In Australia, unilateral market conduct issues are primarily regulated by Section 46 of the national competition statute, the Competition and Consumer Act 2010 (Cth) (CCA). Section 46 prohibits a corporation with substantial market power engaging in conduct that has the purpose or likely effect of substantially lessening competition in the market in which the corporation2 has market power or in any other market in which the corporation supplies or acquires the goods or services.
While the prohibition is drafted with reference to competitors, consistent with the approach in Europe in abuse of dominance cases, Australian courts have made clear that the primary concern of the provision is to protect consumers and the competitive process itself, not particular competitors who may be affected by an exercise of market power. It should also be noted that it is not a contravention for a corporation to have, or to merely exercise, its market power: see, for example, the decision of the Privy Council in Commerce Commission v. Carter Holt Harvey Building Products Group3 in relation to a similar provision under the NZ Commerce Act 1986:
The law of New Zealand does not disable a trader who is in a dominant position in a market from competing with other traders in that or any other market. It is open to the trader to compete on price as well as quality so long as he does not use his dominant position for the purposes of producing an effect which is anti-competitive . . . More over the trader is entitled, before he enters upon a line of conduct which is designed to affect his competitors, to know with some certainty whether or not what he proposes to do is lawful . . . The question which lies at the heart of the appeal to the Board is how, in this difficult area, lawful conduct can be distinguished from unlawful conduct.
Predatory pricing will contravene Section 46 if engaged in by a corporation with market power and with the likely effect of substantially lessening competition in any relevant market, or where that is its purpose.
Previous versions of the provision
On 6 November 2017, an amendment to Section 46 of the CCA came into effect. The amended provision is unchanged to the extent that it requires that it be established that a corporation has a substantial degree of power in a market. From that point on, the provision has changed. Formerly, the requirement of Section 46 was that a corporation take advantage of that market power for a prescribed purpose: eliminating or substantially damaging a competitor; 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 market.
Following the amendment, the focus has shifted from proscribed purposes to whether the conduct itself substantially lessens competition or has that purpose. Specifically, the CCA prohibits corporations that have a substantial degree of market power from engaging in conduct that has the purpose, or likely effect, of substantially lessening competition in a market in which the corporation has market power; in any other market in which the corporation has market power; or in any other market in which the corporation supplies or acquires goods or services.
The CCA previously contained two provisions prohibiting predatory pricing that were both repealed in November 2017. Such conduct is now subject to the general provisions.
Until November 2017, Section 46 provided that corporations with a substantial degree of market power could not use that power, in any market, for the purpose of:
- substantially damaging or eliminating a competitor;
- substantially damaging or eliminating competitors generally, a class of competitors or any particular competitor; or
- preventing or deterring anyone from engaging in competitive conduct in any market.
To make out a contravention, an applicant had to establish that a corporation was using its market power (as opposed to any other power), and that it was doing so for a proscribed purpose. This was established by assessing the way in which the corporation would have acted in a competitive market, or how a profit-maximising firm functioning in a competitive market would have acted.
The provision was focused on the purpose for which the market power was used or was intended to be used, instead of whether conduct had an anticompetitive effect.4
The amendment followed recommendations in which it was proposed to expand the 'purpose' element to a 'purpose, effect or likely effect' test; remove the 'take advantage' element; and shift the legislative focus from damage to a specific competitor to damage to the competitive process itself.5
The proposed Competition and Consumer Amendment (Misuse of Market Power) Act 20176 passed the House of Representatives on 28 March 2017 and came into effect on 6 August 2017. These amendments were in part intended to remedy a significant perception that the Australian Competition and Consumer Commission (ACCC) has not been able to bring enough Section 46 actions under the previous form of the prohibition, and of those that it has brought, it has had a relatively low success rate.7 The ACCC itself had been a vocal supporter of changes to Section 46, with Chairman Rod Sims stating that the prohibition was 'almost unusable' in addressing misuse of market power by dominant corporations.8
II YEAR IN REVIEW
While it was anticipated that the amended Section 46 provision would result in a significantly higher number of cases being brought by the ACCC, this has not been the case. Prior to 2019, no cases had been brought by the ACCC under the new provision.
The ACCC brought its first case under the amended Section 46 provisions in December 2019, instituting Federal Court proceedings against Tasmanian Ports Corporation Pty Ltd (TasPorts) alleging that TasPorts had engaged in conduct in breach of Section 46 by seeking to prevent Engage Marine Tasmania Pty Ltd (Engage Marine) from competing effectively in providing towage and pilotage services in Tasmania.
The ACCC alleges that in response to Engage Marine's attempted entry into the Tasmanian market, TasPorts:
- imposed new charges which would require Engage Marine's sole customer to pay A$750,000 in fees to TasPorts after the customer switched service providers from TasPorts to Engage Marine;
- prevented Engage Marine from expanding in Australia by failing to provide long term berths for its boats and refusing to place it on the shipping schedule, which is necessary for it to provide towing services; and
- prevented Engage Marine from providing pilotage services by failing to provide training to Engage Marine's employees, which only they could provide.
The claim alleges that:
- TasPorts has a substantial degree of power in the markets for the supply of marine services in Tasmania;
- in engaging in this behaviour, TasPorts was attempting to prevent or hinder Engage Marine from competing effectively with its marine pilotage and towage businesses in the relevant markets;
- TasPort's actions were driven by an anticompetitive purpose, with the purpose, effect and likely effect of substantially lessening competition; and
- TasPort's actions substantially lessened competition in the relevant markets by denying Grange and other Tasmanian customers the benefits of competition in the supply of marine services in this market.
