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Prohibited conduct

The following forms of conduct could be unlawful where they have the purpose, effect or likely effect of substantially lessening competition in a market.

Refusal to supply

Whether or not a refusal to deal with another business amounts to a misuse of market power depends on whether the business has legitimate reasons for the refusal. Where a business is just as likely to refuse to supply even if it operated in a more competitive market its decision will not breach the law.

Example

An office supplies retailer buys pencils from two separate pencil manufacturers. One of the manufacturers tells the retailer to stop buying pencils from the other manufacturer. The retailer keeps buying pencils from both, so the manufacturer stops supplying to the retailer. This refusal to supply is unlikely to be illegal as it won’t have a significant impact on competition; there are many other pencil suppliers that the retailer could purchase from.

Limiting customers' or suppliers' ability to deal with competitors

A business with substantial market power must not use that power to limit the extent to which its customers or suppliers are able to deal with competing businesses. For example, a business might supply its goods or services on the condition that the customer does not acquire similar goods or services from the business's competitors.

Case study: ACCC v FILA Sport Oceania Pty Ltd [2004] FCA 376

Bundling of goods or services

Businesses often offer their goods or services in bundles. For example, a utility provider may offer a better price to customers who agree to acquire both electricity and gas from the provider.

This practice is generally pro-competitive and results in consumers receiving a better deal. However, a business with substantial market power must not force customers to buy a different product or service from that business if the purpose, effect or likely effect of that conduct is to substantially lessen competition.

Predatory pricing

A business engages in predatory pricing when it substantially reduces its prices below its own cost of supply for a sustained period to:

  • drive its competitors from the market or
  • discourage potential competitors from entering the market in the future.

Once the competitors are driven from the market the business is able to raise its prices without fear of competition.