It is against the law to participate in certain business practices that limit or prevent competition. This is anti-competitive behaviour. The Competition and Consumer Act 2010 (Cth) (CCA) restricts businesses from acting anti-competitively. It restricts contracts, understandings, arrangements or concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market.
What Is The Market?
A market is the area of close competition or the field of rivalry between firms. In a market, there is substitution in response to changing prices, between one product and another, and between one source of supply and another. Markets have four elements:
- level of function
What Is ‘Substantially Lessening Competition In The Market’?
The effect of being ‘substantial’ has been defined in case law as being large, weighty, big, real or of substance or not insubstantial, depending on the context. The effect is substantial if it is important or weighty, relative to the size of the particular market.
Types of Anti-Competitive Behaviour
Cartels are illegal because they cheat consumers and other businesses, and restrict healthy economic growth. A cartel is a collective of businesses that agree to act together rather than competing with each other. As a result, they maintain the illusion of competition while driving up the profits of cartel members. Certain forms of anti-competitive conduct that are seen as cartel conduct, including:
- price fixing
- sharing markets
- rigging bids
- controlling the output, or limiting the amount of goods and services available to buyers.
Exclusive dealings occur when one person imposes some restrictions on the person they are trading with about their freedom to choose with whom, in what, or where they deal. However, it is only illegal to deal exclusively when it substantially lessens competition.
Collective Bargaining & Boycotts
Collective bargaining is where competitors come together in order to negotiate with a supplier or a customer over terms, conditions and prices. A collective boycott happens when a group of competitors decide to boycott a business that the group is negotiating with. This happens by collectively agreeing to not:
- acquire goods or services from to the business, or
- not to supply goods or services to the business.
Imposing Minimum Resale prices
It is illegal for suppliers to:
- pressure businesses in order to charge their set prices; or
- prevent resellers from advertising, displaying or selling the supplier’s goods below a particular price.
It is illegal for resellers to:
- ask suppliers to use price lists in order to prevent competitors from discounting.
Misuse of market power
Misuse of market power is where a business with a substantial degree of power in a market is not allowed to engage in conduct that has the purpose, effect or likely effect of substantially lessening competition in a market. Although, possessing market power is not in itself unlawful. However, to determine whether there has been a misuse of market power, the courts consider:
- whether the company have substantial market power?
- if the business is engaging in conduct for the purpose, effect or likely effect of substantially lessening competition?
Unconscionable conduct is conduct which is so harsh that it goes against good conscience. The definition is so general because there is no precise definition of unconscionable conduct at law. Unconscionable business behaviour is deemed as behaviour that is harsh or oppressive, and beyond hard commercial bargaining.
In conclusion, anti-competitive behaviour is illegal because it is unfair to limit competition in a market. If you are concerned because a competitor is participating in anti-competitive behaviour, seek legal advice from a commercial lawyer.
Want to know more? Contact a LawPath consultant on 1800 529 728 to learn more about exclusive dealing and to obtain a fixed-fee quote from Australia’s largest legal marketplace.