The ACCC is seeking injunctions, declarations, penalties and costs. In a defence filed in March 2020, TasPorts admitted to charging additional fees to the owner of the local port, but has denied that those actions constituted a misuse of market power and that they substantially lessened competition in Tasmania.9 The trial has been tentatively set for February 2021.
In its claim, the ACCC has made use of the broader 'effects' test post-amendment, claiming that in addition to having a purpose of substantially lessening competition, the actions also had the effect or likely effect of doing so. The outcome of this proceeding is likely to provide further clarity on the interpretation of the amended provision, and is also likely to influence the appetite of the ACCC to instigate further proceedings pursuant to Section 46 in the future.
Since the amended rule was introduced, the larger portion of cases invoking Section 46 that have come before the courts have been a result of private actions. As a result, there were several judgments in respect of private actions considering Section 46 in 2019.
- Of particular note was the decision in B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd,10 the first to consider the amended Section 46 provisions. The Court considered an application for summary judgment on a claim regarding predatory pricing practices alleged to have been engaged in by Garmin. The application was unsuccessful, as the Court was not satisfied that B&K Holdings had no reasonable prospects of succeeding at trial. In relation to the amended Section 46 as it relates to predatory pricing, the Court noted that 'If a business with substantial market power utilises it for the purposes of substantially lessening competition by engaging in below cost pricing, the mere fact that the cessation of that conduct will cause prices to increase does not immunise the conduct.'11
- The applicants in Black & White Cabs Pty Ltd & Ors v Regent Taxis Limited12 and RSA Express Pty Ltd v Aaron Guilfoyle, Work Health and Safety Prosecutor13 sought interlocutory injunctions, relying on the amended Section 46. Both applications were dismissed due to the applicants' failure to establish a prima facie case. In Black & White Cabs, while it was accepted that the respondent had a substantial degree of power in the market, the applicants had not demonstrated any substantial lessening of competition.14
- Further proceedings seeking to rely on Section 46 of the CCA dealt with the issue in a summary way. In Zaghloul v Jewellery and Gift Buying Services Pty Ltd & Anor,15 the Court considered that there was no breach of the consumer law or oppressive conduct by the respondent; and in Zierholz@UC Pty Ltd v University of Canberra  ACTSC 310, the Court noted that while the respondent had a substantial degree of market power, there was no evidence that this market power had been used at all, noting that even if it had been used, it would have needed to have been used for a proscribed purpose (pursuant to the previous formulation of Section 46).
A decision was recently handed down in ACCC v Ramsay Health Care Australia Pty Ltd,16 a proceeding brought by the competition regulator alleging that Ramsay had contravened Sections 46 and 47 of the CCA (as they stood in August–September 2015) which prohibited misuse of market power and exclusive dealing. The ACCC alleged that in four pleaded conversations, Ramsay conveyed words to the effect that if certain surgeons were to open a new day surgery in Coffs Harbour, their access to operating theatre time at Ramsay's private hospital in Coffs Harbour 'would be substantially reduced or entirely withdrawn'.
With respect to misuse of market power, the ACCC needed to establish that Ramsay had a substantial degree of power in a market. The Court favoured the view of the ACCC which provided a purposive approach.17 Griffith J accepted that there was a market in which private hospitals competed to attract surgeons. Upon finding that there were no close competitors in the relevant market, a high barrier to entry to the market, and that Ramsay was not constrained by surgeons, the Court concluded that Ramsay did possess a substantial degree of market power (which was corroborated by Ramsay's own internal documents).
The second and third limbs of the previous Section 46 provision required the ACCC to establish that Ramsay took advantage of its substantial market power for a proscribed purpose. The Court distinguished between the purpose and motive of conduct and cautioned that the two were not to be equated, holding that 'purpose' relates to the end sought to be accomplished by the conduct.18 In order to establish that a corporation took advantage of substantial market power for a proscribed purpose, the Court held, and the ACCC accepted, that a corporation must 'use' that market power to engage in impugned conduct.19 On this point, however, the Court refrained from making any findings given that it had already found that no communications to the effect alleged by the ACCC had taken place. However, even upon the assumption that the alleged contravening conduct did occur, the Court opined that Ramsay's alleged conduct (if it did occur) would have been justified by legitimate business rationale (including considerations of economic profitability, and balancing day and overnight surgery).
Considering exclusive dealing, the Court clarified that the practice of exclusive dealing involves supply upon condition, and that conditions need not be legally binding but must have 'attributes of compulsion and futurity'.20 In light of this, the ACCC failed to establish that Ramsay offered to supply services to surgeons on condition that they not acquire services from a competitor. The alleged contravention was framed as a threat to revoke or withdraw operating theatre lists in the event a competitor entered the market (an event which was at least two or three years in the future). The Court held there could not exist a supply or offer to supply services on the condition that surgeons would not acquire services from a competitor in circumstances 'where there were no services to acquire and there was no competitor'.21
Proceeding to nonetheless consider whether there was likely to be a substantial lessening of competition, the Court found against the ACCC on the evidence, given that even after the relevant pleaded conversations, the surgeons continued to explore planning the new day surgery for many months.
