AustLII Home | Databases | WorldLII | Search | Feedback

University of New South Wales Law Journal Student Series

You are here:  AustLII >> Databases >> University of New South Wales Law Journal Student Series >> 2021 >> [2021] UNSWLawJlStuS 11

Database Search | Name Search | Recent Articles | Noteup | LawCite | Author Info | Download | Help

Pegg, John --- "Section 46 And The 'Effects Test': A Shot In The Arm For The Accc?" [2021] UNSWLawJlStuS 11; (2021) UNSWLJ Student Series No 21-11


SECTION 46 AND THE 'EFFECTS TEST': A SHOT IN THE ARM FOR THE ACCC?

JOHN PEGG

Section 46, Misuse of Market Power, of the Competition and Consumer Act (CCA) was recently amended to insert an “effects test”. Discuss whether and how you think this will improve the effectiveness of the provision

I INTRODUCTION

This essay will discuss whether the 2017 amendments to section 46 will increase the effectiveness of this section. The history of section 46 will be briefly discussed first to show the evolution of this section since it was first introduced. There will then be an assessment of the purpose of this section, with how the courts have interpreted the section, as well as the parliamentary intent. This will be important to consider as its intent will determine whether the amendments are effective in implementing its purpose. The essay will then look at how the pre-amended section 46 operated, with a look at each of the three elements of the section, with a focus on the ‘taking advantage of’ element. The essay will explore the High Court decision of Rural Press Ltd v Australian Competition and Consumer Commission[1] (‘Rural Press’) to show how section 46 operated, as well as its drawbacks. The Harper Report that was released in 2015 will then be analysed as the report recommended the amendments to section 46. Finally, the essay will look at the amended section 46, which removes the ‘taking advantage of’ element and inserts the ‘effects test’, to determine how the section is intended to operate. The High Court matter of Australian Competition and Consumer Commission v Cement Australia Pty Ltd[2] (‘Cement Australia’) will be discussed, to see whether the amended section 46 would have impacted on this decision. This essay will argue that the amended section 46 will improve the effectiveness of this section.

II HISTORY OF SECTION 46

The misuse of power provision in section 46 has undergone changes since it was introduced into Australian competition law. The original provision was influenced by anti-trust law (as competition law is referred to in the United States), in particular, the Sherman Act of 1890 (‘Sherman Act’).[3] Under section 2 of the Sherman Act there is a prohibition on the monopolization, or the attempted monopolization, of an industry.[4] This section was captured in section 7 of the Australian Industries Preservation Act 1906 (Cth).[5] From then, there was an evolution of Australian competition law over the years. When the Trade Practices Act 1974 (Cth) (‘TPA’) was revised in 1986 the wording of this provision change from ‘monopolisation’ to ‘misuse of market power’.[6] Though, it should be noted that the wording weakened the threshold of ‘monopolisation’, which refers to a corporation that controls a market, to one where “a corporation that is in a position substantially to control a market for goods or services” [my emphasis].[7] There were also amendments in 1986 with the lowering the bar of the kind of corporations caught by this provision to ones who have “a substantial degree of market power”.[8] This section had moved away from American concepts of ‘monopolisation’ to one where a corporation has substantial market power. In 2010, the TPA was changed to the Competition and Consumer Act 2010 (Cth) (‘CCA’) and section 46 operated, save for some amendments, until it was amended in 2017.[9]

III PURPOSE OF SECTION 46

There are conflicting views of section 46 between the perceived parliamentary intention of the section and the High Court’s position on the reasons behind the section. When the TPA was introduced in 1974 by the Whitlam Government, the second reading speeches evidenced the parliamentary intention of section 46.[10] The second reading speech by the then Attorney-General Lionel Murphy highlighted that the purpose of this section was to provide protection for small businesses, which were perceived to be muscled out of markets by big businesses.[11] This was believed to have a flow on effect to the consumers, as they would be negatively impacted by the lack of competition in a market.[12] As Julie Clarke outlined in her article, the parliamentary intention behind this section is that it would serve dual purposes.[13] The first is that the section would provide protection to small businesses, with assistance and protection being provided to small businesses against the perceived anti-competitive practices of big business.[14] The second is that there is a consumer welfare objective to this section, as the protection of the consumer from the effects of anti-competitive practices is the goal of competition policy.[15] The intention of parliament behind section 46 was for the protection of small business, and also to protect consumer welfare.

