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What Do Changes to the Competition & Consumer Act Mean To You?

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By Raynia Theodore, Principal, MST Lawyers and Megan Teh,Lawyer, MST Lawyers

In October 2017, Parliament passed the Competition and Consumer Amendment (Competition Policy Review) Bill 2017, introducing many significant changes to the Competition & Consumer Act 2010 (CCA).  The changes relating to the misuse of market power were contained in a separate bill, the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017, which was passed by Parliament in August 2017.

The new laws came into effect on 6 November 2017.

This article summarises the key features of the changes and how they may affect businesses in Australia.

  1. Introducing a new prohibition on “concerted practices.”

A concerted practice that has the purpose, effect or likely effect of substantially lessening competition is prohibited across all industry sectors. The term ‘concerted practice’ is drafted broadly to capture a wide range of conduct, including a one-way or indirect exchange of communication, one-off interaction and anything that falls short of an agreement.

It is important to remember that although the term ‘concerted practice’ is drafted broadly to capture a wide range of conduct, the prohibition only applies where the concerted practice has the purpose, effect or likely effect of substantially lessening competition.

As part of this reform, the price signalling provisions that applied only to the banking sector have been repealed.

What this means for you

  • You need to be wary of your interactions with any of your competitors to make sure that you do not share information that could facilitate conduct by your competitors that may have the effect of substantially lessening competition.
  • You need to ensure that you have confidentiality arrangements in place to ensure that any third parties (including a peak body association) who may have access to your commercially sensitive information will handle your information in a way that will not expose you to the risk of the contravention of this new provision. You must also ensure that if you are exposed, that there is an indemnity clause in the confidentiality documents that you can rely upon to protect your interests.
  • You can still publicly disclose your prices to consumers as this conduct will increase rather than substantially lessen competition.
  1. Broadening the definition of “misuse of market power.”

The prohibition has been broadened so that it extends to conduct that has the purpose, effect or likely effect of substantially lessening competition in a market where there is actual or likely supply or acquisition of goods or services.

The “taking advantage” test has also been removed which means there is no need for any causal link between the conduct and the corporation’s market power. The corporation does not need to take advantage of its substantial market power. If the conduct has the effect or likely effect of substantially lessening competition, it will breach the new provision even if this was not the purpose of the conduct and even if the conduct did not take advantage of the substantial market power.

What this means for you

  • If you have a substantial market power, you need to assess the effect or likely effect of your conduct on competition, especially when you reduce prices to below cost, refuse to supply to a competitor or introduce loyalty discounts.
  • Under the new law, you can now seek authorisation from ACCC for conduct which may amount to ‘misuse of market power’. However, you need to be careful in utilising this exemption as you may be seen to be making an admission that you have market power and such an admission may put you under the spotlight.
  1. Changing the prohibition on third line forcing from “prohibition regardless of effect or purpose” to prohibition only where it has the purpose or effect of substantially lessening competition.

A person is prohibited from engaging in the practice of third line forcing, which is a form of exclusive dealing, involving:

  • the supply of goods or services; or
  • the giving of a particular price or discount on the condition that the purchaser also acquires goods or services from another unrelated person; or
  • a refusal to supply because the purchaser will not agree to such a condition.

Instead of a blanket prohibition on third line forcing, now third line forcing will only be prohibited if it has the purpose, effect or likely effect of substantially lessening competition.

The amendment aims to bring Australia’s regulation of third line forcing in line with overseas jurisdictions (e.g. the US, the EU, Canada and NZ), who assess such conduct against a similar competition test.

What this means for you

  • You will no longer need to notify the ACCC of third line forcing, but will instead need to consider the potential impact on competition.
  • For some businesses, this may require augmenting systems that self-identify anti-competitive practices, rather than outsourcing this role to the ACCC via notifications.
  1. Allowing resale price maintenance to be notified to the ACC as an alternative to authorisation.

A person is prohibited from engaging in resale price maintenance (RPM), which involves the supply of goods on the condition that the goods not to be sold below a price specified by the supplier. It is acceptable, however, to set a maximum price or to recommend a price.

The change to the CCA allows businesses to notify the ACCC of RPM conduct as an alternative to seeking authorisation from the ACCC. RPM conduct that has been notified to the ACCC will be immune from prosecution unless the ACCC overturns the notification within a period of 60 days after the notice is given to the ACCC.

One of the reasons behind the amendment and the relaxation of the requirements around RPM conduct is that, in some cases, RPM conduct can be pro-competitive.  The introduction of a notification process for RPM conduct may have the effect of increasing competition in some areas (e.g. where it creates an incentive for retailers to invest in training their staff on the use of a complex product).

What this means for you

  • Notification is an easier and quicker process than authorisation (despite a delay of 60 days from notification). But, remember that the ACCC does retain the ability to withdraw an exemption for any RPM conduct, where it considers that the anti-competitive harm outweighs the public benefit.
  1. Changing the scope of joint venture exception to the cartel conduct and narrowing the geographical reach of the cartel provisions.

A cartel provision is a provision relating to:

  1. price‑fixing;
  2. restricting outputs in the production and supply chain;
  3. allocating customers, suppliers or territories; or
  4. bid‑rigging

by parties that are or would otherwise be, in competition with each other.

The new provision now confines the application of the cartel provision to cartel conduct affecting competition in Australia or between Australia and other places.

In addition, the new provision also changes the scope of the joint venture exception. The joint venture exception is now broadened to include:

  • joint ventures in arrangements or understandings (not just contracts); and
  • joint ventures for the acquisition of goods and services (not just production or supply).

However, additional requirements have been imposed on the joint venture exception, specifically:

  • the cartel provision is for the purpose of, and reasonably necessary for, undertaking the joint venture; and
  • the joint venture is not carried on for the purpose of substantially lessening competition.

What this means for you

  • Due to the additional requirements to qualify for the joint venture exception, you will now need to ensure that the joint venture is not carried on for the purpose of substantially lessening competition and that any cartel provisions are for the purposes of, and reasonably necessary for, undertaking the joint venture.

Next steps

With the new changes emerging, it is imperative that you have a clear understanding of how the changes to the law will affect your business operations.  A review of your business operations is a must to ensure that you do not fall foul the new laws or, on a more positive note, to determine whether you can make use of the new laws and engage in conduct which was previously prohibited.

Feel free to contact our Corporate and Commercial or Franchising Team by email or call +61 3 8540 0200 if you would like to speak with our lawyers directly.