BILLS DIGEST NO. 87, 2016–17              29 March 2017

Competition and Consumer Amendment (Misuse of Market Power) Bill 2016

Paul Davidson
Economics Section

Date introduced: 1 December 2016

House: House of Representatives

Portfolio: Treasury

Commencement: Sections 1-3 on Royal Assent; Schedules 1 and 2 on the earlier of a day or days to be fixed by proclamation or six months after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at March 2017.

The Bills Digest at a glance

The Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 (the Bill) introduces amendments to the Competition and Consumer Act 2010 (CCA) following the Government’s acceptance of certain recommendations of the Competition Policy Review (the Harper Review).

The Bill has two principal purposes:

•       to amend section 46 of the CCA, which relates to the misuse of market power

•       to repeal Divisions 2 and 3 of Part XIB of the CCA, which relate to telecommunications-specific anticompetitive conduct arrangements.

The amendments to section 46 of the CCA follow from extensive consultation as part of the Harper Review, subsequent consultation by the Treasury, and the circulation of an Exposure Draft Bill. When introduced, the Bill was also subject to inquiry by the Senate Economics Committee. The amendments to Divisions 2 and 3 of Part XIB of the CCA follow from the recommendations of the Harper Review and separate consultation conducted by the Department of Communications and the Arts.

In summary, the main amendments to section 46 are:

•       removing the ‘take advantage’ and ‘proscribed purposes’ aspects of the current law

•       removing explicit references to predatory pricing

•       introducing a ‘conduct’ test and a ‘purpose, effect, or likely effect’ test

•       introducing a ‘substantially lessening competition’ test

•       amending the scope of the markets that misuse of market power is to be subject to

•       introducing a set of pro-competitive and anti-competitive mandatory factors for courts to apply.

The cumulative effect of the amendments is to significantly expand the scope of section 46 to target conduct by corporations with substantial market power. However, concerns remained that proposed subsection 46(1) would capture procompetitive conduct. The Bill therefore introduces a series of non-exhaustive pro- and anti-competitive mandatory factors as proposed subsection 46(2). In recognising the concerns of participants—including the Australian Competition and Consumer Commission (ACCC)—about the mandatory factors, the Senate Economics Committee recommended, among other things, that the mandatory factors be removed. If this were to occur there would be a significant risk that subsection 46(1) as proposed would capture pro-competitive conduct. A suggested solution is therefore to explicitly provide that section 46 is solely concerned with anti-competitive conduct (rather than any form of conduct).

The proposed repeal of Divisions 2 and 3 of Part XIB—as a result of the changes proposed to section 46—have generally received much less attention than the amendments to section 46. When Part XIB was initially introduced in 1996, it was designed to be a transitionary part of the then Trade Practices Act 1974 (now the CCA). As part of consultations, some participants argued that the proposed changes to section 46 should be mirrored in the provision on anti-competitive conduct in Part XIB. Some argued that the removal of Divisions 2 and 3 was justified given the more mature telecommunications market. However, this was contested by other participants.

Several important consequences arise from the proposed repeal:

•       Part XIB applies in addition to section 46 so this additional avenue to correct anti-competitive conduct in the telecommunications market will disappear. This is particularly relevant given the strong pecuniary penalties that the ACCC can impose on carriers and carriage service providers under Part XIB.

•       Part XIB provides an avenue to exempt conduct which would otherwise be considered to be anti-competitive conduct. Although the Harper Review recommended such ‘authorisations’ be available in relation to conduct under section 46, it has not been introduced as part of the Bill. Therefore, authorising telecommunications conduct will not be available until such time as authorisations legislation passes Parliament.

History of the Bill

On 23 March 2017, the Government introduced proposed amendments to the Bill in the House of Representatives.[1] The proposed amendments, among other things would amend the commencement date of the Bill, so that it will commence at the same time as Schedule 1 to the proposed Competition and Consumer Amendment (Competition Policy Review) Act 2017 and will not commence at all if Schedule 1 to that Act does not commence. A Bill for the Competition and Consumer Amendment (Competition Policy Review) Act 2017 has not yet been introduced into Parliament. The commencement date of the Bill (if passed) is therefore currently unclear.

Purpose of the Bill

The purpose of the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 (the Bill) is to amend the Competition and Consumer Act 2010 (CCA) to reflect the Government’s acceptance of certain recommendations of the Competition Policy Review (the Harper Review). Specifically, the Bill introduces changes to section 46 of the CCA which relates to the misuse of market power, namely:

•       removing the ‘take advantage’ and ‘proscribed purposes’ aspects of the current law

•       removing explicit references to predatory pricing

•       introducing a ‘conduct’ test and a ‘purpose, effect, or likely effect’ test

•       introducing a ‘substantially lessening competition’ test

•       amending the scope of the markets that misuse of market power is to be subject to

•       introducing a set of pro-competitive and anti-competitive mandatory factors for courts to apply.

The Bill also repeals Divisions 2 and 3 of Part XIB of the CCA which deal with telecommunications-specific anti-competitive conduct, as a consequence of amending section 46.

Structure of the Bill

The Bill comprises two schedules:

•       Schedule 1 introduces changes to section 46 of the CCA

•       Schedule 2 contains two Parts. Part 1 repeals Divisions 2 and 3 of Part XIB of the Act, and Part 2 provides for consequential amendments as a result of the changes brought about by Part 1.

Background

The CCA exists to enhance the welfare of Australians, and it is predicated on competition being a means to achieving that end.[2] Competition may be lessened (and therefore welfare may be harmed) where a business has market power sufficient that it can, to some extent, control the market price, quantity, or both, of a good or service. One indicia of market power may be the size of the business, although it was noted in introducing the Bill for the Trade Practices Act 1974 (which became the CCA) that:

The provision is not directed at size as such. It is confined to the conduct by which a monopolist uses the market power he derives from his size against the competitive position of competitors or would-be competitors—for example, by inducing a supplier or customer who is dependent upon him not to deal with a competitor, or by predatory prices. A monopolist is not prevented from competing as well as he is able—for example, by taking advantage of economies of scale, developing new products or otherwise making full use of such skills as he has or protecting his patent rights in respect of an invention. In doing these things he is not taking advantage of his market power.[3]

The Bill has been introduced after extensive consultation on the misuse of market power provision of the CCA as part of a review of Australia’s competition laws, known as the Harper Review. In 2013, the Government commissioned the Harper Review to review and report on Australia’s competition policy.[4] The terms of reference, among other things, required the Harper Review to consider

… whether the misuse of market power provisions effectively prohibit anti-competitive conduct and are sufficient to: address the breadth of matters expected of them; capture all behaviours of concern; and support the growth of efficient businesses regardless of their size …[5]

An Issues Paper was released on 14 April 2014,[6] and the Draft Report was released on 22 September 2014.[7] The Final Report was released on 31 March 2015.[8]

The Harper Review Draft Report

The Harper Review Draft Report made a number of observations about the misuse of market power provision, and provided a draft recommendation such that ‘… section 46 can be focused more clearly on the long-term interests of consumers and enhanced to restore its policy intent’.[9] Specifically, the Harper Review considered—at the time of writing its Draft Report:

•       ‘taking advantage of market power’ is difficult to interpret and apply in practice

•       the focus of the prohibition on showing the purpose of damaging a competitor is inconsistent with the overriding policy objective of the CCA, which is to protect competition, not competitors

•       supplementary prohibitions that attempt to address concerns about predatory pricing do not advance the policy intent of section 46

•       in general, all prohibitions should focus on protecting competition and not individual competitors and

•       the prohibition against unilateral anti-competitive conduct should be made subject to an exception for business strategies or decisions that enhance competitiveness and create durable consumer benefit.[10]

The Draft Report therefore considered a reformulation of section 46 based on the above observations and sought further submissions on the scope of the defence against the prohibition of unilateral anti-competitive conduct where it:

•       would be a rational business decision if it was made by a corporation that did not have a substantial degree of power in the market and

•       was likely to have the effect of advancing the long-term interests of consumers.[11]

The Harper Review Final Report

The Harper Review Final Report reiterated that the focus of section 46 should be on the long-term interests of consumers and also repeated concerns about the ‘take advantage’ test;[12] the ‘purpose’ test;[13] the provisions dealing with predatory pricing; and that prohibitions should focus on protecting competition, not competitors.[14]

However, in response to post-draft submissions, the Final Report of the Harper Review did not include the defence proposed in the Draft Report and instead proposed mandatory legislative guidance to assist the courts in the operation of the section:

Specifically, the legislation should direct the court, when determining whether conduct has the purpose, effect or likely effect of substantially lessening competition in a market, to have regard to the extent to which the conduct:

•   increases competition in a market, including by enhancing efficiency, innovation, product quality or price competitiveness; and

•   lessens competition in a market, including by preventing, restricting or deterring the potential for competitive conduct in a market or new entry into a market.[15]

Additionally, the Final Report proposed two additional mechanisms to address ‘residual concerns about business uncertainty’:

•    first … authorisation should be available to exempt conduct from the prohibition in section 46; and

•    second, the ACCC [Australian Competition and Consumer Commission] should issue guidelines on its approach to enforcing section 46, prepared in consultation with business stakeholders, legal experts and consumer groups, and issued in advance of the commencement of the revised prohibition.[16]

In turn, the Final Report considered that the proposed amendments to section 46, in conjunction with making authorisation (under Part VII of the CCA) available, obviated the need for the telecommunication industry-specific anticompetitive conduct provisions (Division 2 of Part XIB) and exemption order regime (Subdivision B of Division 3 of Part XIB).[17] Schedule 2 of the Bill repeals those provisions.

The ACCC has issued draft guidelines for the interpretation of the misuse of market provisions.[18]

About authorisation

Authorisation provides protection against legal action for conduct or arrangements that might breach the competition provisions of the CCA. Parties apply for authorisation where they believe that there is some risk that the conduct they propose to engage in would or may breach the competition provisions of the CCA and they require the certainty provided by an authorisation to undertake the activity. Authorisation is a formal and public process.

