Newsletter Archive

This issues considers the “take advantage” element of section 46 (misuse of market power) & its application via the counterfactual. Is it as difficult as so often stated? What could (should) be done instead? Whatever happens next, the counterfactual will be around for a while – both as old conduct comes to light and as the courts continue to search for a causal link between market power and problematic conduct. So here’s our take on things, together with a short discussion on purpose.

Competition policy for the oligopoly economy

Australia, as recently observed, is an oligopoly economy.  But what does that mean exactly?  And – in this time of reflection – does (or should) this fact impact upon our competition policy?  A very smart lawyer and academic, Michal Gal, has researched this issue closely.  She recommends that small economies such as Australia favour efficiency over competition, via a liberal merger policy combined with strong conduct rules.  In this edition, we outline her research, highlighting the key insights as well as some potential pitfalls.  We then consider Gal’s work specifically in the Australian context.

The pros & cons of overseas adventures

There is clear value in learning from other jurisdictions as growing international co-operation – and the Harper Report – demonstrate.  The High Court warns, however, of the “danger that principles relevant to the laws of other countries may be adopted uncritically and without regard to the context in which they were developed”.  This edition of TSoC – the second in our series on policy development – considers some of the often forgotten differences that impact on the adaptability of overseas wisdom.  Focusing on the US and Europe, we examine the legal systems themselves, approaches to market definition and the application of the competition test.

“There is a time for everything, and a season for every activity under the heavens…” (Ecclesiastes).  2014 has certainly been a time for reflection; the Harper Review has prompted so much rumination that we’re lucky there’s not been much action in the courts. So rather than our usual “year in review”, this year we’re finishing up with a reflective piece on just what the substantial lessening of competition test involves. As the slogan says, it’s time for less opinion, more expertise.

The Harper Committee has been charged with ensuring that our competition laws are “fit for purpose”. In its draft report, it has set about this task by (amongst other things) proposing a radical re-write of our misuse of market power prohibition. But will the proposed new law address the shortcomings identified by critics of the current section 46? In this edition of TSoC, we road-test the Harper proposal, trying it out with examples of allegedly anti-competitive conduct said to fall outside the scope of the current law.

“Access to justice” rates as one of the top five issues raised in submissions to the Harper Review into Australian competition policy.  But a review of litigation over the last decade shows much more is at stake: ACCC competition cases focus almost exclusively on per se prohibitions.  While private litigants appear more prepared to pursue provisions subject to a competition test, they are an endangered species.  In the US, private actions outnumber their public counterparts 10:1 – here, we have 3 public actions for every private one.  Yet the importance of private litigation is acknowledged around the world.  How then can we increase its incidence?

Unwrapping a fallacy: market definition, market power & cellophane

While the cellophane fallacy is a recurring theme in competition law fairytales, you don’t often see it in real life. But in the recent Cement Australia (Flyash) decision, cellophane was front and centre. The decision raises questions about defining markets, applying the hypothetical monopolist test and even our approach to examining misuse of market power. This month’s TSoC has philosophy, fine music and lots of cellophane-clad ideas to unwrap. Select a beverage of your choosing, kick back and enjoy.

What they are talking about & how to join in

The Harper Review is off and running.  The Panel’s been charged with reinvigorating the Australian economy for the coming decades, and has a very short timetable in which to do its work.  Submissions in response to a lengthy Issues Paper are due by 10 June 2014.

In this edition of The State of Competition, we identify the issues likely to be of key concern to small business & consumers.  We also set out some tips for those thinking about making a submission.

Australia’s small business sector:
“Not for the faint of heart”

It’s been observed that “Small business isn’t for the faint of heart. It’s for the brave, the patient & the persistent. It’s for the overcomer”. While this many be true, the law should not be amongst the hurdles that small business needs to overcome. But a close look at Australia’s competition law regime suggests that there is plenty of room to improve its engagement with the “backbone” of the Australian economy. In this issue, we identify some shortcomings before floating ideas as to how they may be overcome.  To read Issue 16, follow this link: TSoC (Issue 16 small business)

Is the public benefit test eroding?

In the previous edition of The State of Competition, we looked at the filings available for statutory immunity in Australia and commented on their use as a tool for businesses wanting to achieve best practice compliance.  In this follow-up issue, we examine some more complex aspects of filings, including whether they are fulfilling their intended role in our competition law regime.

