Competition Law

Australian Competition Law and Policy Discussion

Archive for the ‘Legislation (TPA/CCA)’ Category

Trade Practices Act 1974
Competition and Consumer Act 2010
(note, this is the same legislation, renamed from 1 January 2011)

Private member’s bill madness

Posted by Julie Clarke on 18 June 2013

A couple of private member’s bills were introduced yesterday to get the ball rolling on this election season’s competition law craziness.

Supermarket shopping

First up we have Rob Oakeshott MP’s  Competition and Consumer Amendment (Strengthening Rules About Misuse of Power) Bill 2013. This proposes insertion of a subsection 46(1AAAA) – just to keep with the Act’s horrendous numbering trend and would introduce an effects based test for conduct engaged in by corporations with substantial market power. It also proposes further investigation powers for the ACCC where the ACCC ‘reasonably believes that circumstances exist to indicate that there has been or might be a contravention of section 46’. The EM talks a lot about cheap milk and Rob Oakeshott’s press release emphasises the bill’s aim to ‘help farmers’, so there’s no need to guess at the genesis for the bill.

This, however, is nothing compared to the industry-specific and convoluted bill introduced by Bob Katter MP and, not suprisingly at all, supported by Nick Xenophon MP and Andrew Wilkie MP.  The Supermarket Dominance Bill 2013 would make it an offence (subject to $50m penalty) to operate a supermarket business where that business (and related supermarket businesses) has a supermarket market share of: more than 40% for year 2 or more than 35% for year 3 etc to more than 20% for any later year. Essentially it requires reduction in market share of the major supermarkets to no larger than 20% progressively over a six year period. Other similar offences are included. It goes beyond supermarket retailing to ‘household retail businesses’ as well, aiming to ‘ensure that the supermarket giants’ vast operations in “household retail businesses” are progressively reduced to 20% total market share throughout a 6 year period’ (EM). This bill also involves setting up a Commissioner for Food Retailing.

The Katter bill is one of the strangest bills I’ve read … and there have been some shockers relating to competition policy in Australia. Margy Osmond of the ANRA has described the bill as ‘ill-conceived and populist’ (see Jacob Greber and Claire Stewart, ‘MP’s pressure supermarkets’ (Australian Financial Review, 18 June 2013). Hard to argue with that assessment.  Fortunately, as private member’s bills they are unlikely to come to anything; but let’s just hope they’re not an early indication of the craziness that awaits as we head full swing into election campaigning in a climate where supermarket bashing is as popular as ever.

Posted in Legislation, Legislation (TPA/CCA), Misuse of Market Power | Leave a Comment »

Price signalling bill passes through House

Posted by Julie Clarke on 11 July 2011

Following amendments, brought about by negotiation with the opposition over their proposed amendments, the Competition and Consumer Amendment Bill (No. 1) 2011 has passed through the House (on 7 July 2011). It remains an appalling piece of legislation – Brent Fisse has described it as ‘on the lunatic fringe of international competition laws’.  The retention of broad per se prohibition (accompanied by complex exemptions) and the industry-specific (banking) nature of the legislation is very disappointing; it exempts (at the moment) most of the economy while over-regulating the banking industry and ignoring other forms of anti-competitive collusion altogether.  It is an utter failure as far as good competition policy is concerned. Unfortunately it is unlikely to find much resistance in the Senate when Parliament resumes after the winter break.

For details relating to the bill, including extracts from the numerous second reading speeches, amendments etc (and commentary to follow), visit my Competition and Consumer Amendment Bill (No. 1) 2011 page.

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Report on Price Signalling bills now released

Posted by Julie Clarke on 23 June 2011

The House of Representatives Standing Committee on Economics has now released (three weeks late) the ‘Advisory Report on the Competition and Consumer (Price Signalling) Amendment Bill 2010 and the Competition and Consumer Amendment Bill (No. 1) 2011‘.

The (government) majority recommended that “The House of Representatives pass the Competition and Consumer Amendment Bill (No.1) 2011 and reject the Competition and Consumer (Price Signalling) Amendment Bill 2010.” A dissenting report was prepared by opposition members of the Committee.

The government bill is due to be debated in the House today.

More details on the inquiry and report are on my web site – here.  I will provide further commentary on the report on that site throughout today and tomorrow.  Briefly, it does not look particularly thorough or impressive.  Repeated reference to (perceived) deficiencies highlighted by the ‘Apco’ case are particularly odd, given the proposed limitation of the legislation to the banking industry – at least for the foreseeable future.

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Creeping acquisition bill back in Parliament

Posted by Julie Clarke on 15 June 2011

In 2010 the Government announced it would introduce laws to deal with ‘creeping acquisitions’.  In May 2010 they introduced a bill which they claimed would do this (see my blog post discussing the proposed amendments).  That bill was considered by the Senate Economics Legislation Committee which, on 15 June 2010 (precisely a year ago!) recommended that it be passed.  The bill subsequently lapsed as a result of the 2010 Federal Election.

