Trade Practices Act 1974
Encyclopedia
The Competition and Consumer Act 2010 is an act
of the Parliament of Australia
. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key competition law
in Australia. It is administered by the Australian Competition and Consumer Commission
and also gives some rights for private action.
, which sets out the division of powers between the federal and state parliaments. As a result, most of the TPA is drafted to apply only to corporations, thus relying on Section 51(xx)
. Some parts of the TPA have a broader operation, relying for instance on the telecommunications power (Section 51(v)
) or the territories power.
Parts of the Act are mirrored in Fair Trading Acts in each Australian State and Territory, to extend regulation to individuals.
The Act exempts the Commonwealth, state and territory governments from some provisions of the Act. The immunity from the Act does not generally derive to third parties who deal with the government: see Australian Competition and Consumer Commission v Baxter Healthcare
.
This part of the act allows services to be ‘declared’ and for parties to negotiate terms and conditions of access. The National Competition Council and the ACCC are both involved in registering agreement and assessing what is fair (to owners, to public, to users). As an alternative non-declared services may be subject to ACCC undertakings.
, provisions in the Trade Practices Act are aimed at deterring practices by firms which are anti-competitive in that they restrict free competition. This part of the act is enforced by the Australian Competition and Consumer Commission
(ACCC). The ACCC can litigate in the Federal Court of Australia
, and seek pecuniary penalties of up to $10 million from corporations and $500,000 from individuals. Private actions for compensation may also be available.
These provisions prohibit:
A priority of ACCC enforcement action in recent years has been cartel
s. The ACCC has in place an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining information/evidence about price-fixing behaviours.
’ which was clarified as a cause-of-action in the case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447. The High Court of Australia held that an act was unconscionable if a party to a transaction is under a ‘special disability’, the other party is or ought be aware of that disability, and that other party acts in a way that makes it unfair or unconscionable to accept the offer of the weaker party.
Section 51AA codifies the common law by referring to the ‘unwritten law’ (i.e. the common law). However, s51AA allows access to TPA remedies.
Section 51AB bans unconscionability in consumer transactions, and gives factors that indicate unconscionability. This clarifies the application of unconscionability and circumstances where a consumer is at a “special disability”.
The inclusion of s51AC, added in 1998, extends unconscionability by, in effect, classing ‘small business’ as a ‘special disability’.
These parts deal with:
Misleading or deceptive conduct carried out by companies can also be prosecuted by the state (under Part VC).
Under the Trade Practices Act implied conditions and warranties are mandatory: they cannot be excluded by a contractual intent to the contrary. The implied conditions are as to title (s69), quiet possession, freedom from encumbrances, fitness for purpose (s71(2), supply by description or sample (s70, s72 ) and that the goods are of merchantable quality (s66(2)).
The most important of these to a consumer is likely to be merchantable quality. If goods fail to reach a basic level of quality (considering the price of the goods) – that is they are defective, break, or do not do what they should do – then the TPA has been breached.
In 2006 the TPA was amended to include a new Division 3 to Part VIIA providing a process for formal clearance and authorisation of mergers.
the Australian economy.
The ACCC’s functions under this part are:
Australia is a free market economy and the Trade Practices Act does not establish the ACCC as a price-fixing body. An example of the use of this section is that, under a direction from the Minister, the ACCC monitors the price of petrol. However, the ACCC cannot set the price of petrol.
.
, now privatised, has traditionally dominated the telecommunications sector. Telstra owns the copper network infrastructure.
The market was partially deregulated in 1992 with the introduction of Optus
as a competitor. In 1997 deregulation continued when new entities were permitted to enter the market (see Communications in Australia
). However, a feature of the Australian telecommunications market is that it is not feasible/efficient to have multiple networks of, for example, fibre optic cables or the copper network. For this reason, section XIB and XIC of the Trade Practices Act exist to ensure that competitors (downstream users) have access to Telstra’s networks.
