NO.052

MAJOR PACKAGE OF TRADE PRACTICES ACT REFORMS

The Treasurer announced today a major package of amendments to the Trade

Practices Act 1974 (the Act) to improve the operation of fundamental provisions

in the Act and to enhance administrative processes that have a major impact

on business, particularly small business.

Consultation with the States and Territories on relevant changes announced

today have also commenced, as required by the intergovernmental Conduct

Code Agreement.

Introduction of Dawson Package of Amendments to the Act

Legislation to implement the majority of the recommendations of the Review

of the Competition Provisions of the Trade Practices Act (Dawson Review)

will be introduced before Parliament rises this month.

The Dawson Review was the most comprehensive review of the competition provisions

of the Act for over a decade and provided an opportunity for business and other

interested parties to participate in a thorough consultation process.

The Australian Government sought and received the support of the States and

Territories for the draft Bill as required by the intergovernmental Conduct

Code Agreement.

The Dawson Review found that the competition provisions of the Act have served

Australians well. However, the Review recommended a series of changes, largely

directed at improving administrative processes, to enhance the timeliness, transparency

and overall accountability of Australia’s competition regulation.

New merger processes

The Bill will establish a voluntary formal merger clearance system —

to operate in parallel with the existing informal merger clearance system —

and provide for merger authorisation applications to be considered by the Australian

Competition Tribunal.

While the Dawson Review found that the informal system of merger clearance

conducted by the Australian Competition and Consumer Commission (ACCC) can be

quick, inexpensive and flexible in many circumstances, it identified a lack

of certainty for business as a clear disadvantage:

• There is no statutory time limit on the ACCC’s informal system;
• The absence of an appeals mechanism may allow the extraction of undertakings

  that go beyond the competition concerns of a merger;

• The lack of a legal requirement for the ACCC to provide reasons for its

  decisions prevents the development of a body of precedent; and

• There is no certainty of immunity from later legal action even if the ACCC

  has granted informal merger clearance.

The informal system will continue to answer the needs of straightforward mergers.

Parties to more complex mergers can utilise the informal system to address ACCC

concerns but, when they are ready to proceed, the formal system will provide

the certainty of legislated time limits, require disclosure of reasons, allow

the applicant to appeal to the Australian Competition Tribunal, and provide

immunity from legal action should the clearance be granted.

Non-merger authorisation processes

The Bill imposes time limits on the ACCC for the consideration of non-merger

authorisation applications and provides the ACCC with the discretion to waive,

or reduce the filing fee in appropriate circumstances.

Joint ventures

The Bill provides a joint venture defence to the exclusionary and price-fixing

provisions. This means that while cartel conduct will continue to be prohibited

outright, genuine joint ventures will be considered on the basis of a competition

test.

Increased penalties for breach of the competition provisions

The Bill introduces higher penalties for breaching the competition provisions,

as a means of better deterring corporations from engaging in anti-competitive

behaviour. The maximum fine for corporations will be the greater of $10 million

or three times the value of the benefit from the anti-competitive conduct, or

where the value cannot be determined, 10 per cent of the annual turnover of

the body corporate and all its related bodies (if any).

Benefits for Small Business

Notification process for collective bargaining by small business with

big business

As part of the Bill, the Government will reduce the regulatory burden on small

business by introducing a notification process for collective bargaining by

small business as an alternative to the authorisation process. It also provides

that third parties can make a collective bargaining notification on behalf of

a group of small businesses with a specific target.

To ensure collective bargaining benefits for small businesses dealing with

large businesses, there is a transaction limit of $3 million in any 12 month

period. However, the Government recognises that there are businesses with high

turnover and small profit margins which should have a higher transaction limit

and the Bill provides that a higher limit can be set by regulation. The Government

considers there would be a range of businesses suitable for a higher limit,

these could include motor vehicle dealers, motor vehicle repairers, petrol station

owners and some agricultural businesses. The Minister for Small Business and

Tourism will develop proposals for the Government’s consideration in respect

of these regulations.

The Treasurer, in consultation with both the Minister for Small Business and

Tourism and the Australian Competition and Consumer Commission, will determine

the fee for collective bargaining for small business in the regulations. The

Australian Government accepts the Dawson Review comment that “if a fee

is to be charged for notification, it should be substantially less than the

fee charged for an application for authorisation”, which is currently

$7,500.

Government Response to the Senate Inquiry into ‘The effectiveness

of the Trade Practices Act 1974 in protecting small business’

The Government will also table today its response to the Senate Inquiry into

‘The effectiveness of the Trade Practices Act 1974 in protecting

small business’. Eight of the 17 recommendations made by the Senate Inquiry

have been accepted by the Government, either in full or in part. The remaining

recommendations were not accepted because they were either unnecessary or because

they are ill conceived and inappropriate.

The Government response is guided by the findings of the Government Senators.

Their suggested changes have been largely accepted by the Government, with modifications

to some proposals to clarify their impact.

Most changes are directed at clarifying the prohibition on the misuse of market

power and extending the application of the prohibition of unconscionable conduct

in business transactions in sections 46 and 51AC of the Trade Practices

Act 1974.

The Government considers that section 46 should be amended to provide some

additional guidance to courts in the consideration of predatory pricing cases.

Section 46 should also be amended to ensure it can stop anti competitive leveraging

of market power by firms and to ensure arrangements between firms are taken

into account in the assessment of market power.

The Government also considers that section 51AC should be amended so that

it applies to the supply or acquisition of goods or services by businesses priced

up to a value of $10 million. The section should also be amended to make it

clear that courts are able to consider terms enabling a unilateral variation

of a contract when they are assessing unconscionable conduct.

The Government has not accepted the proposal to allow the ACCC to use its

coercive information gathering powers after interlocutory court proceedings

have started. The Government considers the extensive existing powers of courts

to compel corporations to disclose information before trial to be adequate.

The full text of the response may be found at www.treasurer.gov.au.

CANBERRA

23 June 2004

Contact: David Alexander

02 6277 7340