Bills Digest no. 1 2008–09
Trade Practices Legislation Amendment Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Trade
Practices Legislation Amendment Bill 2008
Date introduced: 26
June 2008
House: House
of Representatives
Portfolio: Treasury
Commencement: On
the day after the day of Royal Assent.
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
The primary purpose of the Bill is to amend the Trade
Practices Act 1974 (TPA) to clarify the meaning of the term ‘take
advantage’ and address problems in relation to ‘predatory pricing’ in
the context of the prohibition on misuse of market power in section 46.
In addition the Bill will extend the jurisdiction for section 46 cases
to the Federal Magistrates Court.
The provisions of Part IV of the TPA,
which includes section 46, prohibit various trade practices that tend
to prevent or lessen competition in an Australian market for goods and
services. These provisions are at the heart of the TPA. Since 1974, they
have been instrumental in shaping the Australian economy. They lay down
rules which, as interpreted by the courts from time to time, restrain
anti-competitive behaviour and promote competition in the market place.[1]
The original form of section 46 of the TPA reflected provisions of the
Sherman Act 1890 in the United States[2]
and the Australian Industries Preservation Act 1906[3]. It was directed at a corporation
operating independently using its market power against a competitor.[4]
Since that time section 46 has been the subject a number of formal inquiries
and resultant amendments. Today, subsection 46(1) provides that a corporation
that has a ‘substantial degree of power’ ‘in a market’ shall
not ‘take advantage’ of that power in that, or any other, market
for the following ‘proscribed’ purposes:
- eliminating or substantially damaging a competitor of the corporation
or of a body corporate that is related to the corporation in that or
any other market
- preventing the entry of a person into that or any other market or
- deterring, or preventing, a person from engaging in competitive conduct
in that or any other market.
Despite the amendments to section 46 over the years, there
remain concerns that the section does not achieve its purpose of prohibiting
the misuse of market power.
The Review of Competition Provisions of the Trade Practices
Act (known as the Dawson report)
was released in April 2003. Its terms of reference were broadly cast
as there had not been a comprehensive review of the competition provisions
in Part IV of the TPA since the Independent Committee of Inquiry
into National Competition Policy in Australia reported in 1993. After
the Dawson Committee had completed its consultations, but before the report
was actually completed, a number of decisions about section 46 of the
TPA were handed down by the Full Court of the Federal Court and the High
Court. Of these, Boral Besser Masonry Ltd v ACCC[5]
(the Boral case) in particular, raised a number of issues. The
Dawson Committee did not make any recommendations for change to section
46 at that time.[6]
The following year the Senate Economics References Committee
(the 2004 Senate Committee) conducted a review entitled ‘The
effectiveness of the Trade Practices Act 1974 in protecting small business’
which detailed a number of concerns about the effectiveness of section
46 at that time, specifically:
- whether the TPA gives sufficient guidance as to what constitutes
‘substantial power in a market’
- whether the TPA provides sufficient guidance as to what constitutes
‘taking advantage of’ market power
- whether the TPA provides sufficient protection against ‘predatory
pricing’
- whether a ‘financial power’ test should be introduced
- whether the TPA should proscribe the misuse of market power in a
second market
- whether the TPA provides sufficient protection against the use of
co-ordinated market power and
- whether an ‘effects test’ should be included as an addition to, or
substitute for, the current ‘purpose test’.
These have been the recurring themes in calls for an update
to section 46. However, only ‘taking advantage’ of market power and protection
against ‘predatory pricing’ are relevant to the current Bill.
There have been a number of cases in which the courts have
commented on the meaning of ‘taking advantage’ in the context of section
46 of the TPA. In 2003, two cases were heard which considered this issue.
The first was ACCC
v Safeway Stores[7]
in which the Federal Court decided that the business rationale of
the conduct is important to the question of whether the corporation has
taken advantage of its market power.
However, Rural Press
Ltd v ACCC,[8]
(the Rural Press case) was determined by the High Court. It defined
‘take advantage’ very narrowly, suggesting that one test of whether a
company had taken advantage of its market power was whether it could
have acted in that way in the absence of the market power.
This ‘could’ test is about physical or business capacity,
rather than rationale or intent. It appears to result in a situation
where corporations may use their market power to engage in proscribed
conduct with impunity, as long as they could also undertake that conduct
in the absence of such power.
