Competition and Consumer Act 2010

Competition law
Basic concepts
History of competition law Monopoly Coercive monopoly Natural monopoly Barriers to entry Herfindahl–Hirschman Index Market concentration Market power SSNIP test Relevant market Merger control
Anti-competitive practices
Monopolization Collusion Formation of cartels Price fixing Bid rigging Product bundling and tying Refusal to deal Group boycott Essential facilities Exclusive dealing Dividing territories Conscious parallelism Predatory pricing Misuse of patents and copyrights
Enforcement authorities and organizations
International Competition Network List of competition regulators
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The Competition and Consumer Act 2010 is an act of the Parliament of Australia. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010^[1]. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key competition law in Australia. It is administered by the Australian Competition and Consumer Commission and also gives some rights for private action.

Application of Act

The Trade Practices Act (TPA) is an act of the Parliament of Australia and so its application is limited by section 51 of the Australian Constitution, which sets out the division of powers between the federal and state parliaments. As a result, most of the TPA is drafted to apply only to corporations, thus relying on Section 51(xx). Some parts of the TPA have a broader operation, relying for instance on the telecommunications power (Section 51(v)) or the territories power.

Parts of the Act are mirrored in Fair Trading Acts in each Australian State and Territory, to extend regulation to individuals.

The Act exempts the Commonwealth, state and territory governments from some provisions of the Act. The immunity from the Act does not generally derive to third parties who deal with the government: see Australian Competition and Consumer Commission v Baxter Healthcare.

Provisions

Establishing Parts

The TPA establishes four organisations with a role in administering the TPA:

• Part II establishes the Australian Competition and Consumer Commission
• Part IIA establishes the National Competition Council
• Part III establishes the Australian Competition Tribunal
• Part IIIAA establishes the Australian Energy Regulator

Part IIIA of TPA: Access to Facilities

See also: Essential facilities doctrine

Part IIIA of the Trade Practices Act deals with third party access to services of facilities of national significance. For example, it covers access to electricity grids or natural gas pipelines. The aim of this part of the act is to encourage competition in upstream or downstream markets.

This part of the act allows services to be ‘declared’ and for parties to negotiate terms and conditions of access. The National Competition Council and the ACCC are both involved in registering agreement and assessing what is fair (to owners, to public, to users). As an alternative non-declared services may be subject to ACCC undertakings.

Part IV: Restrictive Trade Practices

The restrictive trade practices, or antitrust, provisions in the Trade Practices Act are aimed at deterring practices by firms which are anti-competitive in that they restrict free competition. This part of the act is enforced by the Australian Competition and Consumer Commission (ACCC). The ACCC can litigate in the Federal Court of Australia, and seek pecuniary penalties of up to $10 million from corporations and $500,000 from individuals. Private actions for compensation may also be available.

These provisions prohibit:

• Most Price Agreements (see Cartel and Price-Fixing)

• Primary boycotts (an agreement between parties to exclude another)

• Secondary boycotts whose purpose is to cause substantial lessen competition (Actions between two persons engaging in conduct hindering 3rd person from supplying or acquiring goods or services from 4th)

• Misuse of market power – taking advantage of substantial market power in a particular market, for one or more proscribed purposes; namely, to eliminate or damage an actual or potential competitor, to prevent a person from entering a market, or to deter or prevent a person from engaging in competitive conduct.

• Exclusive dealing – an attempt to interfere with freedom of buyers to buy from other suppliers, such as agreeing to supply a product only if a retailer does not stock a competitor’s product. Most forms of exclusive dealing are only prohibited if they have the purpose or likely effect of substantially lessening competition in a market.

• Third-line forcing: A type of exclusive dealing, third-line forcing involves the supply of goods or services on the condition that the acquirer also acquires goods or services from a third party. Third-line forcing is prohibited per se.

• Resale price maintenance – fixing a price below which resellers cannot sell or advertise

• Mergers and acquisitions that would result in a substantial lessening of competition

A priority of ACCC enforcement action in recent years has been cartels. The ACCC has in place an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining information/evidence about price-fixing behaviours.

