In an important decision the High Court today considered the principles applicable to the misuse of market power provisions of Section 46* of the Trade Practices Act 1974.
While the majority of the Court decided that Melway Publishing Pty Ltd did not breach the misuse of market power provisions of the Act in refusing to supply Robert Hicks Pty Ltd its Melway Melbourne street directory on the particular facts of the case relating to its long-established exclusive distribution system, the Court explained that s 46 may be contravened where the conduct in question is facilitated by a firm's substantial degree of market power.
"The ACCC welcomes this landmark decision of the High Court", ACCC Chairman, Professor Allan Fels, said today. "The decision clarifies the meaning of critical aspects of the misuse of market power provisions, in particular what it means for a firm with a substantial degree of power in a market to 'take advantage' of that power for an anti-competitive purpose.
"This decision represents only the second occasion that the substantive elements of s 46 have been considered by the High Court of Australia, the only other instance being the judgment in Queensland Wire Industries more than ten years ago. All judges confirmed the approach taken by the Court in the Queensland Wire Industries decision".
"The ACCC sought leave of the High Court to intervene in the appeal of this matter and make submissions as to the proper construction of s 46 from its perspective as the Trade Practices Act regulator in the public interest so that these submissions could be taken into account along with the submissions in support of the private interests of each of the parties", Professor Fels said.
"The ACCC has the statutory obligation and function of administering the Act and the State Competition Codes throughout the Commonwealth. These functions include the investigation and in appropriate circumstances the prosecution of proceedings seeking civil penalties and other relief under the law in respect of alleged contraventions of the law, including s 46.
"The ACCC submitted that its functions and role enabled it to provide a perspective which may assist the Court to see this matter in a larger context than that which the parties were willing or able to offer".
The ACCC was granted leave to intervene and its submissions focussed upon what it means for a firm with market power to 'take advantage' of that power.
The ACCC submitted that conduct may 'take advantage' of a substantial degree of market power within the meaning of s 46 where the conduct is facilitated or made easier by that market power. The ACCC submission on this issue was accepted in principle by the Court and, in doing so, the Court enhanced and extended the law as set down in the Court's Queensland Wire Industries decision. In their joint judgment the majority judges state that …"in a given case, it may be proper to conclude that a firm is taking advantage of market power where it does something that is materially facilitated by the existence of the power, even though it may not have been absolutely impossible without the power. To that extent, one may accept the submission made on behalf of the ACCC, intervening in the present case, that s 46 would be contravened if the market power which a corporation had made it easier for the corporation to act for the proscribed purpose than otherwise would be the case".
Professor Fels said the decision of Australia’s highest Court comes soon after the decision of the Full Federal Court where it was found that Boral had misused its market power in the Melbourne concrete masonry products market and the Federal Court decision where it was found that Rural Press had misused its market power in its dealings with a smaller publisher of regional newspapers in South Australia.
"Each of these decisions provide assistance to small and large business alike in terms of clarifying the law in relation to misuse of market power. Firms with market power must remain aware of the law and ensure that they do not take advantage of that power for an anti-competitive purpose. The decisions also show that the Courts will protect the legitimate interests of small businesses, the competitive process and ultimately consumers from abuses of large and powerful market participants in a variety of factual circumstances. The Boral case involved predatory pricing below cost in an attempt to force an efficient competitor out of the market and the Rural Press matter involved threats made with the purpose of forcing a competitor out of a particular geographic region.
"This judgment and the other recent decisions in relation to the meaning and application of the misuse of market power provisions of the Act have important implications for the ACCC’s trade practices enforcement program and the ACCC will consider future complaints in light of these judgments".
*Section 46 proscribes the misuse of market power by corporations that have a substantial degree of power in a market. The section prohibits such corporations taking advantage of that power for the purpose of:
- substantially damaging or eliminating a competitor
- preventing the entry of anyone into a market
- preventing or deterring anyone from engaging in competitive conduct in a market.
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