What is anti-competitive behaviour? Am I engaged in or losing business to it?

The Australian Competition and Consumer Commission provides detailed information regarding anti-competitive behaviour, how you can identify it and how you can prevent your business from engaging in it. If you operate a business it is crucial that you gain an understanding of what constitutes anticompetitive behaviour as you can be at risk of losing business to it and you may risk serious penalties if your business is found to be engaging in it.

To provide you with a general understanding of anti-competitive behaviour, we have summarised a variety of examples of this behaviour and how you can identify it.

What are cartels?

Businesses that operate as part of a cartel prevent fair and honest business dealings. Cartels often form when businesses work together rather than in a competitive way to the detriment of consumers who may, as a result, be denied competitive prices for products and services. Cartel conduct includes price fixing, rigging bids, sharing markets and controlling the output of goods and services to consumers.

What is price signalling?

Price signalling is another example of anti-competitive behaviour as it allows businesses to work together rather than in a competitive manner. Price signalling is prohibited when certain information is disclosed between parties that is required to operate within a competitive market. Such information includes the price of goods and services, the commercial strategy of the business and the likely capacity of the business to acquire goods and services.

What is misuse of market power?

While most marketplace behaviour encourages competition between businesses, misuse of market power to eliminate or substantially damage a competitor is considered to be a misuse of market power. While misuse of market power is rather difficult to determine, it generally consists of three elements: whether the business has substantial market power, whether it is taking advantage of this power and whether this power is being used for an illegal purpose.

What are anti-competitive agreements?

Agreements that lessen the competition between businesses within a market are considered to be anti-competitive and are prohibited under Australian law. To determine whether an anti-competitive agreement exists, you should consider whether there is an agreement between the businesses, whether the businesses exist within a market and whether the conduct required under the agreement substantially lessens competition within that market.

What are minimum resale prices? 

Suppliers must not put pressure on businesses to charge at a recommended retail price or any other set price and threaten to stop supplying re-sellers. Suppliers also cannot pressure re-sellers to stop advertising, displaying or selling goods supplied by the supplier below a specified price.

What is predatory pricing?

Predatory pricing is another example of anti-competitive behaviour. This method of pricing reduces the competition between businesses which detriments consumers and the market in general. Example of predatory pricing include:

• Preventing the entry of a competitor into the market
• Deterring or preventing a competitor from engaging in competitive behaviour
• Eliminating or substantially damaging a competitor

What is unconscionable conduct?

In keeping with the general obligations to engage in fair and honest business dealings, business cannot act unconscionably. Determining what is unconscionable conduct is quite difficult and depends on the specific facts of the business, the market and the conduct in question. However, unconscionable conduct is generally behaviour that is harsh, oppressive and goes beyond severe commercial bargaining.

Can a supplier refuse to supply?

Australian law recognises the general right of suppliers to choose to whom they may supply their products and services and on what terms. However, there are certain circumstances under which refusing to supply products or services is illegal. These circumstances are:

• Acting unconscionably
• Engaging in exclusive dealing
• Boycotting the reseller
• Imposing minimum sale prices
• Misusing market power

Conclusion

To speak with a small business solicitor about what constitutes anti-competitive behaviour, call LegalVision on 1300 544 755. For more information on anti-competitive behaviour, please see:  http://www.accc.gov.au/business/anti-competitive-behaviour