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Competition and Consumer Amendment (Competition Policy Review) Bill 2017



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ISSN 1328-8091

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BILLS DIGEST NO. 28, 2017-18 6 SEPTEMBER 2017

Competition and Consumer Amendment (Competition Policy Review) Bill 2017 Paul Davidson Economics Section

Contents

Purpose of the Bill ............................................................... 4

Structure of the Bill ............................................................. 4

Background ......................................................................... 4

Hilmer Review.......................................................................... 4

Resulting reforms .................................................................. 5

Dawson Review ....................................................................... 5

Election commitment .............................................................. 5

Harper Review ......................................................................... 6

Government response ........................................................... 7

Key changes to recommendations between the draft report and the final report ...................................................... 7

Recommendations first introduced in the final report ........... 7

Key changes between the Exposure Draft and the Bill............ 8

Committee consideration .................................................... 8

Selection of Bills Committee.................................................... 8

Senate Standing Committee for the Scrutiny of Bills .............. 8

Policy position of non-government parties/independents ..... 8

Position of major interest groups ......................................... 8

Financial implications .......................................................... 9

Statement of Compatibility with Human Rights .................... 9

Parliamentary Joint Committee on Human Rights .................. 9

Schedule 1—Definition of competition ................................. 9

Commencement .................................................................... 9

Harper Review consideration .................................................. 9

Key provision and issues...................................................... 10

Date introduced: 30 March 2017

House: House of Representatives

Portfolio: Treasury

Commencement: Various dates as set out in the body of this Bills Digest

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

September 2017.

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Schedule 2—Cartels ........................................................... 10

About cartels ......................................................................... 10

Reducing the complexity of the cartel provisions ................. 11

Key provisions...................................................................... 11

Reducing the scope of the cartel provisions ......................... 12

The relevant market ............................................................ 12

Likelihood of competition ................................................... 13

Joint ventures ...................................................................... 13

Renumbering the cartel conduct provisions ......................... 15

Schedule 3—Price signalling and concerted practices .......... 15

Commencement .................................................................. 15

Division 1A of Part IV of the CCA ........................................... 15

Key provision ....................................................................... 15

Introduction of concerted practices ...................................... 16

Key Provisions...................................................................... 16

Schedule 4—Exclusionary provisions .................................. 18

Commencement .................................................................. 18

About exclusionary provisions ............................................... 18

Schedule 5—Covenants affecting competition .................... 19

Commencement .................................................................. 19

About covenants .................................................................... 19

Schedule 6—Secondary boycotts ....................................... 19

Commencement .................................................................. 19

Background ............................................................................ 19

How the secondary boycott provisions operate ................... 20

Key provisions...................................................................... 21

Right to freedom of association .......................................... 21

Right to freedom of assembly and expression .................... 21

Schedule 7—Third line forcing ............................................ 22

Commencement .................................................................. 22

About third line forcing ......................................................... 22

Harper Review consideration ................................................ 22

Key provisions...................................................................... 23

Schedule 8—Resale price maintenance .............................. 23

Commencement .................................................................. 23

About resale price maintenance ........................................... 23

Harper Review consideration ................................................ 23

Key provisions...................................................................... 24

About notifications ................................................................ 24

Key provisions...................................................................... 24

Schedule 9—Authorisations, notifications and class exemptions ....................................................................... 25

Commencement .................................................................. 25

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About authorisation .............................................................. 25

Harper Review consideration ................................................ 25

Summary of the changes ..................................................... 25

Key provisions...................................................................... 27

About collective bargaining ................................................... 30

Harper review consideration ................................................. 30

Key provisions...................................................................... 30

About class exemptions ......................................................... 32

Harper Review consideration ................................................ 32

Key provisions...................................................................... 32

Schedule 10—Admissions of fact ........................................ 33

Commencement .................................................................. 33

About evidence ...................................................................... 33

Harper Review consideration ................................................ 33

Key provisions...................................................................... 33

Schedule 11—Power to obtain information, documents and evidence ..................................................................... 34

Commencement .................................................................. 34

Harper Review consideration ................................................ 34

Legal burden of proof .......................................................... 34

Significant penalties ............................................................ 35

Right to privacy .................................................................... 35

Key provisions...................................................................... 35

Schedule 12—Access to services ........................................ 36

Commencement .................................................................. 36

About the national access regime ......................................... 36

The Productivity Commission recommended approach ..... 37

Harper Review consideration ................................................ 37

Government response ......................................................... 38

Retrospective commencement ........................................... 38

Key provisions ........................................................................ 39

Schedule 13—Application and transitional provisions ......... 40

Commencement .................................................................. 40

Key provisions...................................................................... 40

Schedule 14—Other amendments ...................................... 40

Commencement .................................................................. 40

Harper Review considerations ............................................... 41

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Purpose of the Bill The purpose of the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 (the Bill) is to introduce legislative changes to the Competition and Consumer Act 2010 (CCA) arising from the Government’s acceptance of a series of recommendations emanating from the Competition Policy Review (the Harper Review).1

Structure of the Bill The Bill comprises 14 schedules all of which amend the CCA:

• Schedule 1 amends the definition of competition in the CCA

• Schedule 2 relates to cartels

• Schedule 3 relates to price signalling and concerted practices

• Schedule 4 relates to exclusionary provisions

• Schedule 5 relates to covenants affecting competition

• Schedule 6 relates to secondary boycotts

• Schedule 7 relates to third line forcing

• Schedule 8 relates to resale price maintenance

• Schedule 9 relates to authorisations, notifications and class exemptions

• Schedule 10 relates to admissions of fact

• Schedule 11 relates to the Australian Competition and Consumer Commission’s (ACCC’s) ability to obtain information, documents, and evidence

• Schedule 12 relates to access to services

• Schedule 13 provides for application and transitional provisions

• Schedule 14 provides for other amendments.

Background Hilmer Review In 1993, the Independent Committee of Inquiry into National Competition Policy (the Hilmer Review) prepared a comprehensive review of Australian competition policy, under the Keating Government.2

The Hilmer Review took a broad view of competition policy, arguing it encompasses all policy dealing with the extent and nature of competition in the economy. Specifically, the Review considered competition policy in terms of six specific elements, each of which it argued was supported by laws, policy and/or government action:

• limiting anti-competitive conduct of firms

• reforming regulation which unjustifiably restricts competition

• reforming the structure of public monopolies to facilitate competition

• providing third party access to certain facilities that are essential to competition

• restraining monopoly pricing behaviour and

• fostering ‘competitive neutrality’ between government and private businesses when they compete. 3

1. Competition Policy Review Panel, Competition policy review: final report, (Harper Review: Final Report), Treasury, Canberra, March 2015; Australian Government, Australian government response to the Competition Policy Review, op. cit. 2. F Hilmer, M Rayner, G Taperall, National competition policy review, (Hilmer Review), Australian Government Publishing Service, Canberra, August 1993. 3. Ibid., p. xvii.

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The Review saw the goal of competition policy as facilitating effective competition in order to promote efficiency and economic growth, while accommodating situations where competition does not achieve efficiency or conflicts with other social objectives.

Resulting reforms The Hilmer Review led to a range of legislative reforms and policy development, including:

• extension of the anti-competitive conduct provisions in the (then) Trade Practices Act (TPA) to unincorporated enterprises and government businesses

• reforms to public monopolies and other government businesses:

- structural reforms—including separating regulatory from commercial functions; and reviewing the merits of separating natural monopoly from potentially contestable service elements; and/or separating contestable elements into smaller independent businesses and

- competitive neutrality requirements involving the adoption of corporatised governance structures for significant government enterprises; the imposition of similar commercial and regulatory obligations to those faced by competing private businesses; and the establishment of independent mechanisms for handling complaints when these requirements were breached

• the creation of independent authorities to set, administer or oversee prices for monopoly service providers

• the introduction of a national regime to provide third-party access on reasonable terms and conditions to essential infrastructure services with natural monopoly characteristics

• the introduction of a Legislation Review Program to assess whether regulatory restrictions on competition are in the public interest and, if not, what changes were required. The legislation covered by the program spanned a wide range of areas, including: the professions and occupations; statutory marketing of agricultural products; fishing and forestry; retail trading; transport; communications; insurance and superannuation; child care; gambling; and planning and development services.4

Dawson Review Over subsequent years other reviews were undertaken, including the Review of the Competition Provisions of the Trade Practices Act (known as the Dawson Review).5 The competition rules in Part IV of the CCA seek to restrain conduct that tends to lessen competition. According to the Dawson Review:

Competition is an important mechanism for achieving the advances in efficiency and productivity that are essential to enhance welfare. Competition creates an environment that provides incentives and disciplines for continuing improvement. In a competitive market, each participant seeks to constrain costs to maintain its position in the market and achieve some advantage over its competitors. Business decisions made in response to competitively determined prices direct resources within the economy to where the best opportunities lie. Ultimately, consumers benefit as increases in productivity are reflected in lower prices in the short term or through greater choice in the longer term. Their welfare is enhanced.

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It is therefore important for governments to ensure that the competition provisions are operating effectively.

Election commitment Prior to the 2013 election, the Abbott Government committed to undertaking ‘a root and branch review of competition laws’.7 That review was announced in December 2013:

The ‘root and branch’ review delivers on a key election commitment and will help identify ways to build the economy and promote investment, growth and job creation. The competition review will examine not only the

4. Productivity Commission (PC), Review of National Competition Policy reforms, Inquiry report, 33, PC, Canberra, 28 February 2005, p. xv. 5. D Dawson, J Segal, C Rendall, Review of the competition provisions of the Trade Practices Act, (Dawson Review), January 2003, Canberra. 6. Ibid., chapter 1, p. 30. 7. Liberal Party of Australia and the Nationals, Our plan: real solutions for all Australians, Coalition policy document, Election 2013,

January 2013, p. 23.

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current laws but the broader competition framework, to increase productivity and efficiency in markets, drive benefits to ease cost of living pressures and raise living standards for all Australians. 8

Harper Review Draft terms of reference of the Harper Review were released on 11 December 2013,9 and final terms of reference and the composition of the Review Panel were announced on 27 March 2014.10 The key areas of focus for the review were to:

• identify regulations and other impediments across the economy that restrict competition and reduce productivity, which are not in the broader public interest;

• examine the competition provisions of the Competition and Consumer Act 2010 (CCA) to ensure that they are driving efficient, competitive and durable outcomes, particularly in light of changes to the Australian economy in recent decades and its increased integration into global markets;

• examine the competition provisions and the special protections for small business in the CCA to ensure that efficient businesses, both big and small, can compete effectively and have incentives to invest and innovate for the future;

• consider whether the structure and powers of the competition institutions remain appropriate, in light of ongoing changes in the economy and the desire to reduce the regulatory impost on business; and

• review government involvement in markets through government business enterprises, direct ownership of assets and the competitive neutrality policy, with a view to reducing government involvement where there is no longer a clear public interest need. 11

An Issues Paper was released for public comment on 14 April 2014,12 and the Draft Report was released on 22 September 2014.13 The Final Report was released on 31 March 2015.14

The Harper Review’s Final Report notes:

The CCA (and competition policy more generally) is not designed to support a particular number of participants in a market or to protect individual competitors; instead, it is designed to prevent competitors’ behaviour from damaging the competitive process to the detriment of consumers.

The robust competitive process supported by Part IV of the CCA may inevitably lead to some market participants being damaged or leaving the market completely. Those adversely affected by competition may feel aggrieved by this damage, but the CCA is neither intended nor designed to protect individual competitors or classes of competitors from such outcomes.

15

And further:

… the law must balance two principles:

• that its scope not over-reach (by prohibiting pro-competitive conduct) or under-reach (by failing to prohibit anti-competitive conduct); and

• that the language of the law be clear to market participants and enforceable by regulators and the courts. 16

The Harper Review’s Final Report made 56 recommendations to Government.

8. T Abbott (Prime Minister) and B Billson (Minister for Small Business), Review of competition policy, media release, 4 December 2013. 9. B Billson (Minister for Small Business), Government releases details for competition review, media release, 11 December 2013. 10. B Billson (Minister for Small Business), Government names competition review panel, media release, 27 March 2014. 11. Ibid., p. 3. 12. Competition Policy Review, Competition policy review: issues paper , Treasury, Canberra, 14 April 2014. 13. Competition Policy Review Panel, Competition policy review: draft report , (Harper Review: Draft Report), Treasury, Canberra,

September 2014. 14. Harper Review: Final Report, op. cit. 15. Ibid., p. 307. 16. Ibid.

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Government response The Turnbull Government’s response was released in November 2015, including the response to the National Access Regime.17 On 16 March 2016 the Government announced its support for changes to the misuse of market power provisions.18 The Government supported 39 of the recommendations in full or in principle, with partial support for another five.19 On 5 September 2016, the Turnbull Government released an Exposure Draft for amendments to the CCA.20

Key changes to recommendations between the draft report and the final report Key changes to recommendations between the Draft Report and the Final Report were:

• recommendation 18 of the Draft Report was that sections 46A and 46B (which relate to the misuse of market power in a Trans-Tasman market) be repealed.21 The companion recommendation in the Final Report (recommendation 23), removed the recommendation to repeal the sections22

• recommendation 22 of the Draft Report specified that the cartel conduct provisions should be limited to conduct involving firms that are actual competitors and not to firms for whom competition is a mere possibility.23 In the Final Report it was recommended that cartel conduct should apply to ‘conduct involving firms that are actual or likely competitors, where ‘likely’ means on the balance of probabilities’24

• recommendation 28 of the Draft Report provided that the scope of exclusive dealing (covered in section 47 of the CCA) should be amended to cover all forms of vertical conduct, rather than specific types.25 In the Final Report, as a result of recommended changes to sections 45 and 46 (which deal with contracts, arrangements, and understandings that affect competition; and the misuse of market power, respectively), it was recommended that section 47 be repealed.26

Recommendations first introduced in the final report There was no formal Draft Report recommendation on procurement and other commercial arrangements. In the Final Report it was recommended:

All Australian governments should review their policies governing commercial arrangements with the private sector and non-government organisations, including procurement policies, commissioning, public-private partnerships and privatisation guidelines and processes.

Procurement and privatisation policies and practices should not restrict competition unless:

• the benefits of the restrictions to the community as a whole outweigh the costs; and

• the objectives of the policy can only be achieved by restricting competition.

An independent body, such as the Australian Council for Competition Policy (see Recommendation 43), should be tasked with reporting on progress in reviewing government commercial policies and ensuring privatisation and other commercial processes incorporate competition principles. 27

17. Australian Government, Australian government response to the Competition Policy Review, op. cit. 18. B Joyce (Deputy Prime Minister and Minister for Agriculture and Water Resources), “Effects test” a win for farmers and small business, media release, 16 March 2016. Legislative changes to the misuse of market power provisions were introduced by the Competition and Consumer Amendment (Misuse of Market Power) Act 2017.

