Chapter 15 - Restrictive trade practices. At the end of this chapter you should understand: the background to the passing of the Competition and Consumer Act 2010 (Cwlth) (CCA) and identify those responsible for its administration, the aims of the CCA, the definition of the terms ‘market’ and ‘competition’,...
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Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Copyright © 2000 McGraw-Hill Australia Restrictive trade practices Chapter 15 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Objectives of Trade Practices Act 1974 (Cwlth) • To improve industry efficiency • To promote competition in the market • To provide consumer protection Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-3 Copyright © 2000 McGraw-Hill Australia Constitutional basis AUSTRALIAN CONSTITUTION S51 • Allows laws made with respect to corporations, trade and commerce Trade Practices Act 1974 (Cwlth) Competition Policy Reform Act 1995 (Cwlth) Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-4 Copyright © 2000 McGraw-Hill Australia Administration of the legislation Australian Competition and Consumer Commission (ACCC) • Responsibility for bringing proceedings for contravention of restrictive trade practices provisions • Grants authorisations, permitting conduct that might otherwise be in breach of the Act • General research, public information and guidance role Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-5 Copyright © 2000 McGraw-Hill Australia Administration of the legislation HIGH COURT FEDERAL COURT • Contravention of restrictive trade practices authorisation INDIVIDUAL ACTION (ACCC may intervene if in public interest) Copyright AUSTRALIAN COMPETITION TRIBUNAL • Appeals against decisions AUSTRALIAN COMPETITION AND CONSUMER COMMISSION • Administers the Act • Brings action against those that contravene the Act 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-6 Copyright â 2000 McGraw-Hill Australia Definitions ã Market - 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-7 Copyright © 2000 McGraw-Hill Australia Trade Practices Act (TPA) Part IV • Section 45: Agreements or covenants • Section 46: Monopolies • Section 47: Exclusive dealing • Section 48: Resale price maintenance Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-8 Copyright © 2000 McGraw-Hill Australia Trade Practices Act (continued) Part IVA • Section 51AA: Unconscionable conduct Part V • Section 52: Misleading and deceptive conduct • Section 60: Harassment and coercion in relation to the supply of goods and services • Section 61: Pyramid selling • Section 63A: Sending unsolicited cards • Section 64: Payment for unsolicited goods or services Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-9 Copyright © 2000 McGraw-Hill Australia Trade Practices Act (continued) Part V • Section 65-65D: Safety of products sold to consumers; product information requirements Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-10 Copyright © 2000 McGraw-Hill Australia Section 45B: Covenants annexed to or running with land • If they substantially lessen competition in market in which corporation or person supplies or acquires goods or services Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-13 Copyright © 2000 McGraw-Hill Australia Section 45C: Price-fixing covenants Do not need to prove competition is reduced Prohibits 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-14 Copyright © 2000 McGraw-Hill Australia Section 45D: Prohibits secondary boycotts • i.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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-15 Copyright © 2000 McGraw-Hill Australia Section 46: Abuse of market power • Prohibits 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-16 Copyright © 2000 McGraw-Hill Australia Elements affecting market power • The ability of a firm to raise prices without losing customers • The firm’s conduct in the market is not affected by competitors • The market share of the firm • The existence of vertical integration • The extent to which new participants can enter the market Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-17 Copyright © 2000 McGraw-Hill Australia Section 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-18 Copyright © 2000 McGraw-Hill Australia Prohibited actions • • • • • Supplying goods and services on the condition that: – the purchaser does not acquire goods or services from a competitor of the supplier – the purchaser accepts restrictions on the right to resupply goods – the 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 products – has failed to accept some restriction on the right of resupply – refuses 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-19 Copyright © 2000 McGraw-Hill Australia Section 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 s48 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-20 Copyright © 2000 McGraw-Hill Australia Section 50: Mergers • Prohibits mergers and acquisitions if likely to substantially lessen competition in a market, including substantial ‘regional’ markets (Authorisation of mergers is available under S88.) Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-21 Copyright © 2000 McGraw-Hill Australia Matters to be considered for mergers • The actual and potential level of import competition in the market • Barriers to entry into the market • The level of concentration in the market • The extent to which substitutes are, or are likely to be, available • The degree of countervailing power in the market • The likelihood that the acquisition would result in the acquirer being able to significantly and substantially increase profits or profit margins Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-22 Copyright © 2000 McGraw-Hill Australia Section 50A: Acquisition outside Australia • Prohibits entity gaining dominance of an Australian company through acquisition of overseas interests Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-23 Copyright © 2000 McGraw-Hill Australia Exceptions to restrictive trade practices provisions Section 51 provides a number of exemptions to the prohibitions above, including: • Conduct authorised by legislation • Industrial agreements covering working conditions • Restrictive provisions in employment contracts • Contracts requiring compliance with prescribed standards • Partnership agreements • Arrangements relating to copyright or patterns • Provisions in a contract for the sale of a business to protect the goodwill of the business Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-24 Copyright © 2000 McGraw-Hill Australia Authorisations (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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-25 Copyright © 2000 McGraw-Hill Australia Notifications • Notify 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 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-26 Copyright © 2000 McGraw-Hill Australia Remedies • Pecuniary penalties: - Corporations - up to $10 million - Natural persons - up to $500 000 • Injunction S80 • Divestiture orders S81 • Damages S82 • Ancillary orders S87 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 15-27 Copyright © 2000 McGraw-Hill Australia ... McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 5- 15 Copyright © 2000 McGraw-Hill Australia Section 46: Abuse of market... McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 5- 6 Copyright © 2000 McGraw-Hill Australia Definitions • Market - Includes... McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 5- 11 Copyright © 2000 McGraw-Hill Australia Section 45A: Price-fixing