One of the most important aims of the TPA is to promote FREE competition in trading and business activities. To this end, restrictive trade practices : ie : business practices that would have the effect of substantially lessening competition in the marketplace, are prohibited under part IV of the TPA. The " pro " competition objectives set out in Part IV seek to allow each business to compete on its own merits, making its own decisions and treating consumers fairly. Competition in Australian markets is encouraged by prohibiting anti-competitive conduct and unfair trading practices between businesses. Part IV prohibits anti competitive conduct in the private sector. This includes cartel behaviour, misuse of market power, exclusive dealing that is anti competitive, resale price maintenance and anti competitive mergers.

The Act looks at two economic areas in determining whether or not an activity is anti-competitive, and thus, draws heavily on economic rather than legal concepts. It is thus imperative to determine and understand two major areas discussed in Part IV : market and competition. It is the ACCC that administers and polices the legislation under Part IV, and it has three major functions :

( 1 ) to bring proceedings against businesses who contravene the Act,

( 2 ) to authorise and permit otherwise prohibited conduct, often necessary because of our large size and small population, and

( 3 ) the guide the public, research new and problem areas, and provide basic consumer information.

Market : is the area of close competition between businesses. It has three parts or levels :

( a ) the product market

( b ) the geographic market

( c ) a functional and distribution level.

Part IV of the TPA thus seeks, to strengthen competition in the market place : but remember, the marketplace as used here is NOT the same as used in the normal commercial or business sense. Rivalry and competition are normal and essential functions in the marketplace, and the TPA does NOT seek to restrict or prohibit this, BUT, competition which has a restrictive, an anti competitive, a " forcing " effect, or that misuses and abuses power and share in the marketplace IS prohibited or restrained. The object is to discover the degree of the defendant’s market power. See the Qld. Wire case ( Barron p 496 ) here, as a precedent for the proposition, viz : if a company has little power in the market, nothing that it does matters too much in the overall competitiveness of that market. One of a hundred small players in a large market tends to indicate that the impact of any change in that players status or behaviour will be minimal. Conversely, if the market is dominated by a few large or key players, they have extensive market power. If these key players collude on prices or market division or share, if they merge their operations into a single, monolithic company, the effect in that market would be drastic. Qld. Wire thus indicated that although it may be impossible to define market boundaries with continual precision, these boundaries must nevertheless be drawn as closely as possible.

See also the Nicholas Enterprises case, where hotel proprietors 12 kms apart agreed to fix the discount allowed on sales of bottled beer. Customers would drive up to 10 kms to buy at a bigger discount, and thus, the retail market extended that far, and this meant that the proprietors were in competition with each other, and their agreement was in breach of S. 45A of the TPA because it was likely to have the effect of fixing, controlling or maintaining the price of bottled beer.

Part IV of the TPA, sections 45 thru 50, effectively deal with the restraint of trade that is in view here. Essentially, these sections detail the anti competitive conduct the TPA seeks to prohibit. Some conduct is prohibited outright, ( eg : retail price maintenance/3^rd line forcing/horizontal price fixing/primary boycotts ) others if the conduct substantially lessens competition ( eg : agreements affecting competition/secondary boycotts/misuse of market power/exclusive dealing/anti-competitive mergers )

Section 45 is the broad, catch all provision, which prohibits any agreement that contains an exclusionary provision OR substantially lessens competition. Mindset here ? : if competitors cooperate instead of competing with each other, they can artificially manipulate prices, keep them high, and exercise a much greater degree of control over the market than they would have standing alone, in a " competitive " market.

S. 45 prohibits corporations from entering into any contract, understanding or arrangement that :

( i) contains an exclusionary provision, or that gives effect to such an arrangement,

( ii )has the purpose and effect, or is likely to have the effect of substantially lessening competition, or that gives effect to such an arrangement.

Note that an understanding as referred to above is broad and flexible, and involves a meeting of the minds : that the parties are " ad idem " as in K law.

How to prove the arrangement of understanding exists ?

Can be extremely difficult to prove the requisite amount of collusion in each case : eg a totally oral arrangement, with nothing in writing. Courts thus look at all the circumstances and see if they can imply an understanding that is not innocent, and bears the " hall marks " of a prohibited understanding.

