Legislation
Trade Practices Legislation Amendment (No 1) Act 2007
This Act made minor amendments to s 46 and introduced a radical new s 46(1AA) designed to capture predatory pricing (referred to as the Birdsville Amendment)
The original amendment bill provided for very cosmetic changes to s 46: essentially it provided for some further clarification about matters the Court may consider in determining whether a company has market power and made clear that market power does not require ‘substantial control’ or ‘absolute freedom from competitive restraint’; it also provided that the Court may have regard to sustained low cost pricing, but this was the only concession given to predatory pricing in the original bill. In addition to expanding on the definition of market power the bill provided expressly for the possibility of leveraging market power – making clear the power did not have to be in the market to which the conduct was targeted.
At the last minute the bill was amended to provide for a drastic new provision relating to predatory pricing (referred to as the 'Birdsville amendment' after the pub in which it was supposedly conceived by Senator Barnaby Joyce). In introducing the amendment Senator Brandis was quick to point out that, while many held the view that the existing provisions of s 46 were ‘sufficiently broad to deal with the problem’ of predatory pricing, these amendments were proposed ‘out of a sense of abundant caution’ (Senate Hansard p 10, 17 Sept). Labor and the Democrats indicated they would support the amendment (Senator Sherry and Senator Murray respectively, p 11 Senate Hansard 17 Sept), although Senator Sherry considered it would have been better to strengthen section 46, not introduce new sections, and expressed concern that the ‘amendment was hastily cobbled together at the last minute’.
Predatory pricing amendment (s 46(1AA))
The new provision provides, essentially, that:
(1) a corporation with a substantial share of the market (different from substantial market power – the reason for the difference remains a mystery - a new s 46(1AB) provides that the number and size of competitors will be a relevant factor)
(2) must not supply, or offer to supply, goods or services
(3) for a sustained period
(4) at less than the relevant cost (whatever that means)
(5) for the purpose of:
(6) - the same prohibited purposes as apply to s 46(1)
The 'taking advantage' requirement is eliminated altogether. There is no specified need for recoupment and the ‘Supplementary Explanatory memorandum’ made clear that the new provision does not require recoupment, although it may provide some evidence that the provision has been breached. This is the only guidance the Supp EM provides to this new provision.
Section 46(1) was amended to include the following passage (in italics): '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 ...' This was designed to ensure that 'leveraging' of market power into another market was captured (although this does not seem to have presented much of a problem in the past)
The following new provisions were also added:
(3A) In determining for the purposes of this section the degree of power that a body corporate or bodies corporate has or have in a market, the Court may have regard to the power the body corporate or bodies corporate has or have in that market that results from:
(a) any contracts, arrangements or understandings, or proposed contracts, arrangements or understandings, that the body corporate or bodies corporate has or have, or may have, with another party or other parties; and
(b) any covenants, or proposed covenants, that the body corporate or bodies corporate is or are, or would be, bound by or entitled to the benefit of.
(3B) Subsections (3) and (3A) do not, by implication, limit the matters to which regard may be had in determining, for the purposes of this section, the degree of power that a body corporate or bodies corporate has or have in a market.
(3C) For the purposes of this section, without limiting the matters to which the Court may have regard for the purpose of determining whether a body corporate has a substantial degree of power in a market, a body corporate may have a substantial degree of power in a market even though:
(a) the body corporate does not substantially control the market; or
(b) the body corporate does not have absolute freedom from constraint by the conduct of:
(i) competitors, or potential competitors, of the body corporate in that market; or
(ii) persons to whom or from whom the body corporate supplies or acquires goods or services in that market.
(3D) To avoid doubt, for the purposes of this section, more than 1 corporation may have a substantial degree of power in a market.
...
(4A) Without limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has contravened subsection (1), the Court may have regard to:
(a) any conduct of the corporation that consisted of supplying goods or services for a sustained period at a price that was less than the relevant cost to the corporation of supplying such goods or services; and
(b) the reasons for that conduct.
