Bills Digest No. 23 2004-05
Trade Practices
Legislation Amendment Bill 2004
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Trade Practices Legislation
Amendment Bill 2004
Date
Introduced: 24 June
2004
House: House of Representatives
Portfolio: Treasury
Commencement:
The items in Schedule 1 to
9 commence on a day to be fixed by Proclamation, except that items
23 and 24 do not commence at all if item 10 of Schedule 1 to the
Trade Practices Amendment (Personal Injuries and Death) Act
(No. 2) 2004 commences before the Proclamation, and items 18
and 19 of Schedule 9 commence the later of:
-
the
Proclamation referred to above and
-
the
commencement of Part 3 of Schedule 4 to the Corporate Law Economic
Reform Program (Audit Reform and Corporate Disclosure) Act
2004,
but do not commence at
all if Part 3 of that Act does not commence. Schedules 10 and 11
commence the day after the Act receives Royal Assent. Schedule 12
(a technical amendment) commences 1 March 2004.
The main purpose of the Bill is
to amend the Trade Practices Act 1974 (the Act) consistent
with the government s response to the Review of the competition
provisions of the Trade Practices Act (1) (the
Dawson Review).
On 9 May 2002 Treasurer Peter Costello announced that, pursuant
to the Government s policy commitment made during the 2001 federal
election, Sir Daryl Dawson, together with Jillian Segal and Curt
Rendall, had been appointed to a Committee of Inquiry into the
competition provisions of the Trade Practices Act 1974, and their
administration.(2) The Treasurer cited, as the need for
the inquiry, public debate about various provisions of the Act, and
particularly the mergers regime, the misuse of market power
provision and the authorisation process .(3) The terms
of reference, according to the Treasurer:
enable the Inquiry to consider whether the Act
provides sufficient recognition for globalisation factors and the
ability of Australian companies to compete globally. At the same
time, the review will consider whether the Act is sufficiently
flexible to respond to the transitional needs of certain
industries, and specifically those in rural and regional Australia.
The review will also consider whether the Act provides an
appropriate balance of power between small and large
businesses.(4)
The Dawson Review reported on 31 January 2003. The report
contained several recommendations which form the basis of this
Bill.
The term merger denotes a combination of two or more firms or
corporations, usually such that one is absorbed into the structure
of the other(s) and loses its separate identity .(5) The
Act does not anywhere refer to mergers as such, rather, the Act
provides that a corporation must not acquire shares in a
body corporate, or any other assets, where such acquisitions would
have the effect, or likely effect, of substantially lessening
competition in a market.(6)
The regulation and administration of mergers present some
peculiar difficulties. According to the Australian Competition and
Consumer Commission (the Commission), the primary purpose of the
Act in this regard is to promote the economic policy which
underpins the restrictive trade practices provisions by ensuring
that parties cannot avoid restrictions on anti-competitive
behaviour through merger. (7) Mergers can, however,
promote economic efficiency in a variety of ways. Inefficient and
unprofitable businesses, for instance, might benefit from being
acquired by more efficient corporations with more effective
managers and in that way add value to the economy. The difficulty
is in locating the balance between these competing considerations.
That is the more problematic because effective merger activity
often requires swift action and decisiveness and these are hindered
by time consuming and sometimes uncertain legal and administrative
processes. It was in this context that the Government asked the
Dawson Review to consider whether the provisions of the Act:
-
inappropriately impede the ability of Australian industry to
compete locally and internationally
-
provide an appropriate balance of power between competing
businesses, and in particular businesses competing or dealing with
businesses that have larger market concentration or power, and
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promote competitive trading which benefits consumers in terms of
services and price.(8)
A practice has developed whereby corporations proposing to
acquire shares or assets in circumstances where there is a question
as to whether the acquisition would or be likely to substantially
lessen competition, usually approach the Commission informally, for
its views on the proposed acquisition. In such cases the Commission
consults with third parties potentially affected by the merger and
considers whether there is likely to be a substantial lessening of
competition in the market as a result of the proposed acquisition.
The Commission may approve the proposed acquisition with or without
undertakings made by the proposed acquirer pursuant to section 87B
of the Act. If it approves an acquisition, it remains possible for
a third party to take action in the Federal Court seeking remedies
for breach of the merger provisions.
A second option for those proposing mergers is to seek
authorisation. Where acquisitions of shares or assets
would substantially lessen competition in a market, or be
likely to have that effect, it is possible, nevertheless, for the
Commission to grant an authorisation for the
acquisition.(9) The Commission must not grant
authorisation in such cases unless satisfied that the proposed
acquisition would result, or be likely to result, in such a benefit
to the public that the acquisition should be allowed to take
place.(10) A person dissatisfied by a determination of
the Commission in relation to an authorisation may apply to the
Australian Competition Tribunal (the Tribunal) for a
review.(11)
The result is that a corporation proposing to acquire shares or
assets in circumstances where there is a question as to whether the
acquisition would or be likely to substantially lessen competition
currently has three options: to proceed without approaching the
Commission and run the risk of action in the Federal Court by the
Commission or a third party; to approach the Commission for
informal approval; and, where there would be a substantial
lessening of competition, to apply to the Commission for an
authorisation on the ground that the public benefit warrants the
conclusion that the acquisition should be allowed to take
place.
The Commission is, in respect of the merger aspects of the Act,
in favour of the status quo. This is because the Commission is
unaware of any compelling arguments supporting a major overhaul of
the current arrangements. (12) The Commission does,
however, express its receptivity to any constructive suggestions
for improvements to its processes in the administration of s. 50
.(13) Graeme Samuel, current chairman of the Commission,
argues that the existing informal process coupled with a safety
valve available by way of appeal to the Federal Court, works well
and that the formal process proposed by the Dawson Review could
endanger the process.(14) The intention appears to be,
however, to retain the existing informal process alongside the
formal, so that those applying for clearance may choose their
preferred mode of application.
A variety of submissions for substantial changes to the merger
provisions of the Trade Practices Act were made to the Dawson
Committee. According to one point of view, in a relatively small
economy such as Australia s, large firms need to be easily able to
merge so that they can grow to a size necessary to enable them to
compete in international markets. This has become known as the
national champions argument. One of the proponents of the national
champions argument is the Business Council of Australia. The
Council is concerned that over-rigorous controls may deny firms in
small, fragmented economies the economies of scale and scope needed
to successfully compete and grow in increasingly global markets
.(15) The Commission responds to the national champions
debate by referring to studies that conclude that vigorous domestic
competition is a better generator of internationally competitive
firms. In a review of the situation in Japan, Sakariko and Porter
concluded that Japanese competitiveness was associated with home
market competition, not collusion, cartels, or government
intervention that stabilises it. (16) In another study
by Porter, he found few national champions , or firms with
virtually unrivalled domestic positions, that were internationally
competitive. Instead, most were uncompetitive though often heavily
subsidised and protected. (17)
The Business Council, in submissions to the Dawson Inquiry,
proposed that section 50 of the Act be amended so as to allow the
Commission to consider, at the informal approval stage, not only
whether the proposed acquisition would or be likely to
substantially lessen competition, but also the question of whether
the acquisition should nevertheless be allowed because the public
benefit outweighs the lessening of competition. This would not
change the substantial effect of the Act, because acquisitions can
already be authorised on the basis of public benefit, but presently
there are two separate processes one for clearance under section 50
(where the question is whether the acquisition would substantially
lessen competition) and another for authorisation (where the
question is whether the public benefit outweighs the lessening of
competition). The Business Council proposal is to allow both of
those matters to be considered simultaneously. The proposal would
also require that efficiency gains be taken into account in
considering whether a proposed acquisition is likely to lead to a
substantial lessening of competition. According to the Council, the
existing processes do not provide a commercially realistic
opportunity for merger proponents to argue the broader public
benefit or efficiency merits of their proposals
.(18)
The concern expressed by the Business Council comes about as a
result of what it sees as a cumbersome, expensive, time consuming,
and uncertain process for authorisation under the existing
provisions. If the Commission considers a proposed acquisition
under the current provisions, and opposes it, then, unless it
wishes to risk legal action against it, the proponent of the
acquisition must apply to the Commission for authorisation on the
grounds of public benefit. The Commission s decision can then be
appealed by interested parties, to the Tribunal, which can then
take some time to decide the matter.