Case Eg : TPC & Email & Anor ( Barron p 494 )

The suggested arrangement here, was that the companies had come to a parallel pricing understanding, which was true, BUT, this alone is not enough to constitute a breach of S.45 : there must be a coming together of minds to predetermine a uniform pricing policy, NOT MERELY similarity in market behaviour, which was the only factor present here, due to prevailing market forces. On the facts, there was absolutely NO evidence to show consultation and collusion between Email and Warburton-Frankie, but a simple business decision from the non market leader Frankie to follow the pricing and marketing strategies of leader Email, in the knowledge that if they didn’t, they would not survive in business. The Court accepted that it was out of commercial necessity that Frankie followed Email’s policies and prices.

Examples of conduct that WOULD / WILL be caught under S.45 :

( a ) professional industry and codes of conduct : eg : restrictions on advertising, fee scales, and working with non members. All such tend to breach S.45 : NOTE : it is possible to have such codes of conduct approved by the ACCC, but only then will such practices avoid being seen as infringing.

( b ) agreements to share markets : by dividing up customers, territories or markets between traders.

( c ) agreements to regulate the supply of goods : in order to keep prices artificially high, as in Gallagher V Pioneer Concrete ( NSW ) Pty Ltd.

Pioneer’s truck drivers wanted to make sure they earned equal wages.

They agreed to restrict the number of trucks used for transporting concrete.

Instead, they used a rotation system and effectively stopped

Pioneer from hiring 3^rd parties from also carrying concrete.

Decision : this WAS a clear case where the conduct of the truck drivers lessened competition, and this lessening of competition was substantial. Efficient operators were penalised, inefficient operators were subsidised by these " shady " practices.

( see also Primary and Secondary boycotts here )

This section prohibits competitors from making an agreement that would have the purpose or effect of fixing, controlling or maintaining the prices of goods or services, on either a temporary ( eg : prior to Christmas trading ) or on a permanent basis.

Its purpose is to ensure that there is effective competitive activity in the relevant market. S 45A is an extension of S 45 : and refers specifically to price fixing agreements, and prohibits any contract, arrangement or understanding between competitors on fixing, or controlling prices, allowances, rebates or availability of credit for the supply of goods. This section makes ANY price fixing agreement illegal from the outset, because it presumes that the restriction on the free movement of prices in a market must, by its nature, substantially lessen competition. Genuine sales, price reductions, model run outs, and liquidation sales will not infringe this section, if there is no collusion between competitors to deliberately rip off consumers.

See TPC V Australian Autoglass PL : in which a number of automotive windscreen suppliers agreed to stop a price cutting war by agreeing to limit the amount of discount they would allow in particular markets. This action was held to have contravened S 45 A, and penalties of $ 130,000 were imposed.

See TPC V Pioneer Concrete ( Qld ) & Anor : In this case, Pioneer, Boral Resources and CSR held regular meetings to allocate work among the companies in accordance with pre arranged agreements on major contracts. They agreed amongst themselves, which company would put in the winning tender on any contract. In this way, the companies avoided competing with each other for available work. The companies also had an agreement to increase the base price of concrete in the Brisbane market.

The Federal Court found that these actions clearly amounted to price fixing activities, and imposed fines of $ 6.6 million dollars on the three companies.

This section deals with primary boycotts, which are agreements between two or more parties NOT to deal with a third party, OR to deal with that party only on certain

( eg : harsh or restrictive ) terms. Primary boycotts must have a "horizontal" effect or element : ie : at least one of the colluding parties must be a competitor of the targeted third party. The law here states that three points must be present for a firm to be guilty of excluding under S 45 ( 2 ). These are :

( a ) there must be a contract, agreement or an understanding,

( b ) between parties of whom any two or more are in competition with each other,

( c ) for the purpose of restricting the supply of goods or services by the target third party business.

It is important to understand that it is the purpose and not the effect of the boycott that is of importance here, and as such, the purpose must seek to prevent, restrict or limit dealings with particular customers or suppliers. Such activities will be presumed to have an anti competitive effect.

See : McCarthy V Australian Rough Riders Association. In this case, the Rough Riders Association prevented rough riders who were members of the ARRA from competing in rodeos organized by rodeo associations that were not ARRA members. Further to this, riders who were not members of the ARRA were prevented from competing in rodeos organized by rodeo associations that were ARRA members. The ARRA fined McCarthy and others, who were ARRA members $ 3000 for competing in rodeos organized by non member associations. The Court held that the ARRA’s rules involved a contravention of S 45 ( 2 ) because they amounted to a boycott of rodeo riders who were not members of the ARRA by organizers of rodeos who were members.

In a secondary boycott, a third party is subjected to pressure in order to prevent the third party dealing with the target. In this way, the target is damaged indirectly.

