#7176 - Introductory - Competition Law

You do not need to do restraint of trade. Except for s 4M(2) says that the act works in parallel with competition law. Peters v Peters talks about the relationship with the CCA and the commonwealth restraint of trade. They are different approaches. Restraint of trade is straight common law. So do not bother with chapter 2.

You must be able to apply what you read to facts. Both exams in this course are problem based. There will be scenarios with problems and there is unlikely to be a definite answer. There may not be a right answer. You must just show that you can approach dealing with the problem, using the case law and the working of the act. You need to say what do you need to know from the client to give advice? The client will not thank you if you say they can’t do what they want and then charge them. You need to work out if they can do it and if they can’t what the next best thing is and what you need to help them get what they want.

QUESTIONS FOR DISCUSSION ON 24 JULY

Discuss the evolution of competition law in Australia in the context of the current CCA

• Australian competition law can be traced back to English common law, which attacked anti competitive conduct.

• The Court of Kings Bench case: Darcy v Allein (1602), found that Darcy’s exclusive right to import playing cards in England was utterly void. This is because a monopoly is against the common law and against the divers Acts of Parliament.

• Crown monopolies were also attacked in the Statute of Monopolies 1623, which was passed to end the Crown granting monopolies. Yet Parliament did retain the right to grant patent monopolies for new inventions.

• The Dyer’s Case (1414) found that all contracts in restraint of trade were absolutely prohibited. But later in Mitchel v Reynolds (1711) it was held that ‘reasonable’ restraint was permitted.

• There was an early common law of conspiracy doctrine which rendered traders illegal and liable to civil action when they engaged in competitive activity. E.g. R v Norris, in which an agreement by salt producers to fix prices above the prevailing level was held unlawful by Lord Mansfield (whether it was fixed high or low). Yet conspiracy had many limitations because it did not respond aggressively to anti-competitive conduct and would not allow third parties to challenge restraint or recover damages if they suffered loss.

• 1906 Act was struck down based on the Corporation’s power. There was the reserve powers of the state doctrine. Section 6 of the Act applies the Act to people who deal with corporations and not corporations being active. The issue was whether the Act extended to people dealing with corporations. Corporations power was a big power before because the act only applied to trading corporations and you would not have the act applied to you if you did not fit in the heads of power. Stricklin v Rockland Pipes and other cases were people going to court to argue the TPA did not apply to them. This died of in 1995 and the Act was changed by the Hilmer Review.

How influential was the US law originally and is it important now?

• The common law in the early 19^th century in the US was applied with more vigour than in England. Price fixing and market division were generally prohibited.

• Yet the common law was inadequate to deal with the anti-competitive activity of the railways as they expanded. There was also a rise of trusts to control markets across the most important sectors of the economy. This led to the Sherman Antitrust Act 1890. It established that every contract or combination in the form of a trust or conspiracy in restraint of trade or commerce among several states or with foreign nations is declared illegal (there was a large fine or imprisonment penalties): provision 1. It also prevented people monopolising or attempting to monopolise any part of trade or commerce: provision 2.

• The provisions 1 and 2, above, influenced the Trade Practices Act 1974 (Cth). S 45 was an abbreviated version of s 1 of the Sherman Act. They prohibit substantially the same form of conduct. Similarly, s 2 of the Sherman Act influenced s 46 of the TPA.

• In the US, Standard Oil Co of New Jersey v US (1911) found that restraints of trade would only violate the Sherman Act if they reduced competition to an unreasonable extent. This is reflected in the TPA which requires conduct to ‘substantially lesson competition’ before there will be contravention.

• The Clayton Act 1914 US was introduced to make the law of reason (mentioned in the bullet point directly above) less vague. S 3 of the act deals with what in Australia is called ‘exclusive dealing’ (you cannot sell or lease or contract for sale of goods on the understanding that the lesee or purchaser shall not deal in the goods of a competitor/competitors of the seller). It influenced s 47 of the TPA. S 7b of the Clayton Act prohibits mergers in terms that resemble those used in s 50 of the TPA. See page 8 of text,.

• The USA was important to the creation of the Australian act. Lionel Murphey talked about the drafting of US law. The big thing that happened was the Lionel Murphey was similar to the Sherman Act that anything in restraint of trade will be prohibited. But the Quadromaine case found that it only meant common law constrain of trade and then the act had to be re done. The courts did not want to change how they looked at the act. The court was not prepared to take an enlightened view of the act. At this time you couldn’t interpret with reference to the headings of the statute or to explanatory memorandum (the acts interpretation act allowed this later). 44 MMZA is stuff on access and is a nightmare.

What was the major impact of the Hilmer Review? Was this important?

• It was the most comprehensive review of Australian competition law (1992-1993). It was conducted by the Independent Committee of Inquiry into National Competition Policy.

• It argued that there should be a national competition policy rather than reforms advanced on a sector by sector basis.

• Most of the reforms put forwarded regarding the TPA were accepted. It led to the Competition Policy Reform Act 1995 (Cth). It was found that no participant in the market should engage in anti-competitive conduct against the public interest. There should be universal and uniform rules applied regardless of the form of business. There should be a transparent assessment process to review anti-competitive behaviour. The aim was to develop an open, integrated domestic market in which unnecessary barriers to trade and competition were removed and to reduce complexity and administrative duplication.

• Hilmer said it is unfair that if you are in association, partnership etc that the Act doesn’t apply unless you are involved in interstate commerce. The Act should not be determined by the form of how your business operates. E.g. Law firms only operated in one state and they could not be caught under the Act. Under the Hilmer arrangements, everyone who signed the documents agreed to adopt the schedule and not change it without everyone discussing it. States gave up their autonomy in this area because of significant payments – 897 million paid to states and territories over a 6-7 year period for doing things like reviewing all the legislation to see if things could be done in a less anti competitive way. Adopting an access regime for their monopoly services. (Part 3A is a mandated access regime and in NSW where things like monopolies need to be accessed, they are dealt with the IPART – Independent Pricing and Review Tribunal in NSW (and other states)).

• There were far sighted politicians at the time who realised that the productivity figures for Australia were going down and we needed to do something to improve efficiency and productivity. The greater good was put in front. This was around the banana republic time and Australia was in a recession. Australia made large productivity gains in this time. We were being run like 9 countries and we are far too small to be dealt with in early isolation like this.

• E.g. the dairy industry was very regulated. Not one drop of milk was allowed to go across state at the time. This was because they were scared that the price for milk would drop and there was a Farm Gate fixed cost for milk. This was not efficient. They gave people money to exit the industry. NSW dairy farmers were paranoid from milk coming from Victoria because it is cheaper and they get more rain. When the barriers went down the supermarkets took all the market power. The idea was that the barriers would go down and the efficient producers would be paid more and the inefficient ones would leave. There would be no more allocating how many milk products were produced.

• There were problems where the state could exempt their friends from the act from regulations.

• The act applies to the crown in right of the state so long as they are carrying on business. LOOK at s 2B and s 2C.

• In McMillan: is procurement by crown caught by carrying on business?

• In the Baxter Case, there was an RFT that envisaged that you could bundle hospital products. Bundle bundled sterile water (it had 90% of the market) with a treatment for diabetes (which it did not have a monopoly). Baxter bundled the two but the price was almost as cheap as the monopoly price. Did they abuse their market power? It was accepted that the state purchasing authorities were not bound by the act. In this situation you would think that government would have a lot of market power but in this case court found Baxter had the market power. Because of the Shield of the Crown (and...