19. For a discussion of the Government’s decisions on the Harper Review recommendations, see: P Davidson, Government response to the Harper Competition Policy Review: a quick guide, Research paper series, 2016-17, Parliamentary Library, Canberra, 2016. 20. The Treasury, ‘Competition law amendments: exposure draft consultation’, The Treasury website, 5 September 2016. 21. Harper Review: Draft Report, op. cit., p. 39. 22. Harper Review: Final Report, op. cit., p. 56. 23. Harper Review: Draft Report, op. cit., p. 41. 24. Harper Review: Final Report, op. cit., p. 59. 25. Harper Review: Draft Report, op. cit., p. 46. 26. Harper Review: Final Report, op. cit. p. 64. 27. Ibid., p. 51.

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There was no formal Draft Report recommendation on informed choice. In the Final Report it was recommended:

Governments should work with industry, consumer groups and privacy experts to allow consumers to access information in an efficient format to improve informed consumer choice.

The proposed Australian Council for Competition Policy (see Recommendation 43) should establish a working group to develop a partnership agreement that both allows people to access and use their own data for their own purposes and enables new markets for personal information services. This partnership should draw on the lessons learned from similar initiatives in the US and UK.

Further, governments, both in their own dealings with consumers and in any regulation of the information that businesses must provide to consumers, should draw on lessons from behavioural economics to present information and choices in ways that allow consumers to access, assess and act on them. 28

In the Final Report, there was a recommendation concerning the implementation of the Harper Review, as well as a recommendation for the Productivity Commission (PC) to be tasked with undertaking economic modelling of the recommendations as a package.29

Key changes between the Exposure Draft and the Bill The key changes between the Exposure Draft and the Bill were:

• changes to proposed amendments to cartel provisions

• changes to the proposed application of concerted practices

• the removal of amendments relating to the misuse of market power (which were separately introduced into Parliament on 1 December 2016)30

• the introduction of contingent amendments to access to services amendments

• changes to amendments associated with authorisations, notifications, and class exemptions and

• changes to application and transitional provisions, and other amendments.

The relevant changes are covered in the relevant Schedule heading below.

Committee consideration Selection of Bills Committee The Selection of Bills Committee recommended that the Bill not be referred to Committee for inquiry and report.31

Senate Standing Committee for the Scrutiny of Bills The Scrutiny of Bills Committee raised concerns with three aspects of the Bill: the legal burden of proof; significant penalties; and retrospective commencement.32 The comments are canvassed under the relevant Schedule heading below.

Policy position of non-government parties/independents There have been no public comments made in relation to the Bill.

Position of major interest groups Professor Fred Hilmer noted that injecting greater competition into the health and education sectors was a ‘new frontier’, but noted that there were ‘still huge gains to be made in infrastructure and utilities reform’. Professor

28. Ibid., p. 54. 29. Ibid., recommendations 55 and 56, p. 91. 30. Originally introduced as the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, the Bill was passed as the Competition and Consumer Amendment (Misuse of Market Power) Act 2017.

31. Senate Selection of Bills Committee, Report, 5, 2017, The Senate, 11 May 2017. 32. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 5, 2017, The Senate, 10 May 2017, pp. 12-17.

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Hilmer considered that the economic gains from the Harper Review could potentially be as large as the 2.5 per cent increase to GDP which occurred as a result of the implementation of the Hilmer Review.33

The Victorian Chamber of Commerce and Industry said the reforms under the Competition Policy Review would lift long-term productivity and growth, and:

The Victorian Chamber looks forward to working with the Federal Government to progress the implementation of this new competition reform agenda, as well as with all governments to drive a new wave of state-based competition and regulation reforms. 34

Business Council of Australia CEO Jennifer Westacott stated:

We have to redesign … markets knowing that the power of today’s consumer is profoundly different to the consumer at the time of the Hilmer competition review …

Increased competition will give public sector service delivery organisations an incentive to do better. The strengthened competitive neutrality framework recommended by Harper will level the playing field between public and private providers. 35

Financial implications The Government considers that the Bill has no financial impact on the federal budget and will result in an overall decrease in compliance costs.36

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.37

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights Scrutiny Report raised concerns with four aspects of the Bill: the right against self-incrimination; the right to privacy; the right to freedom of association; and the right to freedom of assembly and expression.38 The comments are canvassed under the relevant Schedule heading below.

Schedule 1—Definition of competition Commencement The provisions in Schedule 1 to the Bill are contingent on the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 receiving the Royal Assent. That Act received Royal Assent on 23 August 2017. As a result, the provisions of Schedule 1 commence on the earlier of a single day to be fixed by Proclamation and six months after the day this Act receives Royal Assent.

Harper Review consideration The current definition of competition in subsection 4(1) of the CCA provides that it includes competition from imported goods or from services rendered by persons not resident, or not carrying on business, in Australia. The Harper Review considered:

33. J Kelly, ‘Market power law worse than N Korea’s: Fels’, The Australian, 26 November 2015, p. 4. 34. C Heaney, ‘Shopper front queue: consumers set to win in competition shake-up’, Herald Sun, 26 November 2015, p. 54. 35. J Westacott, ‘Consumer choice at heart of review’, Weekend Australian, 28 November 2015, p. 33. 36. Explanatory Memorandum, Competition and Consumer Amendment (Competition Policy Review) Bill 2017, pp. 4-12, 142. 37. The Statement of Compatibility with Human Rights can be found at pages 145-165 of the Explanatory Memorandum to the Bill. 38. Parliamentary Joint Committee on Human Rights, Report, 6, 2017, Parliament of Australia, Canberra, 20 June 2017, pp. 2-7.

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… given the importance of ensuring that global sources of competition are considered where relevant, the [review] recommends strengthening the current definition of ‘competition’ in the CCA so there can be no doubt that it includes competition from potential imports of goods and services and not just actual imports. 39

[original emphasis]

Key provision and issues Item 1 of Schedule 1 of the Bill repeals and substitutes the definition of competition in the CCA.40 The amendment, which adopts the recommendation in the Harper Review, clarifies that the scope of the term competition includes a ‘credible threat’ of import competition.41

The Harper Review discussed the concept of competition in relation to merger decisions, and noted that the Australian Competition and Consumer Commission (ACCC) already takes ‘the potential for competitive constraint’ into account.42 However, competition is particularly applicable to Part IV of the CCA which relates to restrictive trade practices. For example, many of the provisions of that Part prohibit specific conduct that has the effect of substantially lessening competition.43

In its submission to the Harper Review, the ACCC opposed the change to the definition of competition on the ground that the current definition of competition is sufficiently clear to ensure that competition in Australian markets includes competition from actual and potential imports into Australia. In addition, the ACCC expressed concern that the change has the potential to make enforcement action more difficult.44 By including a ‘credible threat’ of import competition in the definition, there is a potential that more competition may be identified by the courts and that may make it more difficult to prove that that the particular conduct complained of substantially lessens that (now larger) level of competition.

Schedule 2—Cartels Commencement

Items 1-37 of Schedule 2 to the Bill are contingent on the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 receiving the Royal Assent. That Act received Royal Assent on 23 August 2017. As a result, the provisions commence on the earlier of a single day to be fixed by Proclamation and six months after the day this Act receives Royal Assent.

Item 38 of Schedule 2 to the Bill which relates to simplification of the existing cartel provisions commences immediately after the commencement of items 1-37.

About cartels Schedule 2 proposes to make amendments to Part IV of the CCA45 in respect of cartels (box 1).

Box 1: information about cartels

A cartel can generally be thought of as a horizontal agreement between a number of firms to restrict competition. The agreement is classified as ‘horizontal’ as it involves firms which are in competition with each other at the same level in the supply chain, for example, manufacturing, retailing etc. The restrictions on competition can take a number of forms:

 price-fixing—an arrangement where firms agree to all set a particular price at which to sell goods or services

39. Harper Review: Final Report, op. cit., p. 317. 40. Note that items 2 and 7 of Schedule 3 to the Bill make separate amendments to the definition of competition for the purposes of section 45 of the CCA. 41. Harper Review: Final Report, op. cit., p. 317. 42. Ibid., p. 316. 43. For instance, section 45 deals with contracts, arrangements and understandings affecting competition and section 47 deals with exclusive

dealing conduct which substantially lessens competition. 44. Australian Competition and Consumer Commission (ACCC), Submission to the Competition Policy Review Panel, Competition policy review: response to the draft report, 26 November 2014, pp. 33-34. 45. Part IV is mirrored in the Competition Code in Schedule 1 of the CCA, which applies anti-competitive laws through application legislation in

the states and territories. Therefore, although the discussion which follows refers to the provisions of Part IV, it equally applies to Part 1 of Schedule 1.

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 restricting supply—an arrangement where firms agree to withhold production in the supply chain

 geographical restrictions—an arrangement where firms are allocated customers, suppliers or territories, usually on an exclusive basis

 bid-rigging—an arrangement where firms agree beforehand to restrict particular tenders such that one firm will receive the contract tendered for, usually at an inflated price.

The effect of a successful cartel is to restrict competition in the market. The object of the CCA is to enhance the welfare of Australians, with competition a means to that end. Where competition is restricted, welfare is generally reduced. The purpose of Division 1 of Part IV of the CCA is to prohibit cartel conduct and to set both civil and criminal penalties for contraventions.

Sources: RV Miller, Miller’s Australian competition and consumer law annotated, 38th edn, Thomson Reuters, Sydney, 2016, pp. 463-464, 474-478; Organisation for Economic Co-operation and Development (OECD), Recommendation of the Council concerning effective action against hard core cartels, C(98)35/FINAL, OECD, Paris, 25 March 1998.

The Harper Review noted that submitters expressed broad support for serious cartel conduct to be per se prohibited and for imposing criminal sanctions for that conduct.46 The two principal concerns raised in submissions to the Harper Review were:

• The provisions are unnecessarily complex, making the law difficult to understand and comply with.

• The provisions have been framed too broadly and criminalise commercial conduct that ought not be characterised as cartel conduct, including joint venture activity and vertical arrangements between suppliers and their customers. 47

Reducing the complexity of the cartel provisions The Harper Review recommended reformulating the cartel provisions from the current purpose/effect condition, purpose condition, and competition condition to one based on the OECD cartel forms identified in box 1 above.48 Despite the Government’s support for the recommendation,49 the Exposure Draft did not incorporate the changes to the cartel provisions as proposed in the Harper Review’s model legislative provisions.50 Indeed, it is possible that the changes to the CCA in Schedule 2 may do little to change the complexity of the current provisions.51 Currently, subsection 44ZZRD(1) provides the definition of a cartel provision:

For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if:

(a) either of the following conditions is satisfied in relation to the provision:

(i) the purpose/effect condition set out in subsection (2);

(ii) the purpose condition set out in subsection (3); and

(b) the competition condition set out in subsection (4) is satisfied in relation to the provision. 52

Key provisions Currently, the purpose condition is satisfied where the provision of the contract, arrangement or understanding relates to preventing, restricting, or limiting the production, capacity to supply, or supply of goods or services, as the case may be.

46. Harper Review: Final Report, op. cit., p. 359. 47. Ibid., p. 360. 48. Harper Review: Final Report, ‘Appendix A: Competition and Consumer Act 2010: model legislative provisions’, pp. 504-506. See: Organisation for Economic Co-operation and Development (OECD), Recommendation of the Council concerning effective action against

hard core cartels, C(98)35/FINAL, OECD, Paris, 25 March 1998. 49. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 23. 50. Competition and Consumer Amendment (Competition Policy Review) Bill 2016: Exposure Draft. 51. For a useful discussion surrounding the complexity of the current provisions, see: C Beaton-Wells and B Fisse, Australian cartel regulation,

Cambridge University Press, Melbourne, 2011. 52. CCA, subsection 44ZZRD(1).

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Item 2 of Part 1 of Schedule 2 to the Bill amends the purpose condition in section 44ZZRD by inserting proposed subparagraph 44ZZRD(3)(a)(iv) into the CCA.53 It operates to include a provision of a contract, arrangement or understanding which has the purpose of directly or indirectly preventing, restricting, or limiting the acquisition (or likely acquisition) of goods or services from persons or classes of persons by parties to the contract, arrangement or understanding to which the cartel conduct relates. Item 2 effectively recognises that cartel conduct can exist in relation to the buying of goods or services, and not merely various types of actual or potential selling arrangements.

Item 2 ensures that the purpose condition can be satisfied in similar circumstances to the purpose/effect condition in paragraph 44ZZRD(2)(d) which is directed towards a provision of a contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of directly or indirectly fixing, controlling, or maintaining the price for, or a discount, allowance, rebate, or credit in relation to goods or services acquired (or likely to be acquired) by parties to the contract, arrangement, or understanding.

Item 6 of Part 1 proposes to make analogous changes to the competition condition in section 44ZZRD by inserting proposed paragraph 44ZZRD(4)(ha) relating to actual or likely acquisitions of goods or services in trade or commerce.

These amendments clarify the operation of the cartel provisions to include acquisitions, but they do not appear to reduce the level of complexity of the current provisions.

Reducing the scope of the cartel provisions The Harper Review identified three specific problems with the current cartel provisions, other than complexity:

• The cartel law is not limited to conduct that harms competition in markets in Australia.

• The ‘competition condition’ for the application of the cartel law is set at a very low threshold.

• The exceptions for joint ventures and for vertical supply arrangements are each too narrow. 54

The relevant market The Harper Review observed that generally Australia’s competition laws are directed at conduct which harms competition in markets in Australia.55 However, the current cartel provisions are not so constrained. As noted in the Review:

In Norcast v Bradken, the first and only case to consider the cartel prohibitions to date, the cartel prohibitions were found to be applicable to an arrangement concerning a tender for the sale of a Canadian corporation, which had business operations in Canada, Malaysia and Singapore, where the seller was based outside Australia and the tender was conducted outside Australia.

56

The Harper Review recommended that the prohibition on cartel conduct should be limited to ‘conduct involving persons who compete to supply goods or services to, or acquire goods or services from, persons resident in or carrying on business within Australia’ [emphasis added].57

To that end, items 3-5 and 7 of Part 1 in Schedule 2 to the Bill insert references to ‘in trade or commerce’ into the relevant paragraphs relating to the competition condition in subsection 44ZZRD(4). Item 8 repeals the existing note to subsection 44ZZRD(4) of the CCA and adds a definitional reference to trade or commerce as defined in section 4 of the CCA to mean trade or commerce within Australia or between Australia and places outside Australia.

Therefore, unless at least two of the parties to the relevant contract are engaged in trade or commerce within Australia or between Australia and places outside of Australia, there will be no contravention of the competition condition.

53. Items 1, 9 and 10 make consequential amendments to reflect the insertion of proposed subparagraph 44ZZRD(3)(a)(iv) into the CCA. 54. Harper Review: Final Report, op. cit., p. 361. 55. Ibid., p. 361 and Chapter 18. 56. Ibid., p. 361. Norcast S.ár.L v Bradken Limited (No 2) (2013) 302 ALR 486, [2013] FCA 235. 57. Harper Review: Final Report, op. cit., p. 367.

