The Australian Trade Practices Act 1974: Proscriptions and Prescriptions for a More Competitive Economy

240 Pages·1994·5.09 MB·English

by  David K. Round (auth.)

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Studies in Industrial Organization
Volume 19
Series Editors:
H. W. de Jong, University of Amsterdam, Amsterdam, The Netherlands
W. G. Shepherd, University of Massachusetts, Amherst, U.S.A.
Advisory Board:
W. Adams, Michigan State University, East Lansing (Mich.), U.S.A.
R. E. Caves, Harvard University, Cambridge (Mass.), U.S.A.
K. D. George, University Col/ege of Swansea, Singleton Park, U.K
E. Heusz, Friedrich Alexander University, Eriangen-NOmberg, Germany
A. P. Jacquemin, University of Louvain, Louvain, Belgium, and
Commission of the European Communities, Brussels, Belgium
E. Kantzenbach, University of Hamburg, Hamburg, Germany
H. W. Lambers, Erasmus University, Rotterdam, The Netherlands
R. Prodi, University of Bologna, Bologna, Italy, and
Istituto per la Ricostruzione Industriale, Bologna, Italy
F. M. Scherer, Harvard University, Cambridge (Mass.), U.S.A.
The titles published in this series are listed at the end of this volume.
The Australian Trade
Practices Act 1974
Proscriptions and Prescriptions for a
More Competitive Economy
Edited by
David K. Round
University of Adelaide, Australia
Springer-Science+Business Media, B.V.
A C.I.P. Catalogue record for this book is available from the Library of Congress.
ISBN 978-90-481-4491-4 ISBN 978-94-015-8324-4 (eBook)
DOI 10.1007/978-94-015-8324-4
Printed on acid-free paper
All Rights Reserved
© 1994 Springer Science+Business Media Dordrecht
Originally published by Kluwer Academic Publishers in 1994.
Softcover reprint of the hardcover 1s t edition 1994
No part of the material protected by this copyright notice may be reproduced or
utilized in any form or by any means, electronic or mechanical,
including photocopying, recording or by any information storage and
retrieval system, without written permission from the copyright owner.
Review of Industrial Organization
Volume 9, No.5, October 1994
Special Issue
The Australian Trade Practices Act 1974. Proscription and Prescription for a
More Competitive-Economy
Guest editor: David K. Round
DAVID K. ROUND I Editorial Introduction: Twenty Years of Modern Antitrust in
Australia: She'll Be Right, Mate [1]
GEORGE GEAR I Foreword: A Minister's Perspective on Twenty Years of the
Trade Practices Act [17]
MAUREEN BRUNT I The Australian Antitrust Law after 20 Years - a Stocktake [25]
NEVILLE R. NORMAN I Progress under Pressure: The Evolution of Antitrust
Policy in Australia [69]
mSTICE R. S. FRENCH I Judicial Approaches to Economic Analysis in Australia [89]
DAVID K. ROUND and JOHN J. SIEGFRIED I Horizontal Price Agreements in
Australian Antitrust: Combatting Anti-Competitive Corporate Conspiracies of
Complicity and Connivance [111]
PHILIP L. WILLIAMS I The Exercise of Market Power: Its Treatment under the
Australian and New Zealand Statutes [149]
R. IAN McEWIN I Vertical Restraints in the Australian Trade Practices Act [169]
BRIAN L. JOHNS I Threshold Tests for the Control of Mergers: The Australian
Experience [191]
ALAN E. BOLLARD I The Role of Antitrust in a Small Open Economy: The
Commerce Act in New Zealand [213]
Review of Industrial Organization 9: 459-473, 1994.
© 1994 Kluwer Academic Publishers.
EDITORIAL INTRODUCTION
Twenty Years of Modem Antitrust in Australia:
She'll Be Right, Mate
DAVID K. ROUND*
Department of Economics , University ofA delaide, Adelaide, South Australia, 5005, Australia
Key words: Australian antitrust, antitrust history, Hilmer report, enforcement, competition.