This parliamentary position is contrasted with the view of the courts in interpreting section 46. In Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd[16] (‘Queensland Wire’), the High Court viewed the ultimate objective of section 46 is to protect the interests of consumers.[17] In a separate judgement, Deane J viewed that the purpose of section 46 is to protect the competitive environment and competitive conduct by stopping anti-competitive practices from occurring.[18] Mason CJ and Wilson J were clear in their judgement that the effect of competitive does result in competitors injuring each other, as that is the nature of the competitive environment.[19] There was agreement between the judges that the purpose of the section was not to help other competitors within the market, but to protect competition in itself. The reason for the protection was to prevent harm to consumers. [20]

This approach of the High Court was accepted in subsequent decisions. In Boral Besser Masonry Ltd v Australian Competition and Consumer Commission[21] Gleeson CJ and Callinan J outlined that the purpose of the Act is not to protect competitors in a market, but to promote competition.[22]

Therefore, the purpose of this section is cited by the Parliament as being about protecting small business and consumer welfare. However, the courts have viewed this section as being concerned with the protection of the competitive process and not with the protection of competitors. Though, the protection of the competitive process ultimately leads to the safeguard of consumer welfare, which both the Parliament and courts intend.

IV PRE-AMENDMENT SECTION 46

Before the passing of the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth) (‘Misuse of Market Power Act’), section 46 read as follows:

“(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:

(a) Eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;

(b) Preventing the entry of a person into that or any other market; or

(c) Deterring or preventing a person from engaging in competitive conduct in that or any other market.”[23]

This provision shows that there are three elements that are required to be met before a firm can be held to misuse market power. The first is that the corporation must have a substantial degree of power in a market. The second is that the corporation must not take advantage of that power. The third is that the power must not be taken advantage of for a specific purpose, which are outlined at section 46(1)(a)-(c).[24]

As highlighted above, the operation of this section is whether a company’s “behaviour involved the taking advantage of a substantial degree of power in a market”.[25] If the behaviour does take advantage than acting with any of the purposes at section 46(1)(a)-(c) would be illegal. If it does not take advantage of their market power, then the company’s conduct is lawful competitive behaviour.[26]

The three elements will need to be assessed, both in how they are interpreted separately, and in how they operate in cases.

A Substantial degree of power in a market

The first requirement is that the firm must have substantial market power within the relevant market. The essay will not go into substantial detail of this provision, as this element was carried into the amended section 46.

Market power is not defined in the CCA and so the meaning must be drawn from case law.[27] There is no fixed definition provided by the courts in determining the meaning of market power, and substantial marker power. In Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481, the tribunal held that a company is said to have market power when it “is sufficiently free from market pressures to ‘administer’ its own production and selling policies at its discretion”.[28] The elements that can be drawn from this definition have been used by the Federal courts and High Court in defining market power. For example, in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, market power is said to be the power to behave in a market for a sustained period of time in a manner non-constrained by competitors.[29]

It can therefore be drawn from these cases that a company with market power has freedom from the constraints of competitive pressures and a freedom to engage in discretionary creating and selling products. [30] A company with substantial market power does not mean it has to control a market, but only that it has substantial degree of market power.[31]

B Taking advantage

The second element is the ‘taking advantage’ of the market power for one of the specified purposes. This requirement, and the third requirement, was discarded in the 2017 amendments. It is therefore important that this is considered carefully to ascertain the reasons for its removal from the section.

