Abuse of Market Power Laws in Australia

If you’re building a startup or small business in Australia, you’ve probably felt it at some point: the market doesn’t always feel like a level playing field.

Maybe a much bigger competitor has suddenly cut prices below what seems commercially sensible. Or a supplier has told you they “can’t” work with you anymore right after you started gaining traction. Or a platform that your customers rely on has changed the rules in a way that hits your business hard.

Not every tough commercial move is illegal. Competition can be aggressive, and larger businesses are allowed to compete hard.

But in some situations, the conduct may cross the line into abuse of market power - and that’s where Australia’s competition laws (in particular, the Competition and Consumer Act 2010 (Cth)) come into play.

Below, we’ll break down what “abuse of market power” means in practical terms, what types of conduct may be a red flag, what evidence to keep, and how to protect your business contractually and strategically.

What Is “Abuse Of Market Power” In Australia?

In Australia, “abuse of market power” is a concept that comes from competition law. It’s usually associated with section 46 of the Competition and Consumer Act 2010 (Cth), which is enforced by the Australian Competition and Consumer Commission (ACCC).

At a high level, the idea is this:

A business with substantial market power shouldn’t use that power in a way that has the purpose, effect, or likely effect of substantially lessening competition in a market.

Two points matter for small businesses:

It’s about protecting competition, not competitors. The law is aimed at keeping markets competitive overall, rather than guaranteeing any one business a fair outcome.
The focus is on power + harmful competitive impact. A large business being “tough” isn’t enough on its own. The conduct needs to be linked to substantial market power and competition harm.

What Does “Substantial Market Power” Really Mean?

“Substantial market power” doesn’t automatically mean “big company” or “famous brand”. It’s more specific than that.

In plain English, a business may have substantial market power if it can act in a way that is relatively independent of:

its competitors (because they can’t really constrain its behaviour), and/or
its customers and suppliers (because they don’t have realistic alternatives).

Market power can also exist in narrower markets. For example, even if a business isn’t dominant nationally, it could still have substantial power in a specific region, niche, or distribution channel.

What Is “Substantially Lessening Competition” (SLC)?

This is often the hardest part to understand, because it’s more than “they hurt my business”. The question is whether the conduct substantially reduces competition in the market overall - for example by:

making it harder for new entrants to launch or scale,
forcing smaller competitors out (or stopping them from expanding),
reducing consumer choice, innovation, or price competition over time, or
entrenching a dominant position in a way that undermines competitive pressure.

If you’re unsure whether something is “just aggressive competition” or potentially an abuse of market power issue, it’s worth getting legal advice early - it can change how you respond and what evidence you prioritise.

Common Examples Of Conduct That Can Raise Red Flags For Startups

Startups and small businesses often experience market pressure in ways that feel personal and targeted, especially if you’re competing with an established player.

While every situation depends on the facts (including how the relevant market is defined and whether competition is actually harmed), here are some common categories of conduct that may raise concerns when they’re tied to substantial market power and a substantial lessening of competition. In some cases, similar conduct can also be assessed under other parts of competition law (for example, exclusive dealing provisions), not just section 46.

Predatory Pricing (Below-Cost Pricing To Push You Out)

This is one of the best-known examples. Predatory pricing broadly refers to pricing goods or services so low that competitors can’t sustainably match it, with the aim of removing competition and then recovering losses later (for example, by raising prices once rivals are gone).

It’s not illegal for a competitor to run promotions or offer discounts. The concern is when a business with substantial market power uses below-cost (or otherwise unsustainable) pricing in a way that has the purpose, effect, or likely effect of substantially lessening competition. Whether pricing is “predatory” usually requires a close look at the actual pricing, the commercial context, and what this means for competition in the market overall.

In practice, if a large competitor suddenly undercuts you in a way that seems commercially irrational and timed to your market entry or growth, that’s the kind of pattern you’d want to document.

Refusal To Supply Or Restrictions On Supply

If you rely on a key supplier, wholesaler, distributor, or platform to reach customers, supply issues can be existential.

Some red-flag scenarios include:

a supplier refusing to supply you after you start competing more effectively,
exclusive supply arrangements that block you from accessing key inputs, or
pressure being applied to suppliers to avoid dealing with you.

Sometimes this ties into other competition-law concepts like exclusive dealing, concerted practices, or (in more serious cases) cartel conduct. Either way, your contracts and paper trail matter, especially around pricing, termination rights, and any “reason” given for cutting you off.