Active competition authority cases
The active competition authority cases are set out in the following table.
|Sector||Investigating authority||Conduct||Case opened|
|Ports and infrastructure||ACCC||Alleged misuse of market power in relation to conduct by Tasmanian Ports Corporation, which sought to prevent a new entrant, Engage Marine Tasmania, from competing effectively||December 2019|
III MARKET DEFINITION AND MARKET POWER
The prohibition against misuse of market power contained in Section 46 of the CCA applies only to corporations that have a 'substantial degree of power in a market'. Courts in Australia have tended to consider the analysis of market definition and market power together.
i Market definition
Sections 46(8)(b) and 4E of the CCA provide that, for the purposes Section 46, a reference to 'market' is a reference to a market for goods or services, and includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services; and is a market in Australia.
Given the definition of market in the CCA, analysis focuses initially on the identification of substitutes. Both the ACCC and the Australian courts often commence an analysis of the borders of a market using the hypothetical monopolist test (HMT).22 The HMT examines the effect of a small but significant non-transitory increase in price by a hypothetical monopolist in a market for the good or service in question.
Owing to the input-intensive nature of the HMT analysis, the ACCC limits its inquiry in most cases to examining a list of product and geographic characteristics that tend to satisfy the test.23 This analysis consists of physical characteristics and portability in addition to economic metrics such as cross-elasticity of demand.
The meaning of 'in Australia' has recently been the subject of consideration in a decision of the Full Court of the Federal Court of Australia. A majority of the Court held, in the context of price-fixing enforcements in the airfreight market, that a market that is located both outside and within Australia was a market in Australia for the purposes of the CCA.
ii Market power
Unlike many other jurisdictions, there are no statutory or court-based market-share presumptions. Proof of market power in Australia always needs to proceed on the basis of a full economic analysis. Market shares are helpful in identifying the degree of market power; however, a large market share does not necessarily mean that a corporation holds a substantial degree of market power. Section 46(7) provides that more than one corporation may have a substantial degree of market power in a market. Australian courts place significant focus on the existence and scale of barriers to entry in determining to what extent an entity possesses market power.24 Courts have also placed weight on other evidence of related but distinct indications of market power,25 including:
- the ability of the firm to raise prices above the supply cost without rivals taking away customers in due time;
- the extent to which a corporation's conduct in the market is constrained by that of competitors or potential competitors;
- the market share of the corporation (although not determinative by itself );26 and
- the existence of vertical integration.
In its interim guidelines for market power, the ACCC indicates that market power exists where a firm can only engage in the conduct in question absent competitive constraint. This freedom, the ACCC notes, can be assessed having regard to the factors indicated in Queensland Co-operative Milling Association Limited and Defiance Holdings Limited:
- the number and size of distribution of independent sellers, especially the degree of market concentration;
- the height of barriers to entry; that is, the ease with which new firms may enter and secure a variable market;
- the extent to which the products are characterised by extreme product differentiation and sales promotion;
- the character of 'vertical relationships' with customers and suppliers, and the extent of vertical integration; and
- the nature of any formal, stable and fundamental arrangements between firms that restrict their ability to function as independent entities.27
An important element of the analysis is determining whether market power is 'substantial' in nature. For market power to be substantial, courts have held that it needs to be 'real and of substance rather than trivial or minimal',28 or put another way, 'large or weighty' or 'considerable, solid or big'.29
Since the amendment, the provision no longer explicitly provides that a corporation with a substantial market share is prohibited from supplying, or offering to supply, goods or services for a sustained period at below the relevant cost of supplying goods or services where the corporation's purpose was to substantially damage or eliminate a competitor, competitors generally, a class of competitors or any particular competitor; or prevent or deter anyone from engaging in competitive conduct in any market. Such conduct will now be subject to the general prohibition.
iii Purpose or likely effect of substantially lessening competition
Substantial market power
For the provision to apply, it is necessary to establish that a corporation has substantial market power. Such market power can be described to be 'considerable', 'big' or 'not merely nominal'.32 The explanatory memorandum accompanying the bill introducing the concept in 1986 indicated that substantial was to be regarded as 'large or weighty' or 'considerable, solid or big'.33
While the introduction of the competition test is recent for the operation of Section 46, the test is well established in the Australian legal landscape in relation to anticompetitive contracts, arrangements or understandings, and mergers or acquisitions, which have all been prohibited where the conduct concerned has been likely to result in a substantial lessening of competition for some time. These authorities are informative as to the likely approach of the courts in relation to application of the test in the context of Section 46.
The ACCC, in its interim guidelines, has observed that 'conduct substantially lessens competition when it interferes with the competitive process in a meaningful way by deferring, preventing or limiting competition. This can be done by raising barriers to entry or to entry into a market'.34 As noted elsewhere in this chapter, 'substantial' must be meaningful to the competitive process.35,36 The ACCC identifies at Paragraph 2.26 of its interim guidelines that lessening competition means that the field of rivalry is diminished or lessened, or that the competitive process is compromised or impacted. The ACCC notes that the commercial rationale for the conduct will be relevant to the assessment.37
The prohibition in Section 46 requires not only satisfaction of the elements of market power and engaging in conduct with the purpose or likely effect of substantially lessening competition.
