5
COMPETITION AND CONSUMER LAW
COURSE SYNOPSIS
November 2011
Note: cases referred to in the synopsis are given as examples only. The Subject Guide contains the full list of relevant cases.
Additional cases may be added, from time to time.
As from 1 January 2011, the Trade Practices Act (“TPA”) was renamed the Competition & Consumer Act 2011 ("CCA"). There were several major amendments including the repealing of the Deceptive Trade Practices & Product Liability provisions and the insertion into the Act of the Australian Consumer Law (“ACL”).
Australian Consumer Law
On 1 January 2011, the name of the Trade Practices Act 1974 was changed to the Competition and Consumer Act 2010 ("CCA").
As a result of the passing of the Trade Practices Amendment Act (Australian Consumer Law) Act 2010 (Cth), a new Part XI was inserted into the CCA. It provides for the “Application of the Australian Consumer Law as the law of the Commonwealth”.
Section 131(1) of the ACL states that the ACL applies to conduct of “corporations”. It then refers to Schedule 2 in the CCA– “The Australian Consumer Law”.
ACL comprises 5 chapters. Within each chapter there are divisions, parts and sections.
The provisions of the ACL largely reproduce the Deceptive Trade Practices & Product Liability provisions in the TPA and those in the State and Territory Fair Trading Laws. As an example, s52 of the TPA appears in s18 of Chapter 3, Part 2.1 of the ACL.
The principal changes that are introduced by the ACL are:
· A single set of definitions and interpretive provisions, some of which differ from those used in the TPA;
· A national law on unfair contract terms;
· A single set of provisions about unfair practices and fair trading, including amendments and additions which reflect the existing provisions in State and Territory Consumer Law;
· New national consumer guarantees provisions, which replace statutory implied conditions and warranties;
· A new national regime for unsolicited consumer agreements, which replace State and Territory Laws on door to door sales and other direct marketing;
· A new, national product safety legislative regime.
It should be noted that State and Territory governments have retained their Fair Trading Acts.
Topic A:- Background and outline to the CCA.
Issues:
General purpose of and its effects on commercial activities and consumers.
Object and Structure:
s2. – “The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.” by prohibiting anti-competitive conduct/restrictive trade practices (“RTP”), “deceptive trade practices (“DTP”) & inadequate/defective products/services (product liability).
RTP contained in Part IV of the CCA, comprises:
· anti-competitive agreements between competitors which contain cartel provisions (Divi 1)
· anti-competitive agreements between competitors which contain exclusionary provisions (s4D) or substantially lessen competition (s45)
· misuse of market power (s46)
· exclusive dealing (s47)
· resale price maintenance (s48, 96 – 100)
· mergers/acquisitions (s50 and 50A).
DTP comprise:
· Unconscionable Conduct (Part 2.2- ACL)
· Industry Codes (Part IVB of CCA)
· Misleading or deceptive conduct (part 2 – 1 of ACL
· Unfair contract terms (Part 2 – 3 of ACL)
· Unfair Practices (Part 3.1 of ACL).
Product liability provisions comprise:
· Consumer guarantees (Part 3.2 of ACL)
· Actions against manufacturers for goods with safety defects (Part 3.5 of ACL).
“Enforcement refer to sections in Part VI of CCA & Chapter 5 of ACL
Remedies” refer to sections in Part VI, VIA & B of CCA & Chapter 5 of ACL.
Desired Outcome:
Appreciation and understanding of broad objectives and structure of the CCA & ACL.
Topic B: Constitutional Basis for CCA (including ACL)
Issues:
Heads of Power under Australian Constitution relied upon.
Extended jurisdiction of the Act.
Structure:
Main head of power:-Corporations Power. [S51 (XX)] – provides for the making of laws concerning the “trading” activities of “trading corporations” (defined in s4 of TPA.)
Other heads of power used to extend the operation of CCA to include “persons”.
“A person” is defined in the Acts Interpretation Act to include a “body corporate & body politic”.
Other heads of power:
Trade & Commerce power [s51 (I)],
Territories power [s122],
Posts & Telegraph [s51 (v)],
Executive power coupled with incidental power [s61, &s51 (xxxix)].
Refer s6 of CCA in relation to “persons" e.g. "post and telegraphic power" see s6 (3) (Smolonogov v O'Brien and Pears v Balzer involving use of a telephone by person, Dataflow v Goodman involving use of email by person.)
CCA not meant to cover everything.
Fair Trading Acts of the various states & territories still operative. Also see ASIC Act, Corporations Act and other federal and state legislation.
Desired outcome:
Understanding
· the Constitutional basis for the TPA.
· consequential limitations of its application
· the extended jurisdiction of the CCA including its application to “persons”.
