Kinh tế học - Chapter 15: Restrictive trade practices

This is the prescribed textbook for your course.Available NOW at your campus bookstore!Copyright © 2000 McGraw-Hill AustraliaRestrictive trade practicesChapter 151Copyright © 2000 McGraw-Hill AustraliaObjectives of Trade Practices Act 1974 (Cwlth)To improve industry efficiencyTo promote competition in the marketTo provide consumer protection2Copyright © 2000 McGraw-Hill AustraliaConstitutional basisAUSTRALIAN CONSTITUTION S51 Allows laws made with respect to corporations, trade and commerce Trade Practices Act 1974 (Cwlth) Competition Policy Reform Act 1995 (Cwlth)3Copyright © 2000 McGraw-Hill AustraliaAdministration of the legislationAustralian Competition and ConsumerCommission (ACCC)Responsibility for bringing proceedings for contravention of restrictive trade practices provisionsGrants authorisations, permitting conduct that might otherwise be in breach of the ActGeneral research, public information and guidance role4Copyright © 2000 McGraw-Hill AustraliaAdministration of the legislationHIGH COURTFEDERAL COURT AUSTRALIAN COMPETITION• Contravention of TRIBUNAL restrictive trade practices • Appeals against decisions authorisationINDIVIDUAL AUSTRALIAN COMPETITION ACTION AND CONSUMER COMMISSION(ACCC may intervene • Administers the Act if in public interest) • Brings action against those that contravene the Act5Copyright © 2000 McGraw-Hill AustraliaDefinitionsMarket - Includes all sellers competing for the same buyers.Competition - Is a mechanism that ensures consumer needs are provided at cheapest costs by businesses through control of the use of society’s resources.6Copyright © 2000 McGraw-Hill AustraliaTrade Practices Act (TPA)Part IVSection 45: Agreements or covenants Section 46: MonopoliesSection 47: Exclusive dealingSection 48: Resale price maintenance7Copyright © 2000 McGraw-Hill AustraliaTrade Practices Act (continued)Part IVASection 51AA: Unconscionable conductPart VSection 52: Misleading and deceptive conductSection 60: Harassment and coercion in relation to the supply of goods and servicesSection 61: Pyramid sellingSection 63A: Sending unsolicited cardsSection 64: Payment for unsolicited goods or services8Copyright © 2000 McGraw-Hill AustraliaTrade Practices Act (continued)Part V Section 65-65D: Safety of products sold to consumers; product information requirements9Copyright © 2000 McGraw-Hill AustraliaSection 45: Agreements or covenants affecting competitionMust prove competition has been reducedProhibits the making of contracts, arrangements or understandings containing exclusionary provision, or with the effect of substantially lessening competition in the market place.Examples: - market-sharing agreements for territory - restrictions on output produced - limited amount of discount for areas - limited participation in other associations - limited numbers allowed to participate10Copyright © 2000 McGraw-Hill AustraliaSection 45A: Price-fixing agreementsDo not need to prove competition is reduced Prohibits “horizontal” price-fixing agreements, by contract, arrangement or understanding, to fix, control or maintain prices. Prohibits the fixing/controlling/maintaining of prices through the practice of ensuring the same - prices - discounts - allowances - rebates - credit for businesses at the same level of commercial activity e.g. retailers.11Copyright © 2000 McGraw-Hill AustraliaSection 45B: Covenants annexed to or running with landIf they substantially lessen competition in market in which corporation or person supplies or acquires goods or services.12Copyright © 2000 McGraw-Hill AustraliaSection 45C: Price-fixing covenantsDo not need to prove competition is reducedProhibits covenants that have effect of price fixing, whether competition is lessened or not. i.e. Practice of - fixing - controlling - maintaining prices via allowing the same - prices - discounts - allowances - rebates.13Copyright © 2000 McGraw-Hill AustraliaSection 45D: Prohibits secondary boycottsi.e. When two parties engage in conduct that hinders or prevents a third party from supplying, acquiring or from otherwise dealing with another party.If it causes substantial loss or damage, lessening competition.14Copyright © 2000 McGraw-Hill AustraliaSection 46: Abuse of market powerProhibits