On 31 March 2015, the much anticipated Final Report of the Competition Policy Review, known as the Harper Review, was released.  In the Report, the Competition Policy Review Panel have made sweeping recommendations for the reform of Australia's competition laws as well as for changes to competition policy and Australia's competition institutions, including the ACCC.

In this alert, we have summarised the Panel's key recommendations for reforming the prohibitions against misuse of market power, cartel conduct and other anti-competitive conduct in the Competition and Consumer Act 2010, as well as their proposed changes to the merger review process.

Misuse of market power

As was widely anticipated, the Panel recommends that the current prohibition against misuse of market power be amended to introduce an 'effects test'.  Under the proposed new section 46, a corporation with substantial market power would be prohibited from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in a market.

In response to submissions on the Draft Report, the Panel has not proposed that there be a defence to the new prohibition.  Instead, the Panel recommends that in assessing whether there has been a breach of section 46 the court must have regard to:  

  • in the extent to which the conduct has the purpose, effect or likely effect of increasing competition in the market, including by enhancing efficiency, innovation, product quality or price competitiveness; and
  • in the extent to which the conduct has the purpose, effect or likely effect of lessening competition in the market, including by preventing, restricting or deterring the potential for competitive conduct in the market or new entry into the market.

The Panel also recommends authorisation be available for section 46.

Cartel conduct

The Panel recommends that the prohibitions against cartel conduct be substantially simplified with a new streamlined definition of 'cartel provision' inserted to replace the current overly complex definition.  

In addition, the Panel also recommends that:

  • the prohibitions against cartel conduct:
    • apply to persons who compete to supply goods or services to, or acquire goods or services from, persons resident or carrying on business in Australia; and
    • be confined to persons who are or are likely to be in competition with each other (i.e. not simply person who may possibility be in competition with each other).
  • the joint venture defence be substantially amended so there is a broad exemption covering joint ventures for the production, supply or marketing of goods or services; and
  • the prohibition against exclusionary provisions be repealed. 

Price signalling and concerted practices

The Panel recommends the repeal of the current price signalling provisions in the CCA (which currently only apply to the banking sector).

The Panel recommends amending section 45 to introduce a new prohibition against a person engaging in a 'concerted practice' with one or more other persons that has the purpose, effect or likely effect of substantially lessening competition.

Exclusive dealing and third line forcing

The Panel recommends the repeal of the current prohibitions against exclusive dealing in section 47 if their recommendations for the amendment of section 46 are accepted.

If the recommended amendments to section 46 are not accepted, then the Panel recommends that:

  • the current prohibitions against exclusive dealing be simplified; and
  • the prohibition against third line forcing be subject to a competition test.

Resale price maintenance

The Panel recommends that the per se prohibition against resale price maintenance be retained but that an ACCC notification process be introduced.  This would allow a corporation to seek immunity under the much quicker and less expensive notification process where the public benefits of specifying minimum resale price outweigh the detriments.

Merger review process

The Panel recommends retaining the current informal merger clearance process but recommends further consultation between the ACCC and business representatives with the aim of delivering more timely decisions in this process.

The Panel recommends that a new formal process be introduced, replacing both the current formal merger clearance and authorisation processes.  Key features of this new process include:

  • the ACCC would be the decision-maker of first instance;
  • the ACCC should be empowered to authorise a merger if satisfied that it does not result in a substantial lessening of competition or would result in a net public benefit;
  • the process would be subject to strict timelines; and
  • ACCC decisions would be subject to review by the Australian Competition Tribunal.

Other significant recommended amendments

Other important recommendations by the Panel include:

  • Extra-territorial reach of Australian competition law: the CCA should apply to conduct outside Australia that relates to trade or commerce within Australia or between Australia and places outside Australia (removing the requirement that an overseas corporation must carry on business in Australia for its conduct outside Australia to be subject to the CCA).
  • Application of the CCA to Government activities: the prohibitions against anti-competitive conduct in the CCA, as well as the Australian Consumer Law, should apply to the Commonwealth, States, Territories and local government insofar as they undertake activity in trade or commerce.
  • Intellectual property: the exception in section 51(3) for certain types of transactions involving intellectual property be repealed.
  • Block exemptions: a 'block exemption' power, exercisable by the ACCC, be introduced to enable the ACCC to create safe harbours.
  • Authorisation and notification process: the ACCC be empowered to grant an exemption if satisfied that the conduct would not be likely to substantially lessen competition or would be likely to result in a public benefit that outweighs any detriment.
  • Secondary boycotts and employment related matters:the prohibitions against secondary boycotts be retained and the penalties increased so that they are the same as for other competition law breaches, and the prohibition in sections 45E and 45EA be extended to apply to awards and industrial agreements (except insofar as they relate to remuneration, conditions of employment, hours of work or working conditions).
  • Creation of an independent access and pricing regulator: responsibility for third-party access and infrastructure regulation be transferred from the ACCC, AER and NCC to a new independent Access and Pricing Regulator.  This new regulator would have responsibility for access and pricing in relation to telecommunications, water, electricity and gas, as well as other major third party infrastructure, with the ability for its remit to be extended if other sectors are transferred to national regimes.  The ACCC would retain consumer protection and competition functions.