Coalition Senators' Dissenting Report[1]
The Federal Government's proposals
to amend Section 46 in relation to predatory pricing takes small business back
to the former complexities and improbabilities of having to prove the market
power test. The market power test was given an onerous interpretation by the
High Court in the Boral Decision in 2003. Small businesses seeking to take
legal action for predatory pricing under the market power test have been
required to satisfy the High Court market power test before they could even
argue that the behaviour by the big business was anti-competitive. If the small
business could not prove market power then they could not have any remedy under
law against predatory pricing. Reliance on the market power test would be a retrograde
step as is clearly exemplified in the evidence delivered to the Senate Inquiry
which showed under the market power test the ACCC has not commenced any new
court prosecutions under s 46 since the Boral Case in 2003.
...if a small business feels that it
has been the subject of predatory pricing or predatory conduct of any sort they
are effectively looking down the barrel of a 10-year case appealed all the way
to the High Court and a cost of $1 million or more —God knows how much. That is
just an impossibility for a small business. The only recourse that a small
business has is if the ACCC will take up a case and prosecute it. There has
been a clear reluctance on the part of the ACCC to do that...[2]
In contrast, the market share test
as stated in Section 46(1AA), generally known as the Birdsville Amendment,
gives Australians, especially those in small business, access to an effective
legal remedy against predatory pricing. Predatory pricing is anti competitive
as it removes efficient competitors from the market and with a reduction in
competition comes inflation leading to higher interest rates and a general
disfunctionality in the economy.
So often it is put that proving substantial
market share is all that one has to do to win a case on predatory pricing but
the evidence stands for itself in that over 75 cases have been taken to the
ACCC, under the Birdsville Amendment, involving a complaint against an entity with
substantial market share but this has not been held to be a breach of the law
as the other hurdles in the Birdsville amendment had not been satisfied.
Far more needs to be proved to win a
case of predatory pricing under the Birdsville Amendment than just having substantial
market share. There are sufficient safeguards in the Birdsville Amendment that
have ensured that it has not dampened legitimate competition in any way.
Accordingly, the Birdsville Amendment strikes an appropriate balance in
preventing predatory pricing while in no way undermining legitimate
competition. In summary, there is no evidence that the Birdsville Amendment is
undermining competition in any way. Rather, there is ample evidence from the
ACCC alone that there are sufficient safeguards in the Birdsville Amendment.
In this
environment, the Federal Government has failed to make out a case for amending
the Birdsville Amendment. Instead, the Government is proposing to undermine the
effectiveness of the Birdsville Amendment by reintroducing the very onerous
market power test.
The government's...proposed amendments
are what can be described as procedural changes and do not deal with the
underlying substantive weaknesses or gaps in key sections of the Trade
Practices Act dealing with abuses of market power and unconscionable conduct by
large and powerful entities.[3]
In addition, the Government is proposing
adding a further hurdle; the Take Advantage Test. The Take Advantage Test will
add extra complexities to the process of proving predatory pricing which will
be to the detriment of small business. The additional hurdle of the Take
Advantage Test is unnecessary given the already sufficient safeguards in the
Birdsville Amendment. Clearly, the Federal Government's proposal to insert the
Take Advantage Test as an additional hurdle is yet another form of excluding
small business from recourse to the courts against anti competitive actions such
as predatory pricing.
The Government has put forward the
argument that having both a market power and a market share test leads to
uncertainty yet has stated that having separate predatory pricing offences, is
on balance a good thing.
I have reached the view that having
separate predatory pricing offences is, on balance a good thing...However, having
strengthened the substantial degree of market power test, there is no need, in
my view, to have a separate 'market share' test for predatory pricing. Having a
new market share test creates considerable uncertainty in the market as to how
it will be interpreted by the courts. Accordingly; we will legislate for the
test of breaches of 46AA to be 'a substantial degree of market power'.[4]
The Federal Government's assertion
that market share tests lead to uncertainty fails to recognise that the ACCC
will, when assessing predatory pricing claims, closely review the market share
of the entity allegedly engaging in the predatory pricing. Market share is a
well understood concept and can be easily defined by reference to the relevant
market. While market share depends on the market definition, it is clear that
once we define the relevant market we can determine the market shares of each
entity and determine if that market share is substantial. The word
“substantial” is a generally understood term which has long been used
throughout the competition law sections of the Trade Practices Act.
The Federal Government's further
assertion that having both market share and market power tests in s 46 means
that there is a “dual track” process under s 46 fails to acknowledge that other
competition law sections of the Trade Practices Act also contain a “dual
track” process. Having two different tests within s 46 is not a valid criticism
and a dual track approach is totally consistent with the approach taken in
other competition law sections of the Trade Practices Act.
If there is a concern that the
substantial market share test should be discarded as it is not used elsewhere
in the Trade Practices Act, one would presume that the most effective
way to deal with this lack of use elsewhere would be to expand the use of the market
share test to other sections of the act and remove the market power test
altogether. In fact, the real concern is with the narrow ambit of the market
power test and the fact that not one witness through out the whole enquiry was
able to provide any conclusive evidence that the market power test would fully
capture all forms of predatory pricing.
