Law Notes > Competition Law Notes
This is an extract of our Authorisations document, which we sell as part of our Competition Law Notes collection written by the top tier of University Of New South Wales students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Competition Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Authorisations are not available for misuse of market power.
If you try to get an authorisation you have alerted the ACCC to your conduct. If you are already engaging in the conduct, you cannot get immunity for it. The ACCC
S 88
Provides for the granting of authorisations by the ACCC for conduct that would otherwise contravene one or more of the substantive prohibitions in Part IV (restrictive trade practices).
(8) allows the ACCC to grant an authorisation for exclusive dealing under s 47.
(8A) is for an authorisation for RPM under s 48.
(9) is for an authorisation by the ACCC in relation to s 50A.
For mergers, this power is given directly to the Tribunal.
You must apply to the ACCC to revoke or make a minor alteration to the authorisation. A record of all authorisations, including those that have been withdrawn must be on the public register.
The ACCC can dismiss or accept the authorisation in writing. It shall state its’ reason.
There are two different tests to be applied by the ACCC and the Tribunal in deciding whether to grant or refuse an application for authorisation.
Neither test requires consideration of whether there are less restrictive alternatives for achieving the claimed public benefits.
The public benefit outweighs the anti-competitive detriment
The ACCC must be satisfied that the conduct will result in a benefit to the public and that that benefit would outweigh the detriment to the public constituted by any lessening of competition associated with the conduct.
It is the test for exclusive dealing (other than third line forcing) = section 90(6).
Also cartels (sections 90(5A) and (5B)) and anti-competitive agreements (sections 90(7)).
This test is for the SLC provisions but now applies to cartels too.
The public benefit is such that the conduct should be allowed
The ACCC must be satisfied that the conduct would result in such a benefit to the public that it should be allowed to be made.
It is the test for third line forcing (section 90(8)(a)(iii)), resale price maintenance (section 90(8)(a)(iv)) and mergers (section 95AZH(2)).
Also exclusionary provisions.
This test is for the per se offences.
The imposing the restrictions on consumer welfare bear the onus of proving on the balance of probabilities that they are in the public interest.
There is a time limit of 6 months for the consideration of non-merger authorisations by the ACCC. It may be extended by a further 6 months or if there is a pre-decision conference.
The fee is $7500 for non merger applications.
The ACCC can waive, in whole or part the fee payable for filing non-merger applications for authorisation (a request must be made in writing). If the ACCC waives the fee, the company still has to pay $2,500. ACCC Guide to Authorisation (Dec 2010) states that the fee will be waived if the fee would ‘impose an unduly onerous burden on the applicant.’
For merger applications the fee is $25,000!! Tribunal must make its’ decision in three months, but can extend the time by another three months. If Tribunal fails to make decision it is assumed that the merger may not go ahead. The ACCC is required to make a report to held the Tribunal in its’ decision (and may include any matters it considers relevant).
The onus is on the parties seeking authorisation to satisfy the ACCC or Tribunal that there is a benefit to the public enough to outweigh the likely anti-competitive detriment.
Second, the Tribunal must consider the likely shape of the future both with and without the conduct in question.
Third, the task will involve an understanding of the functioning of the relevant markets with and without the conduct for which the authorisation is sought (i.e. a future with and without test).
The ACCC and then Tribunal on appeal (unless it is a merger) will look only at whether or not the conduct is likely to result in such a benefit to the public that it should be allowed to take place.
For mergers there are certain likely outcomes deemed to constitute public benefits for the purpose of the Tribunal’s assessment. Under s 95AZH(2), a significant increase in the real value of exports; and a significant substitution of domestic products for imported goods; and all other relevant matters that relate to the international competitiveness of any Australian industry MUST be regarded as benefits to the public.
This test can consider a wider range of public detriments (as the detriment does not need to result from a SLC).