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The amendments only relate to market aspects, that is, the relevant nexus between the persons involved in the cartel conduct. In relation to the conduct complained of, however, there is no such restriction.58 Subsection 5(1) of the CCA provides for extraterritorial application of the cartel provisions in qualified terms to include conduct outside Australia engaged in by:

• bodies corporate incorporated or carrying on business within Australia or

• Australian citizens or

• persons ordinarily resident within Australia.59

Likelihood of competition Currently, the competition condition which is used to identify cartel conduct is satisfied if at least two of the parties are or are likely to be in competition with one another in trade or commerce.

The Harper Review considered that the statutory definition of likely was too low for cartel conduct, and recommended that the cartel provisions ‘should be confined to conduct involving firms that are actual or likely competitors, where likely means on the balance of probabilities’.60 This was in response to a Federal Court decision which considered the statutory definition of likely in section 44ZZRB.61

In its formal response to the Harper Review recommendations in relation to the cartel conduct provisions, the Government did not explicitly state that it would change the statutory definition of likely.62 The Exposure Draft proposed to repeal the definition.63 As outlined in the Explanatory Material accompanying the Exposure Draft, by removing the definition of likely in section 44ZZRB, the word would be interpreted analogously to other Part IV provisions including the word ‘likely’.64

Contrary to the Exposure Draft, the Bill does not repeal the definition of likely in section 44ZZRB and the Explanatory Memorandum is silent as to the rationale for the change in approach. As such, contracts, arrangements and understandings will continue to be subject to the cartel provisions in instances where at least two of the parties are in competition with each other in relation to the supply, acquisition or production of goods or services, or there is a possibility that is not remote that they will be in competition with each other.

Joint ventures Sections 44ZZRF and 44ZZRG of the CCA provide that a corporation commits a criminal offence if it makes, or gives effect to, respectively, a contract, arrangement or understanding which contains a cartel provision. Corresponding civil penalty provisions are provided for in sections 44ZZRJ and 44ZZRK, respectively.

Currently, sections 44ZZRO and 44ZZRP of the CCA provide for an exception from the criminal and civil penalty provisions for joint ventures.65

58. Norcast S.ár.L v Bradken Limited (No 2), op. cit., [2013] FCA 235, [231] (Gordon J). 59. Subsections 5(3) and 5(4) of the CCA operate to prevent private citizens from claiming damages or seeking other remedial orders without the written consent of the Minister. This requirement is qualified by subsection 5(5) of the CCA which provides that the Minister is to give consent unless he, or she, is of the opinion that the law of the country in which the relevant conduct was engaged in required, or specifically

authorised, the engaging in of the conduct and it is not in the national interest that the consent be given. Subsections 5(3)-(5) are set to be repealed by item 1 of Schedule 14 to the Bill. 60. Harper Review: Final Report, op. cit., p. 367. 61. Norcast S.ár.L v Bradken Limited (No 2), op. cit., [2013] FCA 235, [14], [259] (Gordon J). 62. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 23. 63. Competition and Consumer Amendment (Competition Policy Review) Bill 2016: Exposure Draft, item 2 in Part 1 of Schedule 2. 64. Exposure Draft Explanatory Materials, Competition and Consumer Amendment (Competition Policy Review) Bill 2016: Exposure Draft, p. 12.

For a discussion of how ‘likely’ has been interpreted by the courts in relation to Part IV of the CCA, see: P Davidson, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, Bills digest, 87, 2016-17, Parliamentary Library, Canberra, 2017, pp. 14-15. 65. Section 4J of the CCA defines a joint venture for the purposes of that Act as follows: (a) a reference to a joint venture is a reference to an activity in trade or commerce that is carried on jointly by two or more persons, whether or not in partnership; or carried on by a body

corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly by means of their joint control, or by means of their ownership of shares in the capital, of that body corporate; and (b) a reference to a contract or arrangement made or understanding arrived at, or to a proposed contract or arrangement to be made or proposed understanding to be arrived at, for the purposes of a joint venture shall, in relation to a joint venture by way of an activity carried on by a body corporate, be read as including a reference to the memorandum and articles of association, rules or other document that constitute or constitutes, or are or is to constitute, that body corporate.

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The Harper Review considered that the joint venture exception was cast too narrowly, thus excluding pro-competitive commercial conduct.

Items 11-14 amend subsection 44ZZRO(1) of the CCA so that cartel conduct may occur via arrangement or understanding, in addition to via contract. This reflects commercial realities—for instance, an arrangement or understanding may have been reached in an informal setting and may not be in written form—as well as blocking a potential gap in the law as a result of the repeal of the prohibition on exclusionary provisions proposed in Schedules 3 and 4 of the Bill (see below).

In addition, item 13 provides a new requirement that the joint venture is not carried on for the purpose of substantially lessening competition, and recasts the current requirements that the:

• cartel provision in the contract, arrangement or understanding must have been reasonably necessary for undertaking a joint venture and

• the joint venture is for the production, supply or acquisition of goods or services.

Items 12 and 17 also provide that the defendant bears a new, higher burden of proof (box 2) in relation to raising the joint venture exceptions under sections 44ZZRO and 44ZZRP, respectively.

The Harper Review also noted that exempting joint ventures from the cartel provisions does not exempt joint ventures from the general provisions in the CCA.66 Accordingly, the Review considered that it needed to assess whether joint ventures should be subject to the per se liability (including potentially criminal liability) of the cartel provisions, or whether they should be subject to the general Part IV standard of substantially lessening competition.67 It decided that the latter standard was more appropriate. Since joint ventures can have pro-competitive aspects they should not be subject to a per se prohibition. The introduction of a requirement that the defendant prove that the joint venture is not carried on for the purpose of substantially lessening competition is included as proposed paragraph 44ZZRO(1)(ba).

Box 2: burden of proof under cartel provisions

Under the current cartel provisions in the CCA, the defendant bears an evidential burden in establishing the exceptions to both the criminal offences and civil penalty provisions.68 See Note 1 to subsection 44ZZRO(1) and subsection 44ZP(2).

An evidential burden of proof borne by the defendant means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist.69

Item 15 repeals and replaces the note to subsection 44ZZRO(1) of the CCA to provide that the defendant bears a legal burden in establishing the exception in that subsection to prosecution under sections 44ZZRF and 44ZZRG. The standard of proof required by the defendant to discharge the legal burden of proof is on the balance of probabilities.70 Item 20 repeals and replaces subsection 44ZZRP(2) so that a defendant who wishes to rely on the exemption in civil proceedings must prove that matter on the balance of probabilities. The effect of items 15 and 20 is to impose a higher standard of proof on the defendant than is currently the case.

Items 21-37 make equivalent changes to Schedule 1 to the CCA in relation to cartel conduct by persons (as opposed to corporations).

66. Harper Review: Final Report, op. cit., p. 363. 67. For a discussion on the substantially lessening competition test, see: P Davidson, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, Bills digest, op. cit., p. 17. 68. Item 15 of Part 1 in Schedule 2 to the Bill repeals and replaces the note to subsection 44ZZRO(1) to specify that the defendant bears a legal

burden in relation to the matter in this section. 69. Criminal Code Act 1995, section 13.3(6) and definition of ‘evidential burden’ at section 44ZRB of the CCA. 70. Ibid., section 13.5.

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Renumbering the cartel conduct provisions Item 38 provides for the cartel conduct provisions (sections 44ZZRA-44ZZRV) to be renumbered, and also accommodates for the repeal of section 44ZZRQ71 (which deals with an exemption to the cartel provisions relating to covenants affecting competition). Item 39 provides for equivalent renumbering of Schedule 1 of the CCA.

Schedule 3—Price signalling and concerted practices Commencement The amendments in Schedule 3 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

Division 1A of Part IV of the CCA Division 1A of Part IV of the CCA relates to the anti-competitive disclosure of pricing and other information. Division 1A is a relatively recent addition to the CCA, having commenced on 6 June 2012.72 Essentially, Division 1A was created to prohibit anti-competitive disclosure of pricing information, as well as prohibiting disclosure of a wide range of matters if the purpose of the disclosure is to substantially lessen competition in a market.73

Subsection 44ZZT(1) provides that Division 1A applies to goods and services prescribed in the regulations. Currently, there are only two goods or services prescribed:

• a good or service provided by an authorised deposit-taking institution (within the meaning of the Banking Act 1959) and consisting to any extent of taking money on deposit (otherwise than as part-payment for identified goods or services) and

• a good or service provided by an authorised deposit-taking institution (within the meaning of the Banking Act) and consisting to any extent of making advances of money.74

The Harper Review considered that Australia’s competition laws should apply equally to all sectors of the economy, noting that Division 1A of Part IV of the CCA had applied only to the banking sector since its enactment and that ‘no cases have been brought’.75 The Review also noted that ‘no one seems happy with the provisions in their current form’.76

The Harper Review considered that the law could be removed, and the provisions’ intent could be better captured in other provisions of the CCA:

Other provisions of the competition law are capable of addressing anti-competitive price signalling. For example, if the price signalling causes competitors to agree the level of their prices, the conduct will be prohibited as price fixing by the cartel provisions. If, on the other hand, the price signalling falls short of price fixing but has the effect of substantially lessening competition (by enabling competitors to co-ordinate their pricing decisions), the conduct will generally be prohibited by section 45.

77

Key provision To that end, the Harper Review recommended repealing Division 1A and amending section 45 (which relates to contracts, arrangements or understandings that restrict dealings or affect competition):78

Ensuring that section 45 of the CCA can apply to instances of concerted practice that substantially lessen competition will meet the policy intent of the price signalling provisions. This would remove the need for a separate

71. Item 8 of Schedule 5 of the Bill repeals section 44ZZRQ. 72. Competition and Consumer Amendment Act (No. 1) 2011, section 2. 73. P Pyburne, Competition and Consumer Amendment Bill (No. 1) 2011, Bills digest 138, 2010-11, Parliamentary Library, Canberra, 2011. 74. Competition and Consumer Regulations 2010, regulation 48. 75. Harper Review: Final Report, op. cit., p. 367. 76. Ibid., p. 369. 77. Ibid., p. 370. 78. Ibid., p. 372.

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division on price signalling within the CCA, and is consistent with simplifying the CCA and ensuring that its provisions apply generally throughout the economy. 79

The Government supported the recommendation.80 Accordingly, item 1 of Part 1 in Schedule 3 to the Bill repeals Division 1A of the CCA.

Introduction of concerted practices Section 45 of the CCA provides for a range of offences relating to contracts, arrangements or understandings that restrict dealings or affect competition. The Harper Review considered that section 45 should be expanded to include concerted practices (box 3), while at the same time recommending that the exclusionary provisions references be removed.81 Exclusionary provisions are discussed below in relation to the amendments proposed in Schedule 4.

Box 3: concerted practices

The Harper Review considered that section 45 should be the central provision in the CCA that covers anti-competitive dealings between businesses. To that end, the Harper Review recommended that in addition to its current coverage relating to contracts, arrangements or understandings, that it also extend to concerted practices with one or more persons that have the purpose, effect or likely effect of substantially lessening competition.

The Review stated:

The word ‘concerted’ means jointly arranged or carried out or co-ordinated. Hence, a concerted practice between market participants is a practice that is jointly arranged or carried out or co-ordinated between the participants. The expression ‘concerted practice with one or more other persons’ conveys that the impugned practice is neither unilateral conduct nor mere parallel conduct by market participants (for example, suppliers selling products at the same price).

The Harper Review noted that both the UK and the EU competition laws explicitly refer to concerted practices. As such, the Review recommended that Division 1A of Part IV (which deals with anti-competitive disclosure of pricing and other information) be repealed and that activity now be covered under section 45.

Source: Competition Policy Review Panel, Competition policy review: final report, Treasury, Canberra, March 2015, pp. 369-372.

Key Provisions Item 2 of Part 1 in Schedule 3 to the Bill repeals and replaces subsections 45(1)-(3). Subsection 45(1) currently relates to contracts made prior to the commencement of the Trade Practices Amendment Act 1977 (being 1 July 1977) that contain an exclusionary provision or have the purpose, or have or are likely to have the effect of substantially lessening competition.82 The Harper Review considered that the subsection should be removed.83 Item 2 does that.

Subsection 45(2) of the CCA currently prohibits a corporation from making a contract, arrangement or understanding which contains an exclusionary provision or has the purpose, effect or likely effect of substantially lessening competition. In addition, a corporation must not give effect to such a provision of a contract, arrangement or understanding. Proposed subsection 45(1) now contains the prohibition. However, the reference to an exclusionary provision has been removed and a reference to concerted practice is inserted. The Bill does not contain a definition of that term. According to the Explanatory Memorandum:

79. Ibid., p. 370. 80. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 24. 81. Harper Review: Final Report, op. cit., pp. 370-1. 82. Section 4D of the CCA operates so that a provision of a contract, arrangement or understanding, will be taken to be an exclusionary provision

for the purposes of the Act if: (a) the contract or arrangement was made, or the understanding was arrived at between persons any two or more of whom are competitive with each other and (b) the provision has the purpose of preventing, restricting or limiting the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions by all or any of the parties to the contract, arrangement or understanding. The section is repealed by item 1 of Schedule 4 to the Bill. 83. Harper Review: Final Report, op. cit., p. 311.

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A concerted practice is any form of cooperation between two or more firms (or people) or conduct that would be likely to establish such cooperation, where the conduct substitutes, or would be likely to substitute, cooperation in place of the uncertainty of competition. 84

Proposed subsection 45(2) captures contracts or arrangements made, or understandings arrived at, before or after the commencement of the section.85

Subsection 45(3) currently provides the definition of competition for the purposes of section 45 of the CCA. The definition is unchanged by the Bill, save for the addition of a reference to a concerted practice. Proposed paragraph 45(3)(b) provides that the definition of competition in relation to a concerted practice is competition in any market in which a corporation that is a party to the practice, or any related body corporate, supplies or acquires, or is likely to supply or acquire goods or services, or would be likely to do so, if not for the concerted practice.

Subsection 45(5) of the CCA sets out various circumstances in which the section does not apply.86 Item 3 amends the CCA to insert proposed subsection 45(5A) which applies to the making of a contract, arrangement or understanding.87 The effect of proposed subsection 45(5A) is to subject the making of such a contract, arrangement or understanding to the exclusive dealing provisions in section 47 of the CCA (unless it is permitted in some other way) rather than section 45. However, the absence of reference to a concerted practice would presumably mean that such conduct is to be caught under section 45.

Item 4 amends existing subsection 45(6) so that section 45 does not apply to, or in relation to, the giving effect to a provision of a contract, arrangement or understanding, or engaging in a concerted practice in circumstances that would be captured by other provisions of the CCA.