The Queensland Wire case was the first to deal with this requirement. This matter concerned a private claim for misuse of market power under section 46 of the TPA.[32] Queensland Wire Industries Pty Ltd (the Appellant) claimed that Broken Hill Proprietary Co Pty Ltd (the Respondent) refused to sell it a Y-bar, which is a steel product that the Appellant required for their business.[33] The Appellant claimed that the Respondent misused their market power in doing so.[34] The justices considered the meaning of ‘taking advantage’, as the primary judge Pincus J, held that the Respondent did not take advantage of their market power.[35] Pincus J framed the meaning of taking advantage in terms of hostile intent.[36] Mason CJ considered that this was not an appropriate usage of the term ‘taking advantage’, as the section does not lead itself to define ‘taking advantage’ in terms of reprehensible conduct.[37] In a separate judgement, Toohey J used the dictionary to arrive at the conclusion that to take advantage of something means to use the favourable condition it offers, and to make use of an opportunity.[38] It was therefore interpreted to mean that a corporation engaged in conduct that used its market power.

The Queensland Wire case also provided initial guidance on determining whether a firm had taken advantage of their market power. The ‘take advantage of test’, as it became known, involved a counterfactual assessment to determine whether a corporation had taken advantage of their market power.[39] A counterfactual assessment is a thought experiment where a fictional company, without market power, would engage in the same conduct. If the company would, in theory, engage in the conduct then the real company could not be said to be taking advantage of its market power.[40] However, if the fictional company would not engage in the conduct, then it indicates that the real company did take advantage of its market power. This approach led to two questions that the court could ask: would a firm, without market power, engage in the conduct? Or could a firm, without market power, engage in the conduct?[41] McHugh CJ and Wilson J preferred the ‘would’ approach, whereas Toohey J preferred the ‘could’ approach.[42]

After successful High Court decisions that did not answer the correct approach to take, the majority in the decision of Rural Press adopted the ‘could’ approach.[43] This case will be analysed later in this essay, but the outcome of the decision led to the Federal Government passing the Trade Practices Legislation Amendment Act 2008 (Cth), which introduced the new subsection of 46(6A).[44] The High Court’s interpretation in this decision meant that the ‘taking advantage’ element of section 46 became a high bar to reach.[45] The result of this was that it became difficult for prosecution under this section, as the counterfactual assessment meant that there was a high threshold for an applicant to reach to prove that the company took advantage of its market power.

C Proscribed purpose

The final element of the pre-amendment section 46 is that the conduct that a firm engaged in by taking advantage of their market power was for one of the prescribed purposes in section 46(1)(a)-(c). These prescribed purposes are:

1. eliminating or substantially damaging a competitor of the corporation in that market;

2. preventing the entry of a person into that market; or

3. deterring or preventing a person from engaging in competitive conduct in that market.[46]

As one can glean, the focus of the prescribed purposes is on damaging, or preventing competitors from competing in a market. However, as referred to previously in this essay, the courts have made clear that the focus of this section is not on the protection of competitors within the market, but on the competitive process itself.[47] This meant that an applicant would need to demonstrate that the company engaged in conduct that took advantage of its market power for one of these purposes, which are concerned with blocking the entry of a competitor into the market, or substantially damaging a competitor, rather than focusing on the protection of the competitive process itself.[48]

V RURAL PRESS CASE

The Rural Press case involved an applicant by the Australian Competition and Consumer Commission (‘ACCC’) against Rural Press Pty Ltd and a wholly owned subsidiary of Rural Press, Bridge Printing Office Pty Ltd. Part of the claim against Rural Press was for misuse of market power. Bridge published a regional newspaper in the locality around Murray Bridge and north to Mannum.[49] Another news publisher, Waikerie Printing House Pty Ltd, published a newspaper in the neighbouring locality of Riverland.[50] Due to a reallocation of the boundaries, Waikerie began selling its newspaper in the Mannum area. In response to this Bridge and Rural Press threatened Waikerie with the free distribution of a rival newspaper in the Riverland area, unless Waikerie ceased selling its newspaper in Mannum.[51] Waikerie acquiesced to this threat and withdrew its newspaper from sale in Mannum. The ACCC alleged that the threat from Rural Press and Bridge against Waikerie was a misuse of their market power.[52]

The primary judge in the Federal Court found that the behaviour of Rural Press and Bridge was a breach of section 46, as they prevented another competitor entering their market (the sale of newspapers in Murry Bridge). Mansfield J held that the market power of Rural Press and Bridge included its financial resources. Waikerie capitulated to the threat from Rural Press and Bridge due to their dominance in other newspaper markets across the state.[53]