Part IVA: Unconscionable Conduct

The inclusion of unconscionable conduct in the Trade Practices Act is a codification and extension of the equitable principle of ‘unconscionability’ which was clarified as a cause-of-action in the case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447. The High Court of Australia held that an act was unconscionable if a party to a transaction is under a ‘special disability’, the other party is or ought be aware of that disability, and that other party acts in a way that makes it unfair or unconscionable to accept the offer of the weaker party.

Section 51AA codifies the common law by referring to the ‘unwritten law’ (i.e. the common law). However, s51AA allows access to TPA remedies.

Section 51AB bans unconscionability in consumer transactions, and gives factors that indicate unconscionability. This clarifies the application of unconscionability and circumstances where a consumer is at a “special disability”.

The inclusion of s51AC, added in 1998, extends unconscionability by, in effect, classing ‘small business’ as a ‘special disability’.

Part IVB: Industry Codes

Part IVB relates to Industry Codes. Industry codes can be prescribed under the Act (by the Australian government) and breach of these codes is a breach of the TPA. The ACCC administers ongoing compliance with these codes. There are currently three codes made under this part: the franchising code, the oilcode, and the horticulture code.

Part V: Consumer protection

The consumer protection part of the act, contained in Part V and Part VC, is based on the proposition that low consumer power or lack of information is a market failure which needs to be addressed by interference in the market.

These parts deal with:

• Unfair Practices (including unsconscionable conduct and misleading or deceptive conduct) —Part V, Division 1 and Part VC, Division 2

• Product safety and information —Part V, Division 1A and Part VC, Division 3

• Conditions and Warranties in Consumer Transactions  – Part V, Division 2

• Actions Against Manufacturers/Importers of Goods – Part V, Division 2A

• Product Liability – Part VA

Misleading or Deceptive Conduct

Main article: misleading or deceptive conduct

Misleading or deceptive conduct (s52) is one of the most important consumer parts of the act. It allows both individuals and the ACCC to take action against corporations who engage in conduct that is misleading or deceptive, or likely to mislead or deceive. Misleading or deceptive conduct carried out by companies can also be prosecuted by the state (under Part VC).

Other Unfair Practices

The Trade Practices Act also prohibits a range of other unfair practices including bait advertising (advertising a product that is not reasonably available), pyramid schemes (Division 1AAA), and certain misrepresentations (e.g. a misrepresentation as to price).

Conditions and Warranties (Division 2 and 2A of Part V)

The Trade Practices Act implies into contracts with consumers certain conditions and warranties. Similar conditions are implied by the State Sale of Goods Acts, but these acts have slightly different jurisdictional limits (e.g. ‘consumer’ and ‘goods’) and the legislative phrases may have been interpreted slightly differently.

Under the Trade Practices Act implied conditions and warranties are mandatory: they cannot be excluded by a contractual intent to the contrary. The implied conditions are as to title (s69), quiet possession, freedom from encumbrances, fitness for purpose (s71(2), supply by description or sample (s70, s72 ) and that the goods are of merchantable quality (s66(2)).

The most important of these to a consumer is likely to be merchantable quality. If goods fail to reach a basic level of quality (considering the price of the goods) – that is they are defective, break, or do not do what they should do – then the TPA has been breached.

Part VII Authorisations, Notifications, and clearances in respect of restrictive trade practices

A unique feature of the Trade Practices Act, which does not exist in similar legislation overseas, is that exemptions may be granted by the ACCC. The ACCC may grant immunity based on assessment of the public benefits and anti-competitive detriments of the conduct, through the ‘notification’ or ‘authorisation’ process. This exemption does not apply to resale price maintenance or misuse of market power. The ACCC maintains a public register of authorisations and notifications.

In 2006 the TPA was amended to include a new Division 3 to Part VIIA providing a process for formal clearance and authorisation of mergers.

Part VIIA: Prices surveillance, Notification, and Monitoring

Part VIIA enables the ACCC to examine the prices of selected goods and services in the Australian economy.

The ACCC’s functions under this part are:

• Hold price inquiries in relation to the supply of goods or services, and to publicly report the findings to the responsible Commonwealth minister

• To examine proposed price rises on ‘notified’ goods, subject to instruction from Minister. This allows some control over price rises

• To monitor the prices, costs and profits of an industry or business under the direction of the minister and to publicly report the results to the minister.

