Competition Law Reading Room
Some outside observations on overly restrictive agreements and the Souths rugby case
(2004) 12 Competition and Consumer Law Journal 83
United States courts have adopted a variety of rules for presuming a lessening of competition, in part because it is too burdensome to demand that plaintiffs prove that challenged conduct takes place within a particular market whose definition will be highly contested by skilled defence counsel. From an outsider’s perspective, the High Court’s decision in News Ltd v South Sydney District Rugby League Club Ltd to narrowly construe the application of s 4D of the TPA to rivals’ agreements designed to restrict the supply of services seems unfortunate, for several reasons. As a matter of competition doctrine, the decision fails to recognise that a requirement of proof that competition be substantially lessened can allow firms to enter into overly restrictive agreements because of the cost and difficulties of litigation. Given a dichotomous choice between the per se and ‘full monty’ provisions of s 45, sound competition policy supports a construction that allows relief without a full inquiry for demonstrably overbroad competitor agreements that exclude buyers from the market. As a matter of comparative competition law, the court’s approach departs from the more flexible standard used by - albeit somewhat inconsistently - US courts, as well as the standard of the common law, under which overbroad restraints can be condemned without necessarily engaging in a full-blown economic inquiry including proof of market power. As a matter of statutory interpretation, a creative reading of the TPA to prohibit overbroad restraints that exclude firms from the market is more consistent with Australian precedents mandating a broad interpretation to protect consumers. Finally, as a matter of public policy, the decision makes it substantially easier for powerful sports officials to make decisions that enhance their own economic power without constraints provided by a free market or competition law. The preferred approach would have been to interpret s 4D to condemn agreements that deprive victims of services essential for them to viably compete, where the agreement is not necessary to achieve some other legitimate pro-consumer goal.
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