Rural Press and Bridge appealed this decision to the Full Court of the Federal Court, where the decision was overturned. The Full Court found that the threat to compete was in a market where Rural Press and Bridge had no presence or dominance (the Riverland market). It was therefore a new market to Rural Press and Bridge.[54] The lack of their presence meant that they had no market power, which means that there is no market power that they can use to take advantage of. The Full Court reversed the decision.[55]

The ACCC appealed the decision to the High Court, where the majority held against the ACCC’s appeal.[56] The reasons for this were that the threats against Waikerie were made using Rural Press and Bridge’s market power.[57] The High Court also took issue with the primary judge’s (Mansfield J) characterisation of market power as containing financial resources.[58] The majority separated financial backing as distinct from the market power. So, just because a company has significant wealth, does not mean that the company has market power.[59] The existence of financial resources is not evidence of market power, as it is something that is separate from market power. The majority also believed that it was the financial wealth of Rural Press and Bridge that made the threat and not their perceived market power.[60]

While the High Court’s judgement is useful with the additional analysis of the ‘taking advantage test’, the dissenting judgement of Kirby J highlights the issues that the majority’s decision entails, as well as provides an interesting example of the issues that plague the operation of section 46.

The main thrust of Kirby J’s dissent was the perceived mischaracterisation of the conduct engaged in by Rural Press and Bridge. The majority framed the conduct, following the Full Court’s lead, by focusing only on the Riverland market where Waikerie operated without reference to the Murray Bridge market that Rural Press and Bridge held a monopoly position in and that Waikerie was selling their newspaper.[61] The threat that Rural Press and Bridge made was conditional on Waikerie withdrawing its newspaper from the Murray Bridge market.[62] There is therefore a connection between the market power of Rural Press and Bridge and the threat made to Waikerie. The conduct engaged in by Rural Press and Bridge in doing this was to exclude a new entrant into the Murray Bridge market.[63]

Kirby’s dissent also criticised the approach of the majority in their characterisation of Rural Press and Bridge’s conduct by claiming that “[it] is insufficiently attentive to the object of the Act to protect and uphold market competition”.[64] The failure of the majority in focusing on the objectives of the CCA is that the operation of section 46 becomes ineffective and public confidence in the act becomes weakened.[65] The blowback from this is that companies can see that any misuse of their market power will become difficult to enforce.[66]

The case encapsulates issues with the operation of section 46, namely the way effectiveness of the ‘taking advantage test’ and the link between conduct of the company and the use of their substantial market power.

VI HARPER REPORT

Since the introduction of the TPA in 1974, there have been numerous reviews commissioned by the Federal Government into Australian Competition Policy.[67] The latest review was the Harper review, which undertook a detailed analysis of Australian competition law. This review was announced by the then Prime Minister Tony Abbott and the then Minister for Small Business Bruce Billson on 4 December 2013.[68] The review came at the back of a campaign promise by the Coalition that the competition laws would be reviewed.[69]

Part of the review into Australian competition policy involved assessing the effectiveness of section 46. The inclusion of section 46 came at the back of High Court decisions that highlighted difficulties in the judicial interpretation of the section, which meant that the misuse of power was difficult to establish.[70] These issues led to its inclusion in the issues paper that was released in April 2014. The final report was handed down in March 2015. However, the recommended reforms were not implemented until 2017.[71]

The report made numerous recommendations concerning competition policy in Australia. Part of the reforms was an overhaul of section 46 by the deletion of the ‘taking advantage test’ and the specific purposes and replacing these with the ‘effects test’.[72]

The ‘effects test’ refers to the conduct that a firm undertakes that “has the purpose, effect, or likely effect of substantially lessening of competition’.[73] This test is found in other sections of Part IV of the CCA, including sections 46, 47 and 50.[74] The interesting consideration around the implementation of an ‘effects test’ is that out of 12 reviews (including the Harper review) that considered the introduction of the ‘effects test’, only 1 other review recommended the introduction of this test.[75]

