Certain business practices that limit or prevent competition are against the law. It is important that businesses understand their rights and obligations at all times and, in particular, when dealing with wholesalers, suppliers and other businesses.
Section 45 of the Competition and Consumer Act prohibits contracts, arrangements or understandings that are likely to substantially lessen competition in a market, even if that conduct does not meet the stricter definitions of other anti-competitive conduct such as cartels. A number of factors are considered by the courts to reach a decision:
Businesses that make agreements with their competitors to fix prices, rig bids, share markets or restrict outputs are breaking laws and stealing from consumers and businesses by inflating prices, reducing choices and damaging the economy.
It is against the law for businesses to fix prices, restrict outputs or allocate customers, suppliers or territories. But the ACCC can grant businesses an exemption providing protection from legal action under the Competition and Consumer Act when such conduct results in benefits to the public.
Broadly speaking, exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal. Most types of exclusive dealing are against the law only when they substantially lessen competition, although some types are prohibited outright.
A supplier with a substantial degree of power in a market is not allowed to use this power for the purpose of eliminating or substantially damaging a competitor or to prevent a business from entering into a market. This behaviour is referred to as ‘misuse of market power’.
Predatory pricing is one way in which a business may misuse its market power. Predatory pricing occurs when a company with substantial market power or share of a market sets is prices at a sufficiently low level with the purpose of damaging or forcing a competitor to withdraw from the market. This conduct is illegal.
Laws prohibiting anti-competitive price signalling and information disclosures were introduced in June 2012. At present these laws only apply to the banking sector in relation to taking deposits and making loans, but they may extended by regulation in the future to other sectors of the economy.
Unconscionable conduct is generally understood to mean conduct which is so harsh that it goes against good conscience. Under the Australian Consumer Law, businesses must not engage in unconscionable conduct, when dealing with other businesses or their customers