Exclusive Dealing (forcing)
Section 47 of the TPA prohibits various forms of exclusive dealing. Broadly, it captures two types of anti-competitive vertical transactions:
(1) the conditional supply (or acquisition) of goods or services (conditions may relate to the ability to re-supply, exclusivity, limits on ability to acquire from competitors etc)
(2) refusing to supply for specified reasons (eg, because purchaser refuses to agree to a conditional supply).
Most forms of exclusive dealing (including full line forcing) are captured only if it can be demonstrated that they substantially lessen competition (s 47(10)). However, third line forcing is captured regardless of its anti-competitive effect.
Specific conduct captured includes:
(1) Supplying on condition as to acquisition or re-supply (s 47(2)). This captures various forms of full line forcing. Thus, for example, it is exclusive dealing to supply goods or services on the condition that the recipient will not (or will not except to a limited extent) acquire goods or services directly or indirectly from a competitor. It also captures supplying on conditions as to re-supply - including customer and territorial restrictions (eg, supplying on condition that the acquirer will not re-supply to particular person or in particular places)
(2) Refusing to deal because a customer will not agree to the kind of restriction mentioned above: s 47(3).
(3) Acquisitions restrictions (same as above but in reverse): ss 47(4) and 47(5).
(4) Exclusive dealing in relation to leases and licences: ss 47(8) and 47(9).
Third line forcing
Sections 47(6) and 47(7) prohibit third line forcing. This conduct, where established, is prohibited whether or not it can be demonstrated to have an anti-competitive effect. Essentially, third line forcing captures the supply of goods or services on condition that the customer acquire other goods or services froma third party (or refusing to supply because the customer will not agree to such an acquisition).
Notification
Recognising potential benefits associated with exclusive dealing, a system of notification and authorisation is available. Authorisation may be provided on public benefit grounds. More commonly, parties will notify the ACCC of conduct that might fall within the various definitions of exclusive dealing and, while the notification stands, they will not be held in breach of s 47 (see s 47(10A)) The ACCC can only remove the notification if they consider the conduct substantially lessens competition and that there are no benefits to the public that would outweigh the anti-competitive detriment.
The key provisions
(1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.
(2) A corporation engages in the practice of exclusive dealing if the corporation:
(a) supplies, or offers to supply, goods or services;
(b) supplies, or offers to supply, goods or services at a particular price; or
(c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation;
on the condition that the person to whom the corporation supplies, or offers or proposes to supply, the goods or services or, if that person is a body corporate, a body corporate related to that body corporate:
(d) will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(e) will not, or will not except to a limited extent, re-supply goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or
(f) in the case where the corporation supplies or would supply goods or services, will not re-supply the goods or services to any person, or will not, or will not except to a limited extent, re-supply the goods or services:
(i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(ii) in particular places or classes of places or in places other than particular places or classes of places.
(3) A corporation also engages in the practice of exclusive dealing if the corporation refuses:
(a) to supply goods or services to a person;
(b) to supply goods or services to a person at a particular price; or
(c) to give or allow a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services to a person;
for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate:
(d) has acquired, or has not agreed not to acquire, goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(e) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or
(f) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired from the corporation to any person, or has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired from the corporation:
(i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(ii) in particular places or classes of places or in places other than particular places or classes of places.
(4) A corporation also engages in the practice of exclusive dealing if the corporation:
(a) acquires, or offers to acquire, goods or services; or
(b) acquires, or offers to acquire, goods or services at a particular price;
on the condition that the person from whom the corporation acquires or offers to acquire the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description:
(c) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(d) in particular places or classes of places or in places other than particular places or classes of places.
(5) A corporation also engages in the practice of exclusive dealing if the corporation refuses:
(a) to acquire goods or services from a person; or
(b) to acquire goods or services at a particular price from a person;
for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has supplied, or has not agreed not to supply, goods or services, or goods or services of a particular kind or description:
(c) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(d) in particular places or classes of places or in places other than particular places or classes of places.
