Competition and Consumer Amendment (Misuse of Market Power) Act 2017

The Competition and Consumer Amendment (Misuse of Market Power) Act 2017 is an amending Act. Its main effect was to repeal and replace section 46 of the Competition and Consumer Act 2010. The replacement section sets out the misuse of market power rule covered by this page.

The core prohibition is directed at a corporation that has a substantial degree of power in a market. That corporation must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition. The prohibition can apply in the market where the corporation has substantial power, but it is not confined to that market. It can also apply in other markets where the corporation, or a related body corporate, supplies goods or services or acquires goods or services, including where that supply or acquisition happens indirectly through one or more other persons.

In practical terms, the Act broadened the section 46 test. Businesses with strong market positions need to assess not only what they were trying to achieve, but also whether their conduct has, or is likely to have, a substantial anti-competitive effect in a relevant market.

The main section inserted by this Act applies to a corporation that has a substantial degree of power in a market. The legislation is framed broadly enough to capture market power held by a single corporation, by related bodies corporate, or by a corporation together with one or more related bodies corporate.

The Act is also clear that market power and conduct are relevant on both the supply side and the acquisition side. This matters because competition risk is not confined to dominant sellers. A powerful buyer can also be within scope if it has a substantial degree of power in a market and engages in conduct with the prohibited purpose, effect or likely effect.

The legislation refers to markets for goods or services. It also makes clear that more than one corporation may have a substantial degree of power in the same market. So a business cannot assume it is outside section 46 simply because another large competitor is also influential.

The prohibition is triggered where three elements come together. First, the corporation must have a substantial degree of power in a market. Second, it must engage in conduct. Third, that conduct must have the purpose, effect or likely effect of substantially lessening competition in a relevant market.

The relevant market may be the same market in which the corporation has substantial power. It may also be another market in which the corporation, or a related body corporate, supplies goods or services or is likely to do so, whether directly or indirectly. The same applies to markets in which the corporation, or a related body corporate, acquires goods or services or is likely to do so, whether directly or indirectly.

This means businesses should not assess risk only by looking at the market where they are strongest. The legislation expressly extends to connected supply and acquisition markets where the corporation or its related entities operate. If a business has strong power in one market, conduct affecting an upstream, downstream or purchasing market may still need to be tested under section 46.

The Act sets out matters that must, and may, be considered when determining the degree of power a body corporate or bodies corporate have in a market. Regard must be had to the extent to which the conduct of the corporation in that market is constrained by competitors or potential competitors, and by persons to whom or from whom the corporation supplies or acquires goods or services in that market.

The legislation also says regard may be had to market power that results from contracts, arrangements or understandings with other parties, including proposed contracts, arrangements or understandings. This is important for businesses that rely on long term exclusivity, strategic alliances, distribution structures or procurement arrangements, because contractual settings may be relevant to the market power analysis.

The Act also makes two clarifying points. A body corporate may have a substantial degree of power even if it does not substantially control the market. And it may still have substantial power even if it does not have absolute freedom from constraint by competitors, potential competitors, suppliers or customers. The listed matters do not limit what else may be considered when assessing market power.

The legislation does not provide a closed list of banned business models. Instead, it creates a competition effects test that businesses with substantial market power need to apply to their conduct. The practical question is whether the conduct has the prohibited purpose, effect or likely effect of substantially lessening competition in a relevant market.

That makes internal decision-making important. Businesses should examine how proposed conduct may affect competitive conditions, not just whether the conduct appears commercially rational. This is especially relevant for pricing strategies, refusals to deal, exclusive supply or acquisition arrangements, distribution restrictions, procurement tactics, bundling, and conduct implemented through related entities or intermediaries.

Because the section reaches both supply and acquisition markets, businesses should review customer-facing and supplier-facing conduct. A company with strong buying power should not assume section 46 is only about how it sells. The text expressly covers conduct in a market either as a supplier or as an acquirer of goods or services.

One of the most important practical features of this Act is that it is not confined to a corporation's conduct as a seller. The legislation says references to power in relation to, or conduct in, a market are references to power or conduct in that market either as a supplier or as an acquirer of goods or services. That means a business with substantial buying power can face section 46 risk in the same way as a business with substantial selling power.

The Act also treats related bodies corporate as central to the analysis. A corporation can be taken to have substantial market power because a related body corporate has that power, because two or more related bodies corporate together have that power, or because the corporation and related bodies corporate together have that power. Group structures therefore matter. Businesses should assess market power and conduct at the group level where related entities operate in the same or connected markets.

The section also extends to direct and indirect supply or acquisition. If a business operates through distributors, agents, platforms or other intermediaries, that does not automatically remove the conduct from the scope of the provision.

In addition to replacing section 46, the Act made related amendments for the telecommunications industry in Schedule 2. Those amendments changed references in section 151AJ and repealed subsections 151BC(4) and (5) of the Competition and Consumer Act 2010.

The Act omits references to sections 45B and 46 from paragraph 151AJ(3)(a), subsections 151AJ(4) and (5), and subsection 151AJ(7). It also replaces paragraph 151AJ(5)(a), repeals paragraphs 151AJ(5)(c) and (d), repeals paragraph 151AJ(7)(d), and repeals subsections 151BC(4) and (5). Telecommunications businesses should check the current consolidated text of the Competition and Consumer Act 2010 before relying on a general summary of these changes.

The Act received Royal Assent on 23 August 2017. Under its commencement provision, the whole Act commenced at the same time as Schedule 1 to the Competition and Consumer Amendment (Competition Policy Review) Act 2017. The commencement table records that date as 6 November 2017.

The Act is in force. As with any amending Act, businesses should read it together with the current consolidated version of the Competition and Consumer Act 2010 if they need to understand the law as it applies today.

This page explains the text of the amending Act and the section 46 framework it inserted. Before relying on it for a live decision, a business should confirm the current consolidated wording of the Competition and Consumer Act 2010, identify the relevant market or markets, and consider whether market power may exist at the level of a single entity or across related bodies corporate.

A business should also check whether the conduct is occurring as a supplier, as an acquirer, or both, and whether the conduct affects the same market or another connected market in which the business or a related body corporate supplies or acquires goods or services directly or indirectly. Telecommunications businesses should also check the current operation of the industry-specific provisions affected by Schedule 2.

Because the statutory test turns on substantial lessening of competition, businesses should be cautious about relying on simple labels for conduct. The legal question is driven by the market power position, the conduct itself, and its purpose, effect or likely effect in the relevant market.

The official source for this Act is the Federal Register of Legislation. The title is Competition and Consumer Amendment (Misuse of Market Power) Act 2017, No. 87, 2017.