The panel justified the inclusion of the ‘effects test’ for two reasons. The first reason is that it is a matter of competition policy that the focus of the section should be on the effect of competition and not the purpose.[76] The reason for this is that focusing on the purpose does not focus it on consumer welfare, which is the outcome that competition policy is trying to protect.[77] Focusing on the effect of competition means that the court would be assessing the conduct based on consumer welfare, who would feel the effects of any change in competition.[78] The second reason is for practical reasons, as proving effect is an objective enquiry and so is easier to prove, while proving purpose is subjective and difficult to prove.[79]

The arguments that the Panel made in removing the ‘take advantage of test’ were that the test was undermining confidence in the legislation, due to the difficulties in its interpretation.[80] It became unclear for companies, as well as the ACCC, as to what kind of conduct would be considered taking advantage of market power.[81] The lack of clarity and the extensive judicial interpretations of the section meant led to the panel concluding that it was undermines effectiveness in section 46. The panel’s opinion in this respect seems to echo those comments made by Kirby J in his dissenting judgement in the Rural Press case.[82] Kirby J argued that the lack of clarity and the judicial interpretation of section 46 undermined the effectiveness of the section.[83]

The panel also recommended removing the proscribed purposes from section 46. The argument that the panel made for its removal was that the proscribed purposes focused on protecting competitors.[84] The panel argued that competition policy is concerned with the protection of the competitive process.[85] The comment was also made that competitiveness in the market injures competitors.[86] It is the nature of business. The panel’s comments about nature of the competitive process reflects the judgement of Mason CJ and Wilson J in the Queensland Wire case, where they commented on the nature of the competitive process injuring competitors, which is the point of a competitive environment.[87]

The criticism and opposition to the proposed amendments were for two main reasons. The first is that the amendments to the law will result in costs for companies in compliance, which includes legal costs, as companies will need to ensure that they comply with the new section.[88] This was argued to harm consumers, as the costs will filter down to the consumers.[89] The panel rejected this argument by noting that the ‘effects test’ is found in other sections in the CCA.[90] It is intended that the courts will interpret the ‘effects test’ in the same way that they interpret the test in other sections.[91] This means that there would be minimal costs in compliance.

The second argument raised was that the amended section may create a “chilling effect” where companies may be nervous about entering into transactions, as they may infringe this section.[92] The response from the panel followed a similar logic to the argument on the compliance and legal costs. They argued that the amended section incorporates the ‘effects test’, which is found in other sections.[93] Therefore, it should not create uncertainty, as there would be an understanding as to how this section would operate.

The panel therefore concluded that section 46 should be amended to remove the ‘take advantage of test’ and the proscribed purposes. In their place should be the ‘effects test’.[94]

VII PARLIAMENTARY PURPOSE OF SECTION 46 AMENDMENTS

The intent behind the Misuse of Market Power Act is like those referred to earlier in this essay when the 1986 amendments were enacted. The second reading speeches demonstrate that when voting in favour of the Misuse of Market Power Act that there is a common intent behind the legislation. The intent is that the amendment will protect small businesses from the big companies. This approach seems to be a non-partisan approach, as multiple parties within the Australian Parliament not only support this amendment, but set the intention as protecting small businesses. Nick Xenophon’s eponymous political party supported the amendment but did not believe that it goes far enough.[95] Mr Xenophon advocated for divestiture powers to be incorporated into the CCA, in a similar way that the United States anti-trust laws have this power, claiming that it would be a “sword of Damocles hanging over the companies”.[96] There was also a similar reaction from Greens senator, Richard Di Natale, who raised that the taking advantage of test was making it difficult for ACCC to prosecute offending companies.[97] Mr Di Natale also framed the legislation as being about the protection of small businesses.[98] However, libertarian senator David Leyonhjelm, holding true to his political beliefs, criticized the amendment, as well as the CCA in general, and claimed that the market should be the one that regulates corporate conduct and not government.[99]

The consistent theme is that the amendment was needed to protect small business and to ensure that small business could compete fairly with the larger corporations, which is in conflict with the purposes given for this section in the Harper Report, as well as the High Court’s view of the purpose of the section, as was discussed earlier in this essay.

