A Third Way: Objective Anticompetitive Purpose

Posted by Social Science Research Network

A Third Way: Objective Anticompetitive Purpose

Katharine Kemp (University of New South Wales)

Abstract:     This paper was drafted in response to the Discussion Paper on ‘Options to Strengthen the Misuse of Market Power Law’ released by the Australian Treasury in December 2015. In particular, it offers a potential compromise, or third way, in the current debate concerning the amendment to section 46(1) of the Competition and Consumer Act 2010 (Cth) proposed by the Competition Policy Review Panel in its Final Report dated March 2015 (‘the Harper Proposal’).

The Harper Panel reached the conclusion that the current ‘take advantage’ requirement in s 46(1) has proved uncertain and under-inclusive as a standard for unilateral anticompetitive conduct: it is not ‘fit for purpose’. This paper supports that view.

The Harper Proposal, by contrast, would allow courts to focus on the effect or likely effect of the impugned conduct on rivalry in a market. Large retailers have argued that this test creates uncertainty for dominant firms, who cannot be expected to predict accurately the actual outcome of every strategy and cannot be certain of how a court may interpret the mixed outcomes of conduct after the fact, even if the strategy was an attempt to ‘compete on the merits’. This submission acknowledges that the Harper Proposal may reduce dominant firm incentives to engage in some socially beneficial conduct.

As a third way, it is submitted that it is preferable for unilateral conduct rules to focus on whether the impugned conduct had an ‘objective anticompetitive purpose’: that is, whether, assessed objectively, the conduct had the purpose of enhancing or prolonging the dominant firm’s market power by suppressing rivalry in the market, without creating any proportionate benefits for consumer welfare.