In general, the ACCC may grant authorisation if it is satisfied that the likely public benefits flowing from the proposed conduct for which authorisation is sought, outweigh the likely public detriments flowing from that conduct.

Authorisation has not previously been available for conduct that may breach section 46 of the CCA.

However, coinciding with the proposed section 46, authorisation is now proposed to be available under a revised authorisation test by which the ACCC may grant authorisation if it is satisfied either that the conduct is unlikely to substantially lessen competition or is likely to result in a net public benefit.

Under the proposed authorisation test, in order to grant authorisation to section 46 conduct, the ACCC must be satisfied that the conduct meets at least one limb of the test; but for the ACCC to deny authorisation the conduct must fail both limbs of the test.

Australian Competition and Consumer Commission (ACCC), Draft framework for misuse of market power guidelines, ACCC, Canberra, September 2016, p. 16.

Additional consultation

The Government decided to consult further on the recommended changes to section 46 via a Treasury discussion paper.[19] The discussion paper canvassed a range of potential options to alter section 46, including a number of variations on the Harper Review recommendation.[20] The outcome from the discussion paper was to implement the Harper Review recommendations in full.[21]

At the same time as the Exposure Draft was released,[22] the Department of Communications and the Arts commenced a consultation process on the possibility of removing Divisions 2 and 3 of Part XIB—which covers telecommunications-specific anticompetitive conduct—in light of the Government’s acceptance of the Harper Review recommendations.[23]

The conclusion from both processes culminated in a Treasury exposure draft of legislation, which, among other things, reflected the Harper Review recommendations on the misuse of market power, as well as removing Divisions 2 and 3 of Part XIB.[24]

Committee consideration

Selection of Bills Committee

The Selection of Bills Committee recommended that the Bill be referred to the Senate Economics Legislation Committee (Economics Committee) for inquiry and report by 16 February 2017.[25]

Senate Economics Committee

Majority report

The Economics Committee received 35 submissions and reported on 16 February 2017.[26] The position of major interest groups from those submissions and other consultations are referenced throughout the key issues and provisions section below.[27] The majority Senators on the Committee made three recommendations:

•       the proposed mandatory factors in subsection 46(2) be removed

•       the government undertake a post-implementation review of the changes to section 46 at least five years after commencement and

•       that the Bill be passed.[28]

The potential consequences of removing the mandatory factors are discussed below in the section titled ‘Key potential consequences of removing the mandatory factors’. A number of submitters to the inquiry called for a post-implementation review, particularly with regards to the removal of an explicit offence for predatory pricing.[29]

Other views

The dissenting report by Labor Senators noted that since 1976, 12 Australian competition reviews had recommended against the introduction of an ‘effects test’.[30] Labor Senators considered that the proposed changes would result in a ‘lawyer’s picnic’.[31] They also opposed the removal of Divisions 2 and 3 of Part XIB, stating:

Given the concentrated nature of the telecommunications market, it remains appropriate to preserve Part XIB in order to both retain adequate deterrence and facilitate speedy action against anti-competitive conduct in the sector if it arises.

Labor Senators consider the stronger mechanisms available under Part XIB are still necessary to deter misuse of market power by Telstra, and potentially NBN Co in the future.[32]

Additional comments were provided by Senator Xenophon who broadly supported ‘the recommendations of the committee but [considered that] they simply do not go far enough to resolve current failings of competition law …’[33] Senator Xenophon recommended:

•       a ‘cost waiver order’ be introduced to improve access to justice

•       a divestiture order be made available as a remedy to the courts for serious or repeat market power abuse offender cases

•       reverting to the recommendation in the Harper Review Draft Report (outlined above) that a statutory defence for rational business conduct which had the effect or likely effect of long-term benefit to consumers be introduced.[34]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills made no comment on the Bill.[35]

Financial implications

The Government considers that the Bill will entail no financial impact on the Government.[36]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[37]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considered that the Bill did not raise human rights concerns.[38]

Schedule 1—misuse of market power

Elements of the test

Existing subsection 46(1) establishes an offence for the misuse of market power. It has six elements:

1.       a corporation

2.       that has a substantial degree of power in a market

3.       shall not take advantage of that power

4.       in that or any other market

5.       for the purpose of

6.       eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation; or preventing the entry of a person; or deterring or preventing a person from engaging in competitive conduct—in that or any other market.

Item 1 in Schedule 1 of the Bill repeals and replaces section 46 of the CCA. Proposed subsection 46(1) similarly has six elements, although there are some significant differences with current subsection 46(1). It provides:

1.       a corporation

2.       that has a substantial degree of power in a market

3.       must not engage in conduct

4.       that has the purpose, or has, or is likely to have, the effect

5.       of substantially lessening competition in

6.       that market; or any other market in which the corporation or a body corporate that is related to that corporation—supplies/acquires goods or services, or is likely to supply/acquire goods or services either directly or indirectly through one or more persons.

As elements 1 and 2 remain unaltered by the amendments in the Bill it is not anticipated that there will be substantive changes to the judicial interpretation of these elements. The remainder of the discussion in this Bills Digest will therefore focus on the remaining four elements which are classified as follows:

•       ‘take advantage’ compared with ‘conduct’

•       the scope of the ‘market’

•       ‘purpose’ compared with ‘effect’

•       ‘proscribed purposes’ and ‘substantially lessening competition’.

Part IV is mirrored in the Competition Code in Schedule 1 of the CCA, which applies anti-competitive laws through application legislation in the states and territories. Therefore, although the discussion which follows refers to the provisions of Part IV, it equally applies to Part 1 of Schedule 1.

‘Take advantage’ compared with ‘conduct’

The Harper Review Final Report considered that the element of take advantage ‘… is not a useful test by which to distinguish competitive from anti-competitive unilateral conduct’.[39] The Harper Review based this conclusion on the way in which the provision had been interpreted by the courts.

In Queensland Wire,[40] the majority joint judgment considered that ‘[t]he question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition …’,[41] and went on to conclude:

In effectively refusing to supply Y-bar to the appellant, BHP is taking advantage of its substantial market power. It is only by virtue of its control of the market and the absence of other suppliers that BHP can afford, in a commercial sense, to withhold Y-bar from the appellant. If BHP lacked that market power—in other words, if it were operating in a competitive market—it is highly unlikely that it would stand by, without any effort to compete, and allow the appellant to secure its supply of Y-bar from a competitor.[42]

In the four subsequent cases noted in the Harper Review,[43] three of those cases involved circumstances where the trial and appellate courts differed on the application of whether the particular corporation in question had taken advantage of its market power.[44] Ultimately, the main issue identified by the Harper Review was that the jurisprudence from those decisions has involved a focus on a hypothetical counterfactual of a corporation without the market power and the court asking itself how a firm without the market power could have behaved.[45]

The Harper Review considered that the take advantage test ‘has given rise to substantial difficulties of interpretation, revealed in the decided cases, undermining confidence in the effectiveness of the law.’[46] It is relatively straightforward to demonstrate that there have been differences in judicial interpretation of the matters that have been decided under section 46, although those differences have not always turned on the application of the take advantage test.[47] Further, the Harper Review considered that the partial codification in 2007 of the hypothetical counterfactual was unlikely to have increased confidence in the effectiveness of the law.[48]

A speech given by current ACCC Chairman Rod Sims in May 2015 in response to the release of the Harper Review Final Report succinctly highlighted three problems with the application of the take advantage test:

First, we need to predict the behaviour of a firm in a hypothetical world that can be difficult to imagine and agree on. Contemplating a market where all is the same, except the source of the firm’s market power is removed, is often fanciful.

…

Second, and fundamentally, it fails to address the key issue; the likely effect of the conduct on competition. Is the conduct likely to restrict, limit or hinder other firms from competing on their merits? This question is best addressed by focusing on the likely market outcomes from the conduct. The likely actions of a hypothetical firm in a hypothetical market would seem largely irrelevant.

Third, and most important, relying on the counterfactual test fails to recognise that the effects on competition of conduct by a firm with a substantial degree of market power can differ to the effects of the same conduct in a competitive market.[49]

In summary the Harper Review noted that ‘[b]usiness conduct should not be immunised merely because it is often undertaken by firms without market power’,[50] and therefore recommended the removal of references to ‘take advantage’ and replacing it with a ‘conduct’ test.

Conduct

Conduct is already defined in the CCA[51] as the doing or refusing to do any act. Refusing to do an act is further defined to mean refraining (otherwise than inadvertently) from doing that act, or making it known that that act will not be done. The courts have held that the omission to act must have been deliberate.[52] It has also been held that the definition means that to refrain (otherwise than inadvertently) from doing an act, or to make it known that an act will not be done, is to refuse to do that act, and as such, amounts to engaging in conduct.[53]

A number of section 46 cases that have been brought over the years have involved a refusal to supply.[54] As a general proposition, suppliers are not obliged to supply everyone who seeks to order their goods:

Economic efficiency is enhanced if suppliers are allowed the freedom to decide by whom and under what conditions their product will be sold.[55]

Section 46 is not concerned with how a corporation should conduct its business,[56] but as noted above, a deliberate refusal to supply would constitute conduct for the purposes of the CCA.

One of the clearest differences between the take advantage test and a conduct test was in effect illustrated by the High Court in Melway:

Section 46 of the Act requires, not merely the co-existence of market power, conduct, and proscribed purpose, but a connection such that the firm whose conduct is in question can be said to be taking advantage of its power.[57]

How the conduct test could work

With the ‘take advantage’ element removed by the Bill, it is reasonable to presume that a co-existence between market power and conduct would be sufficient to satisfy that aspect of section 46. That is to say, if a corporation possesses market power and, for example, makes a deliberate decision to refuse to supply, then it will have engaged in the conduct to which proposed subsection 46(1) is directed. Given that the output decision of a profit-maximising corporation with market power is to supply less of its products to the market than it would under a more competitive environment; it stands to reason that firms with market power would often undertake to refuse to supply (that is, to engage in conduct) so as to maximise the returns on the products that they do supply.