“Bundling” Or “Tying” That Locks Customers In

Bundling (selling products together) isn’t automatically unlawful. Plenty of businesses offer bundles to deliver value.

But bundling can become problematic where a business with substantial market power uses it to make customers take additional products or services, and that has the purpose, effect, or likely effect of substantially lessening competition (for example, by foreclosing rivals from effectively competing in the secondary market). Depending on the structure, bundling/tying may also raise issues under other competition provisions.

For example, if customers effectively can’t buy the primary product without also taking a secondary product, and that reduces the ability of other businesses to compete in the secondary market, it can raise competition concerns.

Contract Terms That Unfairly Limit Your Ability To Compete

Startups often sign agreements quickly to secure growth opportunities - distribution deals, referral partnerships, platform access, supply agreements, and more.

Restrictions that can become risky include:

wide non-compete clauses,
exclusivity that stops you from using other channels,
one-sided termination clauses, and
terms that allow the larger party to change pricing or conditions unilaterally.

Even if these issues aren’t ultimately an abuse of market power claim, they can create the commercial conditions that allow a bigger player to squeeze you.

This is one reason it’s worth having a lawyer review major commercial agreements before you sign, especially where you’re dealing with a business with significant leverage. A tailored Contract Review can often identify the pressure points before they become disputes.

How Startups Can Spot Market Power Issues Early (Without Overreacting)

When you’re running a small business, it’s easy to either:

assume “this is just business” and do nothing, or
assume “this must be illegal” and burn bridges too early.

A measured approach usually works best. Here are practical signs that might justify a closer look.

Look For Patterns, Not One-Off Events

A single aggressive discount or a one-off supply delay is rarely enough to establish much.

Patterns that may be more meaningful include:

pricing that drops sharply only in the segment where you compete,
pressure that appears coordinated across multiple suppliers or partners,
rule changes that conveniently disadvantage certain rivals but not others, or
conduct that escalates right as you hit key milestones (funding, major launch, expansion).

Separate “Hard Bargaining” From “Competition Harm”

Large businesses often negotiate tough. That’s not necessarily unlawful.

Ask yourself:

Is this conduct likely to reduce customer choice or innovation long-term?
Is it likely to deter new competitors from entering?
Would the business likely act this way if it didn’t have strong market power?

Even if you can’t answer these confidently, these questions help you frame the issue in the way competition law looks at it.

Consider Your Own Risk Profile Before Escalating

In many cases, your best first move is not legal escalation - it’s risk management:

diversify suppliers and sales channels,
tighten contracts and commercial terms,
protect IP and confidential information, and
document everything in case you need to take action later.

If you do need to escalate, having done the groundwork makes your position much stronger.

What Evidence Should You Keep If You Suspect Abuse Of Market Power?

If you think a larger business is engaging in conduct that could be an abuse of market power, keeping good records can make an enormous difference.

Even if you never take formal action, documentation helps you:

assess whether you’re seeing a genuine pattern,
get accurate legal advice, and
respond strategically without relying on memory or assumptions.

Helpful Types Of Evidence

Written communications: emails, letters, chat logs, and internal notes of phone calls (including date/time and who you spoke to).
Pricing history: screenshots, invoices, quotes, public pricing pages, and dated promotional material.
Supply and distribution records: delivery schedules, purchase orders, stock availability logs, and cancellation messages.
Contractual documents: supply agreements, platform terms, reseller or distribution agreements, and any amendments or unilateral term changes.
Market context: information about competitors, customer switching barriers, and why alternatives aren’t realistically available.

A Note On Recording Conversations

Sometimes the key statements happen over the phone. If you’re thinking about recording calls, be careful - the rules can differ depending on where you are and what the recording is used for.

Before you record any conversations in a business context, it’s worth checking what’s allowed. If you operate in Queensland, for example, recording conversations in Queensland has specific legal considerations.

Even without recordings, detailed contemporaneous notes (written right after the call) can still be valuable.

How To Protect Your Business With Strong Contracts And Compliance

Competition law issues can feel out of your control. You can’t force a competitor to behave differently.

But you can reduce the impact of market power issues by strengthening your legal foundations - particularly around contracts, IP, and customer-facing compliance.

Key Legal Documents That Reduce Your Risk

Not every business needs every document below, but these are common building blocks that help startups stay resilient in uneven markets.

