Reform of the competition provisions of the Australian Trade Practices Act

1. Reform of the competition provisions of the Australian Trade Practices Act A paper prepared for the Conference at ANU on Comparative Experience in Competition Policy Reform: Australia, Japan and East Asia 22-23 September 2008

2. Business and competition • Efficient business has an interest in competition. The interests of inefficient business are opposed to competition. • Australia’s first antitrust legislation, the Australian Industries Preservation Act of 1906, was introduced with the help of one of Australia’s largest manufacturers. • The same was true of the US Sherman Act of 1890. The leading business group agitating for antitrust legislation from the 1870s was the Grangers or Patrons of Husbandry. • Antitrust legislation aids neither big nor small business. May attack conduct that promotes market power (or even market concentration) but not economic power.

3. Original form of the TPA: substantive provisions • No contracts or understandings in restraint of trade or commerce. • No taking advantage of position of substantial control of a market to damage competitors or potential competitors. • No exclusive dealing that substantially lessens competition. Third-line forcing proscribed per se. • No resale price maintenance. • No price discrimination that substantially lessened competition. • No mergers that had the likely effect of substantially lessening competition. • Act established a Commission.

4. Monopolisation • From the 1970s, was concern by small business about predatory pricing. This was the motive behind a reduction in the degree of market power required to infringe the section. This finally occurred in 1985. • The concern gathered real impetus with the decision of the High Court in Boral - 2003. • Senate Economic References Committee of 2004 recommended changes to protect small business. • Result was a new provision that proscribed: (i) a corporation that has a substantial market share; (ii) from supplying for a sustained period at a price less than the relevant cost; and (iii) for the purpose of damaging actual or potential competitors.

5. Exclusive dealing • This provision dealt essentially with verticals – subject to an slc test. • The exception was the per se prohibition of third-line forcing. • Expert committees in 1993 and 2003 recommended removal of the per se prohibition. Government agreed in 2003 and then changed its mind.

6. Price discrimination • Was proscribed (subject to slc test) in 1974. • The very first review recommended repeal on grounds of creating disincentive to offer low prices. This continued until 1993. • Government repealed the provision in 1995. • Independent grocers argued in the latest review (2003) that the provision should be reinstated. This was rejected.

7. Lessons • Do not have a group of public servants in charge of the Act. • Have few reviews of the legislation. • Business submission may be good or bad for competition.

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