Item 5 repeals and replaces subsections 45(7)-(8) which set out other circumstances in which section 45 does not apply to include reference to a concerted practice. Item 5 also inserts proposed subsection 45(8AA) which provides that section 45 does not apply to concerted practices engaged in solely between Commonwealth or state or territory entities. The Explanatory Memorandum to the Bill provides that this is to ensure social policy objectives are not unduly hindered, in particular those relating to community service obligations.88

Item 11 amends paragraph 4(2)(a) of the CCA to explain that a reference to engaging in conduct in the CCA also includes the engaging in of a concerted practice, as does a reference to conduct.

Items 6-10 make analogous changes to those introduced by items 1-5 to Schedule 1 of the CCA. Items 12-15 make minor consequential amendments to the CCA.

Currently subsection 51(2) of the CCA sets out those matters which are irrelevant to a decision that there has been a contravention of Part IV—other than in respect of sections 45D,89 45DA,90 45DB,91 45E,92 45EA93 or 48.94

In particular, paragraph 51(2)(a) of the CCA provides that any act done in relation to, or to the making of a contract or arrangement or the entering into of an understanding, or to any provision of a contract, arrangement or understanding, to the extent that the contract, arrangement or understanding, or the provision, relates to, the remuneration, conditions of employment, hours of work or working conditions of employees is an irrelevant matter.

84. Explanatory Memorandum, Competition and Consumer Amendment (Competition Policy Review) Bill 2017, p. 28. 85. Item 21 repeals subsection 51(4) which deals with repealed subsection 45(1) relating to contracts entered into prior to the commencement of the Trade Practices Amendment Act 1977—which is repealed by item 2; as well as in relation to subsection 45B(1) which deals with covenants affecting competition. Covenants under section 45B are to be repealed as a result of item 10 of Schedule 5 to the Bill (and item 20 in relation

to Schedule 1 of the CCA). 86. Subsections 45(5)-(8A) of the CCA are known as ‘anti-overlap’ provisions. 87. Subsection 45(6) of the CCA relates to the making of a contract, arrangement, or understanding. 88. Explanatory Memorandum, Competition and Consumer Amendment (Competition Policy Review) Bill 2017, p. 32. 89. Section 45D of the CCA relates to secondary boycotts for the purpose of causing substantial loss or damage. 90. Section 45DA of the CCA relates to secondary boycotts for the purpose of causing substantial lessening of competition. 91. Section 45DB of the CCA relates to boycotts affecting trade or commerce. 92. Section 45E of the CCA relates to the prohibition of contracts, arrangements or understandings affecting the supply or acquisition of goods

and services. 93. Section 45EA of the CCA states that provisions contravening section 45E are not to be given effect. 94. Section 48 of the CCA relates to resale price maintenance.

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Item 16 in Part 2 of Schedule 3 to the Bill repeals paragraph 51(2)(a) and inserts proposed paragraphs 51(2)(a) and (aa) to extend the exception to a concerted practice.

Items 18 and 19 maintain the current exceptions from potential contraventions of the above provisions in relation to:

• under paragraph 51(2)(c), obligations arising under a standard set by Standards Australia or by a prescribed association or body and

• under paragraph 51(2)(d) in relation to business partnerships

• under paragraph 51(2)(g) in relation to the export of goods or the supply of services from Australia where full particulars were provided to the ACCC in relation to the contract, arrangement or understanding.

Items 18 and 19 also add references to a concerted practice to those exceptions as a result of the amendments introduced under Schedule 3 Part 1 of the Bill. Item 20 provides specifics that must be provided to the ACCC in relation to the required particulars for the purposes of proposed paragraph 51(2)(g).

Items 24-26 replace references in the collective bargaining notification provisions of sections 93AB and 93AC in relation to contracts, consistent with the amendments proposed to section 45. The effect of these amendments will mean that corporations will only be able to provide notification for contracts, arrangements or understandings, and not for concerted practices under proposed paragraph 45(1)(c). The removal of the application to exclusionary provisions is consistent with the proposed repeal of section 4D (item 1 of Schedule 4 to the Bill) and changes to section 45. Notification is discussed in Schedule 9.

Items 27-29 makes minor consequential amendments as a result of the amendments to paragraph 51(2)(g) made by item 19.

Items 30-37 make analogous changes to Schedule 1 of the CCA to those proposed by items 14-21.

Schedule 4—Exclusionary provisions Commencement The amendments in Schedule 4 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About exclusionary provisions Currently, subparagraphs 45(2)(a)(i) and 45(2)(b)(i) of the CCA per se prohibit the making of a contract or arrangement or understanding that contains an exclusionary provision, or of giving effect to a contract, arrangement or understanding which contains an exclusionary provision (box 4). Item 2 of Schedule 3 to the Bill removes these subparagraphs.

Box 4: what is an exclusionary provision?

An exclusionary provision simply means a ‘boycott’.95 In turn, a boycott relates to two or more businesses which are in competition with each other in which either a contract, arrangement or understanding is made which has a purpose of preventing, restricting or limiting: the supply of goods or services to (or acquisition from) particular persons or classes of persons; or only to supply or acquire in particular circumstances or on particular conditions.

Examples could include two competitors in a market who refuse to supply a downstream operator under any terms, or on prohibitively high terms; or a group of suppliers agreeing on tenders for which each will bid and those suppliers dividing up the market geographically between them. There are therefore links between section 4D (which deems certain contracts, arrangements or understandings to have exclusionary provisions, in certain circumstances) and section 45 and the cartel provisions discussed in Schedule 2.

The reference to boycotts in relation to section 4D of the CCA is not the same as a reference to secondary boycotts which relate to two or more businesses acting in concert to constrain a third party from supplying or acquiring goods or services from a fourth person. Secondary boycotts are discussed in Schedule 6.

Source: Competition and Consumer Act 2010, sections 45D-45DA, 47.

95. RV Miller, Miller’s Australian competition and consumer law annotated, 39th edn, Thomson Reuters, Sydney, 2017, p. 109.

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The Harper Review considered: … the prohibition of exclusionary provisions, separately from cartel conduct, is unnecessary and increases the complexity of the law. The definition of exclusionary provisions overlaps substantially with the definition of market sharing, a form of cartel conduct. Many submissions agree, supporting the removal of section 4D of the CCA.

96

Items 2-5 of Schedule 4 to the Bill make consequential amendments to the CCA to remove references to section 4D and exclusionary provisions.

Schedule 5—Covenants affecting competition Commencement The amendments in Schedule 5 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About covenants The Harper Review considered that sections 45B and 45C of the CCA which deal with covenants (box 5) were unnecessarily duplicative of other provisions, and hence recommended that they be repealed.97

Box 5: what is a covenant?

Section 4 of the CCA defines a covenant to mean:

… a covenant (including a promise not under seal) annexed to or running with an estate or interest in land (whether at law or in equity and whether or not for the benefit of other land), and proposed covenant has a corresponding meaning.

Section 45B covers covenants that affect competition in real estate transactions in essentially the same terms as section 45 apart from the fact that section 45B extends to persons as well as corporations and also extends to:

 threatening to engage in offending conduct if the other party to the covenant does not comply with its terms and

 engaging in offending conduct because a person who would, but for the section, be bound by the covenant proposes not to comply with it.

Section 45C covers covenants in relation to prices in real estate transactions in essentially the same terms as the price fixing provisions in Division 1 of Part IV, apart from the fact that section 45C extends to persons.

Source: RV Miller, Miller’s Australian competition and consumer law annotated, 38th edn, Thomson Reuters, Sydney, 2016, p. 542.

Item 1 inserts definitions of contract and party into subsection 4(1) of the CCA. The effect of including a covenant as part of the definition of a contract means that covenants will now be covered under section 45 of the CCA, which deals with contracts, arrangements or understandings which affect competition (see above). Accordingly, item 10 of Schedule 5 to the Bill repeals sections 45B and 45C. Item 8 repeals section 44ZZRQ which is the cartel provision relating to covenants. The inclusion of the definition of party means that persons bound by or entitled to the benefit of the covenant are also included within the scope of section 45, where they would currently not be if those persons were not corporations.

Schedule 6—Secondary boycotts Commencement The amendments in Schedule 6 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

Background The secondary boycott provisions were inserted into the then Trade Practices Act 1974 (now the CCA) in 197798 in response to a recommendation of the Swanson Review which stated:

96. Harper Review: Final Report, op. cit., p. 361. 97. Ibid., pp. 308, 311.

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In our view, the [Trade Practices] Act should continue to apply as at present to anti-competitive conduct by employer organisations: With respect to such conduct by employees and employee organisations (which at present have a much wider exception than is afforded employer organisations) we recommend that the Government take steps to deal with certain problems raised by the action of secondary boycotts … and with collusion between organisations of employees and any other person (being engaged in trade or commerce) which results in a substantial lessening of competition.

99 [emphasis added]

The sections are directed towards the activities of trade unions.

Consistent with the views of the Swanson Committee, the Fraser Government, which was responsible for inserting the secondary boycott provisions, took the view that trade unions should be subject to the TPA in relation to all of their activities other than those of employees directed against their own employer.

How the secondary boycott provisions operate An explanation of secondary boycotts is provided in box 6.

Box 6: information about secondary boycotts

Secondary boycotts are generally found in employment relationships. The CCA generally does not cover employment matters, given that there is a recognition that matters arising in employment markets can differ from those in relation to markets for goods and services. Nevertheless, the limited role that the CCA has is in relation to secondary boycotts (and also trading restrictions in industrial agreements).

Generally, a secondary boycott involves two (or more) persons, acting in concert together to:

 hinder or prevent a third person from supplying/acquiring goods or services from a fourth person (who is not an employer of the persons acting in concert), where the purpose, effect, or likely effect is to cause:

- substantial loss or damage to the business of the fourth person (section 45D) or

- a substantial lessening of competition in any market in which the fourth person trades (section 45DA) or

 have the purpose, effect, or likely effect of preventing or substantially hindering a third person (who is not an employer of the first person) from engaging in trade or commerce involving the export or import of goods (section 45DB).

The Harper Review considered that secondary boycotts had not been as vigorously enforced by the ACCC, compared with other offences under Part IV of the CCA.100 It is possible that enforcement of secondary boycotts was not as vigorous as enforcement for other breaches of Part IV for a number of reasons, including:

• the maximum penalty for secondary boycotts is currently less than ten per cent of the maximum penalty for contraventions of other Part IV provisions—this would represent a strong parliamentary indication as to where the ACCC should prioritise its scarce enforcement resources (to the contraventions which attract more significant penalties) and

• there may be a greater incidence of other Part IV contraventions vis-à-vis secondary boycotts.

The Harper Review stated:

As with all competition laws, the secondary boycott laws will only act as a deterrent to unlawful behaviour if the laws are enforced consistently and effectively. 101

98. Trade Practices Amendment Act 1977. 99. Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs, (Swanson report), Parl. Paper No. 228/1976, The Government Printer of Australia, Canberra, August 1976, p. 6. 100. Harper Review: Final Report, op. cit., p. 68. 101. Ibid., p. 391.

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Key provisions Section 76 of the CCA is the key penalty provision in relation to breaches of the restrictive trade practices provisions of the Act—including the secondary boycott provisions. Subsection 76(1A) provides a maximum pecuniary penalty for corporations of the greater of $10 million or three times the gain from the contravention or where gain cannot be readily ascertained, ten per cent of the annual turnover of the body corporate and all of its interconnected bodies corporate (if any) in the first 12 months after the contravention occurred.

However, there is an exception (contained in paragraph 76(1A)(a)) to this general rule which applies to acts or omissions to which sections 45D, 45DB, 45E and 45EA apply. In that case the maximum penalty is $750,000.

The Harper Review, recommended that ‘the maximum penalty level for secondary boycotts should be the same as that applying to other breaches of the competition law’.102

Item 1 of Schedule 6 amends paragraph 76(1A)(a) of the CCA by omitting references to sections 45D and 45DB, which cover secondary boycotts. In summary, section 76 provides for pecuniary penalties (that is, fines) for contraventions of Part IV, as well as a number of other provisions in the CCA.

This means that contraventions of the secondary boycott provisions will be subject to the default maximum penalty provision of $10,000,000 as outlined above.

Right to freedom of association The Parliamentary Joint Committee on Human Rights Scrutiny Report considered that the proposed maximum potential penalty for secondary boycott offences in section 76 of the CCA may constitute a limitation on the right to freedom of association.103 In particular, the Committee noted that the Government’s statement of compatibility did not discuss the penalty increase in those terms.104 Further, the Committee noted that the statement did not explain the kind of matters not considered to have a dominant purpose relating to employment, to which the increase in secondary boycott penalties is to apply.105 The Committee requested further advice from the Treasurer. At the time of writing, a response had been received but not published.106

Right to freedom of assembly and expression The Parliamentary Joint Committee on Human Rights Scrutiny Report noted:

As the increased penalty may have the effect of discouraging certain kinds of protest activities it may engage and limit the right to freedom of assembly and expression. These rights were not addressed in the statement of compatibility. 107

The Committee requested further advice from the Treasurer as to:

• whether the measure is aimed at achieving a legitimate objective for the purposes of international human rights law;

• how the measure is effective to achieve (that is, rationally connected to) that objective; and

• whether the limitation is a reasonable and proportionate measure to achieve the stated objective (including any relevant safeguards). 108

At the time of writing, a response had been received but not published.109

102. Ibid., recommendation 36, p. 68. 103. Parliamentary Joint Committee on Human Rights, Report, 6, op. cit., pp. 6-7. 104. The Statement of Compatibility with Human Rights can be found at pages 145-165 of the Explanatory Memorandum to the Bill. 105. Ibid. 106. Parliamentary Joint Committee on Human Rights, ‘Correspondence register’, Australian Parliament website, Table 2: recent correspondence

received.

107. Parliamentary Joint Committee on Human Rights, Report, 6, op. cit., p. 7. 108. Ibid. 109. Parliamentary Joint Committee on Human Rights, ‘Correspondence register’, op. cit., table 2.

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Schedule 7—Third line forcing Commencement The amendments in Schedule 7 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About third line forcing Third line forcing (box 7) is covered under subsections 47(6)-(7) of the CCA, and by virtue of the operation of subsection 47(10) is a per se prohibition.

Box 7: what is third line forcing?

Third line forcing is a vertical supply arrangement whereby a supplier, as part of supplying goods or services, requires the purchaser to buy additional (perhaps unwanted) goods or services from a third party. For example, a corporation may supply paint to an individual and then require that individual to hire a painter from a third party business.

The key features of third line forcing are that it requires two distinct goods or services, with the supply of the first by one party being subject to acquisition of the second from a different party. It is therefore distinguishable from another common practice of bundling or tying of goods or services. Bundling involves the supply of both of the goods or services by the one supplier, for example, the sale of white goods and an extended warranty by the same corporation.

Source: Miller, Miller’s Australian competition and consumer law annotated, op. cit., p. 612.

