The Dominance and Monopolies Review: Australia

Introduction

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 second reading speech of the predecessor Act to the CCA (the Trade Practices Act) in 1974, in which Senator Murphy clarified that Section 46 did 'not prevent normal competition by enterprises that are big by, for example, their taking advantage of economies of scale or making full use of such skills as they have'.3

This was reiterated by Justice Deane of the High Court in Queensland Wire Industries Pty Ltd v. Broken Hill Proprietary Co Ltd:4

The objective is the protection and advancement of a competitive environment and competitive conduct by precluding advantage being taken of 'a substantial degree of power in a market' for any of the proscribed purposes. If the substantial degree of market power exists and is 'take[n] advantage of' for one or other of those purposes, it is not to the point that that degree of market power was acquired by praiseworthy means . . . or that the anti-competitive purpose is inspired by altruistic or even patriotic motives.

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:

  1. substantially damaging or eliminating a competitor;
  2. substantially damaging or eliminating competitors generally, a class of competitors or any particular competitor; or
  3. 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.5

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.6

The proposed Competition and Consumer Amendment (Misuse of Market Power) Act 20177 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.8 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.9

Year in review

As noted in previous editions of this chapter, while it was anticipated that the amended Section 46 provision would result in a significantly higher number of cases being brought by the ACCC, to date this has not been the case. A number of actions have been brought by private parties, while only one case has been brought by the ACCC under the new provisions to date. We do, however, remain of the view that ACCC actions in relation to this provision will emerge in the future as the ACCC gains an understanding of the courts' reading of the provision and its effectiveness to address the conduct that the ACCC considered was able to go unregulated in the former version of the prohibition.

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. In the past year, these have relied on alleged contraventions of Section 46.

A proceeding commenced in 2020, which invoked the 'effects test', was Qube Ports Pty Ltd v. Port of Newcastle Operations Pty Limited.10 In that case, Qube, a bulk stevedore, alleged the private equity-owned operator of the Port of Newcastle (PON) had exercised the power of its monopoly to ensure terminal users had no choice but to use the PON's equipment for all operations. The PON had previously rented access to two fixed cranes and other receiving equipment, which were decommissioned in 2019 with replacements not due until 2020. In the interim, the PON's customers were forced to rely on equipment rented from the PON. Qube alleges it approached the PON with a proposal to use its own equipment, which the PON denied. The PON then constructed a new conveyor system at the port that, Qube said, 'practically preclude[d]' alternatives to the new crane being built by the PON. Qube ultimately asserted that the PON was working to monopolise the crane services market at the port to the exclusion of others. Unfortunately, there will not be any judicial consideration of the matter as proceedings were discontinued in November 2020 following settlement between the parties.

In addition to ongoing litigation, in 2020, Australian regulators continued to focus on potential dominance issues with digital platforms and large tech companies. Following the completion of the Digital Platforms Inquiry in July 2019, the Australian government announced two further inquiries in February 2020, which remain ongoing: the Digital Advertising Services Inquiry and the Digital Platform Services Inquiry. The Digital Platforms Inquiry also resulted in legislative changes in early 2021 to address the ACCC's concerns about alleged bargaining power imbalances between large tech companies and news media businesses.

The Digital Advertising Services Inquiry directs the ACCC to conduct an 18-month inquiry into markets for the supply of digital advertising technology services and digital advertising agency services. An interim report that was handed down on 28 January 2021 notes that, currently, Section 46 of the CCA 'does not address all the concerns which can arise from vertical integration in ad tech', citing the apparent conflict of interest created when an ad tech provider acts for both an advertiser and a publisher in the same transaction.11 A final report is due on 31 August 2021.

Competition authority cases

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 alleged that in response to Engage Marine's attempted entry into the Tasmanian market, TasPorts:

  1. imposed new charges that 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;
  2. 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
  3. prevented Engage Marine from providing pilotage services by failing to provide training to Engage Marine's employees, which only they could provide.

The claim alleged that:

  1. TasPorts has a substantial degree of power in the markets for the supply of marine services in Tasmania;
  2. 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;
  3. TasPorts' actions were driven by an anticompetitive purpose, with the purpose, effect and likely effect of substantially lessening competition; and
  4. TasPorts' 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 sought 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.12

In May 2021, by consent, the court declared that government-owned TasPorts misused its market power by charging a new port access fee to a customer after that customer switched to a different provider of towage and pilotage services, Engage Marine.