(6) A corporation also engages in the practice of exclusive dealing if the corporation:
(a) supplies, or offers to supply, goods or services;
(b) supplies, or offers to supply, goods or services at a particular price; or
(c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation;
on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation.
(7) A corporation also engages in the practice of exclusive dealing if the corporation refuses:
(a) to supply goods or services to a person;
(b) to supply goods or services at a particular price to a person; or
(c) to give or allow a discount, allowance, rebate or credit in relation to the supply of goods or services to a person;
for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation.
(8) A corporation also engages in the practice of exclusive dealing if the corporation grants or renews, or makes it known that it will not exercise a power or right to terminate, a lease of, or a licence in respect of, land or a building or part of a building on the condition that another party to the lease or licence or, if that other party is a body corporate, a body corporate related to that body corporate:
(a) will not, or will not except to a limited extent:
(i) acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or
(ii) re-supply goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(b) will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description:
(i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(ii) in particular places or classes of places or in places other than particular places or classes of places; or
(c) will acquire goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation.
(9) A corporation also engages in the practice of exclusive dealing if the corporation refuses to grant or renew, or exercises a power or right to terminate, a lease of, or a licence in respect of, land or a building or part of a building for the reason that another party to the lease or licence or, if that other party is a body corporate, a body corporate related to that body corporate:
(a) has acquired, or has not agreed not to acquire, goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(b) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(c) has supplied goods or services, or goods or services of a particular kind or description:
(i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or
(ii) in particular places or classes of places or in places other than particular places or classes of places; or
(d) has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation.
(10) Subsection (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in subsection (2), (3), (4) or (5) or paragraph (8)(a) or (b) or (9)(a), (b) or (c) unless:
(a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or
(b) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening competition.
(10A) Subsection (1) does not apply to a corporation engaging in conduct described in subsection (6) or (7) or paragraph (8)(c) or (9)(d) if:
(a) the corporation has given the Commission a notice under subsection 93(1) describing the conduct; and
(b) the notice is in force under section 93.
(11) Subsections (8) and (9) do not apply with respect to:
(a) conduct engaged in by, or by a trustee for, a religious, charitable or public benevolent institution, being conduct engaged in for or in accordance with the purposes or objects of that institution; or
(b) conduct engaged in in pursuance of a legally enforceable requirement made by, or by a trustee for, a religious, charitable or public benevolent institution, being a requirement made for or in accordance with the purposes or objects of that institution.
(12) Subsection (1) does not apply with respect to any conduct engaged in by a body corporate by way of restricting dealings by another body corporate if those bodies corporate are related to each other.
(a) a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having legal or equitable force or not, and includes a reference to a condition the existence or nature of which is ascertainable only by inference from the conduct of persons or from other relevant circumstances;
(b) a reference to competition, in relation to conduct to which a provision of this section other than subsection (8) or (9) applies, shall be read as a reference to competition in any market in which:
(i) the corporation engaging in the conduct or any body corporate related to that corporation; or
(ii) any person whose business dealings are restricted, limited or otherwise circumscribed by the conduct or, if that person is a body corporate, any body corporate related to that body corporate;
supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the conduct, supply or acquire, or be likely to supply or acquire, goods or services; and
(c) a reference to competition, in relation to conduct to which subsection (8) or (9) applies, shall be read as a reference to competition in any market in which the corporation engaging in the conduct or any other corporation the business dealings of which are restricted, limited or otherwise circumscribed by the conduct, or any body corporate related to either of those corporations, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the conduct, supply or acquire, or be likely to supply or acquire, goods or services.
Section 93 (Exclusive dealing notification)
Notification of exclusive dealing
(1) Subject to subsection (2), a corporation that engages, or proposes to engage, in conduct of a kind referred to in subsection 47(2), (3), (4), (5), (6), (7), (8) or (9) may give to the Commission a notice setting out particulars of the conduct or proposed conduct.
(1A) To be valid, a notice under subsection (1) must:
(a) be in a form prescribed by the regulations and contain the information required by the form; and
(b) be accompanied by any other information or documents prescribed by the regulations; and
(c) be accompanied by the fee (if any) prescribed by the regulations.
