1. 1 Recent Developments in Competition Law in Australia ABA Spring Meeting, Global Antitrust Panel (The East) Washington DC, April 2009 Elizabeth M. Avery Gilbert + Tobin

2. 2 Overview - Merger review process in Australia No legislative requirement for notification –Notification advisable in light of ACCC’s power to challenge or block merger –New notification thresholds further entrench a “voluntary” clearance process Three options for seeking clearance –Informal clearance – no action letter –Formal clearance – application to ACCC with appeal right to Competition Tribunal –Authorization – application to Tribunal that public benefit outweighs any substantial lessening of competition Formal clearance and authorization confer immunity from challenge –Informal clearance provides no immunity Informal process preferred – the formal review process has never been used –Flexibility to focus on the real issues, compared with rigid and onerous nature of formal process –Formal process lacks confidentiality –Many of the perceived flaws of the informal process have been addressed Section 50 of the Trade Practices Act prohibits “acquisitions of shares in the capital of a body corporate or the assets of a person where the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market in Australia.”

3. 3 New Merger Guidelines - Australia Introduced by ACCC in November 2008, replacing 1999 Guidelines Closer alignment with international best practice (e.g., US DOJ/FTC Guidelines) More developed analytical framework: evaluation of merger within context of a theory of harm –ie, unilateral and/or coordinated effects New notification threshold - above which the ACCC “recommends” notification: –Products are complements or substitutes –Relevant market share/s post-merger > 20% –In addition – firms or industries where ACCC has indicated notification advisable New measures of concentration –HHI metric publicly adopted (internally used for many years) –Used as a preliminary indicator of competition concerns –ACCC less likely to identify horizontal merger concerns where post-merger HHI is: less than 2000; or above 2000 but the change in post-merger concentration is less than HHI 100 Emphasis on internal documents on reviewing transaction The new guidelines reflect the evolution of merger review in Australia and “state how we currently do this evaluation.” ACCC Chairman Graeme Samuel

4. 4 “Creeping Acquisitions” debate ACCC considers s.50 inadequate to address circumstances where a firm with existing substantial market power enhances its market power through one (or more) acquisitions which individually do not substantially lessen competition –Directed at highly concentrated industries such as groceries Two proposals for specific prohibition on creeping acquisitions: –Backward looking test: prohibits an acquisition where when combined with prior acquisitions in specified period, it would substantially lessen competition requires a hypothetical unwinding of recent transactions –Substantial market power test: prohibits transactions that “lessen competition” by a firm with “substantial market power,” effectively prohibiting further growth by acquisition unclear what lessening of competition would be prohibited Unintended effects in acquisitions markets by reducing competitive tension in the sales process – larger firms would be restricted in ability to participate Section 50 of the Trade Practices Act prohibits “acquisitions of shares in the capital of a body corporate or the assets of a person where the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market in Australia.”

5. 5 Misuse of market power and predatory pricing String of failed prosecutions by ACCC for misuse of market power -- particularly for predatory pricing –E.g., Boral v ACCC [2003]: no breach where no evidence of likely recoupment; indicated that firm did not have or take advantage of market power In 2007, the “Birdsville Amendments” were introduced –Impose additional predatory pricing prohibition on firms with a substantial share of any market: –A firm with a “substantial market share” may not sell “at a price less than the relevant cost” for a sustained period for an anticompetitive purpose. Section 46(1AA) –Substantial market share: Court may have regard to number and size of competitors. Section 46(1AB) Heavily criticized –“Two track process” for considering predatory pricing : ss.46(1) and 46(1AA) – interaction unclear –Uncertainty created by introduction of concept of “substantial share” In 2008, further amendments introduced by new Government –Recoupment not necessary to prove predatory pricing –Failed attempt to overturn the market share test A firm with substantial market power shall not take advantage of that power in that or any other market, for the purpose of eliminating or damaging a competitor, preventing entry, deterring or preventing competitive conduct in that or any other market. Trade Practices Act, s.46(1)

6. 6 Private Enforcement Third parties who suffer “loss or damage by conduct of another person that was done in contravention of a provision of Part IV... may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.” Trade Practices Act, s.82 Damages are limited to single damages for actual – not potential/likely --loss or damage Private damages suits for competition cases are infrequent – most enforcement originates from the ACCC 2008 reforms also included conferring jurisdiction on Federal Magistrates Court power to hear privates suits alleging breach of s.46 (misuse of market power) up to an amount of $750,000 – an attempt to simplify private actions – and make less expensive Recent vitamins cartel litigation was settled for A$35 M.