The Government has published an Exposure Draft of the Competition and Consumer Amendment (Competition Policy Review) Bill 2016 for consultation. The Bill will implement some of the Harper Review’s recommendations relating to competition law, with further competition law simplification expected in the future. Background.
UPDATE: The Competition and Consumer Amendment (Competition Policy Review) Bill 2017 received Royal Assent on 27 October 2017.
The Exposure Draft includes amendments to the misuse of market power provision, as well as other amendments which:
- repeal separate, specific prohibitions on price signalling and exclusionary provisions, and replace them with a prohibition against “concerted practices”;
- confine the cartel conduct provisions to Australian trade or commerce, and broaden the exceptions for joint ventures;
- consolidate the various merger authorisation processes into a single, streamlined process; and
- change the conditions for third line forcing.
Separately the ACCC has released a framework for guidance on how it proposes to approach two important proposals in the exposure draft Bill, the misuse of market power and the creation of a prohibition against concerted practices that substantially lessen competition.
If the Bill is enacted, the ACCC will publish guidelines that will be based on these frameworks to explain its approach to possible breaches of these prohibitions. Ultimately it will be a matter for the court to determine if particular conduct has breached the relevant prohibitions.
Concerted practices replaces price signalling
The Bill repeals the price signalling provisions and extends section 45 to prohibit a person from engaging in a concerted practice with one or more other persons that has the purpose, effect or likely effect of substantially lessening competition.
The current price signalling provisions are confined in their application to a single industry (banking) and since the introduction of the provisions in June 2012, no cases have been brought for contravention of the prohibitions.
The amendment to introduce the concept of a ‘concerted practice’ is made to recognise that lesser forms of coordination than what has been judicially interpreted as required for a contract, arrangement or understanding, should be captured by section 45, provided the practice has the purpose, effect or likely effect of substantially lessening competition.
Third line forcing
The Bill amends the Act to only prohibit third line forcing where it has the purpose, effect or likely effect of substantially lessening competition.
It replaces the current rules that third line forcing may be exempted by filing a notification with the ACCC.
Under the amendment a business can engage in third line forcing without the need for notification to the ACCC unless it substantially lessens competition.
Misuse of market power
The draft Bill amends section 46 to prohibit a corporation with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in a market.
A person may seek exemption from section 46 via the ACCC authorisation process.
The ACCC’s draft framework for misuse of market power gives examples of conduct that it considers likely to breach the proposed section 46:
- refusal to supply an essential input;
- land banking;
- predatory pricing;
- bundling a competitive product with a monopoly product.
Examples of conduct that would not breach section 46 include:
- research and development;
- standardised or national pricing by large retail chains;
- a price war; and
- investing in new production technology to increase efficiency.