Section 46(4) provides the following non-exhaustive list of factors the court may consider to determine whether a corporation has taken advantage of market power:
- whether the conduct was materially facilitated by the corporation's substantial degree of power in the market;
- whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;
- whether it is likely that the corporation would have engaged in the conduct if it did not have a substantial degree of power in the market; and
- whether the conduct is otherwise related to the corporation's substantial degree of power in the market.
While courts have taken a range of approaches to determining purpose, including assessing conduct on a subjective basis,40 it appears likely that the position going forward is that, while there are subjective elements to assessing purpose, the ultimate test is objective.41 In the Telstra Corporation case, the Federal Court placed weight on the requirement, which provides that the court may find that a corporation's purpose where that purpose is ascertainable only by inference from the corporation's conduct or the conduct of any other person, or from other relevant circumstances. The Court took the approach that if, upon consideration of the nature and substance of the conduct, it can be said that the substantial purpose for that conduct was to substantially lessen competition, or if such a purpose can be inferred, it is not necessary to consider the subjective reasons for the conduct.42
To contravene Section 46(1), the proscribed purpose need not be the sole purpose of the conduct, merely a substantial purpose.43 If the conduct was motivated by both a legitimate purpose and purpose to substantially lessen competition, and both are substantial purposes, the corporation will have contravened Section 46(1).44 However, Section 46(1) will not be contravened where a corporation was motivated entirely by a legitimate purpose, or dual purposes where the purpose of substantially lessening competition was not substantial.45 For example, in Dowling v. Dalgety Australia Ltd, the respondents' dominant purpose was to use their valuable asset without sharing it with a person who had no proprietary interest in it, and restricting competition was found to be a subsidiary purpose.46
iii Exclusionary abuses
Predatory pricing will now be dealt with under the general misuse of market power prohibition in Section 46(1), and will be prohibited if engaged in by a corporation with market power, and the purpose or likely effect of the conduct substantially lessens competition in any relevant market. Conduct will be considered predatory pricing if the corporation has market power and is selling below cost. Typically, the conduct drives competition from the market, following which the offender will increase its price and recover its losses. As per Finkelstein J in ACCC v. Cabcharge Australia Limited:
Firms engage in predatory pricing 'to drive rivals out of business and scare off potential entrants' . . . Then, they raise prices, capturing monopoly oligopoly rents.
Once firms gain monopoly/oligopoly power, it is often extremely difficult to take that power away and firms are likely to be deterred from entering the market because they know that the incumbent has the ability to undercut them and to engage in predatory pricing.47
To establish that a firm has engaged in predatory pricing in contravention of Section 46, two questions will arise. First is assessing when will the price be sufficiently low to be regarded as predatory. In relation to costs, the courts have yet to settle on the appropriate costs measure to establish predatory pricing. In Eastern Express Pty Ltd v. General Newspaper Pty Ltd,48 the court found that no specific category of pricing tends to imply a misuse of market power. On the question of recoupment, the Australian courts have not yet established that recoupment is necessary to establish a contravention. In Boral Besser Masonry Ltd 49 v. ACCC, per Gleeson CJ and Callinan JJ, 'While the possibility of recoupment is not legally essential to a finding of pricing behaviour in contravention of Section 46, it may be of factual impertinence'.50 Accordingly, although not a necessary precondition to establishing a contravention, the ability to recoup may be an indication of market power.
While there is no judicial precedent, a possible theory of harm of a 'price squeeze' that may fall within Section 46(1) suggests that a vertically integrated firm with substantial market power in the provision of an essential upstream product sets the wholesale price for the upstream product and retail price for the final product in such a way that the margin 'squeezes' an efficient downstream rival from the market.
The CCA specifically prohibits all corporations from, in trade or commerce, engaging in the practice of exclusive dealing where such conduct has the purpose, or would have the effect or likely effect, of substantially lessening competition.51
A refusal to supply may not substantially lessen competition if it does not alter the market structure by raising barriers to entry or reducing price competition, and is unlikely to substantially lessen competition if it is a refusal to supply one of a number of competing retailers in a generally competitive market.52
Additionally, regardless of whether the purpose or likely effect is to substantially lessen competition, a corporation will contravene the CCA if it:
- supplies, or offers to supply, goods or services at a particular price, or at all, or gives or allows, or offers to give or allow, a discount, allowance, rebate or credit, on the condition that a person to whom a corporation supplies, or offers or proposes to supply, the goods or services (or a related corporation), will acquire goods or services directly or indirectly from another person (not being a related corporation);53 or
- refuses to supply goods or services at a particular price, or at all, or to give or allow a discount, allowance, rebate or credit, for the reason that a person (or a related corporation) has not acquired, or has not agreed to acquire, goods or services directly or indirectly from another person (not being a related corporation).54
Exclusive dealing conduct notified to the ACCC may be immunised unless the ACCC is of the opinion that the likely public benefit of the conduct will not outweigh the likely detriment.55
Tying and bundling
A tying scheme may fall within one of the exclusive dealing provisions discussed above if it has the purpose or likely effect of substantially lessening competition. If a corporation with market power grants a discount on condition that a purchaser acquires other goods from it or a third party, such a tying or forcing arrangement may contravene Section 46(1) or Section 47(1) of the CCA.
It will need to be proved that the tying or bundling conduct was exclusionary. For example, in some cases, requiring a customer to obtain consumables from the equipment supplier may be justified as the only way to ensure the safe functioning of the equipment.
