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Anti-competitive agreements | Overview

 

Prohibition of anti-competitive agreements in Australia

General prohibition on anti-competitive agreements

Section 45 prohibits making or giving effect to a contract, arrangement or understanding (or a provision of a contract, arrangement or understanding) if it has the purpose, or is likely to have the effect, of substantially lessening competition.

Unlike the cartel provisions, there is no requirement that parties be competitors. As a result, section 45 will capture both horizontal and vertical agreements that substantially lessen competition, subject to some exemptions and anti-overlap provisions.

Note: The current Harper Review Final Report has recommended that section 45 be modified to also prohibit a corporation from engaging in a 'concerted practice' with one or more other persons if that concerted practice has the purpose, effect, or likely effect of substantially lessening competition. See Harper Report Recommendation 29.

Cartels

Cartel conduct is defined and prohibited in Division 1 of Part IV of the Act. Conduct falling outside the scope of that definition, or which benefits from an exemption, may still be prohibited by the general prohibition in section 45. For further details see the cartel conduct page.

Exclusionary provisions

Exclusionary provisions (primary boycotts) between competitors are separately prohibited by a combination of s 45 and 4D of the Act. There is considerable overlap between this prohibition and the cartel laws and, for this reason, the Harper Report recommended that it be repealed. See separate boycotts page.

Dual listed company arrangements

Dual listed company arrangements which substantially lessen competition are separately prohibited by section 49 of the Act. See dual listed company page.

Price signalling conduct

Price signalling laws currently apply only to the banking industry and it is subject to numerous exceptions. The provisions have not yet been the subject of litigation and remain controversial. The Harper Report 2015 recommended that they be repealed. See price signalling page.

Telecommunications

A separate telecommunications regime applies in relation to anti-competitive conduct in that industry. See telecommunications page.

 

The relevant legislation

The core prohibition

Section 45 states (in part):

(2) A corporation shall not:

(a) make a contract or arrangement, or arrive at an understanding, if:

...

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

...

(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.

Contract, arrangement or understanding

In ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794 the Federal Court held that in order for a 'contract, arrangement or understanding' to exist, the following elements must be present:

  • Communication
  • Consensus
  • Commitment

The final element - 'commitment' - has proven the most controversial and has, in part, led to a recommendation to extend anti-competitive conduct prohibitions (accepted by the Government but not yet implemented) to 'concerted practices'.

Purpose or effect of substantially lessening competition

Section 45(4) provides that a provision of a contract, arrangement or understanding will be deemed to substantially lessen competition if that provision, combined with other provisions of that contract, arrangement or understanding or provisions of any other contract, arrangement or understanding to which the corporation is party, would together have or be likely to have that effect.

 

Exceptions and anti-overlap

There are a number of exceptions to Part IV, including the cartel provisions.

The general Part IV exceptions are contained in section 51.

In relation to section 45, see prohibited conduct page.

 

Authorisation and notification

Parties may seek authorisation (on public benefit grounds) for agreements which might otherwise contravene s 45. See conduct page for more detail.

Small business may also provide a collective bargaining notification to the ACCC (see conduct page for further details).

 

The history and future of the provision

History

Details forthcoming

Future

The current Harper Review Final Report has recommended that section 45 be modified to also prohibit a corporation from engaging in a 'concerted practice' with one or more other persons if that concerted practice has the purpose, effect, or likely effect of substantially lessening competition. See Harper Report Recommendation 29.

 

Penalties and remedies for contravention

Application may be made to the Federal Court for the following:

  • Injunction (section 80)
  • Pecuniary penalties for breach (section 76)
  • Divestiture (section 81)
  • Damages (by persons who suffer loss and damage as a result) (six year limitation period) (section 82)
  • Disqualification from directorship (section 86E)
  • Non-punitive orders (such as community service order) (section 86C)
  • Other orders (Court may make 'such orders as it thinks appropriate' (section 87)

View remedies page for more details.

 

Case law

Details about the key cases relating to anti-competitive agreements in Australia can be found on my separate cases page.

 

Commentary

For research and commentary on anti-competitive agreements in Australia see the reading room.