1. This is the prescribed textbook for your course.
Available NOW at your campus bookstore!
Copyright © 2000 McGraw-Hill Australia

2. Restrictive trade practices
Chapter 15

3. Objectives of Trade Practices Act 1974 (Cwlth)
To improve industry efficiency
To promote competition in the market
To provide consumer protection
Copyright © 2000 McGraw-Hill Australia

4. Constitutional basis AUSTRALIAN CONSTITUTION S51
Allows laws made with respect to corporations, trade and commerce
Trade Practices Act 1974 (Cwlth)
Competition Policy Reform Act 1995 (Cwlth)
Copyright © 2000 McGraw-Hill Australia

5. Administration of the legislation
Australian Competition and Consumer
Commission (ACCC)
Responsibility for bringing proceedings for contravention of restrictive trade practices provisions
Grants authorisations, permitting conduct that might otherwise be in breach of the Act
General research, public information and guidance role
Copyright © 2000 McGraw-Hill Australia

6. Administration of the legislation
HIGH COURT
FEDERAL COURT AUSTRALIAN COMPETITION
• Contravention of TRIBUNAL
restrictive trade practices • Appeals against decisions
authorisation
INDIVIDUAL AUSTRALIAN COMPETITION
ACTION AND CONSUMER COMMISSION
(ACCC may intervene • Administers the Act
if in public interest) • Brings action against those that contravene the Act
Copyright © 2000 McGraw-Hill Australia

7. Copyright © 2000 McGraw-Hill Australia
Definitions
Market - Includes all sellers competing for the same buyers.
Competition - Is a mechanism that ensures consumer needs are provided at cheapest costs by businesses through control of the use of society’s resources.
Copyright © 2000 McGraw-Hill Australia

8. Trade Practices Act (TPA)
Part IV
Section 45: Agreements or covenants
Section 46: Monopolies
Section 47: Exclusive dealing
Section 48: Resale price maintenance
Copyright © 2000 McGraw-Hill Australia

9. Trade Practices Act (continued)
Part IVA
Section 51AA: Unconscionable conduct
Part V
Section 52: Misleading and deceptive conduct
Section 60: Harassment and coercion in
relation to the supply of goods and
services
Section 61: Pyramid selling
Section 63A: Sending unsolicited cards
Section 64: Payment for unsolicited goods or
Copyright © 2000 McGraw-Hill Australia

10. Trade Practices Act (continued)
Part V
Section 65-65D: Safety of products
sold to consumers; product information requirements
Copyright © 2000 McGraw-Hill Australia

11. Section 45: Agreements or covenants affecting competition
Must prove competition has been reduced
Prohibits the making of contracts, arrangements or understandings containing exclusionary provision, or with the effect of substantially lessening competition in the market place.
Examples:
- market-sharing agreements for territory
- restrictions on output produced
- limited amount of discount for areas
- limited participation in other associations
- limited numbers allowed to participate
Copyright © 2000 McGraw-Hill Australia

12. Section 45A: Price-fixing agreements
Do not need to prove competition is reduced
Prohibits “horizontal” price-fixing agreements, by contract, arrangement or understanding, to fix, control or maintain prices.
Prohibits the fixing/controlling/maintaining of prices through the practice of ensuring the same prices
- discounts
- allowances
- rebates
- credit
for businesses at the same level of commercial activity e.g. retailers.
Copyright © 2000 McGraw-Hill Australia

13. Section 45B: Covenants annexed to or running with land
If they substantially lessen competition in market in which corporation or person supplies or acquires goods or services.
Copyright © 2000 McGraw-Hill Australia

14. Section 45C: Price-fixing covenants
Do not need to prove competition is reduced
Prohibits covenants that have effect of price fixing, whether competition is lessened or not.
i.e. Practice of - fixing
- controlling
- maintaining
prices via allowing the same - prices
- discounts
- allowances
- rebates.
Copyright © 2000 McGraw-Hill Australia

15. Section 45D: Prohibits secondary boycotts
i.e. When two parties engage in conduct that hinders or prevents a third party from supplying, acquiring or from otherwise dealing with another party.
If it causes substantial loss or damage, lessening competition.
Copyright © 2000 McGraw-Hill Australia