A similar proposal to that of the Business Council was put
forward by the Law Council of Australia (the Law Council). The Law
Council considered that, subject to acceptance of its
recommendation for the establishment of an independent review
tribunal to review the Commission s merger clearance decisions:
a public benefits qualification for mergers should
be incorporated directly into s50 to supplement the current
authorisation process. Public benefits, including increased
exports, increased substitution of domestic products with foreign
goods, increased international competitiveness of Australian
industry and efficiency gains, could then be considered in the
informal clearance process, used in relation to all mergers
considered by the Commission since 1999, and also by the review
panel if necessary.(19)
As discussed below, the Dawson Review rejected these proposals
and hence they are not included in the Bill.
Concern has been expressed in some quarters about whether the
existing merger provisions adequately provide for circumstances in
which companies substantially lessen competition not by single
large acquisitions but by incremental smaller acquisitions over a
period of time. The Australian Democrats submitted to the Dawson
Inquiry that:
To accompany good existing powers restraining
anti-competitive mergers and acquisitions, the Commission needs
powers to address existing dominant monopolies, including an undue
concentration of market power achieved by small creeping
acquisitions. The Commission or the Courts should be given a power
to order divestiture where an ownership situation has the effect of
materially limiting or substantially lessening
competition.(20)
In a similar vein, the Australian Labor Party has expressed the
intention to introduce new provisions to combat creeping and
cumulative acquisitions.(21) The Dawson Committee made
no specific recommendation in relation to this issue, but the
matter was revisited recently by the Senate Economics References
Committee. The Committee considered that:
creeping acquisitions must, if continued
indefinitely, at some point result in a very concentrated market.
The clear consensus of evidence before the Committee supported this
view, and no substantial arguments were raised to oppose it.
Current merger law does not effectively address this issue. Section
50 of the Act should be strengthened to take account of the
cumulative effects of acquisitions which over time may
substantially lessen competition.(22)
The problem is, however, a difficult one, as acknowledged by
former Commission Chairman, Professor Allan Fels. In giving
evidence to the Economics References Committee, Professor Fels
said:
no-one would want to disguise the difficulties of
dealing with creeping acquisitions. The issue comes up most often
in regard to big acquisitions of retail stores one by one. It is
more the case that, while we feel uneasy about this part of the
Act, we have not been able to come up with a proposal that would in
our view solve our concerns. When a big retailer, say, is going to
buy a very large number of outlets at a given time, if they bunch
them all together it is possible for us to look at them as a whole
and say, This could substantially lessen competition. But most
often acquisitions are made in small parcels or one at a time, so
each case as you look at it does not seem to amount to a
substantial lessening of competition. It has to be a substantial
lessening of competition in a market.(23)
The Economics References Committee also recommended that the Act
be amended to allow for divestiture in cases of creeping
acquisitions.(24) Government members of the Committee
expressed disagreement with these recommendations, arguing that the
existing provisions of the Act, especially section 50, were
adequate to deal with the problem.(25)
Dawson Committee
recommendations
The Dawson Review rejected the proposals to broaden the test at
the first or clearance stage because of what it saw as important
practical difficulties that would arise.(26) To
introduce an efficiency test at the clearance stage would,
according to the review, require more extensive economic analysis
to be undertaken by the Commission , taking more time and requiring
access to more information.(27) Those circumstances, the
review concluded, would be likely to extend the time taken for the
clearance process, impeding the swiftness of the current
process.(28) The Review considered that:
If a broader efficiency test were to be introduced
into section 50, there would need to be a more structured approach
to its application than that offered by a clearance process. Such
an approach is offered by the authorisation process and, in the
course of that process, efficiencies may be considered in the
context of public benefit.(29)
Another concern regarding the proposal to broaden section 50 is
that expressed by the Australian Consumers Association that, to
take into account the public benefit of a merger at the informal
clearance level would take the question out of the public view and
hence reduce public accountability in the decision making
process.(30)
The Dawson Committee considered that the informal merger
clearance option would be improved and the potential for error
reduced, if the Commission were required to provide adequate
reasons for its decisions relating to mergers. The Committee
thought that this would allow a better understanding of the
decisions and reduce uncertainty about the way in which the process
operates.(31) The Government agreed with the
Committee(32) and accordingly the Bill contains a
provision requiring written reasons to be given by the
Commission.(33)
In other recommendations with which the Government agreed, the
Dawson Committee outlined a re-structuring of the processes by
which acquisitions may be approved or authorised. Firstly, the
Committee considered that a formal clearance process should be
established alongside the existing informal process. The Committee
thought these to be essential features of such a new process:
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the Commission could grant a binding clearance on the
basis that the acquisition did not contravene section 50 of the
Trade Practices Act
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the information required for applications should be sufficient
for the Commission to make a reasoned assessment yet not be onerous
for applicants
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the Commission should be required to decide applications within
40 days, and
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only applicants (not third parties) should have the right to a
review of the Commission s decision on the merits, by the Tribunal.
Applications for such review should be made within 14 days of the
Commission s decision and should be decided upon by the Tribunal
within 30 days.(34)
One issue that arises out of this is whether it is equitable
that the right of review on the merits is open only to those
applying for merger clearance. Other parties that might be affected
competitors in the same market, for example will have no right to a
review on the merits.
Secondly, the Committee considered that applications for
authorisation of acquisitions that is, authorisations for
acquisitions which are anti-competitive but should be allowed in
the public interest should be made directly to the Tribunal and not
firstly to the Commission as is the present requirement. The
Committee considered that the features of this process should
be:
-
applications should be considered within 3 months
-
there should be no review on the merits of the Tribunal s
decision, and
-
the Tribunal should have the power to remit applications to the
Commission if it considers that the application requires a decision
solely on competition issues under section 50 rather than a
decision on public benefit.(35)
Professor Allan Fels, former chairman of the Commission, has
criticised the proposals to allow applications for authorisation to
go directly to the Tribunal, and to have no right of appeal from
the Tribunal.(36) Professor Fels points out that, unlike
the Commission, the Tribunal is not an investigative body, and
hence mechanical difficulties arise regarding the role the
Commission is to play. That role is to be a very broad one under
the Bill, which provides that, for the purposes of determining
applications for authorisation, the Tribunal may require the
Commission to give such information, make such reports and provide
any other assistance the Tribunal requires.(37) The
Tribunal is, according to Professor Fels, an unfriendly forum for
the consumer and small business, usually knee deep in
lawyers.(38) Fels thinks that the proposal to allow no
appeal from the Tribunal is undesirable. It should be noted,
however, that the proposal is to allow no appeal on the
merits, there is no prohibition on judicial review. The effect
is that Tribunal decisions may still be challenged in the courts on
the grounds that they are legally flawed.
These recommendations have been broadly followed in the drafting
of the Bill. Details of the proposals can be found in the Main
Provisions section below.
According to the Commission, collective bargaining:
[R]efers to an arrangement whereby multiple
competitors in an industry come together, either directly or
through the appointment of a representative to negotiate on their
behalf, to negotiate the terms and conditions of supply with
another, usually larger, business.(39)
Under the current regime, collective bargaining is not permitted
unless it is authorised by the Commission. Crucial to the
authorisation process is the net public benefit
test,(40) allowing the Commission to authorise conduct
that otherwise would breach the Act. Where collective bargaining is
authorised, the applicants receive a broad immunity from any
challenge brought against them on the basis that their conduct
would constitute anti-competitive behaviour.
The
Dawson recommendations
As the authorisation process is very thorough and time
consuming, the Dawson Committee recommended introducing a procedure
akin to the notification process already available under the Act
for exclusive dealing. However, the Dawson Committee made it clear
that this notification process should exist as an alternative to
the currently available authorisation process.(41) The
individual recommendations made by the Dawson Committee were as
follows:
Recommendations
7.1 A notification process should be introduced,
along the lines of the process contained in section 93 of the Act,
for collective bargaining by small businesses (including
co-operatives that meet the definition of small business) dealing
with large business.
7.2 A transaction value approach should be adopted
to provide a definition of small business. Initially the amount of
transactions should be set at $3 million but be variable by the
Minister by regulation.
7.3 A period of 14 days should be required to
elapse before a notification takes effect.
