Are you ready? Amendments to the competition laws will enhance the misuse of market power prohibition

  • Under amendments which are likely to be in force early next year, firms with a substantial degree of market power will now need to carefully consider whether any conduct they engage in, or propose to engage in, could have the purpose, or have or be likely to have the effect, of substantially lessening competition in any Australian market.
  • Firms will also, for the first time, be able to apply to the Australian Competition and Consumer Commission (ACCC) to authorise the firm engaging in conduct which might otherwise contravene the law.

Halt hand gesture

Does your firm possess a substantial degree of market power? If so, do you ever refuse to supply goods or services to a customer? Do you ever engage in vigorous price cutting or supply more than one good or service but only as a bundled offering? If any of these behaviours sound familiar, then you need to take note of recent amendments to Australia's competition laws.

On 14 August 2017 the Senate passed the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Amendment Act). Royal assent was given on 23 August 2017. The Amendment Act introduces a new s 46 into the Competition and Consumer Act 2010 (CCA).

The new provision states that a corporation that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in that market or any other market in which the corporation (or a related body corporate) supplies or acquires goods or services or is likely to do so.

While the ACCC and many market participants, including small businesses, will welcome these changes, others argue that they will lead to economic inefficiency and legal doubt and uncertainty that may increase compliance and legal expenses and cause a reduction in investment by large firms.

The new provision is expected to commence in the first half of 2018, depending on the passage of the other Harper-related amendments in the Competition and Consumer Amendment (Competition Policy Review) Bill 2017, currently before the Senate.

Section 46 of the CCA: What does it prohibit?

Currently, s 46 prohibits a firm that has a substantial degree of power in a market from taking advantage of its market power in any market for the purpose of:

  • eliminating or substantially damaging a competitor
  • preventing the entry of a person into a market; or
  • deterring or preventing a person from engaging in competitive conduct in a market.

In order to make out a contravention of s 46, the ACCC or any aggrieved competitor, supplier or customer must demonstrate three connected things — that a firm:

  • possesses market power
  • has ‘taken advantage’ of its market power
  • acted for a proscribed purpose.

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