The Treasurer Scott Morrison has today released exposure draft legislation as part of the Government's response to the Final Report of the Competition Policy Review from the panel chaired by Prof Ian Harper (Report).

The Report made recommendations for major changes to the restrictive practices provisions (Part IV) of the Competition and Consumer Act 2010 (Cth) (CCA).

In its response to the Report released in November 2015, the Government signalled its support for most of those recommendations.

The exposure draft legislation addresses most of these recommendations and proposes far reaching amendments to the CCA by:

  • amending the misuse of market power provision (section 46) (see more detail below);
  • confining the operation of the cartel conduct provisions to conduct affecting competition in Australia and provisions involving actual or likely competitors and broadening the exceptions for joint ventures and vertical trading relationships;
  • prohibiting third line forcing only where it has the purpose, effect or likely effect of substantially lessening competition;
  • allowing for notification (in addition to authorisation) of resale price maintenance;
  • consolidating the various authorisation processes (including those relating to mergers) into a single authorisation process;
  • abolishing the price signalling laws which currently apply only to banks and introducing instead a generally applicable prohibition against 'concerted practices'; and
  • extending the ACCC's power to obtain information to cover investigations of alleged contraventions of court enforceable undertakings, introducing a new 'reasonable search' defence and increasing the fine for non-compliance with section 155.

MinterEllison welcomes many of the proposed amendments for which it advocated, including the Government's endeavour to make clearer how cartel rules operate on joint venturers (which will bring greater certainty for business), the application of a competition test to third line forcing (which is long overdue) and the abolition of the unused bespoke price signalling laws.

The ACCC has also released draft frameworks for misuse of market power guidelines and for concerted practices guidelines.

Misuse of market power

The proposed amendment (which adopts the Report's original recommendation) reframes the current prohibition to prohibit corporations with a substantial degree of market power engaging in conduct that has the purpose, effect or likely effect of substantial lessening competition. In determining that issue a court will have regard to the purpose or effect of the conduct:

  • increasing competition in the market, including by enhancing efficiency, innovation, product quality or price competitiveness; and
  • lessening competition in the market, including by preventing or deterring 'the potential for' competitive conduct in the market or new entry into the market.

MinterEllison remains concerned about the risk that removing the 'take advantage' limb of the current prohibition may undermine the confidence with which businesses holding substantial market power can approach company strategy. The lack of any qualification to the broad noun "conduct" in the draft legislation leaves all the work sorting between good and bad conduct by firms with substantial market power to the 'purpose or effect' competition test.

The competition test is pretty well understood in Australian competition law, so the sky will not in our view fall down (as some commentators suggest) if such a test is introduced, but there inevitably remains some doubt about how it will be applied in this different context. We think the Government should consider some qualification of the noun "conduct" in the exposure draft. In other words, it would be helpful to express generically what type of conduct the CCA is aiming to catch – not just in an ACCC guideline or explanatory materials - but in the statute itself. Identification of some adjectival qualification such as "exclusionary" conduct or "anti-competitive" conduct for example could assist with the issues around certainty and chilling risks, giving some comfort to businesses on those issues that 'normal' competitive conduct is not intended to be caught by the competition test. Canadian law illustrates such an approach – it applies to a so-called "practice of anti-competitive acts" by a dominant firm with the effect or likely effect of substantially preventing or lessening competition.

Mergers

As part of the simplification of the authorisation processes under the CCA, the exposure draft legislation proposes to repeal the formal merger clearance and authorisation process, which has been little used. Instead, mergers will be subject to the general authorisation process in section 88, where the decision maker at first instance will be the ACCC not the Australian Competition Tribunal (Tribunal). The ACCC must not give merger authorisation unless it is satisfied in all the circumstances that the merger would not have the effect or likely effect of substantially lessening competition or the conduct would result or likely result in public benefits which would outweigh the detriment to the public that would or likely result from the conduct. The ACCC will have 90 days to determine the application (unless a longer period is agreed). The Tribunal may review an ACCC merger review determination but it will not re-hear the matter and the matters that the Tribunal can have regard to are limited.

While the informal merger process will remain, the proposed new authorisation process provides an alternative clearance process that is far more attractive than the current formal merger clearance process.

Interested parties have until 5pm Friday 30 September 2016 to make a submission on any aspect of the exposure legislation.