Refusal to deal
The general position is that there is no obligation to deal with everyone seeking to deal. Operators have the freedom to choose whom they deal with, and under what conditions. This is subject to the prohibition in Section 46. To contravene Section 46(1), there must be a connection between a refusal to deal and market power. A court considers the business rationale for the refusal, and whether a corporation would have refused to deal even if it was subject to competitive constraints in the market. In particular, where there was a cooperative relationship between parties and a party with substantial market power terminates this dealing, a court may require evidence of some change in circumstances justifying the refusal to continue that relationship. The court will also need to be persuaded that the purpose or likely effect of the conduct is to substantially lessen competition in a relevant market.
Some refusals to supply or acquire goods or services for failure to comply with a requirement will contravene the exclusive dealing provisions in Section 47 of the CCA.
Refusal to license intellectual property rights can also attract Section 46(1) if the criteria are met.56
Price discrimination was specifically prohibited by the former statutory regime if it was likely to have the effect of substantially lessening competition. This provision was repealed in 1995 following a government report concluding that price discrimination generally enhances economic efficiency except in cases otherwise falling within Section 46.57 Price discrimination will only be prohibited if there is a misuse of market power where the purpose or likely effect of the conduct is the substantial lessening of competition in a relevant market. It will not constitute taking advantage of market power if it is justified by efficiency considerations.
Buyer-induced price discrimination can also constitute a misuse of market power within Section 46(1).
v Exploitative abuses
Mere exploitation of market power by charging the maximum price the market will bear does not generally fall within Section 46(1), provided it does not have the purpose or effect of substantially lessening competition 58
Different considerations may apply where a monopoly input supplier competes in a downstream market, and the high price charged has an exclusionary purpose and is associated with price discrimination or a price squeeze.
For example, BHP was held to have contravened Section 46(1) by offering to supply QWI with Y-bars at an 'excessively high' price, which would have made it impossible for QWI to compete with BHP in the downstream rural fencing products market.59
V REMEDIES AND SANCTIONS
Section 76 of the CCA provides that a contravention of a provision of Part IV (on 'restrictive trade practices'), including Section 46, can lead to pecuniary penalties of the largest of the following: A$10 million; where the court can determine the value of benefits that have been obtained that are reasonably attributable to the contravening act or omission, three times the total value of the benefits; or where the court cannot determine the value of benefits that have been obtained, 10 per cent of the annual turnover of the offender over the previous 12 months.60
For an individual, a penalty of up to A$500,000 may apply.
In addition, a person who suffers loss or damage as a result of a contravention of Section 46 can recover the amount of the loss or damage against the offender.61
Importantly, there is a broad accessorial liability for penalties, damages and other orders for any natural or corporate person who aids, abets, counsels, procures or is 'knowingly concerned' in a breach. Companies are prohibited from indemnifying their staff.
In addition to imposing fines and injunctions, the court can also make the following orders:
- a declaration in relation to the operation of Section 46;62
- non-punitive orders, being:
- community service orders;
- probation orders;
- orders for disclosure of information; and
- orders requiring the offender to publish an advertisement on the terms specified in the order;63
- an adverse publicity order in relation to a person who has been ordered to pay a fine for a contravention of Section 76;64 and
- a disqualification order preventing a person from managing corporations for a period the court considers appropriate.65
ii Behavioural remedies
The CCA also allows for the court to grant an injunction prohibiting a corporation from engaging in contravening conduct, or requiring a corporation to engage in particular conduct, where it is satisfied that the corporation has engaged in, or is proposing to engage in, conduct that constitutes or would constitute a contravention of the restrictive trade practices provisions.66
The court may also make such orders as it thinks appropriate against the offender pursuant to Section 87 of the CCA if the court considers that the orders will compensate the person who made the application, or prevent or reduce the loss suffered, or likely to be suffered, by such a person.67 These orders may include:
- voiding a contract or certain provisions of a contract;
- varying a contract;
- refusing to enforce any or all of the provisions of a contract; or
- an order directing the person who contravened Section 46 to:
- refund money;
- return property;
- pay the person who suffered loss the amount of the loss or repair; or
- provide services or parts for goods that had been supplied to the person who suffered the loss.68
iii Structural remedies
The CCA does not currently provide any structural remedies for contraventions of Section 46.69
iv Statutory immunity
The ACCC guidelines on misuse of market power provide that parties can seek authorisation of conduct that would potentially breach Section 46 of the CCA.
Authorisation provides protection against legal action for future conduct, and parties can apply to the ACCC for authorisation where they believe that there is some risk that the conduct they propose to engage in would or may breach Section 46 and they require the certainty provided by an authorisation to undertake the activity. 70
Authorisation requires that the applicant satisfy the ACCC that the proposed conduct is either unlikely to substantially lessen competition or that it is likely to result in a net public benefit.
The ACCC is Australia's peak competition and consumer protection enforcement agency, and is responsible for enforcement of the CCA.
i Investigating and gathering evidence
The CCA contains multiple far-reaching powers that the ACCC can use for investigating and gathering evidence for investigations, including in relation to Section 46. The ACCC both pursues complaints from third parties and investigates on its own initiative.