7.4 Provision should be made for third parties to
make a collective bargaining notification on behalf of a group of
small businesses.(42)
Even before the proposed changes were announced, Professor Evan
Jones noted in February 2004 that:
Collective bargaining with powerful market players
deserves entrenchment in the Act as a legitimate competitive
(rather than anti-competitive) procedure.(43)
After the introduction of the Bill, the proposed changes to the
Act generally received a positive reception in the print media. It
was noted that the proposed changes were one of the highest
priorities on the wish list of small business and that the reform
was worthwhile [because it included] enhanced powers for small
business to collectively negotiate with the big companies.
(44)
The Commission is rather cautious about the proposed amendments.
One commentator reported that the Commission [R]ecently warned that
collective bargaining can give small businesses as much power as
unions .(45)
The Labor Party generally supports the collective bargaining
changes. In a joint policy statement,
the Leader of the Opposition, Mark Latham and Gavan O Connor,
Shadow Minister for Agriculture and Fisheries, stated that the
Labor Party:
[W]ill give dairy farmers more clout in the
marketplace by strengthening the Trade Practices Act in key areas,
including: Support for collective bargaining improving the market
power of dairy farmers.(46)
The Australian Financial Review reported a similar push
by senior party ministers of the National Party.
The Bill proposes amendments that will allow joint ventures, in
certain circumstances, to contravene the exclusionary and price
fixing provisions under the Act.
A provision in a contract, arrangement or understanding that,
for example, limits or restricts the supply or acquisition of goods
or services, is considered to be an exclusionary provision under
section 4D of the Act. The making of, or giving effect to, such a
provision is prohibited per se under section 45 of the Act because
such conduct is considered to be:
[D]etrimental to economic welfare, and so unlikely
to be beneficial, that it should be proscribed without further
inquiry about its impact on competition.(47)
The Dawson Committee noted, however, that the prohibitions of
exclusionary provisions under the Act have such a broad application
that co-operative arrangements that may not have a detrimental
impact on competition (48) still contravene the Act.
Accordingly, it was recommended that:
8.1 The Act should be amended so that it is a
defence in proceedings based upon the prohibition of an
exclusionary provision to prove that the exclusionary provision did
not have the purpose, effect or likely effect of substantially
lessening competition.
8.2 The Act should also be amended to restrict the
persons or classes of persons to which a prohibited exclusionary
provision relates, to a competitor or competitors, actual or
potential, of one or more of the parties to the exclusionary
provision.
However, the Government considers it to be inappropriate to
introduce a broad defence to exclusionary provisions as suggested
by the Dawson Committee. The Government noted in the Explanatory
Memorandum that it:
[N]ow considers that the recommended defence would
be too broad as it would prevent unambiguously anti-competitive
conduct from being prohibited per se in appropriate
cases.(49)
As a result, the Government limited the defence to joint
ventures as defined in section 4J of the Act. The Explanatory
Memorandum provides several examples of joint ventures that
potentially would be able to benefit from this amendment,
including:
[J]oint ventures directed to research and
development, the production of goods, the supply of services and
marketing. The section 4J definition of joint ventures will also
encompass other arrangements, for example, the enforcement by clubs
of the rules of a professional sporting
competition.(50)
A contract, arrangement or understanding that aims, for example,
at fixing, agreeing or controlling a price is considered to be a
price fixing provision which is always deemed to be
anti-competitive under section 45A of the Act. Under subsection
45A(2), joint ventures are, under certain circumstances, exempted
from the application of this deeming provision.
Indeed, the Dawson Committee observed that joint ventures can be
pro-competitive arrangements between two or more entities and that
the benefits that can be derived from a joint venture may outweigh
the detrimental effects it may have on competition.(51)
Accordingly, the Dawson Committee recommended that:
9.1 The Act should be amended by substituting for
the current exemption from section 45A(1) provided by section
45A(2), a provision that section 45A(1) does not apply to a
provision of a contract or arrangement made, or of an understanding
arrived at, or of a proposed contract or arrangement to be made, or
of a proposed understanding to be arrived at, if it is proved that
the provision is for the purposes of a joint venture and the joint
venture does not have the purpose, effect or likely effect of
substantially lessening competition.
Following this recommendation, the Government proposes
amendments that will make it a defence to an action under section
45A if a joint venture can prove that the conduct in question did
not have the purpose, effect or likely effect of substantially
lessening the competition .(52)
Third line forcing is the practice of offering for sale one good
or service, or a discount on a good or service, on condition that
another good or service is purchased from a third person. An
example is where a financial institution lends money only on
condition that the lender purchases an insurance policy from a
particular insurer.(53) Third line forcing is currently
prohibited by the Act.(54) The Commission may, however,
grant an authorisation to a party or parties to engage in conduct
that would otherwise be a breach of the third line forcing
provisions.(55) The Commission cannot grant such an
authorisation unless satisfied that there are or are likely to be
benefits to the public justifying the grant.(56)
There is also a notification process, through which a
corporation may gain some protection for its conduct by notifying
the Commission of third line forcing that it is engaging in or
proposes to engage in. The Commission may the object to the conduct
where it takes the view that there is no discernible public benefit
that would justify the conduct. Where the Commission does not
object the corporation s conduct is not subject to action for
breach of the third line forcing prohibition.(57)
In 1976, the Swanson Committee said that third line forcing was
considered in virtually all cases to have an anti-competitive
effect.(58) According to the Dawson Committee, however,
third line forcing may be beneficial and pro-competitive where
efficiencies in production make it cheaper to produce and sell two
or more products in combination .(59) Third line forcing
is anti-competitive, says the Committee, where corporations are
able to exploit their market power in one market to distort an
unrelated market, perhaps facilitating anti-competitive price
discrimination or barriers to entry .(60) The Committee
recommended that, consistent with the other exclusive dealing
provisions in the Act, third line forcing be made subject to a
substantial lessening of competition test. That approach has been
adopted in the Bill.
Dual listed companies have been described by the Reserve Bank of
Australia (Reserve Bank) as effectively being mergers between two
companies in which the companies agree to combine their operations
and cash flows, but retain separate shareholder registries and
identities(61) so that there are two corporations, one
listed on a domestic exchange and the other listed on a foreign
exchange.
The Reserve Bank has noted that there are several ways in which
a dual listed company may be established. One form of dual listed
company involves the two companies transferring their assets to one
or more jointly owned subsidiary holding companies. The holding
company then passes dividends back to the main companies who then
distribute the dividends to their shareholders. Another form of
dual listed company arrangement involves a contractual arrangement
to share the cash flows of each other s assets.(62)
There are three dual listed companies in Australia; Rio Tinto
Limited (formed in 1995), BHP Billiton Limited (formed in 2001) and
Brambles Industries Limited (formed in 2001). The dual listing for
these companies is between the Australian Stock Exchange and the
London Stock Exchange. These companies are set up contractually to
share cash flows from each others assets.(63)
Currently, dual listed companies are not expressly dealt with
under the Act. The Dawson Review noted that dual listed companies
are not regarded as a single economic entity for the purposes of
section 45 of the Act.(64) Hence an agreement entered
into by the two companies to form and run a dual listed company may
be in breach of section 45.(65) This may present
barriers to forming a dual listed company. The Dawson Review also
noted that transactions between the different legal entities in a
dual listed company are analogous to transactions between related
bodies corporate in a corporate group .(66) Currently
related bodies corporate are exempt from section 45 and 47 (other
than the third line forcing provisions) of the Act.(67)
Given the similarities between dual listed companies and related
bodies corporate, the Dawson Review recommended that intra-party
transactions between dual listed companies should be treated in the
same way under the Act as related party transactions within a
corporate group.
The Government accepted the Dawson Review s recommendations in
relation to dual listed companies(68) and these changes
are implemented in schedule 6 of the Bill.
As stated above, currently there are only three dual listed
companies in Australia and so it would appear that these changes
will have, at this stage, a limited impact.
Currently, the Commission has broad sweeping investigatory
powers under section 155 of the Act.(69) Subsection
155(1) gives the Commission power to issue a notice requiring a
person to furnish information, produce documents or appear before
the Commission to give evidence. The Commission may only use the
power set out in this sub-section where the Commission, Chairperson
or Deputy Chairperson has reason to believe that the person named
in the notice is capable of assisting the Commission in its
investigations into a matter that may be a contravention of the
Act. It is an offence if the person refuses or fails to comply with
the notice.(70)
Subsection 155(2) also gives the Commission power to authorise a
member of staff to enter premises, inspect documents and make
copies or take extracts of those documents where there is a
suspected contravention of the Act. The Commission does not need to
obtain a search warrant under subsection 155(2), however, it may
only use this power if it has reason to believe that the person who
possesses or controls the documents may have contravened the Act.