While antitrust economics might reflect universal principles, the same cannot be said of the law. Australia’s complex system for statutory immunity is one of the more unusual features of our competition law framework – much like a local short-cut, however, not everyone is familiar with it so it can be under-utilised. While the substantive prohibitions in Part IV of the Competition and Consumer Act tell you what you can’t do, a detailed understanding of the statutory immunities set out in Part VII reveals what you can do. In this issue – the first of a two-part series – we explain the major filings available for statutory immunity, while our next edition will examine some broader policy considerations.

(Out of sight, out of mind)   

It is joked that hospitals run more efficiently when they have no patients.  In the competition arena, we’re sometimes a little more serious about preferencing efficiency over real people, particularly consumers.  Consumers, however, play an integral role in creating and maintaining competitive markets – a competition policy that assumes consumers to be mute and passive can result in consumers who are just that. But this behaviour itself leads to ineffective competition.  So as we gird our loins for Election 2013, it’s worth remembering what we’re trying to achieve.

Even dragons have their ending…

It’s been a pretty big year – interesting merger decisions (and processes), a few quirks in the consumer protection space, the ongoing focus on price fixing, a huge High Court decision on access, and some new faces.  A recurring theme in 2012 has been the increased media profile of ACCC Chairman, Rod ‘Hear me roar’ Sims – he seems ready to slay any number of dragons (particularly those bearing the flag of either of the two main supermarket chains).

When agents (allegedly) price fix… 

It is a per se breach of the law for competitors to agree on prices.  ‘Competitors’ is generally thought to be a straightforward term.  But recent cases highlight how agents and other commercial partners can find themselves in price fixing trouble.  USA v Apple also raises issues of market power, market share & most favoured nation clauses.

A primer in market definition

In the 1976 decision, Re QCMA, the Competition Tribunal articulated the concept of the market. It spoke of a “field of rivalry” that sets limits on the ability to “give less and charge more”. Section 4E of the Competition and Consumer Act defines the market to include products that are “substitutable for or otherwise competitive with” each other. Want to test if two products are in the same market? Some might say, “just find an economist and do a ‘SSNIP’ test”. But, when a market is changing profoundly, it’s not so easy.

If you’ve had an informal merger clearance recently, chances are it took longer than the “standard” 6-8 weeks we’re told to expect.  A significant number of matters this year that did not prompt a Statement of Issues still took 12 weeks to assess. In response to sharp media criticism of its timeframes, the ACCC has claimed the need for “good regulatory practice”.   Meanwhile, another review of the ACCC’s processes is in the wind.  With lessons both from the past and from New Zealand in mind, here we pose some questions to ponder this time around.

We’re told a competitive price should reflect marginal cost.  But applying this can be harder than it sounds, particularly in industries such as electricity.  How do we make sure Mums & Dads can afford their power, while also ensuring that the incentives are right for investment?  It’s easy: you set the Goldilocks price.  Not too high, not too low, but just right.  But how do you know when a market is delivering the right price or in fact has a market power problem?  We consider this issue in light of the ongoing review of generator market power in Australia’s National Electricity Market.

Enforcement powers under the Australian Consumer Law…

Since penalties were introduced for the consumer protection provisions of the Competition and Consumer Act, the ACCC has achieved some astounding results.  But when those penalties are compared with ones for anti-competitive behaviour, are the right incentives are in place to encourage compliance with, and enforcement of, the competition provisions.

Likelihoods & the standard of proof

The decision of the Full Court in Metcash arguably raises the threshold for proving that a merger substantially lessens competition, so one has to wonder how many cases the ACCC will be prepared to bring in future.   In this issue, we examine what the Court said, what it actually held and the implications of the decision for mergers and the CCA more generally.

Lowest prices are just the beginning!

Promises to meet the competition seem pro-competitive, but they sometimes have a sting in the tail.  In Issue 2 of The State of Competition, Alexandra Merrett and Rhonda Smith examine the economic implications of MTC offers, before considering what – if anything – the law can do to prevent some less than desirable consequences.

Buyer power and the rise of private labels

Private labels are increasingly prominent on our supermarket shelves.  The ACCC thinks this is okay – if consumers don’t like it, they’ll vote with their feet.  But does that reflect the reality of the Australian grocery market?  In this, our first issue of The State of Competition, Alexandra Merrett and Rhonda Smith examine the relationship between private labels, copycat products and buyer power.