Bills Digest no. 1 2008–09
Trade Practices Legislation Amendment Bill
2008
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
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Trade Practices Legislation
Amendment Bill 2008
Date
introduced: 26 June
2008
House: House of Representatives
Portfolio: Treasury
Commencement:
On the day after the day
of Royal Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The primary purpose of the Bill
is to amend the Trade Practices Act 1974 (TPA) to clarify
the meaning of the term take advantage and address problems in
relation to predatory pricing in the context of the prohibition on
misuse of market power in section 46. In addition the Bill will
extend the jurisdiction for section 46 cases to the Federal
Magistrates Court.
The provisions of Part IV of the
TPA, which includes section 46, prohibit various trade practices
that tend to prevent or lessen competition in an Australian market
for goods and services. These provisions are at the heart of the
TPA. Since 1974, they have been instrumental in shaping the
Australian economy. They lay down rules which, as interpreted by
the courts from time to time, restrain anti-competitive behaviour
and promote competition in the market place.[1]
The original form of section 46 of the TPA reflected provisions
of the Sherman Act 1890 in the United
States[2] and the
Australian Industries Preservation Act 1906[3]. It was
directed at a corporation operating independently using its market
power against a competitor.[4]
Since that time section 46 has been the subject a number of
formal inquiries and resultant amendments. Today, subsection 46(1)
provides that a corporation that has a substantial degree of
power in a market shall not take advantage
of that power in that, or any other, market for the following
proscribed purposes:
- eliminating or substantially damaging a competitor of the
corporation or of a body corporate that is related to the
corporation in that or any other market
- preventing the entry of a person into that or any other market
or
- deterring, or preventing, a person from engaging in competitive
conduct in that or any other market.
Despite the amendments to section 46 over the
years, there remain concerns that the section does not achieve its
purpose of prohibiting the misuse of market power.
The Review of Competition Provisions of the
Trade Practices Act (known as the Dawson
report) was released in April 2003. Its terms of reference were
broadly cast as there had not been a comprehensive review of the
competition provisions in Part IV of the TPA since the
Independent Committee of Inquiry into National Competition Policy
in Australia reported in 1993. After the Dawson Committee had
completed its consultations, but before the report was actually
completed, a number of decisions about section 46 of the TPA were
handed down by the Full Court of the Federal Court and the High
Court. Of these, Boral Besser Masonry Ltd v ACCC[5]
(the Boral case) in particular, raised a number of issues.
The Dawson Committee did not make any recommendations for change to
section 46 at that time.[6]
The following year the Senate Economics
References Committee (the 2004 Senate Committee) conducted a review
entitled
The effectiveness of the Trade Practices Act 1974 in protecting
small business which detailed a number of concerns about
the effectiveness of section 46 at that time, specifically:
- whether the TPA gives sufficient guidance as to what
constitutes substantial power in a market
- whether the TPA provides sufficient guidance as to what
constitutes taking advantage of market power
- whether the TPA provides sufficient protection against
predatory pricing
- whether a financial power test should be introduced
- whether the TPA should proscribe the misuse of market power in
a second market
- whether the TPA provides sufficient protection against the use
of co-ordinated market power and
- whether an effects test should be included as an addition to,
or substitute for, the current purpose test .
These have been the recurring themes in calls for
an update to section 46. However, only taking advantage of market
power and protection against predatory pricing are relevant to the
current Bill.
There have been a number of cases in which the
courts have commented on the meaning of taking advantage in the
context of section 46 of the TPA. In 2003, two cases were heard
which considered this issue. The first was
ACCC v Safeway Stores[7] in which the Federal
Court decided that the business rationale of the conduct is
important to the question of whether the corporation has taken
advantage of its market power.
However, Rural
Press Ltd v ACCC,[8] (the Rural Press
case) was determined by the High Court. It defined take advantage
very narrowly, suggesting that one test of whether a company had
taken advantage of its market power was whether it
could have acted in that way in the
absence of the market power.
This could test is about physical or business
capacity, rather than rationale or intent. It appears to result in
a situation where corporations may use their market power to engage
in proscribed conduct with impunity, as long as they could also
undertake that conduct in the absence of such power.