It is an offence if the occupier or person in charge of the
premises does not provide the authorised officer with reasonable
facilities and assistance in the exercise of their powers under
subsection 155(2).(71)
The Commission has stated that it uses the power in sub-section
155(2) in only limited circumstances. According to the Dawson
Review the Commission states that they will only use subsection
155(2) where it believes that documents may be destroyed, where
documents are held over a number of sites and it is necessary to
act simultaneously or where there has been a failure to comply with
a voluntary request or a section 155(1) notice.(72)
The Dawson Review examined the frequency of use of section
155(2) of the Act. In 1998-99, no authorities were given under
subsection 155(2). In 2001-2002, eight authorities were given under
subsection 155(2). In total, the Commission has used its powers
under subsection 155(2) on only 16 occasions.(73)
Despite the apparently limited use of subsection 155(2), there
are concerns about the operation of the provision. The Dawson
Review noted that there is no independent assessment of the
Commission s use of the provision.(74) Whilst there is
no suggestion that the Commission has in any way abused this power,
the Dawson Review noted that the provision as it currently stands,
does provide scope for criticism, in particular that it could be
used by the Commission unreasonably and without
impartiality.(75)
Subsection 155(2) is also in conflict with principles set out in
the Government s document; A guide to framing Commonwealth
offences, civil penalties and enforcement powers (the
Guide).(76) In relation to entry, search and seizure the
Guide stated that legislation should only authorise entry to
premises under warrant or by consent or in a limited range of other
circumstances such as where it is a condition of a licence.
Following a consideration of the issues regarding the use of
section 155, the Dawson Review made a number of recommendations
including the following:
13.3 Section 155(2) of the Act, which provides for
the Commission to enter premises and inspect documents, should be
amended to:
13.3.1 require the Commission to seek a warrant
from a Federal Court Judge or Magistrate for the exercise of these
powers: and
13.3.2 provide the Commission with the power to
search for and seize information .
In civil and criminal cases, confidential communications passing
between a client and their legal adviser are not required to be
given in evidence or disclosed by the client, and without the
clients consent, must not be given in evidence or disclosed by the
legal adviser if the communication related to the giving of legal
advice or was in regard to litigation taking place or being
contemplated by the client.(77) The Dawson Review
examined the use of legal professional privilege in relation to
section 155 of the Act. It recommended that legal professional
privilege should be specifically preserved under the Act so that
the Commission does not have power under section 155 to compel the
production of documents and the provision of information covered by
legal professional privilege.(78) This is in accordance
with the High Court s decision in ACCC v Daniels Corporation
International.(79)
The Government accepted the Dawson Review s recommendations
regarding changes to Commission enforcement provisions and these
changes are implemented in schedule 8 of the
Bill.(80)
The Bill proposes to increase the penalties that apply when
there has been a contravention of Part IV of the Act. Currently the
Act provides that in relation to a corporation, the maximum penalty
that can be imposed is $10 million for each act or omission
that breaches Part IV of the Act.(81) In relation to
individuals, the Act provides that the maximum penalty that may be
imposed is $500 000 for each act or omission in breach of the
Act.(82)
The Dawson Review noted that other jurisdictions enable Courts
to deter illegal behaviour by imposing maximum penalties on
corporations that are either a multiple of the gain from the
prohibited conduct or a proportion of the corporation s turnover.
The Dawson Review recommended that:
The maximum pecuniary penalty for corporations be
raised to be the greater of $10 million or three times the gain
from the contravention or, where gain cannot be readily
ascertained, 10 per cent of the turnover of the body corporate and
all of its interconnected bodies corporate.(83)
The proposal to increase the penalty regime for contraventions
of Part IV of the Act has not been criticised in the media.
The Government accepted the Dawson Review recommendation and it
is implemented in part 1, schedule 9 of the
Bill.
The Dawson Review considered that criminal penalties should also
be imposed for a contravention of Part IV of the Act, however it
considered that further work needed to be done before making
recommendations on this matter.
The Dawson Review considered that a further way of deterring
contraventions of Part IV would be to give a court the power to
exclude an individual implicated in a contravention from being a
director of a corporation or being involved in its
management.(84) The Government accepted the Dawson
Review recommendation which is implemented in part 2,
schedule 9 of the Bill.
The Dawson Review recommended that corporations be
prohibited from indemnifying, directly or indirectly, officers,
employees or agents against the imposition of a pecuniary penalty
upon an officer, employee or agent.
The Government accepted the Dawson Review's recommendations
regarding changes to indemnity arrangements and implements this
recommendation in part 3 of schedule 9 of the
Bill. In addition to the Dawson recommendation, the Bill also
amends the Act to provide that a body corporate cannot indemnify
officers, employees or agents for their legal
costs.(85)
The Business Law Section of the Law Council of Australia has
expressed opposition to the proposed indemnity amendments and
suggests that indemnity provisions similar to those contained
within section 199A of the Corporations Act 2001 would be
more preferable.(86)
The Bill provides that a body corporate is not permitted to
indemnify a person for a civil penalty imposed on that person in
their capacity as an officer, employee or agent of the body
corporate, for a contravention of Part IV of the Act. The Business
Law Section argues that the provision does not distinguish between
senior company employees (such as company directors) and junior
employees, nor does it consider the circumstances surrounding the
contravention, that is, whether the contravention was serious or
whether it was in good faith. The provision does not achieve the
best compliance outcome by failing to distinguish between the
different forms of contravention.
The Business Law Section of the Law Council suggests that
guidance on a more workable model may be gained from section 199A
of the Corporations Act 2001. Section 199A only prohibits
the indemnification of a person in the role of an officer or
auditor of the company. It is also noteworthy that persons will
only be liable for a civil penalty under the Corporations Act
2001 if there has been a serious contravention of the relevant
provisions.
Under the Bill, a body corporate will not be permitted to pay
for the legal costs that officers, employees or agents of the
company incur in defending or resisting the Part IV proceedings
giving rise to their liability. The Business Law Section of the Law
Council argues that there is no good policy reason to deny
assistance for legal costs, specifically when conduct has been
undertaken in good faith. It argues that this is particularly the
case where employees may lack the financial capacity to defend
themselves and which is very relevant in section 46 and section 47
cases which commonly involve large scale and expensive litigation.
The Business Law Section suggests that guidance on a more
appropriate provision can be gained by referring to section 199A of
the Corporations Act 2001. It also suggests that if
indemnities of legal costs are to be prohibited as proposed, then,
as in section 199A of the Corporations Act 2001, a
footnote should be added to the Act noting that loans can be made
to employees against legal costs without infringing the
prohibition.
Items 1 and 2 repeal the old, and insert a new,
definition of authorisation into section 4 to reflect the fact that
the Tribunal and not the Commission will now have responsibility
for authorisation decisions.
Item 3 inserts a definition of clearance into
section 4, reflecting the new informal procedure whereby clearance
can be granted by the Commission or, on review, by the
Tribunal.
Item 7 adds to section 37 a requirement that
the Tribunal be constituted by different members when considering
applications for authorisation on the one hand and applications for
review of merger clearance decisions on the other.
Items 9 and 10 add notes to section 50
clarifying that the subsections will not be breached where
clearances or authorisations are granted.
Item 17 inserts into the Act section 80AC which
provides for the granting, on application by the Commission, of
injunctions to prevent mergers where a clearance or an
authorisation has been granted on the basis on false
information.
Item 18 inserts section 81A which provides for
divestiture in cases where mergers proceeded pursuant to clearances
or authorisations granted on the basis of false information.
Item 20 inserts a new subparagraph (1A) into
section 87B which allows the Commission to accept a written
undertaking for the purpose of merger clearances and
authorisations.
Item 21 repeals the existing, and inserts a
new, heading to Part VII of the Act. In effect, the new title is
the same as the old but for the inclusion of the term clearances in
the new.
