ACCC brings first proceedings under amended misuse of market power provision

On 6 December 2019, the Australian Competition and Consumer Commission (ACCC) instituted Federal Court proceedings against Tasmanian Ports Corporation Pty Ltd (TasPorts) for misuse of market power in contravention of s46(1) of the Competition and Consumer Act 2010 (Cth) (CCA). 

The alleged contravention is in relation to the attempted entry by a competitor, Engage Marine Tasmania Pty Ltd (Engage Marine) into markets historically dominated by TasPorts.

The proceedings are noteworthy because:

  • they mark the ACCC’s first court enforcement action under the amended misuse of market power provisions; and
  • they have been taken against a state government owned corporation, reinforcing yet again that the ACCC is prepared to tackle state corporations and instrumentalities.

Facts

TasPorts, who own all but one of the ports in Tasmania, supply marine pilotage and towage services.

In 2017, Engage Marine won a contract for the supply of marine services to a then customer of Tas Ports, Grange Resources Limited (Grange) at Port Latta.

The ACCC alleges TasPorts sought to maintain its monopoly in towage and pilotage, by:

  • imposing a new charge on Grange in relation to Port Latta;
  • offered to reduce that charge along with Grange agreeing to a new contract with TasPorts for the provision of pilotage services, in place of Engage Marine;
  • introduced a new charge targeted to apply to Engage Marine’s tug boats and requirements to use temporary berths;
  • failed or refused to provide any pilot training to Engage Marine;
  • failed or refused to facilitate the provision of long term berths for Engage Marine’s tugs in northern Tasmania; and
  • failed or refused to include Engage Marine on the Shipping Schedule as a towage service provider.

The ACCC further alleges that:

  • TasPorts engaged in that conduct for the anti-competitive purpose of preventing or hindering Engage Marine from competing in the relevant markets; and
  • TasPorts’s conduct had the purpose and/or the effect, and/or was likely to have the effect, of substantially lessening competition in the relevant markets.

A date for legal proceedings in the matter has not been set.

Section 46

The ACCC is responsible for investigating and enforcing the competition provisions of the CCA, including section 46, which prohibits a corporation with a substantial degree of power in a market from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition.

This includes the power to bring court proceedings seeking to prove that the CCA has been contravened.
Section 46 of the CCA was amended by the Commonwealth Parliament following the recommendation of Professor Ian Harper to introduce an “effects test” in section 46 to replace the earlier focus on anti-competitive purpose, or intent.

Potential sanctions

If the Federal Court accepts that TasPorts has contravened, attempted to contravene or been involved in a contravention of section 46, it may impose orders including, but not limited to:

  • requiring TasPorts to pay a civil pecuniary penalty;
  • requiring TasPorts to pay damages;
  • preventing TasPorts from engaging in certain conduct; and
  • declaring that TasPorts has contravened the CCA.

Each breach alleged by the ACCC carries a fine in excess of $10 million. The maximum penalty payable by a corporation is the greater of:

  • $10,000,000;
  • 3 times the value of the benefit obtained by a corporation as a result of the conduct; and
  • if the value cannot be ascertained, 10% of the annual turnover of the corporation.

Lavan Comment 

First case considering revised section 46

Criticism of section 46 of the CCA prior to its amendment to introduce an “effects test” centred on the difficulty of satisfying the requirement to prove an anti-competitive purpose, or intent.

In essence, adoption of the “effects test” was intended to shift the focus of the prohibition from anti-competitive intent to anti-competitive outcomes, which would result – at least initially – in more successful enforcement action by the ACCC and – in the longer term – increased competition across the economy.  

This is the first time that the ACCC has brought proceedings under section 46 since the provision was amended to introduce an effects test.  As such, there is some likelihood that the case will give the Federal Court an opportunity to consider the new provision, particularly what the words ‘purpose, effect or likely effect of substantially lessening competition’ mean in the context of a provision designed to prevent misuse of market power.

Action against a state-owned corporation

Another point to note is that the proceedings concern the conduct of a state government owned corporation, which should highlight the fact that the ACCC is not concerned about avoiding battles with state government corporations or instrumentalities.

Despite successive governments exiting participation in essential services and related sectors, particularly on Australia’s east coast, many state government corporations and instrumentalities are still active in historically government-controlled sectors, such as ports, energy, water and rail.

Characteristics such as vertical integration and obligations to comply with state government policy or directives can make state government corporations and instrumentalities more vulnerable to claims of misuse of market power, whether by the ACCC from competitors or customers.

Conclusion and next steps

The ACCC’s decision to bring proceedings against TasPorts provides a timely reminder to firms and consumers alike that the ACCC continues to monitor the conduct of large firms and can be receptive to competitor concerns. 

Lavan suggests that firms consider their conduct and the conduct of their competitors, suppliers and customers to identify and address instances where they, or their competitors, suppliers or customers, are at risk of having contravened or been involved in the contravention of section 46.

Where a risk of contravening section 46 arises:

  • in respect of past conduct, firms should take steps to modify their conduct and/or examine their options in respect of potential third party contraventions; and
  • in respect of future conduct, firms should consider the suitability of seeking an authorisation from the ACCC in respect of that conduct.
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Luke O’Callaghan
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Ben Fong
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Iain Freeman
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Nick Stagg
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