Anti-Competitive Laws: Practical Implications for Businesses

The role of the ACCC

The ACCC acts for the benefit of the consumer, and their regulatory function often reflects this. In practice, it takes active steps to regulate national infrastructure and undertakes market studies to further promote fair trading, product safety and competition for consumers, businesses and the Australian community.

One way that ACCC often furthers these goals is by conducting investigations. The ACCC has broad investigative powers, including powers to obtain information, documents and evidence across a wide range of matters, including (pursuant to s 115 of the Competition and Consumer Act 2010 (Cth) (the CCA)):

a. any matters that would constitute a contravention of the CCA;

b. any matters relevant to the ACCC investigating; or

c. inquiring into possible unfair terms of consumer or small business contracts.

When the ACCC prosecutes anti-competitive conduct, it can issue pecuniary penalties. Under s 76 of the CCA, if a corporation is found to have engaged in anti-competitive behaviour, they can receive maximum sanctions of up to $100 million in pecuniary penalties, three times the value of the benefit gained by the misconduct, or 30% of adjusted turnover during the breach period (whichever is greater). The $100 million cap was increased from $50 million by the Federal Government earlier this year.

For individuals who have engaged in anti-competitive practices, the ACCC can pursue maximum penalties of $2.5 million, along with potential jail time of up to 10 years for criminal cartel offences. It is also an offence for a corporation to indemnify its officers against civil labilities for a contravention of the anti-competition legislation or legal costs incurred in defending proceedings connected with a contravention of the anti-competition legislation.

Anti-competitive conduct

There are many types of anti-competitive conduct, such as:

1. Substantially lessening competition – when two companies combine to create an entity large enough to substantially lessen competition within a specific industry;

2. Predatory pricing – when a large firm prices a product or service significantly below its cost to bankrupt smaller competitors, subsequently raising prices once the competition is gone;

3. Cartel conduct – when competing businesses agree to act together rather than compete, which may include:

a. Price-fixing – competitors agreeing to charge the same price or adopt a shared pricing structure;

b. Market sharing – competitors dividing up sales territories, customer bases, or product types to avoid competing in the same areas;

c. Bid rigging (or collusive tendering) – competitors secretly collaborating on tenders so one pre-selected bidder wins the contract while giving the illusion of a competitive process; or

d. Output restrictions – competitors agreeing to intentionally limit the supply of goods or services to drive up prices;

4. Misuse of market power – when a business with a substantial share of the market uses its dominance to deter or prevent smaller competitors from entering or surviving in the market. The essence of this is the absence of constraint: Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374.

5. Exclusive dealing – when a supplier places restrictions on who a buyer can do business with (such as forcing a buyer to acquire all of their goods exclusively from one supplier (often called “third-line forcing”), or forcing a customer to buy unwanted products to get the one they actually want (often called "tying" or"bundling"); and

6. Minimum resale prices – when a supplier forces a retailer to sell their product at or above a minimum specified price, stripping retailers of the ability to discount or compete on price.

Penalties for anti-competitive conduct

Under s 76 of theCCA, the following factors are relevant when the Court determines what penalty may be imposed for engaging in anti-competitive conduct:

1. the nature and extent of the contravening conduct;

2. the loss or damage suffered as a result of the contravening conduct;

3. the circumstances in which the contravening conduct took place; and

4. whether the contravener has previously engaged in similar conduct.

Other considerations can also be taken into account, such as:

1. the size of the contravening company;

2. the degree of power the company has, as evidenced by its market share and ease of entry into the market;

3. the deliberateness of the contravention and the period over which it extended;

4. whether the contravention arose out of the conduct of senior management or lower level staff;

5. whether the company has a corporate culture conducive to compliance with the CCA, as evidenced by education programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

6. whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the CCA in relation to the contravention.

The principal purpose of imposing penalties is to have significant specific and general deterrence: Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR ¶42-091, [11].

Practical takeaways

When considering appropriate marketing or sales strategies, certain behaviours should be approached with caution, especially during conferences, negotiations and business transactions. Implementing appropriate measures and maintaining strong business practices can help businesses avoid conduct that may result in anti-competitive legal issues.

Dealing with competitors

When dealing with competitors, extreme caution should be exercised so as to not do or say anything which may give rise to anti-competitive behaviour. Whenever commercial conversations take place or and potential business ventures are discussed, particularly with competitors, businesses should aim to ensure meetings are planned and that genuine efforts are made to understand and promote competitive behaviours.

Dealing with suppliers

When dealing with suppliers, it is important to be wary of cartel conduct or predatory pricing. While businesses are entitled to negotiate commercial terms in their contracts, they must be mindful not to force suppliers to fix prices in a certain way or restrict who suppliers can do business with.

Written communications

Be mindful that all written communications might be read by someone else, such as an opposing party or a judge. Many cases in this area turn significantly on documents, particularly internal documents, that are adduced via discovery or compulsive processes of the Court.

Oral communications

Similarly to written communications, records of oral conversations may be recalled, so the way things are expressed or described should be treated with the same delicacy as written communications. Ensure that oral conversations and discussions are appropriately, and accurately, reduced to writing where possible.

Agents

The conduct of an agent may be attributed to the business that engages them. Accordingly, appropriate care should be taken when appointing agents, such as business agents or real estate agents, to act on one’s behalf.

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The Watson Webb team is well equipped to assist parties involved in commercial transactions by identifying and managing competition law risks, reviewing relevant documentation, providing tailored advice, and applying specific industry knowledge, including within the taxi and rideshare sectors, to ensure businesses do not fall foul of the anti-competitive provisions of the CCA.

Disclaimer

This article is provided for general information purposes only and does not constitute legal advice. It is not intended to address the specific circumstances of any individual or business. It is also not intended to be a comprehensive statement of the law and is limited to a general commentary on the Competition and Consumer Act 2010 (Cth)

Reliance should not be placed on this article as a substitute for obtaining legal advice tailored to your particular circumstances. If you require advice on how anti-competitive conduct laws may apply to your circumstances, you should seek independent legal advice.