The 2004 Senate Committee recommended that the TPA be amended to
include a provision which clearly outlined the elements of take
advantage for the purposes of subsection 46(1).[9]
However, the Howard Government did not accept the recommendation
on the grounds that it did not accept that the interpretation of
take advantage required any statutory clarification. The Howard
Government relied on the interpretation of the High Court in
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co
Ltd (1989) 167 CLR 77 that take advantage merely means use
.[10] As a result
the question of what it means for a corporation that has a
substantial degree of power in a market to take advantage
of that power (as required by section 46 of the TPA) is still
unresolved.
Predatory pricing occurs where:
- a corporation prices a product below some measure of cost
and
- it does so with the intention of driving a competitor out of
the market and
- the corporation raises the price again in an attempt to recoup
the losses they incurred as a result of their below cost conduct.
This is referred to as recoupment .
In effect, predatory pricing is an exclusionary tactic because
the corporation is seeking, in its pricing, to exclude competitors
from the market for the product. This can be done in one of two
ways:
- for an existing competitor, the corporation excludes them from
the market for the product because the competitor cannot match the
below cost price that has been set
- for a new competitor, the corporation sets the price so low
that it deters anyone else from entering the market.
The difficulty with predatory pricing is that
in some instances, it looks like legitimate competitive behaviour,
because the existence of price wars is often an indicator of
competition. This happened in the Boral case.
Boral Besser Masonry Limited (Boral) manufactured concrete
masonry products such as concrete blocks, bricks and pavers. Boral,
Pioneer, C&M, Rocla and Budget all supplied these products into
the Melbourne market. In the 1990 s a price war broke out between
the manufacturers of these masonry products for the supply of the
products into Melbourne.
The price war that took place between 1993 and 1996 primarily
involved Boral and Pioneer who were competing with each other to
supply concrete products to block layers working on major
construction sites in Melbourne. The price war took place during a
time when the Victorian economy was in recession which had an
adverse effect upon the commercial building industry and the level
of demand for concrete masonry products. Boral and Pioneer cut the
prices charged for concrete masonry products significantly and on
many occasions during the price war, Boral s prices were lower than
their variable costs. In 1996, Boral also expanded its production
capacity for concrete masonry products.
In 1995, Rocla closed down all its Victorian masonry operations.
In June 1996, Budget stopped manufacturing concrete masonry
products.
The Australian Competition and Consumer
Commission (ACCC) alleged that between 1994 and 1996 Boral engaged
in conduct that contravened section 46 of the TPA. In particular
the ACCC alleged that Boral reduced the prices at which it offered
to supply concrete masonry products in Melbourne to levels at, or
below, the cost of manufacture and supply of the products and that
it increased the production capacity of concrete masonry products.
The ACCC alleged that the conduct of Boral was designed to
eliminate or substantially damage C & M and other competitors
including Rocla and Budget.
The majority of the High Court (with Justice
Kirby in dissent) decided Boral had not breached section 46 of the
TPA.
Section 46 does not contain the words
predatory pricing . In the Boral case, the High Court
considered, amongst other things, whether recoupment was needed to
establish predatory pricing in the context of section 46 of the
TPA. It concluded that:
- recoupment is a useful tool for analysis in cases where pricing
behaviour is alleged to contravene section 46 and
- evidence that there was no prospect of recoupment would point
away from predatory pricing.
The 2004 Senate Committee recommended that the TPA be amended as
follows:
- to provide that in determining whether a corporation has
breached section 46, the courts may have regard to the capacity of
the corporation to sell a good or service below its variable cost
and
- where the form of proscribed behaviour alleged under section
46(1) is predatory pricing, it is not necessary to demonstrate a
capacity to subsequently recoup the losses experienced as a result
of that predatory pricing strategy.[11]
The Howard Government accepted this recommendation[12] and the TPA was
amended by the Trade Practices Legislation Amendment Act (No.
1) 2007.