It may therefore be the case that the conduct test is somewhat easier to satisfy (and potentially to understand and apply) than the take advantage test. This may be particularly so given the number of cases that have been brought under section 46 where there was a refusal to supply, assuming that such refusals continue. However, the question that needs to be asked is not whether a conduct test is easier to satisfy than a take advantage test; but whether the change furthers the objective of the section, and by corollary, the CCA.

In this regard, as noted above by the High Court in Melway, the take advantage test forms part of the filter that helps distinguish between pro- and anti-competitive conduct (the other substantive filter is the proscribed purposes, see below). By removing the take advantage test and replacing it with a conduct test, there is a risk that the test no longer acts so as to adequately filter procompetitive from anticompetitive conduct. Therefore, there is a legitimate concern that the proposed conduct test may set the requisite bar too low and inadvertently capture procompetitive conduct.

Possible solution

A possible solution to the risk of over-capture could be to predicate the conduct test with the word ‘anti-competitive’. This would help clarify that the purpose of section 46, in conjunction with the objectives of the CCA, is to enhance consumer welfare. By definition, conduct that is pro-competitive should not be caught by the operation of section 46, and inserting the clarifying word anti-competitive should help to ensure that that is the case. A similar approach was proposed in a submission by Minter Ellison to the Economics Committee inquiry into the Bill.[58]

The scope of the ‘market’

Harper view

Element 2 of the proposed test of whether there has been a misuse of market power is that there is a substantial degree of power in a market. The Harper Review considered that the definition of market in section 4E of the CCA remained appropriate, and in the context of section 46, recommended no change to the scope of the market:

Accordingly, the Panel proposes that the primary prohibition in section 46 be re-framed to prohibit a corporation with a substantial degree of market power from engaging in conduct if the conduct has the purpose, effect or likely effect of substantially lessening competition in that or any other market. [emphasis added][59]

The scope of the market was expanded a decade ago (to its current form) in response to the decision in Rural Press where the Full Federal Court implied that the requisite market power needed to be exercised in the same market that the power was acquired in.[60] A number of other provisions in Part IV of the CCA currently prohibit certain restrictive practices ‘in any market’.[61]

The model legislative provisions in the Harper Review reflected that intent,[62] as did the Treasury consultation paper that followed the Harper Review Final Report.[63] The consultation process culminated in the release of an Exposure Draft Bill and Explanatory Memorandum on 5 September 2016.[64] The Exposure Draft contained the phrase ‘in that or any other market’ consistent with the opinion of the Harper Review.

Amendments in the Bill

However, the amendments in Schedule 1 to the Bill have substantially changed the market definition from what was proposed in the Exposure Draft. In essence, the scope of the market that is proposed is that which currently prevails in the telecommunications industry under Part XIB of the Act (see below).

In summary, the scope of the market is proposed to be changed to:

•       in that market or

•       a market where the corporation (or a related body corporate) supplies, or is likely to supply goods or services directly or indirectly or

•       a market where the corporation (or a related body corporate) acquires, or is likely to acquire goods or services directly or indirectly.[65]

According to the Explanatory Memorandum accompanying the Bill:

The Harper Review recommended reframing section 46 to prohibit a firm with a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in any market. However, extensive consultation with stakeholders revealed a concern that the reference to ‘any market’ made section 46 excessively broad in scope.[66]

Given the change to the scope of the market was first introduced in the Bill, the only consultation on the change has been as a result of the Economics Committee inquiry into the Bill.[67] As noted by the Small and Medium Enterprise Business Law Committee of the Business Law Section of the Law Council of Australia (SME Committee):

The SME Committee also notes that the above Bill has a change from the draft Bill circulated for discussion in 2016. That change relates to excluding impact in “any market”. This differs from other CCA provisions. Accordingly, the SME Committee has concerns about the ramifications of that change. The SME Committee believes that the reasons for the change, as set out in the Explanatory Memorandum, are unconvincing.[68]

A similar view was put by Associate Professor Julie Clarke who stated:

… it is not obvious that the more restrictive definition is needed or that conduct by a company enjoying substantial market power, and which has the purpose or effect of harming competition in any market, should not be prohibited.[69]

It is unclear to what extent, if any, the exercise of unilateral conduct by a corporation with substantial market power in ‘an unrelated market’ may result in harm to consumer welfare.[70] Nevertheless, it is clearly more than merely theoretical, otherwise stakeholders would not have asked for the change as part of Treasury’s consultation on the Harper Review recommendations. It is most likely the case that the change will increase the focus on the definition of the requisite market. As noted in Queensland Wire:

The analysis of a s.46 claim necessarily begins with a description of the market in which the defendant is thought to have a substantial degree of power. In identifying the relevant market, it must be borne in mind that the object is to discover the degree of the defendant's market power. … [I]t is necessary to describe accurately the parameters of the market in which the defendant's product competes: too narrow a description of the market will create the appearance of more market power than in fact exists; too broad a description will create the appearance of less market power than there is.[71]

The concept of the market is defined separately in the CCA.[72] In addition to the above, the majority joint judgment in Queensland Wire discussed Pincus J’s finding (at first instance) of an impermissible purpose (namely excluding Queensland Wire from the star picket post market) and that:

… that market is not the most informative one on which to focus. Pincus J. accepted that “there are great advantages accruing to B.H.P. as a participant in the rural fencing market, by virtue of its being the sole domestic supplier of star pickets” and that “(t)hose advantages ... extend well beyond being relatively free from price competition in selling star pickets.” The evidence regarding the importance to BHP of being the only supplier of the full range of rural fencing products indicates that it is in the market for rural fencing products where those advantages lie and where BHP’s market power is being extended.[73]

Under the changes proposed in Schedule 1 to the Bill, conduct may now potentially escape liability under section 46 where that conduct has the purpose, effect or likely effect of substantially lessening competition in an unrelated market.

A slightly different interpretation of the consequences of changing the scope of the market was put in a submission by the Law Council of Australia:

Practically speaking, this means that a bakery which is 60% owned by a company which in turn has a majority stake in a cement business which has substantial market power, may contravene s46 if it is found, from its internal emails … to have the purpose of substantially lessening competition in a local baking market (say, by investing in substantially more efficient plant which will allow it profitably to reduce prices below its rivals costs). This appears to be an unintended outcome.[74]

A Business Council of Australia submission considered that the application of section 46 should be constrained to ‘any other market in which the corporation supplies or acquires goods and services.’[75]

Substantial degree of power

The element of ‘a substantial degree of power in a market’ is not amended as a result of the Bill. Therefore, it is not expected that its current interpretation will materially change. The one point to note is that with the scope of the market having been reduced, it can be expected that there will, by way of corollary, be an impact on the interpretation of the word ‘market’. The interpretation will be such that section 46 will no longer apply to an unrelated market.

Purpose, effect or likely effect

Element 4 of the proposed test of whether there has been a misuse of market power is that the conduct that has been engaged in has a particular purpose, or has, or is likely to have, a certain effect.

Harper view

Much was made in submissions to the Harper Review of its recommendation to move from a purpose test to a ‘purpose, effect or likely effect’ test.[76] In the main, concerns were expressed that a firm with market power ought not to be held liable for the effect of its actions, but rather only its purpose in taking those actions. The current drafting of section 46 of the CCA requires that the purpose must be one of three proscribed purposes (see below).

As noted in the Harper Review ‘compared to the ‘take advantage’ test, the meaning of the ‘purpose’ test in section 46 is at least clear and capable of reliable application by the courts’.[77] The Harper Review largely ignored consideration about the desirability of a subjective purpose test and/or of an objective effects test as it considered that such consideration obscured the larger issue of the proscribed purposes.[78] The Harper Review therefore focused on whether the purpose of the conduct undertaken by the firm with market power was for a proscribed purpose, where that proscribed purpose generally focused on injury to a competitor. The Harper Review was centrally concerned with the fact that the purpose of the conduct was more aimed at injury to competitors, rather than injury to competition (see below).

The Harper Review characterised the effect on competition as the effect on the ‘competitive process’.[79] It considered that this was a better aim of section 46 rather than to prohibit unilateral conduct which had the purpose of injuring a competitor. This reasoning also formed part of the recommendation to introduce a ‘substantially lessening competition’ threshold into section 46 (see below).

The Harper Review further noted that the introduction of an ‘effects test’ would mirror other Part IV offences.[80] As a result, there is some jurisprudence available on the interpretation and application of an effects test in relation to other restrictive trade practices.

Interpretation of an ‘effects test’ in other provisions of the CCA

The phrase ‘has or is likely to have’ has been interpreted to invite the court to objectively look at the facts, as well as infer from those facts, what would be the likely consequences, when viewed at, or about, the time the arrangement was made, without regard to the subjective state of mind of the parties.[81]

The word ‘likely’ has been subject to a range of possible meanings. For example, in Tillmanns Butcheries[82] it was stated:

The word “likely” is one which has various shades of meaning. It may mean “probable” in the sense of “more probable than not”—“more than a fifty per cent chance”. It may mean “material risk” as seen by a reasonable man “such as might happen”. It may mean “some possibility”—more than a remote or bare chance. Or, it may mean that the conduct engaged in is inherently of such a character that it would ordinarily cause the effect specified.[83]

In Monroe Topple & Associates,[84] it was stated that ‘“[l]ikely” does not mean “more likely than not”. It is sufficient that there is a real chance or possibility that a substantial lessening of competition will occur …’[85] See also French J in AGL v ACCC[86] who, in construing the meaning of ‘likely’ in section 50 stated:

In my opinion, having regard to the statutory context provided by other sections of Pt IV the correct construction is that ‘likely’ refers to a significant finite probability or ‘a real chance’ rather than ‘more probable than not’.[87]

From this it can be suggested that all that is required is that there is a real chance that the alleged conduct has or is substantially lessening competition.