Secondary boycotts occur where parties act together to hinder or prevent a third person from :

supplying goods or services to a business

acquiring goods or services from a business

trading interstate or overseas

Secondary boycotts are prohibited only if they cause substantial loss or damage, substantially lessens competition, or affects trade or commerce.

In Australia, secondary boycotts are mostly used by trade unions in industrial disputes. In 1997, provisions covering industrial disputes were strengthened within the TPA. The Mudginberri case is an example of a secondary boycott claim against a union conducting a picket line which hindered meat inspectors from entering the abattoirs, and thus caused loss to the meat exporters/owners.

This section prevents the suppliers of goods and services who hold a substantial degree of market power from abusing that power. It does so by prohibiting them from :

( a ) eliminating or substantially damaging a competitor in the market

( b ) preventing the entry of a person into any market

( c ) deterring or preventing a person from engaging in competitive conduct in any market.

Essentially, this section of the Act is designed to protect small businesses from illegal anti competitive behaviour by their larger rivals. The question to be asked is : whether a supplier has used substantial market power for any of the above purposes, and hus, undermined competition.

To prove abuse of market power, it must be shown that :

( 1 ) the plaintiff and the defendant are both corporations

( 2 ) they are suppliers of goods in the market for those goods

( 3 ) the defendant has a substantial degree of power in that market

( 4 ) the plaintiff is a competitor of the defendant in that or any other market

( 5 ) the defendant has taken advantage of that power for the purpose of preventing the plaintiff from entering that or any other market, or from deterring the plaintiff from being a competitor in that market.

The Queensland Wire Case is a leading case regarding abuse of market power. See also O’Keefe V BP Australia : in which a petrol supplier refused refinery access to one of its independent petrol resellers, and began to sell the petrol to it at a higher price than that charged to the other major petrol companies. The court in this case found that the oil company used its market power to discriminate against an independent reseller that was not one of its "tied or franchised petrol stations.

This section prohibits dealing which usually occurs when a supplier deals with its customers only on certain conditions. Such conditions often require customers to limit their trade with competitors of the supplier, or to limit the re supply of goods to particular persons or geographic areas. One type of exclusive dealing is called third line forcing. Here, the supplier of goods or services supplies on the condition that the other acquires goods or services from a third party, or refuses to supply goods or services because the purchaser wont agree to buy from that third party. The Legion Cabs case is one such example. The other main type of exclusive dealing occurs when one person ( usually a supplier ) trading with one another ( usually a buyer ) imposes restrictions on the others freedom to choose from whom they may buy, or what they may buy and deal.

There are usually three types of restraints imposed via S 47 :

( 1 ) territorial exclusivity : which controls the territory in which the other party can trade, either by locking them in to a certain territory, or excluding them from others.

( 2 ) customer exclusivity : forcing the other to agree not to buy other goods from certain persons, or sell goods to certain persons : ie : preventing them from dealing with certain other persons.

( 3 ) product exclusivity : including re selling agreements / minimum quantity contracts / requirement contracts / tying / forcing.

Cool and Sons V O’Brien Glass is an example of a breach of S 47.

Refusal to deal is also covered here, and occurs when the seller refuses to supply because the buyer has either bought from a competitor, or re supplied against the wishes of the seller. The TPC V CSR case is an example of refusal to deal.

REMEMBER : to be prohibited, exclusive dealing other than forcing, has to have the

purpose or likely effect of substantially lessening competition. See the Twyfords case here, in which a manufacturer restricted 10 distributors from supplying the manufacturers goods outside NSW or the ACT. The TPC found that the restriction did not have the purpose or effect of substantially lessening competition. The TPC took into account that the manufacturer had less than one tenth of the share of the relevant market, the manufacturer was a new competitor in the market, and other competitors products were readily accessible in the market. This indicates that the TPC / ACCC can allow what may otherwise be caught by the Act if the relevant business makes an application to the ACCC for authorization of the particular conduct, on the grounds of public benefit.

RPM involves setting a minimum price below which the goods cannot be sold to a consumer. S.48 seeks to prohibit corporations or other persons from engaging in the practice of RPM, and it is presumed that such practices lessen competition.

It is ok for a supplier to recommend a resale price if it is clear that it is only a recommendation, and provided that the supplier does not influence the seller not to sell the goods below that price. The TPC V Sharp Corporation case is an example of setting a minimum price at which the reseller should advertise, display or offer goods for sale.