1.1974 - The First Modern Milestone in Australian Antitrust
In 1976, I published a paper on Australia's new antitrust legislation (which had
come into effect in 1974) in Industrial Organization Review, the journal estab
lished by the late Gene Boyle which was the forerunner to Review of Industrial
Organization. Given the absence of previous effective antitrust laws in Australia,
I warned, inter alia, that a controversial and difficult path lay ahead of the Trade
Practices Act 1974 (hereafter "the Act") because:
"[a] problem with the legislation is that its language is loose in the part that
matters most ... Firm guidelines should have been provided on how to inter
pret "substantially lessening competition" ... The definition of competition
undoubtedly will prove to be a major obstacle to the harmonious operation of
the Act in the early stages ... A structural approach to competition in Australia
can only serve as a crude first approximation; investigation of conduct is the
only efficient and equitable way to determine whether competition is present
[but] [s]uch an approach has the disadvantage that it is difficult initially to lay
down formal guidelines as to what constitutes competition." (Round (1976,
pp. 146-147))
It is pleasing to report, twenty years after the introduction of the Act, that
while my crystal ball had been well-polished and did foresee the problems which
would occur with its implementation and enforcement, the Act is now widely
accepted in the business community.l Its goals have been embraced by governments
with different philosophies about the business sector and, largely, by the business
sector itself. Judges, lawyers and economists have produced between them a truly
Australian approach to antitrust,2 which has reflected overseas trends in both law
and economics but which has also developed a unique Australian structure and
flavor, both in terms of its administrative machinery and in enforcement. Strong
precedent has resulted, based on commonsense and a practical approach to antitrust,
460 DAVID K. ROUND
administratively as well as judicially, rather than one based on doctrinaire political,
legal or economic thinking.
It is perhaps not unexpected that Australia has developed its own antitrust style.
The nation came late to the modern antitrust scene, and so it had the opportunity to
borrow and blend from other countries' laws and to take advantage of their antitrust
experiences. In addition, the highly concentrated nature of Australian markets - due
in part to their relatively small size, in part to the mergers of the 1950s and 1960s
which were unchecked by antitrust activity, and in part to the traditionally highly
protectionist nature of consecutive governments - meant that a more tailor-made
law was needed to allow for the special Australian business environment. Many in
the business sector in the early 1970s expected (perhaps "hoped" might have been
a better choice of word) the new law to contain few sharp teeth, so that firms could
continue to do as they had done in the heady days of unfettered freedoms. What
emerged, however, was a tough set of specific prohibitions on various types of anti
competitive conduct, misuse of market power, vertical practices and mergers that
were necessary and practical, and which were sensibly enforced and adjudicated
upon.
The papers in this issue provide a historical as well as an analytical review
of Australian antitrust in the last twenty years.3 A common theme emerges in all
the papers - of uncertainty and indecision to start with, of mistakes being made,
but of a gradual synthesizing of political, legal and economic views over the two
decades since 1974. Each paper is self-contained with respect to the historical and
institutional background necessary to understand its particular focus. While this
may lead to some duplication of coverage (but not necessarily of interpretation
and analysis) for those reading the entire issue, it does mean that a reader who is
interested in the Australian antitrust treatment of only one type of firm conduct can
expect to find the complete picture in the chosen paper.
11.1994 - New Directions for Australian Competition Policy
The second major milestone of Australian antitrust occurred in August 1993 with
the release of the report of the National Competition Policy Review (1993), referred
to widely as the Hilmer Report after the Chairman of the Review, Professor EG.
Hilmer. The review was established at the request of the Prime Minister and all State
Premiers to produce guidelines for the role competition policy would playas a major
element underlying Australia's push for deregulation and micro-economic reform.
Recognizing that competition policy is more broadly based than competition law,
the Hilmer Report (which is likely to be acted upon around the middle of 1995)
has provided a blueprint for a more modern interpretation of competition policy,
including antitrust, in Australia for at least the next decade.
Many of the Report's recommendations are controversial. They seek to apply
the Act to State government business operations (which are mainly in utilities, and
which wi1110se their "Shield of the Crown") and statutory marketing authorities; to
[2]
TWENTY YEARS OF MODERN ANTITRUST IN AUSTRALIA: SHE'LL BE RIGHT MATE 461
produce structural reform of all public monopolies; to ensure that new competitors
in such reformed markets be assured of access to essential facilities; to provide
that the Act applies to all incorporated and unincorporated firms in Australia; and
to embrace services as well as goods.4 The Report argues that there should be
no regulatory restrictions on competition unless such restrictions can be justified
as being in the public interest. It proposes that the Trade Practices Commission
(Australia's antitrust agency) be renamed the Australian Competition Commission
and be expanded to include and extend the task formerly carried out by the Prices
Surveillance Authority, namely the oversight of prices charged by firms operating
in markets where effective competition is absent. In addition, it recommended that
a new National Competition Council be established, which would be a "high level
and independent analytical and advisory body" with a key role to play in assisting
governments make policy decisions on all matters relating to competition. All these
recommendations are aimed at producing an effective, unified national competition
policy that will help improve efficiency in Australian markets and enhance the
international competitiveness of Australian firms.
