Chapter 12

Competition Principles

The Competition and Consumer Act 2010 (Cth) (CCA) regulates competition in Australia. It prohibits a range of anti-competitive behaviour, governs merger activity and regulates companies’ dealings with customers under the Australian Consumer Law.

The CCA provides for authorisation and notiﬁcation processes to permit behaviour otherwise prohibited by the legislation, such as mergers, resale price maintenance (RPM), misuse of market power, cartel conduct and exclusive dealing. Signiﬁcant reforms to Australia’s competition laws came into eﬀect in 2017, and included the introduction of a prohibition on concerted practices and a lessening of competition test for the prohibition on misuse of market power (i.e. expanding Australia's competition laws to better capture information sharing and unilateral conduct). The Federal Court considered the new misuse of market power test for the first time in 2021, making its first declaration of contravention of the new provision against Tasmanian Ports.

Contravention of the CCA carries signiﬁcant penalties, with the Australian Competition and Consumer Commission (ACCC), the body responsible for enforcing the CCA, increasingly pursuing criminal prosecution of companies and individuals for cartel conduct. Between 2017 and 2021 the Federal Court ordered penalties totalling over A$150 million against companies for cartel conduct, including in relation to an international shipping cartel and coordination over the supply of car manufacturing materials. The first contested criminal cartel trial in Australia was held in June 2021, with the jury ultimately acquitting the accused of all cartel charges; and in February 2022 the prosecution dropped all remaining charges in a long-running criminal cartel case against Citigroup Global Markets Australia, Deutsche Bank and several of their senior executives. Despite these setbacks, the ACCC in 2022 continues to pursue a number of criminal cartel matters and to push for the award of higher penalties in relation to breaches of the CCA. In September 2022 the first individuals were sentenced for criminal cartel conduct receiving suspended prison terms. The period from late 2020 through 2022 has also been marked by a renewed enforcement emphasis on vertical arrangements, specifically exclusive dealing and RPM. During this time the ACCC commenced five RPM and exclusive dealing proceedings.

The ACCC’s enforcement priorities for 2022/23 include digital platforms and manipulative advertising practices in the digital economy, competition issues in global and domestic supply chains (particularly those disrupted by the pandemic), pricing and selling of essential services (focusing on energy and telecommunications) and anti-competitive conduct in the financial services sector (focusing on payment services). In the product safety space, the ACCC has indicated its intention to prioritise compliance with button battery safety standards and product safety issues for young children.

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12.1 Conduct prohibited under the CCA

Under Part IV of the CCA, certain conduct is prohibited outright (that is, irrespective of the eﬀect on competition), while other conduct is prohibited only where it has the purpose, eﬀect or likely eﬀect of substantially lessening competition (SLC) in any market or it involves the misuse of substantial market power.

Outright prohibitions	Conduct prohibited where it has the purpose, effect or likely effect of SLC
Cartel conduct – any contract, arrangement or understanding between competitors (or potential competitors) which has: the purpose or effect of fixing or influencing prices; or the purpose of restricting production, capacity, or supply to customers; sharing or dividing up markets by allocating customers, suppliers or territories; or bid rigging.	Misuse of market power – where a company has substantial market power, engaging in conduct that has the purpose, or has or is likely to have the effect of substantially lessening competition in: that market; any other market in which that company supplies goods or services; or any other market in which that company acquires goods or services.
Resale price maintenance – specifying a minimum price below which customers are not to resupply or advertise goods or services for resupply.	Concerted practices – the co-operation between two or more persons which reduces the uncertainty of competition.
	Exclusive dealing – imposing restrictions on a customer’s or supplier’s freedom to choose with whom, where or on what terms it may conduct business.
	Mergers and acquisitions – the acquisition of shares or assets.

12.2 Authorised conduct and merger clearances

The CCA permits conduct that may otherwise contravene the CCA to be exempted by the ACCC. A company may apply to the ACCC for authorisation of anti-competitive conduct (including cartel conduct and misuse of market power) on public beneﬁt grounds or it may lodge a notiﬁcation with the ACCC for exclusive dealing, resale price maintenance or collective bargaining arrangements.

In respect of a merger or acquisition which raises competition law issues, companies may also seek to have the merger cleared or authorised by the ACCC. Clearance will require the parties to persuade the ACCC that the proposed merger or acquisition is not likely to SLC. Authorisation can be granted where the merger or acquisition will result in public beneﬁts which outweigh any detriments (including competitive harm). There is presently no mandatory requirement to notify the ACCC prior to completing a transaction with the ACCC Merger Guidelines simply encouraging the parties to notify the ACCC where the products of the merger parties are either substitutes or complements and the merged ﬁrm will have a post-merger market share of greater than 20% in the relevant market/s. However, this may change in future, with the ACCC announcing significant proposed reforms to Australia’s merger laws in August 2021. Among other things, the proposed reforms include changing Australia’s voluntary merger review regime to a mandatory and suspensory regime, with parties being required to notify the ACCC of mergers above certain thresholds, and changes to the substantive merger ‘test’. Discussion on these reforms is still in its preliminary stages.

