Harper Recommendation 25

Exposure Draft Bill

The current definition of ‘market’ in section 4E of the CCA should be retained but the current definition of ‘competition’ in section 4 should be amended to ensure that competition in Australian markets includes competition from goods imported or capable of being imported, or from services rendered or capable of being rendered, by persons not resident or not carrying on business in Australia.

Model legislative provision:

competition includes competition from goods imported or capable of being imported into Australia, or from services rendered or capable of being rendered in Australia, by persons not resident or not carrying on business in Australia.

Comparison of new law and current law (EM page 6)

Current law

New law

'Competition includes goods and services that are imported.'

'Competition expressly includes goods and services that are capable of being imported, in addition to goods and services that are imported'

Harper Recommendation 27

Exposure Draft Bill

The prohibitions against cartel conduct in Part IV, Division 1 of the CCA should be simplified and the following specific changes made:

• The provisions should apply to cartel conduct involving persons who compete to supply goods or services to, or acquire goods or services from, persons resident in or carrying on business within Australia.
• The provisions should be confined to conduct involving firms that are actual or likely competitors, where ‘likely’ means on the balance of probabilities.
• A broad exemption should be included for joint ventures, whether for the production, supply, acquisition or marketing of goods or services, recognising that such conduct will be prohibited by section 45 of the CCA if it has the purpose, effect or likely effect of substantially lessening competition.
• An exemption should be included for trading restrictions that are imposed by one firm on another in connection with the supply or acquisition of goods or services (including intellectual property licensing), recognising that such conduct will be prohibited by section 45 of the CCA (or section 47 if retained) if it has the purpose, effect or likely effect of substantially lessening competition.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law (EM page 11)

Current law

New law

'The cartel conduct provisions are not expressly confined to cartel conduct affecting competition in Australian markets.'

'The cartel conduct provisions apply to cartel conduct occurring in trade or commerce within Australia, or between Australia and places outside Australia.'

'‘Likely’ is a defined term.'

'‘Likely’ is not a defined term.'

'The joint venture exception applies only to contracts.'

'The joint venture exception applies to contracts, arrangements or understandings.'

'The joint venture exception applies to cartel provisions that are for the purposes of a joint venture.'

'The joint venture exception applies to cartel provisions that are for the purposes of a joint venture or reasonably necessary for undertaking a joint venture.'

'The joint venture exception applies to joint ventures for the production and/or supply of goods or services.'

'The joint venture exception applies to joint ventures for the production, supply or acquisition of goods or services.'

'The exception for vertical trading restrictions applies only to exclusive dealing.'

'The exception for vertical trading restrictions applies to a broad range of vertical trading restrictions.'

'The ‘output restriction’ purpose condition refers to production, capacity and supply.'

'The ‘output restriction’ purpose condition refers to production, capacity, supply and acquisition.'

Harper Recommendation 28

Exposure Draft Bill

The CCA should be amended to remove the prohibition of exclusionary provisions in subparagraphs 45(2)(a)(i) and 45(2)(b)(i), with an amendment to the definition of cartel conduct to address any resulting gap in the law.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law (EM pages 19 and 24)

Current law

New law

'There is no separate prohibition on exclusionary provisions within contracts, arrangements or understandings.'

'There is a separate prohibition on exclusionary provisions within contracts, arrangements or understandings.'

'‘Exclusionary provision’ is defined in the Act.'

'‘Exclusionary provision’ is not defined in the Act.'

'There is a defence to the prohibition against exclusionary provisions.'

'There is no provision containing a defence as there is no longer a separate prohibition on exclusionary provisions.'

Harper recommendation 29

Response

The ‘price signalling’ provisions of Part IV, Division 1A of the CCA are not fit for purpose in their current form and should be repealed.

Section 45 should be extended to prohibit a person engaging in a concerted practice with one or more other persons that has the purpose, effect or likely effect of substantially lessening competition.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law (EM page 19)

Current law

New law

'The anti-competitive disclosure of pricing and other information is dealt with under the more general prohibitions in the competition law.'

'The anti-competitive disclosure of pricing and other information is dealt with under the more general prohibitions in the competition law.'

'A corporation is prohibited from engaging in a concerted practice that has the purpose, effect or likely effect of substantially lessening competition.'

'No equivalent.'

