Chance to update the TPA –18 October 2001
In brief: A review of Australia's competition laws will be welcomed with open arms by business, says Partner Bob Baxt.
This article was first published in the Australian Financial Review on 18 October 2001. Professor Bob Baxt is a Partner in the Competition Law Group of Allens Arthur Robinson.
It's been clear for some time that the business community has held concerns about the operation of certain provisions of the Trade Practices Act, particularly those relating to mergers. Furthermore, that community has expressed concerns at the processes for considering mergers.
Some of these concerns were recently considered by the House of Representatives and the Standing Committee on Economics, Finance and Public Administration in its report 'Competing Interests: is there balance?'. This document-which reviews the current annual report of the Australian Competition and Consumer Commission (ACCC)-and certain other pressures being applied by the Business Council of Australia (BCA) have no doubt been instrumental in the Prime Minister's recent pledge to conduct a review of the Act if the government is returned to power on November 10.
The review will be seen by many as a timely response to the concerns of both the business community and some of Mr Howard's parliamentary colleagues.
The ACCC's treatment of mergers has been identified by some as a key area of concern. In particular, the BCA and others in the business community believe the ACCC has been too intransigent in dealing with mergers that have an international context. The Act itself is also arguably too inflexible in dealing with such mergers. The review may provide an opportunity to amend the Act so that the ACCC can deal with such mergers in a proactive way, without the need for the parties to seek authorisation.
While the basic concepts of the Act are reasonably sound, the House of Representatives report has raised certain concerns about processes and the willingness of the ACCC to listen to the community in relation to the concerns about the way in which it administers the legislation. Also, there is an urgent need for some changes in relation to mergers. The authorisation process is flawed. It takes too long. The appeal mechanism is open to any interested party, which can in effect achieve economic blackmail. While the ACCC says that it rejects very few mergers, in fact, many mergers do not go to the ACCC because of concerns that parties have about the length of time it will take to deal with the mergers, and the fear that the ACCC will push certain mergers down the authorisation route. The House of Representatives report certainly confirms the existence of those concerns.
A number of other areas of the Act also need change. Treasury has already indicated that the provisions relating to third-line forcing should be reviewed to make them subject to a competition test; the recent decision in the South Sydney Rugby League case makes it clear that the provisions dealing with collective boycotts need urgent review to ensure that genuine joint venture activity is not strangled.
At the same time as the proposed review is in progress, we note that the Senate has before it an inquiry into section 46 of the Act, which prohibits misuse of market power. The inquiry will proceed irrespective of the Prime Minister's review of the Act. The questions being looked at by the Senate are whether there should be a reversal of the onus of proof in establishing a breach of section 46 and whether, in the event of breach occurring, the court should be able to order the break-up of a company (similar to the proposed break-up of Microsoft in the US, which, of course, did not proceed). It is clear that neither proposal would receive any significant support from the business community or from advisers. Indeed, recent cases show that the section works well.
There are a number of other issues that will no doubt be the subject of consideration by the review. One critical question on which business will probably be completely united is to oppose the proposal that criminal penalties (including jail terms) be introduced into the Act to deal with price-fixing cartels. Professor Fels has been championing this reform and has received some support from the House of Representatives Economics Committee.
The planned review provides a good opportunity not only to ensure that the Act is suitable for Australia in a 21st century environment, but an opportunity to ensure that the regulator takes into account the competing interests that it has to protect in administering this very important piece of commercial legislation. The review is to be welcomed and could provide an important foundation for the future of Australian competition law.
For further information, please contact:
- Patrick RyanConsultant,
Melbourne
Ph: +61 3 9613 8824
Patrick.Ryan@aar.com.au - Carolyn OddiePartner,
Sydney
Ph: +61 2 9230 4203
Carolyn.Oddie@aar.com.au