12.3 Penalties

Pecuniary penalties apply to contraventions of all Part IV provisions. The maximum penalty per contravention is displayed below:

	Companies	Individuals
Civil Penalties	The greatest of: A$10 million; three times the value of the benefit obtained that is reasonably attributable to the act or omission; or if the court cannot determine the value of the benefit, 10% of the annual turnover of the corporate group in Australia in the preceding 12 months.	A$500,000
Criminal penalties (for cartel conduct)	Equivalent to civil penalties	Up to 10 years imprisonment and/or fines of up to $A444,000

Companies

Individuals

Civil Penalties

The greatest of:

A$10 million;
three times the value of the benefit obtained that is reasonably attributable to the act or omission; or
if the court cannot determine the value of the benefit, 10% of the annual turnover of the corporate group in Australia in the preceding 12 months.

A$500,000

Criminal penalties (for cartel conduct)

Equivalent to civil penalties

Up to 10 years imprisonment and/or fines of up to $A444,000

It is noted that on 28 September 2022 the Federal Government introduced a bill which would increase maximum penalties to the greatest of A$50 million, or three times value of the benefit, or where benefit cannot be determined 30% of corporate group turnover in the breach turnover period. If passed this will result in a significant increase in maximum penalties. Maximum penalties for individuals are to increase to $A2.5 million.

A company must not indemnify its oﬃcers against a liability to pay a pecuniary penalty or for the legal costs of defending proceedings in which the oﬃcer is found to have such a liability.

In addition, on the application of the ACCC (or in respect of criminal cartels, the Commonwealth Director of Public Prosecution), a court may disqualify a person who has been found to have engaged in anti-competitive conduct from managing companies for a period the court considers appropriate. Other non-pecuniary penalties include community services orders and adverse publicity orders.

12.4 Other provisions of the CCA

The CCA also has speciﬁc parts dealing with:

access to telecommunications services (access to telecommunications facilities is dealt with in Schedule 1 of the Telecommunications Act 1997 (Cth));
access to essential infrastructure services which cannot be economically reproduced by a third party. For example, gas and electricity transmission and distribution services, railway lines, airports, ports and other services with natural monopoly characteristics;
anti-competitive conduct in telecommunications markets;
the regulation of international liner cargo shipping;
prices surveillance; and
unfair dealings in business, consumer protection and product safety (now contained in the Australian Consumer Law, in Schedule 2 of the CCA). For more information on the Australian Consumer Law see Chapter 15 of this publication, 'Consumer protection and product liability'.

12.5 Australian Competition and Consumer Commission

The ACCC is the body charged with administering the CCA. It also has a number of other competition-related functions under a wide range of other industry legislation. The ACCC is a powerful regulator, with broad discretions and a high proﬁle.

Broadly, the ACCC’s role includes:

the enforcement of the anti-competitive conduct, consumer protection and unfair dealing provisions of the CCA. The ACCC has extensive investigation powers, including powers to compel companies to provide information and documents and to examine individuals under oath. However, the ACCC cannot make ﬁndings of illegality and impose penalties for a breach of the CCA itself – it must apply to the Australian Federal Court. The exception to this is in relation to certain consumer protection provisions where the ACCC has the power to issue infringement and substantiation notices, banning orders and public warnings. The ACCC’s role in enforcement of the CCA is supplemented by the ability of private parties to take private actions under the CCA (other than seeking an injunction in relation to an anti- competitive merger);
the assessment of mergers and acquisitions which might have the likely eﬀect of substantially lessening competition. Although there is currently no compulsory pre-merger notiﬁcation requirement, the ACCC will often investigate mergers and acquisitions that come to its attention, even where the merger parties may not have sought ACCC clearance. Parties can apply for the ACCC to assess mergers and acquisitions through its informal clearance process or by seeking merger authorisation on public beneﬁt grounds and which can be appealed to the Australian Competition Tribunal;
a range of regulatory functions under the general and telecommunications-speciﬁc access regimes, which relate to the terms and conditions upon which businesses competing in upstream and downstream markets will be granted access to services provided by essential infrastructure facilities (for example, telecommunications, electricity and gas transmission and distribution services, and railway lines); and
prices surveillance including price notiﬁcation, price monitoring and pricing inquiries.

A range of state regulatory bodies are responsible for administering state-based access regimes and other industry-speciﬁc regulation.

Last updated: 01/01/2023

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