In the lead up to the federal election, the government has placed big businesses engaging in predatory pricing within its sights, with proposed amendments to section 46 of the Trade Practices Act to be introduced into parliament.
Predatory pricing ordinarily involves a powerful firm pricing goods or services below some measure of cost with an intention to recoup losses once smaller competitors have been forced out. This conduct is currently covered by section 46. However, the courts and commentators have voiced concern over the operation of this section given the difficulty of distinguishing between competitive low pricing and predatory pricing. Most notably, the High Court cases of Boral v ACCC in February 2003 and then Rural Press v ACCC in December 2003 have been seen by small business groups to restrict the operation of section 46.
Media reports suggest that the proposed reforms by and large implement the recommendations of the Senate review conducted by the Economics References Committee in March 2004, including re-wording section 46 to:
- make it easier to show that a company has a substantial degree of power in a market, and
- provide stricter rules for predatory pricing dealing specifically with ‘long term pricing below cost’.
This is a continuation of the government’s trade practices reform program with the specific aim of protecting small businesses. It is expected the amendments’ passage through parliament will face a close vote, with all eyes on Senators Joyce and Fielding. We await the precise wording of the new provisions with interest.
More information
For information regarding possible implications for your business, contact a member of the Competition & Market Regulation team.