ACCC protects competition not competitors

The role of the Australian Competition and Consumer Commission was the promotion of competition, not the protection of competitors, ACCC Chairman, Mr Graeme Samuel said today.*

"However, protecting competition and competitive markets does not mean taking a hands-off approach," he said. "Exploiting economies of scale to deliver lower cost products to consumers is pro-competitive, exploiting market power to eliminate competitors is anti-competitive.

"This is where the ACCC sees itself playing a significant role in promoting competition and at the same time protecting small businesses from being driven out of the market where they can provide a truly competitive dynamic.

"The Trade Practices Act is replete with provisions which, while not specifically referring to small business, have the impact of protecting small business from anti-competitive activity.

"Thus, all of the provisions of Part IV of the Act dealing with anti-competitive arrangements and conduct, are intended to operate to protect vulnerable businesses engaged in lawful, competitive behaviour but which might be subjected to unlawful anti-competitive activity from both big and small businesses."

One way small business could even the imbalance often found in bargaining power when dealing with large suppliers or customers was to take advantage of the collective bargaining arrangements now contained in the Act.

"Specific provisions in Part IV(A) of the Act relating to unconscionable conduct and to the mandated codes of conduct are designed to protect small businesses from harsh and oppressive or misleading and deceptive conduct by more powerful industry players. The ACCC views these provisions as providing powerful tools for dealing with misconduct by businesses that has the effect of significantly damaging small industry players and as a consequence, the Australian economy.

"But we also need to be aware that these provisions have their limitations and will not operate to diminish the rigours of a tough, competitive business environment. Drawing the distinction between the two is one of the toughest tasks that the ACCC faces on a daily basis."

Mr Samuel said one of the most referred to provisions of the Act relating to the interaction between big business and small business was section 46, directed towards misuse of market power.

"This provision of the Act is among its most contentious, debated and misunderstood. But the provision is an important element of effective competition law and sits alongside restrictions that prevent businesses from accumulating excessive market power through mergers and acquisitions and those that prohibit anti-competitive agreements between competitors."

Mr Samuel said it was pleasing to note that the latest amendments to s46 provides the court with some guidance to assist it in determining when a corporation might possess a substantial degree of market power.

The ACCC will certainly be taking these amendments into account when assessing potential action for breaches of section 46.

Mr Samuel also examined in detail the specific amendments relating to predatory pricing that have become known as the Birdsville amendments.

Big and small businesses need to be measured in their expectations of the effect of these changes. As with any relatively new legislation, it can take a while for business to come to terms with exactly what the full ramifications of any changes are, Mr Samuel said.

"It is a two-sided expectation gap that we risk running up against in this case. First… there is some trepidation from big business that their normal, competitive activity may now place them at risk of breaching the Trade Practices Act.

"From the comments I have heard so far, I believe big business has an expectation gap that over-emphasises the impact of the provisions, whereas the reality is likely to be less drastic than many may fear…

The operation of the section may be relevant to issues of retail pricing of petrol, including the discount schemes offered by major supermarket chains.

"It could therefore be expected that the Commission's report, following its current inquiry into the retail pricing of unleaded petrol will include some analysis of these provisions.

"Inevitably, we will prosecute appropriate cases to test some of these questions before the court. However, it should be remembered that businesses which have suffered as the result of anti-competitive conduct of larger rivals can bring their own legal actions under the Act.

"It should not necessarily be assumed that the ACCC will be the first to bring forward such a case. It is equally conceivable that a private party could be the first mover in this area. In fact, historically, the majority of actions under section 46 have been taken by private litigants.

"Regardless, clarification from the courts on these issues will be welcome when it arrives."

Mr Samuel said that the full implications of the changes would not be known until they had been properly tested by the courts, but the ACCC would be examining carefully some of the new concepts it has been given to work with.

"By reaffirming our commitments to the basic principles of promoting competition to the benefit of all Australians and taking a step by step, logical approach to analysis, we can bring these debates into some focus."

Background

*Mr Samuel was addressing the John Curtin Institute of Public Policy Forum in Perth today.  The transcript of his speech will available from the News Centre on the ACCC website.