Item 25 repeals the existing, and inserts a
new, subsection 88(9), effectively removing the jurisdiction of the
Commission to grant authorisations for mergers under section
50.
Item 27 inserts at the end of Part VII a
Division III headed Merger clearances and authorisations . The new
division gives effect to the merger and clearance regime
recommended by the Dawson Committee. The Bill summarises the effect
of the merger clearance provisions as follows:
the Commission grants them [proposed
section 95AC];
it must make its decision whether to grant within
40 business days (which can be extended if the applicant agrees),
and if it doesn t, the application is taken to be refused
[proposed section 95AO];
it cannot grant the clearance unless it is
satisfied that the acquisition would not have the effect, or be
likely to have the effect, of substantially lessening competition
in a market [proposed section
95AN];
if it refuses to grant a clearance, or grants a
clearance subject to conditions, then the person who applied for
the clearance may apply to the Tribunal under Division 3 of Part IX
for review of the Commission s decision [proposed section
111].
The Bill summarises the effect of the merger authorisation
process as:
the Tribunal grants them [proposed section
95AT];
it must make its decision whether to grant within
3 months (which can be extended to 6 months in special
circumstances), and if it doesn t, the application is taken to be
refused [proposed section 95AZI];
it cannot grant the authorisation unless it is
satisfied that the acquisition would result, or be likely to
result, in such a benefit to the public that the acquisition should
be allowed to take place [proposed section
95AZH].
Subdivision D contains a prohibition on
providing false or misleading information to the Commission or
Tribunal.
Items 28 to 36 amend Part IX to separate the
process of review by the Tribunal of Commission decisions on merger
clearances from the process for review on other Commission
decisions. The new process for review of Commission decisions on
merger clearances is set out in Division 3 to be added to Part IX.
Under Division 3 a person dissatisfied with a Commission decision
on a merger clearance may apply within a time to be determined by
regulation to the Tribunal for a review. The Tribunal must make the
decision within 30 days of receiving the application unless it
determines that, by reason of complexity or other special
circumstance, the matter cannot be properly dealt with during that
time, in which case the time is extended by 60 days.
Item 41 inserts section 157A which is a
disclosure provision, essentially requiring the Tribunal to provide
a corporation applying for authorisation, copies of all relevant
documents in the Tribunal s possession.
Items 1 to 14 provide for a number of
essentially procedural amendments to the provisions of the Act
relating to authorisations other than merger authorisations.
Schedule 3 of the Bill provides for the
introduction of the notification process for collective bargaining
as currently available for exclusive dealing.
Item 9 introduces proposed Subdivision
B Collective bargaining into the Act. Central to the
notification process for collective bargaining will be
proposed section 93AB. According to this
provision, a corporation intending to enter into, or give effect
to, a collective bargaining arrangement which potentially breaches
section 45(2)(a) or (b) of the Act, may give the Commission a
collective bargaining notice ( notice ) pursuant to proposed
subsection 93AB(1). Such a notice must include the
particulars of the arrangements.
Schematically, proposed section 93AB operates
as follows:
Before a corporation may give a notice under proposed
section 93AB, it must fulfil three prerequisites.
Essentially, a corporation must:
1. have entered, or
propose to enter, into an initial contract with one or more persons
(proposed subsection 93AB(2))
The corporation can enter into such initial
contracts with persons as defined in section 22 of the Acts
Interpretation Act 1901. This definition is broad and includes
bodies corporate and individuals and
2. reasonably
expect to make one or more contracts with one target
(proposed subsection 93AB(3))
Under this proposed subsection, a notice may
only relate to contractual relations with one target at any time.
Where it is envisaged to contract with multiple targets, individual
notices in relation to each target are required. This limitation is
also reflected in proposed subsections 93AB(7),
which will be dealt with further below.
3. reasonably
expect not to enter into a contract or contracts exceeding an
annual transaction value of $3 million (proposed subsection
93AB(4))
The annual transaction value of $3 million
reflects Recommendation 7.2 of the Dawson Committee. To provide
flexibility to this threshold, the proposed subsection
93AB(4) provides that regulations will prescribe different
amounts for different industries. The Minister for Small Business
and Tourism, the Hon. Mr Joe Hockey explained that this would be
necessary, for example, for those industries that are high in
turnovers but low in profit margins. He stated that:
What is included in the legislation [ ] is a
provision to, by regulation, exempt certain businesses and provide
their own caps. For example, petrol stations have high turnover and
low profit. Their turnover obviously may well exceed $3 million per
annum. For example, if it is an independent petrol station that is
distributing Caltex petroleum their turnover may be $15 million or
$30 million per annum. I will be consulting widely with small
business groups to identify those that are in that position so that
the true meaning of the provisions of collective bargaining are
kept to in the form of new regulations.(87)
Whilst the use of regulations adds flexibility, it also means
that the issue of which threshold will be applicable to each
industry is in the realm of the executive, subject only to limited
scrutiny by Parliament.(88) It seems to be at least
conceivable that the threshold could be modified to accommodate the
needs of medium or large businesses to the extent that the intent
of the provision, the strengthening of small business, is
ultimately compromised. Note also in this regard that the notice
procedure is in fact open to any, including medium and large,
businesses as long as the transaction volume remains under the
respective threshold.
The timing of the reasonable expectation referred to in
proposed subsections 93AB(3) and
(4) is dealt with under proposed
subsection 93AB(5). It provides that a corporation is
required to be able to demonstrate this reasonable expectation:
-
at the time of giving the collective bargaining notice
(proposed paragraph 93AB(5)(a)) and
-
where an initial contract has been entered into pursuant to
proposed subsection 93AB(2) at the time the
contract has been made (proposed paragraph
93AB(5)(b)).
Under proposed subsection 93AB(7), a third
party such as an industry body will be able to give a notice on
behalf of parties to the initial contract. The Explanatory
Memorandum noted that this might be relevant, for example, to
rural producers who may wish to bargain through the structure
provided by a single industry body. (89) This provision
equates to Recommendation 7.4 of the Dawson Committee, however, it
is limited to the extent that the industry body may only give such
notice where the parties to the initial contract would have been
able to give the notice on their own behalf.
The notification process will exist parallel to the
authorisation process. To avoid that parties to an unsuccessful
authorisation application will subsequently be able to utilise the
notification process, proposed subsection 93AB(8)
stipulates that a corporation may not give a notice where an
application for an authorisation was unsuccessful and the
Commission s determination became effective against the
applicant.
A notice that does not conform with the form requirements set
out in proposed subsection 93AB(6) will be deemed
to be an invalid notice under proposed subsection
93AB(9). After receiving such notice, the Commission will
be under the obligation to inform the person who gave that notice,
informing the notifier of the invalidity and the reasons why the
notice did not comply with the form requirements within 5 days.
The Bill expressly stipulates the circumstances in which a
notice will enter into force, will not enter into force and ceases
to be in force.
The notice given to the Commission will come into force
either:
- fourteen days, or such longer period as prescribed in the
regulations, after the corporation gave a notice to the Commission
(proposed paragraph
93AD(1)(a)).
The fourteen day period corresponds with
recommendation 7.3 of the Dawson Committee. However, the government
decided to allow for more flexibility and proposed to be able to
provide for longer periods to be stipulated in the regulations. The
Explanatory
Memorandum foreshadows that:
It is proposed that the period referred to in
subsection 93AD(1) be set by regulation at 28 days. It is envisaged
that this will give the Commission sufficient time to consider
notification applications in the initial stages of the amendment,
but the time period will be monitored and reviewed after 12 months
with a preference for 14 days.(90)
- with the making of a decision not to issue an objection
notice.
Where the Commission has issued a conference notice in reply to
a notice within the period specified in proposed
paragraph 93AD(1)(a), but subsequently decides not
to issue an objection notice, the notice comes into force with this
decision (proposed paragraph
93AD(1)(b)). The issues conference and objection notice
are dealt with further below.
It has been noted that the Commission may not have the
opportunity to:
[P]lay an proactive role in shaping the nature of
the authorised conduct. For example, the authorisation process
allows the Commission to spell out the conduct allowed, and to
impose conditions to protect competition.