Harper Recommendation 30

Exposure Draft Bill

The primary prohibition in section 46 of the CCA should be re-framed to prohibit a corporation that has a substantial degree of power in a market from engaging in conduct if the proposed conduct has the purpose, or would have or be likely to have the effect, of substantially lessening competition in that or any other market.

To mitigate concerns about inadvertently capturing pro-competitive conduct, the legislation should direct the court, when determining whether conduct has the purpose, effect or likely effect, of substantially lessening competition in a market, to have regard to:

• the extent to which the conduct has the purpose, effect or likely effect of increasing competition in the market, including by enhancing efficiency, innovation, product quality or price competitiveness; and
• the extent to which the conduct has the purpose, effect or likely effect of lessening competition in the market, including by preventing, restricting or deterring the potential for competitive conduct in the market or new entry into the market.

Such a re-framing would allow the provision to be simplified. Amendments introduced since 2007 would be unnecessary and could be repealed. These include specific provisions prohibiting predatory pricing, and amendments clarifying the meaning of ‘take advantage’ and how the causal link between the substantial degree of market power and anti-competitive purpose may be determined.

Authorisation should be available in relation to section 46, and the ACCC should issue guidelines regarding its approach to the provision.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law (EM page 36)

Current law

New law

'The conduct must ‘take advantage’ of market power.'

'The conduct must have the purpose, effect or likely effect of substantially lessening competition in that or any other market.'

'Conduct must be for a specific anti-competitive purpose, relating to damaging an actual or potential competitor.'

'The conduct must have the purpose, effect or likely effect of substantially lessening competition in that or any other market.'

'Predatory pricing and other forms of conduct are expressly prohibited.'

'There is a general provision only, and no specific prohibition on predatory pricing or other forms of conduct (however described).'

'Authorisation is not available for section 46.'

'A person may seek exemption from section 46 via the Commission authorisation process.'

'‘Substantial lessening of competition’ is not an element of section 46.'

'Certain pro-competitive and anti-competitive factors must be taken into account when considering a substantial lessening of competition.'

Harper Recommendation 32

Exposure Draft Bill

Third-line forcing (subsections 47(6) and (7) of the CCA) should only be prohibited where it has the purpose, effect or likely effect of substantially lessening competition.

Comparison of new law and current law (EM page 42)

Current law

New law

'Third line forcing is prohibited on a per se basis.'

'Third line forcing is prohibited only where it has the purpose, effect or likely effect of substantially lessening competition.'

Harper Recommendation 33

Exposure Draft Bill

Section 47 of the CCA should be repealed and vertical restrictions (including third-line forcing) and associated refusals to supply addressed by sections 45 and 46 (as amended in accordance with Recommendation 30).

Harper Recommendation 34

Exposure Draft Bill

The prohibition on resale price maintenance (RPM) in section 48 of the CCA should be retained in its current form as a per se prohibition, but notification should be available for RPM conduct.

This recommendation is reflected in the model legislative provisions in Appendix A.

The prohibition should also be amended to include an exemption for RPM conduct between related bodies corporate, as is the case under sections 45 and 47.

Comparison of new law and current law (EM page 42)

Current law

New law

'Notification is not available for RPM.'

'A corporation or other person may notify the Commission of RPM.'

'Acts between related bodies corporate may constitute engaging in RPM.'

'Actions between related bodies corporate do not constitute engaging in RPM.'

Harper Recommendation 35

Exposure Draft Bill

There should be further consultation between the ACCC and business representatives with the objective of delivering more timely decisions in the informal merger review process.

The formal merger exemption processes (i.e., the formal merger clearance process and the merger authorisation process) should be combined and reformed to remove unnecessary restrictions and requirements that may have deterred their use. The specific features of the review process should be settled in consultation with business, competition law practitioners and the ACCC.

However, the general framework should contain the following elements:

• The ACCC should be the decision-maker at first instance.
• The ACCC should be empowered to authorise a merger if it is satisfied that the merger does not substantially lessen competition or that the merger would result, or would be likely to result, in a benefit to the public that would outweigh any detriment.
• The formal process should not be subject to any prescriptive information requirements, but the ACCC should be empowered to require the production of business and market information.
• The formal process should be subject to strict timelines that cannot be extended except with the consent of the merger parties.
• Decisions of the ACCC should be subject to review by the Australian Competition Tribunal under a process that is also governed by strict timelines.
• The review by the Australian Competition Tribunal should be based upon the material that was before the ACCC, but the Tribunal should have the discretion to allow a party to adduce further evidence, or to call and question a witness, if the Tribunal is satisfied that there is sufficient reason.