Topic C:
(i) Government entities covered by the CCA.
(ii) Interpretations and definitions of terms.
Issues:
When government and other entities are subject to the Act.
Structure:
See ss2A, 2B, 2BA and 2C of CCA. Via s2A, s2B and s2BA government bodies are deemed to be “corporations” and hence covered by the Act.
Binds the Commonwealth, State & Territories and Local govts “in so far as they are carrying on a business”. Does not cover activities that are “governmental” in nature (see: JS McMillan Pty Limited, RT. Fall Invest, Village Building v Canberra Airport (as it pertains to Air Services Australia), NT Power Generation).
"Business" (s2C of CCA) specifies activities that “are not business” and 4(1) defines a “business” to include "one not carried on for profit".
“Corporations” (s4) - either “trading” (Hughes v WA Cricket Assoc, R v Fed Ct of Aust ex parte: WA Nat Football League) or “financial” (State Super Board of Vic)
A "corporation": determined by “activities test” (e.g. WA Football Club, State Super Board of Victoria, E v Australian Red Cross Society, Fencott v Muller).
"Financial corp" (e.g. State Superannuation Board of Vic., Bourke, SGIC v GIO).
"Acquire", “acquisition, supply and resupply" (s4C of CCA & s2 of ACL)
“acquisition of shares” (s4 (4)) - relevant to s50
Terms: "goods", “services”
"in trade or commerce" vrs “in connection with trade and commerce” (see Glorie v WA Chip & Pulp, Nelson v Concrete Const, Pritchard v Racecage, AFCO v Tobacco Institute, Pears v Balzer, Martin v Tas Devel, McCormick Inter, Dataflow)
“conduct" including by silence (see Henjo v Collins Marrickville Demagogue Pty Ltd. v Ramensky, Metalcorp Recyclers), Defence of “inadvertence” (Costa Vraca)
“consumer” (s4B of CCA & s 3 of ACL)
“injury loss or damage including personal injury” (s4K & s4KA)
See also s2 in Ch 1 of the ACL.
Desired Outcomes:
(i) Understand when a government entity may be subject to the CCA, and
(ii) be able to identify/ discuss key threshold issues as to the application of the CCA.
Topic D: Competition policy. Markets Market power (s46 CCA), “Substantially lessening competition” (ss45, 47 & 50 of CCA)
Issues:
Why regulate to (a) promote, (b) procure and (c) maintain competition in the economy?
The role and desirability for efficiency within markets
What are “markets” and how are they derived?
Structure:
Basic understanding of theory of competition policy:
Price theory, perfect competition v monopoly, Industrial Organisation Theory.
Implications and connection of theories to Part IV of CCA (see Corones on competition policy).
“Markets” and “market power”.
“Market” definition (s4E of CCA) –
“market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first‑mentioned goods or services”.
Importance of including “close substitutes”. Concept of elasticity of demand and supply to determine “field of competition”...
Markets defined by product type (eg biscuits, abattoirs), by function – (eg manufacture, wholesale, retail), by geographical area. (e.g. TPC v Aust Meat Holdings - Nth Qld). See also: Qld. Co-op Milling Assoc., TPC v Ansett Transport Industries (Operations) Pty Ltd, Qld Wire Industries v BHP, QIW Retailers Ltd v Davids Holdings, Mark Lyons v Bursill, Arnotts, Melway, Universal Music, and Boral Besser.
Sub-markets v markets (Taprobane v Singapore Airlines)
Connection between a “market”/ “market power” on the one hand and the substantially lessening of competition (in that market) on the other hand.
Desired outcomes:
Understand the connection between competition policy and the CCA.
Apply principles in identifying the characteristics of a “market” for the purpose of CCA.
Importance of deriving a market when determining the extent of market power (s46) and the substantial lessening of competition (ss45, 47 and 50).
Topic E: Contracts, Arrangements or Understandings (“c/ a/ u”) between competitors, which contain a cartel provision (Part IV Division 1) or an exclusionary provision (s4D) or that has the purpose or effect of substantially lessening competition (s45)
Issues:
Application to anti-competitive conduct involving collusion between competitors.
C/ a/ u which contain a cartel provision as defined in Division 1. Commenced: 24/7/9.
C/ a/ u containing an “exclusionary provisions” (see s4D of CCA). Otherwise assessed as to extent it has the purpose or effect or likely effect of “substantially lessening competition”.
Application of “substantially lessening competition” test. Need to derive the relevant market.
Price fixing (previously s45A of the TPA) has been repealed. .
Structure:
Consideration of critical concepts, terms and threshold issues. Can involve both “vertical” and “horizontal” conduct.
“C/ a/ u” ( involving the making of or giving effect to c/ a/ u) between 2 or more competitors – see Top Performance Motors, TPA v Nicholas, Apco. ACCC v Leahy (2007).
