Significant reforms to Australian competition law are about to commence

by Dentons
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The most significant changes to Australia’s competition law in over 40 years will take effect in the coming weeks.

Background to the changes

  • In 2013, Tony Abbott announced a ‘root and branch’ review of competition policy, the first in more than 20 years.
  • A panel, led by Professor Ian Harper, produced its report on competition policy in 2015.
  • The government subsequently agreed that most of Harper’s recommendations be adopted.
  • This week, amendments to Australia’s competition laws passed Parliament.
  • The Treasurer has stated that the new laws will come into effect ‘in the coming weeks’.

Key changes

Misuse of Market Power

  • New law: The new prohibition on misuse of market power prevents a firm with substantial market power from engaging in conduct that has the purpose or likely effect of substantially lessening competition in any market in which the company supplies or acquires goods or services.
  • Implication: The change to an ‘effects’ test rather than a ‘purpose’ test means that companies with significant market shares (say 30% or more) need to consider whether the new law will impact their business strategies.

Third Line Forcing

  • New law: Third line forcing is now only prohibited if it has the purpose or likely effect of substantially lessening competition.
  • Implication: There will now no longer be a need to notify the ACCC of most third line forcing conduct.

Concerted Practices

  • New law: There is a new prohibition on a company engaging in a ‘concerted practice’ which has the purpose or effect of substantially lessening competition.  A concerted practice, a concept from the EU and UK, is ‘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 the place of the uncertainty of competition.’ The price signalling provisions that only applied to the banking sector have been repealed.
  • Implication: The new law will capture conduct that falls short of a contract, arrangement or understanding between competitors. Companies should consider how they deal with their competitors. Exchanging information, price signalling and cooperative conduct could potentially be caught by the new law.

Resale Price Maintenance

  • New law: Resale price maintenance remains automatically prohibited, however it can now be notified to the ACCC.
  • Implication: The notification process is simpler than the former authorisation process – which is better for businesses.

Cartels & Joint Ventures

  • New law: The joint venture exception to cartel conduct has expanded to include joint ventures for the acquisition of goods or services, and arrangements or understandings (not just contracts). However, to obtain the benefit of the exception, joint ventures must not be carried on for the purpose of substantially lessening competition, the cartel provision must be for the purposes of a joint venture, and the cartel provision must be reasonably necessary for undertaking the joint venture.
  • Implication: Companies seeking to rely on the joint venture exception to cartel conduct should be aware of the new requirements.

Mergers

  • New law: The option of obtaining authorisation for a merger directly from the Australian Competition Tribunal has ended. Instead, merger parties must apply first to the ACCC.
  • Implication: The majority of mergers will continue to be assessed via the informal merger clearance process in the usual way.

Access to monopoly infrastructure

  • New law: Companies seeking access to infrastructure will need to satisfy new criteria.
  • Implication: It is likely to be easier for infrastructure owners to resist declaration.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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