Competition And Consumer Act 2010: Overview Of Restrictive Trade Practices In Australia

Purpose of the legislation

Dsicuss about the Australian Competition And the Consumer Commission.

1. Outline the purpose of the Competition and Consumer Act 2010 (the CCA).

The legislation has been enacted by the commonwealth government for the purpose of governing primary sectors of the market place, the relationship between consumers, retailers, wholesalers and suppliers. The purpose of the legislation is the improve and enhance the welfare of the Australian community through the promotion of competition and fair trading as well as the provisions in relation to consumer protection. The legislation mainly covers unfair market practices, industry codes, price monitoring, industry codes, product safety and labelling, mergers and acquisition and industrial regulations such as electric, Airports, Telecommunications and Gas (legislation, 2018).

2. What section of the Australian Constitution empowers the Commonwealth Government to make these laws? Do the laws only apply to corporations? What effect does the Competition Code have? What administrative body oversees the Act?

The commonwealth is provided powers to make laws in relation to the marketplace under the provisions of Section 51 (XX) of the Constitution of Commonwealth Australia. No the laws are applicable not only on corporations but also on any person indulging in business practices in Australia. The code makes any restrictive trade practices illegal in the country and also provides specific protection the consumers in the market place which is dominated by suppliers and manufactures. The body which oversees the act is known as the Australian Competition and Consumer Commission (ACCC) (Competition and Consumer Act 2010, 2018).

3. The major focus of Part IV of the CCA is restrictive trade practices. Explain this term financial.

The antitrust or restrictive trade provisions provided through part IV of the CCA have the purpose of addressing the restriction of those practices which anti competitive in nature and are put in place by the business in order to minimise or prevent free competition. Restrictive trade practices include practices like boycott agreements, price fixing, misusing market power, excusive dealings, resale price maintenance and mergers and acquisitions. These practices are put into place by the businesses to ensure that Monopoly is established and their bargaining power in the market is increased and they can make additional practices (Australian Competition Law | Overview,  2018).

4. There are six main types of restrictive trade practices which are prohibited. Explain each of these by referring to the specific section of the CCA and by using appropriate specific cases.

There are six primary types of respective trade practices which are in place as  financial provided under part IV of the CCA. These are as follows:

Division 1 of Part IV of the Competition and Consumer Act 2010 (CCA) imposes prohibition upon cartel conduct. Cartel conduct is not only a civil penalty provision but also can be considered as a criminal offence. There are primarily four activities which are included in Cartel conduct which are defined under section 45AD of the CCA.  These activities are that of Price Fixing, Market division, bid rigging and Restricting outputs.  The activity is made illegal in situation where it is provided effect in an understanding, arrangement or contract and the parties who are involved in the situation are competitors. When it comes to price fixing the terms have to have the intention or effect of price fixing. On the other hand when it comes to other forms of conduct only a requisite purpose is required by the provisions. A person can be imposed with a criminal penalty which may extend up to $420,000 for every offence as well as a 110 year imprisonment period where the commission of a cartel offence has been identified. The civil penalties in relation to such conduct are same as which are available for any other contravention under part IV.

Prohibited Practices

In the case of ACCC v April International Marketing Services Australia Pty Ltd (No 8) [2011] FCA 153 the ACCC was able to prove before the court that the defendant organization had been involved in prace fixing. Price fixing is a process through which two or more competitors fix the price of a certain product to be supplied to the consumer at a specific rate which is usual higher than the market price in order to gain more profit and exploit the consumers. In this case Asia Pulp & Paper Company Ltd (Singapore) and PT Indah Kiat Pulp and Paper Tbk (Indonesia) had been found to have indulged in the process of prince fixing by fixing the price of uncoated woodfree folio to be supplied to customers in Australia.

The federal court imposed  fine of $14.5 million against organizations such as Schneider Electric (Aust), Wilson Transformers, Alstom Australia and AW Tyree for indulging in market sharing by creation of a Power Transformers Cartel. In addition an $8 million plus penalty has been imposed on cartel members in relation to bid rigging in Australia by the federal court in an action brought against them by the ACCC. In addition the ACCC in the case of ACCC v The Tasmanian Salmonid Growers Association Ltd [2003] FCA 788 brought an action against the defendant company for the purpose of indulging in Restricting outputs and was successful for the same. Outputs are restricted for the purpose of increasing the demand of the products by restricting the supply and thus brining an increase in the price (Cartels case studies & legal cases, 2018).

