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Anti-Competitive Conduct and The Competition and Consumer Act

This article provides an introductory summary of anti-competitive conduct and the Competition and Consumer Act.  We provide examples of activities that have been known to have an anti-competitive effect on the market and have therefore been prohibited in Australia.

Competition is an essential ingredient to a functioning and prosperous economy. It stimulates innovation, leads to efficient markets, drives productivity, and provides consumers with choices and competitive prices. In Australia, the Competition and Consumer Act 2010 (the Act) is a piece of Federal Legislation that stands, in part, to prevent and punish certain conduct that may lead to the degradation of competition and hinder the growth of the Australian market. This punishable conduct is called anti-competitive. This article will define anti-competitive conduct, outline some examples, discuss how the Act operates, and suggest solutions for anyone, at all levels of business, who is responsible for business practices or has been a victim of anti-competitive behaviour. 

What is Anti-Competitive Conduct?

Anti-competitive conduct refers to certain conduct by businesses that prevent or restrict competition. The Act sets the measure for what constitutes this level of negative impact as actions that “substantially lessen” competition in a certain market. This requirement of a “substantial” degree of degradation is context specific however has been defined in case law as being large, weighty, big, real or of substance or not insubstantial. Whether conduct is considered to be substantial will depend on it’s weight or impact relative to the size of the particular market. Other factors that contribute to ascertaining whether a business has substantially lessened competition include:

  1. The size of firms within the market;
  2. Any entry barriers for new potential participants to the market;
  3. The availability of substitute products or services; and
  4. The degree of market power held by existing businesses.

Businesses must refrain from acting in this manner, whether they are dealing with competitors, suppliers, customers or consumers. The Act is the source of this law and stipulates, in more detail, the behaviours that are prohibited and the ramifications of engaging in such a way. Anti-competitive behaviour occurs within a ‘market’; a term which was defined in the case of Re Queensland Co-operative Milling Association Ltd, Defiance Holdings Ltd (Proposed Mergers with Barnes Milling Ltd) as an area of close competition or a field of rivalry between firms in which there is substitution between one product and another, and between one source of supply and another, in response to changing prices. It further clarified that a market has four key elements; level of function, geography, product and time. 

What are the Different Types of Anti-Competitive Conduct?

Whilst not an exhaustive list, below are some activities that have historically been known to have an anti-competitive effect on the market, and are therefore prohibited by the Act. These include:

Cartels

This is where a group of business come to an agreement whereby they act together rather than in competition with each other. This has negative impacts on the market, including restricting healthy economic growth, causing prices to increase, restricting innovation, and more. Signals of Cartel operations include price fixing, sharing markets, rigging bids and controlling or limiting the number of goods and services available in a market. 

Imposing minimum resale prices;

This prevents retailers from competing on price.

Anti-competitive agreements;

Agreements cannot be drafted or operate in a way that substantially lessens competition.

Exclusive dealings as anti-competitive conduct;

This is prohibited and occurs where one business seeks to impose restrictions on another business as to their freedoms to buy and sell, interact with other businesses, and operate in any geographical market of their choosing. For example a term in a contract that states that a customer can only buy the supplier’s product on the condition that the customer agrees not to buy from any other supplier.

Collective bargaining and boycotts;

Collective bargaining involves competitors coming together to negotiate with another party over terms or conditions or prices. Collective boycotts involve a group of competitors agreeing to collectively refrain from buying or selling to a particular business. 

Misuse of market power;

Generally, a business using it’s market power to substantially lessen competition is illegal.

Co-operation between businesses as anti-competitive conduct;

In some cases, co-operation between competing businesses may breach the Act.

Unconscionable conduct;

If businesses operate so harshly that their good conscience begs questioning, they may be seen as being anti-competitive.

Price signalling;

This involves businesses agreeing on a fixed price instead of competing. This often occurs within cartels or markets with a limited number of suppliers (oligopoly). 

Predatory pricing; 

This involves a large market player offering significantly lower prices than their competitors, with the intention of squeezing their competitors out of the market, preventing potential competitors from joining the market, or punishing other businesses that compete aggressively. 

How does the Competition and Consumer Act Regulate this Conduct?

The Act performs its function of restricting these behaviours by prohibiting contracts, arrangements, understandings or concerted practices that have the purpose, effect, or likely effect of substantially lessening competition in a market. The Australian Competition and Consumer Commission is tasked with the implementation and enforcement of the Act. They investigate potentially anti-competitive behaviour that is reported, they provide businesses with information regarding their obligations under the Act, and they take action against businesses found to be in breach. 

Any business or natural person who may have suffered loss as a result of anti-competitive conduct also has standing to commence civil legal proceedings against the perpetrator of such anti-competitive conduct.

I Am a Victim of Anti-Competitive Conduct. What do I do?

At Brander Smith McKnight Lawyers, our experienced and professional team of expert commercial lawyers can help you understand your rights and legal remedies in the event that you have been subject to the anti-competitive dealings of another business. 

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