The 2004 Senate Committee recommended that the TPA be amended to include
a provision which clearly outlined the elements of ‘take advantage’ for
the purposes of subsection 46(1).[9]
However, the Howard Government did not accept the recommendation on the
grounds that it did not accept that the interpretation of ‘take advantage’
required any statutory clarification. The Howard Government relied on
the interpretation of the High Court in Queensland Wire Industries
Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 77 that ‘take
advantage’ merely means ‘use’.[10]
As a result the question of what it means for a corporation that has
a substantial degree of power in a market to ‘take advantage’
of that power (as required by section 46 of the TPA) is still unresolved.
Predatory pricing occurs where:
- a corporation prices a product below some measure of cost and
- it does so with the intention of driving a competitor out of the
market and
- the corporation raises the price again in an attempt to recoup the
losses they incurred as a result of their below cost conduct. This
is referred to as ‘recoupment’.
In effect, ‘predatory pricing’ is an exclusionary tactic because the
corporation is seeking, in its pricing, to exclude competitors from the
market for the product. This can be done in one of two ways:
- for an existing competitor, the corporation excludes them from the
market for the product because the competitor cannot match the below
cost price that has been set
- for a new competitor, the corporation sets the price so low that
it deters anyone else from entering the market.
The difficulty with ‘predatory pricing’ is that in some
instances, it looks like legitimate competitive behaviour, because the
existence of price wars is often an indicator of competition. This happened
in the Boral case.
Boral Besser Masonry Limited (Boral) manufactured concrete masonry products
such as concrete blocks, bricks and pavers. Boral, Pioneer, C&M,
Rocla and Budget all supplied these products into the Melbourne market.
In the 1990’s a price war broke out between the manufacturers of these
masonry products for the supply of the products into Melbourne.
The price war that took place between 1993 and 1996 primarily involved
Boral and Pioneer who were competing with each other to supply concrete
products to block layers working on major construction sites in Melbourne.
The price war took place during a time when the Victorian economy was
in recession which had an adverse effect upon the commercial building
industry and the level of demand for concrete masonry products. Boral
and Pioneer cut the prices charged for concrete masonry products significantly
and on many occasions during the price war, Boral’s prices were lower
than their variable costs. In 1996, Boral also expanded its production
capacity for concrete masonry products.
In 1995, Rocla closed down all its Victorian masonry operations. In June
1996, Budget stopped manufacturing concrete masonry products.
The Australian Competition and Consumer Commission (ACCC)
alleged that between 1994 and 1996 Boral engaged in conduct that contravened
section 46 of the TPA. In particular the ACCC alleged that Boral reduced
the prices at which it offered to supply concrete masonry products in
Melbourne to levels at, or below, the cost of manufacture and supply of
the products and that it increased the production capacity of concrete
masonry products. The ACCC alleged that the conduct of Boral was designed
to eliminate or substantially damage C & M and other competitors including
Rocla and Budget.
The majority of the High Court (with Justice Kirby in dissent)
decided Boral had not breached section 46 of the TPA.
Section 46 does not contain the words ‘predatory pricing’.
In the Boral case, the High Court considered, amongst other things,
whether ‘recoupment’ was needed to establish predatory pricing in the
context of section 46 of the TPA. It concluded that:
- recoupment is a useful tool for analysis in cases where pricing behaviour
is alleged to contravene section 46 and
- evidence that there was no prospect of recoupment would point away
from predatory pricing.
The 2004 Senate Committee recommended that the TPA be amended as follows:
- to provide that in determining whether a corporation has breached
section 46, the courts may have regard to the capacity of the corporation
to sell a good or service below its variable cost and
- where the form of proscribed behaviour alleged under section 46(1)
is predatory pricing, it is not necessary to demonstrate a capacity
to subsequently recoup the losses experienced as a result of that predatory
pricing strategy.[11]
The Howard Government accepted this recommendation[12] and the TPA was amended by the
Trade Practices Legislation Amendment Act (No. 1) 2007.
