What you need to know
- The Commonwealth has started its competition law reform package with a new misuse of market power law, passing the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth).
- The new section 46 prohibits a firm with substantial market power from engaging in conduct that has the purpose or likely effect of substantially lessening competition in any market in which the corporation (or a related body corporate) supplies or acquires (or is likely to supply or acquire) goods or services.
- The new law will not come into effect until, and unless, the other Harper Review reforms within the proposed Competition and Consumer Amendment (Competition Policy Review) Bill 2017 commence. It's not known when that will occur, but is expected later this year.
On 15 August 2017, the Australian Parliament passed the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth) (the Act), which repeals and replaces the prohibitions against misuse of market power, and predatory pricing, in section 46 of the Competition and Consumer Act 2010 (Cth).
The Act is the first piece of legislation to implement one of the 56 recommendations made in the final report of the 2015 Harper Review
The new section 46
A new provision – commonly described as an 'effects' test – will apply to any corporation with substantial market power in any market. Section 46 will provide that a corporation with substantial market power must not engage in conduct that has the purpose or likely effect of substantially lessening competition in any market in which that corporation (or a related body corporate) supplies or acquires (or is likely to supply or acquire) goods or services.
We have prepared the following table, based on a table included in the Explanatory Memorandum of the Bill, which summarises the differences between the new section 46 and the section as is currently in effect (taking into account the final amendments made by the Government).
| Current law |
new law |
Section 46 only applies to corporations with substantial market power.
|
No change.
|
| The conduct must have one of three specific purposes, related to damaging an actual or potential competitor, or preventing competition. |
The conduct must have the purpose, effect or likely effect of substantially lessening competition. |
| The conduct may occur in any market. |
The conduct may occur in any market where there is an actual or likely supply or acquisition of goods or services, by the corporation or another prescribed entity. |
| The conduct must ‘take advantage’ of substantial market power. |
The conduct does not need to ‘take advantage’ of substantial market power. As a result, there appears to be no need for a "connection" between the firm's market power, and the impugned conduct. |
| Predatory pricing is expressly prohibited, and subject to a different "market share" rather than "market power" test. |
There is a general provision only, with no specific prohibition on predatory pricing or other forms of conduct. |
The impact of the changes
The changes will mean that:
- A corporation with substantial market power that is accused of misuse of market power will no longer be able to defend that accusation on the basis that it did not 'take advantage' of its market power because it 'would have and/or could have' engaged in the same conduct without the market power.
- The focus of the prohibition on misuse of market power will shift to conduct that has the purpose or likely effect of substantially lessening competition in any market in which the corporation, or its related bodies corporate, operates.
- There is likely to be a period of uncertainty as the ACCC, and businesses who believe they have been the victim of misuse of market power, test the boundaries of the laws.
- The "Birdsville Amendment" that prohibited predatory pricing has been repealed entirely.
What's next?
The commencement provision of the Act ensures that the new section 46 will not commence until, and unless, the other Harper Review reforms within the proposed Competition and Consumer Amendment (Competition Policy Review) Bill 2017 commence.
The Competition and Consumer Amendment (Competition Policy Review) Bill 2017, amongst other amendments, proposes to expand the ACCC's power to grant authorisation to enable authorisation of conduct otherwise in breach of section 46.
Authorisation is currently available for Part IV prohibitions other than section 46. The authorisation process allows the ACCC to grant protection from legal action to a corporation where a net public benefit would result from the conduct (if allowed).
A number of other Harper Review reforms are currently before parliament within the proposed Competition and Consumer Amendment (Competition Policy Review) Bill 2017. We will watch the progress of this Bill with interest.
