The Government has today introduced a Bill to Parliament which, if passed, will amend the controversial “misuse of market power” provision – section 46 of the Competition and Consumer Act 2010 (Cth) (CCA).
The reframed section 46 appearing in today’s Bill reflects to some degree the recommendations made by the Harper Panel and adopted by the Government in the Exposure Draft legislation released on 5 September 2016 (see our previous alert here). There are, however, two key differences:
- The revised formulation of section 46 that appears in in the Bill is less likely to capture cases where conduct affects markets in which the firm with a substantial degree of market power does not operate (eg. a remote downstream market).
- The Bill and explanatory memorandum are (unlike the Exposure Draft) silent on whether businesses will be able to seek authorisation from the ACCC for conduct that might otherwise contravene the reframed section 46. The authorisation process may still be dealt with in subsequent amendments.The Bill has only just been introduced; it remains to be seen what (if any) changes will be made to it as it travels through Parliament.
More limited scope
The scope of the provision now only covers situations where a corporation engages in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:
- that market in which it has a substantial degree of power; or
- any other market in which there is an actual or likely supply or acquisition of goods or services, by the corporation or another prescribed entity.
Exposure Draft version
By contrast, the version of section 46 proposed in the Exposure Draft would have prohibited a firm with a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in “any market”. While this followed the wording of the existing section 46, the current prohibition only bites in relation to conduct that has an anti-competitive purpose directed at a market, purpose being within the firm’s own remit. A number of stakeholders argued during the consultation process on the Exposure Draft that the reference to “any market” made section 46 excessively broad in scope as it would require consideration by a business before engaging in unilateral conduct of its potential effect in markets in which the firm did not operate and therefore could not be expected to have knowledge of.
The provision in the Bill has now been revised in an effort to limit the prohibition to those markets in which the firm’s conduct is more likely to have an effect of competition concern.
As noted above, this latest version of section 46 in today’s Bill applies to markets in which the corporation is (or is likely to be) indirectly supplying or acquiring goods or services. This is intended to pick up situations where the corporation is supplying or acquiring goods indirectly through entities that may not be “related bodies corporate” under s 4A of the CCA. As noted in the explanatory memorandum to the Bill, the Government has been cautious to ensure that section 46 applies to “increasingly common situations” in which a corporation does not act through a related body corporate, but nonetheless exercises a degree of influence or control over another entity which itself is directly engaged in activities in an upstream or downstream market.
The inclusion of the word indirectly in the proposed section 46 may also leave some scope for a firm’s conduct in a downstream market (in which it does not directly operate) to be covered.
Authorisation process for section 46
The explanatory memorandum to today’s Bill is silent on whether a person may seek exemption from section 46 via the Commission authorisation process. This is particularly notable because the explanatory materials to the Exposure Draft explicitly identified the ability to gain authorisation as a key feature of the new law on section 46.
While the Government may still be intending to introduce the ability to seek exemption from section 46 as part of the amendments to Part VII of the CCA, it is unfortunate that this has not been clarified in the explanatory memorandum. This creates some uncertainty in the context where section 46 amendments have been introduced to the Parliament but the remaining amendments have been delayed until next year.
For more information on the reframing of section 46, see our previous alert here.