16. Section 46: Abuse of market power
Prohibits corporations with a substantial degree of market power from taking advantage of that power to:
- substantially damage or eliminate a competitor
- prevent entry of a competitor into any market
- prevent or deter anyone from engaging in
competitive conduct in any market.
Copyright © 2000 McGraw-Hill Australia

17. Elements affecting market power
The ability of a firm to raise prices without losing customers
The firm’s conduct in the market is not affected by competitors
The market share of the firm
The existence of vertical integration
The extent to which new participants can enter the market
Copyright © 2000 McGraw-Hill Australia

18. Section 47: Exclusive dealing (vertical restraint)
Prohibits a supplier from imposing restrictions on the freedom of its customers to deal with others, and vice versa, if substantially lessening competition.
Copyright © 2000 McGraw-Hill Australia

19. Copyright © 2000 McGraw-Hill Australia
Prohibited actions
Supplying goods and services on the condition that:
the purchaser does not acquire goods or services from a competitor of the supplier
the purchaser accepts restrictions on the right to resupply goods
the purchaser acquires other goods or services from a third party.
Acquiring goods or services on condition that the supplier accepts some restriction as to the freedom to supply to third parties.
Refusing to supply goods or services because the purchaser:
has dealt or refused to cease dealing in a competitor’s products
has failed to accept some restriction on the right of resupply
refuses to acquire other goods or services from a third party.
Refusing to acquire goods or services because the supplier refuses to accept some restriction on the right to supply third parties.
Aiding and abetting, procuring, counselling or inducing any corporation to engage in any of the conduct cited above.
Copyright © 2000 McGraw-Hill Australia

20. Section 48: Resale price maintenance (vertical price fixing)
Prohibits a supplier of goods and services from stipulating the minimum price at which goods to be supplied by them can be resold.
S96-100: Relevant qualifications and
definitions required for s48
Copyright © 2000 McGraw-Hill Australia

21. Copyright © 2000 McGraw-Hill Australia
Section 50: Mergers
Prohibits mergers and acquisitions if likely to substantially lessen competition in a market, including substantial ‘regional’ markets. (Authorisation of mergers is available under S88.)
Copyright © 2000 McGraw-Hill Australia

22. Matters to be considered for mergers
The actual and potential level of import competition in the market
Barriers to entry into the market
The level of concentration in the market
The extent to which substitutes are, or are likely to be, available
The degree of countervailing power in the market
The likelihood that the acquisition would result in the acquirer being able to significantly and substantially increase profits or profit margins
Copyright © 2000 McGraw-Hill Australia

23. Section 50A: Acquisition outside Australia
Prohibits entity gaining dominance of an Australian company through acquisition of overseas interests.
Copyright © 2000 McGraw-Hill Australia

24. Exceptions to restrictive trade practices provisions
Section 51 provides a number of exemptions to the
prohibitions above, including:
Conduct authorised by legislation
Industrial agreements covering working conditions
Restrictive provisions in employment contracts
Contracts requiring compliance with prescribed standards
Partnership agreements
Arrangements relating to copyright or patterns
Provisions in a contract for the sale of a business to protect the goodwill of the business.
Copyright © 2000 McGraw-Hill Australia

25. Authorisations (except for S46: Misuse of power)
Sections 88-91: For conduct which may breach provisions, allowed if
- agreement will result in a
benefit to the public which
outweighs anti-competitive
behaviour.
Copyright © 2000 McGraw-Hill Australia

26. Copyright © 2000 McGraw-Hill Australia
Notifications
Notify commission that S47 (exclusive dealing) is to be infringed before authorisation which eliminates any liability that may result for contravention of section.
If disallowed after consideration, action must stop immediately or penalties will be imposed.
Copyright © 2000 McGraw-Hill Australia

27. Copyright © 2000 McGraw-Hill Australia
Remedies
Pecuniary penalties:
- Corporations - up to $10 million
- Natural persons - up to $
Injunction S80
Divestiture orders S81
Damages S82
Ancillary orders S87
Copyright © 2000 McGraw-Hill Australia