Anti-competitive behaviour

A robust and competitive market is essential for Australia’s open economy to thrive. It fosters innovation and efficiency among businesses, leading to lower prices, improved product and service quality, increased consumer choice, and overall prosperity and welfare for all Australians. Continue reading this Legal Kitz blog post to understand more about anti-competitive behaviour.

What is anti-competitive behaviour?

Anti-competitive behaviour refers to actions or strategies taken by individuals, companies, or organisations that aim to restrict or eliminate competition within a market. It involves practices that undermine fair competition, hinder market dynamics, and potentially harm consumers and other businesses. Such behaviour can take various forms.

What is the legislation that governs anti-competitive behaviour?

To maintain a healthy competitive environment, businesses must adhere to acceptable behaviour towards competitors and suppliers. The Competition and Consumer Act 2010 establishes rules that ensure fair competition, enabling businesses to compete based on their merits.

Types of anti-competitive behaviour

• Monopolistic practices refer to actions taken by a dominant company in a market to limit competition. This includes predatory pricing, exclusive dealing, and tying arrangements.

• Collusion and cartels involve competitors conspiring together to manipulate prices, divide markets, or restrict supply. This harms competition and inflates prices.

• Anti-competitive mergers and acquisitions can result in reduced competition, increased market power, or the creation of monopolies. Regulatory authorities scrutinise such transactions to ensure they don’t harm market dynamics.

• Predatory practices occur when companies intentionally set prices below cost to eliminate competitors and later raise prices after establishing dominance. This harms competition and restricts consumer choice.

• Market foreclosure involves actions that restrict or exclude competitors from accessing key resources, distribution channels, or technologies, creating barriers to entry and stifling innovation.

Business behaviour that is potentially illegal

Certain business practices have the potential to harm competition in various situations.

When the purpose, effect, or likely outcome of business behavior is to significantly reduce competition in a market, it can violate the law.

Competition is significantly diminished when business behaviour interferes with or undermines the competitive process in a meaningful manner, often by discouraging, obstructing, or impeding competition.

When competition is substantially lessened

Competition faces significant reduction when the behavior of a business leads to the following outcomes:

1. Effective competition is hindered for the business’s competitors.
2. The business gains the ability to substantially and consistently raise prices.
3. The establishment and entry of new businesses into the market become exceedingly challenging.

Furthermore, competition can also be substantially diminished when two or more businesses engage in conduct that weakens the competitive landscape.

Cooperation

In general, the foundation of competition lies in the independent decision-making of businesses.

However, when businesses engage in communication and cooperation, they run the risk of undermining competition and violating the law.

If businesses wish to collaborate and collectively negotiate with a supplier or customer, they must first obtain permission through an exemption process.

Market power and misuse

Possessing market power in itself is not unlawful. However, it is imperative for businesses to refrain from abusing this power to impede fair competition among other businesses.

If the misuse of market power significantly diminishes competition, it becomes a violation of the law.

Exclusive dealing

When a business imposes restrictions on how its customers or suppliers conduct their business, it runs the risk of violating competition laws through exclusive dealing practices.

Although exclusive dealing is a customary aspect of legitimate business relationships, it becomes illegal when it significantly diminishes competition in a market.

Legitimate business behaviour

As long as a business engages in fair competition rather than attempting to hinder other businesses from competing, its conduct is unlikely to violate the law. This remains true even if a competitor’s business is adversely affected.

Businesses that compete on their merits undertake various activities, including:

1. Investing in research to enhance products or services, or develop new innovations.
2. Engaging in truthful advertising campaigns to attract customers, without resorting to false or misleading claims.
3. Improving operational processes to achieve cost reductions.

Such behaviours are advantageous to consumers and the overall economy, and are not considered illegal.

The Australian Competition and Consumer Commission

The Australian Competition and Consumer Commission (ACCC) employs several measures to prevent and address anti-competitive behavior in Australia. Here are some key ways the ACCC fulfills this role:

1. Enforcement of Competition Laws: The ACCC actively enforces competition laws, taking legal action against entities involved in anti-competitive behavior.
2. Merger and Acquisition Reviews: The ACCC reviews business transactions to ensure they don’t harm competition, imposing conditions or opposing mergers if necessary.
3. Cartel Detection and Prosecution: The ACCC investigates and prosecutes collusion among competitors, such as price-fixing or bid-rigging.
4. Market Studies and Inquiries: The ACCC conducts studies and inquiries to identify market issues and recommend reforms that promote competition.
5. Compliance and Education: The ACCC provides guidance and resources to help businesses understand and comply with competition laws.
6. Advocacy and Policy Development: The ACCC engages in advocacy, proposing reforms and providing input to government consultations.
7. International Cooperation: The ACCC collaborates with international authorities to address cross-border anti-competitive behaviour and share information.

ACCC proactively monitors markets, investigates complaints, educates stakeholders, enforces competition laws, and advocates for policies that promote competition. By doing so, the ACCC plays a critical role in preventing and deterring anti-competitive behaviour, fostering fair competition, and protecting consumer welfare in Australia.

Know your rights!

Knowing your rights as a consumer is essential to make informed choices and protect yourself in commercial transactions. Here are some ways to familiarise yourself with your consumer rights:

1. Research consumer laws.
2. Read contract terms and conditions.
3. Understand product and service guarantees.
4. Be informed about pricing and advertising.
5. Explore consumer rights organisations.
6. Be aware of the complaint channels available to address consumer grievances.
7. Seek legal advice.

By familiarising yourself with consumer laws and resources, you can navigate the marketplace with confidence and protect yourself from unfair practices.

Legal advice

If you have any concerns or questions regarding competitive behaviour, you can always contact Legal Kitz to assist you. To request a FREE 30-minute consultation with one of our highly experienced team members, contact us at [email protected] or 1300 988 954. You can also check out our sister company – Business Kitz’s Subscriptions, to access our full range of legal, commercial and employment document templates to begin your business with a solid foundation that ensures compliance.