The breadth of submissions to, and the nature of the recommendations
by the 2004 Senate Committee, reflected a level of frustration experienced
by both business and the ACCC with the manner in which section 46 had
been interpreted by the courts. As a consequence of those interpretations,
the ACCC had not been able to successfully prosecute a number of corporations
which it considered had engaged in a misuse of market power.[13]
The Trade Practices Legislation Amendment Bill (No. 1) 2007 was introduced
into the Senate on 20 June 2007. The following day, the Senate Selection
of Bills Committee referred the provisions of the Bill to the Standing
Committee on Economics (the 2007 Senate Committee) for enquiry. The 2007
Senate Committee reported
on 1 August 2007.[14]
The Trade Practices Legislation Amendment Act (No. 1) 2007 inserted
new subsections 46(1AA) and (1AB) as follows:
(1AA) A corporation that has a substantial share of a market
must not supply, or offer to supply, goods or services for a sustained
period at a price that is less than the relevant cost to
the corporation of supplying such goods or services, for the purpose
of:
(a) eliminating or substantially damaging a competitor of the corporation
or of a body corporate that is related to the corporation in that or
any other market; or
(b) preventing the entry of a person into that or any other market;
or
(c) deterring or preventing a person from engaging in competitive
conduct in that or any other market.
(1AB) For the purposes of subsection (1AA), without limiting the matters
to which the Court may have regard for the purpose of determining whether
a corporation has a substantial share of a market, the Court may have
regard to the number and size of the competitors of the corporation
in the market.
These two subsections became known as the ‘Birdsville amendment’.[15]
The subsections were significantly different from subsection 46(1) which
provides that a corporation that has a ‘substantial degree of power’
‘in a market’ shall not ‘take advantage’ of that power.
Subsection 46(4A) was also inserted into the TPA by the Trade Practices
Legislation Amendment Bill (No. 1) 2007. The Bills
Digest provides useful background and information about that subsection
stating that subsection 46(4A) deals with whether a company has taken
advantage of its market power for one or more of the prohibited purposes
in section 46(1). Under subsection 46(4A), the Court may to have regard
in making that decision to:
- the conduct of the corporation in selling goods or services for a
sustained period at a price that is below cost. and
- the corporation’s reasons for such below-cost selling.[16]
Both of those amendments are relevant to the current Bill.
It has been argued that the ‘Birdsville amendment’
introduced considerable uncertainty into the law by introducing the concepts
of ‘substantial market share’ ‘sustained period’
and ‘relevant cost’ - terms which had not been determined
by the courts.[17]
This uncertainty had the potential to discourage discounting for fear
of being caught by the provision.[18]
In addition, the predatory pricing prohibition introduced by the ‘Birdsville
amendment’ was thought to apply more broadly than other parts of section
46 because it applied to firms with a substantial share of the market
rather than firms with substantial market power.[19]
Finally Duke opines that the ‘Birdsville amendment’ rendered the newly-introduced
subsection 46(4A) redundant. A party seeking to challenge predatory pricing
would be foolish to attempt to prove that the alleged predator has taken
advantage of its market power when they could avoid the difficulties associated
with establishing ‘market power’ and ‘taking advantage’ of that power
by bringing their claim under the provisions introduced by the ‘Birdsville
amendment’.[20]
Further criticism of the ‘Birdsville amendment’ was made by the Law
Council of Australia which stated:
The fundamental difficulty with the Birdsville Amendments
is that they prohibit price discounting below cost for a substantial
period when undertaken for a proscribed purpose. However, as almost
all price discounting is undertaken to secure more custom for the discounter,
it follows that it must also be undertaken for the purpose of taking
custom away from the discounter’s competitors, thereby exposing the
discounter to having a proscribed purpose of damaging those competitors,
preventing their market entry or deterring or preventing them from engaging
in competitive conduct. The practical consequence of the Birdsville
Amendments … would be to deter any corporation with a substantial market
share from discounting to low prices, for fear of prosecution by the
Australian Competition and Consumer Commission or attack by competitors.[21]
The Motor Trades Association of Australia welcomed the introduction of
this Bill on the grounds that the proposed clarification of aspects of
section 46 will assist small business operators in seeking redress against
predatory behaviour.[22]
The Australian Retailers Association supported the Bill stating that:
The proposed amendments distinguish predatory pricing
from legitimate competitive discounting, which was previously unclear.
