In a timely reminder to business, the Australian Competition and
Consumer Commission has commenced proceedings against 28 parties in
the telecommunications and finance industries, alleging third line
forcing and misleading and deceptive conduct arising out of bundled
Third line forcing is the practice of supplying goods or
services (whether at all, at a particular price or with a discount
or rebate) on condition that the purchaser also acquires goods or
services from another party. Third-line forcing is a form of
exclusive dealing which is always illegal, regardless of its effect
on competition. The prohibition is frequently overlooked or
misunderstood by businesses, which are therefore at significant
risk of inadvertently breaking the law. The ACCC's routine
prosecution of companies engaging in third-line forcing highlights
the seriousness with which such breaches may be treated.
The ACCC has alleged that the telecommunications companies
entered into contracts with small businesses to provide them with
telecommunication services, call credits and equipment. It is
claimed that many of the small business customers were led to
believe that the equipment was a "free" add-on to the
service contract. However, it is alleged that the equipment was
actually supplied to customers under rental agreements with the
finance companies unrelated to the phone companies.
The Commission claims that by entering into these bundled
service deals, the telecommunications companies were in breach of
the third line forcing provision in section 47(6) of the Trade
Practices Act. The finance companies and a number of
individuals have also had proceedings issued against them for being
knowingly concerned in the alleged contraventions.
While third line forcing conduct is strictly unlawful regardless
of its effect on competition, the Trade Practices Act
recognises that many bundling and other cross-promotional
arrangements have a legitimate place in Australian commerce, are in
the public interest, and are often pro-competitive. In these
circumstances, infringement can often be readily avoided by first
lodging a relatively straightforward notification with the ACCC.
Where a notification is lodged, it will give the business immunity
from prosecution for the exclusive dealing conduct 14 days after
the lodgement. The ACCC may only revoke that immunity if it
considers that the detriment to the public of the arrangement
outweighs the benefits to the public of the proposed conduct.
Businesses should be mindful that any commercial arrangement
that involves another person or company's goods or services
risks triggering the provision. However, rather than avoiding all
such initiatives, familiarity with the notification process and
understanding of the public benefit/detriment test can be extremely
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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