against specifying or enforcing a minimum price for resupply and other related conduct, such as withholding supply as a result of failure to resupply at a specified price.

  • Secondary boycotts (sections 45D, 45DA and 45DB, CCA): a prohibition on two or more persons acting together to hinder or prevent the supply of goods or services in various circumstances.

  • Misuse of market power (section 46(1) , CCA): a prohibition on a corporation with a substantial degree of market power taking advantage of that market power for a proscribed anti-competitive purpose.

  • Predatory pricing (section 46(1AA) , CCA): a prohibition on a corporation with a substantial market share supplying goods or services below cost for a sustained period for a proscribed anti-competitive purpose.

The CCA prohibits certain conduct if it fails to meet a substantial lessening of competition test, as follows:

  • Price signalling (Division 1A, CCA): a prohibition against disclosures about prices, capacity or strategy which have the purpose of substantially lessening competition. This prohibition only currently applies to the banking sector.

  • Anti-competitive agreements (section 45, CCA): a prohibition against making and giving effect to a contract, arrangement or understanding that has the purpose, effect or likely effect of substantially lessening competition. These arrangements will generally be horizontal in nature.

  • Exclusive dealing (section 47, CCA): prohibitions on various forms of vertical transactions that have the purpose, effect or likely effect of substantially lessening competition. Third line forcing, a form of exclusive dealing, is prohibited outright (see above).

  • Dual listed company arrangements (section 49, CCA): prohibition on dual listed company arrangements that have the purpose or effect of substantially lessening competition.

There are also specific prohibitions concerning anti-competitive conduct in the telecommunications industry and a regime for access to essential facilities.

Parties can also bring claims under the common law doctrine of restraint of trade, which operates alongside the CCA.

Regulatory authority

The Australian Competition and Consumer Commission (ACCC) is Australia's national competition regulator responsible for enforcing the CCA. The ACCC has broad powers to investigate suspected breaches and bring civil proceedings for a breach of any of the substantive provisions of Part IV of the CCA. The ACCC can seek a range of penalties or remedies including injunctive relief, declarations and fines.

The Commonwealth Director of Public Prosecution (CDPP) has the sole statutory authority to prosecute criminal cartel claims. Formal procedures are in place between the ACCC and the CDPP to govern the relationship between the authorities.

See box, The regulatory authorities.

 
2. Do the regulations only apply to formal agreements or can they apply to informal practices?

Prohibitions under the Competition and Consumer Act 2010 apply to contracts, arrangements or understandings, which include both formal agreements and informal practices. The relevant test in relation to establishing an "understanding" is whether there has been a "meeting of minds". A mere hope that a party will act in a certain way will not satisfy this test. However, it is possible that an informal arrangement, such as a nod or a wink between competitors, can amount to a breach of the law.

 

Exemptions

3. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

There are various statutory exemptions from the prohibitions in Part IV of the Competition and Consumer Act 2010 (CCA), including:

  • The joint venture exception to cartel conduct and exclusionary provisions (see Question 26).

  • The exception to the cartel offence of price fixing for the:

    • collective acquisition of goods or services; or

    • joint advertising of the price for the re-supply of collectively acquired goods and services.

  • Conduct subject to an authorisation or notification (see Question 5).

  • The loss leading exception to resale price maintenance.

  • The exception to various prohibitions against price signalling where disclosure is made:

    • in the context of a joint venture;

    • for the purpose of complying with continuous disclosure obligations; or

    • accidentally or beyond the control of the corporation.

In addition, section 51 of the CCA specifies a number of exemptions which apply in relation to the restrictive trade practices provisions in the CCA. Those include the following:

  • General exemptions for:

    • anything specified in and specifically authorised by federal legislation other than relating to patents, trade marks, designs or copyrights;

    • anything in any state or territory specified in and specifically authorised by state or territory legislation, provided the state or territory is a party to the Conduct Code Agreement and the Competition Principles Agreement;

  • Exemptions for provisions (other than from the secondary boycott and resale price maintenance prohibitions):

    • relating to restrictions on employment;

    • relating to restrictions between non-corporate partners in relation to the terms of the partnership, the conduct of the partnership business and competition between the partnership and a partner;

    • relating to restrictions in a contract for the sale of a business;

    • in export agreements provided certain notification requirements are met.