Types of c/ a/u with cartel provisions: price fixing; output restrictions; allocating customers, suppliers or territories; bid-rigging. Criminal penalties for proscribed forms of conduct. Civil prohibition operates in relation to the same forms of cartel conduct.
Types of c/ a/ u under s45 containing an Exclusionary Provisions (s4D):
· refuse to deal,
· limit dealings with another supplier or particular customer, or class of competitor or customer (eg Top Performance Motors).
Agreements containing an Exclusionary Provisions –illegal per se.
If c/ a/ u does not contain an exclusionary provision then determine whether it involves the making of or giving effect to agreements between 2 or more competitors which has the purpose or effect or likely effect of substantially lessening competition. Purpose must be a substantial purpose (s4F of CCA).
Requires defining the market & evaluating level of competition in that market both pre & post the conduct to establish whether the lessening of competition is substantial (weighty/ considerable).
Desired outcomes:
Appreciation of:
· cartel provisions, including penalties
· threshold issues and
· elements when considering whether there has been a breach of s45.
Topic F: Misuse of market power (s46)
Issues:
Corporations with “market power” or “a substantial share of the market”.
Misusing/taking advantage of that market power for a prescribed anti-competitive purpose. Supplying at a price that is less than the relevant cost to the corporation for a prescribed anti-competitive purpose where the corporation has a substantial share of the market.
Establishing the causal connection between the corporation’s market power and its anti-competitive conduct.
Structure:
Consideration of critical steps, concepts, terms and threshold issues.
To find the existence of market power must first find the “market” in which the conduct is alleged to occur (e.g. QWI v BHP etc). “Market power” (eg Mark Lyons v Bursill, Munroe Topple v ICA, Boral Besser & Universal Music). Must be evidence of the “taking advantage of “ that market power” (e.g. Melway Publishing).
Alternatively, a corporation with a significant share of the market which in turn sells below cost for a prescribed purpose, may also breach the Section.
“Purpose” (refer to s4F) – May be one of multiple purposes Must be a substantial purpose - apply subjective test (Pont Data)
Proscribed purposes which constitute “forms of anti-competitive” conduct including:
a. damaging a competitor
b. preventing entry of a person into a market
c. deterring or preventing a person from engaging in competitive conduct in a market.
Typical types of conduct:
§ predatory pricing (Vic Egg Marketing Board)
§ oppressive contracts (see Pont Data)
§ refusal to deal. (see Mark Lyons v Bursill, QWI)
Note: H C cases – QWI, Melway Publishing v Hicks & Boral Besser Masonry v ACCC, NT Power Generation v Power & Water
Desired outcomes:
To be able to determine:
· the threshold issues and
· elements when considering whether there has been a breach of s46.
Topic G: Exclusive dealing (s47)
Issue
Vertical non-price restrictions i.e. practices which place restrictions on parties in the distribution chain which amount to exclusive dealing.
Structure:
The rationale for prohibitions under s47.
Types of conduct which can constitute exclusive dealing including:
§ solus agreements - subject to the "substantially lessening competition” test
§ requirements contracts - involving geographical areas or customer restrictions; subject to the competition test
§ full line forcing
§ 3rd line forcing.
3rd line forcing illegal per se.
Otherwise, application of the competition test.
Consideration of critical concepts, terms and threshold issues.
What constitutes a “substantial lessening of competition”?
Derive the market, then apply the competition test.
Product restrictions consider the meaning of solus agreements (Re Tooths, Dandy Power, Outboard Marine), partial requirements contracts (O’Brien Glass v Cool & Sons), including tying and full line forcing (Nashua).
Territory or customer restrictions.
Third line forcing: must exist 2 separate contracts (one with a 3rd party) see: Castlemaine Tooheys v Willams and Hodgson, Paul Dainty, at the hand of Legion Cabs.
See also ACCC v Health Partners, ACCC v Safeway, Universal Music
Desired outcomes:
To be able to determine the threshold issues and elements when considering whether there has been a breach of s47.
Topic H: Resale price maintenance (“RPM”) (ss48 and s96 to s100)
Issue
Practices of establishing minimum resale prices for goods and services as a condition of supply i.e. stopping the practice of discounting.
Structure:
Applies vertically
The rationale for the prohibition of RPM.
Considered anti-competitive therefore a per se offence.
6 separate types of conduct (direct & indirect) (s96 (3) (a) – (f)).
Consideration of critical concepts, terms and threshold issue.
“Specified price” – s96 (4)
The manner in which “specified price” is determined (See Bata Shoes, Mobil Oil, Heating Centre v TPC, 2UE v Stereo FM, TPC v Penfolds Wines).