ACCC Suggestion is Far From Novel: Readings of s 46

Contrary to the assertion by Graeme Samuel and Stephen King that the Australian Competition and Consumer Commission (the ACCC) is aiming “at constraining big business from legitimate competition” (AFR, 12 August 2014), the amendments to s 46 suggested by the ACCC would protect such competition and only target conduct that is anti-competitive. Conduct that enhances competition, by definition, will not substantially lessen competition.

A prohibition on corporations with substantial market power engaging in conduct that has the purpose or effect of substantially lessening competition would draw on established jurisprudence and competition policy. Indeed, it has effectively been trialled in telecommunications markets since 1997.

The Debate on s 46

Recent contributions to the public debate on whether to amend the misuse of market power provision (s 46) of the Competition and Consumer Act 2010 (Cth) (the Act), have suggested that a competition test would be novel, would chill pro-competitive conduct by big business, and would protect individual competitors instead of the competitive process.

Jurisprudence in Australia has confirmed consistently that the substantial lessening of competition test is concerned with the process of competition and not with the effect on individual competitors. As Samuel and King pointed out, the courts have recognised that competition, by its very nature, is deliberate and ruthless, and so their examples of conduct (such as a corporation gaining an advantage through R&D and innovation, or as a result of economies of scale) would not be regarded by the ACCC or the courts as a lessening of competition, even if the conduct caused competitors harm or forced them to exit the market.

Inconsistencies with the Current s 46

This issue highlights an inconsistency in the current s 46 which has long been recognised. Unlike the competition tests in other sections, s 46 focuses on conduct that has the purpose of damaging a competitor or deterring a competitor from engaging in competitive conduct, rather than focusing on the process of competition or competition more generally in the market.

International comparisons are fraught with difficulty, but it is worth noting that the US Federal Trade Commission, in its submission to the Harper review, describes the US monopolisation test as a combination of substantial market power and substantial lessening of competition. Europe has abuse of dominance provisions which focus on the anti-competitive effect of conduct by firms in a position of dominance. These are more similar to the amendments that the ACCC is suggesting than to the existing prohibition in s 46.

ACCC Seeking to Address Current Requirements

In addition, the ACCC is seeking to address the difficulties inherent in the current requirement that a corporation must “take advantage” of its substantial market power. With the focus of the current test on individual competitors, these words have been required to do the “heavy lifting” in s 46, attempting to distinguish what is anti-competitive from what is pro-competitive. The ACCC is suggesting that (as in Europe) if a corporation with substantial market power acts anti-competitively, that should be enough, provided that it constitutes a “substantial lessening of competition”. With this as the threshold competition test, the words “taking advantage” become redundant.

This would simplify the Act and focus the analysis of the purpose or effect of the conduct on the process of competition in the market.

Perhaps a debate based on the current Act and how it might sensibly be improved, and any examples should be appropriate to illustrate issues, rather than simply as scaremongering.

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ACCC suggestion is far from novel and not anti-competitive – Article published on acc.gov.au