Part XIB of the act allows the ACCC to issue competition notices to telecommunications corporations if it has reason to believe the corporation has engaged in "anti-competitive conduct". "Anti-competitive conduct" refers to the restrictive trade practices in Part IV of the Act (Sections 45, 45B, 46, 47 or 48), or when a carrier with a substantial degree of power in a telecommunications market has taken advantage of the power with the effect, or likely effect, of substantially lessening competition.
If the conduct continues after the issue of the Competition Notice the ACCC can seek an injunction and financial penalty through the Federal Court. Competition Notices also allow third parties to take legal action.
Part XIC is a telecommunications-specific access regime. The object of Part XIC is to promote the long-term interests of end-users of telecommunications carriage services and services that facilitate the supply of such carriage services: s152AB. The extent to which something promotes the long-term interests of end-users is assessed by having regard to three, and only three, objectives, namely:
• promoting competition in markets for listed services;
• promoting any-to-any connectivity; and
• encouraging economically efficient use of, and investment in, the infrastructure by which listed services are suppled.
Under Part XIC, the ACCC can declare particular telecommunications carriage services if it is in the long-term interests of end-users: s152AL. Suppliers of declared services must comply with standard access obligations: s152AR.
Persons can obtain access to declared services on terms and conditions set either by agreement with the supplier of the declared service, by an ordinary access undertaking given by the supplier of the declared service, or through arbitration by the ACCC.
Restrictive Trade Practices
Consumer Protection
Industry Codes
Amendments and Reform
Statute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
of the Parliament of Australia
Parliament of Australia
The Parliament of Australia, also known as the Commonwealth Parliament or Federal Parliament, is the legislative branch of the government of Australia. It is bicameral, largely modelled in the Westminster tradition, but with some influences from the United States Congress...
. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key competition law
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....
in Australia. It is administered by the Australian Competition and Consumer Commission
Australian Competition and Consumer Commission
The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...
and also gives some rights for private action.
Application of Act
The Trade Practices Act (TPA) is an act of the Parliament of Australia and so its application is limited by section 51 of the Australian ConstitutionSection 51 of the Australian Constitution
Section 51 of the Constitution of Australia grants legislative powers to the Australian Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth...
, which sets out the division of powers between the federal and state parliaments. As a result, most of the TPA is drafted to apply only to corporations, thus relying on Section 51(xx)
Section 51(xx) of the Australian Constitution
Section 51 of the Australian Constitution, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the right to legislate with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth"...
. Some parts of the TPA have a broader operation, relying for instance on the telecommunications power (Section 51(v)
Section 51(v) of the Australian Constitution
Section 51 of the Constitution of Australia is a subsection of Section 51 of the Constitution of Australia that gives the Commonwealth Parliament of Australia power to legislate on "postal, telegraphic, telephonic, and other like services".-Postal Services:...
) or the territories power.
Parts of the Act are mirrored in Fair Trading Acts in each Australian State and Territory, to extend regulation to individuals.
The Act exempts the Commonwealth, state and territory governments from some provisions of the Act. The immunity from the Act does not generally derive to third parties who deal with the government: see Australian Competition and Consumer Commission v Baxter Healthcare
Australian Competition and Consumer Commission v Baxter Healthcare
Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd was a decision of the High Court of Australia, which ruled on 29 August 2007 that Baxter Healthcare Proprietary Limited, a tenderer for various government contracts, was bound by the Trade Practices Act 1974 in its trade and...
.
Establishing Parts
The TPA establishes four organisations with a role in administering the TPA:- Part II establishes the Australian Competition and Consumer CommissionAustralian Competition and Consumer CommissionThe Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...
- Part IIA establishes the National Competition Council
- Part III establishes the Australian Competition Tribunal
- Part IIIAA establishes the Australian Energy RegulatorAustralian Energy RegulatorThe Australian Energy Regulator is the regulator of the wholesale electricity and gas markets in Australia. It is part of the Australian Competition and Consumer Commission and enforces the rules established by the Australian Energy Market Commission....