  • Exemption in relation to acts done in concert by consumers of goods or services, otherwise than in trade or commerce (other than from the resale price maintenance prohibition).

  • Exemptions for imposing or giving effect to certain specified matters relating to intellectual property rights (other than from resale price maintenance and misuse of market power provisions).

Agreements solely between related corporate bodies will not breach the prohibitions against:

  • Cartel conduct.

  • Provisions that substantially lessen competition.

  • Exclusionary provisions.

  • Exclusive dealing.

  • Third line forcing.

  • Price signalling.

Many of the CCA prohibitions in Part IV feature anti-overlap exemptions. For example, the prohibitions against cartel conduct do not apply where the conduct constitutes resale price maintenance, exclusive dealing or provides for the acquisition of shares or assets.

 

Exclusions and statutes of limitation

4. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

There are no exclusions for any types of agreements or practices and no de minimis provisions excluding small agreements under the Competition and Consumer Act 2010 (CCA).

Statutes of limitation

A party must commence proceedings within:

  • Six years of the alleged breach, if it seeks pecuniary penalties (Australian Competition and Consumer Commission or Commonwealth Director of Public Prosecution only).

  • Six years from when the cause of action accrued, if it seeks damages or other remedial orders.

There is no limitation period for a criminal prosecution of cartel conduct.

 

Notification

5. What are the notification requirements for restrictive agreements and practices?

Notification

Parties can apply to the Australian Competition and Consumer Commission (ACCC) for authorisation, on net public benefit grounds, of conduct that would otherwise breach certain Part IV prohibitions, including:

  • Cartel conduct.

  • Anti-competitive agreements.

  • Exclusionary provisions.

  • Certain forms of exclusive dealing.

  • Resale price maintenance.

  • Price signalling.

  • Dual listed company arrangements.

The ACCC must conduct a public consultation and make its decision within six months. Any authorisation that the ACCC grants is generally for a limited period of time.

The ACCC can also grant immunity from prosecution for:

  • Third line forcing, where immunity will commence 14 days after the ACCC receives a valid notification, provided the ACCC does not object.

  • Other exclusive dealing conduct, where immunity will commence from the date the ACCC receives a valid notification, provided the ACCC does not object.

  • The per se price signalling prohibition.

  • Collective bargaining arrangements where:

    • the parties involved are small businesses; and

    • the immunity commences 14 days after the ACCC receives a valid notification, provided the ACCC does not object.

Informal guidance/opinion

Parties can seek informal guidance from the ACCC before lodging an authorisation application or notification.

Responsibility for notification

Parties to the proposed arrangement will apply to the ACCC for authorisation or notification.

Relevant authority

Parties must lodge applications for authorisations and notifications with the ACCC.

Form of notification

Prescribed forms are available on the ACCC's website (www.accc.gov.au/business/applying-for-exemptions/fees-forms).

Filing fee

Filing fees vary depending on the application:

  • A$7,500 for an authorisation application.

  • A$1,000 for notification of collective bargaining.

  • A$100 for notification of third line forcing or price signalling.

  • A$2,500 for notification of exclusive dealing other than third line forcing.

 

Investigations

6. Who can start an investigation into a restrictive agreement or practice?

Regulators

The ACCC has statutory authority to commence an investigation into any restrictive agreement or practice that may contravene the Competition and Consumer Act 2010 (CCA). The ACCC has the power to require a person to provide information, documents and give evidence under oath or by way of affirmation (section 155, CCA).

The ACCC publishes a yearly Compliance and Enforcement Policy which sets out the ACCC's areas of focus and explains the factors it takes into account when deciding whether or not to pursue particular matters.

Third parties

Third parties can lodge a complaint with the ACCC by contacting the Enforcement and Compliance division of the ACCC. This is generally done informally (that is, by way of letter, e-mail or phone call). The ACCC does not examine all complaints and may have regard to its yearly Compliance and Enforcement Policy in choosing which complaints to pursue. Third parties do not have the right to start an investigation, but can bring private court proceedings for damages or other compensatory orders (see Question 14).