The ACCC also alleged that TasPorts' failure to provide long-term berths for Engage Marine tugs, the omission of Engage Marine from the shipping schedule for towage services and the refusal to provide pilotage training to Engage Marine substantially lessened competition. The court, however, dismissed those allegations.

TasPorts' settlement agreement with the ACCC ended the litigation and requires TasPorts to invest in infrastructure to allow tug competitors to operate and to charge reasonable fees for access. Although the settlement does not require TasPorts to pay a penalty, it agreed to pay A$200,000 towards the ACCC's litigation costs.

SectorInvestigating authorityConductCase opened
Ports and infrastructureACCCAlleged misuse of market power in relation to conduct by Tasmanian Ports Corporation, which sought to prevent a new entrant, Engage Marine Tasmania, from competing effectivelyDecember 2019

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).13 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.14 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.15 Courts have also placed weight on other evidence of related but distinct indications of market power,16 including:

  1. the ability of the firm to raise prices above the supply cost without rivals taking away customers in due time;
  2. the extent to which a corporation's conduct in the market is constrained by that of competitors or potential competitors;
  3. the market share of the corporation (although not determinative by itself );17 and
  4. 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:

  1. the number and size of distribution of independent sellers, especially the degree of market concentration;
  2. the height of barriers to entry; that is, the ease with which new firms may enter and secure a variable market;
  3. the extent to which the products are characterised by extreme product differentiation and sales promotion;
  4. the character of 'vertical relationships' with customers and suppliers, and the extent of vertical integration; and
  5. the nature of any formal, stable and fundamental arrangements between firms that restrict their ability to function as independent entities.18

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',19 or put another way, 'large or weighty' or 'considerable, solid or big'.20

Courts have held that merely because a corporation is not profitable does not mean that it lacks market power.21 Financial power is also not evidence of market power.22

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'.23 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'.24

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'.25 As noted elsewhere in this chapter, 'substantial' must be meaningful to the competitive process.26 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.27

Abuse

i Overview

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:

  1. whether the conduct was materially facilitated by the corporation's substantial degree of power in the market;
  2. whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;
  3. 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
  4. whether the conduct is otherwise related to the corporation's substantial degree of power in the market.

ii Purpose

The purpose element in Section 46(1) will be established where it can be shown merely that there is an intention to achieve a result,28 rather than the fulfilment of that intention.29

While courts have taken a range of approaches to determining purpose, including assessing conduct on a subjective basis,30 it appears likely that the position going forward is that, while there are subjective elements to assessing purpose, the ultimate test is objective.31 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.32

To contravene Section 46(1), the proscribed purpose need not be the sole purpose of the conduct, merely a substantial purpose.33 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).34 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.35 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.36

iii Exclusionary abuses

Predatory pricing

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.37

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,38 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 Ltd39 v. ACCC, per Gleeson C J and Callinan J J, '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'.40 Accordingly, although not a necessary precondition to establishing a contravention, the ability to recoup may be an indication of market power.

Margin squeeze

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.

Exclusive dealing

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.41

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.42

Additionally, regardless of whether the purpose or likely effect is to substantially lessen competition, a corporation will contravene the CCA if it:

  1. 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);43 or
  2. 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).44

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.45

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.46

iv Discrimination

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 46.47 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 48

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.49

Remedies and sanctions

i 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.50

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.51

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:

  1. a declaration in relation to the operation of Section 46;52
  2. 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;53
  3. an adverse publicity order in relation to a person who has been ordered to pay a fine for a contravention of Section 76;54 and
  4. a disqualification order preventing a person from managing corporations for a period the court considers appropriate.55

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.56

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.57 These orders may include:

  1. voiding a contract or certain provisions of a contract;
  2. varying a contract;
  3. refusing to enforce any or all of the provisions of a contract; or
  4. 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.58

iii Structural remedies

The CCA does not currently provide any structural remedies for contraventions of Section 46.59

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. 60

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.

Procedure

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,61 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).

iii Enforcement

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.

iv Undertakings

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:

  1. the conduct is particularly egregious;
  2. there is reason to be concerned about future behaviour;
  3. a high-profile corporation is involved; or
  4. 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.62

Private enforcement

i Overview

Notwithstanding that the CCA provides a ready means of enforcement for private litigants, private actions have historically been few in number.63 Further, while it is increasingly common for high-profile ACCC proceedings to trigger subsequent private damages suits (in 'piggy-back' proceedings),64 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 46.65 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 46.66 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.67

iii Calculation of damages

Courts are largely guided by general common law principles in assessing damages.68 To rely upon Section 82, the person must have suffered actual loss or damage (thus, potential damage is not sufficient).69 Second, 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.70

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.71 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.72 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.

