Upcoming Mallesons seminarsACCC loses misuse of market power case against Boral
K E Y P O I N T S
- Well reasoned judgment applies section 46 in a step by step process. First, did the respondent have market power. Second, did it take advantage of that power. Third, did it have a prohibited anti-competitive purpose
- Essentially finds broader market, so no market power and hence, no contravention despite Boral having a prohibited anti-competitive purpose
Background
On 22 September 1999, the Federal Court found against the ACCC in a claim against Boral Limited (‘Boral’) and its subsidiary Boral Besser Masonry Limited (‘BBM’) for an alleged breach of section 46 of the Trade Practices Act. The ACCC had sought injunctions, the development of a trade practices compliance program and an order
for payment of pecuniary penalties.
The ACCC had claimed that Boral and BBM, or one of them, had a substantial
degree of power in the market for concrete masonry products in the Melbourne
The ACCC alleged that Boral/BBM had taken advantage of that power by:
- selling at less than the avoidable cost (variable cost) of production;
- offering to buy the plant of a competitor C&M Brick (Melbourne) (‘C&M’), and
- increasing capacity at its existing plant.
The ACCC alleged that Boral/BBM had prohibited purposes under section 46, being to eliminate or substantially damage other competitors in the market, in particular C&M and to deter or prevent those competitors from engaging in competitive conduct in the market.
The decision
Justice Heerey found that the relevant market was the market in the Melbourne metropolitan area in which builders (either directly or indirectly through sub-contractors such as block layers), acquired materials for the construction of walls and paving. It apparently was common ground that if the market was so wide, then Boral/BBM
could not and was found not to have a substantial degree of power in the market.
Justice Heerey’s analysis was methodical. Having analysed the facts and competition dynamics, Justice Heerey also found that even if the relevant market was narrower as alleged by the ACCC, Boral/ BBM did not have market power and did not take advantage of any power they may have had in any event. Interestingly, his Honour found that market dynamics showed that Boral had acted in an anti-competitive manner, but that did not constitute a contravention of section 46 as Boral did not have the required ‘market power’.
Conclusion
The approach taken by Justice Heerey was that Boral had competed vigorously in a competitive market, but that such conduct did not constitute a contravention of section 46 as Boral did not have the requisite degree of market power and its actions were consistent with vigorous market behaviour, not the ‘taking advantage’ of market power.
The approach in this decision is consistent with standard economic principles and the intention behind section 46. That is, the Trade Practices Act should not prohibit vigorous competitive activity, even if that activity causes firms to fail, provided that that behaviour is not undertaken by a party which can act in an unconstrained manner – that is, a party with market power.
Dave Poddar
Partner
Tel (61 2) 9296 2281
dave.poddar@msj.com.au