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Exclusive dealing

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Overview

Note: The Competition and Consumer (Competition Policy Reform) Act 2017 removed the per se prohibition on third line forcing, effective 6 November 2017. This followed recommendations contained in the Harper Review Final Report.

Given the potential overlap between the new section 46 (introducing an effects test for misuse of market power) and anti-competitive agreements generally, the Harper Panel recommended repealing s 47 altogether; although this recommendation was not rejected (the Government indicated it would consider it after determining whether to modify s 46) there has been no modification or repeal of s 47 as part of the Harper legislative reforms, other than the removal of the per se ban on third line forcing.

 

Section 47 of the CCA 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).

All of exclusive dealing are captured only if it can be demonstrated that they substantially lessen competition (s 47(10)).

 

Conduct

Specific conduct captured as exclusive dealing 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) Third line forcing (sections 47(6) and 47(7)), capturing the supply of goods or services on condition that the customer acquire other goods or services from a third party (or refusing to supply because the customer will not agree to such an acquisition).

(5) Exclusive dealing in relation to leases and licences: ss 47(8) and 47(9).

 

Key provisions

 

Authorisation and notification

Authorisation (on public benefit grounds) is possible for exclusive dealing.

In addition, recognising potential benefits associated with exclusive dealing, a system of notification is available. Because it is faster and essentially reverses the onus of demonstrating public benefits, it is utilised more frequently than authorisation for exclusive dealing conduct (s 93). While the notification stands, parties will not be held in breach of s 47 (see s 47(10A)).

The ACCC can only remove the notification if it is satisfied

  • (for third line forcing): the likely benefit to the public will not outweigh the likely detriment to the public arising from the proposed conduct (current cost of notification is $100)

 

Cases

Links to some of the key cases relating to exclusionary provisions in Australia are provided below. Although teh provision has been repealed, they remain relevant for section 45 generally and/or the cartel provisions.

Exclusive dealing cases

External linkAustralian Association of Pathology Practices Incorporated [2004] ACompT4 (authorisation)

External linkAustralian Competition and Consumer Commission v Baxter Healthcare [2007] HCA 38 (29 August 2007)

ACCC v Bill Express Ltd (in liq) (2009) 180 FCR 105; [2009] FCA 1022
Third line forcing - including 2007 amendments

External linkACCC v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402
Exclusive dealing (third line forcing)

External linkACCC v Link Solutions Pty Ltd (No 3) [2012] FCA 348

External linkApplication by Co-operative Bulk Handling Limited (No 3) [2013] ACompT 3
Appeal against revocation of exclusive dealing notification - public benefit v SLC

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 (2 December 1986)
Third line forcing

External linkKAM Nominees Pty Ltd v Australian Guarantee Corporation Ltd (1994) 123 ALR 711

External linkRe Ku-ring-gai Co-operative Building Society (No. 12) Ltd [1978] FCA 50; (1978) 36 FLR 134
Exclusive dealing (third line forcing)

Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd (1987) 74 ALR 581

External linkO'Brien Glass Industries Ltd v Cool & Sons Pty Ltd (1983) 77 FLR 441; (1983) 48 ALR 625

Outboard Marine Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) ATPR 40–327

External linkThe Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust [1990] FCA 163; (1990) 22 FCR 495 (LawCite)
Exclusive dealing (sub-sections 47(1), (8), (9) and (13))

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

External linkSWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd [1980] FCA 125; (1980) 48 FLR 445
Exclusive dealing (third line forcing)

External linkTrade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd. [1978] FCA 47; (1978) 35 FLR 372
Exclusive dealing (third line forcing)

Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193

Visy Paper Pty Ltd v ACCC [2003] HCA 59
Exclusionary provisions; exclusive dealing; anti-overlap

 

Reports

There have been a number of reports dealing with exclusionary provisions.

Most recently, the Harper Report (2014-2015) recommended the prohibition be repealed or simplified (depending on changes to be made to the misuse of market power provision.

Previously the Dawson Report 2003 had recommended the removal of the per se prohibition against third line forcing but although the government intended to make the change, it was eventually removed from the final Dawson reform bill.

See generally the main reports page.

 

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