One argument that is raised is that
the Trade Practices Act is there to protect competition and not competitors. It
stands to reason that you will not have competition without competitors and the
more efficient and vigorous competitors you have, the stronger the competition.
Predatory Pricing and other like actions remove competitors so as to reduce
competition. They remove the competitors that are competitive, or are likely to
be competitive, which means that they remove from the market the potential for
the consumer to get a better price. The destruction of competition is not good
for consumers and therefore we need the retention of the Birdsville Amendment
in its current form as this is essential to the preservation of competition. It
is the role of Government to make sure a competitive environment exists. A corporation
with substantial market share should not be allowed to reduce competition to
the detriment of consumers. The Government's proposed undermining of Section 46(1AA)
only serves the interests of those corporations with substantial market share
as these corporations will be given the green light to engage in predatory
pricing by the Government's proposal to replace the current market share test
in the Birdsville Amendment with the new and extremely onerous hurdles of the
Market Power and Take Advantage tests.
In the representations from the law
council it was made clear and apparent that, to the best of their knowledge,
they had not represented a plaintiff in bringing a successful s 46 case under the
Market Power Test but they had been quite successful in their representations on
behalf of defendants that have escaped prosecution under s 46. We see this as
clear evidence of the inadequacies of the Market Power Test under s 46 as it
stood. Now the Government is proposing to take us back to a point where there
will be no s 46 cases taken to Court. It seems paradoxical that the Government would
say that they are concerned about competition and prices and in the same breath
be moving amendments to the Birdsville Amendment to make the situation worse.
Take Advantage
The take advantage amendments proposed
by the Government are merely a codification of the case law on the
interpretation of take advantage. The opposition does agree that the Rural
Press Case requires that the current onerous interpretation of the Take Advantage
Test should be relaxed. However, we believe that the Government's proposed
amendments on take advantage will not make it easier to take s 46 cases. Under
the present court interpretation of take advantage, the ACCC needs to prove
that the corporation is engaging in conduct that is unique to the market power
held by the corporation. If the corporation can engage in the same conduct with
or without market power, then the corporation is not taking advantage of its
market power according to the High Court. So for instance, since selling below
cost may be an action that one could undertake whether one had market power or
not, such conduct would not represent a taking advantage and therefore the
entity would not be in breach of s 46.
In short the Corporation with market
power had to have done something they wouldn't have otherwise done in order to be
deemed to have taken advantage of their market power. The Government's position
once more is flawed as it relies on the market power and take advantage tests.
Since proving a substantial degree of market power and a taking advantage has
been proved to be near impossible, the Govt position means that the ACCC and
small business will not be able to take s 46 cases to court unde the Government's
proposals.
We already know from price surveys
that, if a major chain store has no local competition, as is the case in some
areas of Sydney or Melbourne, their prices are relatively higher than the same
store in areas where there is competition. In answering your question about
whether prices go up in the
absence of
competition, certainly, yes.[5]
Removing the monetary ceiling to bringing cases under s
51AC
The removal of the monetary ceiling
will not assist small businesses in bringing unconscionable conduct cases under
s 51AC. The Courts have interpreted the concept of unconscionable conduct in
such an onerous manner that there have been very few successful cases under s
51AC. The fundamental problem with s 51AC is that it currently lacks a
statutory definition of what is unconscionable conduct. Unless the fundamental
problem with s 51AC is dealt with, the removal of the monetary ceiling will be
of no practical benefit to small businesses.
The appointment of an ACCC Deputy Chairperson with responsibility
for small business
The appointment of an ACCC Deputy
Chairperson with responsibility for small business will be of no practical
benefit to small businesses unless the Deputy Chairperson is given new powers
to assist small business. We have seen the failure of the Petrol Commissioner
because the appointee was not given new powers and this serves as a reminder
that appointments to the ACCC must be given new powers if they are to be
effective.
Access to the Federal Magistrates
Court
Allowing access to the Federal
Magistrates Court for cases under s 46 will be of no practical benefit to small
businesses unless the Birdsville Amendment is retained and small businesses are
given financial assistance to bring s 46 cases. Consideration should be given
to the establishment of a Small Business Advocate that can help small
businesses bring s 46 cases in the Federal Magistrates Court.
Recommendation 1
Section 46 (1AA) be left as is.
Recommendation 2
A statutory definition of
unconscionable conduct be in inserted 51(AC);
Recommendation 3
A new statutory duty of good
faith be inserted into the Trade Practices Act;
Recommendation 4
ACCC Small Business Deputy
Chair be given adequate funding and powers to take section 46 and 51(AC) cases
on behalf of small business;
Recommendation 5
A small business advocate be
established to help small business to take action under s46 and s51(AC) in the
Federal Magistrates court; and
Recommendation 6
Divestiture powers be inserted
into the Trade Practices Act.
Senator Alan Eggleston
Deputy Chair
LP
Senator Barnaby Joyce
LNP
Senator David Bushby
LP
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