‘Proscribed purposes’ and ‘substantially lessening competition’

Element 5 of the proposed test of whether there has been a misuse of market power is whether the purpose, effect, or likely effect of the conduct is to substantially lessen competition.

Section 46 currently requires, among the other elements outlined above, that the corporation must have acted for one of three proscribed purposes, namely:

•       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.

The Harper Review considered that moving to an effects test was appropriate (see above); but that it was not appropriate to maintain the current focus of the proscribed purposes on competitors. Instead, the focus of the provision should be on competition (that is, the competitive process). This was reasonably self-evident as it would not be sound policy to prohibit unilateral conduct that had the effect of damaging individual competitors.[88] In practice however, the current provisions have not been interpreted in this manner so it is questionable whether the approach would have changed as a result of the proposed amendments (see box 1). It was considered appropriate that firms with a significant degree of market power be responsible for the consequences of their actions, and not merely their intent. In many respects, this is analogous to the Harper Review’s reasoning in recommending the introduction of an ‘effects test’ (see above).

Box 1: Injury to competitors or injury to competition?

An important consideration is whether the interpretation of section 46 as regards purpose has focused on injuring competitors, rather than competition. One of the clearest explanations was provided by the joint majority judgment in Queensland Wire where it was considered that protection of individual traders was not an objective, stating:

… the object of s 46 is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end. Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to “injure” each other in this way … and these injuries are the inevitable consequence of the competition s 46 is designed to foster. In fact, the purpose provisions in s 46(1) are cast in such a way as to prohibit conduct designed to threaten that competition—for example, s 46(1)(c) prohibits a firm with a substantial degree of market power from using that power to deter or prevent a rival from competing in a market. The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition …[89] [emphasis added]

Therefore section 46 has been interpreted to relate to competition and not to competitors. Additionally this has been explicitly recognised by ACCC Chairman Rod Sims in a recent speech where there was discussion about ‘the insider/outsider divide’:

There is, on the one hand, an exclusive club, with members of the club knowing that section 46 means ‘avoid damage to the competitive process’.

On the other hand, those not in the club, the vast majority of the population, aren’t privy to this insight …

This insider/outsider divide that has emerged contributes to a lot of unnecessary activity. The ACCC is often urged to take action under section 46 when harm has been done to an individual competitor, particularly if that competitor is a small business.[90]

Notwithstanding the current words in section 46, those words have not been interpreted by either the courts or the regulator as amounting to a breach when an individual business is injured.[91] Viewed in that manner, the amendments in Schedule 1 to the Bill ensure that on a plain reading of the CCA, injury to an individual competitor is highly unlikely to breach section 46. The only feasible way in which a breach could occur is if the injury suffered amounted to a substantial lessening of competition in that or a ‘related market’ (see above for a discussion on the relevant market).

Purpose

As noted above, there are currently three proscribed purposes set out in section 46. Those proscribed purposes help to filter pro- from anti-competitive conduct. As explained by Mason CJ and Wilson J in Queensland Wire:

… it is significant that s 46(1) already contains an anti-competitive purpose element. It stipulates that an infringement may be found only where the market power is taken advantage of for a purpose proscribed in par (a), (b) or (c). It is these purpose provisions which define what uses of market power constitute misuses.[92]

Section 4F of the CCA provides that the actual purpose need only be a substantial one (rather than the exclusive purpose). As noted in Queensland Wire, purpose in section 46 simply refers to an intention to achieve a particular purpose.[93] A number of cases have been lost due to a failure to demonstrate a proscribed purpose,[94] although it is interesting to note that the ACCC has only lost one matter (which is currently subject to appeal).[95]

The effect of the amendments in Schedule 1 to the Bill is that the purpose for which conduct is undertaken will be irrelevant if the conduct has or is likely to have the effect of substantially lessening competition.

In Melway Kirby J (dissenting) considered the following illustrative purposes:

There are numerous “purposes” which such a corporation might have which could explain and justify, for example, a refusal to supply a monopolist's product to a would-be competitor of current distributors. They could include the fact that the would-be competitor is judged as: (1) incompetent to handle a product that in some hands might be dangerous; (2) a person with a poor credit record or with unacceptable business ethics; (3) unqualified to offer essential after-sales service; (4) liable to damage the reputation of the supplier; (5) being unable to maintain accurate records; (6) prone to engage in deceptive advertising or unfair practices; or (7) likely to breach persistently the reasonable terms of a distribution agreement.[96] [footnotes omitted]

None of the seven purposes listed above by Kirby J would be sufficient to attract liability under section 46 currently; however, the effect of item 1 would mean that any of these purposes would be sufficient to breach section 46, provided that the effect or likely effect of the relevant conduct was a substantial lessening of competition.

The operation of the purpose, effects or likely effects test and the addition of the substantial lessening of competition test will have the effect of lowering the bar, which seems somewhat peculiar given that the ACCC has generally not had difficulty in proving a proscribed (and thereby more limited) purpose in the past. Further, since it is generally the subjective purpose that is relevant in determining liability,[97] any purpose behind conduct that has the effect or likely effect of substantially lessening competition will become sufficient. It should be further noted that liability still attaches when the aim of the purpose is unattainable.[98] Therefore, it is perhaps unsurprising that participants argued that the purpose element should be removed entirely from section 46.[99] This view was forcefully put by the Law Council of Australia that ‘aggressive, “locker-room” talk’ should not be caught within the ambit of section 46.[100] A similar concern was put by Minter Ellison that:

The centrality of subjective purpose in the current section 46 in our experience typically leads to a forensic focus in investigations on trawling many thousands of internal company emails for indications of a ‘bad’ subjective purpose. That quest for ‘smoking gun’ expressions of purpose in internal communications very often elevates the status of the unusual, the random, the poorly expressed or the downright wrong in company communications.[101]

Substantially lessening competition

The Harper Review proposed the introduction of a ‘substantially lessening competition’ test in largely analogous terms to the introduction of the effects test, namely that it is a well-known and accepted part of restrictive trade practices in Part IV of the CCA.[102] The test has been interpreted as requiring a counterfactual assessment whereby the court must consider the state of competition in the market both with and without the conduct.[103]

The term ‘substantial’ has not been conclusively determined although it has been interpreted to mean ‘… that there be a purpose, effect or likely effect of the impugned conduct on competition which is substantial in the sense of meaningful or relevant to the competitive process.’[104] It has also been considered that it is not sufficient for liability if the relevant effect was quantitatively more than insignificant or not insubstantial.[105] Under section 4G of the Act, ‘lessening of competition’ includes references to preventing or hindering competition. Hindering competition has been interpreted to mean in any way affecting usual competition to an appreciable extent.[106] Competition is itself defined in section 4 to include imports.

Mandatory considerations

Proposed subsection 46(2) introduces a non-exhaustive list of pro- and anti-competitive factors—as recommended by the Harper Review Final Report. Accordingly, the court must, when considering ‘… whether the conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market …’, take into account the extent to which that conduct has the purpose or effect or likely effect of:

•       increasing competition in that market, including by enhancing efficiency, innovation, product quality or price competitiveness in that market

•       lessening competition in that market, including by preventing, restricting, or deterring the potential for competitive conduct or new entry into that market.

Draft report proposed defence

The Harper Review Final Report included the list of mandatory factors as it was concerned that without them pro-competitive conduct may otherwise be inadvertently caught.[107] Indeed, in the Draft Report, the Harper Review proposed a statutory defence which would exonerate conduct, if the conduct in question:

•       would be a rational business decision by a corporation that did not have a substantial degree of power in the market and

•       would be likely to have the effect of advancing the long-term interests of consumers.[108]

The Draft Report also proposed that the onus of proof in relation to these matters be imposed on the corporation that has engaged in the conduct.[109]

Many post-Draft Report submissions roundly criticised both the introduction of the defence, as well as the reversal of the onus of proof.[110] The Final Report recommended the inclusion of the mandatory considerations but did not provide for the earlier form of a defence.

Part of the rationale for the adoption of the substantially lessening competition test (see above) was that it was well known in industry.[111] Whether the fact that a concept is well known forms a relevant basis upon which to change the law is not discussed here. What is important is that the substantially lessening competition test in other provisions of Part IV of the CCA is not subject to legislative guidance. Therefore, to the extent that jurisprudence on substantially lessening competition is well known to industry (see above), it would only be illustrative as the mandatory factors accompanying the substantially lessening competition test would be unique to the CCA.

Discussion of the mandatory factors

Since the mandatory factors were included in the Harper Review Final Report—but not the earlier Draft Report, stakeholders did not get the opportunity to comment on them during the Harper Review process. Instead, it was not until Treasury commenced its consultation process that stakeholders had the chance to consider the mandatory factors and make comments about them.

A submission from Minter Ellison to Treasury suggested moving the mandatory factors in proposed paragraph 46(2)(b) so that the mandatory factors would be part of a broader definition of ‘anti-competitive conduct’.[112]

A similar suggestion was made in a submission by the Business Council of Australia.[113] An issue with changing the reference to conduct to a reference to anti-competitive conduct or exclusionary conduct as suggested by stakeholders was one of the key points in the Business Council of Australia submission. It was put there that the conduct test in subsection 46(1) should remain, but proposed rewording subsection 46(2) such that it only applied to exclusionary conduct.