Today the Government re-introduced this bill (in the same terms as far as mergers are concerned – the bill also deals with unconscionable conduct).  View also David Bradbury’s second reading speech.

More to follow …

Posted in Legislation (TPA/CCA), Mergers | Tagged: , , , | Leave a Comment »

Telstra fined more than $18m for competition law breaches

Posted by Julie Clarke on 30 July 2010

Justice Middleton has penalised Telstra $18.55 million for denying infrastructure access to competitors, indicating that the contraventions ‘demonstrate substantial non-compliance by Telstra with its legal obligations’.  The fine was assessed at $26.5 million, but reduced to $18.55m following a 30% discount.  Although not satisfied Telstra had expressed any ‘remorse’ over their conduct and noting that they had not demonstrated an ‘appreciation of the seriousness of the admitted contraventions’, the discount was held to be justified because of a ‘large degree of co-operation … and … an acceptance of responsibility and the implementation of a compliance program’.

The decision is particularly interesting in its discussion of corporate compliance.  One of the factors relevant to the size of penalty imposed will be whether a company has a ‘corporate culture conducive to compliance with the Act’ and Justice Middleton emphasised that higher fines for breaches will be imposed where internal compliance programs are inadequate.  Amongst other things, Justice Middleton noted:

Telstra had the ability to properly implement its policies so it would comply with its statutory obligations, but did not do so.  At the very least, Telstra did not turn its corporate mind to the essential aspect of implementation

The relevant managers and employees were not properly trained in relation to Telstra’s access obligations, or otherwise failed to comply with any training that was given to them, and Telstra had no adequate system for checking on compliance. …

Telstra failed to put in place exchange access processes and procedures which would ensure that Telstra meet the required regulatory and legal obligations.  Telstra also failed to provide the necessary oversight to ensure that Telstra was fulfilling its access obligations.  This is not a case in which junior employees ignored directions from senior management.  The staff involved were not low level staff but experienced staff.  In the period from 2006 to 2008, I find that Telstra took no steps to develop a culture of compliance with its access obligations under the TPA and the Telecommunications Act

View Federal Court decision. View ACCC press release.

See also news items/reviews, including:

Posted in Access Regime, Legislation (TPA/CCA) | Leave a Comment »

Renaming of the TPA

Posted by Julie Clarke on 19 March 2010

As previously predicted, the TPA will be renamed the Competition and Consumer Act 2010 if the second phase of the Australian Consumer Law Amendments passes through Parliament.

The Trade Practices Amendment (Australian Consumer Law) (No 2) Bill 2009 was introduced into the House of Representatives on 17 March 2010.  Nestled in the monster bill, Schedule 5, s 2 includes the name change: “Omit “Trade Practices Act 1974 “, substitute “Competition and Consumer Act 2010“”


Posted in Legislation, Legislation (TPA/CCA) | Tagged: , , | 2 Comments »

C7 … again

Posted by Julie Clarke on 6 December 2009

Channel Seven believe that a number of media companies conspired to kill it’s pay-TV arm, C7, in contravention of sections 45 and 46 of the TPA.  In 2007 Justice Sackville delivered judgment against Seven, rejecting their conspiracy theory and observing that “Seven was the author of its own misfortune.”  Seven appealed the decision and last week the Full Federal Court delivered judgment rejecting that appeal.  It appears they have decided against further appealing the matter to the High Court, although officially it is still considering its options.

In dismissing the appeal, the majority of the Full Court (Justices Dowsett and Lander) disagreed with the primary judge, Justice Sackville, on two important points.  Both related to the requirement of ‘purpose’.

The first point related to who must have the requisite purpose to establish a contravention. Justice Sackville held that all parties responsible for including the provision must share the requisite anti-competitive purpose.  Justices Dowsett and Lander held that there was no such requirement for a shared purpose – it will suffice if any party to the agreement, responsible for including the provision, had the requisite purpose.

The second point of difference related to the effect of a purpose being ‘impossible to achieve’.  Justice Sackville concluded that for a breach to occur the purpose must be capable of being achieved.  The majority disagreed, holding that the ‘purpose’ element could be established even if that purpose could not, in fact, be achieved.

The c7 case has been a litigator’s dream.  Proceedings commenced in 2002 and trial judgment was delivered in 2007.  The trial lasted 120 days (one of the longest in Australian history), produced 85,654 documents comprising 589,392 pages (only 12849 of which were admitted into evidence), produced 1,028 pages of pleadings, 1,613 statements from lay witnesses, 2,041 pages of expert reports (plus appendices), 2,368 pages of written closing submissions by Seven and 2,594 pages of written closing submission from the Respondents (naturally supplemented by outlines, notes and summaries), a trial transcript running to 9,530 pages and resulted in a 1,200+ page judgment at a cost of more than $200m in legal fees (about the same amount as the claimed damages).  This was all described by Justice Sackville as “extraordinarily wasteful” and “bordering on the scandalous” and led him to caution against appealing the decision (see summary of trial judgment).  During the course of the trial it also led Justice Sackville to worry about the implications of his own mortality – the following passage from day 104 of the trial, is one of the most amusing I’ve seen yet (reproduced in LawyersWeekly):

Noel Hutley for News Ltd had said: “The worst thing that can happen in this case is that the timetable breaks down.”