 
7. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

Representations

Generally, Australian Competition and Consumer Commission (ACCC) investigations are confidential. However, the ACCC can ask third parties (including complainants) for information. A third party (including a complainant) need not show a special interest to make representations. Complainants are not afforded any special rights to make representations as compared to other third parties.

Document access

Information obtained by the ACCC during the course of an investigation will generally not be disclosed unless a court orders otherwise or certain statutory criteria are met. In limited circumstances, it is possible to apply for access to documents in the ACCC's possession under freedom of information laws.

Be heard

See above, Representations.

 
8. What are the stages of the investigation and timetable?

There are no formal stages or timelines for Australian Competition and Consumer Commission (ACCC) investigations. The process can take anywhere from six to 18 months or longer. As a result of the investigations, the ACCC may decide to:

  • Bring civil proceedings. This generally entails, as between the parties, the exchange of pleadings, the exchange of documents (discovery), and the preparation and exchange of witness statements. There may also be other steps dictated by the courts, such as a case management conference.

  • Refer the matter to the Commonwealth Director of Public Prosecution for criminal charges.

  • Consider alternative enforcement strategies, such as court-enforceable undertakings.

 

Publicity and confidentiality

9. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

Generally, Australian Competition and Consumer Commission (ACCC) investigations are confidential. However, the existence of any proceedings brought by the ACCC will be made public (including the identities of the parties involved) when the proceedings are formally instituted. Certain documents filed in court are typically publicly available (for example, the pleadings). The ACCC will normally issue a media release setting out the nature of the conduct and orders being sought.

Automatic confidentiality

Subject to limited exceptions, the ACCC must not disclose information obtained under section 155 of the Competition and Consumer Act 2010 (CCA) without the consent of the party who provided the information.

Confidentiality on request

Parties can request confidentiality for certain information.

Subject to limited exceptions, the ACCC must not disclose information that is given in confidence to the ACCC and relates to a matter arising under a core statutory provision, without the consent of the party who provided the information (section 155AAA, CCA).

After proceedings are started, parties may apply to the court for an order to restrict the publication of confidential, commercially sensitive evidence (section 37AH, Federal Court of Australia Act 1976 ( Cth)). The parties can also agree a confidentiality regime between themselves.

 
10. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The ACCC uses a range of investigative tools when investigating breaches of competition law, including:

  • Section 155 notices: the ACCC can issue statutory demands for information (section 155 notices) where it has reason to believe that an individual or business is capable of providing information, documents or evidence about a matter that may breach competition laws. Failure to comply with a section 155 notice, or providing false and misleading information, is an offence punishable with penalties including imprisonment for up to 12 months.

  • Search and seizure powers: the ACCC can apply to the court for a warrant that permits its employees to enter premises, search for and seize evidence relating to potential breaches of competition law.

  • Phone tapping and covert surveillance: where the ACCC is investigating cartel conduct that may warrant criminal prosecution, it can involve the Australian Federal Police, who have the power to tap phones and undertake covert surveillance.

 

Settlements

11. Can the parties reach settlements with regulators to bring an early resolution to an investigation? If so, what are the circumstances for doing so and the applicable procedure?

The Australian Competition and Consumer Commission (ACCC) adopts a range of strategies to resolve investigations.

Administrative resolution

The ACCC has the discretion to resolve a matter by reaching an agreement with the business in question. This includes, for example, the implementation of an individual compliance programme. When considering whether to reach such an agreement, the ACCC will consider:

  • The extent of the harm caused by the breach.

  • The deliberateness of the conduct.

  • Whether the business in question has previously breached the law.

Enforceable undertakings

The ACCC may accept a court enforceable undertaking under which the business that has breached the law undertakes to cease the conduct and remedy harm caused by the conduct.

Litigation settlement

The ACCC may take enforcement action in the Federal Court if the relevant party agrees to make admissions regarding illegal conduct. The size of the civil penalty and other sanctions imposed is ultimately determined by the court, however, the procedure often includes the ACCC and the relevant party submitting jointly to the court an appropriate penalty amount for approval.

