In its attempt to tighten up cartel conduct, the Australian
Government has released the final draft of the Trade Practices
Amendment (Cartel Conduct and Other Measures) Bill 2008. Has
it gone too far?
On 27 October, Hon Chris Bowen MP released a revised draft of
the Trade Practices Amendment (Cartel Conduct and Other
Measures) Bill 2008 ("Bill"). The Bill proposes to
create two new criminal offences and two new civil cartel offences
in Part IV of the Trade Practices Act 1974 (Cth)
("TPA"). The proposed offences extend well beyond the
current prohibitions on price-fixing and exclusionary arrangements,
resulting in significant changes to Part IV of the TPA.
Individuals convicted of a cartel offence can now face a maximum
sentence of ten years imprisonment and a fine of up to $220,000. It
is anticipated that the Bill will be introduced into Parliament at
the end of the year.
Practical implications of the Bill
Companies and individuals currently compliant with the TPA may,
in fact, be in breach of the new cartel prohibitions.
The effect of the proposed cartel provisions is to prohibit
conduct which is currently subject to a "lessening of
competition" test. The significance of failing to retain the
"lessening of competition test" is far reaching. Under
the current law, certain conduct is only prohibited if it has the
purpose, or has or is likely to have the effect of, substantially
lessening competition. However, under the proposed Bill, if the
parties to the contract, arrangement or understanding are in
competition with one another, the new prohibitions potentially
extend to prohibit some forms of vertical exclusive dealing
arrangements. Territorial exclusivity and price setting (for
example, specifying a maximum resale price) between competitors may
now be caught by the cartel prohibitions.
Vertical supply agreements
Notably, anti-overlap provisions are not incorporated into the
Bill. Current anti-overlap provisions contained in Part IV of the
TPA serve an important function, as they ensure vertical supply
arrangements containing exclusivity clauses are subject only to the
"lessening of competition test" and are not caught by the
absolute prohibitions in Part IV of the TPA such as price-fixing
and exclusionary provisions. Under the proposed amendments, a
business that appoints an exclusive distributor, while retaining a
right to compete against the distributor, may find itself in breach
of the new cartel prohibitions.
Where to from here?
It remains to be seen whether the practical implications
mentioned are unintended drafting consequences. There is currently
no explanatory memorandum to the Bill to provide guidance. However,
should the Government pass the Bill in its current form, many
existing commercial arrangements will need to be reviewed,
including 'exclusive' distribution agreements, which, as a
result of the proposed amendments, may no longer be compliant with
Part IV of the TPA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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