Australia is a free market economy and the Trade Practices Act does not establish the ACCC as a price-fixing body. An example of the use of this section is that, under a direction from the Minister, the ACCC monitors the price of petrol. However, the ACCC cannot set the price of petrol.

Part IX Review by Tribunal of determinations of commission

Part IX allows the Australian Competition Tribunal, established in Part III of the TPA, to review certain decisions of the Australian Competition and Consumer Commission.

Part XIB and Part XIC: Telecommunications Regulation

The Trade Practices Act also regulates aspects of the Telecommunications market. In Australia the previously government owned Telstra, now privatised, has traditionally dominated the telecommunications sector. Telstra owns the copper network infrastructure.

The market was partially deregulated in 1992 with the introduction of Optus as a competitor. In 1997 deregulation continued when new entities were permitted to enter the market (see Communications in Australia). However, a feature of the Australian telecommunications market is that it is not feasible/efficient to have multiple networks of, for example, fibre optic cables or the copper network. For this reason, section XIB and XIC of the Trade Practices Act exist to ensure that competitors (downstream users) have access to Telstra’s networks.

Part XIB of the act allows the ACCC to issue competition notices to telecommunications corporations if it has reason to believe the corporation has engaged in "anti-competitive conduct". "Anti-competitive conduct" refers to the restrictive trade practices in Part IV of the Act (Sections 45, 45B, 46, 47 or 48), or when a carrier with a substantial degree of power in a telecommunications market has taken advantage of the power with the effect, or likely effect, of substantially lessening competition.

If the conduct continues after the issue of the Competition Notice the ACCC can seek an injunction and financial penalty through the Federal Court. Competition Notices also allow third parties to take legal action.

Part XIC is a telecommunications-specific access regime. The object of Part XIC is to promote the long-term interests of end-users of telecommunications carriage services and services that facilitate the supply of such carriage services: s152AB. The extent to which something promotes the long-term interests of end-users is assessed by having regard to three, and only three, objectives, namely:

• promoting competition in markets for listed services;
• promoting any-to-any connectivity; and
• encouraging economically efficient use of, and investment in, the infrastructure by which listed services are suppled.

Under Part XIC, the ACCC can declare particular telecommunications carriage services if it is in the long-term interests of end-users: s152AL. Suppliers of declared services must comply with standard access obligations: s152AR.

Persons can obtain access to declared services on terms and conditions set either by agreement with the supplier of the declared service, by an ordinary access undertaking given by the supplier of the declared service, or through arbitration by the ACCC.

The Dawson Report

The Review of the Competition Provisions of the Trade Practices Act (Dawson Report) was released in January 2003 and received 212 submissions. The scope of the report was quite broad, with recommendations regarding mergers and acquisitions, exclusionary provisions, third line forcing, joint ventures, penalties and remedies, and the functions and powers of the ACCC. As a result, some amendments have been made to the TPA.

See also

• Consumer Credit Act 2006

References

1. ^ The Australian Competition and Consumer Commission (2011). "Legislation". Commonwealth of Australia. http://www.accc.gov.au/content/index.phtml/itemId/3653. Retrieved 02 September 2011. 

External links

• Text of the Trade Practices Act
• Australian Competition Law

• Law Vision Trade Practices Act DVD's

Restrictive Trade Practices

• Julie Brebner Resale Price Maintenance – The Need for Further Reform (2001) 9 Trade Practices Law Journal 19-29

• Brendan Bailey, Small business success on Section 46 of the Trade Practices Act 1974

Consumer Protection

• ACCC, Guide to Unconscionable Conduct

• Freehillls Law Firm, Unconscionable conduct and door to door sales – What lessons can be learnt from the two recent cases?

Industry Codes

• ACCC webpage on industry codes of conduct

Amendments and Reform

• Dawson Report

• Freehills Law Firm, Dawson Report Key Implemented Changes to Trade Practices Act

• Deacons Law Firm, Dawson Report Amendments
• The Trade Practices Act – Recent Reforms

• The Trade Practices Act – Recent Reforms