Merger review processes and analysis would also be improved by implementing a program of post-merger evaluations, looking back on a number of past merger decisions to determine whether the ACCC’s processes were effective and its assessments borne out by events. This function could be performed by the Australian Council for Competition Policy (see Recommendation 44).

Comparison of new law and current law (EM page 42)

Current law

New law

'There are separate authorisation provisions applying to mergers and other types of authorisations.'

'There is a single authorisation provision for all types of authorisations.'

'The decision-maker at first instance for merger authorisations is the Tribunal.'

'The decision-maker at first instance for merger authorisations is the Commission.'

'The Tribunal’s determination on a merger authorisation cannot be appealed.'

'The Commission’s determination on a merger authorisation can be reviewed by the Tribunal on appeal.'

Recommendation 38

Response

The authorisation and notification provisions in Part VII of the CCA should be simplified to:

• ensure that only a single authorisation application is required for a single business transaction or arrangement; and
• empower the ACCC to grant an exemption from sections 45, 46 (as proposed to be amended), 47 (if retained) and 50 if it is satisfied that the conduct would not be likely to substantially lessen competition or that the conduct would result, or would be likely to result, in a benefit to the public that would outweigh any detriment.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law (EM page 42)

Current law

New law

'There are separate authorisation provisions applying to mergers and other types of authorisations.'

'There is a single authorisation provision for all types of authorisations.'

'The decision-maker at first instance for merger authorisations is the Tribunal.'

'The decision-maker at first instance for merger authorisations is the Commission.'

'The Tribunal’s determination on a merger authorisation cannot be appealed.'

'The Commission’s determination on a merger authorisation can be reviewed by the Tribunal on appeal.'

'The Commission can only approve or reject notifications.'

'The Commission may impose conditions on collective boycott and RPM notifications.'

'There is no provision for a ‘stop notice’.'

'A collective boycott must cease when the Commission gives a ‘stop notice’ ...'

Recommendation 39

Response

A block exemption power, exercisable by the ACCC, should be introduced and operate alongside the authorisation and notification frameworks in Part VII of the CCA.

This power would enable the ACCC to create safe harbours, where conduct or categories of conduct are unlikely to raise competition concerns, on the same basis as the test proposed by the Panel for authorisations and notifications (see Recommendation 38).

The ACCC should also maintain a public register of all block exemptions, including those no longer in force. The decision to issue a block exemption would be reviewable by the Australian Competition Tribunal.

The Panel’s recommended form of block exemption power is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law

Harper Recommendation 41

Exposure Draft bill

Section 83 of the CCA should be amended so that it extends to admissions of fact made by the person against whom the proceedings are brought in addition to findings of fact made by the court.

This recommendation is reflected in the model legislative provisions in Appendix A.

Comparison of new law and current law

Current law

New law

'Findings of fact made by a court against a person may be used in other proceedings against that person under the Act.'

'Admissions of fact made by a person, or findings of fact made by a court, in certain proceedings may be used in certain other proceedings against that person under the Act.'

Harper Recommendation 42

Exposure Draft Bill

The declaration criteria in Part IIIA of the CCA should be targeted to ensure that third-party access only be mandated where it is in the public interest. To that end:

• Criterion (a) should require that access on reasonable terms and conditions through declaration promote a substantial increase in competition in a dependent market that is nationally significant.
• Criterion (b) should require that it be uneconomical for anyone (other than the service provider) to develop another facility to provide the service.
• Criterion (f) should require that access on reasonable terms and conditions through declaration promote the public interest.

The Competition Principles Agreement should be updated to reflect the revised declaration criteria.

The Australian Competition Tribunal should be empowered to undertake a merits review of access decisions, while maintaining suitable statutory time limits for the review process.

Comparison of new law and current law (pp 77-78)

Current law

New law

'The declaration criteria that must be considered by the Council and Minister are replicated across multiple sections.'

'The declaration criteria that must be considered by the Council and Minister are contained in a single section.'

'Declaration criterion (a) requires the decision maker to consider whether access (or increased access) would promote a material increase in competition.'

'The decision maker must consider whether access (or increased access) on reasonable terms and conditions following declaration would promote a material increase in competition.'

'The decision maker must consider whether it is uneconomical for anyone to develop another facility to provide the service.'

'The decision maker must consider whether total foreseeable market demand could be met by the facility at least cost.'