His Honour: “The worst thing that can happen in this case is that the judge breaks down.”

Hutley: “Your Honour looks in glowing health. We check every morning.”

His Honour: “On January 1, 2006, Mr Hutley, when the temperature was 45 degrees, I climbed up on a ladder in order to clear the garage of our holiday home from leaves.”

Hutley: “You should have told us, your Honour, we would have done it.”

His Honour: “The bushfires were raging four or five kilometres away, so I did what every sensible home owner does, get up in the heat; and I fell and knocked myself unconscious and spent an evening in Gosford Hospital. I was unconscious for about 20 minutes and, when I came to my senses, the very first thought that crossed my mind was, ‘can I remember anything about the C7 case?’

“Unfortunately the answer was yes. It only goes to show, Mr Hutley the fragility of human existence.”

Seven did not heed Sackville’s warnings against appealing to its own detriment – more legal fees, more animosity between the parties and another long (about 350 pages) judgment to read.  The only winners were the lawyers.

I confess to having some interest in seeing the matter appealed to the High Court – the issue of the meaning of ‘purpose’ in the Trade Practices Act continues to fester and it would be useful to have some further clarity on the issue – particularly in light of the introduction of the new cartel laws.  But it is hard to imagine what Seven would gain from the litigation; I await their formal decision with interest.

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Creeping acquisitions … the journey continues …

Posted by Julie Clarke on 1 December 2009

Yesterday the  Senate referred the Trade Practices Amendment (Material Lessening of Competition—Richmond Amendment) Bill 2009 (introduced into the Senate last Thursday) to the Senate Economics Committee for an inquiry and report.  This is a private member’s bill, rather than a Government bill, sponsored by Nick Xenophon.

The Bill proposes to amend the TPA in relation to creeping acquisitions.  The proposal involves ‘preventing corporations from directly or indirectly merging, or acquiring an asset, which would result in ‘material’ lessening of competition in the relevant market.  The word ‘material’ refers to a pronounced or  noticeably adverse effect on competition’, a lower threshold than the current test.   It would also prevent any corporation with substantial market share acquiring shares or assets if the acquisition would have the effect or likely effect of lessening competition (no material effect necessary).

This differs significantly from the two government issues papers on creeping acquisitions released last year and earlier this year.

I have much to say on the proposal but, as the Senate has requested withholding submissions until released by the Committee, I will refrain from expressing my views until a later date.  [Note: my submission has now been released by the Committee and can be viewed online] At this stage it is hard to know if this is a serious proposal (leaving aside content, as a private member’s bill it is almost certainly doomed to failure) or is designed to provoke the Government into releasing its own creeping acquisition legislation – something it originally promised to do by mid-this year.

One thing is certain: Economists will have fun with this one. So will I. Submissions are due by 18 December.  Reporting date is 18 March 2010.

View all submissions.

Posted in Legislation, Legislation (TPA/CCA), Mergers | Tagged: , | 3 Comments »

Market definition in Australia

Posted by Julie Clarke on 20 October 2009

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.

Posted in Cartels, Competition Policy, Evidentiary Issues, Jurisdiction, Legislation (TPA/CCA) | Tagged: , , , , , , | Leave a Comment »

Emerson: Labor is the Party of Competition

Posted by Julie Clarke on 2 September 2009

On Monday the Hon Dr Craig Emerson MP, Minister for Competition (among other things), delivered a speech tot he Committee for Economic Development of Australia outlining Labor’s approach to competition and consumer policy.

The discussion of competition policy is very good.  In the context of competition law and proposed amendments Emerson discusses the ‘Blacktown Amendment’, proposed by Senator’s Joyce and Xenophon, which proposes to make unlawful the selling of the same product at different prices within a 35km radius.  Emerson is highly critical of the bill, claiming Adam Smith would have described it as ‘a conspiracy against the poor’ and suggesting the description would not ‘be too far off the mark’.  The speech is highly critical of protectionist policies generally and notes that policy proposals ‘that are pro-competitive will get a sympathetic hearing [from the Government] while those that are anti-competitive will be listened to with great precaution and examined with the most suspicious attention’.

Emerson also notes, in the context of competition policy, the Government proposals to ‘improve the timeliness and effectiveness of decision-making process under the national access regime …’

No mention is made of the current reviews into creeping acquisitions and the meaning of ‘understanding’.

Despite the title of the speech, Emerson also spends some time discussing current and future reforms to Consumer law, including the unfair terms provisions, the current review into the unconscionable conduct provisions of the TPA and the proposed additional powers for the ACCC and ASIC to seek civil penalties under the Australian Consumer Law.

Worth a read.

View speech.

Posted in Competition Policy, Legislation (TPA/CCA), Speeches | Tagged: , , , , | Leave a Comment »

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