Future developments

While the coronavirus pandemic was undoubtedly the cause of significant disruption, 2020 did not see any further actions brought by the ACCC in respect of Section 46. With respect to enforcement going forwards, the ACCC's 2021 enforcement priorities include misuse of market power as an enduring priority for the regulator. In a speech on 23 February 2021, chairperson of the ACCC, Rod Sims, indicated that funeral businesses were a priority for deeper examination in 2021, citing criticisms regarding 'their use of their significant market power to bundle services and block new entrants to the market, or to engage in unconscionable conduct'. In the speech, Mr Sims also noted the establishment of the ACCC's permanent Digital Platforms Branch in 2020, leading to a number of high-profile court actions, with further investigations into the practices of digital platforms in 2021 and more cases to follow.73

Following the ACCC's final report into digital platforms in 2019, further inquiries are ongoing in relation to digital platform services and digital advertising services, which will proceed for some time (with the Digital Platform Services Inquiry set to proceed until 2025). Interim reports arising out of these investigations, and out of the Digital Platforms Inquiry report, have consistently identified concerns with the substantial market power enjoyed by large tech companies. A major recent development in Australia has been the passing of new legislation allowing the Australian Federal Treasurer to 'designate' digital platforms companies to comply with a mandatory media bargaining code. Whether large tech companies will be 'designated', and whether similar codes of conduct or restrictions will be put in place in respect of other areas such as advertising services, will also be a developing situation over the next 12 months as these inquiries continue.

Footnotes

1 Prudence J Smith is a partner, Jason A Beer and Mitchell J O'Connell are associates, and Trent Candy is a law clerk 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 Australia, Senate, Parliamentary Debates (Hansard), 30 July 1974, page 544 cited in Pengilley, 'Misuse of Market Power: The Unbearable Uncertainties Facing Australian Management' (2000) 8 Trade Practices Law Journal 56 at 58.

4 (1989) 167 CLR 177.

5 In Queensland Wire Industries Pty Ltd v. Broken Hill Pty Ltd [1989] HCA 6; (1989) 167 6LR 177; 83 ALR 577; 63 ALJR 181; (1989) ATPR 40-925.

6 2015 Australian Competition Policy Review Final Report.

7 The Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Act 87 of 2019).

8 C Coops, 'A fly in the ointment for the ACCC? Implications of the Cement Australia decision for the interpretation of Section 46', (2015) 23 AJCCL 83.

9 M Hefernan 'Misuse of market power laws “almost unusable”, ACCC chairman Rod Sims says', Sydney Morning Herald, 30 April 2017.

10 NSD1905/2019.

11 ACCC (2021), 'Digital advertising services inquiry – Interim report', dated December 2020.

12 M Bolza, 'TasPorts slams ACCC case, says extra fees don't amount to misuse of market power', Lawyerly, 31 March 2020.

13 See, e.g., ACCC's Merger Guidelines (2008), 17–18 and ACCC v. The Australian Medical Association Western Australia Branch Inc [2003] FCA 686; 199 ALR 423 at [305].

14 ACCC's Merger Guidelines.

15 ACCC v. Boral Ltd [1999] FCA 1318 at [140]-[148]; see also ACCC v. Pfizer Australia Pty Ltd (ACN 008 422 348) [2015] FCA 113; 323 ALR 429.

16 Eastern Express Pty Ltd v. General Newspapers Ltd (1992) 35 FCR 43, 62-63.

17 A market share of 30 per cent has been referred to as indicative of market power in Boral Besser Masonry Ltd v. ACCC [2003] HCA 5; 215 CLR 374.

18 (1976) 8 ALR 481, 512.

19 Mark Lyons Pty Ltd v. Bursill Sportsgear Pty Ltd (1987) 75 ALR 581.

20 Dowling v. Dalgety Australia Pty Ltd (1992) 34 FCR 109.

21 Seven Network Ltd v. News Ltd (2009) FLAFC 166; (2009) 262 ALR 160; 282 FCR 160; (2009) ATDR 42-301.

22 NT Power Generation Pty Ltd v. Power & Water Authority [2004] HCA 48; (2004) 219 CLR 90; 210 ALR 312; 79 ALTR 1; (004), ATDR 42-201.

23 See Tillmanns Butcheries Pty Ltd v. Australasian Meal Industry Employees Union (1979) 27 ALR 367; (1979) ATPR 40-138.

24 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).

