Navigating the Australian Competition and Consumer Act

The Australian Competition and Consumer Act (CCA) (formerly known as the Trade Practices Act) regulates competition and consumer protection law in Australia. 

All mergers in Australia are subject to the Competition and Consumer Act 2010 (Cth) (the CCA), a Federal law aimed at restricting anti-competitive trade practices and protecting consumers.

Overview

The competition provisions of the CCA are based on anti-trust legislation in the USA and are not dissimilar to the anti-trust provisions of the European Community’s Treaty of Rome.

The CCA prohibits:

• cartels;
• resale price maintenance;
• anti-competitive concerted practices;
• misuse of market power;exclusive dealing;
• anti-competitive mergers; and
• a range of unfair business practices, including when dealing with consumers and small businesses.

It also imposes obligations on businesses designed to protect consumers, provides an access regime for essential facilities and provides a specific access and competition regime for the telecommunications industry.

The Australian Competition and Consumer Commission (ACCC) is responsible for administering and enforcing the CCA. It has the power to authorise, on public benefit grounds, conduct that may otherwise breach the CCA.

There are significant consequences for contraventions of the CCA, including potential imprisonment, fines, compensation, corrective actio, and other orders.

Cartels and RPM

The CCA prohibits anti-competitive behaviour such as agreements between competitors to:

• fix, maintain or control prices
• split up a market or customers
• restrict or limit supply, production, capacity or acquisition;
• rig bids
• imposing a minimum resale price or inducing resellers to not sell products below a specified price.

Concerted practices & other anti competitive agreements 

The CCA also prohibits- ‘concerted practices’, being coordination between corporations which may otherwise fall short of an agreement, arrangement or understanding that has the purpose, effect or likely effect of substantially lessening competition in a market.

The CCA also prohibits agreements, arrangements or understandings that have the purpose, effect or likely effect of substantially lessening competition in a market.

Misuse of market power

It is illegal for a corporation with a substantial degree of market power to engage in conduct which has the purpose, effect or likely effect of substantially lessening competition.

Exclusive dealing

Various forms of exclusive dealing (including restrictions on acquiring or supplying) are illegal if they have the purpose, effect or likely effect of substantially lessening competition in a market.

Mergers and acquisitions

The CCA prohibits the acquisition of shares or assets of a company if the acquisition is likely to have the effect of substantially lessening competition in a market in Australia.

The acquisition of a foreign company by another foreign company may be subject to the CCA if, as a consequence, a controlling interest in a company in Australia is acquired.

The ACCC undertakes reviews of mergers and acquisitions which raise (or may raise) competition concerns.

Unfair business conduct aimed at small businesses

The CCA aims to protect businesses, particularly small businesses, by prohibiting:

• misleading conduct in business transactions – this is extremely broad and includes not only the making of untrue statements about present matters, but also the making of unfounded or unreasonable predictions or statements as to future matters
• voiding an unfair term of a standard form contract that is a ‘small business contract’ (being where one party has less than 20 employees and the price payable is less than A$300,000 or less than A$1 million if the term is more than 12 months) and that is entered into, renewed or varied on or after 12 November 2016 with ‘unfair’ being judged by the same tests applying to unfair terms in consumer contracts (see below), and
• unconscionable conduct in business transactions – the CCA makes it illegal for businesses to engage in unconscionable conduct in business transactions with businesses.

Unconscionable conduct includes the use of a strong bargaining position to extract unreasonably onerous terms from another business.

Consumer protection

The consumer protection provisions of the CCA aim to protect consumers by:

• prohibiting a wide range of misleading conduct – this is extremely broad, and includes not only the making of untrue claims or statements but also omitting to give all relevant details and failing to correct mistaken impressions;
• prohibiting unconscionable conduct – for example, taking advantage of a party’s weaker bargaining position or lack of knowledge or expertise in the subject matter of a negotiation;
• voiding unfair contract terms in standard form consumer contracts where the terms would produce a significant imbalance in the parties’ rights and obligations arising under the contract, is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the terms, and would cause detriment to a party if it were to be applied or relied on;
• establishing a statutory consumer guarantees regime that applies to sales transactions with consumers – the guarantees relate to the quality and standard of goods and services supplied and cannot be excluded, limited or modified even with the agreement of the consumer (it is also illegal to misrepresent the existence of these rights or remedies (including through puporting to exclude or limit liability)); and
• making manufacturers and importers liable for defective goods – the CCA essentially defines defective goods as those that are unsafe. Liability for defective goods can rest with a manufacturer, an importer, or someone who allows their name or logo to appear on a good sold in Australia.

Industry codes

The CCA provides a regime for the declaration of industry codes whereby code can be established to regulate the conduct of participants in industry towards consumers or other participants in the industry. Industry codes can be voluntary or mandatory, focusing on general competition and consumer protection issues.

Key Takeouts

1. ACCC is responsible for administering and enforcing the Australian Competition and Consumer Act (CCA) (formerly known as the Trade Practices Act).
2. The competition provisions of the CCA are based on anti-trust legislation in the USA and are not dissimilar to the anti-trust provisions of the European Community’s Treaty of Rome.