(2) A corporation may not give a notice for conduct or proposed conduct if:
(a) the corporation applied for an authorisation for the conduct or proposed conduct; and
(b) the Commission or the Trade Practices Commission made a determination dismissing the application; and
(c) either:
(i) the Tribunal or the Trade Practices Tribunal made a determination on an application for a review of a determination described in paragraph (b); or
(ii) the time for making such an application for review has ended without the making of an application.
(2A) In subsection (2):
Trade Practices Commission means the Trade Practices Commission established by section 6A of this Act as in force immediately before this subsection commenced.
Trade Practices Tribunal means the Trade Practices Tribunal continued in existence by section 30 of this Act as in force immediately before this subsection commenced.
(2B) If the Commission receives a purported notice under subsection (1) that it considers is not a valid notice, it must, within 5 business days of receiving the purported notice, give the person who made the purported notice a written notice:
(a) stating that the person has not given a valid notice; and
(b) giving reasons why the purported notice does not comply with this Division.
Definition
(2C) In subsection (2B):
business day means a day that is not a Saturday, a Sunday or a public holiday in the Australian Capital Territory.
(3) If the Commission is satisfied that the engaging by a corporation in conduct or proposed conduct of a kind described in subsection 47(2), (3), (4) or (5) or paragraph 47(8)(a) or (b) or (9)(a), (b) or (c) and referred to in a notice given by the corporation to the Commission under subsection (1) has or would have the purpose or has or is likely to have, or would have or be likely to have, the effect of substantially lessening competition within the meaning of section 47 and that in all the circumstances:
(a) the conduct has not resulted or is not likely to result, or the proposed conduct would not result or be likely to result, in a benefit to the public; or
(b) any benefit to the public that has resulted or is likely to result from the conduct, or would result or be likely to result from the proposed conduct, would not outweigh the detriment to the public constituted by any lessening of competition that has resulted or is likely to result from the conduct or would result or be likely to result from the proposed conduct;
the Commission may at any time give notice in writing to the corporation stating that the Commission is so satisfied and accompanied by a statement setting out its reasons for being so satisfied.
(3A) If:
(a) a corporation has notified the Commission under subsection (1) of conduct or proposed conduct described in subsection 47(6) or (7) or paragraph 47(8)(c) or (9)(d); and
(b) the Commission is satisfied that the likely benefit to the public from the conduct or proposed conduct will not outweigh the likely detriment to the public from the conduct or proposed conduct;
the Commission may give the corporation a written notice stating that the Commission is so satisfied.
(3B) The Commission must also give the corporation a written statement of its reasons for giving notice when the Commission gives the notice.
(4) Before giving a notice under subsection (3) or (3A) the Commission shall comply with the requirements of section 93A.
(5) In satisfying itself for the purposes of subsection (3) or (3A) in relation to any conduct or proposed conduct referred to in a notice given to the Commission by a corporation under subsection (1), the Commission shall seek such relevant information as it considers reasonable and appropriate and may make a decision on the basis of any information so obtained and any other information furnished to it by the corporation or any other person or otherwise in its possession.
(6) A corporation that has given a notice to the Commission under this section in relation to any conduct or proposed conduct may, at any time before the Commission has given to the corporation a notice under subsection (3) or (3A) in relation to the conduct or proposed conduct, by notice in writing to the Commission, withdraw the first-mentioned notice.
(7) Where a corporation has given notice to the Commission under subsection (1):
(a) in the case of a notice given before the expiration of the period of 3 months commencing on the date of commencement of the Trade Practices Amendment Act 1977, the engaging by the corporation in the conduct referred to in the notice on or after that date and before the giving of the notice shall not be taken, for the purposes of section 47, to have had the effect of substantially lessening competition within the meaning of that section; and
(b) in any case, the engaging by the corporation in the conduct referred to in the notice after the giving of the notice shall not be taken, for the purposes of section 47, to have the purpose, or to have or be likely to have the effect, of substantially lessening competition within the meaning of that section unless:
(i) the Commission has given notice to the corporation under subsection (3) of this section in relation to the conduct and the conduct takes place more than 30 days (or such longer period as the Commission by writing permits) after the day on which the Commission gave the notice; or
(ii) the notice has been, or is deemed to have been, withdrawn and the conduct takes place after the day on which the notice was, or is deemed to have been, withdrawn.
