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Anti-competitive agreements
| Prohibited conduct (general prohibition)

 

Prohibition of anti-competitive agreements in Australia

General prohibition on anti-competitive agreements

Section 45 prohibits making or giving effect to a contract, arrangement or understanding (or a provision of a contract, arrangement or understanding) if it has the purpose, or is likely to have the effect, of substantially lessening competition.

Unlike the cartel provisions, there is no requirement that parties be competitors. As a result, section 45 will capture both horizontal and vertical agreements that substantially lessen competition, subject to some exemptions and anti-overlap provisions.

Note: The current Harper Review Final Report has recommended that section 45 be modified to also prohibit a corporation from engaging in a 'concernted practice' with one or more other persons if that concerted practice ahs the purpose, effect, or likely effect of substantially lessening competition. See Harper Report Recommendation 29.

 

Contract, arrangement or understanding

In order to constitute a prohibited cartel provision, the provision must be contained in a 'contract, arrangement or understanding'. Mere parallel conduct or concerted practice is insufficient.

In ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794 the Federal Court held that in order for a 'contract, arrangement or understanding' to exist, the following elements must be present:

  • Communication
  • Consensus
  • Commitment

Communication may be express or implied; this requirement has not attracted much criticism. Similarly, it is not controversial that consent to engage in a course of action is required.

The final element, commitment, has proven controversial. Mere expectation or hope that another party will act (or refrain from acting) is insuffiicent).

Decisions in high profile petrol cases (Leahy and Apco), which failed because this element was not satisfied, led to a review of the 'meaning of understanding' and has featured in a number of other inquiries, most recently the Harper Review. To date, there has been no change in the law, save for the introduction of narrow, industry specific (banking), price signalling laws, which are likely to be repealed in the near future.

 

Purpose or effect of substantially lessening competition

Conduct is only prohibited if it can be demonstrated that it has or would be likely to have the purpose or effect of substantially lessening competition.

Section 45(4) provides that a provision of a contract, arrangement or understanding will be deemed to substantially lessen competition if that provision, combined with other provisions of that contract, arrangement or understanding or provisions of any other contract, arrangement or understanding to which the corporation is party, would together have or be likely to have that effect.

 

Exceptions and anti-overlap

General exemptions

There are a number of general exceptions to the competition provisions in Part IV. These are contained in section 51.

In addition, s 45(8) provides that the section does not apply in relation to arragnements between related corporations (where they are the only parties to the agreement).

Anti-overlap exemptions

Section 45 contains a number of anti-overlap provisions designed to give priority to specific prohibitions over the general prohibition in s 45.

Sections 45(5) provides that the section does not apply in relation to certain conduct prohibited by other parts of the Act (insofar as they do constitute that other conduct):

  • provisions which constitute a covenant to which s 45B applies;
  • resale price maintenance (s 48), including maximum resale price maintenance (which is not prohibited by s 48)

Section 45(6) provides that s 45 will not apply in relation to conduct which would constitute exclusive dealing under s 47 (or which would constitute exclusive dealing if the relevant conduct substantially lessened competition)

Section 45(6A) provides that s 45 will not apply in relation to the making or giving effect to a dual listed company agreement if that conduct would contravene s 49.

Section 45(7) provides that s 45 will not apply in relation to contracts, arrangements or undestandings insofar as they would constitute an acquisition of shares or assets (this gives priority to the merger provision in s 50 of the Act).

 

Authorisation and notification

Authorisation

Parties may seek authorisation (on public benefit grounds) for proposed agreements which might otherwide contravene s 45.

Small business collective bargaining

In addition, parties may notify the ACCC if they wish to engage in collective bargaining for the supply or acquisition of goods or services (s 93AB); if the ACCC does not object to the notification then the parties may engage in the conduct without contravening s 45.

This collective bargaining notification option is only available where it is reasonably expected that the supply or acquisition contract (or contracts) involved will not exceed $3m (or such other sum as prescribed by regulation) within a 12 month period. Industries which currently benefit from higher thresholds under regulations are:

  • Petrol retailing ($15m)
  • New motor vehicle retailing ($20m)
  • Farm machinery retailing ($10m)
  • Primary production ($5m)

The ACCC may only object to a notification if satisfied that the provision has or would have the purpose or likely effect of substantially lessening competition and either (a) the provision has not resulted or is not likely to result in a benefit to the public or (b) the benefit to the public that has resulted (or is likely to result) does not outweight the detriment constituted by any lessening of competition (s 93AC)

 

Penalties and remedies for contravention

Application may be made to the Federal Court for the following:

  • Injunction (section 80)
  • Pecuniary penalties for breach (section 76)
  • Divestiture (section 81)
  • Damages (by persons who suffer loss and damage as a result) (six year limitation period) (section 82)
  • Disqualification from directorship (section 86E)
  • Non-punitive orders (such as community service order) (section 86C)
  • Other orders (Court may make 'such orders as it thinks appropriate' (section 87)

View remedies page for more details.

 

Case law

Details about the key cases relating to anti-competitive agreements in Australia can be found on my separate cases page.

 

Commentary

For research and commentary on anti-competitive agreements in Australia see the reading room.