The breadth of submissions to, and the nature of the
recommendations by the 2004 Senate Committee, reflected a level of
frustration experienced by both business and the ACCC with the
manner in which section 46 had been interpreted by the courts. As a
consequence of those interpretations, the ACCC had not been able to
successfully prosecute a number of corporations which it considered
had engaged in a misuse of market power.[13]
The Trade Practices Legislation Amendment Bill (No. 1) 2007 was
introduced into the Senate on 20 June 2007. The following day, the
Senate Selection of Bills Committee referred the provisions of the
Bill to the Standing Committee on Economics (the 2007 Senate
Committee) for enquiry. The 2007 Senate Committee
reported on 1 August 2007.[14]
The Trade Practices Legislation Amendment Act (No. 1)
2007 inserted new subsections 46(1AA) and (1AB) as
follows:
(1AA) A corporation that has a substantial share of a
market must not supply, or offer to supply, goods or
services for a sustained period at a price that is
less than the relevant cost to the corporation of
supplying such goods or services, for the purpose of:
(a) eliminating or substantially damaging a competitor of the
corporation or of a body corporate that is related to the
corporation in that or any other market; or
(b) preventing the entry of a person into that or any other
market; or
(c) deterring or preventing a person from engaging in
competitive conduct in that or any other market.
(1AB) For the purposes of subsection (1AA), without limiting the
matters to which the Court may have regard for the purpose of
determining whether a corporation has a substantial share of a
market, the Court may have regard to the number and size of the
competitors of the corporation in the market.
These two subsections became known as the Birdsville amendment
.[15] The
subsections were significantly different from subsection 46(1)
which provides that a corporation that has a substantial degree
of power in a market shall not take
advantage of that power.
Subsection 46(4A) was also inserted into the TPA by the Trade
Practices Legislation Amendment Bill (No. 1) 2007. The
Bills Digest provides useful background and information about
that subsection stating that subsection 46(4A) deals with whether a
company has taken advantage of its market power for one or more of
the prohibited purposes in section 46(1). Under subsection 46(4A),
the Court may to have regard in making that decision to:
- the conduct of the corporation in selling goods or services for
a sustained period at a price that is below cost. and
- the corporation s reasons for such below-cost selling.[16]
Both of those amendments are relevant to the current Bill.
It has been argued that the Birdsville
amendment introduced considerable uncertainty into the law by
introducing the concepts of substantial market
share sustained period and
relevant cost - terms which had not been
determined by the courts.[17] This uncertainty had the potential to discourage
discounting for fear of being caught by the provision.[18]
In addition, the predatory pricing prohibition introduced by the
Birdsville amendment was thought to apply more broadly than other
parts of section 46 because it applied to firms with a substantial
share of the market rather than firms with substantial market
power.[19]
Finally Duke opines that the Birdsville amendment rendered the
newly-introduced subsection 46(4A) redundant. A party seeking to
challenge predatory pricing would be foolish to attempt to prove
that the alleged predator has taken advantage of its market power
when they could avoid the difficulties associated with establishing
market power and taking advantage of that power by bringing their
claim under the provisions introduced by the Birdsville amendment
.[20]
Further criticism of the Birdsville amendment was made by the
Law Council of Australia which stated:
The fundamental difficulty with the Birdsville
Amendments is that they prohibit price discounting below cost for a
substantial period when undertaken for a proscribed purpose.
However, as almost all price discounting is undertaken to secure
more custom for the discounter, it follows that it must also be
undertaken for the purpose of taking custom away from the
discounter s competitors, thereby exposing the discounter to having
a proscribed purpose of damaging those competitors, preventing
their market entry or deterring or preventing them from engaging in
competitive conduct. The practical consequence of the Birdsville
Amendments would be to deter any corporation with a substantial
market share from discounting to low prices, for fear of
prosecution by the Australian Competition and Consumer Commission
or attack by competitors.[21]
The Motor Trades Association of Australia welcomed the
introduction of this Bill on the grounds that the proposed
clarification of aspects of section 46 will assist small business
operators in seeking redress against predatory behaviour.[22]
The Australian Retailers Association supported the Bill stating
that:
The proposed amendments distinguish predatory
pricing from legitimate competitive discounting, which was
previously unclear. This allows retailers to get on with business
and provide benefits to consumers without being concerned they are
breaching the TPA under recent amendments.[23]
The Council of Small Business in Australia[24] has given similar support to the
proposed amendments in this Bill.