Harper Review consideration According to the Harper Review, as a general principle:

… the CCA should not interfere with trading conditions agreed between buyers and sellers in connection with acquiring and supplying goods and services, unless those conditions have the purpose, effect or likely effect of substantially lessening competition. 110

Section 47 of the CCA prohibits the following categories of vertical restraint practices:

• supplying goods or services on condition:

- the purchaser does not acquire goods or services from a competitor or the supplier111 - the purchaser accepts some restriction on the right to resupply goods or services112 or - the purchaser acquires other goods or services from a third party113 • acquiring goods or services on condition that the supplier accepts some restriction as to the freedom to supply third parties114

• refusing to supply goods or services because:

- the purchaser has dealt or refused to cease dealing in a competitor's products115 - the purchaser has failed to accept some restriction on the right to resupply116 or - the purchaser refuses to acquire other goods or services from a third-party117 • refusing to acquire goods or services because the supplier refuses to accept some restriction on the right to supply third parties118 and

110. Ibid., p. 63. 111. CCA, subsection 47(2). 112. Ibid., subsection 47(2). 113. Ibid., subsection 47(6). 114. Ibid., subsection 47(4). 115. Ibid., subsection 47(3). 116. Ibid., subsection 47(3). 117. Ibid., subsection 47(7). 118. Ibid., subsection 47(5).

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• aiding, abetting, procuring, counselling or inducing any corporation to engage in any of the conduct referred to above.119

The general rule is that these practices are prohibited where the conduct has the purpose or likely effect of substantially lessening competition. However, the exception to this general rule is third-line forcing which is prohibited per se—that is, regardless of the purpose or effect of the conduct.

The Harper Review considered section 47 of the CCA (which prohibits exclusive dealing) could be repealed in its entirety as a result of recommended changes to sections 45 and 46.120 The Review considered that if section 47 were to be maintained, then third line forcing should cease being subject to a per se prohibition and instead be subject to the same competition test as applies to the other conduct set out in section 47.121

Key provisions Item 1 of Schedule 7 to the Bill amends subsection 47(10) so that all of the exclusive dealing contraventions are subject to the competition test and third line forcing is no longer prohibited per se.

Items 2 and 3 make minor consequential amendments as a result of item 1. Item 4 removes subsection 47(10A) which permits the ACCC to provide notification in relation to conduct which would otherwise constitute a contravention of the third line forcing provisions. The removal of this subsection operates so that third line forcing is treated in the same way as the other conduct described in section 47 in that conduct is subject to a competition test (item 1) and is subject to the general ACCC notification provisions in section 93 of the CCA.

Schedule 8—Resale price maintenance Commencement The amendments in Schedule 8 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About resale price maintenance Schedule 8 of the Bill makes amendments relating to resale price maintenance (box 8) which is covered under section 48 of the CCA.

Box 8: what is resale price maintenance?

Resale price maintenance is a form of vertical restriction concerning resale prices. It generally involves a supplier supplying a product to a person on the condition that the product cannot be sold below a price specified by the supplier. For example, a manufacturer may provide its televisions to a retailer, and as part of providing the television, the manufacturer states that the television is not to be sold below a certain price.

Source: Miller, Miller’s Australian competition and consumer law annotated, op. cit., p. 621.

Harper Review consideration Section 48 of the CCA prohibits resale price maintenance and makes it a per se offence. However, resale price maintenance may be authorised if a manufacturer can demonstrate that the imposition of resale price maintenance results in such a public benefit that it should be allowed to be made.

The Harper review noted that the appropriateness of a per se prohibition of resale price maintenance has been debated for many years.122 The rationale for the per se prohibition is that resale price maintenance may cause significant harm to the competitive process, including by:

• facilitating collusion between suppliers: resale price maintenance conduct may be used by suppliers to reduce or eliminate price competition between its customers

• facilitating collusion between retailers: a bottom up resale price maintenance occurs when one or more retailers compel a supplier to adopt resale price maintenance conduct to reduce or eliminate price competition at the retail level

119. Ibid., section 75B. 120. Harper Review: Final Report, op. cit., p. 376. 121. Ibid. 122. Ibid., p. 377.

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• supplier exclusion: an incumbent supplier may use resale price maintenance conduct to guarantee margins for retailers to make them unwilling to carry the products of a rival or new entrant

• retailer exclusion: resale price maintenance conduct can be used as a means to eliminate retail competition from discount or more efficient retailers.123

The Harper Review considered that there was not a sufficient case for changing the prohibition of resale price maintenance from a per se prohibition to a competition based test. Rather, the notification process should be extended to resale price maintenance to provide a quicker and less expensive exemption process for business. In addition, the Harper review considered that the prohibition should also be amended to include an exemption for resale price maintenance conduct between related bodies corporate—consistent with sections 45 and 47 of the CCA.124

Key provisions Accordingly, item 2 in Schedule 8 to the Bill inserts proposed subsection 48(2) which provides that there is no contravention of the prohibition of resale price maintenance where the corporation engaging in resale price maintenance has notified the ACCC and a notice is in force under section 93 of the CCA. Item 1 makes a minor consequential amendment as a result of item 2.

Item 21 in Schedule 8 to the Bill inserts proposed subsection 96(8) into the CCA so that a corporation (known as the supplier) does not engage in resale price maintenance if the supplier and the second person (referred to in subsection 96(3)) are bodies corporate that are related to each other.

About notifications Section 93 of the CCA relates to notifications. Notifications are discussed in box 9.

Box 9: what is notification?

Notification is a process whereby conduct which would otherwise contravene particular provisions of the CCA is effectively permitted, and is regulated by the ACCC. Currently, notification is only available for conduct in relation to section 44ZZW—which deals with the private disclosure of pricing information—or in relation to subsections 47(2)-(9), which cover exclusive dealing.125

Currently, notification is not available for resale price maintenance, although conduct may currently be permitted under the authorisation provisions of subsection 88(8A) of the CCA. The authorisation process is discussed in Schedule 9.

Key provisions Broadly speaking, section 93 of the CCA allows a corporation to file a notice with the ACCC in relation to conduct that would otherwise breach the provisions of section 47 in relation to exclusive dealing conduct. The notice must be in the manner and form specified in regulation 9 of the Competition and Consumer Regulations 2010. Lodgement of the notification provides statutory protection in relation to the relevant conduct to the corporation.

Item 5 repeals and substitutes subsection 93(1) of the CCA which sets out the scope of notifications. Reference to section 44ZZW (which deals with private disclosure of prices to competitors) is repealed owing to the fact that section 44ZZW is itself repealed by Schedule 3, item 1 which repeals Division 1A of Part IV. Proposed paragraph 93(1)(b) includes a reference to section 48—resale price maintenance—in the notifications regime as recommended by the Harper Review. Since resale price maintenance can be engaged in by persons (as well as corporations), items 6-8, 10-11, 15, and 17-19 make minor consequential amendments to include references to ‘or other person’.

123. Ibid., pp. 377-378. 124. Ibid., p. 379. 125. Notification is also available for the forcing provisions in section 47 via section 47(10A) of the CCA, but that section is set to be repealed by item 4 of Schedule 7 to the Bill.

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Item 13 repeals and replaces subsection 93(7A) of the CCA to set out the time that a notification of proposed resale maintenance comes into effect. Under proposed subsection 93(7A), the statutory protection commences at the end of 60 days (or other such period as prescribed in the regulations) after the day that the corporation gave the notice to the ACCC. Alternatively, if the ACCC gave notice under subsection 93A(2) (which deals with the ACCC holding a conference in relation to a draft notice) and decides not to give the corporation or other person a notice under section 93(3A) because the ACCC is not ‘satisfied that the likely benefit to the public from the conduct or proposed conduct will not outweigh the likely detriment to the public from the conduct or proposed conduct’, then at the time the ACCC makes that decision.

Item 20 makes a minor consequential amendment to subsection 93A(2) as a result of the proposed inclusion of ‘or other person’ by item 2 within the ambit of resale price maintenance under section 48 of the CCA.

Schedule 9—Authorisations, notifications and class exemptions Commencement Item 104 of Schedule 9 to the Bill commences immediately after Schedules 3-8 commence. Item 133 commences immediately after Schedules 10 and 11 commence. All other amendments in Schedule 9 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About authorisation Schedule 9 to the Bill proposes a substantial number of amendments to the authorisation and notification provisions of the CCA. Authorisation is discussed in box 10 below, and notification was discussed in box 9 above.

Authorisation is an alternative process to notification, although they do not apply to the same conduct. The authorisation process applies to most types of business conduct. The ACCC may grant authorisation for a business to engage in certain anti-competitive conduct if it is satisfied that the conduct generates a net public benefit. The exemption from the competition law does not commence until the ACCC has made a determination in respect of an application which may take some months.126

Notification has an advantage over authorisation in that the relevant exemption is generally provided upon filing the notification.127

Harper Review consideration The Harper Review considered that the notification and authorisation procedures in the CCA were unnecessarily complex and made a number of recommendations to improve their efficacy.128 The Review also noted that the absence of a block exemption power represented a substantive gap in the law, and made a recommendation to introduce such a power.129

The Government supported the recommendation on authorisation and notification and noted that it:

… will simplify the authorisation and notification provisions of Part VII of the CCA to ensure that only a single application is required for a single business transaction or agreement and allow the ACCC to consider both competition and public benefit considerations. 130

The Government supported the recommendation to introduce a block exemption power, and noted that such ‘safe harbour’ provisions have the opportunity to reduce business compliance costs vis-à-vis the authorisation and notification processes, as well as to provide further certainty about the application of the CCA.131

Summary of the changes Among other things, Schedule 9 makes a number of substantive amendments relating to authorisation and notification, which in summary are:

126. ACCC, ‘Authorisation’, ACCC website. 127. ACCC, ‘Notifications’, ACCC website. 128. Harper Review: Final Report, op. cit., pp. 398-399. 129. Ibid., pp. 403-405. 130. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 30. 131. Ibid., p. 31.

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• the ACCC authorisation provision in section 88 is completely rewritten, which allows for:

- a broader range of restrictive trade practices to be authorised - multiple restrictive trade practices to be covered by one authorisation process - the ACCC to grant an authorisation subject to conditions • Division 3 of Part VII (which deals with merger clearances and merger authorisations) is repealed and authorisations relating to mergers will now be subject to the new authorisation procedures in proposed section 88

• section 90 (which deals with the ACCC making a determination on applications seeking authorisation) is substantively amended to allow the ACCC to choose whether to assess the application under a substantially lessening competition test or a public benefit test

• section 93 (which deals with notifications) is amended, which, when combined with the other amendments proposed by Schedule 8, permits:

- a broader range of conduct to be subject to notification - the ACCC to grant notification subject to conditions.

Box 10: what is authorisation?

Authorisation is a process whereby conduct which would otherwise contravene particular provisions of the CCA is effectively immunised, and is regulated by the ACCC. There are two types of authorisation:

 section 50 merger authorisations (Division 3 of Part VII)

 all other authorisations (Division 1 of Part VII).

Section 50 merger authorisations

Division 3 of Part VII provides for two types of section 50 merger authorisations:

 merger clearances (Subdivision B)

 merger authorisations (Subdivision C).

As explained in the simplified outline (section 95AA), the main differences between merger clearances and authorisations are:

 different bodies decide whether they should be granted—the ACCC and the Competition Tribunal, respectively

 different timeframes apply for when the decision must be made—generally 40 business days for the ACCC and three months for the Competition Tribunal

 they have different tests that need to be satisfied for them to be granted—the ACCC has to be satisfied that the acquisition would not have the effect or likely effect of substantially lessening competition; whereas the Competition Tribunal needs to be satisfied that the acquisition would result or likely result in such a benefit to the public that the acquisition should take place

 merits review is available for decisions on merger clearances by the ACCC, but not for decisions on merger authorisations by the Competition Tribunal.

All other authorisations

Currently, authorisation is granted by the ACCC and is available in relation to:

 making or giving effect to a contract, arrangement or understanding which contains a cartel provision (subsection 88(1A))

 making or giving effect to a contract, arrangement or understanding which affects competition (subsection 88(1))

 a requirement for the giving of a covenant which has the purpose, effect or likely effect of substantially lessening competition (subsection 88(5))

 a private disclosure of information (subsection 88(6A))

 secondary boycotts (subsection 88(7))

 trading restrictions in industrial agreements (subsection 88(7A))

 exclusive dealing (subsection 88(8))

 resale price maintenance (subsection 88(8A))

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 a dual listed company arrangement (subsection 88(8B))

 a person acquiring a controlling interest in a body corporate, within the meaning of section 50A (subsection 88(9)).

Key provisions Items 27-29 relate to definition provisions affecting authorisation. Item 27 repeals and replaces the definition of authorisation in subsection 4(1) of the CCA so that it captures all authorisations under the amended provisions of Division 1 of Part VII. This means that merger authorisations will become subject to the authorisations process outlined in section 88, as opposed to being assessed under its own bespoke regime as is currently the case. The definition of clearance—which relates to a merger clearance granted by the ACCC—is repealed as all mergers are to occur via one process, the merger authorisation process. Item 29 inserts a definition of merger authorisation to distinguish it from the definition proposed by item 27, so as to ensure that the relevant test applied is the one under section 50 or 50A (as the case may be), rather than the generic authorisation process which is covered under proposed section 88.

Item 1 repeals and replaces section 88 of the CCA which deals with authorisations. Proposed subsection 88(1) empowers the ACCC to grant authorisation to a person to engage in conduct which might otherwise contravene one or more provisions of Part IV of the CCA. The effect of proposed subsection 88(1) is to expand the scope of the section by making section 46 or 46A (which relate to the misuse of market power) and section 50 (which deals with mergers and is currently subject to a bespoke authorisation regime which is discussed below) subject to the authorisation regime.

The effect of an authorisation once in force is that it immunises the relevant conduct from the provisions to which it relates. For example, an authorisation that is granted in relation to making a contract where the purpose, effect or likely effect of that contract is to substantially lessen competition (an offence under subparagraph 45(2)(a)(ii)) provides a statutory protection to the maker of the contract.

Currently, most of the authorisation provisions provide immunity for the applicant and ‘to every other person named or referred to in the application’.132 Proposed paragraph 88(2)(c) extends the authorisation to ‘any particular persons or classes of persons, as specified in the authorisation, who become engaged in the conduct’. This allows groups of persons to benefit from the authorisation. In addition to broadening the group of potential persons covered by an authorisation, proposed subsection 88(5) permits the ACCC to grant a single authorisation in relation to all conduct specified in the application; or it may grant separate authorisations for any of the conduct. The effect is to reduce regulatory burdens on applicants by avoiding the need to apply for multiple authorisations to immunise what would otherwise amount to multiple contraventions of Part IV. Currently, each authorisation can only deal with one type of conduct. However, any reduction in regulatory burden is conditional upon the ACCC providing for a single authorisation which permits conduct which would otherwise be multiple contraventions of Part IV.

