The Trade Practices Legislation Amendment Act (No. 1) 2006 (the Amending Act) will amend the Trade Practices Act 1974 (Cth) (“the TPA”), with most of the changes coming into force on a day to be fixed by proclamation or after six months. The Treasurer’s Office has indicated that they expect the changes will commence in January 2007.
The major changes to the TPA are as follows;
MERGERS
The new merger provisions provide for three alternative methods of obtaining merger clearance. The test for considering mergers will remain unchanged – section 50 of the TPA will continue to prohibit mergers that would have the effect, or be likely to have the effect of substantially lessening competition in the market.
CURRENT INFORMAL MERGER CLEARENCE SYSTEM
The changes do not affect the current informal merger clearance system, which includes approaching the ACCC. This informal system will continue to operate as an alternative to the new processes.
NEW ACCC FORMAL MERGER CLEARENCE SYSTEM
A new formal merger clearance process through the ACCC will be introduced. This will operate in parallel with the informal clearance system, and parties will be able to choose whether the formal or informal system is preferable. The new formal clearance process does offer some benefits that are not available under the informal system;
- It provides the certainty of legislated time limits (40 days but this can be extended if the merger party agrees or, in special circumstances or in complex cases, by a further 20 days if the ACCC decides);
- It requires the disclosure of reasons;
- It allows the applicant to appeal to the Australian Competition Tribunal ("the Tribunal"); and
- It provides immunity form legal action (including third party action) if clearance is granted.
STREAMLINED MERGER AUTHORISATION PROCESS BEFORE THE TRIBUNAL
Under the new process, merger authorisation applications can be lodged directly with the Tribunal rather than with the ACCC. The Tribunal has three months (this can be extended to six months in the case of complex mergers) to make a first and final decision in a merger authorization application permitted o public benefit grounds. The Tribunal’s decision on a merger authorisation application is not subject to a review, on the merits.
The ACCC will continue to participate in the authorisation process by providing reports which the Tribunal is required to seek and take into account. The ACCC will also have a right to appear before the Tribunal, provide evidence, and examine and cross-examine witnesses.
PENALTIES AND INDEMNIFICATION
The maximum penalties for contravening the competition provisions of Part IV of the TPA will be substantially increased. The maximum pecuniary penalty for corporations will be the greater of $10 million or three times the gain from the contravention or, where the gain is not readily ascertainable, 10 percent of the turnover of the body corporate and any related bodies corporate.
In addition, the courts may disqualify any individual implicated in a contravention of Part IV of the TPA from being a director of a corporation or otherwise being involved in its management. Companies will be expressly prohibited from indemnifying officers against any penalties imposed on them individually and the legal costs of defending proceedings against them.
COLLECTIVE BARGAINING
A new notification process will be introduced for collective bargaining by small businesses dealing with big businesses. Under the notification process small businesses may notify the ACCC of the collective action and, if the ACCC raises no objection at the end of 14 days, the notifying business receives immunity for three years. This immunity is not available to action taken by trade unions.
While the benefits of the notification process are confined by a transaction limit of $3 million in any 12-month period, the Bill provides for a higher transaction limit to be set by regulation.
JOINT VENTURES
There will be a new broad joint venture defence to the price fixing and exclusionary provision prohibitions under which the commercial practices of genuine joint ventures will be examined according to a substantial lessening of competition tests.
THIRD LINE FORCING
While the per se prohibition in respect of third line forcing will be retained, amendments to section 47 (6) and (7) of the TPA mean that related companies will be treated as a single entity for the purposes of third line forcing. This means that it will no longer be a breach of the TPA to supply goods or services on condition that a good or service is also purchased from another party if that other party is a body corporate related to the initial supplier.
ENFORCEMENT
A new enforcement provision will provide the ACCC with the ability to search premises and seize evidence, but this will be balanced by the requirement to obtain a warrant from a Magistrate.
If you would like any further information in relation to these amendments, please do not hesitate to contact either Kevin Elkington or David King at EKM legal on 9829 0999.
