The past and the future of competition law

Economic Papers (Economic Society of Australia), March, 2004 by Allan Fels

This paper reviews the evolution and significance of the Trade Practices Act for the development of competition policy in Australia. The paper also discusses the role of the ACCC in the enforcement of competition law and speculates on future challenges facing the ACCC in this role.

Keywords: ACCC, Competition Policy, Trade Practices Act

JEL Codes: K2, L4

1 Introduction

One can view the ACCC from many perspectives.

The ACCC is an instrument of economic policy enabling it to contribute to better economic performance in this country through promoting competition in the interest of achieving enhanced economic welfare for all Australians. In doing so it is involved in what some regard as a paradox: it seeks to promote free competitive markets by means of substantial intervention.

The ACCC is an instrument of law. It was decided when the Trade Practices Act was introduced in its modern form in 1974 that legal means and instruments would be used to give effect to an economic policy: competition policy. It is imaginable that a different scheme could have been used. It is imaginable that a broad competition policy could have been adopted with the implementation being left in the hands of politicians, or it could have been placed in the hands of regulators, with courts playing little or no role. In fact, it was decided that implementation should be essentially court based, that is to say that certain forms of behaviour would be prohibited by law, that a law enforcement agency (the TPC) would be established to enforce the law in the courts and that final decisions would be with the courts. Essentially, it was decided that the general provisions of the law would be applied on a case-by-case basis. As I will discuss later, the ACCC also has now acquired a more traditional regulatory role where it makes final decisions in regard to matters such as access and monopoly prices subject to appeal to a Tribunal.

The ACCC is of political significance. Essentially it is an independent body involved in promoting competition and regulating monopoly for the benefit of the public. In carrying out this role, it deals with, and often is in conflict with, major interest groups. The nature of its relationship with the legislature and government of the day is of interest in this context.

As a regulator, the ACCC also is a subject of interest to scholars of public administration.

There is also an international dimension to the work of the ACCC and the Trade Practices Act.

2 The Trade Practices Act

The Trade Practices Act in its modern form was enacted in 1974 and its essential structure has not changed since then, but there has been considerable expansion and the addition of new functions especially in relation to the regulation of public utilities.

The Act prohibits anti-competitive conduct of various kinds. In particular it prohibits price fixing agreements between competitors, collective boycotts between competitors, other anti-competitive agreements, secondary boycotts, misuse of market power, anti-competitive exclusive dealing, resale price maintenance and anticompetitive mergers.

The role of the ACCC is to police this law. It may investigate and litigate in order to achieve injunctions, fines, damages (in some cases) and other possible orders. There is no divestiture power to break up large businesses. The regime is a civil law one in relation to the competition part of the Act.

Private enforcement is also possible and frequent. In other words private actions can be taken, by firms and by individuals who have a relevant interest, to get injunctions and damages and sometimes other orders. Private enforcement, of course, does not give rise to fines nor can injunctions be sought by private parties in relation to anticompetitive mergers.

There is a similar regime under Part V of the Act, which deals with consumer protection. Essentially the ACCC is involved in national consumer protection issues, mainly where there are instances of misleading or deceptive conduct or product safety. There is the possibility of criminal actions involving fines but not jail sentences under Part V of the Act.

In more recent times the Act has been extended to cover unconscionable conduct by business against business as well as by business against consumers.

Unlike in many other countries, authorisation of anticompetitive behaviour prohibited under Part IV of the Act is possible for most but not all forms of proscribed anticompetitive conduct. Authorisation is possible if the benefit to the public exceeds the detriment from reduced competition.

Adjudication is by the ACCC, with the right of appeal to the Australian Competition Tribunal, a tribunal which is headed by a Judge of the Federal Court but with membership which includes an economist and a person with business experience. The ACCC also was involved in GST price regulation for a time but this legislation has now ceased. The ACCC also administers the Prices Surveillance Act. Finally, the ACCC is involved in considerable international work these days.