Market definition in Australia

Earlier this month (on 2 October 2009) the Full Federal Court dismissed Singapore Airlines’ appeal against a decision of Justice Middleton which challenged ACCC investigation powers under s 155. A key issue was whether ‘routes between two points wholly outside Australia could be within a “market in Australia”.’ In rejecting the appeal, the Full Federal Court held that ‘prices fixed for legs of a journey which take place wholly outside Australia may ultimately affect competition in a market in Australia’. ACCC Chairman, Mr Graeme Samuel, noted that the decision was crucial in that it

‘confirms that the Act is able to reach cartels formed outside Australia affecting Australians. The Full Federal Court has also confirmed that the ACCC is fully able to investigate conduct occurring overseas. Here we are investigating a worldwide market for air cargo services.’  See ACCC Press Release.

The decision is a positive one. The definition of market in s 4E of the Trade Practices Act as one within Australia is artificial and distorting in cases where the reality is that the market is global or, at least, transnational.  It is not a problem that appears to arise in other jurisdictions which more sensibly focus on local effect on competition without the artificial market restriction.  Confirmation that a global market might be classified as a ‘market in Australia’, even where relevant conduct occurs entirely outside Australia is a positive step – and consistent with foreign approaches to the application of competition laws to conduct occurring abroad – but it is not a complete panacea for the problems generated by our restrictive market definition.

The last time this was officially reviewed was during the course of the Dawson Review of the competition law provisions of the Act which addressed it very briefly in the context of mergers (in which the definition of market is defined as a substantial market for goods or services in Australia, a State, a Territory or a Region of Australia: s 50(6)).  The Report concluded that this definition is not too restrictive and that it allows regard to be paid to foreign competition.  However it entirely glossed over the point that a market which is transnational cannot be.  I briefly discussed this in ‘The Dawson Report and Merger Regulation’ (2003) 8 Deakin Law Review (pages 59-61).   See also submission by Dr Maureen Brunt – ‘Market Definition in the Trade Practices Act: the Challenge of Globalization’.

The issue has arisen in a number of cases recently, with judges taking vastly different approaches to the meaning of market in the TPA.  The importance of defining market in a realistic, rather than artificial, way has increased with the globalisation of markets and will continue to do so as more conduct occurring outside our territorial shores impacts on our domestic competitive environment.  It is time to revisit the issue of market definition for purposes of the competition law provisions of the TPA.

Farewell to the Federal Magistrates Court

The Federal Magistrates Court will be scrapped in a bid to save time and money.  All federal matters will now be heard by the Federal Court. Why is this relevant to competition law?  Late last year the Government, in its infinite wisdom, decided to give the Federal Magistrates Court the power to hear matters relating to s 46 (misuse of market power) where brought by a corporation or private person (see Trade Practices Legislation Amendment Act 2008); in all other competition law matters the Federal Court has exclusive jurisdiction.

Misuse of market power is, of course, one of the most complex areas of competition law and policy and, although the Government claimed this amendment was designed to make access to ‘justice’ quicker and easier, it was always doomed to failure.  Leaving aside the fact that the Federal Magistrates Court has no expertise in complex s 46 (or any competition law) matters and that by their very nature (requiring economic evidence etc) these matters are costly pursuits, the abolition of the FMC has been contemplated for some time.  No s 46 case has been brought under s 46 in the FMC and never will be.

Ironically, while the conferral of power on the FMC for certain s 46 cases was said to be needed to provide greater access to justice for small business, the AG now claims abolishing the Court will provide greater access to justice.

The newly structured Federal Court will, however, operate in two tiers, with appeals ‘and other complex work’ generally being heard in the first tier by Federal Court judges and less complex matters being heard at the second tier, which will be operated by the Magistrates currently working in the Federal Magistrates Court (who will still be called Magistrates).  It is unclear whether competition law matters will be capable of being heard at both tiers or (more appropriately) just in the first tier.

See Press Release from the Attorney General.

Follow up – magistrates may thwart attempts to completely abolish the Court