(7A) A notice under subsection (1) describing conduct or proposed conduct referred to in subsection 47(6) or (7) or paragraph 47(8)(c) or (9)(d) comes into force:
(a) at the end of a prescribed period that started on the day when the corporation gave the Commission the notice; or
(b) if the Commission gives notice to the corporation under subsection 93A(2) during that period—when the Commission decides not to give the corporation a notice under subsection (3A) of this section.
(7B) A notice under subsection (1) describing conduct or proposed conduct referred to in subsection 47(6) or (7) or paragraph 47(8)(c) or (9)(d) does not come into force:
(a) if the notice is withdrawn, or deemed to be withdrawn, before it would come into force under subsection (7A); or
(b) if the Commission:
(i) gives notice to the corporation under subsection 93A(2) during the period described in paragraph (7A)(a); and
(ii) gives notice to the corporation under subsection (3A).
(7C) A notice under subsection (1) describing conduct referred to in subsection 47(6) or (7) or paragraph 47(8)(c) or (9)(d) ceases to be in force:
(a) when the notice is withdrawn or deemed to be withdrawn; or
(b) if the Commission gives the corporation a notice under subsection (3A)—on the 31st day after the Commission gave the notice under subsection (3A) or on a later day specified in writing by the Commission.
(8) Where:
(a) a corporation gives a notice to the Commission under subsection (1) in relation to any conduct or proposed conduct;
(b) before or after the notice is given the corporation makes an application to the Commission for an authorization to engage in that conduct;
(c) the Commission:
(i) makes a determination dismissing the application; or
(ii) makes a determination granting an authorization in respect of the application; and
(d) the Tribunal makes a determination on an application for a review of the determination of the Commission or the time for making such an application for review expires without an application for review having been made;
the notice shall thereupon be deemed to be withdrawn.
(9) If an application is made to the Tribunal for a review of the giving of a notice by the Commission under subsection (3) or (3A), a reference in subsection (7) or paragraph (7C)(b) to the day on which the Commission gave the notice shall be read as a reference to:
(a) if the application is withdrawn—the day on which the application is withdrawn;
(b) if the Tribunal, on the application of the Commission or of any other person who the Tribunal is satisfied has an interest in the subject matter of the review, declares that the application for the review is not being proceeded with by the applicant with due diligence—the day on which the Tribunal makes the declaration; or
(c) in any other case—the day on which the Tribunal makes a determination on the review.
(10) Where:
(a) a corporation has given a notice to the Commission under subsection (1) in relation to conduct or proposed conduct and the Commission has given notice to the corporation in writing under subsection (3) or (3A) in relation to the conduct or the proposed conduct; or
(b) a notice given by a corporation to the Commission under subsection (1) in relation to conduct or proposed conduct is withdrawn or deemed to be withdrawn;
the corporation is not entitled to give a further notice under subsection (1) to the Commission in relation to the same conduct or proposed conduct or in relation to conduct or proposed conduct to the like effect.
Cases relating to exclusive dealing
Stationers Supply Pty Ltd v Victorian Authorised Newsagents Associated Ltd (1993) 44 FCR 35
Purpose of substantially lessening competition; exclusive dealing
Visy Paper Pty Ltd v ACCC [2003] HCA 59
Exclusionary provisions; exclusive dealing; anti-overlap
Articles relating to exclusive dealing
Reports relating to exclusive dealing
Dawson Report 2003
Chapter 8 relating to per se prohibitions and including recommendations for the removal of the per se prohibition against third line forcing.
Guidelines
Exclusive Dealing Notification Process - The Basics (ACCC 2007)
Useful links
Forthcoming
