The proposed new rules for misuse of market power have serious implications for business. Big fellas, your compliance costs are going up. Little guys, you and the ACCC will have a much easier time reining in the market leaders.
In short, a whole heap of conduct that does not amount to misuse of market power under the current law will fall foul of the new laws. Given that maximum penalties start from $10M, that makes the new laws kind of a big deal.
A business with market power will no longer have to ‘misuse’ that market power to get in trouble. Purpose and intent won’t matter. And there won’t need to be any connection between the market power and the conduct. Any conduct that substantially lessens competition (or is likely to), will get the business in hot water.
An example is $1 milk in the big supermarkets. Let’s assume Coles and Woolies have market power (which isn’t a given).
- For the supermarkets, $1 milk is a great way to get customers in the door. And so long as that is their purpose (as opposed to destroying their competitors), they’re not engaging in misuse of market power under the current laws.
- For the dairy farmers and competing dairy brands, the situation pretty much sucks. It’s literally impossible to compete on price. And you can forget new market entrants. Why buy the cow when you can get the milk for $1.
- The ACCC struggles to help them because the current test for misuse of market power is so hard to satisfy. It’s forced to look to other causes of action like unconscionable conduct which have their own challenges and shortcomings.
- Under the new law, the big supermarkets selling $1 milk would be a misuse of market power. It doesn’t matter if their motives aren’t evil. All that matters is that they’re substantially lessening competition by pricing the milk so cheaply that nobody can compete with them.
That’s why the ACCC and the little guys are celebrating the changes. Big fellas, not so much. All their business activities will need review, and in a lot of cases they’ll have to change how they do things.