20 April, 2016
General
What is the main piece of legislation of general application which regulates anti-competitive behavior? What are the main prohibitions in the legislation?
The Competition and Consumer Act 2010 (CCA). The main prohibitions in the CCA against anti-competitive conduct include the prohibitions against:
- cartel conduct (where there are parallel criminal and civil prohibitions);
- agreements, arrangements and understandings that have the purpose, effect or likely effect of substantially lessening competition;
- anti-competitive exclusive dealing;
- resale price maintenance;
- misuse of market power; and
- mergers and acquisitions that have the effect or likely effect of substantially lessening competition.
Which regulator is responsible for administering and enforcing competition laws?
The Competition and Consumer Act is administered and enforced by the Australian Competition and Consumer Commission (ACCC). While the ACCC has the power to investigate and enforce the CCA, it does not have the power to impose pecuniary penalties and must bring proceedings in the Federal Court of Australia if it is seeking penalties for a breach of the CCA.
Are there any exclusions from the competition legislation of general application? Are there any sector-speci c competition laws or regulations?
The CCA contains a number of exemptions and defences to certain of the prohibitions against anti-competitive conduct. These exemptions include exemptions for certain aspects of employment agreements, certain provisions of partnerships and certain conditions in intellectual property assignments and licences.
In addition to the CCA, Australia has sector speci c regulations, some of which include additional provisions regulating competition in that sector.
Does the competition legislation apply extraterritorially to persons, behaviour or action outside the jurisdiction?
Yes. The prohibitions against anti-competitive conduct in the CCA apply to conduct engaged in outside Australia by a company incorporated or “carrying on business” in Australia, or by a person ordinarily resident within Australia.
Where the anti-competitive conduct involves exclusive dealing or resale price maintenance, a less strict territorial nexus applies: those prohibitions apply to the supply of goods or services to persons within Australia from places outside Australia.
What penalties and liabilities may be imposed for a breach of the competition law?
The maximum penalties for a corporation that has contravened the prohibitions against anti-competitive conduct in the CCA is, per contravention, the greater of AUD10 million or three times the value of the bene t gained from the anti-competitive conduct (or, if that cannot be determined, 10% of annual group turnover in Australia in the preceding 12 months).
The maximum penalties for individuals who contravene or are involved in a contravention of the CCA are AUD500,000 per breach. For contravention of the criminal cartel provisions, the maximum penalties are imprisonment for up to 10 years and/or a ne of up to AUD360,000.
Civil damages proceedings, including representative proceedings, can be brought by private litigants for breaches of the CCA. In addition to damages, other available remedies include injunctions and orders declaring part or all of contracts void.
Prohibition on anti-competitive agreements
What kinds of agreement or conduct is illegal under the prohibition?
The CCA prohibits corporations from:
- making or giving effect to a contract, arrangement or understanding that contains a cartel provision (with parallel criminal and civil prohibitions) or an exclusionary provision;
- making or giving effect to a provision of a contract, arrangement or understanding that has the purpose, effect or likely effect of substantially lessening competition in a market;
- in the context of the supply or acquisition of goods or services, engaging in ‘exclusive dealing’ where that exclusive dealing has the purpose, effect or likely effect of substantially lessening competition in a market (for example, imposing exclusivity requirements or geographic or customer restrictions);
- engaging in third line forcing, i.e. where a supplier forces a customer to also acquire separate goods or services from a third party;
- engaging in resale price maintenance (whether this is in an agreement or not); and
- engaging in certain kinds of anti-competitive secondary boycotts.
The CCA also contains a speci c prohibition against certain anti- competitive disclosures of price and other competitively sensitive information. These prohibitions currently only apply to the banking sector.
What types of agreements or conduct are illegal by object? And which are illegal only if they are signi cantly anti-competitive in effect?
Certain conduct is illegal regardless of the impact on competition. This includes cartel conduct, exclusionary provisions, third line forcing and resale price maintenance. Other conduct is only illegal if it has the purpose, effect or likely effect of substantially lessening competition in a market.
Is there regulation of vertical agreements and if so, what type of vertical restraints or provisions in such agreements are typically examined?
Yes. Provisions of vertical agreements that have the purpose, effect or likely effect of substantially lessening competition in a market are prohibited. The types of vertical restraints that are typically examined include exclusivity provisions, customer or geographic restrictions and bundling or tying requirements.
Vertical agreements can also raise issues under the prohibitions against cartel conduct and exclusionary provisions where the supplier and customer are also in competition with each other.
Is resale price maintenance allowed? Are recommended resale prices or maximum resale prices permitted?
No. The CCA contains an absolute prohibition against resale price maintenance (i.e. it is prohibited regardless of the impact on competition). Suppliers of goods or services in Australia are prohibited from specifying a minimum resale price, and must
not withhold supply on the basis that the reseller has refused to comply with a speci ed minimum price. The prohibition applies to advertised prices as well as actual resale prices.
It is permissible under the CCA for a supplier to issue a recommended resale price provided that the price is a recommendation only and there is no obligation to comply. It is also possible for a supplier to specify a maximum resale price (provided this does not constitute a de facto actual price at which the reseller must sell).