However, this potentially creates an issue in relation to the pro-competitive mandatory factors. The way it was phrased appears to place an onus on the court to assess whether the conduct complained of was pro-competitive, and if so, subsection 46(1) does not apply. Whilst that makes sense from a practical perspective—subsection 46(1) should not apply to pro-competitive conduct—it seems a rather cumbersome way to express what the law should be.

This can be readily contrasted with the phrasing adopted by the Harper Review and which is reflected in Schedule 1 to the Bill. It is made quite clear that an evaluative assessment is required in assessing the pro- and anti-competitive aspects of the conduct.

While the ACCC strongly endorsed the Harper Review Final Report recommendations affecting subsection 46(1)—that is, removing ‘take advantage’ and the proscribed purposes, and moving to an effects test which focuses on whether conduct substantially lessens competition—it expressed serious concerns about the mandatory factors. The ACCC listed five issues so as to demonstrate that ‘the proposed mandatory factors are unnecessary and unworkable’:

•       sections 45 and 47 currently function effectively without the need for consideration of mandatory factors, yet each has the same [substantially lessening competition] SLC test

•       inserting mandatory factors in section 46 will lead to legal arguments that the test is to be construed differently to the SLC test in sections 45 and 47

•       the inclusion of the proposed mandatory factors would significantly increase the complexity of section 46, contrary to the simplification recommendation of the Harper Review

•       the mandatory factors would impose a heavy and unrealistic evidentiary burden upon an applicant to disprove matters which will often be within the respondent’s knowledge (such as any efficiency enhancements or changes in product quality)

•       the mandatory factors would require some quantification or weighing of anti-competitive purposes or effects as well as efficiencies and innovation, and a netting off exercise to determine whether there is a substantial lessening of competition.[114]

The Economics Committee inquiry into the Bill agreed with these and other participants that the mandatory factors were unnecessary and that:

… the other reforms to section 46, as drafted in the Bill, are more than sufficient to address the deficiencies evident in the current legislation. Additionally, the committee considers that the removal of the mandatory factors will aid in reducing uncertainty among affected stakeholders.[115]

Accordingly, the Economics Committee recommended that subsection 46(2) be removed from the Bill.[116]

Consequences of removing the mandatory factors

If the mandatory factors in proposed subsection 46(2) of the Bill were to be removed as suggested by the Economics Committee there would be a number of consequences.

First is the lack of statutory guidance that will be provided to courts about distinguishing between pro- and anti-competitive conduct. Currently, that distinction is provided in the statute by two means: the take advantage test and the proscribed purposes. Those ‘filters’ have been removed in the new drafting of section 46. The Harper Review recognised that without some other form of ‘filter’ there was a real risk that section 46 would ‘over-capture’ in the sense that pro-competitive behaviour would be caught.[117] To that end, the Draft Report proposed a statutory defence. However, the Final Report proposed legislative guidance with the introduction of a list of mandatory non-exhaustive factors. The risk of over-capture is further exacerbated by the introduction of the any conduct test and the capturing of conduct undertaken for any purpose that has the effect or likely effect of substantially lessening competition.

Second is whether relying on the substantially lessening competition test to filter pro- from anti-competitive conduct is sufficient. Whether the substantially lessening competition test is fit for the purpose of distinguishing between pro- and anti-competitive conduct is not discussed in academic writing about Part IV of the CCA. In any event, even if the test is fit for purpose, it is confined to breaches of particular conduct unique to each section; it is not applicable (in its current form) to all forms of conduct, and certainly not unilateral conduct.[118] The Business Council of Australia submitted that relying on the ‘substantially lessening competition’ test alone is insufficient.[119]

Third, the question arises as to how a proposed section 46 which is without the mandatory factors would interact with other provisions of Part IV of the CCA.[120] It has been reasonably commonplace that the ACCC has brought claims against corporations with substantial market power under section 46 contemporaneously with action under other provisions of Part IV.[121] Due to the current substantive differences between section 46 and other provisions of Part IV, the arguments that the ACCC has run have largely been similar in terms of the alleged offending conduct, but have had to satisfy different legislative tests. That, however, may change under the new formulation of subsection 46(1).

The ACCC has issued draft guidance material associated with proposed section 46. That material only provides illustrative examples of conduct that, in principle, may or may not amount to a misuse of market power.[122] It does not consider whether other provisions of Part IV would or would not potentially be breached. A submission on the draft guidelines from the Australian Automobiles Association suggested that:

In addition, the ACCC could offer even further guidance by providing an example or undertaking a case study of a situation that would not constitute a misuse of market power under the current section 46 but may constitute a breach under the proposed reforms. This would provide a clearer picture of how the ACCC will interpret the proposed section 46 compared to the current one. This could be a clear example or one that is more complex and ambiguous, like the matters relating to the service and repair market.[123]

There is a danger that, without the mandatory factors, there would not be sufficient differentiation between the prohibitions in proposed section 46 and the other sections in Part IV of the CCA. Given the scope of the amendment in Schedule 1 to the Bill, any conduct with any purpose that has the effect or likely effect of substantially lessening competition is sufficient to attract liability, providing the other elements are in place. Principally, the difference between the application of other provisions of Part IV and that of section 46 to a set of facts is whether or not the corporation has a substantial degree of market power.[124] It is likely that there would be significant uncertainty for business if the mandatory factors were removed. A similar view was put by the Australian Food and Grocery Council:

Unlike other CCA offences based on a substantial lessening of competition, the proposed s.46 potentially applies to ALL conduct of a corporation with market power. Other substantial lessening of competition provisions (sections 45, 47 and 50) deal only with specific instances of behaviour, such as contracts or acquisitions, and in no other instance is the test applied to unilateral behaviour by a corporation.[125] [original emphasis]

Although the ACCC listed five reasons which demonstrated that the mandatory factors were unnecessary and unworkable (see above), the most persuasive is perhaps the fourth reason surrounding the evidentiary burden placed on the applicant to disprove the impact of the pro-competitive factors. Generally the applicant, be it the ACCC or a private party, will have less information about the pro-competitive aspects of the alleged conduct than the party engaging in that conduct. Given that the applicant bears the onus of proof, it will be up to the ACCC to demonstrate that the conduct substantially lessened competition. As such, it will be up to the ACCC to demonstrate that the pro-competitive factors are not applicable or that they are so insignificant that the alleged conduct remains sufficient to amount to a substantial lessening of competition. As pointed out above, this will be very difficult to do notwithstanding the potential application of section 155 notices to the action.[126]

Other issues regarding section 46
Section 46 of the CCA has been the subject of a number of amendments since 2007. The Harper Review concluded that:

The proposed reform would allow section 46 to be simplified. Amendments introduced since 2007 would be unnecessary and could be repealed. These include specific provisions prohibiting predatory pricing and amendments that attempt to explain the meaning of ‘take advantage’.[127]

About predatory pricing

‘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.

Currently subsections 46(1AAA)-(1A) and (4A) explicitly deal with predatory pricing.

The Bill repeals these subsections, along with subsection 46(5) which excludes the acquisition of plant and equipment from section 46; subsection 46(6) which provides that clearances or authorisations under other Part IV provisions do not contravene subsection 46(1) and subsection 46(7) as a consequence of removing references to proscribed purposes and take advantage from subsection 46(1).

The Harper Review noted that ‘[t]he existing interpretative provisions in section 46, insofar as they are relevant to the proposed new [mandatory factors], would be retained (subsections 46(2) to 46(4)).’[128] To that end, current subsections 46(2)-(4) are reflected as proposed subsections 46(3)-(8) with only minor word changes which are not anticipated to change the overall meaning of the subsections.

The Harper Review acknowledged concerns about residual risks of over-capture and concluded that:

Any residual concerns about business uncertainty can be further mitigated in two ways:

•          first … authorisation should be available to exempt conduct from the prohibition in section 46; and

•          second, the ACCC should issue guidelines on its approach to enforcing section 46, prepared in consultation with business stakeholders, legal experts and consumer groups, and issued in advance of the commencement of the revised prohibition.[129]

The proposed authorisation provisions have not been introduced in the Bill, although the Government has agreed to permit authorisations, so it is anticipated that those changes will be legislated at some point in the future.[130] The ACCC issued draft guidance on its enforcement approach in September 2016.[131]

Need for statutory review

Overall, participants supported the recommended changes relating to subsections 46(3)-(8), although some concerns were raised about the removal of the provisions relating to predatory pricing.[132] More generally, participants strongly indicated that the section 46 changes should be subject to a post-implementation review.[133]

Schedule 2—telecommunications industry

Part 1—main amendments

The amendments in Part 1 of Schedule 2 to the Bill repeal Divisions 2 and 3 of Part XIB of the CCA. In summary, Part XIB covers the telecommunications industry, specifically anticompetitive conduct, tariff-filing, and record-keeping rules. Part IXB applies in addition to Part IV.

Division 2 of Part XIB

Section 151AK within Division 2 of Part XIB sets out the competition rule which provides that a telecommunications carrier or carriage service provider must not engage in anti-competitive conduct. Section 151AJ of the CCA details the circumstances in which a carrier or a carriage service provider will be regarded as engaging in anti-competitive conduct, being if:

•       it has a substantial degree of power in a telecommunications market and

•       either

–      takes advantage of that power in that or any other market with the effect, or likely effect, of substantially lessening competition in that or any other telecommunications market or

–      takes advantage of that power in that or any other market, and engages in other conduct on one or more occasions, with the combined effect, or likely combined effect, of substantially lessening competition in that or any other telecommunications market.