The first test requires a balancing exercise, necessitating a consideration of the extent to which competition is likely to be lessened by the conduct. The second test doesn’t require that the public benefit be balanced against anti-competitive detriment; although in almost all cases it is unlikely the public benefit will be such as to allow the conduct where it does not outweigh the anti-competitive detriment.
Authorisation is a process under which the ACCC, in response to an application, can grant immunity on public benefit grounds against action under the CCA.
The ACCC cannot authorise the conduct retrospectively.
The ACCC is often asked to authorise collective bargaining arrangements where two or more competitors come together to negotiate terms and conditions with a supplier or a customer.
Overview: the process involves the ACCC:
Inviting interested parties to lodge written submissions commenting on the application and supporting submission.
Meeting with the applicant and interested parties as appropriate.
Inviting the applicant to lodge a written submission in response to interested party submissions.
Conducting its own market inquiries and research while consulting with interested parties.
Issuing a draft determination.
Inviting written submissions in response to the draft determination and inviting the applicant or interested parties to call a conference to make oral submissions to the commissioner.
Holding a conference, if one is called.
Issuing a final determination.
The same test in practice: Simply because the test is lessening of competition does not mean that other detriments are not weighed in the balance when a judgment is being made – something relied on as a benefit may also have a detrimental effect on society. Thus the ACCC can also take into account all public detriments likely to result from the relevant conduct into account either by looking at the detriment side of the equation or assessing the extent of the benefits.
A big public benefits case where 7-Eleven managed to argue successfully that there was a change of circumstances and that the newspapers should not have authorisation to exclusively deal with the newsagents. This allowed 7-Eleven to purchase its newspapers at a more competitive cost. This had been going on for 20 years.
Public benefit (not defined in the Act) but it has been defined to be: anything of value to the community generally, any contribution to the aims pursued by the society including as one of its’ principle elements the achievement of the economic goals of efficiency and progress. This must be judged from the perspective of society as a whole; the best use of society’s resources.
Efficiency usually encompasses progress and allocative efficiency, production efficiency and dynamic efficiency. A broad view is taken of ‘benefit’ found in VFT Chicken Meat Growers and includes anything that increases the well being of members of society.
Public detriment (not defined in the Act) but the Tribunal found it to mean any impairment to the community generally, any harm or damage to the aims pursued by the society including as one of its principal elements, the achievement of the goal of economic efficiency.
Public benefit standard:
The Tribunal said that the ‘public’ includes all members of society in all their roles as investors, shareholders, workers and consumers and people incidentally affected by market outcomes.
There should be no difference in the weight attached to the benefits irrespective of who are the beneficiaries.
Qantas Airways
The Tribunal found that whether a benefit is a public benefit should be directed towards the extent to which the benefit has an impact on members of the community – does it fall into the category of ‘anything of value to the community generally?’
Cost savings arising from increases in productive efficiency constitute public benefits, as the community at large has an interest in these resource savings. It is a form of ‘total welfare standard.’
While the benefit of an arrangement or merger does not necessarily need to be passed on to consumers it may be in some cases that gains flow through to only a limited number of members in the community and this will carry less weight.
What weight is given to the benefit will be decided with regard to its nature, characterisation and the identity of the beneficiaries of it.
The ACCC considers all efficiency gains as public benefits.
In determining how much weight to give these gains the ACCC will take into account: has the applicant provided sufficient evidence to support a claim that efficiency gains are of a particular size? Is the achievement of the efficiency gains sufficiently certain?
Those gains that will take a number of years to be achieved will be given less weight.
Are the efficiency gains likely to be offset, partially or fully, by efficiency losses – from productive efficiency losses flowing from a reduction in competitive pressures in the market?
Should the efficiency gains be given less weight due to the limited breadth, scope or the nature of the beneficiaries?
The ACCC is more likely to accept non economic public benefits when the evidence shows that the community broadly supports the proposition.
Authorisation was for an industry code of conduct seeking to ensure that garment sewers who work from home received terms and conditions available under the relevant industrial award. Public benefit was improvement in the working conditions of clothing workers.