 
12. Can the regulator accept remedies (commitments) from the parties to address competition concerns without reaching an infringement decision? If so, what are the circumstances for doing so and the applicable procedure?
 

Penalties and enforcement

13. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

The Australian Competition and Consumer Commission (ACCC) can bring Federal Court proceedings if it considers that the Competition and Consumer Act 2010 (CCA) has been breached.

Orders

The ACCC can seek the following discretionary civil remedies:

  • Civil pecuniary penalties (section 76, CCA).

  • Injunctions restraining ongoing conduct (section 80, CCA).

  • Non-punitive remedial orders, such as community service or probation orders sections 86C-86E, CCA).

  • Punitive orders, such as adverse publicity and directorship disqualification orders (sections 86C-86E, CCA).

  • Other orders, such as orders for restitution or specific performance (section 87, CCA).

  • Declarations under the provisions of the Federal Court of Australia Act 1976.

Criminal penalties for cartel offences include:

  • Imprisonment.

  • Criminal fines.

  • Non-punitive orders.

  • Adverse publicity orders.

  • Disqualification orders.

Fines

The maximum civil and criminal penalties the Federal Court can impose on a corporation per breach are the greater of the following:

  • A$10 million.

  • Three times the value of the benefits obtained by the breach.

  • If these benefits cannot be determined, 10% of the corporate group's annual turnover attributable to Australia.

Personal liability

Individuals may face personal liability for being "knowingly concerned" with a CCA breach, including:

  • Civil penalties of up to A$500,000 per breach.

  • Imprisonment of up to ten years and fines of up to A$360,000 per breach, for cartel offences.

  • Exclusion from company management.

It is illegal for a corporation to indemnify its officers against legal costs and any final penalty.

Failure to comply with orders of the Federal Court can result in further fines or imprisonment.

Immunity/leniency

The ACCC operates a "first in" immunity policy for cartel conduct which enables one participant in a cartel (person or corporation) to apply for immunity from civil prosecution if certain criteria are met. Derivative immunity is available to cover individual employees, directors and officers of a corporation who have obtained corporate immunity. Immunity from criminal prosecution is determined by the Commonwealth Director of Public Prosecution (CDPP) in accordance with the same principles that determine immunity under the ACCC policy.

A person or corporation with immunity must co-operate fully with the ACCC or CDPP's investigation. If a party is not eligible for immunity, its co-operation with the ACCC may be considered under the ACCC's Immunity and Cooperation Policy which enables the ACCC to provide leniency to corporations and individuals in certain circumstances.

Impact on agreements

Unless a court order says otherwise, if the breaching provision in an agreement is severable, the remainder of the agreement remains valid (section 4L, CCA).

 

Third party damages claims and appeals

14. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?

Third party damages

Third parties who have suffered loss or damage caused by a breach of the competition provisions of the Competition and Consumer Act 2010 (CCA) can bring claims for damages or other compensatory orders against any party involved in the breach (sections 82 and 87, CCA). Damages are compensatory in nature (that is, for the amount of the loss or damage suffered). Exemplary damages are not available. Proceedings must be commenced, generally in the Federal Court, within six years of the date on which the cause of action accrued.

The Australian Competition and Consumer Commission (ACCC) may bring representative proceedings for Part IV breaches on behalf of persons who have suffered, or are likely to suffer, loss or damage by conduct in breach of the statutory prohibitions (section 87(1A) , CCA). Those persons must be identified and consent to the action in writing.

Private group actions are also possible under the "opt out" statutory regime (Part IV, FCA), that is, where seven or more persons have claims against the same respondent and those claims:

  • Arise out of the same or similar circumstances.

  • Give rise to a substantial common issue of law or fact.

The representative body must have a claim and a sufficient interest on its own behalf to commence proceedings.

Proceedings for damages that "follow on" from ACCC regulatory proceedings pose lesser evidentiary burdens for claimants if a court has already made findings of fact in relation to the breach. Findings of fact made by a court in certain earlier proceedings (including proceedings for cartel offences) constitute prima facie evidence of those facts in later proceedings for damages or compensation orders (section 83, CCA). If no such findings are made, there is little probative value from an infringement decision.

Infringement decisions by authorities from other countries have little to no probative value. Claimants still need to be able to make out the claim under Australian law.

