06 November 2017

Long-awaited changes: competition law reform takes effect today

This article was written by Trish Henry, Melissa Monks and James Gould. 

After four years of consultation and debate, some of the most significant reforms to Australia’s competition laws have today come into effect.

The reforms, introduced by the Competition and Consumer Amendment (Competition Policy Review) Act 2017 and the inter-related Competition and Consumer Amendment (Misuse of Market Power) Act 2017, are the culmination of a process that began in September 2013, with the government’s announcement of a ‘root and branch’ review of Australia’s competition laws which resulted in the Competition Policy Review, commonly known as the Harper Review after its chair, Professor Ian Harper. 

What do you need to know?

The key changes made by the reforms are:

  • Section 46 - misuse of market power: Corporations with substantial market power are now prohibited from engaging in conduct with the purpose or likely effect of substantially lessening competition in:
    • the market in which they have substantial market power; or
    • any other market in which they directly or indirectly supply or acquire (or are likely to supply or acquire) goods or services.
    The amendments, which were hotly debated in parliament and in the business community, mean that the ACCC (or other parties seeking to enforce section 46) no longer needs to show that the corporation has taken advantage of its substantial market power. Conduct may also breach s 46 on the basis of its effects in a market, regardless of its underlying purpose.

    The ACCC has released “Interim Guidelines on misuse of market power”, and is seeking submissions from interested parties by 24 November 2017.
  • Section 45 - concerted practices (and price signalling): Section 45 has been amended to introduce a new prohibition on corporations engaging in concerted practices with the purpose, effect or likely effect of substantially lessening competition.

    ‘Concerted practice’ is not defined in the CPR Act.  However, the Explanatory Memorandum to the Bill explained that a concerted practice is “any form of cooperation between two or more firms (or people) or conduct that would be likely to establish such cooperation, where this conduct substitutes, or would be likely to substitute, cooperation in place of the uncertainty of competition”.

    The ACCC has recently published and is seeking feedback on its “Interim Guidelines on concerted practices” by 24 November 2017.

    In light of the new prohibition on anticompetitive concerted practices, the price signalling provisions (which only applied to the banking sector and were never enforced) have been repealed.
  • Section 47 - third line forcing: Third line forcing is now only prohibited where it has the purpose, effect or likely effect of substantially lessening competition, removing the need to notify the ACCC of non-anticompetitive technical third line forcing conduct. This change brings Australia into line with many overseas jurisdictions including the United States, Canada, the European Union and New Zealand, all of which assess third line forcing by reference to a competition-based test.
  • Merger assessment: Under previous legislation, the ACCC could only provide clearance where it was satisfied that a relevant merger or acquisition would not substantially lessen competition. Now, the ACCC will be able to authorise mergers and acquisitions that it considers would result in a net public benefit (a test that could previously only be applied by the Australian Competition Tribunal). There have also been a number of procedural changes to the way in which the ACCC assesses and authorises mergers.
  • Part IIIA access regime: The access regime will provide for new declaration criteria for access to services. Significantly, there is now a requirement that access as a result of the declaration must promote a material increase in competition in another market, other than the market for the services. Further, access to the services as a result of the declaration must promote, rather than merely not be contrary to, the public interest.

There has also been reform to:

  • the ACCC’s information and document gathering powers, with increased fines and scope, and a new ‘reasonable search’ defence;
  • the joint venture exception to the cartel provisions, which now applies to joint ventures for the acquisition of goods, not just the production of goods;
  • introduce class exemptions for conduct which the ACCC determines does not raise competition concerns;
  • resale price maintenance, which can now be notified to the ACCC, instead of requiring parties to use the more burdensome authorisation process, and which is now permitted to be engaged in by related bodies corporate;
  • the cartel provisions, confining them to conduct that occurs in trade or commerce within Australia or between Australia and elsewhere;
  • exclusionary provisions, the prohibition of which has now been repealed; and
  • allow the use of admissions in follow-on damages litigation.

Businesses need to start complying immediately

It’s important that businesses are across the new changes to competition laws given that they need to start complying with these today.  This may involve updating competition law policies and procedures, conducting training and revisiting some practices (for example, industry interaction from a concerted practices perspective). 

Businesses should also seriously consider making a submission to the ACCC on its proposed interim guidelines on misuse of market power and concerted practices as this may be the only opportunity to influence the regulator’s approach before it commences investigations and enforcement under these new provisions.

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