VIII SECTION 46: SUBSTANTIAL LESSENING OF COMPETITION

The explanatory memorandum to the Misuse of Power Act sets out that the meaning of substantially lessening of competition is drawn from existing case law on the definition, rather than a term that needs new judicial consideration.[100] As of the date of this essay, there have been no judgements rendered that discuss the application of this term in the context of a section 46 application, so it is not known whether the courts will follow the intention of Parliament as to its application. It seems likely that the courts would have to consider it in the context of the provision, as the current case law on the term exist in the relevant statutory provisions in which they are found. However, as there is no case law to the contrary, the essay will consider the term in the case law that involves other provisions in the CCA.

The test that is undertaken to determine whether there has been a substantial lessening of competition is to perform a competition test.[101] The test is a three-step one that first begins with a counterfactual and factual assessment of the conduct, the next step is to determine the extent that the competitive process is diminished, and the final step is to determine if the conduct will have a substantial effect on the competitive process.[102]

The first step involves a comparison between the factual and the counterfactual. The factual is the events and the effects that would occur should the conduct in question occur. The counterfactual is the same assessment as the factual, except that the conduct does not occur.[103] To put it another way, the step is a ‘with’ and ‘without’ exercise.[104] To enable this step to be performed effectively a structure of the market needs to be ascertained. This is used to determine what the barriers to entry are in the market and how the market operates.[105] It is important to perform this exercise to be able to effectively perform a factual and counterfactual assessment of the conduct. The second step is to assess whether the “future field of rivalry” is reduced due to the conduct.[106]

Lastly, the exercise is to determine whether these hypothetical differences are likely to substantially lessen competition.[107] This involves looking at the degree that it is lessened in the market.[108] If the lessening of competition would hypothetically damage a minor competitor in the market, then it is likely that the conduct would not meet the requisite degree of market reduction, however, if it is a major competitor that would be damaged or prevented from entry into a market, then this would be a substantial lessening of competition within a market.[109]

The competition test therefore focuses on the effects of competition on the market, rather than the purpose of the conduct as occurred under the pre-amended section 46.

IX CEMENT AUSTRALIA CASE

The Cement Australia case will be assessed as an example of the drawbacks in the operation of section 46, as well as an example of the ACCC successfully arguing a breach of section 45 (which involves the substantially lessening of competition), while also being unsuccessful in claiming a breach of section 46.[110] The facts and the relevant portions of the judgement will be discussed, as well as the hypothesis that the current iteration of section 46, which now contains the element of substantially lessening competition, would be successful.

The facts of the case involve Cement Australia Pty Ltd (Cement Australia) a manufacturer and supplier of cement and concrete products across Australia.[111] Part of the manufacture of cement involves the use of ‘fly ash’, which is mixed into the cement as filler that provides benefits to the produced cement.[112] Fly ash is obtained from power stations, where the fly ash is the by-product of the burning of coal in power stations. Cement businesses usually purchase fly ash from power stations. Cement Australia engaged in a mass purchase of fly ash from every power station in the south-east Queensland area.[113] Cement Australia acquired virtually all of the fly ash that the power stations in this area will manufacture.[114] The effect of these transactions was that other competitors in the cement manufacture market could not purchase fly ash for their products.[115] The ACCC alleged that Cement Australia purchased more fly ash then they reasonably required for their products and that this conduct was performed in a way that would damage competitors, or lock them out of the market.[116] The ACCC alleged that this breached sections 45 and 46 of the CCA.

The primary judgement in the Federal Court of Greenwood J found that Cement Australia had contravened section 45, as the entering into of the contracts with power stations had the effect of substantially lessening competition in the market.[117] This was based on the provisions of the contracts that Cement Australia had entered into with the various power stations. The provisions of these agreements were worded in such a way to have the effect of substantially lessening competition.[118]

However, Greenwood J found that there was no contravention of section 46. The reasoning follows the approach of the High Court in determining section 46 matters.[119] While Cement Australia had a substantial degree of power within the cement market and the conduct undertaken by Cement Australia was for the prescribed purposes of locking out competitors, the conduct did not involve Cement Australia taking advantage of their market power. Greenwood J followed the ‘could test’ from the Rural Press case and questioned whether a firm without a substantial degree of market power could have performed the conduct that Cement Australia had undertaken.[120] His honour concluded that a firm sans market power could have entered into these agreements and therefore he did not conclude that Cement Australia had taken advantage of its market power.

