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LEGT 1710

BUSINESS AND THE LAW

Lecture 8

Competition Law

Lecturer: Dr Leela Cejnar

2013 The University of New South Wales

Sydney 2052 Australia

The original material prepared for this gu ide is copyright. Apart from fair dealing for the purposes of private study, research, criticism orreview, as permitted under the Copyright Act, no part may be reproduced by any process without written permission.

Enquiries should be addressed to the Head of School, Taxation and Business Law, UNSW, Sydney

New tutorial rooms

Monday 9:00 Quad G042Monday 10:00 Law 301

Monday 10:00 Quad G042 (Marys class)Thursday 9:00 Webster 302Thursday 10:00 Webster 302Thursday 11:00 Webster 302

Tuesday 12:00 Gold G05Tuesday 13:00 Gold G05Tuesday 14:00 Quad 1047Tuesday 15:00 Quad 1047

Wednesday 14:00 Quad 1047Wednesday 15:00 Quad 1047

Thursday 10:00 Webster 215

Thursday 11:00 Mat 313Thursday 12:00 Mat 313 (Danielle/Anthony)

Thursday 12:00 Webster 302Thursday 16:00 Gold G03Thursday 17:00 Gold G03

ALSO CHECK BLACKBOARD AND myUNSW

Assignment 2

Due next Monday 23 September, by 5pm

ONLINE SUBMISSION ONLY

Via Blackboard on Turnitin

Must use references: do not plagiarise

Must include a Bibliography

3

The legislation

From 1 January 2011:

Competition and Consumer Act 2010(Cth)

Pre-2011: Trade Practices Act 1974 (Cth)

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Overview of Competition Provisions

Competition and Consumer Act 2010 (Cth)

art IV

Cartel provisions (ss 44ZZRA to 44ZZRV)

Anti-competitive agreements (s 45)

Misuse of market power (s 46)

Exclusive dealing (s 47)

Resale price maintenance (s 48)

Mergers and acquisitions (s 50)

Enforcement and remedies (Pt VI)

Authorisation, notifications and clearance (Pt VII)

Object of theCompetition and Consumer Act 2010 (Cth)

Section 2

To enhance the welfare of Australians throughthe promotion of competition and fair trading andthe provision of consumer protection

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Application of the

Competition and Consumer Act 2010 (Cth)

pplies to:

Conduct of corporations

Business and commercial activities of individuals

The professions

Business activities of government

trade or commerce

ee Latimer at 8-020

Market definition

Identification of market: essential 1st step toassessing competition

ASK: Who are/could be in competition?

See Latimer at 8-040

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Market definition

Product

Geographic

Time/period of time

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The tests

Competition test

What is the effect or likely effect oncompetition in a market?

Per se test

Speeding offence

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Misuse of market power

Separate test

To be discussed later

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Competition test

Does the conduct have the purpose, effect orlikely effect of substantially lessening

competition in a market?

Anti-competitive agreements EXCEPTagreements that contain an exclusionaryprovision/primary boycott

Exclusive dealing EXCEPT third line forcing

Mergers

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Anti-competitive arrangements: s 45

A corporation shall not make a contract or

arrangement or arrive at an understanding if

a provision in it has the purpose or would

have or be likely to have the effect of

substantially lessening competition

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Anti-competitive agreements: s 45

Contract, arrangement or understanding

Purpose

Effect or likely effect

Substantially lessening or competition

See Latimer at 8-050 to 8-051

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Exclusive Dealing: s 47

Forms of exclusivity arrangements that are prohibitedinclude:

product exclusivity

- Minimum quantity contracts

- Requirement contracts

customer exclusivity

territorial exclusivity

Such arrangements may be imposed by either supplier

or acquirer

ee Latimer at 8-361

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Mergers: s 50

Section 50(1):

A corporation must not directly or indirectly:

(a)acquire shares in the capital of body corporate;or

(b)acquire any assets of a person

if the acquisition would have the effect or

likely effect of substantially lessening competition

See Latimer at 8-570 to 8-580

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Mergers: what to look for?