Special procedures/rules

See above, Third party damages.

Collective/class actions

See above, Third party damages.

 
15. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

Rights of appeal and procedure

A Federal Court (single judge) decision regarding a breach of Part IV of the Competition and Consumer Act 2010 (CCA) and/or the remedies/penalties to be imposed can be appealed to the Full Court of the Federal Court (usually three judges) within 21 days of the decision of the single judge.

To appeal, a party must show that the judge either applied an incorrect principle of law or made a finding of fact on an important issue which could not be supported by the evidence.

Except in special circumstances, the Full Court does not consider new evidence or information that was not presented in the original case and does not call witnesses to give evidence. It does review all the relevant documents filed by the parties in the original case and considers legal arguments from both parties to the appeal.

If a party is not satisfied with the decision of the Full Court, it can seek leave to appeal to the High Court. There is no automatic right to have an appeal heard by the High Court and parties who wish to appeal must persuade the High Court that there are special reasons for the appeal to be heard. Decisions of the High Court are final.

A person dissatisfied with an Australian Competition and Consumer Commission (ACCC) authorisation or notification decision can apply to the Australian Competition Tribunal (Tribunal) for a merits review of the decision within 21 days of the ACCC's decision. A person can also apply to the Federal Court for review of the Tribunal's decision on administrative law grounds within 28 days.

Third party rights of appeal

Third parties must have sufficient standing to bring an action in order to appeal court decisions. They can appeal ACCC authorisations and notifications decisions if the Tribunal is satisfied they have a sufficient interest.

 

Monopolies and abuses of market power

Scope of rules

16. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

See below, Monopolies and Misuse of market power. There are also some industry specific regimes in relation to some regulated infrastructure, such as telecommunications.

Monopolies

Part IIIA of the Competition and Consumer Act 2010 (CCA) establishes a national Third Party Access Regime for services provided by significant monopoly infrastructure. The regime sets out the following three cases in which third parties can gain a legally enforceable right to access services:

  • Providers of infrastructure services can voluntarily submit access undertakings to the Australian Competition and Consumer Commission (ACCC), specifying the terms and conditions on which they will provide access, for ACCC approval.

  • State and territory governments can create and implement access regimes for particular infrastructure services in their jurisdiction.

  • Any person can apply to the National Competition Council (NCC) to have services provided by a facility "declared" and regulated where certain criteria are met. Once a service is declared, a person applying for access to the service can negotiate terms of access with the service provider and, in the event of a dispute, apply for binding arbitration by the ACCC.

Misuse of market power

The CCA contains the following two civil prohibitions against misuse of market power:

  • A prohibition on a corporation with a substantial degree of market power taking advantage of that market power for a prohibited anti-competitive purpose. Prohibited purposes include:

    • eliminating or substantially damaging a competitor;

    • preventing the entry of a person into that or any other market; or

    • deterring a person from engaging in competitive conduct in any market.

    • A prohibition on a corporation with substantial market share supplying goods or services below cost for a sustained period for a proscribed anti-competitive purpose (predatory pricing).

The ACCC regulates the misuse of market power provisions.

Regulatory authority

See above, Monopolies and Misuse of market power.

 
17. How is dominance/market power determined?

While the court is not limited in the matters it can consider when determining the market power a business has, it must have regard to the extent to which the conduct of the business is constrained by actual or potential competitors, customers or suppliers. Other factors to consider include the:

  • Barriers to entry (or difficulty) competitors face when entering or expanding in the market.

  • Market share and financial strength of the business.

  • Ability of the business to consistently restrict competition.

A business can have a substantial degree of power in a market even if it does not substantially control the market or have absolute freedom from constraint by the conduct of its competitors, customers or suppliers.

 
18. Are there any broad categories of behaviour that may constitute abusive conduct?

Other than predatory pricing, there are no regulated categories of behaviour that constitute abusive conduct. However, refusals to supply goods or services and bundling goods and services in certain circumstances have been found to amount to misuse of market power.

 

Exemptions and exclusions

19. Are there any exemptions or exclusions?

The Competition and Consumer Act 2010 (CCA) provides for the following exemptions:

  • A corporation's purchase of plant or equipment does not breach the prohibition on misuse of market power (section 46(5), CCA).