There are notable differences between section 151AJ and section 46:

•       section 151AJ deals with effects and likely effects whereas section 46 (currently) deals with purpose

•       section 151AJ is concerned with effects on competition in a telecommunications market whereas section 46 is (currently) concerned with damaging competitors or potential competitors.[134]

Division 3 of Part XIB

Division 3 of Part XIB relates to competition notices and exemption orders. There are two types of competition notices, which have different requirements:

•       Part A competition notices: these must specify the kind of anticompetitive conduct which the ACCC is alleging (rather than any particular instance of anticompetitive conduct)[135]

•       Part B competition notices: these must include particulars of the contravention that the ACCC believes has occurred or is occurring. In any proceedings, the existence of such is a notice is prima facie evidence of the matters in the notice, and can reverse the onus of proof.[136]

Potential penalties for a breach accrue on a daily basis and are currently set at a maximum of $31 million and $3 million per day for each day in excess of 21 days where the competition rule has been breached for more than 21 days (otherwise the maximum penalty is the sum of $10 million plus $1 million for each day the contravention continued).[137]

Section 151AS of the CCA provides an avenue for an applicant to seek an exemption order from the ACCC such that specified conduct by the applicant is exempted from the scope of section 151AJ (which deals with anticompetitive conduct). The process for obtaining an exemption order is similar to the process for authorisation for certain Part IV offences.

Importantly, the amendments in Schedule 1 to the Bill do not expand the existing authorisation provisions to include section 46. However, the amendments in Part 1 of Schedule 2 to the Bill have the effect of removing ‘authorisations’ from the telecommunications industry until such time as the Government introduces legislation to provide authorisations for activity captured under proposed section 46 (which would then apply to all industries).

Discussion on Part XIB

Part XIB was introduced in 1996 to operate in addition to Part IV of the Act in part because:

Telecommunications is an extremely complex, horizontally and vertically integrated industry and competition is not fully established in some telecommunications markets. There is considerable scope for incumbents to engage in anti-competitive conduct because competitors in downstream markets depend on access to networks or facilities controlled by the incumbents. Furthermore, the possibility of anti-competitive cross-subsidies by incumbents from non-competitive markets to markets in which competition exists or is emerging is a particular threat to the establishment of a competitive environment.

Total reliance on Part IV of the [Trade Practices Act] TPA to constrain such anti-competitive conduct might, in some cases, prove ineffective because of the state of competition in the telecommunications industry and the fast pace of change in this industry.[138]

The introduction of Part XIB was always designed to be transitory:

It is intended that competition rules for telecommunications will eventually be aligned, to the fullest extent practicable, with general trade practices law. Part XIB will apply for the period from 1 July 1997 until some future review determines that competition is sufficiently established that the Part or some provisions of the Part are no longer needed.[139]

During its 20 year existence so far, Part XIB has not been frequently invoked. As noted in the Explanatory Memorandum to the Bill:

Since the introduction of Part XIB [in 1997], the ACCC has only issued five Part A competition notices, with the last issued in April 2006, and only one Part B notice which was later withdrawn by the ACCC.[140]

That said, merely because Part XIB has been infrequently used does not necessarily provide justification for its repeal. It could the case that, for instance, Part XIB has been rarely invoked because it operates as a ‘credible threat’ to the telecommunications industry, particularly the existence of the pecuniary penalty provisions. From a public policy perspective, what is relevant is whether Part XIB remains fit for purpose and provides net benefits to the Australian community.

The Vertigan Review recommended that the telecommunications-specific anti-competitive regime in Part XIB be reviewed to assess its ongoing effectiveness.[141] The Harper Review provided that:

The proposed amendment to section 46 and the availability of authorisation would also obviate the need for the telecommunications industry-specific anti-competitive conduct provisions (Division 2 of Part XIB) and exemption order regime (Subdivision B, Division 3 of Part XIB) of the [Competition and Consumer Act] CCA. Division 2 currently provides for an effects-based test in relation to the conduct of carriers or carriage service providers (within the meaning of the Telecommunications Act 1997) with a substantial degree of power in a telecommunications market. Division 3 allows applications to the ACCC for an order exempting specific conduct from the scope of that effects test, where the public benefit outweighs the anti-competitive detriment.[142]

There was a review conducted by the Department of Communications and the Arts in relation to Part XIB as part of the Treasury exposure draft response to the Harper Review.[143] A submission to the review by the ACCC stated:

… if section 46 of the CCA is amended as proposed, the Australian Competition and Consumer Commission (ACCC) would support repealing the telecommunications specific anti-competitive conduct provisions in Part XIB of the CCA. … While market power concerns still remain in the telecommunications sector, the ACCC considers that the proposed amendments to section 46 are likely to be an effective tool for dealing with any associated competition concerns.[144]

A submission from the Australian Communications Consumer Action Network (ACCAN) considered that:

The telecommunications market has undergone, and will undergo a significant amount of changes in the next few years. Due to these circumstances, ACCAN does not believe now is the time to remove existing competition law protections except where there is clear and unnecessary duplication. Until further competition develops, ACCAN strongly believes it is in the best interests of end users that the ACCC should continue to be able to issue competition notices to intervene quickly and effectively to protect consumers from anti-competitive market behaviour.[145]

A submission from Telstra supported repealing the relevant provisions:

Telstra considers that if the proposed amendments to section 46 are made, the competition rule and competition notice regime in Divisions 2 and 3 (and associated provisions in Divisions 7-10) of Part XIB, will distort competition to the detriment of consumers and should be repealed as soon as possible. … Retaining the competition rule and competition notice regimes would make Australia an outlier [internationally] in terms of competition regulation.[146]

The Competitive Carriers’ Coalition considered that subsection 151AJ(2) (which deals with engaging in anti-competitive conduct) could be removed to avoid duplication, but strongly advocated retaining other aspects of Part XIB, noting:

The competition rule extends to conduct in contravention of other sections of Part IV of the CCA, including section 45 (contracts, arrangements or understandings) and section 47 (exclusive dealing).

Further, the telecommunications competition regime embraces the use of competition notices that may be issued in respect of anti-competitive conduct and potential contraventions of the competition rule. Competition notices are important enforcement tools that should remain available to the Australian Competition and Consumer Commission (ACCC) to address anti-competitive conduct.[147]

A similar view was put in a submission by NBN, although the submission also canvassed other potential changes to Part XIB.[148]

Optus submitted that notwithstanding development in telecommunications, concentrated markets remained and that there was a justification for the retention of the existing Part XIB provisions. The submission did, however, agree that the anti-competitive conduct provision in Part XIB should mirror the changes recommended by the Harper Review (and introduced by item 1 of Schedule 1 above), apart from the mandatory factors.[149] A submission from Vodafone expressed a strong preference to retain Divisions 2 and 3 of Part XIB, stating that ‘[t]he justifications for introducing these anti-competitive conduct prohibitions remain as relevant today as they did when they were introduced in 1996.’[150]

Part 2—consequential amendments

Part 2 of Schedule 2 to the Bill makes a range of consequential amendments to the CCA as a result of the main amendments proposed in Part 1. For instance, items 2-4 of Schedule 2 remove references to section 151AJ from other provisions of the CCA to reflect the proposed removal of the anti-competitive conduct provision. Items 5 and 6 of Schedule 2 amend the heading and simplified outline of Part XIB to reflect the proposed more limited scope of Part XIB, which will then be focused on filing tariff information and record-keeping rules. It is not anticipated that the amendments as proposed in Part 2 will change the operation of the CCA.

Appendix 1
Current section 46

46               Misuse of market power

(1)                            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 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;

(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.

(1AAA)              If a corporation supplies goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying the goods or services, the corporation may contravene subsection (1) even if the corporation cannot, and might not ever be able to, recoup losses incurred by supplying the goods or services.

(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.

(1A)               For the purposes of subsections (1) and (1AA):

(a)              the reference in paragraphs (1)(a) and (1AA)(a) to a competitor includes a reference to competitors generally, or to a particular class or classes of competitors; and

(b)               the reference in paragraphs (1)(b) and (c) and (1AA)(b) and (c) to a person includes a reference to persons generally, or to a particular class or classes of persons.

(2)                             If:

(a)              a body corporate that is related to a corporation has, or 2 or more bodies corporate each of which is related to the one corporation together have, a substantial degree of power in a market; or

(b)               a corporation and a body corporate that is, or a corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in a market;

the corporation shall be taken for the purposes of this section to have a substantial degree of power in that market.

(3)                             In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the court shall have regard to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(a)               competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(b)               persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market.

(3A)               In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the court may have regard to the power the body corporate or bodies corporate has or have in that market that results from:

(a)              any contracts, arrangements or understandings, or proposed contracts, arrangements or understandings, that the body corporate or bodies corporate has or have, or may have, with another party or other parties; and

(b)               any covenants, or proposed covenants, that the body corporate or bodies corporate is or are, or would be, bound by or entitled to the benefit of.

(3B)               Subsections (3) and (3A) do not, by implication, limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(3C)               For the purposes of this section, without limiting the matters to which the court may have regard for the purpose of determining whether a body corporate has a substantial degree of power in a market, a body corporate may have a substantial degree of power in a market even though:

(a)               the body corporate does not substantially control the market; or

(b)               the body corporate does not have absolute freedom from constraint by the conduct of:

(i)              competitors, or potential competitors, of the body corporate in that market; or

(ii)               persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(3D)               To avoid doubt, for the purposes of this section, more than 1 corporation may have a substantial degree of power in a market.

(4)                             In this section:

(a)              a reference to power is a reference to market power;

(b)               a reference to a market is a reference to a market for goods or services; and

(c)               a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

(4A)               Without limiting the matters to which the court may have regard for the purpose of determining whether a corporation has contravened subsection (1), the court may have regard to:

(a)               any conduct of the corporation that consisted of supplying goods or services for a sustained period at a price that was less than the relevant cost to the corporation of supplying such goods or services; and

(b)               the reasons for that conduct.

(5)                             Without extending by implication the meaning of subsection (1), a corporation shall not be taken to contravene that subsection by reason only that it acquires plant or equipment.

(6)                             This section does not prevent a corporation from engaging in conduct that does not constitute a contravention of any of the following sections, namely, sections 45, 45B, 47, 49 and 50, by reason that an authorization or clearance is in force or by reason of the operation of subsection 45(8A) or section 93.