This allows retailers to get on with business and provide benefits to
consumers without being concerned they are breaching the TPA under recent
amendments.[23]
The Council of Small Business in Australia[24] has given similar support to the proposed amendments
in this Bill.
The ACCC has also responded positively stating that:
The reforms announced recently by the government to
section 46 … continue the process of providing the regulator with the
tools it needs to vigorously protect competition, while not falling
into the trap of protecting competitors from the impact of that competition.[25]
And further:
… moves by the Federal Government to clarify predatory
pricing provisions of the law should be welcomed by all consumers who
enjoy the benefits if competition – lower prices and better products…
The Government is now proposing to streamline the
predatory pricing provisions of the act, consistent with the broader
misuse of market power provisions … this is a sensible strategy.[26]
Institute of Public Affairs
In contrast, Alan Moran, of the Institute of Public Affairs acknowledged
that it is not uncommon for businesses large and small to involve themselves
in price cutting in general, or to selected valued customers. He stated
that:
… the amendments will provide further opportunities
for the ACCC to flex its muscles and doubtless allow it to bid for a
larger budget. Small businesses now have a permanent voice within the
ACCC that can be recruited against a competitor offering lower prices
and can make a determination without any tests of its merits of practicality.
… giving the ACCC more powers to pursue companies
that are pricing goods and services too attractively for the consumer
will put a brake on competition.[27]
The Opposition small business spokesman, Steven
Ciobo was reported as saying that the Coalition supported the amendments
in principle but they would make little difference. The Government needed
to improve industrial relations and boost small business confidence.[28]
However, Shadow Minister for Finance, Competition Policy and Deregulation,
the Hon Peter Dutton MP stated that the Government needed to show that
the proposed changes to section 46 will increase competition, thereby
benefiting businesses and consumers.[29]
The comments by Shadow Attorney General, the Hon. George Brandis are
discussed under the heading ‘concluding comments’ at the end of this digest.
On 26 June 2008, the Senate referred the Trade Practices Legislation
Amendment Bill 2008 to the Senate
Standing Committee on Economics for report by 27 August 2008.
According to the Explanatory Memorandum, the measures outlined in the
Bill will have no significant financial impact. Furthermore, there is
no ongoing compliance cost impact and a minimal transitional impact.[30]
The Bill contains three schedules
of amendments.
Item 1 proposes to amend existing subsection 46(1AA) so that it
will read:
(1AA) A corporation that has a substantial degree of power in a
market must not take advantage of that power in that or any other market
by supplying, or offering to supply goods or services for a sustained
period at a price that is less than the relevant cost to
the corporation of supplying such goods or services, for the purpose
of:
(a) eliminating or substantially damaging a competitor of the corporation
or of a body corporate that is related to the corporation in that or
any other market; or
(b) preventing the entry of a person into that or any other market;
or
(c) deterring or preventing a person from engaging in competitive
conduct in that or any other market.
The term ‘substantial market share’ has been replaced by
‘substantial degree of power in a market’. This is the
same as term as is already used in section 46 of the TPA. The terms ‘sustained
period’ and ‘relevant cost’ remain and courts will
be required to take these factors into account when considering whether
a corporation has engaged in predatory pricing.
Item 2 repeals the existing subsection 46(1AB) which contains
a list of factors to which the court may regard in deciding whether a
corporation has a substantial share of the market under subsection 46(1AA).
With the changes to subsection 46(1AA) which are contained in item
1, existing subsection 46(1AB) becomes redundant.
Item 2 inserts proposed subsections 46(1AB) and (1AC) which
make clear what part ‘recoupment’ plays in determining whether predatory
pricing has occurred. Under the proposed subsections it is not necessary
to prove that a corporation has an ability to recoup losses incurred from
predatory pricing in order to establish a breach of subsection 46(1AA).
The amendment takes into account the comments of the High Court in the
Boral case that matters relating to ‘recoupment’ of costs were
useful but not essential for analysis in cases where pricing behaviour
is alleged to contravene section 46.[31]
Item 4 repeals existing subsection 46(4A) which currently deals
with the question of what constitutes ‘taking advantage’ of market power.