  • An exemption from the operation of section 46 of the CCA for certain conduct that is authorised by the Australian Competition and Consumer Commission (section 46(6), CCA).

 

Notification

20. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

It is not possible to obtain authorisation or immunity for conduct constituting a misuse of market power.

 

Investigations

21. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

There are no procedural differences between investigations into abuses of market power and investigations into restrictive agreements (see Questions 6 to 9 and 11 to 12).

 
22. What are the regulator's powers of investigation?
 

Penalties and enforcement

23. What are the penalties for abuse of market power and what orders can the regulator make?
 

Third party damages claims

24. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?
 

EU law

25. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law.

Not applicable.

 

Joint ventures

26. How are joint ventures analysed under competition law?

The Competition and Consumer Act 2010 (CCA) defines a joint venture as an activity in trade or commerce which is carried on in either of the following two ways:

  • Jointly by two or more persons, whether or not in partnership.

  • By a body corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly by means of:

    • their joint control of that body corporate; or

    • their ownership of shares in the capital of that body corporate.

For joint ventures that meet these definitions, there is a joint venture exception to the cartel prohibitions and a joint venture defence for prohibitions against exclusionary provisions.

For the joint venture exception to cartel prohibitions to apply:

  • The cartel provision must be for the purposes of the joint venture and:

    • in a contract; or

    • if in an arrangement or understanding, intended to be in a contract and the parties believed it to be so.

  • The joint venture must be for the production and supply of goods and services and must be carried on:

    • jointly by the parties to the contract; or

    • by a body corporate formed by the parties for the purpose of enabling those parties to carry on activities jointly by means of joint control or joint ownership.

The joint venture defence for prohibitions against exclusionary provisions applies if the provision:

  • Is for the purposes of the joint venture.

  • Does not have the purpose or effect of substantially lessening competition.

 

Inter-agency co-operation

27. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The Australian Competition and Consumer Commission co-operates with regulatory authorities in a number of jurisdictions including New Zealand, Canada, the EU, the UK, China, Taiwan, South Korea, Japan, Fiji, India, the Philippines, Papua New Guinea and the US. Co-operation generally extends to the exchange of information and co-operation and co-ordination of enforcement activities.

 

Recent cases

28. What are the recent developments, trends or notable recent cases concerning abuse of market power?

ACCC v Cement Australia Pty Ltd and others

In September 2008, the Australian Competition and Consumer Commission (ACCC) filed proceedings against Cement Australia Pty Ltd and two related entities (collectively Cement Australia) claiming that by entering in and extending various acquisition contracts in circumstances where there was no commercial rationale to do so, Cement Australia had misused its market power in the downstream market for the supply of processed fly ash in South East Queensland. Fly ash is a by-product of the combustion of black coal in electricity-generating power stations.

Cement Australia raised various defences to the ACCC's allegations, including that it:

  • Did not have substantial market power.

  • Did not take advantage of that market power

  • Had a legitimate commercial rationale for its conduct, including to:

    • have a secure and consistent supply of fly ash from diverse sources in order to maintain its market position by overcoming operational issues; and

    • develop new sales opportunities in the long run.

In September 2013, the court handed down its long-awaited decision finding that Cement Australia did not abuse its market power. The court held that Cement Australia had substantial market power in the market for supply of processed fly ash because it effectively had exclusive rights to acquire all available fly ash from the two power stations producing fly ash at the time. The court found that Cement Australia did not take advantage of that market power because, among other things, it could have profitably entered into and extended the contracts in a workably competitive market, that is, one in which it did not have market power.

However, the court held that Cement Australia breached the prohibitions against making and giving effect to arrangements that have the purpose or effect of substantially lessening competition in a market. On 29 April 2016, Cement Australia was ordered to pay fines totalling A$18.6 million. The decision shows that businesses that seek to "tie up" the market through contractual arrangements with suppliers or competitors may run the risk of breaching competition laws.