While the ACCC was successful in prosecuting Cement Australia under section 45, it was difficult to establish a finding under section 46. The difficulty that the ACCC encountered with this provision is the taking advantage provision. As Christopher Hodgekiss SC mentioned in his case note a company that has substantial market power can “escape liability if it can establish that only one of the legitimate business justifications it advances is profitable”.[121] The justification through the business reasons was used by Cement Australia to justify the reasons for entering into those contracts and demonstrated that other firms could have engaged in the same conduct without market power.[122]

As discussed earlier in this essay, the take advantage element has been excised from section 46 and has been replaced with an ‘effects test’. Greenwood J had found that Cement Australia had contravened section 45 due to the transactions having the effect of substantially lessening competition in the market. In their submissions to the Harper review the ACCC advocated or the introduction of an ‘effects test’, which the Harper panel ultimately recommended, and parliament enacted.[123] It would therefore be probable that the Federal Court would have reached the same conclusion on section 46 if there was an ‘effects test’.

X CONCLUSION

In conclusion, the amendment to section 46 should enhance the effectiveness of the provision. To establish a contravention of misuse of market power under the pre-amended section 46 required the applicant to demonstrate the ‘take advantage of test’, as well as show that the conduct was undertaken for one of the proscribed purposes in the provision. The test was difficult to enforce by private applicants as well as the ACCC, as the law itself was complicated and lacked clarity. This meant that it was difficult to establish a contravention under this section. This was demonstrated in the Rural Press and Cement Australia cases. The focus of the proscribed purposes on the competitors in the market was also against the ideas behind competition policy, which was established in the Queensland Wire decision. The amendment of section 46 to insert an ‘effects test’ and to remove the proscribed purposes and the ‘take advantage of test’ was meant to correct the shortcomings of this section. The ‘effects test’ is found in other provisions in Part IV of the CCA and is established by case law. The purpose of the section is to protect the competitive process against the misuse of market power. The insertion of the ‘effects test’ enhances the operation of this section and should therefore ensure the effectiveness of section 46.


[1] Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53 (‘Rural Press’).

[2] Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2019] FCA 909 (‘Cement Australia’).

[3] Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 104 ALR 633, 641 (“Singapore Airlines”).

[4] Sherman Act of 1890, 15 USC §§ 2.

[5] Singapore Airlines (n 3) 641; Australian Industries Preservation Act 1906 (Cth) s 7, as enacted.

[6] Explanatory Memorandum, Trade Practices Revision Bill 1986 (Cth) 10.

[7] Singapore Airlines (n 3) 642.

[8] Ibid; Explanatory Memorandum, Trade Practices Revision Bill 1986 (Cth) 11.

[9] Alex Bruce, Australian Competition Law (2018, 3rd ed, LexisNexis Butterworths) 11.

[10] Julie Clarke, ‘Section 46: Its Purpose and the Proposed New Effects Test’ (2017) 45 Australian Business Law Review 364, 368.

[11] Commonwealth, Parliamentary Debates, Senate, 30 July 1974, 540 (Lionel Murphy).

[12] Clarke (n 10) 368.

[13] Ibid 367.

[14] Ibid.

[15] Ibid.

[16] Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6; (1989) 167 CLR 177, 191 (‘Queensland Wire’)

[17] Ibid.

[18] Ibid 194.

[19] Ibid 191.

[20] Ibid 194.

[21] Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 10; (2003) 215 CLR 374 (‘Boral Besser’).

[22] Ibid 411.

[23] Competition and Consumer Act 2010 (Cth) s 46(1), later amended by Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth) sch 1 item 1 (‘CCA’).

[24] Ibid.

[25] Boral Besser (n 21) 411 (per Gleeson CJ and Callinan J).

[26] Ibid 411.

[27] Bruce (n 9) 59.

[28] Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481, 512.

[29] Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1.

[30] Bruce (n 9) 59.

[31] Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (2003) FCAFC 149 at [455].

[32] Queensland Wire (n 16) 178.

[33] Ibid.

[34] Ibid.

[35] Ibid.

[36] Ibid.