Actual and potential level ofimport competition

Height of barriers to entry into the market

Level of concentration

Degree of countervailing powerin the market

Likelihood of acquirer being able to significantly and sustainablyincrease prices or profit margins

Extent to which substitutes are available in the market

Dynamic characteristics of the market

Likelihood the acquisition would result in the removal from themarket of a vigorous and effective competitor

Nature and extent of vertical integration in the market (ie wherebusiness expands along different points in relation to the same

production path, such as where manufacturer also owns itssupplier/distributor etc)

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ACCC Merger Guidelines

Merger Guidelines 2008

See ACCC website: www.accc.gov.au

See Latimer at 8-572

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Per se test

Per se breach:

impact on competition does not matter

if you engage in the conduct, you are inbreach of the Act

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Per se prohibitions

Cartel conduct

Contracts containing exclusionaryprovisions/primary boycotts

Third line forcing

Resale price maintenance

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Cartel conduct: ss 44ZZRA to 44ZZRV

Corporations must not make or give effect to a

ontract, arrangement or understanding that

ontains a cartel provision

Cartel conduct

What is a cartel?

When businesses agree to act together insteadof competing with each other

Designed to drive up profits of cartel memberswhile maintaining illusion of competition

Cartels are illegal

2

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Cartel conduct

A cartel provision is a provision relating to:

Price-fixing

- Price fixing was formerly dealt with under s 45A,now repealed

Restricting outputs in the production or supply chain

Allocating customers, suppliers or territories

Bid-rigging/collusive tendering

by parties who are competitors

See Latimer at 8-120

Cartel conduct: TUTORIAL

Tutorial materials for week 9

ACCC module on Cartels

Group work in class

Quiz Questions

ACCC feedback

2

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Cartel conduct

he Marker A Short Film About Cartels

he Australian Competition and Consumer Commission (ACCC)

as made a fictional short film called The Markerto demonstrate

e devastating impact cartels can have on the people involved.

he film was inspired, in part, by Melbourne University research

howing gaps in business awareness of the illegality of cartel

onduct.

he film shows how cartel activity can ruin relationships, careers

nd long-term financial security, and may ultimately land guiltyarties in jail.

he film can be viewed at www.accc.gov.au/themarker.

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Exclusionary provisions/

Primary boycotts: s 45 (2)(a)(i)/ s 45(2)(b)(i)

A corporation shall not make a contract or

arrangement or arrive at an understanding if

it contains an exclusionary provision

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Exclusionary provisions: s 4D

Provision of a contract, arrangement or understanding

Made by parties competitive with one another

Purpose of preventing, restricting, limiting

Particular persons or classes of persons

Need to identify boycott of some other person or class orpersons

ee Latimer at 8-220

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Exclusionary provisions: s 4D

Cases:

News Limited v Australian Rugby FootballLeague Ltd

News Limited v South Sydney District RugbyLeague Football Club Ltd

See Latimer at 8-220

2

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Third line forcing: s 47(6) and 47(7)

Occurs where A forces B to deal with third party, C

Examples:

A supplies B on condition that B acquires from C

A refuses to supply B because does not agree to acondition that B acquire from C

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Third line forcing

Subject to the per se test

Unlike other subsections of s 47 which aresubject to the competition test

See Latimer at 8-410

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Third line forcing

Case:

Castlemaine Tooheys Ltd v Williams andHodgson Transport Pty Ltd

See Latimer at 8-410

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Resale price maintenance: s 48 and ss 96-100

Relates to price at which goods acquired can beon-sold

Supplier dictates resale price

Per se breach

See Latimer at 8-440 to 8-450

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Resale Price Maintenance

types of conduct :

making it known

inducing

entry or offer to enter into an agreement not to sell orresupply below specified price

withholding supplies for purpose of maintaining price,without agreement

use of a price statement, likely to be understood asrequiring a minimum resale price

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Resale Price Maintenance:

Key Terms

Stating price charged must be within a range ofparticular figure

Couching price in terms ofrecommendation does notprevent it from being a price specified not genuinerecommendation

Resale price maintenance deals with price at which theacquirer will re-sell the goods or services acquired (iethe on-selling/resale price)

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Resale price maintenance

Cases:

ACCC v Sundaze Australia Pty Ltd

ACCC v Jurlique International Pty Ltd

See Latimer at 8-450

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Misuse of Market Power: s 46

