Exclusionary provisions (primary boycotts)

Note: The Harper Review Final Report recommended that the separate prohibition of exclusionary provisions contained in s 45 be repealed. Legislation was passed in October 2017 giving effect to this recommendation. View the Competition and Consumer (Competition Policy Reform) Act 2017.

The separate prohibition on exclusionary provisions in s 45 was effectively repealed on 6 November 2017.

History
Exclusionary provisions (boycotts) between competitors were, until 6 November 2017, prohibited per se by section 45 of the Act, and were defined in section 4D. This operated in addition to the cartel conduct provisions which might also capture many forms of exclusionary provisions caught by the definition in s 4D.

Section 45 prohibited making or entering into an agreement containing an exclusionary provision; 'exclusionary provision' is defined in section 4D.

Section 4D defined exclusionary provisions as occurring when parties (two ore more of whom are in competition) make a contract, arrangement or understanding in which the relevant provision has the purpose of 'preventing, restricting or limiting'

'(i)    the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii)   the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions'

by all or any of the parties.

It was a defence to the exclusionary provision prohibition to demonstrate that the provision was entered into for the purpose of a joint venture and it did not have the purpose, effect or likely effect of substantially lessening competition (s 76C).

Certain secondary boycotts remain the subject of prohibition (sections 45D-45DD).

Harper changes

Although the separate prohibition on exclusionary provisions was repealed on 6 November 2017 as a result of the Harper Reforms, the conduct that is currently caught by this prohibition (defined in s 4D) will still be subject to review under other provisions. For example, where it involves an agreement (or concerted practice) it can be considered under s 45 and prohibited where it has the purpose or effect of substantially lessening competition. In addition, much of the conduct may also be caught by the separate cartel laws; in particular, section 44ZZRD(3) dealing with output restrictions. To address any gap resulting from the repeal of the separate prohibition on exclusionary provisions, s 44ZZRD(3)(a) was broadened to include restrictions on acquisitions of goods or services.

The explanatory memorandum to the Competition and Consumer (Competition Policy Reform) Act 2017 states:

[para 4.4] Exclusionary provision is defined in section 4D, and broadly means a provision of an actual or proposed contract, arrangement or understanding between competitors, where the provision has the purpose of preventing, restricting or limiting supplies of goods and services to, or acquisitions from, particular persons or classes of persons.

...

[para 4.6] The prohibition on exclusionary provisions substantially overlaps with the prohibition on cartel provisions, particularly where a provision in a contract, arrangement or understanding between competitors has the purpose of:

• restricting the actual or likely production of goods, supply of goods or services, or the capacity to supply services (i.e. output restriction) (paragraph 44ZZRD(3)(a)); or
• allocating customers or geographical areas of supply or acquisition between the parties (i.e. market sharing or division) (paragraph 44ZZRD(3)(b).

[para 4.7] Where a provision has the purpose of output restriction or market sharing or division, that provision is likely to constitute both a cartel provision and an exclusionary provision.

[para 4.8] Section 45 contains a number of anti-overlap provisions which prevent the application of section 45 to conduct which contravenes one of several other provisions. However, there is no anti-overlap provision preventing the application of section 45 to conduct which contravenes the prohibition on cartel provisions.

[para 4.9] The Harper Review considered that this overlap is unnecessary and increases the complexity of the law, and recommended that the separate prohibition on exclusionary provisions be repealed, with an amendment to the provisions on cartel conduct to address any resulting gap in the law.