Item 5 inserts proposed subsection 46(6A)
which sets out those matters to which a Court may have regard in
determining whether a corporation, by ‘engaging in conduct’[32] has ‘taken advantage’ of its
substantial degree of power in a market. Those matters include, but are
not limited to:
- whether the conduct was materially facilitated by the corporation’s
substantial degree of power in the market
- whether the corporation engaged in the conduct in reliance on its
substantial degree of power in the market
- whether it is likely that the corporation would have engaged in the
conduct if it did not have a substantial degree of power in the market
- whether the conduct is otherwise related to the corporation’s substantial
degree of power in the market.
The amendment is introduced in response to the decision of the High Court
in the Rural Press case which interpreted the meaning of ‘take
advantage’ very narrowly. The matters listed in proposed subsection
46(6A) are intended to ensure that the term ‘take advantage’ can be
interpreted more broadly.
Existing subsection 86(1) confers jurisdiction on the Federal Court in
respect of any civil proceeding arising under the TPA. Existing subsection
86(1A) confers an additional jurisdiction on the Federal Magistrates Court
(FMC) under certain limited parts of the TPA where the relevant civil
proceeding is instituted by a person other than the Minister or the ACCC.
Item 7 amends existing subsection 86(1A) to include section 46
matters in the additional jurisdiction of the FMC. Item 3, which
omits the word ‘Court’ and inserts the word ‘court’ in existing subsections
46(3), (3A) and (3C) reflects the increased jurisdiction of the FMC.
During the Senate Inquiry, submissions expressed concerns about the costs
and delays associated with bringing section 46 matters, particularly for
smaller businesses. If the costs associated with enforcing section 46
are prohibitively high, then it will not be effective in addressing anticompetitive
conduct no matter how well it is otherwise suited to doing so.[33] The Bill addresses those concerns
by conferring jurisdiction for section 46 matters on the FMC for civil
proceedings instituted by a person other than the Minister or the ACCC.
It should be noted that section 86AA of the TPA provides that for proceedings
instituted in the Federal Magistrates Court, the amount that can be awarded
for loss or damage is capped at $750,000. In addition, the Federal Magistrates
Court is permitted to transfer proceedings to the Federal Court where
appropriate under Part 5 of the Federal Magistrates Act 1999.
Schedule 2 makes amendments to the version of section 46 found in the
Competition Code as set out in the Schedule of the TPA.
The Schedule originates from the agreement by the governments of Australia
entered into on 11 April 1995 – the Competition Code Agreement
– under which the States and Territories of Australia agreed to submit,
to their respective legislatures, legislation to implement the version
of Part IV of the TPA contained in the Schedule.[34]
The intention was to extend the operation of the restrictive trade practices
provisions of the TPA to all sectors of the community through the enactment
of complementary State and Territory legislation.[35]
To this end, section 150C of the TPA provides that the Competition Code
consists of, amongst other things, a schedule version of Part IV of the
TPA.
The amendments in Schedule 2 of the Bill are in exactly the same terms
as the amendments in Schedule 1 of the Bill. This is so that the schedule
version of Part IV in the Competition Code is in exactly the same terms
as Part IV of the TPA.
Schedule 3 contains amendments to both the Australian Securities and
Investments Commission Act 2001 (the ASIC Act) and the TPA.
Items 1-4 of Schedule 3 amend various sections in Part 2 of Division
2 of the ASIC Act. That Part is about unconscionable conduct and consumer
protection in relation to financial services. Each of the amendments
omits a reference to ‘the Court’ and substitutes a reference to ‘the court’.
The effect of the amendments is to recognise that courts other than
the Federal Court have jurisdiction in relation to matters arising under
those sections. Items 8-11 relate to those parts of the TPA which
are about unconscionable conduct. As with items 1-4, they omit references
to ‘the Court’ and substitute references to ‘the court’. These amendments
are consequential to an amendment in 2006[36]
when the jurisdiction of the FMC was expanded to include unconscionable
conduct matters. That amendment was in accordance with recommendation
17 of the 2004 Senate Committee.[37]
Item 5 repeals existing subsections 12CC(8), (9) and (10) of the
ASIC Act which provide that the prohibition on unconscionable conduct
in relation to financial services does not apply in relation to a supply
or acquisition of goods or services at a price in excess of $10 million.