(6A)               In determining for the purposes of this section whether, by engaging in conduct, a corporation has taken advantage of its substantial degree of power in a market, the court may have regard to any or all of the following:

(a)               whether the conduct was materially facilitated by the corporation’s substantial degree of power in the market;

(b)               whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;

(c)               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;

(d)               whether the conduct is otherwise related to the corporation’s substantial degree of power in the market.

This subsection does not limit the matters to which the court may have regard.

(7)                             Without in any way limiting the manner in which the purpose of a person may be established for the purposes of any other provision of this Act, a corporation may be taken to have taken advantage of its power for a purpose referred to in subsection (1) notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances.

Appendix 2
Proposed new section 46

46 Misuse of market power

(1)               A corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in:

(a)              that market; or

(b)              any other market in which that corporation, or a body corporate that is related to that corporation:

(i)              supplies goods or services, or is likely to supply goods or services; or

(ii)              supplies goods or services, or is likely to supply goods or services, indirectly through one or more other persons; or

(c)              any other market in which that corporation, or a body corporate that is related to that corporation:

(i)              acquires goods or services, or is likely to acquire goods or services; or

(ii)              acquires goods or services, or is likely to acquire goods or services, indirectly through one or more other persons.

(2)              Without limiting the matters to which regard may be had in determining for the purposes of subsection (1) whether conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market, regard must be had to the extent to which:

(a)              the conduct has the purpose of, or has or would be likely to have the effect of, increasing competition in that market, including by enhancing efficiency, innovation, product quality or price competiveness in that market; and

(b)              the conduct has the purpose of, or has or would be likely to have the effect of, lessening competition in that market, including by preventing, restricting, or deterring the potential for competitive conduct or new entry into that market.

(3)              A corporation is taken for the purposes of this section to have a substantial degree of power in a market if:

(a)              a body corporate that is related to that corporation has, or 2 or more bodies corporate each of which is related to that corporation together have, a substantial degree of power in that market; or

(b)              that corporation and a body corporate that is, or that corporation and 2 or more bodies corporate each of which is, related to that corporation, together have a substantial degree of power in that market.

(4)              In determining for the purposes of this section the degree of power that a body corporate or bodies corporate have in a market:

(a)              regard must be had to the extent to which the conduct of the body corporate or of any of those bodies corporate in that market is constrained by the conduct of:

(i)              competitors, or potential competitors, of the body corporate or of any of those bodies corporate in that market; or

(ii)              persons to whom or from whom the body corporate or any of those bodies corporate supplies or acquires goods or services in that market; and

(b)              regard may be had to the power the body corporate or bodies corporate have in that market that results from:

(i)              any contracts, arrangements or understandings that the body corporate or bodies corporate have with another party or other parties; or

(ii)              any proposed contracts, arrangements or understandings that the body corporate or bodies corporate may have with another party or other parties.

(5)              For the purposes of this section, a body corporate may have a substantial degree of power in a market even though:

(a)              the body corporate does not substantially control that market; or

(b)              the body corporate does not have absolute freedom from constraint by the conduct of:

(i)              competitors, or potential competitors, of the body corporate in that market; or

(ii)              persons to whom or from whom the body corporate supplies or acquires goods or services in that market.

(6)              Subsections (4) and (5) do not limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.

(7)              To avoid doubt, for the purposes of this section, more than one corporation may have a substantial degree of power in a market.

(8)              In this section:

(a)              a reference to power is a reference to market power; and

(b)              a reference to a market is a reference to a market for goods or services; and

(c)              a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market.

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

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 Enquiry Point for referral.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

[1].              Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, Proposed amendment [sheet GZ201].Parliament of Australia, ‘Competition and Consumer Amendment (Misuse of Market Power) Bill 2016’, Australian Parliament website.

[2].              Competition and Consumer Act 2010, section 2; Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6, [24] (Mason CJ and Wilson J).

[3].              L Murphy, ‘Second reading speech: Trade Practices Bill 1974’, Trade Practices Bill: In Committee, 14 August 1974, p. 923.

[4].              T Abbott (Prime Minister) and B Billson (Minister for Small Business), ‘Review of competition policy’, media release, 4 December 2013.

[5].              Competition Policy Review, Competition policy review terms of reference, 27 March 2014.

[6].              Competition Policy Review, Competition policy review issues paper, 14 April 2014.

[7].              Competition Policy Review Panel (Australia), Competition policy review: draft report, (Harper Review: draft report), Canberra, September 2014.

[8].              Competition Policy Review Panel (Australia), Competition policy review: final report, (Harper Review: final report), Canberra, March 2015.

[9].              Harper Review: draft report, op. cit., p. 42; Draft recommendation 25, p. 44.

[10].              Ibid., pp. 42–43. See also pp. 206–212.

[11].              Ibid., p. 212.

[12].              Harper Review: final report, op. cit., Canberra, March 2015, pp. 337–339.

[13].              Ibid., pp. 339–340.

[14].              Ibid., pp. 60–62, 335–348.

[15].              Ibid., p. 61.

[16].              Ibid., p. 345.

[17].              Ibid.

[18].              Australian Competition and Consumer Commission (ACCC), Draft framework for misuse of market power guidelines, ACCC, Canberra, September 2016.

[19].              The Treasury, Australian government response to the Competition Policy Review, The Treasury, Canberra, 24 November 2015, p. 25.

[20].              The Treasury, Options to strengthen the misuse of market power law, Discussion paper, The Treasury, Canberra, December 2015.

[21].              M Turnbull (Prime Minister), S Morrison (Treasurer) and K O’Dwyer (Assistant Treasurer), Fixing competition policy to drive economic growth and jobs, media release, 16 March 2016; S Morrison (Treasurer), Release of exposure draft for consultation: strengthening Australia’s competition law, media release, 5 September 2016.

[22].              Competition and Consumer Amendment (Competition Policy Review) Bill 2016: exposure draft, 5 September 2016.

[23].              Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, Discussion paper, Canberra, September 2016.

[24].              Competition and Consumer Amendment (Competition Policy Review) Bill 2016: exposure draft, op. cit.

[25].              Senate Selection of Bills Committee, Report, 10, 2016, The Senate, Canberra, 1 December 2016, p. 3.

[26].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 [Provisions], The Senate, Canberra, February 2017.

[27].              Senate Economics Legislation Committee, ‘Submissions’, Parliament of Australia website, February 2017.

[28].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 [Provisions], op. cit., p. 23.

[29].              Australian Dairy Farmers, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 6, 6 January 2017, p. 3; Woolworths Limited, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 19, 9 January 2017, p. 4; Business Council of Australia, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 27, January 2017, p. 7.

[30].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 [Provisions], op. cit., p. 25.

[31].              Ibid., p. 27.

[32].              Ibid., p. 28.

[33].              Ibid., p. 29.

[34].              Ibid., pp. 30–31.

[35].              Senate Standing Committee for the Selection of Bills, Scrutiny digest, 1, 2017, The Senate, Canberra, 8 February 2017, p. 11.

[36].              Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill, pp. 3–4, 30.

[37].              The Statement of Compatibility with Human Rights can be found at pages 31–32 of the Explanatory Memorandum to the Bill.

[38].              Parliamentary Joint Committee on Human Rights, Scrutiny report, 1, 2017, The Senate, Canberra, 16 February 2017, p. 32.

[39].              Harper Review: final report, op. cit., p. 338.

[40].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6.

[41].              Ibid., [24] (Mason CJ and Wilson J).

[42].              Ibid., [28] (Mason CJ and Wilson J). See also Deane J at [10] (with whom Dawson J agreed) who construed the market differently and focussed heavily on the purpose of BHP’s refusal to supply QWI with Y-bar. See further Toohey J at [37].

[43].              Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, [2001] HCA 13; Boral Besser Masonry Ltd v ACCC (2003) 215 CLR 374, [2003] HCA 5; Rural Press Ltd v ACCC (2003) 216 CLR 53, [2003] HCA 75; ACCC v Cement Australia, [2013] FCA 909.

[44].              The fourth case was decided in 2013 and the ACCC has appealed the Federal Court’s penalty decision: ACCC, ‘ACCC appeals Cement Australia level of penalties’, media release, MR 99/16, 6 June 2016.

[45].              There was a consideration of whether the appropriate test was a ‘could have behaved’ test or a ‘would have behaved’ test. In Melway and Rural Press the courts adopted a ‘could have behaved’ test. In response to the Rural Press decision, section 46 was amended with the insertion of subsection (6A) to formalise a ‘would have behaved’ test.

[46].              Harper Review: final report, op. cit., p. 338.

[47].              F Zumbo, ‘The High Court’s Rural Press decision: the end of s 46 as a deterrent against abuse of market power?’, Trade Practices Law Journal, 12, 2004, pp. 126–134.

[48].              Harper Review: final report, op. cit., pp. 338, 345.

[49].              R Sims, ‘Section 46: the great divide’, speech to the Hodgekiss Competition Law Conference, ACCC website, Sydney, 30 May 2015.

[50].              Harper Review: final report, op. cit., p. 339.

[51].              Competition and Consumer Act 2010, subsection 4(2).

[52].              Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd [1986] FCA 218, [29] (Bowen CJ).

[53].              Re Tooth & Co Ltd; Re Tooheys (1977) TPRS 203.131 [electronic version not available].

[54].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6; Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, [2001] HCA 13; NT Power Generation Pty Ltd v Power & Water Authority (2004) 219 CLR 90, [2004] HCA 48; ACCC v Cabcharge Australia Ltd [2010] FCA 1261; ACCC v Ticketek Pty Ltd [2011] FCA 1489.

[55].              S Corones, Competition Law in Australia, 3rd edn, Lawbook Co., 2004, p. 414.

