Sydney-based lawyer. Formerly Legal Intern at Lawpath.
💡Key Insight
- The proposed changes to Australia’s misuse of market power law will expand the Competition and Consumer Act’s restrictions on anti-competitive conduct by introducing an effects and purpose test, meaning a corporation can breach the law if its conduct has the purpose or likely effect of substantially lessening competition.
- Amendments aim to remove the “take advantage” requirement from section 46 of the Act, closing a loophole where corporations argued they did not take advantage of market power simply because they would have engaged in the conduct regardless of their dominance.
- Under the updated misuse of market power framework, practices such as predatory pricing, exclusionary conduct, or actions that are likely to lessen competition can attract ACCC scrutiny and enforcement, even if there is no clear intent to harm competitors.
- These changes are designed to give the Australian Competition and Consumer Commission (ACCC) stronger tools to regulate dominant firms and deter conduct that could harm market competition, including conduct with predictable anti-competitive effects.
At the current time of writing the Competition and Consumer Amendment (Misuse of Market Power) Bill 2017 is successfully being processed through the two houses of parliament. As it stands, the Bill will provide changes to the powers of the Australian Competition and Consumer Commission (ACCC) by including a change to the misuse of market power. This move is aimed at strengthening the powers the ACCC has over corporations that are accused of anticompetitive conduct.
Misuse of Market Power
Generally, the purpose of the power is to restrict anti-competitive conduct by companies with a large market share. As it stands the power has been said to be almost unusable, and is limited to only being enforced if the conduct of a company has the purpose of eliminating or substantially damaging a competitor. It also applies if a company prevents a competitor entering into a market.
The amendments will broaden the use of the power. Changes to section 46 strengthen such a prohibition by introducing a new ‘effects and purpose test’ which will stop a corporation from engaging in conduct that has the purpose or likely effect of substantially lessening competition in a market. Examples of such anti-competitive behaviour might include where a large corporation implements predatory pricing which will damage or force a competitor to withdraw from the market.
Whilst adding an ‘effects’ test, the amendments also aim to remove the ‘take advantage’ phrase in the section. The phrase asks whether a corporation is ‘taking advantage’ of such a market power, this currently provides a loophole for corporations which argue that no advantage is taken because they would have performed the conduct even without any market power.
Conclusion
The new ‘effect’ based test along with the removal of the ‘take advantage’ line of inquiry provides major restrictions to large corporations. Corporations must now ask themselves whether the conduct that they are engaging in is impacting and having the effect of lessening competition within the market. Arguably, the amendments are challenging the balance between strong competition and maintaining a fair market share. The Bill is looking to be enforced early 2018.
Let us know your thoughts on the amendments to the Misuse of Market Power by tagging us #lawpath or @lawpath