The ACCC has also responded positively stating that:
The reforms announced recently by the
government to section 46 continue the process of providing the
regulator with the tools it needs to vigorously protect
competition, while not falling into the trap of protecting
competitors from the impact of that competition.[25]
And further:
moves by the Federal Government to clarify
predatory pricing provisions of the law should be welcomed by all
consumers who enjoy the benefits if competition lower prices and
better products
The Government is now proposing to streamline
the predatory pricing provisions of the act, consistent with the
broader misuse of market power provisions this is a sensible
strategy.[26]
Institute of Public Affairs
In contrast, Alan Moran, of the Institute of Public Affairs
acknowledged that it is not uncommon for businesses large and small
to involve themselves in price cutting in general, or to selected
valued customers. He stated that:
the amendments will provide further
opportunities for the ACCC to flex its muscles and doubtless allow
it to bid for a larger budget. Small businesses now have a
permanent voice within the ACCC that can be recruited against a
competitor offering lower prices and can make a determination
without any tests of its merits of practicality.
giving the ACCC more powers to pursue companies
that are pricing goods and services too attractively for the
consumer will put a brake on competition.[27]
The Opposition small business
spokesman, Steven Ciobo was reported as saying that the
Coalition supported the amendments in principle but they would make
little difference. The Government needed to improve industrial
relations and boost small business confidence.[28]
However, Shadow Minister for Finance, Competition Policy and
Deregulation, the Hon Peter Dutton MP stated that the Government
needed to show that the proposed changes to section 46 will
increase competition, thereby benefiting businesses and
consumers.[29]
The comments by Shadow Attorney General, the Hon. George Brandis
are discussed under the heading concluding comments at the end of
this digest.
On 26 June 2008, the Senate referred the Trade Practices
Legislation Amendment Bill 2008 to the
Senate Standing Committee on Economics for report by 27 August
2008.
According to the Explanatory Memorandum, the measures outlined
in the Bill will have no significant financial impact. Furthermore,
there is no ongoing compliance cost impact and a minimal
transitional impact.[30]
The Bill contains three schedules of
amendments.
Item 1 proposes to amend existing subsection
46(1AA) so that it will read:
(1AA) A corporation that has a substantial degree of
power in a market must not take advantage of that power in that or
any other market by supplying, or offering to supply goods
or services for a sustained period at a price that
is less than the relevant cost to the corporation
of supplying such goods or services, for the purpose of:
(a) eliminating or substantially damaging a competitor of the
corporation or of a body corporate that is related to the
corporation in that or any other market; or
(b) preventing the entry of a person into that or any other
market; or
(c) deterring or preventing a person from engaging in
competitive conduct in that or any other market.
The term substantial market share has
been replaced by substantial degree of power in a
market . This is the same as term as is already used
in section 46 of the TPA. The terms sustained
period and relevant cost
remain and courts will be required to take these factors into
account when considering whether a corporation has engaged in
predatory pricing.
Item 2 repeals the existing subsection 46(1AB)
which contains a list of factors to which the court may regard in
deciding whether a corporation has a substantial share of the
market under subsection 46(1AA). With the changes to subsection
46(1AA) which are contained in item 1, existing
subsection 46(1AB) becomes redundant.
Item 2 inserts proposed subsections
46(1AB) and (1AC) which make clear what part recoupment
plays in determining whether predatory pricing has occurred. Under
the proposed subsections it is not necessary to prove that a
corporation has an ability to recoup losses incurred from predatory
pricing in order to establish a breach of subsection 46(1AA). The
amendment takes into account the comments of the High Court in the
Boral case that matters relating to recoupment of costs
were useful but not essential for analysis in cases where pricing
behaviour is alleged to contravene section 46.[31]
Item 4 repeals existing subsection 46(4A) which
currently deals with the question of what constitutes taking
advantage of market power.
