NO.051

JOINT MEDIA RELEASE

TREASURER &

MINISTER FOR SMALL BUSINESS AND TOURISM

GOVERNMENT AMENDMENTS TO THE TRADE PRACTICES ACT 1974

Today we announce that following extensive consultation with small business, the Government will introduce the Trade Practices Legislation Amendment Bill (No. 1) 2007 (the Bill) to amend section 51AC and section 46 of the Trade Practices Act 1974 (the Act).

The Bill will improve protection for small business from unconscionable conduct and from the misuse of market power, such as predatory pricing.

The Bill substantially implements the Government’s response to the March 2004 Senate Economics References Committee (SERC) report on The effectiveness of the Trade Practices Act 1974 in protecting small business.

Based on the discussions with small business, the Government will change its legislation, to provide that:

• for the purposes of section 46, more than one corporation can have a substantial degree of power in a market;
• a corporation can have a substantial degree of market power even though it does not substantially control a market;
• a corporation can have a substantial degree of market power in a market even though it does not have absolute freedom from constraint in that market by the conduct of its competitors or persons to or from whom the corporation supplies or acquires goods or services; and
• in regard to below-cost or predatory pricing, the Court may have regard to any conduct that consisted of supplying goods or services for a sustained period at a price that was less than the relevant cost to the corporation of supplying such goods or services, and the reasons for that conduct.

An earlier proposal to insert reference to a reasonable prospect or expectation of being able to recover losses incurred by below‑cost pricing as a factor in section 46 will not be pursued, in light of concerns that it may limit the ability of the court to find breaches of section 46 in cases of predatory pricing.

The Government would like to particularly acknowledge the work of the following small business groups in the consultation process:

• The National Association of Retail Grocers of Australia (NARGA);
• The Council of Small Business Organisations of Australia (COSBOA);
• The National Farmers Federation (NFF); and
• The Fair Trading Coalition (FTC).

We would also like to particularly acknowledge the work undertaken by Senator Boswell, Leader of the Nationals in the Senate, in this regard.

These changes are in addition to amendments in the Bill already announced by the Government, which will:

• prevent leveraging of market power, by providing that a corporation must not take advantage of a substantial degree of market power, either in the market in which the power is held or in any other market;
• take account of coordinated market power, by allowing courts to have regard to any market power the corporation has that results from any agreements it has with parties outside its corporate group;
• amend section 51AC of the Act to provide that a court may consider unilateral variation contract terms when determining whether a corporation has acted unconscionably, and raise the price limitation under the section from $3 million to $10 million, extending its application to a wider range of transactions entered into by small business that supply or acquire goods and services; and
• establish a second Deputy Chairperson position for the ACCC, with the position to be filled by a candidate who is experienced in small business matters.

The Government will introduce the Bill on Wednesday 20 June 2007.

The Bill builds on the successes contained in the Trade Practices Legislation Amendment Bill (No. 1) 2006 (Dawson Act) last year which:

• Allowed a simpler notification scheme when small businesses collectively bargain, making the process quicker, easier and cheaper.
• Increased the penalties for anticompetitive conduct, to the greater of $10 million, or three times the benefit from the contravention (where the gain cannot be readily ascertained, the maximum penalty will be 10 per cent of the value of the turnover of the corporation and related bodies).  These changes represent a significant increase in the penalties available to a court when considering a breach of the Trade Practices Act 1974, greatly boosting its deterrent effect.
• Increased the powers of the ACCC, to grant it search and seizure powers.  This new right to enter premises and inspect documents is similar to the search warrant provision in section 10 of the Crimes Act 1914 (Cth).
• Retained the ‘per se’ prohibition for third line forcing in the Act, so that third line forcing continues to be regarded as being anti‑competitive, regardless of whether is has the purpose, effect, or likely effect of substantially lessening competition.

CANBERRA

19 June 2007

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