Summary Of The Competition Act

Posted on: 30th November 2012

Competition Consumer ACTWhat is called the Competition Act is actually an evolving body of policies and legislation that began with the passage of the Trade Practices Act of 1974. It has since undergone numerous revisions, with major changes in 1995 and 2005, but the goals of the legislation remain the same: To prevent industry monopolization and encourage efficiency and competition while protecting Australians from harmful commercial practices as defined under the law.

Whether or not the legislation actually achieves those goals is a subject of spirited debate, with critics charging that the Competition Act actually frustrates business growth and consumer opportunities through unjustified government intrusion. Yet whatever one's view of the effectiveness of the Competition Act, a summary of its goals and policies are as follows:

Banning Cartels - Price fixing is considered a criminal offense, as is bid rigging and other forms of dishonest manipulation of prices. Cartel offenses can bring as much as ten years imprisonment and over $200,000 in fines.

Suppressing Competition - Any agreements between business that are meant to stifle competition are illegal. This includes any informal understandings, private arrangements or public contracts that have the effect of frustrating competitors.

Aggressive Use of Market Share - Using advantages made possible by having a large share of a given market cannot be used to block competitors from entering the field. This includes predatory pricing, where costs to the consumer are made artificially low in order to drive out competitors who lack the size to withstand the price drop. It also bans any misuse of market share power to drive out competitors.

Exclusivity - Refusing to sell to certain companies with the intention of crippling their competitive ability is prohibited. However, since certain narrow allowances of exclusivity can sometime produce benefits, authorizations for exclusivity can be obtained on grounds of public benefits.

Merger Control - A merger of companies will not be approved in Australia if doing so lowers competition and consumer choices. Mergers can only be authorized by the Australian Competition Tribunal if the merger can be shown to lead to a public benefit.

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