Reform of the competition provisions of the Australian
Trade Practices Act
A paper prepared for the Conference at ANU on Comparative Experience in Competition Policy Reform:
Australia, Japan and East Asia
22-23 September 2008
© Frontier Economics Pty Ltd, Melbourne.
Business and competition
Efficient business has an interest in competition. The interests of inefficient
business are opposed to competition.
 Australia’s first antitrust legislation, the Australian Industries Preservation Act of
1906, was introduced with the help of one of Australia’s largest
manufacturers.
 The same was true of the US Sherman Act of 1890. The leading business
group agitating for antitrust legislation from the 1870s was the Grangers or
Patrons of Husbandry.
 Antitrust legislation aids neither big nor small business. May attack conduct
that promotes market power (or even market concentration) but not economic
power.
2
Original form of the TPA: substantive provisions
 No contracts or understandings in restraint of trade or commerce.
 No taking advantage of position of substantial control of a market to damage
competitors or potential competitors.
 No exclusive dealing that substantially lessens competition. Third-line forcing
proscribed per se.
 No resale price maintenance.
 No price discrimination that substantially lessened competition.
 No mergers that had the likely effect of substantially lessening competition.
 Act established a Commission.
3
Monopolisation
 From the 1970s, was concern by small business about predatory pricing. This
was the motive behind a reduction in the degree of market power required to
infringe the section. This finally occurred in 1985.
 The concern gathered real impetus with the decision of the High Court in
Boral - 2003.
 Senate Economic References Committee of 2004 recommended changes to
protect small business.
 Result was a new provision that proscribed: (i) a corporation that has a
substantial market share; (ii) from supplying for a sustained period at a price
less than the relevant cost; and (iii) for the purpose of damaging actual or
potential competitors.
4
Exclusive dealing
 This provision dealt essentially with verticals – subject to an slc test.
 The exception was the per se prohibition of third-line forcing.
 Expert committees in 1993 and 2003 recommended removal of the per se
prohibition. Government agreed in 2003 and then changed its mind.
5
Price discrimination
 Was proscribed (subject to slc test) in 1974.
 The very first review recommended repeal on grounds of creating disincentive
to offer low prices. This continued until 1993.
 Government repealed the provision in 1995.
 Independent grocers argued in the latest review (2003) that the provision
should be reinstated. This was rejected.
6
Lessons
 Do not have a group of public servants in charge of the Act.
 Have few reviews of the legislation.
 Business submission may be good or bad for competition.
7
Disclaimer
None of Frontier Economics Pty Ltd (including the directors and employees) make any representation or warranty as to the accuracy or completeness of this report.
Nor shall they have any liability (whether arising from negligence or otherwise) for any representations (express or implied) or information contained in, or for any
omissions from, the report or any written or oral communications transmitted in the course of the project.
The Frontier Economics Network
Frontier Economics Limited in Australia is a member of the Frontier Economics network, which consists of separate companies based in Australia (Melbourne,
Sydney & Brisbane) and Europe (London, Cologne and Brussels). The companies are independently owned, and legal commitments entered into by any one
8
company do not impose any obligations on other companies in the network. All views expressed in this document are the views of Frontier Economics Pty Ltd.
THE FRONTIER ECONOMICS NETWORK
MELBOURNE | SYDNEY | BRISBANE | LONDON | COLOGNE | BRUSSELS
Frontier Economics Pty Ltd, 395 Collins Street, Melbourne 3000
Tel. +61 (0)3 9620 4488 Fax. +61 (0)3 9620 4499 www.frontier-economics.com
9