Competition and Consumer Legislation Amendment Act 2011

The Competition and Consumer Legislation Amendment Act 2011 is an amending Act. Its job is to change existing Commonwealth competition and consumer legislation, rather than set up a separate standalone regime.

The Act has three main parts. Schedule 1 changes the merger and acquisition provisions in the Competition and Consumer Act 2010. Schedule 2 rewrites the statutory unconscionable conduct provisions in both the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001. Schedule 3 makes technical amendments connected with the Australian Consumer Law legislation.

For business owners, the practical point is that you need to read this Act together with the legislation it amends. The key operational changes are broader merger scrutiny and a clearer, more detailed framework for assessing unconscionable conduct in commercial dealings involving goods, services and financial services.

Schedule 1 amends section 50 of the Competition and Consumer Act 2010. The amendment replaces references to competition in "a market" with competition in "any market" and removes the word "substantial" from the definition of market.

This matters because the merger test is no longer framed around a substantial market. A transaction can raise issues if it would have the prohibited effect in any market. That can include a local market, a niche product market, a specialised service market or another narrower area of competition that might previously have been argued to fall outside the practical focus of the old wording.

The Act also states that these amendments apply to acquisitions occurring after Schedule 1 commenced. So when reviewing a proposed acquisition, the timing of the deal is important. If the acquisition occurred after commencement, the amended wording applies.

Businesses involved in acquisitions, restructures or consolidation should check not only broad national competition effects, but also whether the deal could materially affect a smaller or more specialised market in which the parties overlap.

Schedule 2 rewrites the statutory unconscionable conduct provisions. In the Competition and Consumer Act 2010, the new section 21 prohibits unconscionable conduct in trade or commerce in connection with the supply or possible supply of goods or services to a person other than a listed public company, and also in connection with the acquisition or possible acquisition of goods or services from a person other than a listed public company.

In the Australian Securities and Investments Commission Act 2001, the new section 12CB does the same for financial services. It applies to the supply or possible supply of financial services to a person other than a listed public company, and to the acquisition or possible acquisition of financial services from a person other than a listed public company.

That means the provisions are not limited to sellers. They also apply to buyers and procurers. A business with stronger bargaining power can face scrutiny when buying from a smaller supplier, just as it can when selling to a smaller customer. The provisions also extend to possible supply and possible acquisition, so pre-contract conduct can matter.

The listed public company exclusion is specific. The relevant person on the other side of the transaction must be a person other than a listed public company. Businesses should not treat this as a broad exemption for all corporate dealings. It is a transaction-specific exclusion built into the amended provisions.

The Act also says these provisions are not limited by the unwritten law relating to unconscionable conduct. It further states that they are capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged. This is important for businesses that use standard form processes, scripts, templates or repeat negotiation tactics across many transactions.

The amended provisions set out a non-exhaustive list of matters a court may consider. The lists are mirrored across goods and services, and financial services, and they cover both supply-side and acquisition-side conduct.

The factors include relative bargaining strength, whether one party was required to comply with conditions not reasonably necessary to protect the other party's legitimate interests, whether documents could be understood, whether undue influence, pressure or unfair tactics were used, and whether equivalent goods, services or financial services could have been obtained elsewhere and on what terms.

The court may also consider consistency of conduct across similar transactions, compliance with any applicable industry code, compliance with another industry code where the other party reasonably believed the business would comply, unreasonable failures to disclose intended conduct or non-obvious risks, willingness to negotiate, the terms and conditions of the contract, conduct in complying with the contract, conduct after entry into the contract, unilateral variation rights and the extent to which the parties acted in good faith.

The Act also makes clear that, when considering whether conduct related to a contract is unconscionable, the court is not limited to the circumstances of contract formation. It may consider the terms of the contract and the manner in which, and extent to which, the contract is carried out. In practice, this means a business cannot assume that a signed contract ends the enquiry. Performance, enforcement and later relationship conduct can all be relevant.