Item 5 inserts proposed
subsection 46(6A) which sets out those matters to
which a Court may have regard in determining
whether a corporation, by engaging in conduct [32] has taken
advantage of its substantial degree of power in a
market. Those matters include, but are not limited to:
- whether the conduct was materially facilitated by the
corporation s substantial degree of power in the market
- whether the corporation engaged in the conduct in reliance on
its substantial degree of power in the market
- whether it is likely that the corporation would have engaged in
the conduct if it did not have a substantial degree of power in the
market
- whether the conduct is otherwise related to the corporation s
substantial degree of power in the market.
The amendment is introduced in response to the decision of the
High Court in the Rural Press case which interpreted the
meaning of take advantage very narrowly. The matters listed in
proposed subsection 46(6A) are intended to ensure
that the term take advantage can be interpreted more broadly.
Existing subsection 86(1) confers jurisdiction on the Federal
Court in respect of any civil proceeding arising under the TPA.
Existing subsection 86(1A) confers an additional jurisdiction on
the Federal Magistrates Court (FMC) under certain limited parts of
the TPA where the relevant civil proceeding is instituted by a
person other than the Minister or the ACCC.
Item 7 amends existing subsection 86(1A) to
include section 46 matters in the additional jurisdiction of the
FMC. Item 3, which omits the word Court and
inserts the word court in existing subsections 46(3), (3A) and (3C)
reflects the increased jurisdiction of the FMC.
During the Senate Inquiry, submissions expressed concerns about
the costs and delays associated with bringing section 46 matters,
particularly for smaller businesses. If the costs associated with
enforcing section 46 are prohibitively high, then it will not be
effective in addressing anticompetitive conduct no matter how well
it is otherwise suited to doing so.[33] The Bill addresses those concerns by
conferring jurisdiction for section 46 matters on the FMC for civil
proceedings instituted by a person other than the Minister or the
ACCC.
It should be noted that section 86AA of the TPA provides that
for proceedings instituted in the Federal Magistrates Court, the
amount that can be awarded for loss or damage is capped at
$750,000. In addition, the Federal Magistrates Court is permitted
to transfer proceedings to the Federal Court where appropriate
under Part 5 of the Federal Magistrates Act 1999.
Schedule 2 makes amendments to the version of section 46 found
in the Competition Code as set out in the Schedule of the TPA.
The Schedule originates from the agreement by the governments of
Australia entered into on 11 April 1995 the Competition Code
Agreement under which the States and Territories of Australia
agreed to submit, to their respective legislatures, legislation to
implement the version of Part IV of the TPA contained in the
Schedule.[34] The
intention was to extend the operation of the restrictive trade
practices provisions of the TPA to all sectors of the community
through the enactment of complementary State and Territory
legislation.[35]
To this end, section 150C of the TPA provides that the
Competition Code consists of, amongst other things, a schedule
version of Part IV of the TPA.
The amendments in Schedule 2 of the Bill are in exactly the same
terms as the amendments in Schedule 1 of the Bill. This is so that
the schedule version of Part IV in the Competition Code is in
exactly the same terms as Part IV of the TPA.
Schedule 3 contains amendments to both the Australian
Securities and Investments Commission Act 2001 (the ASIC Act)
and the TPA.
Items 1-4 of Schedule 3 amend various sections
in Part 2 of Division 2 of the ASIC Act. That Part is about
unconscionable conduct and consumer protection in relation to
financial services. Each of the amendments omits a reference to the
Court and substitutes a reference to the court . The effect of the
amendments is to recognise that courts other than the Federal Court
have jurisdiction in relation to matters arising under those
sections. Items 8-11 relate to those parts of the
TPA which are about unconscionable conduct. As with items 1-4, they
omit references to the Court and substitute references to the court
. These amendments are consequential to an amendment in
2006[36] when the
jurisdiction of the FMC was expanded to include unconscionable
conduct matters. That amendment was in accordance with
recommendation 17 of the 2004 Senate Committee.[37]
Item 5 repeals existing subsections 12CC(8),
(9) and (10) of the ASIC Act which provide that the prohibition on
unconscionable conduct in relation to financial services does not
apply in relation to a supply or acquisition of goods or services
at a price in excess of $10 million. The effect of the amendment is
that the prohibition against unconscionable conduct will apply
regardless of the price paid.
