Competition and Consumer Amendment (Competition Policy Review) Bill 2017 passed by Parliament – Third line forcing no longer prohibited per se
The Bill prohibits third line forcing only where it has the purpose, effect or likely effect of substantially lessening competition
On 18 October 2017, the Government secured the necessary support in the Senate to pass the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 (the Bill).
The new legislation will commence from a day to be fixed by Proclamation or, if no earlier day is fixed by Proclamation, the day after 6 months from the date the Bill receives Royal Assent. The Australian Competition and Consumer Commission (ACCC) has indicated that the Bill is scheduled to come into effect in the coming weeks.
The Bill amends the Competition and Consumer Act 2010 (the Act) to prohibit third line forcing only where it has the purpose, effect or likely effect of substantially lessening competition. That is, once the amendments come into effect, third line forcing will no longer be a per se prohibition, but will only contravene the Act if it has the purpose or likely effect of substantially lessening competition, as with the other forms of exclusive dealing prohibited in section 47.
The amendments to the Act followed the Harper Review, which noted that ‘third line forcing is similar to second line forcing, in which a corporation supplies a product on the condition that the purchaser acquires another product from the same corporation (or a related corporation)’. Second line forcing is also known as ‘bundling’ or ‘tying’, and is not prohibited on a per se basis. Rather, it is prohibited where the conduct has the purpose, effect or likely effect of substantially lessening competition.
Further, whilst the Harper Review acknowledged that an exemption was available to corporations engaging in the conduct through the notification process, it found that it was unnecessary, because in most cases the notification will be allowed.
The most immediate implication of the amendments to the Act is that third line forcing conduct which has had to be notified to the ACCC until now to receive legal protection under the Act, will no longer require notification.
Other changes made to the Act include:
- clarifying that ‘competition’ includes competition from goods and services that are capable of importation, in addition to those actually imported
- confining the application of cartel conduct provisions to conduct affecting competition in Australian markets
- changing the scope of the joint venture exceptions
- removing provisions relating to the anti-competitive disclosure of pricing and other information (known as price signaling)
- prohibiting a corporation from engaging in a concerted practice that has the purpose, effect or likely effect of substantially lessening competition
- increasing the maximum penalty applying to breaches of the secondary boycott provisions
- enabling a corporation or person to notify the ACCC of resale price maintenance conduct, as an alternative to seeking authorisation from the commission for such conduct
- providing an exemption from the resale price maintenance prohibition for conduct between related bodies corporate
- extending the ACCC’s power to obtain information, documents and evidence regarding investigations of alleged contraventions or court enforceable undertakings and merger authorisation determinations
- introducing a ‘reasonable search’ defence regarding the failure or refusal to comply with a notice to produce such documents.
We will continue to keep our clients informed on these amendments and will issue an update when the Bill comes into effect.
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