Will an Effects Test protect Small Business’ and enhance the competitive process in Australia?
Recently, there has been much debate surrounding the proposed changes to section 46 of the Competition and Consumer Act (the Act). This section aims to prohibit the misuse of market power. The recommended amendments were proposed as a result of significant criticism that the section had been ineffective.
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Currently, section 46(1) requires that a corporation ‘take advantage’ of their market power for a prohibited purpose. The vast majority of cases under this section have been unsuccessful because they have failed to satisfy this element. The Courts have tended to treat this as a separate requirement and have not considered it satisfied where a corporation with market power would or could have engaged in the same conduct without its market power even if the purpose has been established.
The leading cases of Rural Press Limited v ACCC, Boral Besser Masonry Ltd v ACCC and Leway Publishing Pty Ltd v Roberts Hicks Pty Ltd have all been decided against the regulator or plaintiff. In the most recent case of ACCC v Cement Australia, the ACCC was unsuccessful in its claim under section 46(1). It has been argued that the issue is due to the interpretation of the words “taking advantage of”. In this case the Court held that if a company with market power is more efficient and effective in conducting business, it is not a misuse of power if it takes advantage of their efficiency to achieve effective campaigns that have an impact on the operations of other competitors.
The proposed change would delete the words “taking advantage of the relevant market power” from section 46(1). This would then require the court to assess the purpose, effect or likely effect of the relevant conduct and whether it has led to a substantial lessening of competition.
Many small businesses support the proposed changes, believing that it will significantly improve their ability to compete effectively within the market. However, there is scepticism over whether such changes will actually make it any easier for section 46(1) to be satisfied. This is due to many of the plaintiffs or regulators (such as the ACCC) that have run a case in reliance of section 46(1) have failed to highlight the critical issues that are required to be addressed. Furthermore, the proposed amendments require the court to be satisfied that the purpose, effect or likely effect of the conduct has led to a substantial lessening of competition (effects test), which will also cause additional complications.
Unless plaintiffs are able to overcome the difficulty of satisfying the effects test, then it is unlikely that the proposed changes to section 46(1) will be effective in making it any easier to establish a misuse of market power by a corporation.
If you require any further information in regards to the above article, please do not hesitate to contact one of our lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form.