Competition law protects, enhances and extends competition between businesses.
- The Competition and Consumer Act 2010 (Cth) (CCA) prohibits conduct that is likely to substantially lessen competition in a market.
- Examples of anti-competitive behaviour include cartel conduct, anti-competitive agreements, exclusionary provisions (boycotts), misuse of market power, exclusive dealing and resale price maintenance.
Anti-Competitive Behaviour in Australia
In Australia, there are certain business practices that prevent and limit unfair competition. When dealing with wholesalers, suppliers and other businesses, it is important to understand your business’s rights and obligations.
Failure to conduct your business within the CCA can result in contravention of the Act. Criminal fines and imprisonment for up to 10 years is available for contraventions of the cartel provisions in Division 1 of Part IV of the CCA.
Substantially Lessening Competition
Conduct engaged in by businesses is subject to a ‘substantially lessening competition’ threshold, where the conduct has the purpose, effect or likely effect of substantially lessening competition.
A market is 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. A market has four important elements:
- level of function
Franchisees and franchisors are subject to the Franchising Code of Conduct, which regulates the relationship between franchisors and franchisees.
- The ACCC’s role is to apply the CCA to enhance the welfare of Australians by promoting competition and fair trading, as well as the provision of consumer protection. The ACCC cannot provide you with legal advice or advice on contractual matters.
- It is crucial to set the terms and conditions of your business’s agreements with suppliers, customers and third parties independently. You can apply to the ACCC for authorisation to negotiate collectively with a supplier or other business.
- If you are entering an agreement with your competitors, ensure you are not preventing, restricting or limiting dealings with suppliers or customers.
Types of Anti-Competitive Behaviour
Businesses that make agreements with their competitors to fix prices, rig bids, share markets or restrict outputs are participating in cartel conduct. These agreements are designed to drive up the profits of cartel members while maintaining the illusion of competition.
Examples of cartel behaviour:
- Horizontal price fixing (fixing prices between firms, controlling or maintaining prices or a discount, allowance, rebate or credit)
- Output restriction (restricting volume of goods produced or services offered)
- Market division (divide up customers or territories to limit the need to compete for custom)
- Bid rigging (agreement not to compete for tenders)
Exclusive dealing is a vertical non-price restraint not permitted in trade or commerce. It takes place when one person trading with another imposes restrictions on the other’s freedom in what they sell and with whom they sell with. It must have the purpose or the likely effect of substantially lessening competition.
Examples of Exclusive Dealing
- Supplying on condition as to acquisition or re-supply (product ties)
- Supplier’s refusal to supply
- Acquisition on condition
- Acquisition restrictions
- Third Line Forcing on condition
- Third Line Forcing refusal to supply
- Lease/License about land
- Resale Price Maintenance
A supplier may recommend that resellers charge an appropriate price for particular goods or services but may not stop resellers charging or advertising below that price. Resale Price Maintenance is a vertical price fixing arrangement across different functional market levels. This can negatively affect price competition at the lower retail functional level because vertical price fixing can eliminate both interbrand and intrabrand competition.
Frequently Asked Questions about Anti-Competitive Behaviour
Q: Can a business charge something other than the recommended resale price (RRP)?
A: It is only a recommended price. A business can change their prices. It is illegal for the supplier to put pressure on you to charge the listed prices or any other set price.
Q: What is a collective boycott?
A: A collective boycott occurs when a group of competitors agree not to acquire goods or services from, or not to supply goods or services to, a business with whom the group is negotiating unless the business accepts the terms and conditions offered by the group.
Q: What is the Trade Practices Act 1974 (Cth)?
A: The TPA was replaced with the Competition and Consumer Act 2010 (Cth).
Q: Can resale price maintenance ever be authorised?
A: The ACCC may authorise RPM for pro-competitive reasons, and RPM would benefit members of the public. The supplier must apply in advance to the ACCC to have conduct authorised.
Q: What remedies are available if there is contravention of the CCA?
A: The CCA provides that persons who contravene the Act are liable to pay damages and subject to other remedial orders as a result of civil actions by those who suffer loss or damage flowing from such contravention.
How can LegalVision help me?
LegalVision assists businesses and individuals with tailored online legal advice for a fixed-fee, including advice and assistance with the Competition and Consumer Act. Call LegalVision today on 1300 544 755.