Abuse of dominance in Australia

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Section 46 of the CCA is directed at prohibiting a firm with a substantial degree of market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition. It is not directed at prohibiting the possession of a substantial degree of market power, although the existence of that power is a precondition for section 46 (see question 2). As noted in question 1, section 46 was amended in November 2017 to include a competitive effects test. There is no longer a requirement to show that a firm has ‘taken advantage’ of its substantial market power, for one of three proscribed anticompetitive purposes, for a contravention to be established.

‘Substantial lessening of competition’ is a concept that is used in other prohibitions in the CCA. ‘Lessening of competition’ is defined to include preventing or hindering competition (section 4G). The courts have found that a lessening of competition means a reduction or loss of competition as a result of the conduct that is ‘meaningful or relevant to the competitive process’ (Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000), Rural Press v ACCC (2003)) and that it involves considering the future state of competition with and without the impugned conduct (Dandy Power Equipment (1982)). The ACCC’s guidelines on section 46 explains that ‘conduct substantially lessens competition when it interferes with the competitive process in a meaningful way by deterring, hindering or preventing competition’.

As noted above, section 46 is not limited to particular anticompetitive purposes. The assessment of purpose is a subjective inquiry as to what a firm intended to achieve through its conduct. Direct evidence of purpose is not necessary. Purpose can be inferred from a firm’s conduct, the conduct of any other person or the relevant circumstances. The courts have found in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989), Boral Besser Masonry Ltd v ACCC (2003) and other cases that meeting competition is a legitimate purpose and have cautioned against confusing aggressive competitive intent with anticompetitive behaviour.

There is no misuse of market power conduct that is subject to a per se prohibition. However, in its guidelines, the ACCC identifies the following types of conduct that may involve a misuse of market power: refusal to deal, restricting access to an essential input, predatory pricing, loyalty rebates, margin or price squeezing, and tying and bundling.

Does the concept of abuse cover both exploitative and exclusionary practices?

The misuse of market power prohibition will only cover exploitative and exclusionary practices to the extent that those practices are engaged in by a firm with substantial market power and have the purpose, effect or likely effect of substantially lessening competition. It is less common for exploitative practices to be caught under the prohibition as courts have typically distinguished between conduct to meet competition and conduct that is anticompetitive. For example, defensive price cutting or profit maximisation may not be caught by the section 46 prohibition except where it is engaged in with an anticompetitive purpose or has an anticompetitive effect (or likely effect). Exclusionary practices may be caught by the prohibitions against cartel conduct (Division 1, Part IV), concerted practices (section 45), anticompetitive agreements (section 45) and exclusive dealing that substantially lessens competition (section 47).

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

Since 6 November 2017, there is no longer a requirement to show that there is a link between a firm’s substantial degree of market power and its conduct. A firm with substantial market power will contravene section 46 if its conduct has the purpose, effect or likely effect of substantially lessening competition in any other market in which it supplies or acquires goods or services, or supplies or acquires goods indirectly through other persons, even though it may not have market power in those markets.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

There are no specific defences that may be raised to allegations of misuse of market power, but efficiency gains or other pro-competitive purposes or effects will be considered in assessing if the conduct is pro-competitive rather than anticompetitive overall (see question 10). A firm may also argue that it does not have a substantial degree of market power.

It is now also possible for firms to apply to the ACCC for authorisation of conduct that might contravene section 46. Authorisation provides the firm engaging in the conduct with legal immunity. Authorisation cannot, however, be sought for past conduct. The ACCC may grant authorisation if it is satisfied that the conduct either does not have the effect or likely effect of substantially lessening competition or meets the ‘net public benefit’ test. As at the date of writing, there have been no applications for authorisation of conduct that might contravene section 46.