Part IIIA of TPA: Access to Facilities
Part IIIA of the Trade Practices Act deals with third party access to services of facilities of national significance. For example, it covers access to electricity grids or natural gas pipelines. The aim of this part of the act is to encourage competition in upstream or downstream markets.This part of the act allows services to be ‘declared’ and for parties to negotiate terms and conditions of access. The National Competition Council and the ACCC are both involved in registering agreement and assessing what is fair (to owners, to public, to users). As an alternative non-declared services may be subject to ACCC undertakings.
Part IV: Restrictive Trade Practices
The restrictive trade practices, or antitrustAntitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
, provisions in the Trade Practices Act are aimed at deterring practices by firms which are anti-competitive in that they restrict free competition. This part of the act is enforced by the Australian Competition and Consumer Commission
Australian Competition and Consumer Commission
The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...
(ACCC). The ACCC can litigate in the Federal Court of Australia
Federal Court of Australia
The Federal Court of Australia is an Australian superior court of record which has jurisdiction to deal with most civil disputes governed by federal law , along with some summary criminal matters. Cases are heard at first instance by single Judges...
, and seek pecuniary penalties of up to $10 million from corporations and $500,000 from individuals. Private actions for compensation may also be available.
These provisions prohibit:
- Most Price Agreements (see CartelCartelA cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
and Price-Fixing)
- Primary boycotts (an agreement between parties to exclude another)
- Secondary boycotts whose purpose is to cause substantial lessen competition (Actions between two persons engaging in conduct hindering 3rd person from supplying or acquiring goods or services from 4th)
- Misuse of market powerMarket powerIn economics, market power is the ability of a firm to alter the market price of a good or service. In perfectly competitive markets, market participants have no market power. A firm with market power can raise prices without losing its customers to competitors...
– taking advantage of substantial market power in a particular market, for one or more proscribed purposes; namely, to eliminate or damage an actual or potential competitor, to prevent a person from entering a market, or to deter or prevent a person from engaging in competitive conduct.
- Exclusive dealingExclusive dealingExclusive dealing refers to when a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies in a given area...
– an attempt to interfere with freedom of buyers to buy from other suppliers, such as agreeing to supply a product only if a retailer does not stock a competitor’s product. Most forms of exclusive dealing are only prohibited if they have the purpose or likely effect of substantially lessening competition in a market.
- Third-line forcing: A type of exclusive dealing, third-line forcing involves the supply of goods or services on the condition that the acquirer also acquires goods or services from a third party. Third-line forcing is prohibited per se.
- Resale price maintenanceResale price maintenanceResale price maintenance is the practice whereby a manufacturer and its distributors agree that the latter will sell the former's product at certain prices , at or above a price floor or at or below a price ceiling...
– fixing a price below which resellers cannot sell or advertise
- Mergers and acquisitionsMergers and acquisitionsMergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
that would result in a substantial lessening of competition
A priority of ACCC enforcement action in recent years has been cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
s. The ACCC has in place an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining information/evidence about price-fixing behaviours.
Part IVA: Unconscionable Conduct
The inclusion of unconscionable conduct in the Trade Practices Act is a codification and extension of the equitable principle of ‘unconscionabilityUnconscionability
Unconscionability is a term used in contract law to describe a defense against the enforcement of a contract based on the presence of terms that are excessively unfair to one party...
’ which was clarified as a cause-of-action in the case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447. The High Court of Australia held that an act was unconscionable if a party to a transaction is under a ‘special disability’, the other party is or ought be aware of that disability, and that other party acts in a way that makes it unfair or unconscionable to accept the offer of the weaker party.
Section 51AA codifies the common law by referring to the ‘unwritten law’ (i.e. the common law). However, s51AA allows access to TPA remedies.
Section 51AB bans unconscionability in consumer transactions, and gives factors that indicate unconscionability. This clarifies the application of unconscionability and circumstances where a consumer is at a “special disability”.
