Substantial lessening of competition

Promotion of competition is one of the objects of the Competition and Consumer Act 2010. Section 2 of the Act states:

The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection. [emphasis added]

As a result, many of the competition provisions of the Act use the term 'competition' and many use the phrase 'substantial lessening of competition' (see, eg, sections 45, 47 and 50). The Act does not, however, define competition for this purpose, save to state (section 4) that it includes import and foreign competition:

competition includes competition from imported goods or from services rendered by persons not resident or not carrying on business in Australia.

In determining whether or not competition is likely to be substantially lessened in the case of mergers, section 50(3) sets out a number of criteria the courts must consider. They are:

(a) the actual and potential level of import competition in the market;

(b) the height of barriers to entry to the market;

(c) the level of concentration in the market;

(d) the degree of countervailing power in the market;

(e) the likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins;

(f) the extent to which substitutes are available in the market or are likely to be available in the market;

(g) the dynamic characteristics of the market, including growth, innovation and product differentiation;

(h) the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor;

(i) the nature and extent of vertical integration in the market.

A number of cases have discussed the meaning of competition and what is necessary in order to establish that competition has the purpose or effect of 'substantially lessening competition'. See, for example:

ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No. 1) (1990) 27 FCR 460

Dowling v Dalgety Australia Ltd (1992) 34 FCR 109
Substantial lessening of competition; purpose

AW Tyree Transformers Pty Ltd and Wilson Transformer Co Pty Ltd (1997) ATPR (Com) 50–247
Substantial lessening of competition

Gallagher v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159
Substantial lessening of competition

Stationers Supply Pty Ltd v Victorian Authorised Newsagents Associated Ltd (1993) 44 FCR 35
Purpose of substantially lessening competition; exclusive dealing

For a comprehensive summary of the case law on SLC, see Peter Armitage, 'The evolution of the substantial lessening of competition test – a review of case law' (2016) 44 Australian Business Law Review 74. See also John Kench, 'Substantial Lessening of Competition' (Competition Law Conference, Sydney, 21 May 2016)