[56].              Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, op. cit., [17] (Gleeson CJ, Gummow, Hayne and Callinan JJ).

[57].              Ibid., [44] (Gleeson CJ, Gummow, Hayne and Callinan JJ).

[58].              MinterEllison, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 15, 9 January 2017; Business Council of Australia, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, submission no. 79210900, September 2016, p. 6.

[59].              Harper Review: final report, op. cit., pp. 57 and 340.

[60].              Rural Press Ltd v ACCC [2002] FCAFC 213. The decision was upheld on appeal, although the High Court did not comment on this aspect of the appeal: Rural Press Ltd v ACCC (2003) 216 CLR 53, [2003] HCA 75. Section 46 was amended by the Trade Practices Legislation Amendment Act (No. 1) 2007.

[61].              Competition and Consumer Act, sections 45, 45B, 45C, 45DA, 47, 49–50.

[62].              Harper Review: final report, op. cit., p. 513.

[63].              The Treasury, Options to strengthen the misuse of market power law, op. cit.

[64].              S Morrison, Release of exposure draft for consultation: strengthening Australia’s competition law, op. cit. See also Treasury, ‘Competition law amendments: exposure draft consultation’, Treasury website, 5 September 2016.

[65].              Competition and Consumer Act, proposed paragraphs 46(1)(a)–(c).

[66].              Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, p. 12.

[67].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016.

[68].              Law Council of Australia, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 20, 9 January 2017, p. 2.

[69].              J Clarke, Submission to Senate Economics Legislation Committee, Inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, submission no. 7, 6 January 2017, p. 7.

[70].              That is, the market power is not exercised in the market that the power originates from, nor is the market power exercised in another market where the corporation (or a related body corporate) supplies or acquires (or is likely to supply or acquire), whether directly or indirectly, goods or services.

[71].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6, [15] (Mason CJ and Wilson J).

[72].              Competition and Consumer Act 2010, section 4E. For a good explanation of the interpretation and importance of correctly defining the ‘market’ see I Stewart, ‘The economics and law of section 46 of the Trade Practices Act’, Australian Business Law Review, 26, 1998, pp. 111-138, esp. 114–121.

[73].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6, [30] (Mason CJ and Wilson J).

[74].              Law Council of Australia, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, 4 October 2016, p. 7.

[75].              Business Council of Australia, Submission to Treasury, op. cit., p. 11.

[76].              See Harper Review: final report p. 339 (footnote 539) for examples of submissions which supported the Draft Report changes, and p. 339 (footnote 540) for examples of submissions which opposed the Draft Report changes.

[77].              Harper Review: final report, op. cit., p. 339.

[78].              Ibid.

[79].              Ibid.

[80].              Competition and Consumer Act 2010, sections 45, 47, and 50.

[81].              ACCC v Pauls Ltd [2002] FCA 1586, [104] (O’Loughlin J); Trade Practices Commission v TNT Management Ltd [1985] FCA 23, [257] (Franki J).

[82].              Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331, [1979] FCA 85.

[83].              Ibid., [34] (Bowen CJ). See further Deane J at [10].

[84].              Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197.

[85].              Ibid., [111] (Heerey J) (with whom Black CJ and Tamberlin J agreed). Also note that Heerey J was referring to Deane J’s judgment in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331, [1979] FCA 85 which concerned s 45D of the Act, ‘but the reasoning of Deane J is equally applicable to the concept of likely effect in s 47(10)’ at [111].

[86].              Australian Gas Light Company v Australian Competition and Consumer Commission (No. 3) [2003] FCA 1525.

[87].              Ibid., [343] (French J).

[88].              Harper Review: final report, op. cit., p. 339.

[89].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6, [24] (Mason CJ, Wilson J).

[90].              R Sims, ‘Section 46: the great divide’, speech to the Hodgekiss Competition Law Conference, Sydney, 30 May 2015.

[91].              See also C Coops, ‘A fly in the ointment for the ACCC? Implications of the Cement Australia decision for the interpretation of section 46’, Australian Journal of Competition and Consumer Law, 23, 2015, pp. 83–96, p. 95.

[92].              Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, [1989] HCA 6, [22] (Mason CJ, Wilson J), [4] (Deane J) (with whom Dawson J agreed).

[93].              Ibid., [32] (Toohey J).

[94].              See, for example, RP Data Limited v State of Queensland [2007] FCA 1639; Seven Network Ltd v News Ltd [2009] FCAFC 166; Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197.

[95].              Australian Competition and Consumer Commission v Pfizer Australia Pty Ltd [2015] FCA 113; Australian Competition and Consumer Commission (ACCC), ‘ACCC appeals Pfizer decision’, media release, 18 March 2015. See also M Terceiro, ‘Mythbusting: bridging the great section 46 divide’, Competition and Consumer Protection Law, blog, 8 November 2015.

[96].              Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, [2001] HCA 13, [104] (Kirby J).

[97].              R Miller, Miller’s Australian competition and consumer law annotated, 38th edn, Thomson Reuters (Professional) Australia Limited, Sydney, 2016, pp. 590–591.

[98].              Ibid., p. 527.

[99].              Harper Review: final report, op. cit., pp. 339–342.

[100].              Law Council of Australia, Submission to Treasury, op. cit., p. 5.

[101].              MinterEllison, Submission to Senate Economics Legislation Committee, op. cit., p. 2.

[102].              Harper Review: final report, op. cit., p. 341; Competition and Consumer Act 2010, sections 45, 47, and 50.

[103].              Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38, [113] (French J).

[104].              Ibid., [114].

[105].              See discussion in Rural Press Ltd v ACCC (2003) 216 CLR 53, [fn. 26].

[106].              The Australian Builders’ Labourers’ Federated Union of Workers—Western Australia Branch v J-Corp Pty Ltd [1993] FCA 266, [39] (Lockhart and Gummow JJ); Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32, [31] (Mason CJ).

[107].              Harper Review: final report, op. cit., p. 344.

[108].              Harper Review: draft report, op. cit., p. 212.

[109].              Ibid., p. 210.

[110].              Harper Review: final report, op. cit., pp. 342–345.

[111].              Ibid., pp. 341, 343.

[112].              Minter Ellison, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, submission no. 127029476, 29 September 2016, p. 5.

[113].              Business Council of Australia, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, op. cit., pp. 12–13.

[114].              Australian Competition and Consumer Commission, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, submission no. 458281969, 5 October 2016, p. 7.

[115].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 [Provisions], op. cit., pp. 22–23.

[116].              Ibid., p. 23, recommendation 1.

[117].              Harper Review: final report, op. cit., pp. 342–345.

[118].              Australian Food and Grocery Council, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, submission no. 49942290, 30 September 2016.

[119].              Business Council of Australia, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, p. 11, op. cit.

[120].              There is also an important relationship between section 46 and Part IIIA of the CCA which covers the national access regime to nationally significant infrastructure, but that is not discussed here.

[121].              Generally action has been brought under sections 45 and/or 47 in addition to section 46: M Terceiro, ‘Mythbusting: bridging the great section 46 divide’, op. cit.

[122].              ACCC, Draft framework for misuse of market power guidelines, ACCC, Canberra, September 2016.

[123].              Australian Automobiles Association, Submission to ACCC, Draft framework on misuse of market power, 30 September 2016, p. 4.

[124].              There is also a distinction made between the purpose of the arrangement (section 45) and the purpose of the corporation engaging in the relevant conduct (section 46), in addition to the fact that section 46 applies to unilateral conduct.

[125].              Australian Food and Grocery Council, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, op. cit., p. 4.

[126].              Section 155 notices relate to the information gathering powers of the ACCC. Private litigants do not have access to section 155 notices and are therefore arguably further disadvantaged.

[127].              Harper Review: final report, op. cit., p. 345.

[128].              Ibid.

[129].              Ibid.

[130].              Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, pp. 27–29.

[131].              ACCC, Draft framework for misuse of market power guidelines, Canberra, September 2016.

[132].              Choice, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, submission no. 587199721, 12 February 2016, p. 2; National Farmers’ Federation, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, 12 February 2016, p. 1. For concerns about the loss of an explicit offence for predatory pricing see, for example, Queensland Dairyfarmers’ Organisation, Submission to Treasury, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016: exposure draft, 12 February 2016, p. 1; Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, p. 19.

[133].              Senate Economics Legislation Committee, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, pp. 19, 21, 23.

[134].              R Miller, Miller’s Australian competition and consumer law annotated, op. cit., p. 1221.

[135].              Competition and Consumer Act 2010, section 151AKA.

[136].              Ibid., sections 151AL and 151AN.

[137].              Ibid., paragraph 151BX(3)(a).

[138].              Explanatory Memorandum, Trade Practices Amendment (Telecommunications) Bill 1996, p. 6.

[139].              Ibid., p. 7.

[140].              Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, p. 15. See also, ACCC, Competition notices register (s. 151AR), ACCC, Canberra, n.d.

[141].              M Vertigan, Independent cost-benefit analysis of broadband and review of regulation: statutory review under section 152EOA of the Competition and Consumer Act 2010, June 2014, Canberra, pp. 22––24.

[142].              Harper Review: final report, op. cit., p. 345.

[143].              Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, Discussion paper, September 2016, Canberra.

[144].              ACCC, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, 6 October 2016, p. 1.

[145].              The Australian Communications Consumer Action Network, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, 6 October 2016, p. 1.

[146].              Telstra Corporation Limited, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, 30 September 2016, p. 2.

[147].              Competitive Carriers’ Coalition, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, 3 October 2016, pp. 1–2.

[148].              NBN Co Limited, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, 2016, pp. 1, 6, 8.

[149].              Optus, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, September 2016.

[150].              Vodafone Hutchison Australia, Submission to the Department of Communications and the Arts, Review of the Part XIB telecommunications anti-competitive conduct provisions, October 2016, p. 2.