As part of the Harper reforms to Australia's competition law, a new concerted practices prohibition has been introduced that represents a significant broadening of the prohibition on anticompetitive conduct.
In late 2017, the Competition and Consumer Act 2010 (Cth) ("CCA") was amended to insert, among other things, a new prohibition on concerted practices. Although it remains to be seen how the new legislation will be interpreted by Australian courts, the amendment represents a significant broadening of the scope of co-operative behaviour between competitors that can breach the CCA. Businesses should be conscious that conduct with competitors that was not previously prohibited may now be caught by the new laws.
In November 2017, the Competition and Consumer Amendment (Competition Policy Review) Act 2017 came into effect, introducing a prohibition into the CCA against engaging in "concerted practices" that have the purpose, effect, or likely effect of substantially lessening competition. The amendments also repealed the previous prohibitions on price signalling conduct.
Subsection 45(1)(c) contains the following prohibition:
(1) A corporation must not:
(c) engage with one or more persons in a concerted practice that has the purpose, or has or is likely to have the effect, of substantially lessening competition.
A concerted practice is considered by the ACCC to involve "communication or cooperative behaviour between businesses that may not amount to an understanding but goes beyond a business independently responding to market conditions." This accompanies the other prohibitions in section 45, on making, or giving effect to a provision of, a contract, arrangement or understanding containing a provision that has the purpose, effect, or likely effect of substantially lessening competition.
As per section 45, a concerted practice will only breach the legislation if it has the purpose, effect, or likely effect of substantially lessening competition. Additionally, it should be noted that establishing a concerted practice still requires that the relevant behaviour of the parties is not independent. That is, parallel behaviour by competitors is not sufficient to prove a concerted practice, because it may merely be the natural response of the parties to market conditions.
The pecuniary penalty payable by a company that breaches the prohibition is up to the maximum of the following:
2. If the total value of the benefits obtained that are reasonably attributable to the concerted practice can be determined, three times that value; and
3. If the total value of the benefits obtained that are reasonably attributable to the concerted practice cannot be determined, 10 per cent of the annual turnover of the company during the previous 12 months.
In addition, individuals found to be in breach are also liable for fines of up to $500,000.
Guidance on Concerted Practices
In late 2017, the ACCC released its "Interim Guidelines on concerted practices" ("Guidelines"). The Guidelines set out how the ACCC proposes to interpret the legislation, and the approach it will take in investigating alleged contraventions. However, although the ACCC may interpret the provision in a particular way, it should be noted that that the courts retain the ultimate jurisdiction to determine whether there has been a breach.
Although concerted practices had not previously been contained in the CCA as a separate concept, it is a well-established prohibition in other jurisdictions including the European Union, Hong Kong, and Singapore. In addition to the Guidelines, it is possible that we can glean an understanding of the application of the provision from an examination of how it has been considered in these jurisdictions. For example, In Europe, one of the key principles in establishing whether there has been a breach is whether "the parties, even if they did not enter into an agreement, knowingly substituted cooperation between them for the risks of competition."
Previously, to establish a breach of the anticompetitive agreements prohibition the ACCC was required to establish that an actual "contract, arrangement or understanding" had been made, or given effect to. This required the ACCC to prove, broadly speaking, that there was communication, consensus, and commitment between the relevant parties. The introduction of the concerted practices prohibition represents a significant lowering of the standard of conduct that is considered a breach, which will arguably give the ACCC a wider jurisdiction, and discretion, to investigate anticompetitive conduct by multiple parties. Establishing the three elements identified above is no longer a necessity for the ACCC to establish a breach of section 45, because cooperative behaviour that does not rise to the level of a commitment between the parties may contravene the concerted practices prohibition.
Although the amendments repealed the previous price signalling prohibitions, including the per se offence, and there is no new per se offence for concerted practices, businesses should not take this as a sign that the law has been relaxed. In fact, the concerted practices prohibition is significantly more simplified in the legislation than the price signalling prohibitions, which may make it easier for the ACCC or third parties to bring actions.
It remains to be seen how the Australian courts will interpret the new legislation, however the scope of conduct between parties that will breach section 45 has been significantly widened. Businesses should be aware that co-ordinated conduct that was previously not prohibited under the CCA may now leave them liable for significant fines, if engaged in after 6 November 2017.