Proposed subsection 88(3) permits the ACCC to grant an authorisation subject to conditions. Currently, authorisation is a ‘yes’ or ‘no’ decision, that is, there is no scope for conditional approval. This is a significant change to the law as it allows the ACCC a broad discretion to impose conditions on the applicant. According to the Explanatory Memorandum to the Bill:

The ability to grant an authorisation subject to conditions allows the [Australian Competition and Consumer] Commission to address elements of the conduct which are a cause for concern, rather than denying the application outright on the basis of those concerns. 133

While this amendment makes the authorisation regime more flexible, the flexibility is not without risk. Proposed subsection 88(3) gives the ACCC a wide discretion to impose conditions. Conditions are not defined in the CCA, although proposed subsection 88(4) indicates that—without limiting the application of proposed subsection 88(3)—in relation to a merger authorisation, the ACCC may grant authorisation subject to an undertaking under section 87B of the CCA. The ACCC’s power under section 87B is broad:

132. CCA, subsection 88(6). 133. Explanatory Memorandum, Competition and Consumer Amendment (Competition Policy Review) Bill 2017, p. 61.

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The [Australian Competition and Consumer] Commission may accept a written undertaking given by a person for the purposes of this section in connection with a matter in relation to which the Commission has a power or function under this Act (other than Part X). 134

Given the foregoing, undertakings could be required in relation to authorisations other than merger authorisations, and could relate to any matter within the ACCC’s powers or functions. Once accepted, undertakings can only be varied or withdrawn with the consent of the ACCC.135

More generally, proposed subsection 88(1) explicitly provides that authorisation can only relate to conduct engaged in for the purposes of the relevant provision(s) in Part IV of the CCA. As such, only conduct relating to Part IV can be authorised. However, proposed subsection 88(3)—which permits the ACCC to impose conditions on an authorisation—is not so constrained. It would therefore appear that conditions could be imposed which are outside of Part IV. It would appear reasonable to provide that any conditions imposed should only relate to the conduct being authorised, which would be limited to conduct relating to Part IV of the CCA. Such an approach would be analogous to proposed paragraph 93AAA(1)(b) (at item 7) in relation to conditions that can be imposed on a notification relating to resale price maintenance. The ACCC’s ability to impose conditions is explicitly limited to only relate to resale price maintenance.

Proposed subsection 88(4) provides that in relation to a grant of a merger authorisation, the ACCC may require an undertaking from the applicant. This indicates that the ACCC’s power to impose a condition on authorisation is quite far reaching. The ACCC did express some concern that its workload would increase with the expansion of conduct able to be immunised by way of authorisation.136 In addition to a potential increased administrative burden for the ACCC, the amendments also subject applicants to increased uncertainty and risk. The uncertainty relates to whether the ACCC will conditionally approve an authorisation, and the risk is the form that any conditions take (such as an undertaking for instance). If the uncertainty and/or risks are sufficiently great, then the applicant may not seek authorisation, which would in turn not increase the workload of the ACCC.

Proposed subsections 88(6)-(7) maintain the current provisions in section 88, being:

• the ACCC cannot authorise conduct which has already taken place and

• the applicant may withdraw their application at any time.

Item 2 repeals subsection 90(2) which requires the ACCC to take into account any submissions in relation to the application made to it by the applicant, the Commonwealth, a state, or by another person, in determining whether to grant authorisation. It is replaced by broader consultation provisions in item 3, specifically proposed subsections 90(6)-(6A).

Section 90 currently sets out the tests to be satisfied before the ACCC grants an authorisation of the conduct referred to in existing section 88. Given the changes to section 88 proposed by item 1 to agglomerate the authorisation provisions and broaden its application to include all Part IV conduct, analogous changes are made to section 90.

Proposed subsections 90(7) and (8) restate the tests to provide clarity. Under proposed subsection 90(7) the ACCC must not make a determination granting authorisation under section 88 unless it is satisfied:

• the conduct would not have the effect or likely effect of substantially lessening competition (competition test) or

• the conduct would result or likely result in a benefit to the public, and the benefit would outweigh the detriment to the public that would result or likely result from the conduct (welfare test).

Proposed subsection 90(8) provides the exception to that general rule. The competition test does not apply to the per se prohibitions in Part IV—namely the cartel provisions, secondary boycotts, and resale price maintenance. Authorisation relating to conduct which would otherwise contravene these provisions needs to satisfy the welfare test.

134. Ibid., subsection 87B(1). 135. Ibid., subsection 87B(2). 136. Harper Review: Final Report, op. cit., p. 398 referring to ACCC, Submission to the Competition Policy Review Panel, op. cit., pp. 65-66.

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A third test currently exists under subsections 90(8A), (8B) and (9) in relation to specified conduct, which provides that authorisation may only be granted where the ACCC is satisfied that the proposed conduct would result, or likely result, in such a benefit to the public that the proposed conduct should be allowed (benefit test). Subsection 90(9A) provides that in determining what amounts to a benefit for these purposes, the ACCC must regard the following as benefits to the public:

• a significant increase in the real value of exports

• a significant substitution of domestic production for imported goods and

• all other relevant matters that relate to the international competitiveness of any Australian industry.

Currently subsection 90(9A) applies in relation to authorisations for arrangements by dual listed companies137 and for overseas acquisitions.138 Item 4 amends subsection 90(9A) so that the matters listed are to be taken into account by the ACCC in determining an application for authorisation to which section 49 applies or to an application for a merger authorisation. The relevant matter is what amounts to a benefit. Currently authorisation for this type of conduct is assessed under the welfare test. Ordinarily what amounts to a benefit under the welfare test would be left for the courts to assess. The effect of item 4 is to specify particular matters that must be regarded as benefits under the welfare test. Item 4 provides a non-exhaustive statutory definition of what amounts to a benefit, namely the benefit test, and provides that that definition must be used by the ACCC in assessing applications for authorisation of mergers or conduct that would be covered by section 49. The consequence of this amendment is that a broader range of benefits must be taken into account by the ACCC than is currently the case in relation to mergers. As a result, this may make it easier for applicants to demonstrate that the proposed conduct to be authorised satisfies the welfare test.

Section 93 of the CCA deals with the procedure by which, and the limits within which, corporations are entitled to obtain statutory protection in relation to exclusive dealing conduct which may otherwise breach section 47 and in relation to disclosure of pricing information to competitors to which Division 1A of Part IV applies. One of the reasons for the changes to section 93 is that Division 1A is repealed by the Bill.

Subsection 93(3) empowers the ACCC to notify a corporation that the conduct or proposed conduct which the corporation set out in a notification is not approved. Notification was discussed in relation to the amendments proposed in Schedule 8. Item 5 repeals and replaces subsection 93(3). The scope of conduct captured by proposed subsection 93(3) is a consequential amendment made as a result of the changes to the scope of notification proposed in Schedule 8. In particular, the scope of notification is expanded to include the forcing provisions.

Item 7 inserts proposed section 93AAA into the CCA which empowers the ACCC to impose conditions on notifications which relate to resale price maintenance. There is currently no provision which allows the ACCC to impose conditions in relation to notification, and in any event, resale price maintenance has only become subject to the notification provisions as a result of the amendments proposed in Schedule 8. If the ACCC exercises this power it must provide a written statement of its reasons for imposing the relevant conditions.

Item 6 repeals and replaces subsection 93(3B) of the CCA. Currently, that subsection requires the ACCC to provide a written statement of its reasons for not approving the conduct that was specified in a notification. Proposed subsection 93(3B) deals with a notification which is subject to a condition imposed by the ACCC where the ACCC is satisfied that the corporation or other person has failed to comply with those conditions. In the event that that occurs, the ACCC may give notice in writing to the corporation or other person stating that it is so satisfied and a statement of its reasons.

The amendments also reflect necessary changes as a result of proposed amendments to the process of notification.

A person who is dissatisfied with the notice given by the ACCC may apply to the Competition Tribunal for a review.139 Section 102 of the CCA empowers the Competition Tribunal to review determinations by the ACCC in relation to an application for authorisation as well as the variation or revocation of an authorisation.

137. CCA, subsections 90(8A) and 90(8B). 138. CCA, subsection 90(9). 139. CCA, section 101A.

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Subsection 102(4) deals with review of a decision by the ACCC to give a notice under 93(3) advising that the conduct proposed in the authorisation application—that is, exclusive dealing which may otherwise breach section 47 and disclosure of pricing information to competitors—is not approved. The Tribunal must make a decision setting aside the ACCC’s notice if the applicant for the review satisfies the Tribunal (as currently relevant) that the conduct has or is likely to result in a benefit to the public and that benefit outweighs the detriment to the public constituted by any lessening of competition. Item 126 removes reference to ‘constituted by any lessening of competition’ and hence broadens the potential detriment to which the Competition Tribunal may have regard in making a determination to set aside the ACCC’s notice.

About collective bargaining Collective bargaining is discussed in box 11.

Box 11: what is collective bargaining?

Collective bargaining is usually an arrangement whereby two or more competing businesses jointly negotiate with a supplier over the terms and conditions of a contract. The two businesses may appoint a third party (usually an agent) to negotiate on their behalf. Collective bargaining may also involve two or more businesses negotiating with a (usually large) customer on prices, with an understanding between the two or more businesses that if no agreement can be reached, they will both (or all) forego supplying the customer. This type of activity is often referred to as a ‘collective boycott’.

Collective bargaining would generally be considered anti-competitive as it would contravene the cartel provisions of the CCA, in particular in relation to prices received (that is, price fixing), or in relation to agreeing to refuse to deal with a customer (that is, restricting supply).

Since cartel conduct is per se prohibited, engaging in collective boycott conduct would be a contravention of the CCA, unless an exception applies. An exception is available via the notification process in section 93AB.

Source: Competition Policy Review Panel, Competition policy review: final report, Canberra, March 2015, p. 399.

Harper review consideration The Harper Review noted that whilst ‘collective bargaining will often be harmful to competition, it can also have beneficial effects’ for small business.140 Accordingly, the Harper Review recommended that the CCA should be amended to introduce greater flexibility into the notification process for collective bargaining by small business including:

• the nomination of members of the bargaining group, such that a notification could be lodged to cover future (unnamed) members

• the nomination of the counterparties with whom the group seeks to negotiate, such that a notification could be lodged to cover multiple counterparties and

• different timeframes for different collective bargaining notifications, based on the circumstances of each application.141

Those recommendations were supported by the Government.142

Key provisions Item 29 inserts a new definition of collective boycott conduct into subsection 4(1) of the CCA being conduct that has a purpose referred to in subsection 44ZZRD(3) in relation to a contract, arrangement or understanding (that is, the purpose condition) which attaches to a cartel provision.143

Existing section 93AB of the CCA entitles corporations that have made or propose to make or give effect to a contract that involves an exclusionary provision or a cartel provision to lodge a collective bargaining notice with the ACCC if the following four pre-conditions are met:

140. Harper Review: Final Report, op. cit., p. 400. 141. Ibid., p. 402. 142. Australian Government, Australian government response to the Competition Policy Review, op. cit., pp. 41-42. 143. As discussed above, the purpose condition will be satisfied if the provision has the purpose of directly or indirectly preventing, restricting or

limiting production, capacity to supply or supply of goods and services.

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• the contract must relate to the supply or acquisition of particular goods or services to or from a target of the conduct by the parties to the contract

• the notifying party must reasonably expect that it will make contracts for the supply or acquisition of one or more of the above-mentioned goods or services with the target

• the notifying part must reasonably expect that the price of the goods or services to be supplied or acquired will not exceed a specified amount in any 12 month period and

• the notice cannot be given by a trade union or anyone acting on the direction of a trade union.

Consistent with the recommendation of the Harper Review, item 8 amends subsection 93AB(2) to allow for notification of collective bargaining between the parties to apply to more than one other person, referred to as targets. Items 9-14 make minor consequential amendments as a result of the introduction of multiple targets. In particular, proposed subsection 93AB(7A) provides that a collective bargaining notice for a group of contracting parties may be expressed to be given on behalf of persons who become members of the group after the notice is given—provided that those persons could have given the notice on their own behalf at the time they became members of the group.

Under section 93AC of the CCA the ACCC may give a corporation which has lodged a collective bargaining notice, a written objection notice if it is satisfied that any benefit to the public resulting from the provision would not outweigh the detriment to the public that would result from the provision. Item 16 of Schedule 9 to the Bill inserts proposed section 93ACA which empowers the ACCC to impose conditions in relation to collective bargaining conduct. Item 15 inserts proposed subsection 93AC(2A) into the CCA so that the ACCC may issue an objection notice relating to collective boycott conduct where the ACCC is satisfied that a corporation has failed to comply with the conditions that have been imposed. Item 15 represents an expansion of the ACCC’s powers in relation to collective boycott conduct.

Section 93AD of the CCA governs when collective bargaining notices come into force and cease to be in force. Item 17 of Schedule 9 to the Bill amends paragraph 93AD(1)(a) so that a collective bargaining notice comes into force 14 days (or a longer period prescribed by regulation) after the notice is given. However, the exception to that general rule is that a notice about collective boycott conduct enters into force after 60 days (unless a different period is prescribed by regulations).

Items 18 and 20 amend section 93AD to extend the period for which a collective bargaining notice has effect. The default period is three years by virtue of proposed subparagraph 93AD(3)(c)(i). If the ACCC is satisfied that three years is inappropriate in the circumstances, then it may set the period up to ten years under proposed subsection 93AD(5).

Item 21 inserts proposed section 93AG into the CCA which provides for a stop notice for collective boycott conduct. In effect, where a collective bargaining notice that relates to collective boycott conduct is in force (see items 17-20 above), there has been a material change in circumstances since the notice entered into force, and the ACCC reasonably believes that the collective boycott conduct has or will result in serious detriment to the public, then the ACCC may issue a stop notice—which must be accompanied by a written statement of reasons.144 A stop notice comes into force at the time that it is given to a corporation.145 A stop notice generally ceases to be in force 90 days after it is given, although this period can be extended by a further 90 days if the ACCC is satisfied in all the circumstances that it is reasonable to do so.146 The conduct that was the subject of the collective bargaining notice is no longer immunised from a possible contravention of subsection 44ZZRD(3) for the duration of the stop notice.

Item 22 repeals Division 3 of Part VII which covers merger clearances by the ACCC and merger authorisations by the Competition Tribunal (see box 10 above). The repeal is consequential to the amendments made above whereby all authorisations are to be assessed in the first instance by the ACCC under new section 88 of the CCA. Item 22 introduces class exemptions which are discussed below.

144. CCA, proposed subsection 93AG(2). 145. CCA, proposed subsection 93AG(4). 146. CCA, proposed subsections 93AG(6) and (7).

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About class exemptions Items 22-26 introduce a process for the introduction, withdrawal, and review of class exemptions (box 12).

Box 12: what are class exemptions?

Class or block exemptions grant a ‘safe harbour’ to certain types of conduct. As such, unlike the authorisation and notification provisions in Part VII, class exemptions are not applicant-based. Instead, the ACCC would be responsible for granting class exemptions which would then apply to an entire class of businesses, rather than individual businesses. The ACCC would need to be satisfied that the conduct would satisfy either the competition test or the welfare test (see above).

