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In the course of operating any business, you will need to compete with others. In Australia, and internationally, there are rules and regulations that prevent anti-competitive behaviour and limitations on consumer choice and freedoms. Understanding how these rules operate is important to all businesses. This article will discuss how competition is regulated and how to avoid anti-competitive practices in Australia.
How is Competition Regulated in Australia?
In Australia, competition is predominantly regulated under Competition and Consumer Act 2010 (‘CCA’). The purpose of this law is primarily to protect consumers and their interests. The benefits for consumers are that they will likely receive goods and services at lower prices. Understanding the CCA and how it applies to you is critical to the operation of any business. The CCA also gives power to the Australian Competition & Consumer Commission (‘ACCC’). The ACCC is responsible for enforcing the CCA. It also accepts complaints from consumers and has the power to issue penalties for breach of the CCA.
What are the Different Types of Anti-competitive Behaviour?
There are many different types of anti-competitive behaviour. The overarching rule in this space is that the ACCC prohibits business practices created to, or will likely have the effect of substantially lessening competition in the market. These practives commonly include:
- arrangements; and
- concerted practices
Other specific examples of anti-competitive behaviour include:
|Collusion||Collusion can take a number of forms. However, most commonly a group of businesses may join together and agree on a fixed price for certain products or services.|
Cartels are an association of companies or businesses that cooperate to control prices or the market in some way. Cartels are not always anti-competitive and can promote orderly marketing.
However, there are civil and criminal penalties for serious cartel conduct in relation to price-fixing, bid rigging, restrictions on the supply chain and product output or division and allocation of consumers, suppliers or territories.
|Price maintenance||This conduct is typically seen where a supplier forces a reseller to sell their product for a minimum price. The supplier can recommend a retail price to the reseller, however price should ultimately be set at the reseller’s discretion. Suppliers cannot withhold goods if the reseller chooses to sell below their recommended price.|
This typically occurs where one party imposes restrictions on the choice of another party. For example, purchase of the goods or price is conditional on purchase of other goods from a third party.
Exclusive dealing is only problematic if it substantially lessens competition in the market.
There are two main types of exclusive dealing including full-line forcing and third-line forcing. Third-line forcing is prohibited under the CCA. This occurs when the supply of goods is conditional on purchase of goods from another party.
Full-line occurs where a supplier refuses to sell goods to the purchaser, unless they agree not to buy or re-supply other goods of a specific kind. Full-line forcing is prohibited if it substantially lessens competition.
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Strategies to Avoid Anti-competitive Practices
There are some simple and practical steps you can implement to reduce your risk of breaching the rules above. These include:
- Avoiding discussions with your competitors about product pricing. Rather you observe your competitor’s pricing and adjust yours accordingly to remain competitive in the market;
- Avoiding discussions with your competitors about division of customers, supplier or specific areas of the market;
- Review your existing business contracts and supply agreements to ensure there are no anti-competitive clauses or exclusive dealing terms that could reduce competition;
- Implement training internally to ensure your staff and employees understand how competition law and the CCA operate. This will not only reduce your business risk of anti-competitive behaviour, but also may help you implement and uphold other consumer law obligations like your consumer guarantees;
- If you think you’ve inadvertently been involved in anti-competitive conduct, speak to a lawyer or the regulator – it is often better to come forward first and work with the regulator to resolve the issues rather than waiting until you are caught out.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
The ACCC regulates competition and anti-competitive practices. Importantly, there are civil and criminal penalties for anti-competitive behaviour. Therefore, it is important to be aware of what business practices you can or cannot engage in. On the other hand, if you suspect another business of engaging in anti-competitive behaviour, you can also make complaints directly to the ACCC. If you have any questions about anti-competitive behaviour or Australia’s competition laws, contact LegalVision’s regulatory lawyers on 1300 544 755 or fill out the form on this page.
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