Last week Parliament passed the most significant reforms to Australia’s competition laws in more than two decades.
The Competition and Consumer Amendment (Competition Policy Review ) Bill 2017 (CPR Bill) includes the majority of reforms recommended in the 2015 Harper Report. The related Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (MMP Act), became law on 23 August this year. As the name suggests, it contains the reforms to the misuse of market power provisions. However, commencement of those new provisions was made contingent on the passage of the CPR Bill. The reforms contained in these bills will commence at a date to be proclaimed, or six months after the CPR Bill receives Royal Assent.
The most significant changes brought about by the passage of these bills are:
Misuse of market power: Introduction of an effects test so that a corporation with substantial market power is prohibited from engaging in conduct having the purpose, effect, or likely effect, of substantially lessening competition. See my earlier blog piece for more detail.
Concerted practices: Introduction of a new civil prohibition against engaging in a concerted practice having the purpose, effect or likely effect of substantially lessening competition. Although not defined in the Act, the explanatory memorandum defines the concept of concerted practice as ‘any form of cooperation between two or more firms (or people) or conduct that would be likely to establish such cooperation, where this conduct substitutes, or would be likely to substitute, cooperation in place of the uncertainty of competition’.
Mergers: The power to authorise mergers will revert back to the ACCC at first instance, subject to merits review by the Tribunal. The concept of formal clearance has now been removed.
Resale price maintenance: The substantive ‘per se’ prohibition on RPM is retained, but it will now be possible for parties to notify the ACCC of RPM conduct; unlike authorisation, the notification will allow the conduct to occur after a 60 day waiting period unless the ACCC objects to the notification on the ground that it considers anti-competitive harm will outweigh any public benefit. The Act is also amended to expressly provide that actions between related bodies corporate do not constitute RPM.
Third line forcing: current per se prohibition on third line forcing in s 47 removed; third line forcing now subject to competition test
Single authorisation test: The various different tests for authorisation have been replaced with a single test for all forms of conduct (including s 46 conduct which cannot currently be authorised). It also expands the range of circumstances in which authorisation can be granted, by allowing it to be granted whenever the conduct would not substantially lessen competition (regardless of any public benefit consideration). The new test allows the ACCC to grant authorisation (prospectively) if either
- the conduct would not substantially lessen competition; or
- the conduct would result in a public benefit likely to outweigh the detriment that would be likely to result from the conduct
Note that the first limb (the SLC limb) does not apply in relation to per se conduct; so for cartels, secondary boycotts and resale price maintenance it will still be necessary to prove a net public benefit.
Class exemption power: The ACCC will now be allowed to create ‘class exemptions’ for particular types of conduct. Class exemptions can be granted where conduct of that ‘kind’ would not have the likely effect of substantially lessening competition or would result in a public benefit likely to outweigh the detriment that would be likely to result from the conduct.
Section 155 notices may be issued in relation to alleged contraventions of court-enforceable undertakings given under s 87B. A defence is also introduced so a person not aware of the requested documents after undertaking a ‘reasonable’ search is taken not to have contravened the provision. Penalties for non-compliance are substantially increased.
Access regime: various amendments to the access regime, relating to declaration criteria and the power of the Minister and ACCC, are made. In particular, the private profitability test is replaced by a ‘natural monopoly’ test.
Some of the less drastic, but nevertheless significant, changes include:
- provisions will be restricted to conduct occurring in trade or commerce (limiting conduct that that affecting competition in Australian markets)
- joint venture exceptions will be expanded
- the output restriction purpose condition will also be expanded to capture acquisition restrictions (this will address any relevant gap associated with removing the separate prohibition on exclusionary provisions)
- Division 1 of Part IV (cartels) will be renumbered. Eg, s 44ZZRD will become 45AD) [In most cases, for those who have memorised the existing clunky provisions, ‘4ZZR’ is simply replaced with ‘5A’ (eg, 44ZZRF becomes 45AF). Unfortunately that only works until we get to s 44ZZRP – after that you’re on your own!]
Price signalling laws repealed (concerted practices laws considered preferable)
Exclusionary provisions: separate prohibition repealed (change to output restriction purpose condition to address any resulting gap)
Section 83 findings of fact as evidence (s 83): Section 83 extended so that certain admissions of fact as well as findings of fact can be used in other proceedings (mainly relevant for private cartel actions following admitted contraventions)
Ministerial consent: the Act removes the requirement for private litigants to seek ministerial consent prior to bringing an action for breaches occurring overseas
Two of the most significant changes are the introduction of the ‘effects test’ for misuse of market power and the introduction of a new concerted practices prohibition. In September 2016 the ACCC released a ‘draft framework for concerted practices guidelines‘ and a ‘draft framework for misuse of market power guidelines‘ for consultation. There has been no further (public) update to the draft guidelines. However, following passage of the Bill, the ACCC announced that it had established a new Substantial Lessening of Competition Unit (SLC Unit) which will be ‘responsible for misuse of market power and concerted practices investigations and litigation within the ACCC’ and that this unit would ‘soon’ release guidance on these new laws. It has taken more than two years since the release of the Harper Report for the key recommendations – most of which had bi-partisan support – to become law. However, with the exception of increased penalties for secondary boycotts (which were removed via a Senate amendment last Monday) the key reforms have now made their way through Parliament and will be in operation in six months later, if not before.