Class exemptions exist as part of the competition framework in the United Kingdom, the European Union, and Singapore.147

Harper Review consideration According to the Harper Review:

A block exemption power under the CCA may be an efficient way to deal with certain types of business conduct that are unlikely to raise competition concerns, either because of the parties engaged in the conduct or the nature of the conduct itself. This would be an efficient means to provide certainty for businesses in respect of conduct that is unlikely to raise significant competition problems. It may also play a role in educating and informing business about the types of conduct that do not raise competition concerns and those that do.

148

In its submission to the Harper Review, the ACCC set out the features which it considered should be incorporated into a block exemption regime being:

• the basis for the ACCC issuing a particular block exemption should be either that the conduct is unlikely to substantially lessen competition or that it results in a net public benefit

• the ACCC should have the ability to set parameters that exclude or limit the benefit of the block exemption in certain circumstances and to revoke or amend the block exemption in particular circumstances, subject to an appropriate consultation and notice period

• it should be possible for the ACCC to impose a time limit on the operation of the block exemption, after which it may review and re-consider the terms of the block exemption and issue a new one if the public benefit/detriment test is met and

• the ACCC should publicly consult and issue a draft document prior to issuing the block exemption.149

The Harper Review recommended that a block exemption power, exercisable by the ACCC, should be introduced and operate alongside the authorisation and notification frameworks in Part VII of the CCA.150

Key provisions Item 22 of Schedule 9 to the Bill repeals Division 3 of Part VII of the CCA which provides for merger clearances and authorisations. In addition, item 22 inserts proposed sections 95AA and 95AB. Under proposed subsection 95AA(1) the ACCC may issue class exemptions where it is satisfied that the relevant conduct satisfies either the competition test or the welfare test.

The determination must specify the duration of the class exemption—being no longer than ten years.151

Proposed section 95AB allows the ACCC to give a notice to a person that advises that a class exemption does not cover particular conduct engaged in by that person, if it considers that the competition test and the welfare test

147. Harper Review: Final Report, op. cit., p. 403. 148. Ibid. 149. ACCC, Submission to the Competition Policy Review Panel, op. cit., p. 68. 150. Harper Review: Final Report, op. cit., p. 405. 151. CCA, proposed subsection 95AA(3).

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are not satisfied by the specified conduct of the person. While such a notice is in effect, the class exemption does not apply to the conduct specified in the notice.152

Item 23 inserts proposed section 101B into the CCA to allow a person who is dissatisfied with a decision of the ACCC to issue a notice under proposed section 95AB to apply to the Australian Competition Tribunal (the Tribunal). Existing section 102 sets out the functions and powers of the Tribunal. Items 24-26 insert proposed subsections 102(5AAA), (5AAB), (5ABA) and (5D)-(5G) into the CCA to provide for the consequences of a determination by the Tribunal which either agrees or disagrees with a person’s application for review of the ACCC decision under section 95AB to issue a notice to a person.

Schedule 10—Admissions of fact Commencement The amendments in Schedule 10 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

About evidence Section 83 of the CCA is an evidentiary provision which is designed to make it easier for individual applicants to prove their case against a respondent against whom the ACCC or some other party has successfully brought proceedings.153

The section achieves its purpose by providing that findings of fact made against a respondent in earlier proceedings will be prima facie evidence of those facts in later proceedings by any affected person for damages or compensation orders. All that is needed to rely on the relevant facts is a copy of the findings sealed by the court which made them.

Harper Review consideration The Harper Review noted that a significant potential deficiency has emerged in respect of the scope of section 83. Many ACCC proceedings are resolved by the corporate defendant making admissions of fact(s) that establish the contravention, but it is uncertain whether section 83 applies to such admissions. A number of decisions of the Federal Court suggest that section 83 is confined to findings of fact made by the court after a contested hearing.154

The Harper Review recommended amending the CCA such that admissions of fact made by the person against whom proceedings are brought (under section 82 or in an application under subsection 51ADB(1) or 87(1A)) are treated analogously to findings of fact made by the courts.155

The Harper Review acknowledged that submitters had expressed concern about the impact that extending section 83 to admissions of fact might have on the willingness of parties to co-operate in cartel matters or settle matters with the ACCC—which could compromise the effectiveness of public enforcement of the CCA:

The assumption underlying those concerns is that companies may choose to settle a proceeding brought by the ACCC on the basis of admissions of fact, believing that those admissions cannot be relied upon by a private litigant seeking compensation in a follow-on proceeding. If the admissions could be relied upon, it might change how respondent companies assess the advantages of settlement.

156

Despite these concerns, the Government supported the recommendation.157

Key provisions Item 1 repeals and substitutes section 83 of the CCA so that in addition to findings of fact, admissions of fact by a person against whom proceedings are brought are to be treated as evidence in any future proceedings.

152. CCA, proposed subsection 95AB(3). 153. Miller, Miller’s Australian Competition and Consumer Law Annotated, op. cit., p. 689. 154. Harper Review: Final Report, op. cit., p. 408. See ACCC v Apollo Optical (Australia) Pty Ltd [2001] FCA 1456; ACCC v ABB Transmission and Distribution Limited (No. 2) [2002] FCA 588; and ACCC v Leahy Petroleum Pty Ltd (No. 3) [2005] FCA 265.

155. Harper Review: Final Report, op. cit., p. 408. 156. Ibid. 157. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 32.

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Schedule 11—Power to obtain information, documents and evidence Commencement The amendments in Schedule 11 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

Harper Review consideration The ACCC is empowered under section 155 of the CCA to compel individuals to appear before it to answer questions about a potential contravention, and to compel corporations and individuals to provide information and produce documents.

Some submitters to the Harper Review criticised the ACCC’s use of its current section 155 powers, citing the scope of the notices and the costs of compliance. On the other hand, ACCC proposed that its powers under section 155 should be able to be used in a wider range of circumstances.158

The Harper Review opined that the current penalty regime for failing to furnish information, documents or evidence to the ACCC was inadequate when compared with similar penalties in relation to entities subject to enforcement by the Australian Securities and Investments Commission, and recommended their increase.159 Item 4 amends subsection 155(6A) of the CCA to substantially increase the penalties for failure to comply with a notice to produce information, documents or evidence under section 155. Currently, a failure to provide information, documents or evidence is subject to a fine not exceeding 20 penalty units or imprisonment for 12 months.160 The amendment operates to increase the maximum fine to 100 penalty units and increase the maximum term of imprisonment to two years.161

In seeking to strike an appropriate balance the Harper Review recommended that the ACCC should be able to use section 155 powers to investigate compliance with court-enforceable undertakings on the grounds that this would assist in protecting the integrity of undertakings as part of the broader compliance and enforcement framework.162

The Government supported the recommendation.163

Legal burden of proof As set out above, it is an offence to fail to comply with section 155 of the CCA. Item 3 of Schedule 11 will introduce a defence to this offence, to provide that the offence of refusing or failing to comply with a notice does not apply in relation to producing documents if the person proves that, after a reasonable search, the person is not aware of the documents and provides a written response to the notice. However, the person will bear the legal burden of an element of this defence. The Scrutiny of Bills Committee noted:

A legal burden of proof is proposed to be placed on the defendant, ensuring that the defendant would need to prove, on the balance of probabilities, that they were not aware of the documents and that they undertook a reasonable search.

At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove one or more elements of an offence, interferes with this common law right. 164

The Scrutiny of Bills Committee considered that the explanation for the amendment as set out in the Explanatory Memorandum was inadequate and requested the Minister’s advice as to why the legal burden of proof needed to be reversed.165

158. Harper Review: Final Report, op. cit., p. 418. 159. Ibid., pp. 419-421. 160. Under section 4AA of the Crimes Act 1914 a penalty unit is equivalent to $210. This means that the maximum penalty payable by a person is $4,200. Under subsection 4B(3) of the Crimes Act, the maximum amount payable by a corporation is five times that amount, being $21,000.

161. The maximum penalty payable by a person is equivalent to $21,000. The maximum penalty payable by a corporation is $105,000. 162. Harper Review: Final Report, op. cit., p. 419. 163. Australian Government, Australian government response to the Competition Policy Review, op. cit., p. 32. 164. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2017, op. cit., p. 90.

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The Committee received further advice from the Treasurer, and as a result, the Committee made no further comment on the matter, apart from requesting that the advice be made part of the Explanatory Memorandum to the Bill.166

Significant penalties The Scrutiny of Bills Committee expressed concern about the proposed increase in the penalties under subsection 155(6A) of the CCA.

The Committee considered that the proposed level of penalties may be at odds with the Guide to Framing Commonwealth Offences,167 as well as in relation to contraventions of similar information gathering powers by various Commonwealth bodies.168 As a result, the Committee sought detailed advice from the Minister on the applicable penalty for comparable Commonwealth offences, as well as the justification for the proposed increase as contained in the Bill.169

The Treasurer advised that the rationale for the increase in fines was based on the Harper Review’s comparison of the penalties available under section 155 of the CCA with the fines for breaching information gathering notices under the Australian Securities and Investments Commission Act 2001. The Committee noted that the Harper Review’s concerns related to a perceived inadequacy of the pecuniary penalty relating to corporations only. That is, there appeared to be no concern with the level of sanctions (including imprisonment) that are currently able to be imposed on individuals. The Committee therefore decided that insufficient information was provided and as a result it drew the increased to the length of imprisonment to Senators’ attention.170

Right to privacy The Parliamentary Joint Committee on Human Rights Scrutiny Report considered that—similarly to the Scrutiny of Bills Committee—the Harper Review had only provided a rationale for an increase in penalty provisions in relation to corporations, not individuals, under section 155 of the CCA.171 The Committee considered that the increased penalties for failure to produce information or documents under section 155 engage and limit the right to privacy.172 The Committee considered that the Government’s statement of compatibility173 did not address ‘whether the measure pursues a legitimate objective (that is, addresses a pressing and substantial concern) and is rationally connected to that objective’,174 and therefore requested advice from the Treasurer. At the time of writing, a response had been received but not published.175

Key provisions Items 1 and 2 of Schedule 11 to the Bill amend subsection 155(1) of the CCA to maintain the existing circumstances under which the ACCC can seek information, documents or evidence, as the case may be, and remove references to provisions in Division 3 of Part VII which are proposed to be repealed by Schedule 9 to the Bill. Item 2 also provides for the ACCC to seek additional information, documents or evidence in relation to a merger authorisation.176

Items 1 and 2 also provide for consequential amendments to increase the scope of the ACCC’s information gathering powers by the addition of proposed subparagraph 155(2)(a)(iii) which relates to undertakings under section 87B of the CCA or under section 218 of the Australian Consumer Law (ACL). The effect of this change is to

165. Ibid., p. 91. 166. Ibid., p. 91-94. 167. The penalty for failure to comply with notice to produce or attend provisions should generally be six months imprisonment and/or a fine of 30 penalty units: Attorney-General’s Department (AGD), A guide to framing Commonwealth offences, infringement notices and enforcement

powers, AGD, Canberra, September 2011, pp. 89 and 93. 168. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, op. cit., p. 95. 169. Ibid., p. 96. 170. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, op. cit., pp. 94-98. 171. Parliamentary Joint Committee on Human Rights, Report, 6, op. cit., pp. 3-4. 172. Ibid., p. 5. 173. The Statement of Compatibility with Human Rights can be found at pages 145-165 of the Explanatory Memorandum to the Bill. 174. Parliamentary Joint Committee on Human Rights, Report, 6, op. cit., p. 5. 175. Parliamentary Joint Committee on Human Rights, ‘Correspondence register’, op. cit., Table 2. 176. CCA, proposed subparagraph 155(2)(b)(iii).

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permit the ACCC to seek additional information, documents or evidence relating to a potential or actual contravention of an undertaking. This is a new power for the ACCC and arose as a result of a recommendation in the Harper Review.177

Currently subsection 155(5) provides that a person subject to an information gathering notice shall not refuse or fail to comply with such a notice, or provide false or misleading evidence. Subsection 155(6A) currently provides that if a person contravenes subsection 155(5) they are guilty of an offence. The Harper Review considered that the insertion of a ‘reasonable search defence’ should adequately deal with concerns about complying with section 155 notices in the digital age where much more information may be stored (which has consequential costs for business compliance).178 Item 3 inserts proposed subsections 155(5B) and 155(6) into the CCA so that a person who is required to furnish additional information, documents or evidence may rely on a ‘reasonable search’ defence. A person who seeks to rely on the defence bears the legal burden of proving that, after a reasonable search, the person is not aware of the documents.

Schedule 12—Access to services Commencement Parts 1-3 of Schedule 12 commence at the same time as the amendments in Schedule 1 to the Bill.

Divisions 1 and 2 of Part 4 of Schedule 12 contain duplicate provisions with slightly different section numbering. Only one of these Divisions will commence, depending on when Schedule 2 to the Public Governance and Resources Legislation Amendment Act (No. 1) 2017 commences. As the whole of the Public Governance and Resources Legislation Amendment Act (No. 1) 2017 commenced on 23 August 2017, Division 1 of Part 4 of Schedule 12 will commence immediately after the amendments in Schedule 1 to the Bill and Division 2 will not commence at all.

About the national access regime Schedule 12 to the Bill makes a number of amendments to the national access regime (box 13), which is set out in Part IIIA of the CCA. Contemporaneously with the Harper Review was a PC inquiry into the national access regime.179 Both reports recommended changes to the national access regime.

Box 13: what is the national access regime?

The national access regime provides a mechanism for third party access to essential or bottleneck infrastructure services. Gaining access is generally a two-stage process:

1. An application must be made to the National Competition Council (NCC) which then recommends the declaration of the infrastructure services, and the Minister accepts the NCC recommendation and declares the service. Declaration can only be made where that declaration satisfies a number of criteria (see below). If the service is declared, third parties may seek agreement with the service provider for access to that service.

2. In the event that the third party access seeker and the service provider are unable to agree on the provision of access to the declared service, either the access seeker or the provider may notify the ACCC that an access dispute exists. The ACCC will then generally arbitrate the provision of access to the declared service.

The declaration criteria, all of which must be satisfied, are:

 that access or increased access to the service would promote a material increase in competition in at least one other market (whether or not in Australia) (‘criterion (a)’)

 that it would be uneconomical for anyone to develop another facility to provide the service (‘criterion (b)’)

 that the facility is nationally significant, having regard to its size, and its importance to both constitutional trade and commerce and the national economy (‘criterion (c)’)

 that access to the service is not already subject to an effective state or territory access regime

177. Harper Review: Final Report, op. cit., p. 421. 178. Ibid., pp. 418-421. 179. PC, National access regime, Inquiry report, 66, PC, Canberra, 25 October 2013.

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(‘criterion (e)’)

 that access or increased access to the service would not be contrary to the public interest (‘criterion (f)’) (see subsections 44G(2) and 44H(4)).

Note that criterion (d) was previously repealed.

Source: Competition and Consumer Act 2010, subsections 44G(2), 44H(4).