corporations with a substantial degree of market power from taking advantage of that power to: - substantially damage or eliminate a competitor - prevent entry of a competitor into any market - prevent or deter anyone from engaging in competitive conduct in any market.15Copyright © 2000 McGraw-Hill AustraliaElements affecting market powerThe ability of a firm to raise prices without losing customersThe firm’s conduct in the market is not affected by competitorsThe market share of the firmThe existence of vertical integrationThe extent to which new participants can enter the market 16Copyright © 2000 McGraw-Hill AustraliaSection 47: Exclusive dealing (vertical restraint)Prohibits a supplier from imposing restrictions on the freedom of its customers to deal with others, and vice versa, if substantially lessening competition.17Copyright © 2000 McGraw-Hill AustraliaProhibited actionsSupplying goods and services on the condition that: the purchaser does not acquire goods or services from a competitor of the supplierthe purchaser accepts restrictions on the right to resupply goodsthe purchaser acquires other goods or services from a third party.Acquiring goods or services on condition that the supplier accepts some restriction as to the freedom to supply to third parties.Refusing to supply goods or services because the purchaser:has dealt or refused to cease dealing in a competitor’s productshas failed to accept some restriction on the right of resupplyrefuses to acquire other goods or services from a third party.Refusing to acquire goods or services because the supplier refuses to accept some restriction on the right to supply third parties.Aiding and abetting, procuring, counselling or inducing any corporation to engage in any of the conduct cited above. 18Copyright © 2000 McGraw-Hill AustraliaSection 48: Resale price maintenance(vertical price fixing)Prohibits a supplier of goods and services from stipulating the minimum price at which goods to be supplied by them can be resold.S96-100: Relevant qualifications and definitions required for s4819Copyright © 2000 McGraw-Hill AustraliaSection 50: MergersProhibits mergers and acquisitions if likely to substantially lessen competition in a market, including substantial ‘regional’ markets. (Authorisation of mergers is available under S88.)20Copyright © 2000 McGraw-Hill AustraliaMatters to be considered for mergers The actual and potential level of import competition in the marketBarriers to entry into the marketThe level of concentration in the marketThe extent to which substitutes are, or are likely to be, availableThe degree of countervailing power in the marketThe likelihood that the acquisition would result in the acquirer being able to significantly and substantially increase profits or profit margins21Copyright © 2000 McGraw-Hill AustraliaSection 50A: Acquisition outside AustraliaProhibits entity gaining dominance of an Australian company through acquisition of overseas interests.22Copyright © 2000 McGraw-Hill AustraliaExceptions to restrictive trade practices provisionsSection 51 provides a number of exemptions to theprohibitions above, including:Conduct authorised by legislationIndustrial agreements covering working conditionsRestrictive provisions in employment contractsContracts requiring compliance with prescribed standardsPartnership agreementsArrangements relating to copyright or patternsProvisions in a contract for the sale of a business to protect the goodwill of the business.23Copyright © 2000 McGraw-Hill AustraliaAuthorisations (except for S46: Misuse of power)Sections 88-91: For conduct which may breach provisions, allowed if - agreement will result in a benefit to the public which outweighs anti-competitive behaviour.24Copyright © 2000 McGraw-Hill AustraliaNotificationsNotify commission that S47 (exclusive dealing) is to be infringed before authorisation which eliminates any liability that may result for contravention of section.If disallowed after consideration, action must stop immediately or penalties will be imposed.25Copyright © 2000 McGraw-Hill AustraliaRemediesPecuniary penalties: - Corporations - up to $10 million - Natural persons - up to $500 000Injunction S80Divestiture orders S81Damages S82Ancillary orders S8726Copyright © 2000 McGraw-Hill Australia