Competition Law - Lecture Notes

Competition Law  - Lecture Notes

Lecture 1 – Introduction to competition law        2

Lecture 2 – Concepts and Economics of the Market and Market Power        8

Lecture 3 – Anticompetitive Practices – Misuse of Market Power –s46        18

Lecture 4 – Misuse of Market Power (‘take advantage of”) and Cartels        33

Lecture 5 – Cartels – horizontal agreements continued        44

Lecture 6 – Vertical Arrangements – RPM        58

Lecture 1 – Introduction to competition law

Definition: “Competition” under Australian Competition Law

• The term “competition” of fundamental importance; however, the term is not defined in the CCA (Competition and Consumer Act 2010) and there is no exact definition in cases.
• Trade Practices Tribunal: Re Queensland Co-operative Milling Assoc., Defiance Holdings Ltd (1976):

• “Competition” is such a very rich concept that we should not wish to attempt any final definition…. Competition may be valued for many reasons as serving economic, social and political goals… It is a mechanism, first for firms discovering the kinds of goods and services the community wants and the manner in which these may be supplied in the cheapest possible way…Competition is a dynamic process; but that process is generated by the market pressure from alternative sources of supply and the desire to keep ahead…

• Competition is not static; it is a process.
• protects and promotes effective competition among competitors.
• deals with anticompetitive practices

• Competition law protects and promotes effective competition among competitors
• What is ‘effective competition’?
• Competition law protects and promotes effective competition among competitors

Effective competition

• Increases (maximises) economic efficiency - total welfare of the public and of their state (innovation, productivity, prosperity)
• simultaneously, it has impact on individuals namely on companies/entities and consumers.

THEORIES – HISTORICAL BACKGROUND

Europe:

• Classical Liberalism (started in the 18th century):

•  Adam Smith: the ‘invisible hand’ of the market (An Inquiry into the Nature and Causes of the Wealth of Nations)
• The Laissez-faire doctrine: a free market

• Neo-liberalims

• Ordoliberalism (the Freiburg School, before WWII)
• Freedoms, social justice -

USA (the 1950s):

• The Harvard School: structure-conduct-performance paradigm
• The Chicago School & Post-Chicago School: economic efficiency (free market)

WHERE ARE WE?

Welfare Economics

The Chicago School & Post-Chicago School (welfare economics):

• Economic efficiency
•  Consumer welfare (v. total/social welfare)
• (output restriction)
• The theory of harm

• Conduct which causes economic harm should be prohibited

Anticompetitive harm occurs if welfare and efficiency decrease.

THEORIES / OTHER DEFINITIONS

The objective of competition law is not unified:

• consumer welfare
• limitation of the power of big business
• economic efficiency

Is there a provision on objective(s) of competition law in the CCA? - YES > s2 -

Objective of Australian Competition Law

• Australian Competition Law - Part IV of the Competition and Consumer Act 2010

Section 2 of the CCA:

The Object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

(Both, competition-law and consumer-law objectives.)

COMPETITION LAW DEALS WITH ANTICOMPETITIVE PRACTICES

• Re Media Council of Australia (No 2) (1987) 88 FLR 1; 82 ALR 115; 11 IPR 162; ATPR 40-774 at 32 (FLR):
• [O]ur general concept of anti-competitive conduct : any system… which gives its participants power to achieve market conduct and performance different from that which a competitive market would enforce, or which results in the achievement of such different market conduct and performance.
• ‘stop’ competing and start colluding or misusing your power…

What anticompetitive practices do we have in Australia?

1. Misuse of market power (abuse of dominant positions; monopolization) – ex post

2. Horizontal arrangements (cartels) – ex post

3. Vertical restrictions / arrangements

1. Exclusive dealing – ex post

2. Resale price maintenance – ex post

4. Anti-competitive mergers and acquisitions – ex ante (stop the conduct before the conduct starts)

Enforcement

1) Public enforcement

2) Private enforcement

AUSTRALIAN COMPETITION LAW: HISTORICAL BACKGROUND

Australian Development: Difficult Path

TWO ISSUES:

• CONSTITUTION: Understanding and interpretation of Commonwealth power [s. 51(xx) of the Constitution]
• COMMON LAW:

Section 51(xx) of the Constitution:

“Legislative powers of the Parliament

• The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”

Australian Industries Preservation Act 1906 (Cth)

•  inspired by the USA Sherman Act, similarly, prohibiting monopolies and combinations (mainly to protect the Australian market from overseas corporations engaged in anti-competitive conducts).
• challenged in Huddart Parker & Co Pty Ltd & Appleton v Moorehead (1909) 8 CLR 330 - state power v. Commonwealth power (‘reserved powers’ doctrine) – this was rejected in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 (further see constitutional law)

• The reserved powers doctrine reserved for the states as much power as possible. Any power not explicitly given to the Cth, was given to States.

• the consequence of the case law: the Act remained largely unused => flourishing of monopolies, market-sharing and price-fixing practices also at the vertical level
• in 1958, most of trade associations were engaged in horizontal price fixing

Trade Practices Act 1965 (Cth)

• In Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468 => the Act was invalidated
• however, the corporations power in section 51(xx) of the Constitution entitles the existence of this kind of acts
• s 51: includes intrastate trade for corporations!

Trade Practices Act 1974 (Cth) – now CCA 2010

Competition Law and Power of the Federal Government in the Constitution

1974: Competition and Consumer Act 2010 (Cth) (‘CCA’) – at that time entitled the Trade Practices Act 1974 (Cth)