There is also an express rule that the court must not have regard to circumstances that were not reasonably foreseeable at the time of the alleged contravention. At the same time, the court may have regard to conduct engaged in, or circumstances existing, before the commencement of the new section.

Most businesses dealing in trade or commerce should assume these amendments are relevant if they supply or acquire goods, services or financial services. This includes B2B and B2C dealings, procurement arrangements, distribution relationships, franchise relationships, finance-related dealings and repeat standard form contracting practices.

On the unconscionable conduct side, the provisions are framed around dealings with a person other than a listed public company. So the exclusion is not a blanket carve-out for all large businesses or all corporations. It is narrower than that. Businesses should identify who the counterparty is in the relevant supply or acquisition and whether that counterparty is a listed public company before assuming the exclusion applies.

The provisions also do not apply to conduct engaged in only because a person institutes legal proceedings or refers a dispute or claim to arbitration in relation to the relevant supply or acquisition. That is a limited carve-out. It does not mean all conduct surrounding a dispute is automatically outside the section.

For mergers and acquisitions, the practical scope is any acquisition that may affect competition in any market after Schedule 1 commenced. Businesses should not limit their review to major national transactions. Smaller acquisitions can still need careful competition analysis if they affect a defined market.

Because this Act amends existing legislation, the practical obligations come from the amended provisions. Businesses should focus on conduct, documents and systems, not just legal labels.

If your business supplies goods, services or financial services, review whether your sales process, onboarding documents, standard terms and account management practices could be seen as taking advantage of weaker bargaining power, using unfair tactics, withholding important information or relying on one-sided conditions that are not reasonably necessary to protect legitimate interests.

If your business acquires goods, services or financial services from others, the same caution applies in reverse. Procurement teams, larger customers and platform operators should not assume unconscionable conduct rules only target suppliers. The amended provisions expressly cover acquisition-side conduct as well.

Where contracts allow unilateral variation, close attention is needed. The legislation specifically identifies unilateral variation rights as a matter the court may consider. The same is true for willingness to negotiate, the actual terms used, and conduct after the contract starts.

Businesses operating under an industry code should also check whether internal processes align with that code. The legislation expressly allows the court to consider applicable industry codes and, in some cases, other industry codes where the other party reasonably believed the business would comply.

The Act received Royal Assent on 6 December 2011. Sections 1 to 3 and anything not otherwise covered commenced on that day.

Schedule 1, dealing with mergers and acquisitions, was to commence on a day fixed by Proclamation, but if not commenced within 2 months after Royal Assent it would commence on the day after that period. The commencement table records 6 February 2012.

Schedule 2, dealing with unconscionable conduct, commenced on the later of Royal Assent and 1 January 2012. The commencement table records 1 January 2012.

Schedule 3, containing technical amendments, commenced immediately after the commencement of Schedule 5 to the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010. The commencement table records 1 January 2011.

When relying on this page, businesses should match the issue they are considering to the correct Schedule and commencement date. The merger amendments and unconscionable conduct amendments did not start on the same day.

This page explains the amending Act at a practical level, but businesses should still verify the current text of the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001 as amended. The operative rules sit in those Acts.

Before relying on this page, check the type of transaction involved, whether it concerns supply or acquisition, whether it involves goods, services or financial services, whether the counterparty is a listed public company, whether an industry code applies, and the relevant commencement date. For acquisitions, also check whether the transaction occurred after Schedule 1 commenced and whether it may affect competition in any market.

The Act strengthens existing enforcement mechanisms by broadening and clarifying the substantive provisions. It should not be read as a separate code with all consequences contained in one place. The enforcement and remedial framework remains tied to the legislation being amended.

Primary source: Competition and Consumer Legislation Amendment Act 2011 on the Federal Register of Legislation.

The key amendments covered on this page are Schedule 1 on mergers and acquisitions, Schedule 2 on unconscionable conduct in the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001, and Schedule 3 on technical amendments.