The ACCC has commenced its first prosecution under the misuse of market power 'effects test' and it highlights the need for businesses to know where they stand in their markets.
Two years ago, new and much broader misuse of market power laws came into effect. Before, misuse of market power was only illegal if it had a prohibited purpose (like knocking off a competitor). In practice, this made it almost impossible for prosecutions to succeed.
Now, if you have market power, any conduct in which you engage that has the effect of substantially lessening competition is against the law. If you operate across multiple markets, power in one market can trigger liability in that market and any other market in which you operate. This places the question of market power front and centre.
The ACCC is prosecuting Tasmanian Ports Corporation for its conduct in markets for marine services, including towage and pilotage services in Tasmania. TasCorp owns all bar one of the ports in Northern Tasmania. The ACCC says that TasCorp tried to block Engage Marine from supplying tug and pilot services in competition with its own.
This might seem like an unusual case for the first effects test prosecution. Why not pursue a huge, consumer-facing market? There are a bunch to choose from, like search engines, supermarkets and social media platforms. People would love to see some scalps there.
There could be some strategy at play by the ACCC. About 20 years ago there was another misuse of market power and anti-competitive conduct case about marine services. It involved the Bunbury Port Authority's proposal to grant an exclusive licence to provide towage services in Port Bunbury. The court found that there existed naturally monopolistic markets for towage services in the port.
That judgment, particularly the characterisation of the market, could assist the court in assessing the market for TasCorp and its degree of market power. With market power and market definition central under the effects test, the ACCC would want the strongest case possible on those points. Losing its first case under the new, expanded laws wouldn't look good.
The case illustrates the importance of market definition and the assessment of market power under the new effects test. It's not against the law to have market power. But if you have it, then you need to consider the competitive impact of everything that you do. If you haven't given your business a competition health check since the introduction of the effects test, now's the time.
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