The ACCC exercises discretion to direct resources to matters that harm the competitive process or result in widespread consumer detriment. Breaches of the prohibition of misuse of market power are regarded as a priority.
ii Power to obtain information, documents and evidence
Section 155 of the CCA is the ACCC's most widely used mandatory information-gathering power. It gives the ACCC the power to require a person to provide information and documents and give evidence relating to a possible contravention where the ACCC has reason to believe that a person is capable of doing so. Failure to comply with a notice is an offence punishable by a fine or imprisonment,71 and there is no privilege against self-incrimination. Legal professional privilege in respect of documents is preserved.
The ACCC also has the option to seek a warrant to conduct search and seizure operations (i.e., dawn raids).
The ACCC has a range of enforcement remedies under the CCA, with lower order matters often being dealt with administratively, while more serious violations are pursued through the courts.
Recent amendments to this provision provide that a 'reasonable search' may provide a defence to compliance with such a notice. While this addition is yet to be subject to judicial consideration, the search need only extend to information in the addressees' knowledge or control.
An administrative resolution often involves an undertaking from the corporation pursuant to Section 87B of the CCA. An undertaking is not an admission of the ACCC's allegations. An undertaking is approximately equivalent to a consent injunction. The terms may vary, but most commonly the trader agrees to stop the conduct and compensate those who have suffered a detriment because of it, and to take other measures necessary to ensure that the conduct does not recur.
v Court proceedings
The ACCC is more likely to proceed to litigation in circumstances where:
- the conduct is particularly egregious;
- there is reason to be concerned about future behaviour;
- a high-profile corporation is involved; or
- the party involved is unwilling to provide a satisfactory resolution.
However, few cases concerning breaches of Section 46 have been fully litigated, as commencement of legal proceedings often encourages parties to resolve a matter by negotiating and settling a statement of agreed facts and consent orders.72
VII PRIVATE ENFORCEMENT
Notwithstanding that the CCA provides a ready means of enforcement for private litigants, private actions have historically been few in number.73 Further, while it is increasingly common for high-profile ACCC proceedings to trigger subsequent private damages suits (in 'piggy-back' proceedings),74 these were historically limited in number.
The reframing of Section 46 to include an 'effects test' was anticipated to increase the efficacy of the provision by broadening the range of conduct captured, which is intended to increase the number of successful ACCC proceedings and encourage private litigants to make greater use of the provision. Interestingly, the provisions have not been significantly utilised by the ACCC, with the first case under these provisions being brought in December 2019, and private actions have been the main avenue for cases invoking Section 46 coming before the courts as noted in Section II.
ii Availability and remedies
While there are no structural remedies available to private parties (or indeed the ACCC) in respect of Section 46 contraventions, behavioural and other remedies are provided for under the CCA, and are available to private litigants.
Section 82 permits private litigants to seek damages for loss or damage suffered owing to the conduct of another party in contravention of Section 46.75 Section 80 also permits private litigants to seek an injunction restraining a party from engaging in certain conduct, or compelling a party to do a certain act or thing, so as to prevent or stop a breach of Section 46.76 Injunctive relief may be appropriate where a litigant wishes to prevent another party from initiating or continuing on a course of conduct, or to compel the other party to engage in some positive action (like in the case of a refusal to deal) in response to conduct that may amount to a misuse of market power.77
iii Calculation of damages
Courts are largely guided by general common law principles in assessing damages.78 To rely upon Section 82, the person must have suffered actual loss or damage (thus, potential damage is not sufficient).79 Secondly, there is a causal requirement that this loss or damage was sustained by the other party's contravention. If it is found that such loss or damage has been incurred, then the court must quantify the loss, even if this requires a degree of approximation or conjecture. Finally, in accordance with general principles governing damages, loss or damage under Section 82 encompasses economic or financial loss but may also extend to consequential loss that arises directly from the impugned conduct.80
iv Availability of collective actions
There are no competition law-specific collective actions, but collective actions to enforce the CCA are available under the general provision for commencement of representative proceedings.81 A collective action may be commenced only if seven or more persons have claims against the same person; the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and all the claims give rise to a substantial common issue of law or fact.
In relation to standing, a person who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a collective action.82 Further, actions are subject to an opt-out regime, so that potential claimants who fall within a class definition will be members of that class unless they opt out, although it should be noted that in some cases, class definitions will be sufficiently narrow that they in effect require claimants to opt in (by defining members as those who have made arrangements with a certain funder or engaged a particular law firm).
Collective actions in respect of damages for anticompetitive conduct are underutilised in Australia.
v Interaction between government investigations and private enforcement
The public and private enforcement regimes interact in a way that both facilitates and frustrates the bringing of private actions. Under Section 83 of the CCA, findings of fact made by a court in a successful proceeding (in respect of a contravention of Section 46) may be used as prima facie evidence of that fact in a subsequent action. A private litigant may therefore rely upon findings of fact made in a successful ACCC proceeding by producing the relevant documents under seal of the court (rather than needing to adduce its own evidence in support of the finding).
On the other hand, some aspects of the ACCC regime may inhibit successful private actions. For instance, while the ACCC has at its disposal a wide range of investigative (and coercive) powers to enable the gathering of evidence, private litigants have no such means of obtaining evidence (for instance, by compelling production of documents). Thus, they face greater hurdles in obtaining sufficient evidence to support a claim of misuse of market power. Further, where a party has engaged in an alleged contravention of the CCA, the ACCC has the discretion to accept a formal undertaking from the party under Section 87B of the CCA. Such undertakings are enforceable by a court and subject to monitoring for compliance (as well as being made a matter of public record). However, undertakings do not necessarily require an admission by the party that it has contravened the CCA. Further, undertakings cannot be relied upon in the same way as findings of fact under Section 83.
