New life for abuse of market power provision
The Federal Court breathed new life into section 46 of the Competition and Consumer Act (Cth) 2010 when it recently found that Ticketek Pty Ltd had contravened the provision. The court issued a penalty of $2.5 million, finding Ticketek had engaged in anti-competitive behaviour on four occasions. The court found that Ticketek took advantage of its substantial degree of market power in the market for the supply of ticketing services for the purpose of deterring or preventing Lasttix (a rival ticketing company) from engaging in competitive conduct.
Commentators and lobbyists have argued that the section lacks teeth, but the Ticketek decision is a timely reminder that it remains a powerful provision. This is particularly the case given the increasingly broad definition of a market. Businesses need to be conscious of the market within which they, their franchisees, their suppliers and even their customers operate, and assess whether any of them have a 'substantial degree of market power' in the relevant market. If so they need to consider section 46 before taking action which may limit the operations of their competitors or the choice of consumers.
Substantial market power and misuse of market power
Ticketek was found to have a substantial market power in the market for ticketing services because of its 45 per cent market share of the total number of tickets sold for live entertainment events across Australia. Ticketek was found to have misused this market power by refusing on a number of occasions to implement a discount ticket offering which was supplied through Lasttix on Ticketek's system for a number of events, despite requests to do so from the promoters of the events. In response to one promoter's request to use the discount ticketing system through Lasttix, Ticketek responded:
"Ticketek have no affiliation with Lasttix and are opposed to facilitating offers to their members by allowing them to piggyback off our transactional website, and in particular when those offers are more favourable than what has been made available to our own customers."
The objectives of the section 46 prohibitions on anti-competitive behaviour are to create a competitive environment which in turn creates follow on benefits to the consumer. The ACCC in its guidelines state that when determining whether a business has misused its market power they will ask three questions:
- does the business in question have substantial market power?
- is it taking advantage of its substantial market power?
- is it using its power for an illegal purpose?
Market power is said to refer to a business' ability to act in the market free of constraints. An example of market power may be a business' ability to raise prices without fear of a rival business being able to set lower prices and subsequently taking away customers. It is important that businesses correctly identify the relevant market within which the conduct is occurring because if the relevant market is smaller or narrower than what the business has initially identified, it is more likely the business will have substantial market power, which may heighten the risk of a contravention of section 46 of the CCA.
In considering whether a business has taken advantage of its substantial market power, the ACCC have stated that courts can consider any or all of the following factors:
- did the substantial degree of market power facilitate the conduct?
- did the business engaging in the conduct rely on its substantial degree of market power?
- would it be likely for the business to engage in the conduct without a substantial degree of market power?
- is the conduct in any other way related to the substantial degree of market power?
For the purposes of section 46 of the CCA a business will be considered to have used its substantial market power for an illegal purpose when they intentionally engage in conduct that:
- substantially damages or eliminates a competitor generally, a specific class of competitor, or any particular competitor;
- prevents or deters a business or person from entering into that market; or
- prevents or deters a business or person from engaging in competitive behaviour in a market.
Given the availability of high civil pecuniary penalties and the court's willingness to award those high penalties, it is likely that the ACCC will remain active in this area and businesses should carefully consider their position in the market place before taking action which may impact competitors or reduce consumers' choice.
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