Competition Policy Review: Debate Continues Over ACCC Call For Section 46 Amendment
Tuesday 12 August 2014 @ 10.18 a.m. | Trade & Commerce
One of the key issues that has arisen from submissions to the "Harper Review" of competition policy is whether to amend section 46 of the Competition and Consumer Act 2010 (Cth), which deals with misuse of market power.
The Australian Competition and Consumer Commission (ACCC) is calling for the section to be amended (amongst other changes). ACCC Chairman Rod Sims has said:
“Currently the section 46 misuse of market power prohibition is of limited utility in prohibiting anti-competitive conduct by firms with substantial market power.”
But the proposal is being opposed by the Law Council, and the International Bar Association and the Productivity Commission have both urged caution about introducing a so-called “effects test”.
The Current Legislation
Section 46(1) provides:
(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:
(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
(b) preventing the entry of a person into that or any other market; or
(c) deterring or preventing a person from engaging in competitive conduct in that or any other market.
The Reform Discussion
The ACCC argued in its submission to the review that “the effectiveness of section 46 is hindered by the form of its current drafting and the unduly narrow interpretation of the words of the statute adopted by the courts”. They believe there is a gap in the law where corporations can engage in conduct that has an anti-competitive effect, but the ACCC is not able to commence proceedings because it may be “unable to establish that the conduct had been engaged in for a proscribed purpose [emphasis added].” The ACCC is thus calling for an “effects test” to be added to section 46.
The ACCC also wants to remove the wording around the “take advantage” limb of the provision. Their submission argues that “the interpretation of the section has moved away from the original intent that section 46 be construed in the final analysis as a single provision…”
They particularly had concerns about Rural Press Limited v ACCC (2003) 216 CLR 53, where the High Court found that:
“Rural Press had not taken advantage of its substantial market power because the conduct engaged in – a threat to enter Waikerie’s Riverland market if Waikerie did not stop distributing its newspaper in competition with Rural Press in Murray Bridge – could have been engaged in by a firm without market power…”
The Australian reports that the Law Council, however, feels that there “is not a compelling case for an effects test and the proof of purpose test has not been an obstacle to the development of the law or enforcement of the section”. The IBA also told the paper that such a modification should be considered carefully to ensure that “the change to an effects test would not produce unintended consequences, like protection of “inefficient rivals”.”
Other commentators also feel that the ACCC has not done enough to prove the need for the change. Clayton Utz’s Michael Corrigan told The Australian that the ACCC “has never complained it has difficulty in proving purpose to satisfy the section”. Clifford Chance’s Dave Poddar told the paper that there needed to be some kind of balance in the provision, noting that “the Apple iPad hurt competitors, but was clearly beneficial”, and saying that he supports “the adoption of a test which requires both purpose and effect to contravene the prohibition”.
Other Recommendations in the Report
Other recommendations released by the ACCC include:
- Expanding the application of the ‘price signalling’ provisions prohibiting anti-competitive disclosure of information throughout the whole economy, not just the banking sector;
- Bringing merger authorisation into line with other authorisation provisions, removing first instance merger authorisation by the Australian Competition Tribunal, to be replaced with merger authorisation by the ACCC with a right of review by the Tribunal;
- Amending the third line forcing provisions to prohibit such conduct only where it has the purpose, effect or likely effect of substantially lessening competition in a market;
- There are a number of exemptions from the Competition and Consumer Act 2010 (Cth) that are no longer appropriate, and others that should be amended to better ensure that the restriction on competition is proportionate and results in a net benefit to the public;
- Amending the Competition and Consumer Act 2010 (Cth) to put beyond doubt that conduct which occurs overseas, but which has an anti-competitive effect in Australia, is caught. This should include clarification of the circumstances in which an overseas corporation is considered to be “carrying on business within Australia”; and
- Greater clarity in the drafting and structure of the provisions surrounding cartel provisions; and the authorisation and notification provisions to reduce regulatory burden.
The Draft Report on the Competition Policy Review is currently scheduled to be released at the end of September, after which further opportunities for comment will be available.
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