Council, quarry company end anti-competitive lease conditions

Conditions on a North Queensland quarry lease which led to preferential treatment in council contracts have been deleted after Australian Competition and Consumer Commission action.

"The conditions were attached to a lease between the Johnstone Shire Council and Giandomenico Holdings Pty Ltd, Remo Giandomenico and Francesco Giandomenico, trading as IQC Quarries", ACCC Chairman, Professor Allan Fels, said today.

"The council owns one of two quarry sites in the Innisfail area. Under a 20-year lease the council leased the quarry to IQC Quarries, agreeing to a condition that all council contracts which required quarry products of a quality able to be supplied by IQC Quarries be bought from IQC Quarries. The condition was contained in various council contracts and tenders.

"The ACCC believes the condition raised concerns under the exclusive dealing provisions of the Trade Practices Act 1974. Specifically, the ACCC was concerned that the council tenders requiring IQC Quarries product was probably 'third line forcing', a specific form of exclusive dealing. Like other businesses, local authorities which are categorised as being in 'trade or commerce' cannot engage in exclusive dealing.

"Businesses, including local authorities engaging in trade or commerce, cannot supply or withhold goods or services on the condition that the buyer acquires goods or services from a third party. Such a practice limits the commercial decisions a business is able to make and often results in harm to consumers, such as higher prices".

The council and IQC Quarries have provided court enforceable undertakings to the ACCC. The undertakings provide that:

• the council and IQC Quarries will delete the lease agreement condition that required all Johnstone Shire Council contracts, which used quarry products, to include a provision that the quarry products would be bought from IQC Quarries

• the council will not require within any tender documents and contracts that contractors must purchase quarry products from a specific supplier, other than Johnstone Shire Council itself

• the council and IQC Quarries will implement trade practice compliance programs

"The conclusion of this investigation does not diminish any rights third parties, including competitors of IQC Quarries, may have", Professor Fels said. 

Background

Section 47(1) of the Trade Practices Act 1974 provides that a corporation shall not in trade or commerce, engage in the practice of exclusive dealing. One form of exclusive dealing is the conduct known as third line forcing which is set out in section 47(6) of the Act. Section 47(6) provides:

A corporation also engages in the practice of exclusive dealing if the corporation:

• supplies, or offers to supply, goods or services
• supplies, or offers to supply, goods or services at a particular price
• gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation

on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person.