Similarly, item 12 repeals existing subsections
51AC(9), (10) and (11) of the TPA so that the prohibition against
unconscionable conduct applies to all transactions not just those
under $10 million.
The 2004 Senate Committee noted that
section 12CC of the ASIC Act and 51AC of the TPA currently did not,
at that time, apply where the complainant is a publicly listed
company or where the services involved are priced at more than $3
million. Recommendation 7 in the 2004 Senate Committee report was
that the $3 million threshold be removed.[38]
This was rejected by Government
Senators who were not persuaded of the need to lift the ceilings
altogether so as to extend the protections in the section to all
firms, irrespective of size. They did, however, consider that the
statutory ceiling was too low and recommended the threshold be
lifted to $10 million.[39] Accordingly, the threshold amount was lifted to $10
million in the Trade Practices Legislation Amendment Act (No.
1) 2007.
Items 5 and 12 of this Bill give final effect
to the majority recommendation of the 2004 Senate
Committee.[40]
Item 7 inserts proposed subsection
10(1B) into the TPA. This provides that the Minister must
be satisfied that at least one Deputy Chairperson of the Australian
Competition and Consumer Commission (ACCC) has a knowledge of or
experience in, small business matters.
The Trade Practices Legislation Act 2007 amended the
TPA to create a second Deputy Chairperson for the ACCC. The then
Treasurer, the Hon. Peter Costello said:
The government intends for the position to be
filled by a candidate who is experienced in small business matters.
On implementation, the government will consult with the states and
territories on its preferred candidate for the position, in
accordance with the requirements of the Conduct Code
Agreement.[41]
However, despite this statement, there was no legislative
provision to that effect. This Bill gives effect to that
intention.
Subsection 155(1) of the TPA provides the ACCC with powers,
under certain circumstances, to obtain information relevant to its
decisions under the Act, by issuing a notice requiring a
person:
(a) to furnish to the Commission within the time and in the
manner specified in the notice, any such information
(b) to produce to the Commission in accordance with the notice,
any such documents; or
(c) to appear before the Commission at a time and place
specified in the notice to give any such evidence, either orally or
in writing, and produce any such documents.
These powers are similar in nature to powers available to the
Australian Securities and Investments Commission, the Australian
Prudential Regulation Authority, the Australian Customs Service,
and the Australian Taxation Office under their various Acts.
Currently, the courts have established that the ACCC s powers
under section 155 cease once legal proceedings have commenced. This
view is based on the notion that executive government agencies
should not interfere in judicial proceedings, once such proceedings
are underway.[42]
The ACCC argued to the 2004 Senate Committee that this
interpretation of section 155 deters it from seeking interim
injunctions against companies undertaking anti-competitive
behaviour, because once those injunction proceedings have
commenced, its powers under section 155 cease.[43] The ACCC put its position as
follows:
At the moment, we have a trade-off between
either getting an interim injunction and therefore losing the
ability to use our section 155 powers thereafter, or not getting an
interim injunction until the point where we have more or less, if
you like, got our case together and finished using our 155 powers.
But that can be a reasonable way down the track and the conduct
continues in the meantime.[44]
The 2004 Senate Committee considered that it was appropriate to
amend the [TPA] to enable the ACCC to seek, from the court in which
injunctive proceedings are brought, an order to enable the
continued operation of its powers under section 155 and
recommendation 15 is in those terms.[45] However, the former Government did
not accept the recommendation on the grounds that the court already
had very extensive powers to compel exchange of information in
preparation for trial. The former Government did not accept that
those powers were inadequate.[46]
Item 14 inserts proposed subsection
155(4) into the TPA which is a response to that
recommendation. It provides that the ACCC can continue to exercise
its powers under subsection 155(1) until:
- the ACCC commences proceedings (other than injunctive
proceedings) in relation to the matter or
- the close of pleadings in relation to an application by the
ACCC for a final injunction in the matter.