Corporation with a substantial degree of market power

Taking advantage

For a proscribed purpose:

eliminating or substantially damaging acompetitor

preventing entry

deterring or preventing competitive conduct

See Latimer at 8-300 to 8-301

3

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Misuse of Market Power: s 46

Cases:

Queensland Wire Industries Pty Ltd v TheBroken Hill Proprietary Co Ltd

Melway Publishing Pty Ltd v Robert Hicks

Boral Besser Masonry Ltd v ACCC

ACCC v Australian Safeway Stores Pty Ltd

See Latimer at 8-301

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Authorisation

ACCC can give an authorisation (exemption) to agreements affecting

competition if:

The benefit of the conduct outweighs any anticompetitivedetriment

There is a public benefit:

Business efficiency

Expansion of employment

Promotion of industry

Growth in exports

Economic developmentAssistance to small business

Lodgement fee payable

See Latimer at 8-620 to 8-710

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Authorisation

What can the ACCC authorise?

an exclusionary provision (primary boycott)

an anti-competitive agreement (including a priceagreement)

a secondary boycott

exclusive dealing

resale price maintenance

mergers

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Notification

What is an exclusive dealing notification?

Businesses may obtain immunity for conduct that mightrisk breaching the exclusive dealing (including third lineforcing) provisions of the Act by lodging a notificationwith the ACCC

Can engage in notified conduct 14 days after notificationlodged and lodgement fee paid

Notification lasts for 3 years or until ACCC revokes

notification

See Latimer at 8-620

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Enforcement and remedies

Part VI of the Competition and Consumer Act 2010isentitled Enforcement and Remedies

This part contains the provisions which enable the ACCCto institute enforcement proceedings againstcorporations and individuals that breach the Act

ee Latimer at 8-770

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Enforcement

Civil proceedings for recovery of pecuniary penalties asa debt due to the Commonwealth

Criminal penalties for cartel conduct

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Penalties:

Competition Provisions

Penalty payable by corporation for breach of Pt IV is thegreater of the following:

$10m; or

three times value of the illegal benefit; or

10% of turnover in preceding 12 months

Individuals: civil penalty of up to $500 000 per offence

Cartel conduct:

criminal penalty for individuals up to 10 years jail

and/or

fines of up to $220 000 per offence

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Other orders

Injunctions: s 80

Damages: s 82

Divestiture: s 81

Punitive orders

Adverse publicity: public disclosure that you have breached theAct

Non-punitive orders, such as:

community service order

probation order,

order requiring disclosure of specific information

corrective advertising order

Order disqualifying person from managing corporations: s 86E

Court enforceable undertakings: s 87B

See Latimer at 8-3770 to 8-860

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Court enforceable undertakings

ACCC may accept written, legally enforceableundertakings: s 87B

Undertaking may be withdrawn or varied at any time withthe consent of the Commission

ACCC has right to enforce where term of undertakinghas been breached and can apply to Federal Court fororder

ACCC guidelines on s 87B see accc.gov.au

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Administration and court structure

Australian Competition and ConsumerCommission (ACCC)

Australian Competition Tribunal

National Competition Council (NCC)

Federal Court of Australia

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The ACCC

Agency responsible for ensuring compliancewith the Act

Independent Commonwealth statutory authorityformed in 1995

Prior to 1995: Trade Practices Commission orTPC

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The ACCC

Key function to promote competition and fairtrading in the market place to benefit consumersbusiness and the community. Also regulatesnational infrastructure industries (gas, electricitytelecommunications)

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The ACCC

Priorities areas include: serious cartel conduct;primary boycotts, deceptive conduct,unconscionable conduct, misuse of marketpower

ACCC Corporate Plan: www.accc.gov.au

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ACCC investigations and

obtaining evidence

Power to obtain evidence:

Section 155 powers and the reason tobelieve requirement

Pt XID : Search and seizure/power to enter

Other investigative powers

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ACCC Policies

ACCC Cooperation Policy for Enforcementmatters

ACCC Leniency Policy/Immunity Policy forCartel Conduct

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Next week

Property Law

Read Latimer, ch 3