25 ACCC, Interim guidelines on misuses of market power, 6 November 2017, Paragraph 2.22, page 8.

26 ibid. at Paragraph 2.27. See Stirling Harbour Pty Ltd v. Bunbury Post Authority [2000] FCA 38.

27 ACCC, Interim guidelines (footnote 25), at Paragraph 2.27.

28 Melway Publishing Pty Ltd v. Robert Hicks Pty Ltd (2001) 205 CLR 1; [2001] HCA 13, [31].

29 Australian Competition & Consumer Commission v. Australian Safeway Stores Pty Ltd (2003) 129 FCR 339; [2003] FCAFC 149, [333]; Australian Competition & Consumer Commission v. Baxter Healthcare Pty Ltd (2008) 170 FCR 16; [2008] FCAFC 141, [171].

30 ASX Operations Pty Ltd v. Pont Data Australia Pty Ltd (No. 1) (1990) 27 FCR 460; [1990] FCA 515, [39]–[47]; Eastern Express Pty Limited v. General Newspapers Pty Limited (1992) 35 FCR 43; [1992] FCA 138, [83]. Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109; [1992] FCA 35, [106].

31 General Newspapers Pty Ltd v. Telstra Corporation (1993) 45 FCR 164; [1993] FCA 473, [67].

32 ibid. at [71].

33 CCA Section 4F.

34 Mark Lyons Pty Ltd v. Bursill Sportsgear Pty Ltd (1987) 75 ALR 581; [1987] FCA 282.

35 Top Performance Motors Pty Ltd v. Ira Berk (Queensland) Pty Ltd (1975) FLR 286; Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109; [1992] FCA 35.

36 Dowling v. Dalgety Australia Ltd (1992) 34 FCR 109; [1992] FCA 35, [148].

37 ACCC v. Cabcharge Australia Limited [2010] FCA 126; (2010) ATPR 42-331.

38 (1992) 106 ALR 297; 35 FCR43; (1992) ATPR 41-167.

39 Now Boral Masonry Ltd.

40 (2003) HCA 5; (2003) 215 CLR 374; 195 ALR 609; 77 ALJR 623;(2003) ATPR 41-915.

41 CCA Section 47(1).

42 Outboard Marine Australia Pty Ltd v. Hecar Investments (No. 6) Pty Ltd (1982) 66 FLR 120; [1982] FCA 265.

43 CCA Section 47(6).

44 CCA Section 47(7).

45 CCA Section 93.

46 NT Power Generation Pty Ltd v. Power and Water Authority (2004) 219 CLR 90; [2004] HCA 48, [84]–[85].

47 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.

48 Pont Data Australia Pty Ltd v. ASX Operations Pty Ltd (1990) 21 FCR 385, 419.

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

50 CCA Section 76(1A)(b).

51 CCA Section 82.

52 CCA Section 163A(1)(a).

53 CCA Section 86C.

54 CCA Section 86D.

55 CCA Section 86E.

56 CCA Section 80(1)(a)(i).

57 CCA Section 87(1).

58 CCA Section 87(2).

59 CCA Section 81.

60 ACCC, 'Guidelines on misuse of market power', August 2018, page 17.

61 CCA Section 155(7).

62 See, for example, Australian Competition and Consumer Commission v. Ticketek Pty Ltd [2011] FCA 1489.

63 C Beaton-Wells and K Tomasic, 'Private Enforcement of Competition Law: Time for an Australian Debate' (2012) 35 UNSW Law Journal 648.

64 ibid. at 648, 649.

65 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).

66 CCA Section 80(1).

67 Such as in the recent case of Ocean Dynamics Charter Pty Ltd v. Hamilton Island Enterprises Limited [2015] FCA 460 (http://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 [8]).

68 Norcast SárL v. Bradken Limited (No. 2) (2013) 219 FCR 14, 89-90 [301]–[303] (http://www.austlii.edu.au/au/cases/cth/FCA/2013/235.html); Marks v. GIO Australia Holdings Limited (1998) 196 CLR 494, 526–527.

69 Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514, 526.

70 ibid. at 514, 525–526, 544; Frith v. Gold Coast Mineral Springs Pty Ltd (1983) 65 FLR 213, 232 (http://www.austlii.edu.au/au/cases/cth/FCA/1983/28.html).

71 Section 33C of the Federal Court Act 1976 (Cth).

72 Section 33D of the Federal Court Act 1976 (Cth).

73 R Sims, 'ACCC 2021 Compliance and Enforcement Priorities, 23 February 2021, available at http://www.accc.gov.au/speech/accc-2021-compliance-and-enforcement-priorities, accessed 12 April 2021.

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