[37] Ibid 190-191.

[38] Ibid 213.

[39] Caroline Coops, ‘A fly in the ointment for the ACCC? Implications of the Cement Australia decision for the interpretation of section 46’ (2015) 23 Australian Journal of Competition and Consumer Law 83, 88.

[40] Arlene Duke, Corones’ Competition Law in Australia (Thomson Reuters, 7th ed, 2018) 518.

[41] Coops (n 39) 89.

[42] Duke (n 40) 518.

[43] Rural Press (n 1) 76.

[44] Duke (n 40) 520-1.

[45] Margaret Brock, ‘Section 46 of the Trade Practices Act- has the High Court made a “u-turn” on “taking advantage”?’ (2005) 33 Australian Business Law Review 327, 340.

[46] CCA s 46(1)(a)-(c), later amended by Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (Cth) sch 1 item 1.

[47] Queensland Wire (n 16) 191.

[48] Duke (n 40) 533.

[49] Rural Press (n 1) 55.

[50] Ibid.

[51] Ibid.

[52] Ibid 55-56.

[53] Ibid 56.

[54] Ibid.

[55] Ibid.

[56] Ibid 92-93.

[57] Ibid 76.

[58] Ibid.

[59] Ibid 76-77.

[60] Ibid.

[61] Ibid 103.

[62] Ibid.

[63] Ibid.

[64] Ibid 105.

[65] Ibid.

[66] Ibid.

[67] Ian Harper et al, Competition Policy Review, Final Report (Australian Government, 2015) 335-6 (‘Harper Report’).

[68] Clarke (n 10) 365.

[69] Ibid.

[70] Katharine Kemp, ‘Uncovering the roots of Australia’s misuse of market power provision: Is it time to reconsider?’ (2014) 32 Australian Business Law Review 329, 329.

[71] Bruce (n 9) 10-11.

[72] Harper Report (n 67) 348.

[73] Ibid 61.

[74] Ibid 61.

[75] Ibid 335-6.

[76] Ibid 335.

[77] Ibid.

[78] Ibid.

[79] Ibid.

[80] Ibid 337.

[81] Ibid 337-8.

[82] Rural Press (n 1) 105.

[83] Ibid.

[84] Harper Report (n 67) 61.

[85] Ibid 339.

[86] Ibid.

[87] Queensland Wire (n 16) 191.

[88] Harper Report (n 67) 341.

[89] Ibid.

[90] Ibid.

[91] Ibid.

[92] Ibid 335.

[93] Ibid 341.

[94] Ibid 348.

[95] Commonwealth, Parliamentary Debates, Senate, 14 August 2017, 5551 (Nick Xenophon).

[96] Ibid 5552.

[97] Commonwealth, Parliamentary Debates, Senate, 14 August 2017, 5548 (Richard Di Natale).

[98] Ibid 5549.

[99] Commonwealth, Parliamentary Debates, Senate, 14 August 2017, 5550 (David Leyonhjelm).

[100] Revised Explanatory Memorandum, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 (Cth) 9.

[101] Duke (n 40) 512.

[102] Cement Australia (n 2) at [3013].

[103] Ibid.

[104] Duke (n 40) 107.

[105] Ibid 123-4.

[106] Cement Australia (n 2) at [3013].

[107] Ibid.

[108] Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) 64 FLR 238, 259-260.

[109] Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193.

[110] Cement Australia (n 2) at [3241].

[111] Ibid.

[112] Christopher Hodgekiss SC, ‘Predatory buying to corner a market: ACCC v Cement Australia Pty Ltd’ (2014) 22 Australian Journal of Competition and Consumer Law 146, 146.

[113] Cement Australia (n 2).

[114] Ibid.

[115] Hodgekiss (n 112) 146.

[116] Ibid.

[117] Cement Australia (n 2).

[118] Ibid [3236].

[119] Ibid [1899]-[1900].

[120] Ibid.

[121] Hodgekiss (n 112) 5.

[122] Cement Australia (n 2) at [2293]-[2301].

[123] Australian Competition and Consumer Commission, Submission to the Competition Policy Review (25 June 2014) 9.


AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/journals/UNSWLawJlStuS/2021/11.html