Authorisation was for an industry code restricting the marketing and advertising of infant formula (based on UN convention). The ACCC agreed this undermined women’s decision to breastfeed and prevented this marketing occurring.
Authorisation was for an arrangement for Speedo to sponsor ASUA swimming competitions (and having exclusive rights to the swimming costumes) and this was found to promote sport.
Aimed to put a levy on the sale of refrigeration and air-conditioning to reduce greenhouse gases
They restricted membership to do anti-competitive things and wanted people to have rigorous testing about their criminality and the tribunal said you have gone past the public benefit part.
In weighing relevant public benefits and detriments, the Tribunal must compare the position which would or would be likely to exist in the future, on the one hand if authorisation were to be granted, and on the other hand if it were absent.
We are concerned with probable effects rather than with possible or speculative effects. Yet we accept the view that the probabilities with which we are concerned are commercial or economic likelihoods which may not be susceptible of proof.
We are required to look into the future but we can be concerned only with the foreseeable future as it appears on the basis of evidence and argument relating to the particular application.
The benefit need not, it is plain, be necessarily capable of quantitative assessment: but it should be sufficiently definable – have sufficient substance – as to permit some factual judgment of its relative importance.
There was a significant public detriment but it was outweighed by substantial public benefit.
Detriment may arise from increased prices to final consumers due to fewer sales or reductions in quality or terms of sale, increased costs of production due to inefficient practices or reduced innovation and improvement over time by lowering incentives to innovate and slowing the uptake of new technology. In making an assessment the QCMA factors are relevant.
Found that there must be a real chance, not a mere possibility, of the benefit or detriment eventuating. It cannot be speculative or theoretical.
There must be commercial likelihood that the applicants will act in a manner that delivers or brings about the public benefits or the lessening of competition that gives rise to the public detriment.
The ACCC can grant authorisation subject to conditions, revoke authorisation if a condition is not complied with and considers duration of authorisation on a case by case basis (typically less than 5 years).
The Tribunal is separate and independent of the ACCC and re-hears the authorisation application as if the ACCC’s assessment had not occurred. It is de novo.
Applicants must satisfy the Tribunal in the same way as the ACCC. The applicant for authorisation and a party with a sufficient interest in the subject matter of the authorisation can apply to the Tribunal.
Sufficient interest includes a person who shows that their business interests or prospects could be adversely affected by the proposed merger – those relying on their status as a taxpayer, member of the public or are remote or fanciful will not have a sufficient interest.
Tribunal will be conducted informally and not bound by rules of evidence. They have no time limit for non-merger authorisations to make their decision. They may affirm, set aside or vary the ACCC’s determination.
Only the legality and not the merits of the Tribunal’s decision can be challenged in the Federal Court under the ADJR Act.
Commission has recognised redistribution of monoposony profits, easing transition to industry deregulation, improving bargaining power. Opening up new business opportunities, to stop unconscionable conduct, to improve industrial harmony, promotion of industry associations.
Important public benefit case:
See mergers authorization above.
It is first necessary to ask whether the industry or sector is characterised by market failure.
If there is no market failure it is automatically assumed that competition will automatically lead to the most efficient outcome and maximise consumer welfare.
Many health care markets, especially the pharmaceutical market have market failure.
The Medicare Levy Act 1986 (Cth) imposes 1.5% medicare levy tax but no levy on those with very low incomes. This is increased by 1% for some who do not have private health insurance. Medicare benefits are payable to the person who incurs the service but can be avoided by ‘bulk billing’ so that the doctor doesn’t have to collect the debt off the patient.
The Pharmaceutical Benefits Scheme (government subsidy) limits the scope of price competition in respect of most prescription pharmaceuticals.
By lowering the cost of health care, usage of such services will increase. This is the moral hazard problem for insurers.
Competition works well when consumers have access to accurate and reliable information about the price and quality of goods and services on offer and can make valid comparisons. Yet it...
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