Therefore, where the ACCC chooses to settle a matter administratively, rather than initiate proceedings, they may inadvertently discourage (or reduce the likely success of) a later private enforcement action.
VIII FUTURE DEVELOPMENTS
With respect to enforcement going forwards, the Chairperson of the ACCC, Rod Sims has indicated that misuse of market power will remain a focus for the regulator in 2020, stating that 'We will continue to pursue companies that we consider use their market position to harm competition and consumers, and are expecting to deal with further matters involving the amended section 46 misuse of market power prohibition in 2020.'83
It is likely that the question of market power which may be alleged to be held by digital platforms, will be a particular focus for the ACCC in the near future. In August 2019, the ACCC delivered its final report following an 18-month inquiry into digital platforms.
The report highlighted the substantial market power enjoyed by Google and Facebook, and warns of the ability and incentive of these platforms to favour their own business interests. The report identified that Google and Facebook hold substantial power in crucial digital markets (Google for its general search and search advertising services, and Facebook for its social network and display advertising services), and that this poses a risk to competitive processes.
The ACCC has indicated that a major area of focus going forward will be consumer protection in the digital space. In its final report, the ACCC recommended that mandatory codes of conduct be developed to govern relationships between digital platforms and media businesses.84 In addition, it has indicated a commitment to building its capacity to aggressively enforce the competition rules as they relate to digital platforms, recommending the government establish a specialist branch within the ACCC, with the role of proactively monitoring digital platforms and identifying potentially anticompetitive conduct, or conduct that may breach Australian consumer laws.
1 Prudence J Smith is of counsel and Jason A Beer and Mitchell J O'Connell are associates at Jones Day. The authors wish to thank Nicolas J Taylor, Matthew J Whitaker and Lachlan J Green for their generous assistance in preparing previous versions of this chapter.
2 Through corresponding legislation enacted by each of the Australian states equivalent provisions also apply to persons other than corporations. References to corporation throughout this chapter should, therefore, be read to apply equally to all other types of entities carrying on a business.
3 Commerce Commission v. Carter Holt Harvey Building Products Group  AU ER (D) 235 (Jul).
4 In Queensland Wire Industries Pty Ltd v. Broken Hill Pty Ltd  HCA 6; (1989) 167 6LR 177; 83 ALR 577; 63 ALJR 181; (1989) ATPR 40-925.
5 2015 Australian Competition Policy Review Final Report.
6 The Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Act 87 of 2019).
7 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 (2015) 23 AJCCL 83.
8 M Hefernan 'Misuse of market power laws “almost unusable”, ACCC chairman Rod Sims says', Sydney Morning Herald, 30 April 2017.
9 M Bolza, 'TasPorts slams ACCC case, says extra fees don't amount to misuse of market power', Lawyerly, 31 March 2020.
10 B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd  FCA 64.
11 ibid at .
12 Black & White Cabs Pty Ltd & Ors v Regent Taxis Limited  QSC 50.
13 RSA Express Pty Ltd v Aaron Guilfoyle, Work Health and Safety Prosecutor  FCA 1605.
14 Black & White Cabs Pty Ltd & Ors v Regent Taxis Limited  QSC 50 at .
15 Zaghloul v Jewellery and Gift Buying Services Pty Ltd & Anor  ACTSC 310.
16 Australian Competition and Consumer Commission (ACCC) v Ramsay Health Care Australia Pty Ltd  FCA 308.
17 ibid .
18 ibid  citing News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563, .
19 ibid .
20 ibid .
21 ibid .
22 See, e.g., ACCC's Merger Guidelines (2008), 17–18 and ACCC v. The Australian Medical Association Western Australia Branch Inc  FCA 686; 199 ALR 423 at .
23 ACCC's Merger Guidelines.
24 ACCC v. Boral Ltd  FCA 1318 at -; See also ACCC v. Pfizer Australia Pty Ltd (ACN 008 422 348)  FCA 113; 323 ALR 429.
25 Eastern Express Pty Ltd v. General Newspapers Ltd (1992) 35 FCR 43, 62-63.
26 A market share of 30 per cent has been referred to as indicative of market power in Boral Besser Masonry Ltd v. ACCC  HCA 5; 215 CLR 374.
27 (1976) 8 ALR 481, 512.
28 Mark Lyons Pty Ltd v. Bursill Sportsgear Pty Ltd (1987) 75 ALR 581.
29 Dowling v. Dalgety Australia Pty Ltd (1992) 34 FCR 109.
30 Seven Network Ltd v. News Ltd (2009) FLAFC 166; (2009) 262 ALR 160; 282 FCR 160; (2009) ATDR 42-301.
31 NT Power Generation Pty Ltd v. Power & Water Authority  HCA 48; (2004) 219 CLR 90; 210 ALR 312; 79 ALTR 1; (004), ATDR 42-201.