Are there any defences or relief from liability provided by the legislation?
The CCA contains a number of exemptions and defences to certain of the prohibitions against anti-competitive conduct. In addition to those referred to above, there are speci c defences and exceptions that apply to the prohibitions against cartel conduct including for joint ventures, collective acquisitions and for certain ‘vertical’ arrangements.
The CCA also contains noti cation and authorisation procedures that are available in relation to certain prohibitions. Under these procedures a corporation can apply to the ACCC for immunity to engage in the relevant conduct where it can be established that the public bene ts of the proposed conduct outweigh any anti- competitive detriments.
Is there a leniency regime? If there is, please describe the extent of and process in seeking leniency?
Yes. The ACCC has an Immunity and Cooperation Policy for Cartel Conduct. Under the Immunity Policy immunity from ACCC prosecution is available to the rst member of a cartel to apply for immunity, provided that at the time of application, the ACCC has not received written legal advice that it has suf cient evidence to commence proceedings. Immunity is also subject to compliance with certain other conditions, including that the applicant has not coerced others into participating in the cartel; provides full, frank and truthful disclosure; and provides full and expeditious ongoing cooperation to the ACCC.
The Prosecution Policy of the Commonwealth includes a speci c section covering immunity for criminal cartel conduct. This is essentially in the same terms as the ACCC’s Immunity Policy.
The ACCC also has a Cooperation Policy for Enforcement Matters, which sets out the ACCC’s position in relation to immunity
and leniency applications resulting from cooperation in ACCC enforcement matters more generally. The Cooperation Policy applies to all anti competitive conduct in contravention of the CCA.
Abuse of Dominance or Market Power
How is “dominance” or “market power” determined? Is there a market share test?
There is no speci ed market share threshold that determines whether a corporation has substantial market power. Substantial market power is generally understood as the ability to act free from the constraints of competition, in particular, in relation to price. Relevant factors in assessing whether a corporation has substantial market power include existing competition in the market, barriers to entry and countervailing power of customers and supplier.
What type of conduct constitutes abuse of dominance or abuse of market power?
The CCC prohibits a corporation with substantial market power from ‘taking advantage’ of that market power for a proscribed anti-competitive purpose, namely for the purpose of eliminating or damaging a competitor, preventing market entry, or deterring or preventing a person from engaging in competitive conduct in a market.
The type of conduct that can constitute a misuse of market power is not limited and can include a refusal to deal, bundling, exclusive dealing and predatory pricing.
There is a also a speci c prohibition against a corporation with a substantial market share engaging in predatory pricing for one of the proscribed anti-competitive purposes.
Are there any defences or relief from liability or exclusions applicable for abusive conduct?
No. There are no defences or exemptions to the prohibition against misuse of market power in the CCA.
Merger Control
Is there a merger control regime? What is considered a “merger”?
Yes. The merger regime in the CCA applies to the acquisition of shares or assets. Such acquisitions are prohibited if the acquisition would have the effect or likely effect, of substantially lessening competition in a market for goods or services in Australia.
Is the merger notification a mandatory or voluntary process?
Voluntary.
When must the merger be notified to the regulator?
The ACCC recommends that parties notify it of a transaction well in advance of completion of the transaction.
What are the ling thresholds and are there any exemptions from notification requirements?
The ACCC recommends that merger parties notify it of a proposed acquisition when:
- the products of the merger parties are either substitutes or complements; and
- the merged rm will have a post-merger market share of greater than 20% in the relevant market/s.
Please provide a brief description of the merger clearance process and the typical timeline for merger clearance.
The usual merger clearance process is to seek ‘informal merger clearance’ from the ACCC. This involves preparing a written submission to the ACCC that provides background information on the parties, information about the proposed merger and an analysis of the impact of the merger on competition in the relevant market. In relation to the last issue, the type of issues that are typically addressed include market concentration and market shares, the height of barriers to entry, availability of substitutes, whether the target is a vigorous and effective competitor, countervailing power of suppliers and customers, the level of imports and the dynamic characteristics of the market.
The ACCC will undertake a pre-assessment to determine whether there is a low risk that the transaction will result in a substantial lessening of competition and can be cleared without a public review is required. This process usually take 2-3 weeks.
Where the ACCC considers a merger cannot be pre-assessed and the transaction is in the public domain, the ACCC will conduct a public review with market inquiries. A public review will usually take 6 to 12 weeks. If signi cant competition concerns arise during this process, the ACCC will publish a Statement of Issues and establish a secondary timeline for further public consultation and consideration of the merger.
What are the consequences of failing to notify the regulator when required?
There are no penalties for not notifying the ACCC of an acquisition. If the ACCC has concerns that a merger is likely to result in a substantial lessening of competition then it can commence court proceedings seeking a range of remedies including injunctions to prevent an anti-competitive merger from taking place, divestiture orders if an anti-competitive merger has completed and penalties.
For further information, please contact:
Jo Daniels, Principal, Baker & McKenzie
jo.daniels@bakermckenzie.com
