Although it will not become law until next year, businesses
should begin reviewing their conduct to ensure they will not fall
foul of the amended section 46.
Changes from the current section 46
The revised section 46 will prohibit a corporation with market
power engaging in conduct that has the purpose or effect of
substantially lessening competition in a market in which the firm
with market power operates.
The new section 46 represents a significant change to the misuse
of market power prohibition. The new provision:
introduces, for the first time, an
"effects test" into section 46. Conduct
that has or is likely to have the effect of substantially lessening
competition (and no longer just such a purpose) will now be
omits the "take
advantage" element of section 46. Courts will no
longer be required to pose the question: "how would the firm
have acted if it lacked its market power?"
removes the "Birdsville amendments",
which were made in 2007 to prohibit firms with a substantial market
share of the market engaging in below cost pricing for a sustained
period of time.
One important change from earlier drafts is that section 46 will
be limited to prohibiting a firm with market power engaging in
conduct that has an anticompetitive purpose or effect
only in those markets in which the firm supplies
or acquires goods or services (or is likely to do so), rather than
the much broader notion of "any other market".
Review your conduct to avoid breaching the new misuse of market
Many firms are likely to already satisfy the test of possessing
a substantial degree of power in a market.
However, unlike the current state of the law regarding section
46 of the CCA, firms, for the first time in Australia, will now
need to carefully consider whether the conduct they engage in, or
propose to engage in, could be said:
to have the purpose;
have the effect; or
or be likely to have the effect
of lessening competition.
The ACCC has recently provided some guidance as to what it
considers may or may not raise issues under the new section 46.
While the circumstances of each case will be relevant, the ACCC has
Conduct likely to raise concerns under the new section 46
a refusal to supply an essential input;
predatory pricing; and
bundling a competitive product with a monopoly product.
Conduct unlikely to raise concerns under the new section 46
research and development;
standardised or national pricing by large retail chains;
a price war; and
investing in new production technology to increase
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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European competition authorities are also serious about resale price maintenance or suppliers fixing resellers’ prices.
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