The Productivity Commission recommended approach The PC report considered that the economic problem that the national access regime is designed to target is: ‘… an enduring lack of effective competition, due to natural monopoly, in markets for infrastructure services where access is required for third parties to compete effectively in dependent markets’.180 To that end, the report recommended the following changes to the declaration criteria:

• criterion (a) should test whether declaration of (instead of access to) a service would promote competition

• criterion (b) should be used to identify facilities that give rise to an enduring lack of effective competition in markets for infrastructure services

- criterion (b) should be applied in a different manner than in the past by directing decision makers to test whether a facility can meet total foreseeable market demand for the infrastructure service—including the demand for any substitute services—at least cost

- the assessment of costs under criterion (b) should be based on an estimate of production costs that would be incurred in meeting total foreseeable market demand for the infrastructure service, including costs from coordinating multiple users of the infrastructure facility • criterion (e) should be removed and separately introduce in Part IIIA:

- a threshold clause stating that a service cannot be declared if it is subject to a certified access regime - a revocation mechanism that allows certification of a regime to be revoked if substantial modifications have been made to the regime or the principles in clause 6 of the Competition Principles Agreement181 • criterion (f) should be amended to:

- establish that declaration would promote the public interest, rather than be ‘not contrary to the public interest’ (as is currently the case) - require a decision maker to have regard to the possible effects on investment, and any administrative and compliance costs that would arise due to declaration - Assess the effect of the declaration of (instead of access to) a service.182 As an alternative formulation to criterion (b), the PC recommended amending the definition of ‘anyone’ in paragraphs 44G(2)(b) and 44H(4)(b) so as to exclude the incumbent service provider.183

Harper Review consideration The Harper Review had the benefit of relying on the PC inquiry as part of its review and framed its discussion around the PC recommendations:

The Panel agrees with the PC’s proposed change to criterion (a), but considers that criterion (a) sets too low a threshold for declaration. The burdens of access regulation should not be imposed on the operations of a facility unless access is expected to produce efficiency gains from competition that are significant. This requires that competition be increased in a market that is significant and that the increase in competition be substantial.

The Panel supports the PC’s alternative recommendation in respect of criterion (b). The alternative recommendation maintains the current language for criterion (b), while clarifying that duplication of the facility by the owner of the existing facility is not a relevant consideration.

180. Ibid., p. 145. 181. Council of Australian Governments, Competition Principles Agreement, 11 April 1995 as amended to 13 April 2007. 182. PC, National access regime, op. cit., pp. 31, 145. 183. Ibid., p. 251.

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As recently interpreted by the High Court in the Pilbara rail access case, criterion (b) asks a practical question whether it would be economically feasible, in other words profitable, for another facility to be developed — if it would, the facility is not a bottleneck. The Panel considers that maintaining the ‘economically feasible’ test for criterion (b) will best promote the competition policy objectives underpinning Part IIIA. Under that test, access regulation will only be considered where there is a bottleneck problem that needs to be addressed. Absent a bottleneck problem, competition and economic efficiency will be advanced if market participants are free to negotiate private arrangements concerning access.

The Panel considers that re-framing criterion (b) such that it requires an evaluation of whether a facility is a natural monopoly suffers from a number of shortcomings. These include that it can be trivially satisfied in the case of facilities that have been built with spare capacity and that it requires the decision-maker to evaluate least cost solutions in complex industries, burdened by information asymmetries where the risk of error is high.

The Panel supports the PC’s recommendations in relation to criterion (f).

Decisions to declare a service under Part IIIA, or determine terms and conditions of access, are very significant economic decisions where the costs of making a wrong decision are likely to be high. The Panel favours empowering the Australian Competition Tribunal to undertake a merits review of access decisions, including hearing directly from employees of the business concerned and relevant experts where that would assist, while maintaining suitable statutory time limits for the review process.

184

To that end, the Harper Review recommendation adopted the PC’s recommended approach for criterion (a) whilst adding that declaration should promote a substantial increase in competition in a dependent market that is nationally significant. The Review recommended adoption of the alternate PC formulation for criterion (b), namely that ‘anyone’ should exclude the incumbent service provider. The Review agreed with the PC’s recommendation that criterion (f) should be reformulated so as to place a positive public interest onus on access seekers.185 Neither the PC nor the Harper Review considered that criterion (c) required amendment.

Government response The Government announced that it would adopt all of the recommendations of the PC report, including on criteria (a) and (b) which differed from the recommendations of the Harper Review.186 The Government response also noted its support for the Competition Principles that were enunciated in the Harper Review, which for the purposes of Part IIIA of the CCA, meant being satisfied that ‘granting third party access to significant bottleneck infrastructure … would promote a material increase in competition in dependent markets and promote the public interest’.187

Retrospective commencement The Scrutiny of Bills Committee expressed reservations over the retrospective application of Part 2 of Schedule 12 of the Bill. As set out above, Schedule 12 provides for a range of amendments to the national access regime, which governs third party access to nationally significant infrastructure. Part 2 proposes to grant the Minister the power to revoke an existing state or territory effective access regime. Item 37 provides that Part 2 applies in relation to decisions of the Minister regarding state or territory effective access regimes made on or after 1 January 2017.

The Committee Report provided:

The committee has a long-standing scrutiny concern about provisions that have the effect of applying retrospectively, as it challenges a basic value of the rule of law that, in general, laws should only operate prospectively (not retrospectively). The committee has a particular concern if the legislation will, or might, have a detrimental effect on individuals.

184. Harper Review: Final Report, op. cit., pp. 73-74. 185. Ibid., p. 440. 186. Australian Government, Australian government response to the Competition Policy Review, op. cit., pp. 33-34. 187. Ibid., pp. 3, 34.

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Generally, where proposed legislation will have a retrospective effect the committee expects the explanatory materials should set out the reasons why retrospectivity is sought, and whether any persons are likely to be adversely affected and the extent to which their interests are likely to be affected. 188

As a result, the Committee sought Ministerial advice as to why 1 January 2017 was chosen as the commencement date, and also whether the retrospective application may cause disadvantage to any individual, and if so, the justification for doing so.189

The Treasurer provided a response to the Committee. The Committee noted that ‘… the Treasurer’s advice did not address the committee’s request for advice as to whether this retrospective application may cause disadvantage to any person’, and as a result drew the retrospectivity to Senators’ attention.190

Key provisions Items 1 and 2 of Schedule 12 to the Bill introduce a definition of declaration criteria in proposed section 44CA. The declaration criteria reflect the Government’s adoption of the PC’s recommendations, combined with the adoption of the Harper Review recommendation on Competition Principles. To that end:

• existing criterion (a) is reformulated as proposed paragraph 44CA(1)(a)

• existing criterion (b) is reformulated as proposed paragraph 44CA(1)(b)

• existing criterion (c) is unchanged and is as proposed paragraph 44CA(1)(c)

• existing criterion (f) is reformulated as proposed paragraph 44CA(1)(d).

Proposed subsection 44CA(2) extends proposed paragraph 44CA(1)(b) to also take into account whether the facility is at capacity, and if so, if it is reasonably possible to expand that capacity—to have regard to the facility as if it had such additional capacity. This reflects the PC’s recommendation that criterion (b) should also reflect future demand, as well as the costs involved in providing that additional capacity, including the costs associated with declaration.

In determining whether criterion (f) is satisfied, proposed subsection 44CA(3) provides that the National Competition Council (NCC) and the Minister must have regard to the effect that declaration would have on investment in infrastructure services, and investment in dependent markets, as well as administrative and compliance costs.

Items 3 and 4 amend section 44D to clarify that if a service provider is a state or territory body, that body needs to be in a position to exercise some control over the access conditions to the facility in question in order for the relevant state or territory Minister to be the Minister responsible for declaring a service (or deciding that the service is ineligible to be declared), rather than the Commonwealth Minister.

Items 5-11, 13-15 and 17 make minor consequential amendments as a result of items 1 and 2. Sections 44G and 44H are simplified to recognise the introduction of a definition of declaration criteria as proposed section 44CA. The relevant criteria other than the declaration criteria are moved to proposed subsection 44F(1). Proposed subsection 44F(1A) provides that in the event that one or more of the criteria under subsection 44F(1) apply, the NCC is to provide reasons to the applicant explaining why those provisions apply and that an application for declaration can therefore not be made in relation to that service.

Item 12 reverses the current presumption that if the designated Minister does not publish a decision on the declaration recommendation within 60 days then the Minister is deemed to have decided not to declare the service. Proposed subsection 44H(9) of the CCA now effectively places a positive onus on the designated Minister to make a decision on the declaration recommendation. In the event that no decision is made within 60 days, proposed subsection 44H(9) deems that the designated Minister has declared the service. The reversal may help to improve the transparency of declaration decision making.

Items 20-37 implement the PC’s recommendations relating to criterion (e) on effective state or territory access regimes. Proposed Subdivision CA of Division 2A of Part IIIA is inserted to provide for the revocation of the

188. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 5, op. cit., p. 16. 189. Ibid., pp. 16-17. 190. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, op. cit., pp. 98-99.

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Commonwealth Minister’s decision made under section 44N. Section 44N relates to a decision about whether a state or territory access regime is an effective access regime for the purposes of Part IIIA of the CCA. Proposed section 44NBA provides that the NCC, may of its own volition, or must on application, consider whether to recommend that the Commonwealth Minister revoke the decision that a state or territory access regime is an effective access regime for the purposes of Part IIIA. In so doing, the NCC may request information (proposed section 44NBB). Upon receiving a recommendation from the NCC, the Commonwealth Minister must decide whether or not to revoke the decision (proposed section 44NBC). Items 21-36 make minor consequential changes as a result of the insertion of proposed Subdivision CA, proposed by item 20.

Items 38-41 reflect recommendations from the PC about what can be determined by the ACCC as part of arbitration, once access to a service has been declared and the access seeker and access provider are unable to agree.191 Principally, those recommendations related to the ACCC’s ability to require the service provider to expand their facility, including capacity and/or its geographical reach, and the burden of costs of such an expansion. To that end, proposed subsection 44V(2A) (item 38) provides that the ACCC may make a determination that requires the service provider to either extend the capacity of the facility, or require the provider to expand the geographical reach of the facility, or both. Items 39-41 make minor consequential amendments as a result of item 38.

The amendments proposed in Part 4 of Schedule 12 relate to annual reporting requirements of the NCC, and make consequential amendments to section 29O as a result of the amendments relating to Part IIIA outlined above. As set out above, Divisions 1 and 2 of Part 4 are alternative provisions, the commencement of which is dependent on the commencement of Schedule 2 to the Public Governance and Resources Legislation Amendment Act (No. 1) 2017. As that Schedule has commenced, Division 1 of Part 4 of Schedule 12 will commence immediately after the amendments in Schedule 1 to the Bill and Division 2 will not commence at all.

Schedule 13—Application and transitional provisions Commencement The amendments in Schedule 13 to the Bill commence at the same time as the amendments in Schedule 1 to the Bill.

Key provisions Schedule 13 to the Bill provides for application and transitional provisions. Proposed section 180 provides for definitions of amended Act, amending Act, and commencement time. The commencement time is the time that Schedule 1 to the Bill commences. As explained above, the provisions in Schedule 1 to the Bill are contingent on the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 receiving the Royal Assent. That Act received Royal Assent on 23 August 2017. As a result, the provisions of Schedule commence on the earlier of a proclaimed date and six months after Royal Assent.

Proposed sections 181-185 provide the commencement or transitional arrangements for:

• the new definition of competition

• orders under section 87 made before, and still in effect at, commencement time

• authorisations under section 88 in force at commencement

• ACCC objection notices under section 93 in force at commencement

• merger clearances and merger authorisations.

Schedule 14—Other amendments Commencement The amendments in Schedule 14 to the Bill commence on the day after Royal Assent.

191. PC, National access regime, op. cit., pp. 34-35.

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Harper Review considerations The Harper Review considered that there were a number of deficiencies in requiring Ministerial consent to seeking the extraterritorial application of specified provisions of the CCA:

The requirement for ministerial consent imposes a material hurdle for private plaintiffs seeking redress for breaches of competition law and can give rise to substantial additional costs in the litigation. The ministerial consideration of the issue also takes time. Further, a defendant to a proceeding can seek judicial review of the Minister’s decision, which may cause delay in the principal proceeding …

The Panel considers that, today, there is a very low likelihood that Australian competition law proceedings involving overseas conduct would create diplomatic concerns. Accordingly, it considers that there is no ongoing need for the requirement for ministerial consent. Removing that requirement would reduce the costs of such actions where consent would currently be required.

192

Item 1 removes the requirement for Ministerial consent in relation to a range of proceedings which involve an extended application of the CCA to conduct outside of Australia.

Items 3-7 extend the jurisdiction of state and territory courts to hear actions under the CCA in relation to Part 3-1 of Schedule 2 to the CCA. Schedule 2 deals with the Australian Consumer Law (ACL) and Part 3-1 relates to unfair practices. Items 3-7 also extend jurisdiction of state and territory courts to hear actions under Part 3-5 of Schedule 2 of the CCA, which relates to liability of manufacturers for goods with safety defects.

Items 9 and 10 remove redundant provisions relating to a requirement for the ACCC to keep a register containing records of proceedings at conferences for product safety bans.

Item 11 extends the exceptions to the confidentiality of notices given under Division 5 of Part 3-3 the ACL in relation to consumer goods, or product related services associated with death or serious injury or illness. Suppliers are under an obligation to report to the Commonwealth Minister, within two working days of becoming aware, that a good or product related service has been associated with death or serious injury or illness. Section 132A provides for such notices to remain confidential, subject to exceptions. Item 11 extends the exceptions to allow disclosure of information to: any other agency within the meaning of the Freedom of Information Act 1982; the Director of Public Prosecutions; a state or territory government body (within the meaning of section 151AAA of the CCA); and a foreign government body (within the meaning of the CCA).

Items 12 and 13 remove a drafting error relating to cartel offences.

Items 18 and 19 clarify that the cooling-off period under an unsolicited consumer agreement concludes at the end of the 10th business day after the agreement was reached. It is currently possible to interpret that traders can enter into an unsolicited consumer agreement and accept or require payment before the end of the cooling-off period. Items 14-17 and 20-22 make minor consequential amendments as a result of items 18 and 19.

Item 23 corrects a drafting omission where the previous equivalent provision in the Trade Practices Act 1974 applied to persons, but subsection 131(2) does not. Item 23 provides that section 33 of Schedule 2 of the CCA applies as a law of the Commonwealth to, and in relation to, the conduct of any person.

Item 25 provides the ACCC with the power to apply to a court for an order directing a person who is subject to a section 155 notice (see above) to comply with the notice. This amendment is in addition to the amendment in Schedule 11, item 4 to the Bill which provides for a fivefold increase in the pecuniary penalty (that is, a fine) and a doubling of the length of imprisonment in the event that a person subject to a section 155 notice refuses or fails to comply with such notice.

Item 27 is an application provision relating to the amendments proposed by items 11 and 14-22 above in relation to the ACL.

192. Harper Review: Final Report, op. cit., p. 415.

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