The inclusion of s51AC, added in 1998, extends unconscionability by, in effect, classing ‘small business’ as a ‘special disability’.
Part IVB: Industry Codes
Part IVB relates to Industry Codes. Industry codes can be prescribed under the Act (by the Australian government) and breach of these codes is a breach of the TPA. The ACCC administers ongoing compliance with these codes. There are currently three codes made under this part: the franchising code, the oilcode, and the horticulture code.Part V: Consumer protection
The consumer protection part of the act, contained in Part V and Part VC, is based on the proposition that low consumer power or lack of information is a market failure which needs to be addressed by interference in the market.These parts deal with:
- Unfair Practices (including unsconscionable conduct and misleading or deceptive conductMisleading or deceptive conductMisleading or deceptive conduct is a doctrine of Australian law.Section 18 of the Australian Consumer Law , which is found in schedule 2 of the Competition and Consumer Act 2010 prohibits conduct by corporations in trade or commerce which is misleading or deceptive or is likely to...
) —Part V, Division 1 and Part VC, Division 2
- Product safety and information —Part V, Division 1A and Part VC, Division 3
- Conditions and Warranties in Consumer Transactions Part V, Division 2
- Actions Against Manufacturers/Importers of Goods Part V, Division 2A
- Product Liability Part VA
Misleading or Deceptive Conduct
Misleading or deceptive conduct (s52) is one of the most important consumer parts of the act. It allows both individuals and the ACCC to take action against corporations who engage in conduct that is misleading or deceptive, or likely to mislead or deceive.Misleading or deceptive conduct carried out by companies can also be prosecuted by the state (under Part VC).
Other Unfair Practices
The Trade Practices Act also prohibits a range of other unfair practices including bait advertising (advertising a product that is not reasonably available), pyramid schemes (Division 1AAA), and certain misrepresentations (e.g. a misrepresentation as to price).Conditions and Warranties (Division 2 and 2A of Part V)
The Trade Practices Act implies into contracts with consumers certain conditions and warranties. Similar conditions are implied by the State Sale of Goods Acts, but these acts have slightly different jurisdictional limits (e.g. ‘consumer’ and ‘goods’) and the legislative phrases may have been interpreted slightly differently.Under the Trade Practices Act implied conditions and warranties are mandatory: they cannot be excluded by a contractual intent to the contrary. The implied conditions are as to title (s69), quiet possession, freedom from encumbrances, fitness for purpose (s71(2), supply by description or sample (s70, s72 ) and that the goods are of merchantable quality (s66(2)).
The most important of these to a consumer is likely to be merchantable quality. If goods fail to reach a basic level of quality (considering the price of the goods) – that is they are defective, break, or do not do what they should do – then the TPA has been breached.
Part VII Authorisations, Notifications, and clearances in respect of restrictive trade practices
A unique feature of the Trade Practices Act, which does not exist in similar legislation overseas, is that exemptions may be granted by the ACCC. The ACCC may grant immunity based on assessment of the public benefits and anti-competitive detriments of the conduct, through the ‘notification’ or ‘authorisation’ process. This exemption does not apply to resale price maintenance or misuse of market power. The ACCC maintains a public register of authorisations and notifications.In 2006 the TPA was amended to include a new Division 3 to Part VIIA providing a process for formal clearance and authorisation of mergers.
Part VIIA: Prices surveillance, Notification, and Monitoring
Part VIIA enables the ACCC to examine the prices of selected goods and services inthe Australian economy.
The ACCC’s functions under this part are:
- Hold price inquiries in relation to the supply of goods or services, and to publicly report the findings to the responsible Commonwealth minister
- To examine proposed price rises on ‘notified’ goods, subject to instruction from Minister. This allows some control over price rises
- To monitor the prices, costs and profits of an industry or business under the direction of the minister and to publicly report the results to the minister.
