March 2017 Competition Update: Misuse of market power – the proposed “finger in the air” test

March, 2017

 By Mick Coleman, Partner, Corporate Advisory

Competition reforms before parliament will prohibit conduct with anti-competitive effect.  They have been amended to remove the requirement to consider whether the conduct creates efficiency, innovation, product quality or price competitiveness.  Which leaves the court to consider … not much.    

On the last parliamentary sitting day of 2016, the government introduced the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016.  It delivered on the most controversial reform proposed by the 2015 Harper Review – the turbo-charging of section 46 of the Competition and Consumer Act 2010.  The rule against misuse of market power for an anti-competitive purpose will become a rule against conduct with an anti-competitive purpose or effect.

The impact is immense.   The ACCC and complainant businesses have repeatedly struggled to prove a corporation’s purpose is anti-competitive, and even where they find a smoking gun, have struggled to prove the other element, that the corporation took advantage of its power for that purpose.  At a single blow, both those obstacles will be swept aside.

The introduction of an effects test seems inevitable.  However, in a rearguard action, larger businesses made the point that it ought not be illegal to launch great new products that sweep all before them and, without any illegitimate conduct, crush the competition.

In the original Bill, the government acknowledged this by requiring courts to consider the extent to which the conduct has the purpose or effect of increasing competition in that market, including by enhancing efficiency, innovation, product quality or price competitiveness (clause 46(2)).

Now, in the March 2017 amendments – those factors are simply deleted.  The result is an extreme bare bones prohibition – against conduct with the purpose or effect of substantially lessening competition in any market.  That’s it.

(In truth, the CCA is never that simple – in the traditional manner, the actual text of 46(1) runs for 1 sentence consisting of 8 sub-paragraphs over 18 lines.  There are another 6 sub-paragraphs of guidance but no other factors to be taken into account in determining “effect”.

As a PS for telecommunications readers – the same Bill will repeal Divisions 2 and 3 of Part XIB of the CCA, which give the ACCC a unique tool, the “competition notice” reversing the onus, to use specifically against Telstra.  That deletion remains.  The rest of Part XIB, with a set of other Telstra-focused tools, is not being repealed.

Conclusion

It is a big ask for companies to assess, in advance, whether a product enhancement or discounting spree is likely to have the effect of substantially lessening competition.  On the other side of the equation, every company losing market share should keep track and alert the ACCC at the first sign that they are losing ability to compete.

Mills Oakley will provide further updates as the important post-Harper competition reform program continues.

Contact Mills Oakley


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

Privacy Policy | Terms of Use