Anti-competitive agreements

Definition

• Anti competitive agreements are agreements that lessen competition in a market for goods or services.

• They may be made by firms competing in that market (horizontal agreements) or between firms operating at different levels in the distribution chain for the goods and services involved (vertical agreements).

• The scheme in the CCA is to deal with horizontal agreements, other than mergers, in s 45(2) and in Part 1 Div IV and to leave vertical agreements to ss 47 (exclusive dealing) and 48 (resale price maintenance). However this scheme is not rigid. S 45(2) is broad enough to catch vertical anti-competitive agreements that do not fall within ss 47 or 48. Horizontal and vertical are not adopted terms by the CCA either.

4 types of conduct:

• The expression ‘anti-competitive agreement’ is not used in s 45(2). Rather s 45(2) identifies 4 types of conduct:

  • Making a ‘contract or arrangement’ or arriving at an understanding which contains an ‘exclusionary provision’;

  • Giving effect to an exclusionary provision in a contract, arrangement or understanding;

  • Making a contract or arrangement or arriving at an understanding which contains a provision which has the ‘purpose or would have or be likely to have the effect, of substantially lessening competition’;

  • Giving effect to a provision in a contract, arrangement or understanding which has the purpose, or would have or be likely to have the effect, of substantially lessening competition.

• SEE: the diagram on page 346.

• The remaining forms of anti-competitive agreements caught by s 45(2) that we have not yet dealt with are dealt with in this chapter.

• Where a horizontal agreement creates regularised or formal cooperation between firms it will often be described as a cartel (usually engage in price fixing, dividing markets between members, controlling production levels and providing for sharing or exchange of market information).

CCA 2010 s 45(1)-(2)

COMPETITION AND CONSUMER ACT 2010 - SECT 45

Contracts, arrangements or understandings that restrict dealings or affect competition

1. If a provision of a contract made before the commencement of the Trade Practices Amendment Act 1977 :

1. is an exclusionary provision; or

2. has the purpose, or has or is likely to have the effect, of substantially lessening competition;

that provision is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation.

2. A corporation shall not:

1. make a contract or arrangement, or arrive at an understanding, if:

   1. the proposed contract, arrangement or understanding contains an exclusionary provision; or

   2. a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

2. give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

   1. is an exclusionary provision; or

   2. has the purpose, or has or is likely to have the effect, of substantially lessening competition.

Contracts, arrangements and understandings

• The central element of s 45 is the requirement that the anti-competitive provision must emanate from a contract, arrangement or understanding made between 2 or more parties.

• S 45 does not catch unilateral conduct.

• Therefore the first step to see if s 45 has been contravened is to see whether a C,A or U exists.

• ACCC v Leahy Petroleum Pty Ltd: in order to meet the lowest threshold of ‘understanding’ conduct must involve some form of communication, consent, consensus and commitment. Gray J: commitment involves at least the assumption of an obligation...morally binding or binding in honour.

Anti Competitive purpose or effect

• Except where it contains an exclusionary provision, a CAU will contravene s 45(2) only if it has the purpose or effect of substantially lessening competition in a market or is likely to do so. This requirement will very often be the principal matter in issue when contravention of s 45(2) is alleged.

• For the purpose of s 45, ‘competition’ is defined in s 45(3):

For the purposes of this section, competition , in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.

• It does NOT require that parties to the CAU be competitors (therefore it is not restricted to horizontal agreements). E.g. if A, B and C will contravene s 45 by making an agreement with the purpose/effect of substantially lessening competition even if C is the only one competing in the market.

Purpose of substantially lessening competition

• The Full Court in Seven Network Ltd v News Ltd: the purpose of a provision is the subjective purpose of at least one of the parties to that arrangement responsible for including the provision.

• Hughes v WACA: In relation to s 4D, purpose means the immediate intended result of the agreement in question, rather than some ultimate or long term objective. (thus if the immediate objective of an agreement is to lessen competition, it is no defence to establish that the parties had some longer term purpose).

• S 4F: the proscribed purpose does not have to be the parties’ sole or dominant purpose. It is sufficient if it is a substantial one.

Dowling v Dalgety Australia Ltd (1992) – page 349

• FCA Lockhart J: ‘Purpose’ is concerned with motivation and the reasons of the parties for introducing the provision. It must be read in...

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