Several papers in this issue refer to the implications of the Hilmer Report
for competition policy reform. It is too early to judge the long term effect of its
proposals, many of which are recommended for phasing in over the next two to four
years. They are still being assessed at Commonwealth and State level for their likely
overall impact. However, just as the Act in 1974 engineered a new series of pro
competitive attitudes in Australia, it may confidently be expected that the Hilmer
Report will provide the guiding philosophy and framework for the next stage of
Australia's antitrust development, and for competition policy more generally. Of
course, this pre-supposes full co-operation between the Commonwealth and the
States, together with provision of sufficient resources to permit the implementation
and enforcement of the proposed reforms.5
III. The Last Twenty Years - Competition Comes of Age in Australia
For most of its twenty years the Act was the responsibility of the Commonwealth
Attorney-General. In 1993 it was shifted to the portfolio of the Assistant Treasur
er, an important regulatory move by the Australian Government. Because of its
strong commitment to a policy of deregulation and micro-economic reform, and
in the interests of achieving a co-ordinated approach to regulatory reform,6 the
Government decided to centralize Ministerial responsibility for various regulato
ry authorities and their governing Acts within the Australian Treasury, the most
senior and influential Commonwealth Government policy department.? Thus, it is
apposite that The Honorable George Gear M.P., Assistant Treasurer of the Com
monwealth of Australia, and Minister responsible for the Act, has written the
foreword to this issue. His paper provides some valuable insights into the poli
cy development, administration and enforcement of the Act, and into its future
application. He concurs with the Hilmer Report's findings that there is more to
[3]
462 DAVID K. ROUND
competition policy than antitrust laws, but at the same time he acknowledges the
"pivotal part" which the Act has played and will continue to play in the future.
He argues that competition laws should apply uniformly and universally across
Australian business, which suggests that this aspect of the Hilmer Report's rec
ommendations will be supported by the Commonwealth Government. Finally, the
Assistant Treasurer highlights the key competition-enhancing role played by trade
policy and foreign competition in recent years in Australia, and he suggests a need
for greater co-operation between different nations' antitrust authorities, as well as
a greater focus on the extra-territorial application of national competition statutes.
The authors of the next three papers provide their own "broad picture" overviews
and analyses of the history, enforcement and interpretation of the Act.
Without a doubt the most influential person in Australian antitrust has been
Maureen Brunt, a leading industrial organization academic and commentator since
the late 1950s, who has spent most of the last twenty years as a member of the
Trade Practices Tribunal, Australia's antitrust administrative review body. Brunt's
input into the key decisions of the Tribunal, especially in the important early days
after 1974, laid the intellectual foundations for the balanced use of theoretical
and applied economics in the unique Australian analytical approach to antitrust
enforcement. Indeed, the methodologies established by the Tribunal for the iden
tification of market boundaries and for the assessment of competition have been
endorsed and used as precedent by both the Federal Court of Australia, the court of
jurisdiction for the Act, and the High Court of Australia, the court of final appeal
for Australian antitrust issues. In a comprehensive and challenging paper, Brunt
provides a stocktake of Australian antitrust over the twenty years of the Act. After
an illuminating survey of the patterns of Australian business (mis)conduct which
led to a gradual recognition that legislative controls were necessary in order to
revive competitive spirits, she analyzes our "extraordinary" antitrust achievements
to date, and identifies several notable features of antitrust law and procedure in
Australia. These include our approach to the task of market definition, our dual
legal and administrative systems of enforcement, the development of a pure market
power standard, and the treatment of vertical price and non-price conduct (which is
at odds with currently prevailing American practice). She attributes these distinc
tive features to three main factors - the small Australian economy, the limitations
of the courts in carrying out economic regulation, and "history", beginning with
the visions of two men who each served as Attorney-General. She suggests that
these combined characteristics might be so unique to Australia that the Australian
antitrust phenomenon may never be replicated anywhere else in the world.
As to the future, Brunt warns that the recommendations of the Hilmer Report
present "a decisive rejection of the Act and its institutions as controlling mecha
nisms in the deregulation and privatization process", but accepts that this might be
an appropriate stand to take. However, she cautions that considerable care will be
needed in handling the interface between the Act and the proposed new regulatory
regime. And, consistent with the observations of several other authors, she notes
[4]