It is not clear that the Commission will be able
to play this role in the new process, and it is given no express
power to impose conditions on notifications. This may result in the
formation of more expansive and effective collective bargaining
groups.(91)
Indeed, proposed paragraph
93AD(1) would provide that the notice will come into force
automatically after the expiry of a certain period of time or a
specific decision made by the Commission. In addition, the proposed
amendments lack a provision empowering the Commission, for example,
to impose conditions in relation to the notice.
The proposed scheme is black and white: either the proposed
conduct is unobjectionable and the notice comes into force or the
Commission will issue an objection notice, bringing the proposed
arrangement to a grinding halt. In light of this, it may be
preferable for some parties to seek approval under the
authorisation scheme which is more flexible because it allows the
Commission to impose conditions.
Proposed subsection 93AD(2)
stipulates two situations in which a notice will not come into
force:
- the notice is withdrawn, or taken to be withdrawn before it
would come into force under proposed
subsection 93AD(1).
The withdrawal of notices is regulated in
proposed section 93AE, distinguishing between the
corporation s withdrawal and a deemed withdrawal. The latter occurs
where prior, or subsequent, to giving the notice a corporation made
an application for authorisation. Where this application was either
successful or dismissed, and the dismissal became effective against
the applicant, the notice is taken to be withdrawn.
- the Commission gives the corporation a conference notice
pursuant to proposed subsection
93AC(4) and subsequently gives the corporation an
objection notice pursuant to proposed
subsection 93AC(1) or (2). The
issues conference and objection notice are dealt with further
below.
Proposed subsection 93AD(3) stipulates three
separate circumstances in which a notice may cease to be in force
including either of the following:
- the notice was withdrawn, or is taken to have been withdrawn,
proposed paragraph 93AD(3)(a)
The reader is referred to the explanations above
in relation to the provision dealing with the withdrawal of
notices, proposed section 93AE.
- the Commission gives an objection notice in relation to the
notice, proposed paragraph 93AD(3)(b)
Where the Commission gives an objection notice,
the notice ceases to be in force on the 31st day after
the relevant day as specified in proposed subsection
93AD(4), or on a later day if so specified by the
Commission. The issue objection notice is dealt with further
below.
at the
end of a three year period, beginning with the day the notice was
given proposed paragraph 93AD(3)(a)
Proposed paragraph 93AD(3)(a)
stipulates the actual life span of a successful notice which passed
without objection and came into force, for example by virtue of
proposed paragraph 93AD(1)(a).
The Dawson Committee expressly agreed with a maximum life span of
three years as submitted by the Commission.(92) There is
no provision in the Bill that would enable the corporation to apply
for the notice s extension; rather it will have to give a fresh
notice, triggering the procedure proposed under the Bill anew.
By making an objection notice, the Commission can prevent a
notice from coming into force.
Where the Commission holds the opinion that the notice should
not come into force to immunise the proposed violation of the Act,
the Commission has the power to give an objection notice under
proposed section 93AC. The Bill contemplates two
situations in which an objection notice may be given:
-
in relation to per se provisions exclusionary conduct as
prescribed in subparagraphs 45(2)(a)(i) or (b)(i) of the Act or
contracts containing price fixing provisions pursuant to subsection
45A(1) of the Act and
-
in relation to competition provisions substantially lessening
competition as prescribed in subparagraphs 45(2)(a)(ii) or (b)(ii)
and (ii) of the Act.
For both circumstances, the Bill proposes to introduce the net
public benefit test , according to which the Commission must be
satisfied that the likely benefit of the violation of the per se or
competition provisions outweighs the benefit, if any, to the
public. In anticipation, the Commission has released an issues paper outlining its
approach in relation to assessing these
arrangements.(93)
Prior to making the decision whether or not to issue an
objection notice, the Commission is required to make further
reasonable and appropriate investigations (proposed
subsections 93AC(3)).
The Commission is further required to comply with the conference
requirement set forth in section 93A of the Act (proposed
subsections 93AC(4)). This provision establishes a
procedure pursuant to which the Commission must afford the
corporation the opportunity to attend a conference to discuss an
objection notice. The Commission is only allowed to proceed to
issue a final objection notice if it has complied with the
requirements of section 93A of the Act. Items 11
to 13 of the Bill make the necessary amendments to
section 93A of the Act.
To afford the corporation the requisite procedural fairness, the
Commission is further required to provide reasons for their
decision in form of a written statement when giving an objection
notice (proposed subsections 93AC(3)).
Items 14 to 18 of the Bill
propose to create a new Subdivision D Register of
Notifications and to make amendments to the already
existing register provisions. Under the new scheme, the Commission
would be required to enter notices, including those that have been
withdrawn, in a register.
Items 19 to 21 of the Bill
propose to make relevant changes to the review process set forth
under the Act.
Item 1 of Schedule 4 of the
Bill proposes to introduce a defence to proceedings relating to
exclusionary provisions. A conduct or arrangement amounting to a
exclusionary provision would remain a contravention of the Act,
however, a joint venture would be able to avoid the resulting legal
consequences if it can prove under the proposed section
76C, that on the balance of probabilities its conduct or
arrangements do not, or are not likely to, have the effect of
substantially lessening competition.
Replacing the current defence available to joint ventures under
section 45A(2) of the Act, joint ventures will be able to invoke a
defence under proposed section 76D in relation to
violations of the anti-price fixing provisions under the Act. The
defence is modelled after the defence discussed under Schedule 4
above.
Schedule 6 of the Bill implements the Dawson
Review s recommendations regarding dual listed companies.
Item 1 of schedule 6 defines a dual listed
company arrangement by referring to section 125-60 of the
Income Tax Assessment Act 1997.
Item 2 of schedule 6 amends section 4A of the
Act to deem dual listed companies as bodies corporate related to
each other. Subsection 45(8) and 47(12) excludes bodies corporate
that are related to each other from the operation of section 45 and
47 respectively. As a result of the deeming amendment in
item 2, dual listed companies will not be
regulated by either section 45 or 47 of the Act.
Dual listed companies will still be subject to a general
competition test (proposed section 49). Under this
proposed section, where a dual listed arrangement has or is likely
to have the effect of substantially lessening competition it will
not be permitted under the Act, unless it has been authorised under
section 88. Item 8 amends the authorisation
provisions of the Act to so that the Commission will have power to
authorise a dual listed company under section 88 of the Act.
This provision was not recommended by the Dawson Review,
however, it has been included to address the concern that the
formation of dual listed company arrangements could potentially be
unregulated by the competition provisions in the Act. The Dawson
Review correctly points out the formation of dual listed companies
may not be regulated by section 50 of the Act as there may not be
an acquisition of shares or assets. If dual listed companies are
removed from the reach of section 45 and 47, their formation
arrangements may be anti-competitive in nature yet not subject to
regulation. The proposed section 49 of the Act is designed to
ensure that the formation of dual listed companies is still
therefore subject to competition tests.
Items 1 to 28 make various technical amendments
that give effect to the government s intention to make the third
line forcing provisions subject to a lessening of competition test,
as outlined in the Background section above.
Items 29 & 30 amend sections 46 and 47 so
as to make a corporation and its related bodies corporate a single
entity for the purposes of those sections. That is, it will no
longer be a breach of the sections to supply goods or services on
condition that a good or service is also purchased from another
party if that other party is a body corporate related to the
initial supplier.
Item 4 of the Bill inserts a new Part XID
Search and Seizure, into the Act. The Bill proposes that entry to
premises can either be by way of consent (proposed division
3) or by warrant (proposed division
4).
The Bill sets out provisions governing appointment and method of
identifying persons given the power to enter premises. The Bill
provides that staff member must have suitable qualifications and
experience to properly exercise their search and seizure powers
(proposed section 154B) and that the inspector
must carry an identity card at all times when carrying out his or
her functions as an inspector (proposed section
154C). It is interesting that the Bill uses the words An
inspector must carry , rather than display the identity card. It
would seem that the requirement to display the card would be more
appropriate.
The Bill, in proposed section 154D provides
that the inspector may only enter premises if the Commission,
Chairperson or Deputy Chairperson has reasonable grounds for
suspecting that there may be evidential material on the premises
and the inspector has obtained the consent of the occupier of the
premises.
The Bill in proposed section 154E sets out the
inspectors powers in relation to premises. The inspector may search
the premises, make copies of evidential material, remove evidential
material if they have the consent of the occupier and secure the
evidential material, pending being able to obtain a search
warrant.
