August 2017 Competition Update: The “effects test” becomes law, and other competition reform news

August, 2017

By Mick Coleman, Partner, Corporate Advisory 

In March 2017, Mills Oakley published a Competition Update on amendments proposed to the Competition and Consumer Act 2010 (Cth) (“CCA”) by the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 (“the Bill”).  This note explains the final form of the Bill, with the main s46 reform largely intact but some other changes dropping out.  We also check in on the other Harper reforms in the Competition Policy Review Bill.

History of the Bill

The 2015 Harper Competition Review recommended giving CCA s46 additional teeth, by introducing an effects test in place of the hard-to-prove three-part purpose test – taking advantage of market power for an improper purpose. That is, a corporation with substantial market power should be held to break the law if its conduct, simply, has the effect or purpose of substantially lessening competition.

The Bill introduced in 2016 and first debated in March 2017 enacted those reforms and tidied up related elements of s46.  The original (but not the final) Bill would have repealed the anti-competitive conduct provisions specific to the telecommunications industry in Division 2 of Part XIB, and the competition notices and exemption order regime in Division 3 of Part XIB.

The Bill passed the Senate on 14 August 2017, amended to instead retain Divisions 2 and 3 of Part XIB with slight revisions. The House of Representatives passed the amended Bill on 15 August 2017 and the Bill awaits Royal Assent.

Amendments to the CCA

The new “Purpose or effect” test – currently, a powerful corporation’s conduct breaches s46 only if it has one of three specified purposes related to damaging competitors. Under new section 46, a breach will occur if the conduct has the purpose, effect or likely effect of substantially lessening competition.  Smoking guns, thoughtless emails or whistleblowers will no longer be required in every case – the ACCC or a competitor will be able to assess market impact using public information using objective market share and similar data.

Other changes to s46 were also made, as follows:

Meanwhile – what about the “low hanging fruit” Harper reforms?

In parallel to the Bill discussed above, a package of other Harper reforms has been drafted as the Competition and Consumer Amendment (Competition Policy Review) Bill.  Presumably, the s46 Bill was separated out because the change was controversial.  It is a satisfying twist that the tough s46 reforms are now through, while the long list of easy wins remains somewhere on the Parliamentary agenda.  We will provide an update once they pass.

Conclusion

Following changes to the CCA s46 misuse of market power laws, companies with market power considering product launches, exclusive offers, distribution strategies, discounting programs, tie-ups, partnering agreements and so on will need to consider the effect on the market of a successful strategy.

On the flipside, a company worse off due to a powerful competitor’s conduct can consider, or ask the ACCC to consider, whether its competitor’s conduct is leading to a substantial lessening of competition.

Contact Mills Oakley

For further information, please do not hesitate to contact:


Mick Coleman | Partner
T: +61 3 9605 0060
E: mcoleman@millsoakley.com.au

 

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