The real question in respect of the amendments in this Bill is:
will they work when all previous attempts to prohibit predatory
pricing and define what it means to take advantage of market power,
have not?
According to Professor Frank Zumbo, Justice Kirby s powerful
insights as to the impact of the present High Court s decisions on
section 46 provide strong evidence of the need to amend the section
to restore its parliamentary intention:[47]
This is the third recent decision of this Court
(Melway and Boral Besser Masonry Ltd v Australian
Competition and Consumer Commission being the other two) in
which a majority has adopted an unduly narrow view of s 46 of the
Act. In effect, it has held, in each case, that the established
large degree of market power enjoyed by the impugned corporation
was merely incidental or coincidental to the anti-competitive
consequences found to have occurred. Notwithstanding the proof of
market power, the Court has held that the impugned corporations did
not directly or indirectly take advantage of that power to the
disadvantage of competition in the market.
In my view,
the approach taken by the majority is insufficiently attentive to
the object of the [Trade Practices] Act to protect and uphold
market competition. It is unduly protective of the depredations of
the corporations concerned. It is unrealistic, bordering on
ethereal, when the corporate conduct is viewed in its commercial
and practical setting. The outcome cripples the effectiveness of
s. 46 of the Act. It undermines this Court's earlier and more
realistic decision in Queensland Wire. The victims are
Australian consumers and the competitors who seek to engage in
competitive conduct in a naive faith in the protection of the Act.
Section 46 might just as well not have been enacted for cases like
these where its operation is sorely needed to achieve the purposes
of the Act. Judicial lightning strikes thrice. A novel doctrine of
innocent coincidence prevails. Effective anti-competitive threats
can be made without the redress which s. 46 appears to
promise. Once again I dissent.[48]
It has been argued that there are very real concerns that the
present High Court is failing to do justice to the parliamentary
intention behind section 46 and, as a result, section 46 is now an
ineffective deterrent against abuses of market power by large and
powerful corporations.[49] Although the amendments in the Bill take into account
the reasoning of the High Court in each of the recent section 46
cases, it remains to be seen how they will be interpreted
judicially in future cases.
On a related matter, the Law Council of Australia has been
particularly critical of the plan to have Federal Magistrates
decide misuse of market power cases on the grounds that they will
be more, rather than less expensive to run.[50] This view is based on the complexity
of section 46 cases and the inexperience of magistrates in dealing
with competition cases.
Shadow Attorney General, the Hon. George Brandis supported the
comments by the Law Council of Australia stating that:
section 46 cases are, of their nature, complex
and usually long. Conducting the hearings in the Federal
Magistrates Court will not make them less complex or
shorter.[51]
As already stated, there has been considerable criticism of the
High Court s interpretation of the provisions of section 46 to
date. That being the case, it seems premature to extend the
jurisdiction for such matters to the Federal Magistrates Court
before judicial interpretation of the amendments in the Bill has
occurred. A likely outcome of a proceeding lodged in the FMC is
that it will be transferred directly to the Federal Court under the
Federal Magistrates Act 1999.
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[2]. The Sherman
Antitrust Act was enacted in 1890. It outlaws all contracts,
combinations and conspiracies that unreasonably restrain interstate
and foreign trade. This includes agreements among competitors to
fix prices, rig bids and allocate customers. The Sherman Antitrust
Act makes it a crime to monopolize any part of interstate
commerce.
[32]. Engaging
in conduct is defined in paragraph 4(2)(a) of the TPA as to doing
or refusing to do any act, including the making of, or the giving
effect to a provision of, a contract or arrangement, the arriving
at, or the giving effect to a provision of, an understanding or the
requiring of the giving of, or the giving of, a covenant.
[42].
Brambles Holdings Ltd. v TPC & Anor (1980) ATPR
40-179.
Paula Pyburne
30 July 2008
Bills Digest Service
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
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