Australia is a free market economy and the Trade Practices Act does not establish the ACCC as a price-fixing body. An example of the use of this section is that, under a direction from the Minister, the ACCC monitors the price of petrol. However, the ACCC cannot set the price of petrol.
Part IX Review by Tribunal of determinations of commission
Part IX allows the Australian Competition Tribunal, established in Part III of the TPA, to review certain decisions of the Australian Competition and Consumer CommissionAustralian Competition and Consumer Commission
The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...
.
Part XIB and Part XIC: Telecommunications Regulation
The Trade Practices Act also regulates aspects of the Telecommunications market. In Australia the previously government owned TelstraTelstra
Telstra Corporation Limited is an Australian telecommunications and media company, building and operating telecommunications networks and marketing voice, mobile, internet access and pay television products and services....
, now privatised, has traditionally dominated the telecommunications sector. Telstra owns the copper network infrastructure.
The market was partially deregulated in 1992 with the introduction of Optus
Optus
SingTel Optus Pty Limited is the second largest telecommunications company in Australia, and is a wholly owned subsidiary of Singapore Telecommunications...
as a competitor. In 1997 deregulation continued when new entities were permitted to enter the market (see Communications in Australia
Communications in Australia
Telecommunications in Australia deals with telecommunications in Australia, involving the availability and use of electronic devices and services, such as the telephone, television, radio or computer, for the purpose of communication.-Early:...
). However, a feature of the Australian telecommunications market is that it is not feasible/efficient to have multiple networks of, for example, fibre optic cables or the copper network. For this reason, section XIB and XIC of the Trade Practices Act exist to ensure that competitors (downstream users) have access to Telstra’s networks.
Part XIB of the act allows the ACCC to issue competition notices to telecommunications corporations if it has reason to believe the corporation has engaged in "anti-competitive conduct". "Anti-competitive conduct" refers to the restrictive trade practices in Part IV of the Act (Sections 45, 45B, 46, 47 or 48), or when a carrier with a substantial degree of power in a telecommunications market has taken advantage of the power with the effect, or likely effect, of substantially lessening competition.
If the conduct continues after the issue of the Competition Notice the ACCC can seek an injunction and financial penalty through the Federal Court. Competition Notices also allow third parties to take legal action.
Part XIC is a telecommunications-specific access regime. The object of Part XIC is to promote the long-term interests of end-users of telecommunications carriage services and services that facilitate the supply of such carriage services: s152AB. The extent to which something promotes the long-term interests of end-users is assessed by having regard to three, and only three, objectives, namely:
• promoting competition in markets for listed services;
• promoting any-to-any connectivity; and
• encouraging economically efficient use of, and investment in, the infrastructure by which listed services are suppled.
Under Part XIC, the ACCC can declare particular telecommunications carriage services if it is in the long-term interests of end-users: s152AL. Suppliers of declared services must comply with standard access obligations: s152AR.
Persons can obtain access to declared services on terms and conditions set either by agreement with the supplier of the declared service, by an ordinary access undertaking given by the supplier of the declared service, or through arbitration by the ACCC.
The Dawson Report
The Review of the Competition Provisions of the Trade Practices Act (Dawson Report) was released in January 2003 and received 212 submissions. The scope of the report was quite broad, with recommendations regarding mergers and acquisitions, exclusionary provisions, third line forcing, joint ventures, penalties and remedies, and the functions and powers of the ACCC. As a result, some amendments have been made to the TPA.External links
Restrictive Trade Practices
- Julie Brebner Resale Price Maintenance – The Need for Further Reform (2001) 9 Trade Practices Law Journal 19-29
Consumer Protection
- Freehillls Law Firm, Unconscionable conduct and door to door sales What lessons can be learnt from the two recent cases?
Industry Codes
Amendments and Reform
- Freehills Law Firm, Dawson Report Key Implemented Changes to Trade Practices Act
- Deacons Law Firm, Dawson Report Amendments
- The Trade Practices Act – Recent Reforms