Summary

After two years of discussion and consultation, the Australian Government has enacted its legislative response to key recommendations in the Competition Policy Review (the Harper Review). 

Background—The Harper Review

In late 2013, the Prime Minister and the Minister for Small Business ("Minister") announced a review of Australia's competition policy and laws. In March 2014, the Minister tasked a panel, led by Professor Ian Harper ("Review Panel"), to conduct a 'root and branch' assessment of Australia's competition laws and policies, with the key area of focus being to identify impediments across the economy that restrict competition and reduce productivity, which are not in the broader public interest. The Review Panel released an issues paper, draft report and final report within 12 months ("Review").

Key Changes

Following on from the Harper Review, two Acts of Parliament were enacted to implement key Review recommendations by amending the Competition and Consumer Act ("CCA"):

  • The Competition and Consumer Amendment (Misuse of Market Power) Act 2016 ("Misuse of Market Power Act"); and
  • The Competition and Consumer Amendment (Competition Policy Review) Act 2017 ("Competition Policy Review Act").

The amendments were split into two bills in order to obtain support from different groups of senators sufficient to achieve a majority for all amendments. 

The Misuse of Market Power Act. 

The Misuse of Market Power Act largely follows the Review recommendations to section 46 of the CCA regarding the prohibition on misuse of market power.

Until now, section 46 prohibited a corporation with a substantial degree of market power from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a person into a market and deterring or preventing a person from engaging in competitive conduct in a market, although the approach is likely to at least be informed by existing cases regarding other providers of the CCA. Previously, it was sufficient to ensure that no 'smoking gun' evidence existed to show purpose. From now on, evidence of the effects will be equally important.

The amendment alters the nature of the prohibited conduct to capture conduct by corporations with a substantial degree of market power that has the purpose of substantially lessening competition, or is likely to have the effect of substantially lessening competition. Businesses with large markets shares, in a position to influence the markets in which they participate, need to consider competition or their strategies in light of the new CCA.

It is, of course, unclear how the courts will approach the amended law although there is some help in the form of the ACCC's guidance.

The Competition Policy Review Act. 

The Competition Policy Review Act implements other key Harper recommendations. These include changes to the definition of 'competition', the provision relating to cartels, exclusionary provisions, secondary boycotts, third line forcing, resale price maintenance, authorisations, notifications and class exemptions, access to services, price signaling and concerted practices and evidentiary provisions related to admissions of fact and the ACCC's power to obtain information, documents and evidence.

Some of the key amendments include:

  • Narrowing the joint venture exception for cartel conduct. Currently, the joint venture exception only applies to provisions in contracts for the production and/or supply of goods and services. The amendments to the CCA widen the exception to include joint ventures for the acquisition goods and services, and also arrangements or understandings (in addition to contracts). However, the exception is also narrowed somewhat by including a requirement that the cartel provision be 'reasonably necessary' for undertaking a joint venture, and excludes joint ventures that are carried on for the purpose of substantially lessening competition.
  • Abolishing the ACCC's formal merger clearance process and transferring the power to authorise mergers at first instance from the Australian Competition Tribunal ("Tribunal") to the ACCC with a path to the Tribunal for merits review of the ACCC's decision. Under the new law, the ACCC can grant authorisation if it is satisfied that the conduct will not, or is not likely to, substantially lessen competition, or is likely to result in a net public benefit. Significantly, applicants for review will be able to introduce new evidence before the tribunal if the evidence did not exist at the time the ACCC made its first instance decision.
  • Introducing a general prohibition on concerted practices that have the purpose, effect or likely effect of substantially lessening competition and removing the separate price signaling and exclusionary provisions prohibitions;
  • Removing prohibitions for types of conduct, such as third line forcing, on a per se basis and replacing them with prohibitions on the conduct only where it has the purpose, effect or likely effect of substantially lessening conduct; and
  • Resale price maintenance ("RPM") will retain the per se prohibition but it will be possible to notify the ACCC of the proposed conduct to enjoy statutory immunity, unless the ACCC revokes the notification (on the basis that the public benefits of the conduct will not outweigh the detriments).

Impact of the Amendments

In many respects, including the changes to the misuse of market power prohibition, the amendments represent a softening of the law, although in other respects the proposed legislation has narrowed the scope of the recommendations made by the Review Panel. For example, the Review Panel recommended that Parliament introduce a prohibition on misuse of market power that has the purpose or is likely to have the effect of substantially lessening competition in any market, however this was narrowed to only include:

  • The market that the corporation has the substantial degree of market power in; or
  • Any other market in which that corporation, or a related body corporate, supplies goods or services; or
  • Any other market in which that corporation, or a related body corporate, acquires goods or services.

The laws represent a significant change for corporations, who may now be caught by the prohibitions even if the purpose of the conduct is not anticompetitive (that is, if the effect of the conduct is anticompetitive).