The effect of the amendment is that the prohibition against unconscionable
conduct will apply regardless of the price paid.
Similarly, item 12 repeals existing subsections 51AC(9), (10)
and (11) of the TPA so that the prohibition against unconscionable conduct
applies to all transactions – not just those under $10 million.
The 2004 Senate Committee noted that section
12CC of the ASIC Act and 51AC of the TPA currently did not, at that time,
apply where the complainant is a publicly listed company or where the
services involved are priced at more than $3 million. Recommendation
7 in the 2004 Senate Committee report was that the $3 million threshold
be removed.[38]
This was rejected by Government Senators
who were not persuaded of the need to lift the ceilings altogether so
as to extend the protections in the section to all firms, irrespective
of size. They did, however, consider that the statutory ceiling was too
low and recommended the threshold be lifted to $10 million.[39] Accordingly, the threshold
amount was lifted to $10 million in the Trade Practices Legislation
Amendment Act (No. 1) 2007.
Items 5 and 12 of this Bill give final effect to the majority
recommendation of the 2004 Senate Committee.[40]
Item 7 inserts proposed subsection 10(1B) into the TPA.
This provides that the Minister must be satisfied that at least one Deputy
Chairperson of the Australian Competition and Consumer Commission (ACCC)
has a knowledge of or experience in, small business matters.
The Trade Practices Legislation Act 2007 amended the TPA to create
a second Deputy Chairperson for the ACCC. The then Treasurer, the Hon.
Peter Costello said:
The government intends for the position to be filled
by a candidate who is experienced in small business matters. On implementation,
the government will consult with the states and territories on its preferred
candidate for the position, in accordance with the requirements of the
Conduct Code Agreement.[41]
However, despite this statement, there was no legislative provision to
that effect. This Bill gives effect to that intention.
Subsection 155(1) of the TPA provides the ACCC with powers, under certain
circumstances, to obtain information relevant to its decisions under the
Act, by issuing a notice requiring a person:
(a) to furnish to the Commission … within the time and in the manner
specified in the notice, any such information
(b) to produce to the Commission … in accordance with the notice,
any such documents; or
(c) to appear before the Commission at a time and place specified
in the notice to give any such evidence, either orally or in writing,
and produce any such documents.
These powers are similar in nature to powers available to the Australian
Securities and Investments Commission, the Australian Prudential Regulation
Authority, the Australian Customs Service, and the Australian Taxation
Office under their various Acts.
Currently, the courts have established that the ACCC’s powers under section
155 cease once legal proceedings have commenced. This view is based on
the notion that executive government agencies should not interfere in
judicial proceedings, once such proceedings are underway.[42]
The ACCC argued to the 2004 Senate Committee that this interpretation
of section 155 deters it from seeking interim injunctions against companies
undertaking anti-competitive behaviour, because once those injunction
proceedings have commenced, its powers under section 155 cease.[43] The ACCC put its position as
follows:
At the moment, we have a trade-off between either
getting an interim injunction and therefore losing the ability to use
our section 155 powers thereafter, or not getting an interim injunction
until the point where we have more or less, if you like, got our case
together and finished using our 155 powers. But that can be a reasonable
way down the track and the conduct continues in the meantime.[44]
The 2004 Senate Committee considered that it was appropriate to amend
the [TPA] to enable the ACCC to seek, from the court in which injunctive
proceedings are brought, an order to enable the continued operation of
its powers under section 155 and recommendation 15 is in those terms.[45] However, the former Government
did not accept the recommendation on the grounds that the court already
had very extensive powers to compel exchange of information in preparation
for trial. The former Government did not accept that those powers were
inadequate.[46]
Item 14 inserts proposed subsection 155(4) into the TPA
which is a response to that recommendation. It provides that the ACCC
can continue to exercise its powers under subsection 155(1) until:
- the ACCC commences proceedings (other than injunctive proceedings)
in relation to the matter or
- the close of pleadings in relation to an application by the ACCC
for a final injunction in the matter.
The real question in respect of the amendments in this Bill is: ‘will
they work when all previous attempts to prohibit ‘predatory pricing’ and
define what it means to ‘take advantage’ of market power, have not?
