Regulatory regime
Legislation
The Trade Practices Act 1974 (Cth) (TPA) is the major legislation governing competition and consumer protection in Australia. The aim of the TPA is ‘to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’. Part IV of the TPA prohibits any anti-competitive agreements or practices which have the purpose, effect or likely effect of substantially lessening competition in a market (the competition test). There are also certain per se offences—ie, price fixing, collective boycotts, third line forcing and resale price maintenance. Other agreements and practices are subject to the competition test. Parallel legislation was enacted in 1995 by Australian States and Territories to overcome constitutional difficulties.
Regulatory entities
The Australian Competition and Consumer Commission (ACCC) is the main competition regulator. Since 1995 it has enjoyed wider powers to ensure that the Australian electricity, gas, telecommunications, transport and other related industries operate more competitively. It is anticipated that other industries will be added to the ‘domain’ of the ACCC, such as water and carbon trading. Parallel competition, fair trading and consumer protection laws are overseen by various state and territory regulators. Recently, two new regulators of note were established—the Australian Energy Regulator (AER) (largely controlled by the ACCC) and the Australian Communications and Media Authority (ACMA). AER is responsible for regulating energy markets while ACMA assists in the regulation of broadcasting, telecommunications and radio communications in a broad sense.
Penalties for breaching the TPA
Significant penalties may be imposed by the courts if the TPA is breached. Since 1 January 2007, the maximum penalties for breaching the competition provisions of the TPA (which can only be sought from the court by the ACCC) can be as high as 10 per cent of the annual turnover of the group of Australian companies in which the guilty company operates, in certain circumstances. The Commonwealth Government proposes to introduce in the near future criminal sanctions for serious cartel behaviour.
Major areas of ‘oversight’ by the ACCC
Mergers
Australia does not have a compulsory notification system for mergers (unlike many other countries). Because section 50 of the TPA prohibits anticompetitive mergers, the practice has developed for parties involved in major mergers (especially if international parties are involved), to seek ACCC informal clearance of the merger. However, this clearance does not have legal effect—it provides an indication that the ACCC will not challenge the merger. Mergers cannot be challenged before consummation by private parties, but divestiture action is available to private parties once the merger is completed, if the merger is found by a court to be anti-competitive. In 2006, some 600 mergers were cleared by the ACCC.
Since 1 January 2007, parties may seek formal clearance of a merger from the ACCC. A formal clearance procedure has a binding legal effect. A rejection by the ACCC of an application for formal clearance may be reviewed by the Australian Competition Tribunal (tribunal). Its decision is final.
Mergers may also be authorised (i.e. granted immunity from the operation of the TPA) if they are assessed to produce public benefits that outweigh the anti-competitive detriments. Since 1 January 2007, the tribunal deals with authorisation applications for mergers.
Many merger clearances are accompanied by undertakings sought by the ACCC to resolve any competition issues. The undertakings usually involve divestiture of assets; the ACCC is becoming very reluctant to accept behavioural undertakings.
Other anti-competitive behaviour
Collusive behaviour
The TPA prohibits certain types of conduct or agreements as per se illegal (eg, price fixing and market sharing). The ACCC in 2003 introduced an immunity programme for parties engaged in cartel behaviour if they are the first to provide the ACCC with information relating to the cartel. The informing party must not be the ringleader of the cartel. Any grant of immunity by the ACCC does not relieve the relevant party or others from facing civil proceedings from third parties. There is increasing activity in this and related areas.
Other anti-competitive agreements and conduct may also be challenged by the ACCC, and if found to be in breach, courts may impose pecuniary penalties.
Civil enforcement
The Australian system relies on a dual enforcement regime—not only is the ACCC able to pursue anti-competitive agreements and conduct but private parties may also seek damages, injunctions and other relief for breaches of the TPA.
Freehills’ competition and market regulation group and its partners are consistently ranked in the top tier of several prominent legal tables. The national group’s profile in Sydney, Melbourne, Perth and Brisbane is well recognised, offering clients the benefit of extensive experience in all aspects of competition law and market regulation across diverse industries.
An integral part of any competition and market regulation practice is its working relationship with key regulators. Freehills’ second to none relationship with the ACCC is widely recognised by its clients. They enjoy the benefit of Freehills’ approach to the ACCC, which encourages a progressive and proactive treatment of mergers and other issues arising out of the operation and interpretation of the TPA. We also pride ourselves on our close working relationships with key economists and other experts to ensure the analysis provided on major international and national transactions is of the highest order.
Our group works closely with the firm’s award winning M&A and projects groups on the competition law aspects of all of their transactions. As a result, merger clearances and advisory work on most of the significant transactions in the Australian market form a large part of our group’s practice. In addition to domestic mergers, we continue to advise on major international transactions, acting as lead lawyers in various anti-trust filings in the US, Europe, Africa, South America and Australia. We also liaise with US and European firms on cartel activity worldwide. Freehills is widely acknowledged as Australia’s pre-eminent law firm, with the resources and expertise of around 1,000 lawyers, including more than 200 partners, across offices in Australia and South-East Asia. We undertake high-level legal work for Australia’s top companies and are involved in many of the largest and most complex commercial transactions in this country.
An extract from The 2007 Handbook of Competition Enforcement Agencies, a Global Competition Review special report
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