32 See Tillmanns Butcheries Pty Ltd v. Australasian Meal Industry Employees Union (1979) 27 ALR 367; (1979) ATPR 40-138.
33 See also Eastern Express Pty Ltd v. General Newspaper Pty Ltd (1992) 106 ALB 297; 35 FCR 43; (1992) ATPR 4-16 at 63 (FCR).
34 ACCC, Interim guidelines on misuses of market power; 6 November 2017, Paragraph 2.22, p. 8.
35 ibid. at Paragraph 2.27.
36 See Stirling Harbour Pty Ltd v. Bunbury Post Authority  FCA 38.
37 ibid. at Paragraph 2.27.
38 Melway Publishing Pty Ltd v. Robert Hicks Pty Ltd (2001) 205 CLR 1;  HCA 13, .
39 Australian Competition & Consumer Commission v. Australian Safeway Stores Pty Ltd (2003) 129 FCR 339;  FCAFC 149, ; Australian Competition & Consumer Commission v. Baxter Healthcare Pty Ltd (2008) 170 FCR 16;  FCAFC 141, .
40 ASX Operations Pty Ltd v. Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460;  FCA 515, –; Eastern Express Pty Limited v. General Newspapers Pty Limited (1992) 35 FCR 43;  FCA 138, . Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109;  FCA 35, .
41 General Newspapers Pty Ltd v. Telstra Corporation (1993) 45 FCR 164;  FCA 473, .
42 ibid. at .
43 CCA Section 4F.
44 Mark Lyons Pty Ltd v. Bursill Sportsgear Pty Ltd (1987) 75 ALR 581;  FCA 282.
45 Top Performance Motors Pty Ltd v. Ira Berk (Queensland) Pty Ltd (1975) FLR 286; Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109;  FCA 35.
46 Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109;  FCA 35, .
47 ACCC v. Cabcharge Australia Limited  FCA 126; (2010) ATPR 42-331.
48 (1992) 106 ALR 297; 35 FCR43; (1992) ATPR 41-167.
49 Now Boral Masonry Ltd.
50 (2003) HCA 5; (2003) 215 CLR 374; 195 ALR 609; 77 ALJR 623;(2003) ATPR 41-915.
51 CCA Section 47(1).
52 Outboard Marine Australia Pty Ltd v. Hecar Investments (No. 6) Pty Ltd (1982) 66 FLR 120;  FCA 265.
53 CCA Section 47(6).
54 CCA Section 47(7).
55 CCA Section 93.
56 NT Power Generation Pty Ltd v. Power and Water Authority (2004) 219 CLR 90;  HCA 48, –.
57 Repealed by the Competition Policy Reform Act 1995 (Cth) following recommendation of the 'Hilmer' Independent Committee of Inquiry, National Competition Policy (AGPS, Canberra, 1993) 79.
58 Pont Data Australia Pty Ltd v. ASX Operations Pty Ltd (1990) 21 FCR 385, 419.
59 Queensland Wire Industries Pty Ltd v. Broken Hill Pty Co Ltd (1989) 167 CLR 177;  HCA 6.
60 CCA Section 76(1A)(b).
61 CCA Section 82.
62 CCA Section 163A(1)(a).
63 CCA Section 86C.
64 CCA Section 86D.
65 CCA Section 86E.
66 CCA Section 80(1)(a)(i).
67 CCA Section 87(1).
68 CCA Section 87(2).
69 CCA Section 81.
70 Australian Competition and Consumer Commission, 'Guidelines on misuse of market power', August 2018, page 17.
71 CCA Section 155(7).
72 See, for example, Australian Competition and Consumer Commission v. Ticketek Pty Ltd  FCA 1489.
73 C Beaton-Wells and K Tomasic, 'Private Enforcement of Competition Law: Time for an Australian Debate' (2012) 35 UNSW Law Journal 648.
74 C Beaton-Wells and K Tomasic, 'Private Enforcement of Competition Law: Time for an Australian Debate' (2012) 35 UNSW Law Journal 648, 649.
75 CCA Section 82(1). Note that pecuniary penalties are available under Section 76 but are payable to the Commonwealth (so are not a private action remedy as such).
76 CCA Section 80(1).
77 Such as in the recent case of Ocean Dynamics Charter Pty Ltd v. Hamilton Island Enterprises Limited  FCA 460 (www.austlii.edu.au/au/cases/cth/FCA/2015/460.html) in which the Federal Court granted an interlocutory injunction to restrain the respondent from preventing the applicant from using a marina (after the respondent decided not to renew a business licence agreement with the applicant). The applicant had a prima facie case on the basis that the respondent's refusal to deal constituted taking advantage of market power (the marina services market) for a proscribed purpose (either eliminating or substantially damaging the applicant in the luxury yacht market or deterring them from competitive conduct in that market) (at ).
78 Norcast SárL v. Bradken Limited (No 2) (2013) 219 FCR 14, 89-90 – (www.austlii.edu.au/au/cases/cth/FCA/2013/235.html); Marks v. GIO Australia Holdings Limited (1998) 196 CLR 494, 526–527.
79 Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514, 526.
81 Section 33C of the Federal Court Act 1976 (Cth).
82 Section 33D of the Federal Court Act 1976 (Cth).
83 R Sims, 'Australia: Competition and Consumer Commission', Asia-Pacific Antitrust Review 2020, Global Competition Review, 27 March 2020.
84 Australian Competition and Consumer Commission, 'Digital Platforms Inquiry: Final Report', June 2019, page 32.