ACCC v Pfizer

In February 2014 the ACCC filed proceedings against Pfizer, alleging that commercial offers made by Pfizer to pharmacies before the expiry of the patents for its Liptor drug were anti-competitive. In making the offers, the ACCC alleged that Pfizer took advantage of its substantial market power to deter or prevent generic manufacturers supplying competing "atorvastatin" (ATV).

In February 2015 the court dismissed the ACCC's case, finding that:

  • While Pfizer had taken advantage of its market power by engaging in the alleged conduct, Pfizer's market power was no longer "substantial" at the time the offers were made.

  • The ACCC had failed to establish that Pfizer had pursued its conduct for the proscribed purpose of deterring or preventing competitors from engaging in competitive conduct or for the purpose of substantially lessening competition.

Although the ACCC is appealing the decision at the time of writing, the case serves as a reminder that market power must be assessed in the context of a potentially changing market over a reasonable period of time. As markets change, due to for example loss of IP rights or other factors, market power may also change.

 

Proposals for reform

29. Are there any proposals for reform concerning restrictive agreements and market dominance?

On 31 March 2015, the Final Report of the Australian Government's Competition Policy Review (the Harper Review) was released. It made recommendations for changes to Australia's existing competition law regime to promote more dynamic, competitive and well-functioning markets.

In September 2016, the Federal Government commenced consultation on an Exposure draft of the Competition and Consumer Amendment (Competition Policy Review) Bill 2016. It was the first step towards giving effect to the Harper Review recommendations in relation to Australia's competition laws. Key amendments (with the exception of the introduction of a new effects test into the misuse of market power provisions, which is discussed separately below) include the following:

  • The introduction of a new prohibition on concerted practices subject to a substantial lessening of competition test (SLC test). A "concerted practice" is not defined but it implies conduct between competitors that is coordinated or otherwise undertaken jointly in some manner. The new law is not intended to apply to unilateral conduct or mere parallel conduct but is targeted at catching conduct that is less than an "understanding". Under the ACCC's guidelines, a concerted practice is a form of coordination between competing businesses by which practical cooperation between them replaces the risks of competition, (without them having entered a contract, arrangement or understanding).

  • Changes to the prohibitions on cartel conduct including:

    • broadening the joint venture exception to allow for a wider range of collaborative activity;

    • clarifying that that cartel conduct must involve actual or likely competitors rather than "potential" competitors.

  • Simplification of the prohibitions on vertical arrangements, including a replacement of the outright prohibition on third line forcing with a substantial lessening of competition test.

  • Amendments to the National Third Party Access Regime, for example, making it easier for potential access seekers to obtain access to nationally significant infrastructures.

The Harper Review also recommended the introduction of an effects test in the misuse of market power provisions. In December 2016, the Federal Government introduced into the Australian Parliament the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 to give effect to the recommendation. The new prohibition will make it illegal for a company with substantial market power to engage in conduct that has the purpose or effect of substantially lessening competition in a market where there is an actual or likely supply or acquisition of goods or services, by the corporation or another prescribed entity. Currently, companies can only contravene the misuse of market provisions in a market if they take advantage of their market power for a proscribed anti-competitive purpose. To distinguish pro-competitive conduct and anti-competitive misuse of market power, the court will be required to take into account whether a company's conduct enhances efficiency, innovation, product quality or price competitiveness or whether it prevents, restricts or deters competitive conduct. Potential contravening conduct will also be able to be authorised by the ACCC if the public benefits of the conduct outweigh the public detriments (currently this is not the case).

 

Online resources

Australian Government ComLaw

W www.comlaw.gov.au

Description. ComLaw is an Australian government website that contains the full official text of Australian Commonwealth government legislation, including the Competition and Consumer Act 2010. ComLaw is managed by the Office of Parliamentary Counsel.

Australian Competition and Consumer Commission (ACCC)

W www.accc.gov.au

Description. The ACCC website contains links to various ACCC policies. The website is managed by the ACCC.



The regulatory authorities

Australian Competition and Consumer Commission (ACCC)

T +61 2 6243 1111
F +61 2 6243 1199
W www.accc.gov.au

Outline structure. The ACCC is an independent statutory authority with a chair, two deputy chairs, and a number of commissioners and associate members. The ACCC's divisions and groups include the following:

  • Merger and authorisation review.
  • Competition enforcement.
  • Consumer enforcement.
  • Consumer, small business and product safety.
  • Infrastructure regulation.
  • Australian energy regulator.
  • Legal and economic.
  • People and corporate services.

