This article on ‘ANTITRUST AND COMPETITION LAWS IN AUSTRALIA’ is written by an intern at Legal Upanishad.
Introduction:
There are many companies in the market, consumers have a variety of choices, anyone could start their own company and many other positive sides to this but have you thought about the situations where one company is so powerful that it doesn’t allow new competitors to appear or when two company make an agreement, collude or merge making it impossible for others to run their business and many more? This is exactly why antitrust and competition laws are created which ensures there exists fair and just marketplaces for producers and consumers by destroying unethical practices.
Each country has its own competition laws which differ from each other to protect consumers and regulate companies. For Example, The Competition Act 2002 in India and The Clayton Antitrust Act in America. This article talks about the antitrust and competition laws in Australia.
What are Antitrust and Competition laws?
These laws are created to maintain market competition which leads to minimal market distortions, and anti-competitive behaviour by the companies so that they don’t gain much power when compared to others. Basically, these laws abolish monopolies and stop people from doing business by playing dirty to make a profit.
Antitrust and Competition Laws in Australia:
The statute that deals with Competition Laws in Australia is the Federal Competition Consumer Act (CCA) 2010. Part IV of this act prohibits anti-competitive agreements and promotes competition. Part IV has several divisions or certain rules to regulate anti-competitive behaviour under this act, they are:
- Consists of civil and criminal prohibitions regarding cartel conduct
- Prohibits anti-competitive price signalling and other information that affects the market in a certain way
- Prohibits misuse of resale price maintenance, exclusive dealing, market power, and anti-competitive mergers.
- Prohibits anticompetitive behaviour between any parties irrespective of their market levels or by individual parties.
The Australian Competition and Consumer Commission (ACCC) administers the competition and Consumer Act. If this commission finds there has been any activity that is in contravention of this act, then it provides remedies by admitting the matters before the Federal Court of Australia and seeks justice against the contravener. It does not have a power on its own to impose remedies but has wide powers to regulate, investigate, and prosecute breaches of competition law. For example, it can compel anyone to provide information, evidence, and documents, obtain search warrants and has certain responsibilities related to merger clearances.
The upcoming information is the elements of Competition laws in Australia:
Cartel conduct:
Cartel conduct was criminalised in Australia in July 2009 and there are civil and criminal offences available for it. A cartel provision is nothing but a contract, understanding or arrangement between competitors which consists of provisions which:
- Has the purpose of maintaining, controlling or fixing the price for selling goods or services
- Has the purpose of rigging tenders or bids
- Has the purpose of stopping or restricting outputs in the supply chain
- Has the purpose of assigning customers, territories
Penalties:
- For criminal offences for individuals – the maximum penalty is imprisonment for 10 years or a fine of AUD 340,000. These offences are taken care of Commonwealth Director of Public Prosecutions.
- For civil offences for individuals – the maximum penalty is AUD500000
- For civil offences for a corporation – AUD 10 million or three times the amount which was received from such conduct
- Other penalties like disqualifying someone or injunctions are also available. In this case, there is a defence available for joint venture contracts.
For example, $46 million was imposed on a Japanese company named Yazaki in May 2018, this was a civil case.
Collective Boycotts:
These are also known as exclusionary provisions. These provisions are strictly prohibited by Consumer and Competition Act. This provision talks about an agreement limiting the supply or acquisition of services or goods to a particular group or person. If at least two parties are competitive relating to the goods or services is sufficient and it is not essential for a person dealing with the boycott to be one of the competitors. Here also, there is a defence for venture contracts.
The CCA also prohibits any two people from preventing a third person from trading or doing any business with the fourth person which leads to the lessening of competition. These are known as secondary boycotts.
Price Signaling:
The CCA includes two provisions regarding this, they are prohibition against the disclosure of information related to pricing between competitors which are not made in the ordinary time of business and disclosure made for lessening the competition. From Jan 2015, these prohibitions apply only to the banking sector.
Anti-competitive arrangements:
The arrangement may be in writing or enforceable at law there is no requirement for it and it is prohibited by CCA. Here, the essential thing is the meeting of minds between the parties.
Resale price maintenance:
In Australia, the suppliers are prohibited from mentioning a minimum resale price for their goods or services and it is considered unlawful. RPM is prohibited under section 48 of CCA and is defined under Part VIII. It is not unlawful for a supplier to mention the maximum resale price as long as it doesn’t affect the price at which the sale must happen by the reseller and it is also permissible to issue a recommended resale price, that has no compulsion to comply.