Proposed Division 4 of Schedule 8 of the Bill
sets out the search warrant arrangements.
A search warrant is to be obtained from a magistrate ex parte.
The magistrate can issue the warrant if the magistrate is satisfied
that there are reasonable grounds for suspecting that there is
evidence on the premises or there may be evidence on the premises
within the next 72 hours (proposed section
154X).
The Bill states that the warrant must contain minimum
information including:
-
Description of the premises to which the warrant relates
-
The kind of material that is to be searched for under the
warrant
-
The name of the inspector responsible for executing the
warrant
-
Whether the warrant may be executed at any time of the day or
night
-
The day on which the warrant ceases to have effect
(proposed section 154X).
These requirements are designed to place parameters around the
use of the warrant.
The Bill also provides that an inspector may apply to a
magistrate by telephone, fax or other electronic means, for a
search warrant in urgent situations (proposed section
154Y).
When applying for the warrant, the inspector must not make a
statement that the inspector knows to be false or misleading.
Making of a false or misleading statement in these circumstances is
an offence punishable by a maximum of two years imprisonment
(proposed section 154Z).
Once a search warrant has been issued, the inspector is then
referred to as the executing officer. The executing officer is
vested with the power to enter premises and search the premises for
the kind of evidential material specified in the warrant
(proposed paragraphs 154G(a) and (b)). If the
evidence is found the executing officer may seize it, or make copes
of evidence (proposed paragraphs 154G(b) and (c)).
The executing officer may operate electronic equipment or take
equipment and material onto the premises to assist in the search
(proposed paragraphs 154G(d) and (e)).
The Bill, in proposed section 154L gives the
executing officer and officers assisting the executing officer the
power to use force in executing the search warrant.
The Bill also sets out the procedures that the executing officer
must follow when using the search warrant. In particular, the
executing officer must announce that he or she is authorised to
enter the premises (unless this would frustrate the search) and
give persons on the premises the opportunity to allow entry onto
the premises (proposed section 154M).
The occupier of the premises must provide the executing officer
and assisting officers with all reasonable facilities and
assistance. Failure to do so is an offence with a maximum penalty
of 30 penalty units (proposed section 154Q).
A person at the premises is required to answer questions or
produce evidence to which the warrant relates. Failure to do so is
an offence with a maximum penalty of 30 penalty units. The person
cannot refuse to answer the questions on the grounds that they may
incriminate themselves (proposed section 154R),
but the production of evidence may only be used.
In relation to seized goods, the executing officer or officer
assisting must provide a receipt for the goods seized
(proposed section 154U). The goods may not be
seized for more than sixty days unless they have been granted a
extension of time under proposed section 154V or
legal proceedings have been commenced before the end of the sixty
days.
The search and seizure provisions in the new Part XID are
largely in accordance with the Entry, Search and Seizure
requirements set out in the Commonwealth s A guide to framing
Commonwealth offences, civil penalties and enforcement
powers.
Item 7 of Schedule 8 repeals the current
subsection 155(2).
Item 18 and 19 of the Bill implements the
Dawson Review s recommendation regarding legal professional
privilege so that a person is not required to produce a document
under section 155 of the Act that would disclose information that
is subject to legal professional privilege.
Item 4 7 of schedule 9 amends the Act to
incorporate the new civil penalty arrangements.
Proposed Part 2 of schedule 9 of the Bill
provides that a Court may disqualify a person from managing a
corporation where the Court is satisfied that the person has
contravened, attempted to contravene or been involved in a
contravention of Part IV and the Court considers that the
disqualification is justified (item 20).
Consequential amendments are made to Part 2D.56 of the Corporations
Act which deals with disqualification from managing
corporations.
Proposed Part 3 of schedule 9 of the Bill
amends the Act so that a company is not able to indemnify their
officers whose conduct has found to breach Part IV of the Act.
This schedule provides for the repeal of section 2D of the Act
and inserts section 2BA. Section 2D was introduced
into the Act as part of the introduction of the National
Competition Policy.(94) It exempts from the operation of
Part IV of the Act, transactions involving only persons acting for
the same local government body and decisions relating to licenses
issued by local government bodies. A review of the section was
undertaken by the Productivity Commission pursuant to the
legislation review process under the National Competition Policy
agreements. The Commission reported that:
In the Commission s view, a provision directly
limiting the application of Part IV to the business activities of
local governments should be inserted into the Act. A direct
provision would:
remove any uncertainty as to the application of
Part IV to local government. This would reduce the risk of a local
government body s legitimate regulatory decisions being challenged
under Part IV and the associated costs of defending such
decisions;
be consistent with the original intention of the
NCP reforms to extend Part IV to all business activities
irrespective of their ownership; and
define the application of Part IV to local
government in a manner similar to that of the other tiers of
government.
Under this approach, section 2D should be
repealed, as both exemptions would be redundant.(95)
Item 1 inserts section 2BA
into the Act, which provides that Part IV applies in relation to a
local government body only to the extent that it carries on a
business, either directly or by an incorporated company in which it
has a controlling interest.
Item 5 repeals section 2D.
Item 2 repeals section 150F and replaces it
with a new section 150F, and 150FA and 150FB.
These amendments seek to address issues arising in R v
Hughes.(96) The High Court there held that:
for the Commonwealth to impose on an officer or
instrumentality of the Commonwealth powers coupled with duties
adversely to affect the rights of individuals, where no such power
is directly conferred on that officer or instrumentality by the
Constitution itself, requires a law of the Commonwealth supported
by an appropriate head of power.(97)
According to the author of the Explanatory
Memorandum:
The amendments to section 150F will ensure the
States and Territories can confer duties on the Commission and the
Tribunal pursuant to the Competition Code, in a way that is
constitutionally valid (that is, the Commonwealth law will impose
the duty on Commonwealth bodies and officers, as opposed to the
Commonwealth law merely consenting to a State or Territory
law).
As the Bill seeks mainly to implement the recommendations of the
Dawson Review, it is silent on matters untouched by the Review. For
example, The Dawson Review recommended no change, for instance, to
the provisions of section 46 misuse of market power of the Act. The
Economics References Committee, however, took a different view and
the government has since indicated an intention to make changes to
section 46 based partly on that Committee s recommendations. It
appears that such changes will be the subject of another Bill.
This Bill does substantially restructure the procedures for
merger clearances and authorisations. One aspect of the new
arrangements that warrants scrutiny is the proposal not to allow
third parties access to the merits review process in relation to
decision of the Commission on merger clearances. This means that,
whilst the corporation applying for a merger would have the right
to review by the Tribunal of a refusal, another corporation in the
same industry that may be affected by the merger would have no
right to review on the merits.
Whilst the amendments aim to protect
small business, the use of a threshold alone will not prevent
medium or even large businesses from utilising collective
bargaining for their purposes unless the Commission sets out clear
internal guidelines, for example in relation to the size of the
corporation intended to be covered by the provisions. This may
become an even stronger concern where the transaction value is
increased by regulation to accommodate the needs of certain larger
businesses. Such increase would be subject only to limited scrutiny
by Parliament, and has the potential to erode the purpose of the
entire measure.
In respect of the notification process, the Commission will have
either the option to let the notice pass or to object to the
notification, preventing it from entering into force. There is no
mechanism under the proposed scheme that would enable the
Commission, for example, to impose conditions.
The Business Law Section of the Law Council of Australia argues
that the provisions regarding the indemnification of officers,
employees or agents of the body corporate are problematic. The
provision states that a body corporate cannot indemnify officers,
employees or agents against:
-
the imposition of a pecuniary penalty upon an officer, employee
or agent or
-
legal costs incurred in defending the legal proceedings giving
rise to the liability.
This provision may have harsh consequences upon
employees who have acted in good faith and yet have contravened the
Act. It is not in step with the indemnity provisions in the
Corporations Act 2001 that seems to more fairly deal with
parties who have contravened that legislation.
1. Committee of Inquiry into the
Competition Provisions of the Trade Practices Act 1974, Review
of the competition provisions of the Trade Practices Act,
(Dawson Review) Commonwealth of Australia, Canberra, 2003, at:
http://tpareview.treasury.gov.au/content/report.asp.
2. The Hon Peter Costello MP,
Press Release, 9 May 2002, at:
http://www.treasurer.gov.au/tsr/content/pressreleases/2002/023.asp.