Through section 45 of the CCA it is expressly prohibited for a person to indulge in a conduct which is making or providing effects to contract arrangement or understandings in relation to a provision purporting to substantially reduce competition. These arrangements primarily have a horizontal nature, however it is not a requirement of section 45. Thus any concerted practice which substantially reduces competition or lessens competition is prohibited through the CCA.

A corporation under the provisions of section 46(1) of the CCA having substantial market power is restricted form indulging in an activity which does or may likely substantially reduce competition. The effects test in relation to the section had been initiated from November 2017. The amendment had been made following the case of ACCC v Pfizer Australia Pty Ltd [2015] FCA 113 where the court ruled against the ACCC due to the meaning of the section.

Penalties for contravening the Act

Section 47 of the CCA provides rules in relation to prohibition of different forms of exclusive dealing and specifically two types of anti-competitive vertical transactions. These are conditional supply of goods and services and refusing to supply goods and services for a particular reason. Exclusive dealings are only subject to liability where they are done to substantially lessen competition. One of the primary cases in relation to the issue is the case of ACCC v AMA(WA) [2003] FCA 686.

Section 48 of the CCA operates in relation to prohibiting a company from indulging in an activity relating to resale price maintenance.

Mergers in Australia are not prohibited unless it can be established that they are or will likely reduce the competition in the market as per section 50 of the CCA. A primary case in relation to the issue in Australia is the case of ACCC v Australian Competition Tribunal [2017] FCAFC 150.

5. What penalties/ remedies are applied if the restrictive trade practices regulations are breached?

As provided in the CCA the following penalties are applicable for the breach of restrictive trade practices under party IV.

• Pecuniary penalties under section 76 which is for corporations $10 000 000 and three times the value when the court can identify "reasonably attributable" benefit obtained and if not than annual turnover in preceding 12 months. On the other hand penalties for individuals are $500000.
• Damages under section 82
• Injunctions under section 80]
• Divestiture under section 81 for mergers
• Non punitive penalties such as community services under section 86C
• Punitive order like adverse publicity ordered under section 86D
• Disqualification from directorship under section 86E (Fines & penalties, 2018).

6. In your report ensure you critically analyse why businesses engage in restrictive trade practices and why the government legislates against these practices.

Restrictive trade practices include practices like boycott agreements, price fixing, misusing market power, excusive dealings, resale price maintenance and mergers and acquisitions. These practices are out in place for the purpose of gaining additional profits by the business and exploiting the consumers. The practice of price fixing is done so that the consumers have to pay high price for certain goods. Market power is misused to not let other small companies enter the market. Mergers are also done to prevent competition in the market. Thus the primary purpose which businesses have in relation to indulging restrictive trade practices is that to make profit in a short time through their power to manipulate the market. It has been discussed above that the purpose of the legislation is the improve and enhance the welfare of the Australian community through the promotion of competition and fair trading as well as the provisions in relation to consumer protection. Thus it is clear that the primary purpose why the government legislates against such practices is that corporations do not take control over the market place and the rule of law is maintained. The purpose is also to ensure that small business may emerge in the market and the consumers are protected against exploitation against illegal business practices.

References

ACCC v AMA(WA) [2003] FCA 686.

ACCC v April International Marketing Services Australia Pty Ltd (No 8) [2011] FCA 153

ACCC v Australian Competition Tribunal [2017] FCAFC 150.

ACCC v Pfizer Australia Pty Ltd [2015] FCA 113

ACCC v The Tasmanian Salmonid Growers Association Ltd [2003] FCA 788

Australian Competition Law | Overview. (2018). Australiancompetitionlaw.org. Retrieved 28 March 2018, from https://www.australiancompetitionlaw.org/overview.html

Cartels case studies & legal cases. (2018). Australian Competition and Consumer business management Commission. Retrieved 28 March 2018, from https://www.accc.gov.au/business/anti-competitive-behaviour/cartels/cartels-case-studies-legal-cases#market-sharing

Competition and Consumer Act 2010. (2018). Legislation.gov.au. Retrieved 28 March 2018, from https://www.legislation.gov.au/Details/C2017C00062

Fines & penalties. (2018). Australian Competition and Consumer Commission. economics 28 March 2018, from https://www.accc.gov.au/business/business-rights-protections/fines-penalties#restrictive-trade-practices

Legislation. (2018). Australian Competition and Consumer Commission. Retrieved 28 March 2018, from https://www.accc.gov.au/about-us/australian-competition-consumer-commission/legislation