What Is Anti-Competitive Behaviour?

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Table of Contents

• What Behaviour Is Anti-Competitive?
• How Do You Define the Market?
• Common Types of Anti-Competitive Behaviour
• Can I Report Anti-Competitive Behaviour?
• Key Takeaways

Being successful in business means competing against other businesses and offering a better service or product than your competitors. However, it is important to be aware of laws that ensure all businesses operate fairly. Consumer laws in Australia prohibit businesses from engaging in anti-competitive behaviour. This includes any practice that restricts a competitor in a particular market. The penalties for engaging in anti-competitive conduct are costly and include fines and imprisonment for up to 10 years. This article will define anti-competitive behaviour. We will also explain the most common types of anti-competitive behaviour and how to avoid them when operating your business. 

What Behaviour Is Anti-Competitive?

Australia’s consumer laws do not allow any contract, arrangement or understanding between businesses that will lessen competition in their market. The arrangement does not have to be a formal written contract but can be an oral agreement. For behaviour to be considered anti-competitive, there must be two or more parties involved in planning an action that will substantially lessen competition in a market. The planning must be intentional and will include a pattern of cooperative behaviour or communications between the businesses that are beyond a business independently responding to market conditions. 

How Do You Define the Market?

The market is the area of close competition between businesses. There are four elements which form a particular market: 

1. product, a range of goods or services that are required by customers;
2. geography, the physical area within which the goods or services are traded; 
3. level of function, such as manufacturing, wholesale or retail; and
4. time, the period over which the goods or services are traded. 

Common Types of Anti-Competitive Behaviour

Cartels 

A cartel is a group of two or more businesses that agree to act together instead of competing against each other. As a result, customers experience higher prices and poorer quality services. Without competition, there is no drive to ensure fair and honest business dealings.  Cartel conduct includes practices such as price fixing, rigging bids, sharing markets and controlling the output of goods and services to customers. 

Imposing Minimum Resale Prices 

A business can not stop another business re-selling its goods or services below a particular price. It is illegal to put pressure on a business to charge a certain price or give a recommended price list. Likewise, a supply business can not pressure re-sellers to stop advertising, displaying or selling goods below a specified price.  

Exclusive Dealings

Exclusive dealing occurs when one business imposes restrictions on another business, limiting the other’s freedom to choose how they trade. It is illegal where it substantially lessens competition in that market. A common type of exclusive dealing is ‘third line forcing.’ This practice occurs when a business limits trading with another business on the condition they only purchase goods or services from a particular third party. 

Price Signalling

Price signalling involves two or more businesses working together to fix prices rather than compete against each other. This can force prices up and cuts choices for consumers and other businesses. Price fixing agreements do not have to be formal written contracts, but can be informal agreements or understandings. Signs of price fixing can include tenders or quotes higher than expected or simultaneous price rise by a number of competitors. 

Collective Bargaining and Boycotts

Collective bargaining involves competing businesses join together to negotiate with a supplier or customer over terms, conditions and prices. It can result in unfair bargaining terms and higher prices. Collective boycotts occur when two or more competing businesses boycott another business the group is negotiating with, which limits fair competition between individual businesses. 

Predatory Pricing

Predatory pricing, or undercutting, involves two or more businesses setting their prices below market rate to eliminate or damage a competitor. It is also considered a misuse of market power. The result can be less choice and ultimately higher prices for consumers. In most cases, companies involved in predatory pricing have significant market power or share, creating an unfair advantage in their market. 

Unconscionable Conduct

Any behaviour that is harsh, oppressive or goes beyond hard commercial bargaining can be considered oppressive conduct. For example, behaviour by a business may be unconscionable, where it is deliberate and clearly unfair and unreasonable. Several factors will be considered when assessing whether conduct is unconscionable, including:

• the relative bargaining strength of the parties;
• the use of undue influence or pressure by the stronger party;
• the willingness of the stronger party to negotiate; and 
• the extent to which the parties acted in good faith. 

Refusal to Supply Goods or Services

In general, businesses have a right to supply goods or services to any other business of their choosing and to determine the terms of supply. However, refusing to supply goods/services is anti-competitive behaviour, where the business refusing is: 

• involved in a boycott;
• misusing its market power; i
• imposing minimum resale prices; 
• engaging in exclusive dealing; or 
• acting unconscionably. 

Can I Report Anti-Competitive Behaviour?

You can report anti-competitive behaviour to the Australian Competition and Consumer Commission (ACCC). Contact the ACCC via its website on www.accc.gov.au. 

Key Takeaways

Anti-competitive behaviour is bad news for consumers, as it stops businesses from acting fairly and honestly. The result of this behaviour includes reduced competition in the market and higher prices for consumers. It is important to understand what conduct is anti-competitive so you can ensure your own business is not engaging in it. You should also learn to recognise anti-competitive behaviour in any competitors in your market so that you can report it to the Australian Competition and Consumer Commission.