Draft framework for misuse of market power
5th Sep 16
The Australian Competition and Consumer Commission (ACCC) is seeking advice on proposed legislation to ensure that a corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose of, or would be likely to have the effect of, substantially lessening competition in that or any other market.
Key Issues For Consideration —
The Australian Government has released an exposure Bill to implement reforms identified by the Harper Competition Policy Review. One area of reform included in the exposure Bill is to amend the misuse of market power prohibition, section 46, of the Competition and Consumer Act (Cth) 2010. If the Bill is enacted, the ACCC will publish guidelines about its approach to possible breaches of the misuse of market power prohibition.
The key clauses in the proposal are in clause 46(1) and 46(2) which are summarised below.
Wth respect to Clause 46(1), the Bill seeks to ensure that a corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose of, or has or would be likely to have the effect of, substantially lessening competition in that or any other market.
With respect to Clause 46(2), the Bill seeks to ensure that without limiting the matters to which regard may be had in determining for the purposes of subsection (1) whether conduct has the purpose of, or has or would be likely to have the effect of, substantially lessening competition in a market, regard must be had to the extent to which: The conduct has the purpose of, or has or would be likely to have the effect of, increasing competition in the market, including by enhancing efficiency, innovation, product quality or price competiveness in the market; and The conduct has the purpose of, or has or would be likely to have the effect of, lessening competition in the market, including by preventing, restricting, or deterring the potential for competitive conduct or new entry into the market.
Further information on the specific proposed amendments in the Bill and a copy of the exposure draft of the legislation is available via the link below:
ADIA Member Consultation Page —
Draft framework for misuse of market power guidelines
The objective of a misuse of market power provision is to prohibit unilateral conduct by a corporation with substantial market power that interferes with the competitive process by preventing or deterring rivals or potential rivals from competing on their merits. Sometimes this is broadly referred to as ‘exclusionary conduct’. The objective is not to protect individual competitors. Conduct by a corporation with a substantial degree of market power that harms an individual competitor should only be prohibited if it has a broader detrimental impact upon the competitive process itself. As stated by the High Court in a key determination, the objective of the legislation "is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end."
The Government has decided to accept the recommendation of the Harper Competition Policy Review that reform of Section 46 is necessary to “improve its effectiveness in targeting anti-competitive unilateral conduct”
The proposed Section 46 does not prohibit a firm obtaining a substantial degree of market power. Nor does it prohibit a firm with a substantial degree of market power from ‘out-competing’ its rivals by using superior skills and efficiency to win customers at the expense of firms that are less skillful or less efficient. This conduct is part of the competitive process and should not be deterred or interfered with. However, consistent with the other competition provisions and objective of the Competition and Consumer Act (Cth) 2010, the introduction of a ‘substantial lessening of competition’ threshold in the proposed s. 46 targets the provision to capturing conduct that interferes with the competitive process, rather than conduct that just damages individual competitors.
Member engagement —
On matters concerning corporate regulation the ADIA policy team receive advice and guidance from members serving on the ADIA-BAC Business Affairs Committee. With respect to this review all member businesses are encouraged to review the discussion paper and return comment to ADIA.
Currency of Information —
This update was issued on 5 September 2016 and please note that changes in circumstances after the publication of material or information may impact upon its accuracy and also change regulatory compliance obligations.
The statements, regulatory and technical information contained herein are believed to be accurate and are provided for information purposes only. Readers are responsible for assessing its relevance and verifying the accuracy of the content. To the fullest extent permitted by law, ADIA will not be liable for any loss, damage, cost or expense incurred in relation to or arising as a result of relying on the information presented here.
This publication is available for your use under a Creative Commons Attribution 3.0 Australia licence, with the exception of the ADIA logo, other images and where otherwise stated.
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