According to Professor Frank Zumbo, Justice Kirby’s powerful insights
as to the impact of the present High Court’s decisions on section 46 provide
strong evidence of the need to amend the section to restore its parliamentary
intention:[47]
This is the third recent decision of this Court (Melway
and Boral Besser Masonry Ltd v Australian Competition and Consumer
Commission being the other two) in which a majority has adopted
an unduly narrow view of s 46 of the Act. In effect, it has held, in
each case, that the established large degree of market power enjoyed
by the impugned corporation was merely incidental or coincidental to
the anti-competitive consequences found to have occurred. Notwithstanding
the proof of market power, the Court has held that the impugned corporations
did not directly or indirectly ‘take advantage’ of that power to the
disadvantage of competition in the market.
In my view, the approach taken
by the majority is insufficiently attentive to the object of the [Trade
Practices] Act to protect and uphold market competition. It is unduly
protective of the depredations of the corporations concerned. It is
unrealistic, bordering on ethereal, when the corporate conduct is viewed
in its commercial and practical setting. The outcome cripples the effectiveness
of s. 46 of the Act. It undermines this Court's earlier and more
realistic decision in Queensland Wire. The victims are Australian
consumers and the competitors who seek to engage in competitive conduct
in a naive faith in the protection of the Act. Section 46 might just
as well not have been enacted for cases like these where its operation
is sorely needed to achieve the purposes of the Act. Judicial lightning
strikes thrice. A novel doctrine of innocent coincidence prevails.
Effective anti-competitive threats can be made without the redress which
s. 46 appears to promise. Once again I dissent.[48]
It has been argued that there are very real concerns that the present
High Court is failing to do justice to the parliamentary intention behind
section 46 and, as a result, section 46 is now an ineffective deterrent
against abuses of market power by large and powerful corporations.[49] Although the amendments in
the Bill take into account the reasoning of the High Court in each of
the recent section 46 cases, it remains to be seen how they will be interpreted
judicially in future cases.
On a related matter, the Law Council of Australia has been particularly
critical of the plan to have Federal Magistrates decide misuse of market
power cases on the grounds that they will be more, rather than less expensive
to run.[50] This view
is based on the complexity of section 46 cases and the inexperience of
magistrates in dealing with competition cases.
Shadow Attorney General, the Hon. George Brandis supported the comments
by the Law Council of Australia stating that:
section 46 cases are, of their nature, complex and
usually long. Conducting the hearings in the Federal Magistrates Court
will not make them less complex or shorter.[51]
As already stated, there has been considerable criticism of the High
Court’s interpretation of the provisions of section 46 to date. That
being the case, it seems premature to extend the jurisdiction for such
matters to the Federal Magistrates Court before judicial interpretation
of the amendments in the Bill has occurred. A likely outcome of a proceeding
lodged in the FMC is that it will be transferred directly to the Federal
Court under the Federal Magistrates Act 1999.
© Copyright Commonwealth of Australia
This work is copyright. Except
to the extent of uses permitted by the Copyright Act 1968, no person
may reproduce or transmit any part of this work by any process without
the prior written consent of the Parliamentary Librarian. This requirement
does not apply to members of the Parliament of Australia acting in the
course of their official duties.
This work has been prepared
to support the work of the Australian Parliament using information available
at the time of production. The views expressed do not reflect an official
position of the Parliamentary Library, nor do they constitute professional
legal opinion.
Feedback is welcome and may
be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for referral.
Members, Senators and Parliamentary staff can obtain further information
from the Parliamentary Library on (02) 6277 2434.
[2]. The Sherman Antitrust Act
was enacted in 1890. It outlaws all contracts, combinations and conspiracies
that unreasonably restrain interstate and foreign trade. This includes
agreements among competitors to fix prices, rig bids and allocate customers.
The Sherman Antitrust Act makes it a crime to monopolize any part of interstate
commerce.
[32]. ‘Engaging in conduct’ is
defined in paragraph 4(2)(a) of the TPA as to doing or refusing to do
any act, including the making of, or the giving effect to a provision
of, a contract or arrangement, the arriving at, or the giving effect to
a provision of, an understanding or the requiring of the giving of, or
the giving of, a covenant.
[42]. Brambles
Holdings Ltd. v TPC & Anor (1980) ATPR 40-179.
Paula Pyburne
30 July 2008
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