'The decision maker must consider whether the facility is of national significance, having regard to its size, importance to constitutional trade or commerce and to the national economy.'

'No change.'

'The decision maker must consider whether access (or increased access) would be contrary to the public interest.'

'The decision maker must consider whether access (or increased access) would promote the public interest.'

'The decision maker must consider whether the service is subject to an effective access regime as part of the declaration criteria.'

'The decision maker does not need to consider an application by an access seeker or access recommendation respectively if the regime is subject to an effective access regime.'

'No equivalent.'

'The Minister may revoke the certification on recommendation by the Council, if the regime ceases to be effective. The Council may make a recommendation on its own initiative or on application.'

'The Commission’s power to make a determination requiring a facility operator to extend or expand the facility, and the safeguards on that power, relate to ‘expansions’, ‘extensions’ and ‘extending’ the facility.'

'The Commission’s power to make a determination requiring a facility operator to extend or expand the facility, and the safeguards on that power, are amended to include capacity and geographical expansions.'

'If the Minister does not publish a decision on a declaration within the 60 day time limit, they are taken to have accepted the Council’s recommendation.'

'If the Minister does not publish a decision on a declaration within the 60 day time limit, they are taken to have not made a declaration.'

Harper Recommendation 40

Exposure Draft Bill

The section 155 power should be extended to cover the investigation of alleged contraventions of court-enforceable undertakings.

The ACCC should review its guidelines on section 155 notices having regard to the increasing burden imposed by notices in the digital age. Section 155 should be amended so that it is a defence to a ‘refusal or failure to comply with a notice’ under paragraph 155(5)(a) of the CCA that a recipient of a notice under paragraph 155(1)(b) can demonstrate that a reasonable search was undertaken in order to comply with the notice.

The fine for non-compliance with section 155 of the CCA should be increased in line with similar notice-based evidence-gathering powers in the Australian Securities and Investments Commission Act 2001.

Comparison of new law and current law (p 72)

Current law

New law

'If a person has refused or failed to comply with a notice to produce documents it is not a defence if the person has undertaken a reasonable search for those documents.'

'If a person has refused or failed to comply with a notice to produce documents it is a defence if the person has undertaken a reasonable search for those documents.'

'A section 155 notice may not be issued in relation to alleged contraventions of court-enforceable undertakings.'

'A section 155 notice may be issued in relation to alleged contraventions of court-enforceable undertakings.'

The maximum penalty for non-compliance with a section 155 notice is 20 penalty units or 12 months imprisonment (for an individual).'

'The maximum penalty for non-compliance with a section 155 notice is 100 penalty units or 2 years imprisonment (for an individual).'

Harper Recommendation 36

Exposure Draft Bill

The prohibitions on secondary boycotts in sections 45D-45DE of the CCA should be maintained and effectively enforced.

The ACCC should pursue secondary boycott cases with increased vigour, comparable to that which it applies in pursuing other contraventions of the competition law. It should also publish in its annual report the number of complaints made to it in respect of different parts of the CCA, including secondary boycott conduct and the number of such matters investigated and resolved each year.

The maximum penalty level for secondary boycotts should be the same as that applying to other breaches of the competition law.

Comparison of new law and current law (p 32)

Current law

New law

'The maximum penalty for a breach of the secondary boycott provisions is $750,000.'

'The maximum penalty for a breach of the secondary boycott provisions is the greatest of:

• $10,000,000;
• three times the total value of the benefit obtained from the secondary boycott; or
• 10% of the annual turnover of the corporation for the twelve months leading up to when the secondary boycott occurred.'

Harper Recommendation 23

Exposure Draft Bill

The competition law provisions of the CCA should be simplified, including by removing overly specified provisions and redundant provisions.

The process of simplifying the CCA should involve public consultation.

Provisions that should be removed include:

• subsection 45(1) concerning contracts made before 1977; and
• sections 45B and 45C concerning covenants.

Comparison of new law and current law (p 28)

Current law

New law

'Contract is not defined.'

'Contract is defined.'

'Contract is not defined and the Act separately refers to contracts and covenants throughout.'

'The definition of contract includes a covenant.'

'Party, to an arrangement that is a covenant, is not defined.'

'Party, to an arrangement that is a covenant, is defined, to include a person bound by or entitled to the benefit of a covenant.'

'Covenants affecting competition are provided for under separate provisions in the law.'

'Covenants are specifically included within the meaning of ‘contract’.'