Responsibilities. The ACCC is responsible for:

  • Enforcing the Competition and Consumer Act 2010 and a range of additional legislation.
  • Promoting competition, fair trading.
  • Regulating national infrastructure for the benefit of all Australians.

Procedure for obtaining documents. There are a number of ways to obtain documents from the ACCC, including by accessing publicly available registers on the ACCC's website and applying for access to documents in the ACCC's possession under freedom of information laws. Certain documents filed in the Federal Court can also be accessed through court portals if proceedings have been started.

Australian Competition Tribunal

T +61 3 8600 3333
F +61 3 8600 3281
W www.competitiontribunal.gov.au

Outline structure. The Australian Competition Tribunal (Tribunal) is a statutory body consisting of a president, a number of deputy presidents and other members as appointed by the Governor‑General of Australia. A presidential member must be a judge of the Federal Court of Australia. Other members must have knowledge of or experience in industry, commerce, economics, law or public administration. For the purpose of hearing and determining proceedings, the Tribunal is constituted by a presidential member and two non-presidential members.

Responsibilities. In relation to restrictive arrangements and practices, the Tribunal hears applications for review of determinations of the ACCC granting or refusing authorisations and notifications.

Procedure for obtaining documents. There are a number of ways to obtain documents from the Tribunal, depending on the subject matter. They are determined by the CCA.



Contributor profiles

Michele Laidlaw, Competition Partner

Johnson Winter & Slattery

T +61 2 8274 9536
E michele.laidlaw@jws.com.au
W www.jws.com.au

Professional qualifications. Australia, 2001

Areas of practice. Investigations and court proceedings in relation to competition law, including anti-competitive agreement cases, cartel prosecutions and restraint of trade cases; large scale commercial transactions and alliances requiring competition authority approvals in Australia and globally.

Recent transactions

  • Advising Bayer AG on the proposed acquisition of Monsanto.
  • Advising energy industry participants in relation to the ACCC's East Coast Gas Markets Inquiry.
  • Advising Qantas Airways Limited on a range of competition issues, including the ACCC prosecution of Jetstar (Qantas' low cost carrier) for drip pricing and in proceedings in respect of the international freight cartel.
  • Advising St Vincent's Hospital Australia and the Catholic Negotiating Alliance (largest alliance of not-for-profit health providers) on ACCC approvals for collective dealing with health insurers and a range of suppliers.
  • Advising Arrium on its sale of its OneSteel Sheet and Coil business to BlueScope.
  • Advising Prysmian in relation to ACCC proceedings alleging an electrical cable cartel and with respect to day-to-day competition issues.

Professional associations/memberships. Member, Law Council of Australia, Business Law section; Member, American Bar Association, Section of Antitrust Law.

Johanna Croser, Senior Associate

Johnson Winter & Slattery

T +61 2 8274 9606
E johanna.croser@jws.com.au
W www.jws.com.au

Professional qualifications. Australia, LLB 2009, PhD Economics 2010

Areas of practice. Investigations and court proceedings in relation to competition law, including anti-competitive agreement cases, cartel prosecutions and restraint of trade cases; large scale commercial transactions and alliances requiring competition authority approvals in Australia and globally. 

Recent transactions

  • Advising energy industry participants in relation to the ACCC's East Coast Gas Markets Inquiry.

  • Advising Qantas on a range of competition issues, including obtaining anti-trust clearance across a number of jurisdictions in relation to the Jetstar Pan-Asia Strategy and the alliance with Emirates and advising on the ACCC prosecution of Jetstar (Qantas' low cost carrier) for drip pricing.

  • Advising Prysmian in relation to ACCC proceedings alleging an electrical cable cartel, and with respect to day-to-day competition issues.

  • Advising Australia's preeminent jockey clubs from trial to successful dismissal of leave to appeal to the High Court for anti-competitive conduct.

  • Advising Ramsay Health Care and ResMed on acquisitions and competition issues.


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