Chapter 4 - Schedule 7—third line forcing
Introduction
4.1
‘Third line forcing’ is the practice of offering for
sale one good or service, or a discount on a good or service, on condition that
another good or service is purchased from a third person. A financial
institution, for example, may offer a loan at a discounted interest rate on
condition that the borrower purchase insurance from a nominated supplier.
4.2
Unlike exclusive dealing which is only prohibited under
the Act[23] if it has the purpose, or
has or is likely to have the effect, of substantially lessening competition, third
line forcing is prohibited per se.[24]
The ACCC may, however, grant an authorisation to a party or parties to engage
in conduct that would otherwise be a breach of the third line forcing provisions.[25] The ACCC may not grant such an
authorisation unless satisfied that there are or are likely to be such benefits
to the public that the authorisation should be given.[26]
4.3
There is also a notification process through which a
corporation may gain protection from ACCC enforcement action 14 days after
notifying the ACCC of third line forcing that it is engaging in or proposes to
engage in. The ACCC may object to the conduct where it takes the view that
there is no discernible public benefit that would justify the conduct. In such
an instance, the notification would be withdrawn and the prohibition
reinstated.[27]
4.4
The Dawson Review noted that the ACCC opposes very few
of the hundreds of third line forcing notifications it receives annually.[28]
4.5
The Review did not consider that third line forcing would
inevitably have anti-competitive effects and saw benefits and pro-competitive
outcomes 'where efficiencies in production make it cheaper to produce and sell
two or more products in combination’.[29]
The Review also referred to 'shopper docket' arrangements such as those between
supermarkets and petrol outlets which enabled consumers to buy petrol at a
discount. These arrangements were seen as 'not necessarily anti-competitive'.[30]
4.6
Third line forcing was considered to have anti-competitive
effects ‘where corporations are able to exploit their market power in one
market to distort an unrelated market, perhaps facilitating anti-competitive
price discrimination or barriers to entry’.[31]
The Review provided the following example:
...the ACCC removed the immunity sought through notification by a
retirement country club that proposed to sell retirement units subject to a
condition that purchasers, on resale of their units, engage a real estate agent
nominated by the club. The ACCC determined that there was insufficient public
benefit to justify removing the choice of real estate agent from a vendor in a
competitive real estate market.[32]
4.7
The Review concluded that the current per se
prohibition of third line forcing was not necessarily in consumers' interests
or anti-competitive. It recommended the repeal of the per se prohibition and
its substitution with a prohibition based on a substantial lessening of
competition test.[33]
4.8
Additionally, the Review recommended that related
companies should be treated as a single entity for the purposes of section 47.
In this regard, it commented that:
Concern was also expressed [in submissions] that the prohibition
of third line forcing is anomalous in that it applies where the third person
(the supplier of the forced product) is a corporation related to the initial
supplier of the goods or services, but does not apply where the initial
supplier and the supplier of the forced product are the one corporate entity.
It was submitted that, consistently with other provisions of Part IV, related
corporations should be treated as one business unit.[34]
The provisions in Schedule 7
4.9
The bill implements both recommendations of the Dawson
Review.
4.10
The per se prohibition of third line forcing will be
removed and the conduct subject to a competition test before it constitutes a
breach of the Act. The bill will also treat related corporations as a single
entity.
Matters of interest
4.11
At the Committee's hearing, the ACCC indicated that
third line forcing covered a very wide range of conduct which could be
beneficial for consumers or pernicious in its effect on competition and the
public interest. The ACCC indicated that enforcement would be more difficult
with the removal of the per se prohibition.
Australian
Competition Tribunal – response to ACCC comments
4.12
The Committee invited the President of the Australian
Competition Tribunal, Justice
Goldberg, to respond to comments made in evidence by Mr Graeme Samuel of the ACCC concerning the roles of the ACCC
and the Australian Competition Tribunal. Justice Goldberg's response is included in this report at Appendix A.
Recommendation 1
4.13
The Committee recommends that the Trade
Practices Legislation Amendment Bill (No. 1)
2005 be passed.
Senator George
Brandis
Chair