Third line forcing:
This is an exclusive deal that is prohibited by the CCA. Third-line forcing occurs when a corporation supplies anything with a discount or by giving credit on goods on the condition that the goods acquired by the purchaser are indirectly or directly from a third party. This conduct is not unlawful if notified to the ACCC, which allows this conduct until it benefits the public.
Abuse of dominant position:
The CCA prohibits any company or corporation with superior power in a market from eliminating or destroying a competitor, preventing a person from the competition, market entry etc. Market power is considered as the ability to act free from any obstacles of competition concerning price still, the court to decide the degree of market power shall look into the ability of a corporation to constrain the conduct of competitors or persons from whom the corporation buys or gets goods or services.
Predatory pricing:
A corporation that is considered to be a substantial share of a market should not sell anything for a sustained period for a price less than the actual cost so that they can eliminate a competitor or prevent anyone from entering into the market or engaging in competitive conduct.
Misuse and exclusive dealing:
Section 46(1) of CCA prohibits the corporation with more market power to misuse its market power. Section 47 of CCA prohibits exclusive dealing like a conditional supply of anything or refusing to supply for any particular reasons.
Exceptions:
There are certain exceptions to the prohibitions in Part IV on the above-given elements under CCA, they are:
- When a contact relates to conditions of hours, employment, remuneration or any working conditions of employees
- Restraint of trade clauses related to any employee or independent contractor
- Few concepts of intellectual property license
- Sale or shares which are formed solely for the protection of the buyer with respect to the goodwill of the business
Merger and Acquisitions:
The CCA prohibits any acquisition which affects the competition in any market in Australia. The ACCC might grant informal clearance or oppose a merger so, the ACCC asks merger parties to notify it when the products are substitutes or when the merged firm has more than twenty per cent post-merger market share in Australia in comparison with relevant markets. The ACCC can authorise a merger for the benefit of the public if it is slightly anti-competitive. This test is rarely used.
Authorization and Notification:
Sometimes the corporation might ask the ACCC to authorise the proposed conduct which might breach Part IV of the CCA. The ACCC may grant immunity through notification for the proposed conduct if it doesn’t affect the benefit of the public.
Extraterritorial application:
This Part IV of CCA apply to conduct that is happening outside Australia by an Australian entity or by a company carrying on business in Australia or by a person who is a resident within Australia.
Australian Consumer Law:
The ACL provides provisions for product safety, deceptive or misleading conduct, unsafe or defective goods and consumer guarantee. Under these, some of the competition law characteristics are involved.
Competition Policy Reform Act 1995:
This act is formed to enhance the welfare of Australians through fair trading, provision for protecting consumers and promoting competition.
Penalties:
- Fine for contravention for individuals – $500,000
- Fine for contravention for companies – $10 million or three times the profit gained from the contravention or 10% of the company’s annual turnover.
- Criminal offences – 10 years jail sentence
- The court may order to make void the whole transaction or to pay compensation. Anyone who suffered damages can take legal action.
Amendments:
Australia has bought few amendments or changes to its antitrust laws which provides much power to an antitrust enforcement agency. Some of them are:
- Any firm must review any practice which will include sharing information with competitors
- Application made for the merger which is permitted for public benefit should be first made to the ACCC not to ACT
- The ACCC now can look after the case where market power is misused.
Conclusion:
During the covid-19, the ACCC very well balanced the situation and managed to maintain the competitors with comfort without any increase in anti-competitive situations. Therefore, the Australian Antitrust and Competition laws enhance the welfare of Australian customers by increasing and promoting competition. This CCA act prohibits every anticompetitive conduct within any level of the market and is providing sufficient penalties.
References:
- Georgina Foster, Rowan McMonnies and Irena Apostopoulos, Antitrust and Competition Laws in Australia Retrieved: https://www.globalcompliancenews.com/antitrust-and-competition/antitrust-and-competiton-laws-in-australia/
- Antitrust, competition and trade practices regulation Retrieved: https://www.claytonutz.com/about/international-services/doing-business-inaustralia/antitrust-competition-and-trade-practices-regulation
- Australian Competition Law Retrieved: https://www.australiancompetition.org/overview.html
- Competition Law In Australia: An Introduction Retrieved: https://www.grondalbruining.com.au/blog/competition-law-in-australia-an-introduction/