On Monday 28 April 2008, the Rudd Government followed through with its pre-election promise by announcing a series of proposed amendments aimed at protecting small business from anti-competitive conduct.

The amendments involve a reform package that seeks to address some of the issues that the Government perceives as problematic in the operation of the current trade practices regime.

Labor’s amendments to the TPA

In summary, if enacted the proposed amendments will:

• remove any need for those claiming to be victims of predatory pricing to prove that the predator has the ability to recoup losses after participating in an anti-competitive below cost pricing strategy- Minister Bowen has indicated that the ability to recoup losses is only one indicator of predatory pricing, but that it is not a necessity to show that recoupment would have occurred
• clarify the meaning of the term ‘take advantage’ in the misuse of market power provisions in section 46 of the TPA
• remove the confusion between the concepts of market power and market share caused by the Birdsville Amendment
• enable the ACCC to use its investigative powers after it has applied for an injunction to stop an alleged contravention of the TPA
• remove the $10 million threshold currently applicable to allegations of unconscionable conduct in business transactions
• require at least one ACCC Deputy Chairperson to have small business expertise, and
• allow cases involving a misuse of market power to be heard in the Federal Magistrates Court rather than in the Federal Court, in appropriate circumstances.

Bye bye Birdsville

The proposed changes to section 46 amend the controversial Birdsville Amendment enacted late last year. The Birdsville Amendment, sponsored by National’s senator Barnaby Joyce, was widely criticised because of its focus on a corporation’s “market share” rather than “market power” and the potential to chill legitimate competitive conduct.

The changes propose to amend subsection 46(1AA) of the TPA so that, rather than prohibiting a corporation with a substantial share of a market from engaging in sustained below-cost pricing for a prohibited purpose, it would prohibit a corporation with a substantial degree of power in a market from taking advantage of that power in any market by supplying, or offering to supply, goods or services for a sustained period below cost, where the conduct is engaged in for one or more of the anti-competitive purposes presently prescribed in subsection 46(1AA).

With these amendments, however, the need to retain subsection 46(1AA) is questionable as the conduct should be covered by the balance of section 46.

“Taking advantage” of market power

In determining whether a corporation has taken advantage of its market power under section 46 of TPA, the proposed amendments would clarify that the court may have regard to whether the corporation's conduct was:

• (a) materially facilitated by its substantial degree of market power
• (b) engaged in, in reliance on its substantial degree of market power
• (c) likely to have been engaged in if the corporation lacked a substantial degree of market power, or
• (d) otherwise related to its substantial degree of market power.

It is hoped that the changes will codify the existing law and in particular that paragraph (d) reflects the “use of a substantial degree of market power” rather than introducing an additional component of “taking advantage”.

Unconscionable conduct in business transactions - monetary threshold abolished

The Government proposes to repeal the $10 million threshold that applies to actions under section 51AC of the Act for unconscionable conduct in business transactions, with duplicate amendments made to the equivalent provisions of the Australian Securities and Investments Commission Act 2001 which apply to transactions involving financial services. This opens up unconscionable conduct actions to a wider class of dealings.

Investigation and enforcement

Under the current state of the law, there has been considerable doubt whether the ACCC is able to use its investigative powers once court proceedings have been commenced. The proposed changes will allow the information gathering powers of the ACCC, contained in section 155 of the TPA, to be used, or continue to be used, after applying for an injunction to stop suspected breaches of the TPA. The proposed amendments will also clarify that the ACCC may continue to utilise its investigative powers until it commences substantive proceedings.

The proposed changes will also allow for an amendment to section 86 of the TPA to extend the jurisdiction of the Federal Magistrates Court to include matters arising under section 46 of the TPA. This proposal is potentially misguided as section 46 cases will normally involve difficult legal issues (as history has shown) and will not be suited to the Federal Magistrates Court.

Small business representation on the ACCC

The proposed changes will require that at least one of the Deputy Chairpersons at the ACCC must have knowledge of, or experience in, small business matters. Given that the current ACCC Commissioner, John Martin, already has small business experience and a small business responsibility, this proposed change will not substantially alter the current operation of the ACCC.

Timing

The Government will need to consult with the States and Territories for the proposed amendments. It is anticipated that the Government will move quickly to have its amendments to the TPA passed by the Senate.