Sections 45, 47, 50 and 50A: substantial lessening of competition standard

Substantial lessening of competition standard – required in sections 45 and 47

45. Contracts, arrangements or understandings that restrict dealings or affect competition

47. Exclusive dealing

50. Prohibition of acquisitions that would result in a substantial lessening of competition

50A. Acquisitions that occur outside Australia

• Sections 45 and 47 require the court to assess whether the provision or the conduct at issue: has the purpose or has the effect or is likely to have the effect of substantially lessening competition in a market.

• Sections 50 and 50A require the court to assess whether the acquisition of shares or assets: has the effect, or is likely to have the effect of substantially lessening competition in the market.

• The CCA is concerned with competition in the market rather than the ability of individual sellers to compete. The conduct must substantially lessen competition in the market as a whole.

The meaning of ‘Substantial’ for Substantial Lessening of competition

Rural Press Limited v ACCC (2003):

• Substantial means meaningful or relevant to the competitive process.

Tillmanns Butcheries Pty Ltd v Australian Meat Industry Employees Union

• Substantial loss or damage means ‘real or of substance and not insubstantial or nominal.’

Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd:

• Substantial means considerably.

Eastern Express Pty Ltd v General Newspapers Pty Ltd:

• Rejected the view that an effect on competition that was more than insignificant was for that reason alone substantial.

The meaning of ‘PURPOSE’ for substantial lessening of competition

• The defendant must have a subjective purpose of lessening competition. Yet for section 50 and 50A purpose is not relevant.

ACCC v Australian Medical Association Western Australia Branch Inc (2003) – page 192

• The reference in s 45(2) to the purpose provision of a contract, arrangement or understanding are to the subjective purpose of those engaging in the relevant conduct.

The meaning of ‘EFFECT’ for substantial lessening of competition

• The next step if subjective purpose is not proved or is not relevant.

• TEST: the future with and without test (Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) (1982)):

  • This test requires the relevant body to consider how, in the future, market forces will work ‘with’ (factual) and ‘without’ (counterfactual) the conduct at issue. In many cases the ‘without’ will be the status quo but if there are other developments imminent they will be considered.

  • THIS IS NOT a ‘before’ and ‘after’ comparison.

  • It is always important to look at barriers to entry. This is the most important thing!

Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) – page 196

• Stirling Harbour sought a declaration that the letting of the proposal tender would be contrary to ss 45 and 47 and of the competition code. Stirling argued that the effect of granting an exclusive licence for towage services prevented new entry or lessened potential competition.

• FCFCA: The test is not a before or after test but the existing state of competition in the market may throw some light on the likely future state of competition in the market absent the impugned conduct. Conduct has the effect of lessening competition in a market only if it involves a reduction in the level of competition which would otherwise have existed in that market but for the conduct in question. The mere fact that one can conceive of other less restrictive alternatives by which a commercial objective might be achieved is not sufficient of itself to lead to a conclusion that the conduct has the effect of lessening competition.

The meaning...

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