The Misuse of Market Power Bill

Key takeaways

On 1 December 2016 the Federal Government introduced the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 (Misuse of Market Power Bill), which is the next step in the Government’s commitment to implement the ‘Harper’ Competition Policy Review’s misuse of market power reform recommendations.

Background

For background please see our previous related articles:

• An overview of the Harper Report on competition law and policy, here.
• A detailed analysis of the proposed amendment to the misuse of market power prohibition, here.

The Bill

The Misuse of Market Power Bill, if passed, will amend section 46 of the Competition and Consumer Act 2010 (Cth). Section 46 presently prohibits a corporation which has a substantial degree of power in a market from taking advantage of that power for three proscribed anti-competitive purposes:

• eliminating or substantially damaging a competitor;
• preventing entry into a market; or
• deterring or preventing engagement in competitive conduct in a market.

The Misuse of Market Power Bill amendment is intended to strengthen the prohibition on the misuse of market power by corporations, preventing unilateral anti-competitive conduct. While the present prohibition is restricted in its focus to the harm cause to competitors by anti-competitive conduct, the amended provision focuses not on the impact on competitors, but upon the competitive process. See the below Table for an overview. To achieve this goal, the amended misuse of market power provision:

• Removes the ‘take advantage’ element – the amended provision no longer requires consideration of how the corporation would have behaved but for its substantial market power.
• Replaces the ‘purpose test’ with a ‘purpose or effects test’, prohibiting a corporation with a substantial degree of market power from engaging in conduct with the ‘purpose, effect or likely effect’ of substantially lessening competition.
• Specifies non-exhaustive mandatory factors for consideration by the Courts when determining whether the alleged conduct substantially lessens competition.¹ These factors are:
  • the extent to which the conduct has the purpose or effect of increasing competition, including by enhancing efficiency, innovation, product quality or price competitiveness in the market; and
  • the extent to which the conduct has the purpose or effect of lessening competition, including by preventing, restricting or deterring the potential for competitive conduct in the market or new entry into the market.

Current status

The Misuse of Market Power Bill was introduced to Parliament on 1 December 2016. Upon its introduction and reading the Bill was referred to the Senate Economics Legislation Committee. The Committee completed its inquiry and tabled its report to Parliament on 16 February 2016. Supporting the Misuse of Market Power Bill the Committee determined:

• section 46, in its current form, is ‘unfit for purpose and deficient’, having ‘not provided adequate protection for non-dominant firms from the destructive actions of firms with substantial market power’;
• claims the amended provision could potentially create a lack of certainty and risk chilling vigorous competitive conduct are ‘possibly overstated’; and
• it is appropriate for the amended provisions to focus on ‘not only on the purpose of conduct, but also on the outcomes of the conduct on competition.’

What's next?

The Misuse of Market Power Bill will return to Parliament for ‘resumption of the debate’ where, as recommended by the Senate Economics Legislation Committee, the Bill is expected to be amended to remove the mandatory factors for consideration when determining whether conduct has the purpose of substantially lessening competition. With the Labor Party opposed to the amendment the Government will need to rely on crossbench support in the upper house for the Bill – whether the Misuse of Market PowerBill will pass remains to be seen.

Key differences between the Competition and Consumer Act and Misuse of Market Power Bill

The following helpful table, sourced from the Explanatory Memorandum, compares the Competition and Consumer Act and Misuse of Market Power Bill misuse of market power provisions.

Misuse of Market Power Bill	Competition and Consumer Act
Section 46 only applies to corporations with substantial market power.	Section 46 only applies to corporations with substantial market power
The conduct must have the purpose, effect or likely effect of substantially lessening competition.	The conduct must have one of three specific purposes, related to damaging an actual or potential competitor.
The conduct must occur in a market where there is an actual or likely supply or acquisition of goods or services, by the corporation or another prescribed entity.	The conduct may occur in any market.
The conduct does not need to ‘take advantage’ of substantial market power.	The conduct must ‘take advantage’ of substantial market power.
There is a general provision only, with no specific prohibition on predatory pricing or other forms of conduct (however described).	Predatory pricing and other specific forms of conduct are expressly prohibited.
Certain pro-competitive and anti-competitive factors must be taken into account when considering a substantial lessening of competition.	‘Substantial lessening of competition’ is not an element of section 46.

To view the update of the Misuse of Market Power Bill click here.

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¹The Senate Economics Legislation Committee, discussed below, has recommended the removal of the mandatory factors for consideration by the Courts when determining whether alleged conduct substantially lessens competition.

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