- Competition law restricts how businesses can communicate and cooperate with each other.
- It’s illegal for businesses to make contracts, arrangements or understandings that substantially lessen competition.
- Other types of cooperation or communication that substantially lessen competition are also illegal. This is the case even without any contract, arrangement or understanding.
What the ACCC does
- We take reports about potentially anti-competitive communication and cooperation among businesses.
- We investigate potentially anti-competitive contracts, arrangements, understandings and concerted practices.
- We take enforcement action against businesses that break competition law. This action includes accepting undertakings from businesses and court action.
What the ACCC can't do
- We don’t mediate between businesses or arbitrate disputes.
The law restricts how business can work together
Competition relies on businesses making independent decisions. When businesses communicate and cooperate, this can undermine competition. For this reason, the law restricts how businesses can work together.
It is strictly illegal for competitors to form a cartel by agreeing to fix prices, rig bids, divide up markets or restrict output.
The law also prohibits some other kinds of communication and cooperation between businesses but only when this activity substantially lessens competition. This prohibition applies to:
Such contracts, arrangements, understandings and concerted practices often involve competitors. However, they can involve other parties such as suppliers, distributors, consultants and trade or professional associations.
Contracts, arrangements and understandings
A contract, arrangement or understanding is formed when two or more businesses develop a shared plan of action. To arrive at an understanding or to make an arrangement, it isn’t necessary for anything to be written down. In fact, these agreements are often not put down in writing and a ‘nod and wink’ can be sufficient.
When determining whether a contract, arrangement or understanding was formed, the court may infer the requisite ‘meeting of minds’ from circumstantial evidence. This can include evidence of joint action, similar pricing structures, or communications between the parties to reach an understanding.
Concerted practices
A concerted practice is communication or cooperation between two or more businesses that is not quite a contract, arrangement or understanding, but that goes beyond businesses independently responding to market conditions.
Often, a concerted practice involves sharing strategic commercial information. The businesses involved may, but won't always, have the same aim or behave in the same way.
For more information, see the Guidelines on concerted practices.
Example of a concerted practice
At an industry event, a bank gives its competitors early notice that it will be increasing its home loan interest rates by 0.25%. With this information, the bank’s competitors each decide to make similar changes to their home loan interest rates.
Noticing its competitors’ reactions, the bank continues sharing information about its interest rate intentions at industry events.
The behaviour of the bank and its competitors is a concerted practice.
Cooperation can be illegal
Under the Competition and Consumer Act 2010, contracts, arrangements, understandings and concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market are prohibited.‘This is the case even if the conduct doesn’t meet the stricter definition of a cartel.
Competition is more likely to be affected when competitors:
- exchange commercially sensitive information
- act, or plan to act, on that information.
Example of a concerted practice substantially lessening competition
An association of electricity meter manufacturers helps its members to plan by publishing a quarterly report on industry trends. The report uses data from a member survey about forecast sales, input costs and pricing intentions. Members use the report’s pricing forecast charts to make pricing decisions.
This concerted practice could substantially lessen competition, breaking the law.
Example of a contract substantially lessening competition
A cement business made agreements with every power station in the region to buy all of their flyash, a by-product from coal fired electricity production that can be used to make concrete.
These contracts prevented anyone else from buying flyash and competing with the business to supply concrete in the area.
The contracts had both the purpose and effect of substantially lessening competition.
For more information, see Media release: $18.6 million penalties ordered against Cement Australia companies for anti-competitive flyash agreements.
Similar behaviour isn’t necessarily cooperation
Businesses are allowed to follow industry trends, observe what competitors do, and react accordingly. However, they must make decisions independently, rather than in consultation or cooperation with competitors.
This is called parallel behaviour, and it is not illegal as long as competitors are responding independently to market conditions. For example, in competitive markets, businesses may very quickly match a competitor’s lowered price in order to avoid losing customers.
Example of independent action by businesses
During a promotional period, an airline offers discounted flights on popular routes, but with strict change and cancellation policies.
The airline’s competitors notice this promotion and independently respond with similar offers of their own.
This is not a concerted practice. Although each airline is offering tickets with similar prices and conditions, this is the result of independent action rather than collaboration.
Seeking an exemption
A business can apply for authorisation for an arrangement or cooperation that is potentially anti-competitive.
Authorisation is an exemption process and gives protection from legal action.
We assess whether the conduct is likely to substantially lessen competition and, if so, whether it's still in the public interest.
See also
Guidelines on concerted practices
Collective bargaining and boycotts
Competition and anti-competitive behaviour
Small business guide to the competition and consumer act
Competition and Consumer Act 2010
- Section 45 Anti-competitive agreements