Customer Terms and Conditions: sets the rules for refunds, delivery, service scope, limitations, and payment terms, which can help stabilise cash flow and reduce disputes during price wars.
Supply or Service Agreements: lock in pricing, delivery standards, quality requirements, and termination rights so you’re not exposed to sudden changes.
Confidentiality / NDA: protects your sensitive information when you’re negotiating with partners, suppliers, or potential investors.
Shareholders Agreement: if you have co-founders or investors, a Shareholders Agreement can help you make decisions quickly under pressure and avoid internal disputes when the market gets tough.
Company Constitution: for companies, a clear Company Constitution sets governance rules and can complement your shareholders arrangements.
Employment Contracts: if you’re hiring, a solid Employment Contract clarifies IP ownership, confidentiality, and expectations so you don’t lose key assets when staff move on.

Don’t Forget Consumer Law Compliance

In a market where bigger competitors squeeze on price, small businesses sometimes feel pressured to “match claims” in advertising or use aggressive sales tactics to keep up.

Be careful here. Australia’s consumer protection rules can be strict, and you don’t want to create new legal risk while responding to a competitor’s conduct.

A practical way to keep your marketing and policies aligned is to understand how the misleading or deceptive conduct rules work (these obligations apply broadly to what you say in ads, on your website, and in sales conversations).

Build Negotiation Leverage Into Your Commercial Terms

When you’re dealing with a larger business (as a supplier, distributor, customer, or platform partner), try to avoid terms that leave you with no practical options.

Depending on your bargaining power, consider negotiating for:

longer notice periods for termination or major changes,
clear pricing review mechanisms,
service levels and remedies if they fail to supply, and
non-exclusivity (or at least carefully limited exclusivity).

Even small changes in drafting can reduce the chance that you’re “locked in” when circumstances change.

What Can You Do If You Think You’re Facing Abuse Of Market Power?

If you suspect abuse of market power, it’s understandable to want a clear “next step.” In reality, there are usually several options, and the best approach depends on your goals, your cash flow runway, and the commercial relationship you’re trying to manage.

1. Get Legal Advice Early (Before You Escalate)

Competition law can be technical, and the facts matter.

Getting advice early helps you:

work out whether what you’re seeing is likely to be unlawful or just competitive pressure,
identify what evidence you need,
avoid missteps in communications, and
choose a strategy that supports your business goals (not just “winning” a fight).

2. Consider Commercial Resolution First

Sometimes the best immediate move is to resolve the issue commercially, especially if you still need the relationship (for example, with a key supplier or platform).

That might include:

renegotiating key terms,
seeking clearer supply commitments,
requesting written reasons and documentation for changes,
and bringing in legal support for negotiations.

A well-structured letter or negotiation can often shift behaviour without triggering a full dispute.

3. Strengthen Your Market Position While You Assess Your Options

Even where there’s a possible competition issue, enforcement processes can take time. In parallel, focus on what you can control:

develop product differentiation and brand loyalty,
secure alternate suppliers and channels,
review your customer and supplier agreements, and
tighten internal governance so you can act quickly.

If your business is structured well, you’re in a better position to withstand market pressure and make strategic decisions.

4. Consider Raising The Issue With The ACCC (Where Appropriate)

The ACCC is the regulator responsible for competition enforcement in Australia. In some situations, businesses may consider making a report to the ACCC.

It’s important to keep expectations realistic: the ACCC focuses on broader market impacts and public interest outcomes. That said, if the conduct you’re seeing reflects wider systemic issues, raising it may be worthwhile.

Before making any complaint, it’s a good idea to get advice so your report is clear, factual, and supported by evidence.

Key Takeaways

Abuse of market power generally involves a business with substantial market power engaging in conduct with the purpose, effect, or likely effect of substantially lessening competition.
Not every aggressive business tactic is unlawful - competition law is focused on protecting competition in the market, not individual competitors.
Red flags can include sustained below-cost pricing, supply restrictions or exclusionary arrangements, bundling/tying that forecloses rivals, and contract terms that heavily restrict your ability to compete - but these issues are often fact-specific and may require careful market and competitive-effects analysis.
Good record-keeping matters: keep communications, pricing evidence, contractual documents, and detailed file notes of key discussions.
Strong contracts and compliance (customer terms, supply terms, governance documents, and clear employment arrangements) can make your business more resilient when bigger players apply pressure.
If you suspect a market power issue, getting legal advice early can help you choose a strategy that protects both your rights and your commercial relationships.

If you’d like help assessing competition-law risks for your startup or small business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Abuse of Market Power Laws in Australia: What Businesses Should Know