3. ibid.
4. ibid.
5. Butterworths Encyclopaedic
Australian Legal Dictionary.
6. Trade Practice Act
1974 (the Act), section 50(1).
7. Australian Competition and
Consumer Commission, Submission to the Trade Practices Act review ,
June 2002, p. 134.
8. Dawson Review, op. cit., p.
201.
9. Section 88(9) of the Act.
10. Section 90(9) of the Act.
11. Section 101 of the Act.
12. Australian Competition and Consumer Commission, op.
cit., p. 157.
13. ibid.
14. Graeme Samuel, Merger policy works, really ,
Business Review Weekly, vol. 26, no. 14, 15-21 April 2004,
p. 52.
15. Business Council of Australia, Towards prosperity:
submission to the Dawson review of the Trade Practices Act 1974 and
its administration , June 2002, p. 71.
16. M. Sakariko & M. Porter, Competing at home to win
abroad: Evidence from Japanese industry, Fundamental Theory
Task Force Report, American Bar Association 2001, cited in
Australian Competition and Consumer Commission, Submission to the
Trade Practices Act review , June 2002, p. 143.
17. M. Porter, The competitive advantage of
nations, Macmillan, London, 1990, cited in Australian
Competition and Consumer Commission, Submission to the Trade
Practices Act review , June 2002, p. 142.
18. Business Council of Australia, op cit., p. 74.
19. Law Council of Australia, Submissions to the Trade
Practices Act review committee by the Business Law Committee of the
Law Council of Australia , 2002, p. 55.
20. Australian Democrats, Submission to the Review of the
Competition provisions of the Trade Practices Act 1974 , July 2002,
p. 4.
21. Australian Labor Party, Restoring competition and
innovation, Labor s plan to reform the Trade Practices Act ,
Policy Statement, 13 April 2004, at:
tpa_reform_policy.pdf on ftp.alp.org.au, 5 August 2004.
22. The Senate, Economics References Committee, The
effectiveness of the Trade Practices Act 1974 in protecting small
business, March 2004, p. xviii, and Chapter 4.
23. ibid., p. 63.
24. ibid., p. xix.
25. ibid., p. 89.
26. Dawson Review, op. cit., p. 56.
27. ibid.
28. ibid., p. 57.
29. ibid.
30. Australian Consumers Association, Submission on the
review of the competition provisions of the Trade Practices Act
1974 , July 2002, p. 6.
31. Dawson Review, op. cit., p. 61.
32. Commonwealth
Government response to the review of the competition provisions of
the Trade Practices Act 1974
http://www.treasurer.gov.au/tsr/content/publications/pub_downloads/TPAResponse.pdf
33. Section 95AM(3) of the Act.
34. Dawson Review, op. cit., p. 70.
35. ibid., pp. 70-71.
36. Allan Fels, The past and future of competition law ,
Economic Papers, vol. 23, no. 1, March 2004, p. 7.
37. Section 95AZF of the Act.
38. Section 95AZF of the Act.
39. Australian Competition and Consumer Commission,
Authorising and notifying collective bargaining , available at
http://www.Commission.gov.au/content/index.phtml/itemId/522935/fromItemId/314462,
30 July 2004.
40. Essentially, before granting authorisation, the
Commission must be satisfied that the benefit to the public from
the proposed conduct would outweigh any detriment to the public
constituted by any lessening of competition. Australian Competition
and Consumer Commission, Authorising and notifying collective
bargaining and collective boycott issues paper , available at
http://www.Commission.gov.au/content/item.phtml?itemId=522935&nodeId=file40ecca5bdfb61&fn=Authorising%20and%20notifying%20collective%20bargaining%20issues%20paper.pdf,
31 July 2004.
41. Dawson Review, op. cit., p. 118.
42. ibid., p. 121.
43. E. Jones, Professor for Political Economy, University
of Sydney, Competition policy still hits hard at small businesses ,
The Canberra Times, 6 February 2004, p. 13.
44. F. Brenchley, TPA safety net change in limbo ,
Australian Financial Review, 26 June 2004, p. 8.
45. T. O Loughlin, Commission wary of abuse of collective
bargaining , Australian Financial Times, 30 July 2004, p.
5.
46. M. Latham, Leader of the Opposition, G O Connor,
Shadow Minister for Agriculture and Fisheries, A fairer deal for
the dairy industry , joint policy statement,
22 July 2004.
47. Dawson Review, op. cit., p. 123.
48. Dawson Review, op. cit., p. 130.
49. Trade Practices Amendment Bill 2004, Explanatory
Memorandum, op. cit., p. 60.
50. ibid., p. 61.
51. ibid., p. 140.
52. ibid., p. 128.
53. See Re United Permanent Building Society Ltd.
(1976) 26 FLR 129.
54. Subsections 47(6) and (7) of the Act.
55. Subsections 88(8), (8AA) and (8AB) of the Act.
56. Subsection 90(8) of the Act.
57. Section 93 of the Act.
58. Trade Practices Act Review Committee, Report to
the Minister for Business and Consumer Affairs, August
1976.
59. Dawson Review, op. cit., p. 128.
60. ibid., pp. 128 129.
61. J. Bedi, A. Richards and P. Tennant, Research
Discussion Paper: The Characteristics and Trading Behaviour of
Dual-listed Companies, RDP 2003-06, June 2003, p. 1.
62. ibid., p. 4.
63. ibid., p. 5.
64. Dawson Review, op cit., p. 137. Section 45 of the Act
prohibits the making of a contract or arrangement or entering into
an understanding (CAU) if the CAU contains an exclusionary
provision or a provision of the CAU has the purpose or is likely to
have the effect of substantially lessening competition.
65. Dawson Review, op cit., p. 135.
66. ibid., p. 142.
67. Subsection 45(8) and 47(12) of the Act.
68. Commonwealth Government response to the review of
the competition provisions of the Trade Practices Act 1974, op
cit.
69. The Commission also has the power to obtain
information and documents from a person located in New Zealand
under section 155A of the Act.
70. Subsection 155(5) and sub-section 155(6A) of the
Act.
71. Subsection 155(6) and sub-section 155(6A) of the
Act.
72. Dawson Review, op cit., p. 192-193.
73. ibid., p. 192.
74. ibid., p. 196.
75. ibid.
76. Minister for Justice and Customs, A guide to
framing Commonwealth offences, civil penalties and enforcement
powers, February 2004, p. 67.
77. J. D. Heydon, Cross on Evidence, Sixth
Edition, Butterworths, Australia, 2000, p. 703-704.
78. Dawson Review, op cit., p. 199.
79. [2002] HCA 49.
80. Commonwealth Government response to the review of
the competition provisions of the Trade Practices Act 1974, op
cit.
81. Section 76(1A) of the Act.
82. Section 76(1B) of the Act.
83. Dawson Review, op cit., p. 164.
84. ibid., p. 165.
85. Commonwealth Government response to the review of
the competition provisions of the Trade Practices Act 1974, op
cit.
86. S Dudley, discussion with members of the Trade
Practices Committee of the Business Law Section of the Law Council
of Australia, 4 August 2004.
87. The Hon J Hockey, The Minister for Small Business and
Tourism, Trade Practices Act; Pharmaceutical Benefits Scheme; Free
Trade Agreement; Housing , Transcript, Joint Press
Conference with the Treasurer, The Hon P Costello, Canberra, 23
June 2004.
88. D Pearce, Rules, Regulations And Red Tape:
Parliamentary Scrutiny Of Delegated Legislation , Occasional
Lecture Series of the Senate, 25 June 2004,
http://www.aph.gov.au/Senate/pubs/occa_lect/transcripts/250604.pdf,
1 August 2004.
89. Explanatory
Memorandum, op cit., p. 51.
90. ibid., p. 53.
91. ibid.
92. Dawson Review, op. cit., p. 120.
93. Australian Competition and Consumer Commission,
Authorising and notifying collective bargaining, op. cit.,
pp. 8-28.
94. Productivity Commission, Review of section 2D of
the Trade Practices Act 1974: Local government exemptions,
Report no. 23, 14 August 2002, p. XI.
95. ibid., p. X.
96. (2000) 171 ALR 155.
97. ibid., p. 558.
Susan Dudley, Thomas John and Jerome Davidson
9 August 2004
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