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1974
AUSTRALIA
HOUSE OF REPRESENTATIVES
TRADE PRACTICES BILL 1974
EXPLANATORY MEMORANDUM
(Circulated by the Minister for Manufacturing
Industry the Hon. Kep. Enderby, M.P. Q.C.)
TRADE PRACTICES BILL 1974
EXPLANATORY MEMORANDUM
The Bill is to replace the Restrictive Trade Practices
Act 1971-and is also to make provision for the protection of
consumers from certain unfair practices.
RESTRICTIVE TRADE PRACTICES
Differences between provisions of Bill and existing
Restrictive Trade Practices Act
2. The main differences between the proposed restrictive
trade practices provisions and the existing Act are -
(a) Practices are to be prohibited by the Act itself
instead of by ad hoc restraining orders made by the
Trade Practices Tribunal after time-consuming
inquiries.
(b) Private individuals will be able to take court
proceedings in respect of prohibited practices.
(c) 'Vertical' exclusive dealing arrangements are
prohibited in certain circumstances.
(d) Limitations to the scope of the present practice of
discriminatory dealing are removed.
(e) Anti-competitive mergers are covered.
(f) A Trade Practices Commission constituted by several
members is to replace the Commissioner of Trade
Practices.
(g) The Trade Practices Tribunal will become a body to
review determinations by the Commission It will also
3.
retain its existing functions under the overseas cargo
shipping provisions.
3. The existing provisions with respect to resale price
maintenance are to be re-enacted subject to minor amendments
and to the omission of the provisions for exemptions.
. The existing provisions with respect to overseas cargo
shipping are to be re-enacted without amendment.
Scheme of the restrictive trade Practices Provisions
. The Bill prohibits the following practices:
(a) contracts, arrangements and understandings in
restraint of trade or commerce,
(b) monopolization,
(c) exclusive dealing,
d) resale price maintenance,
e) price discrimination,
(f) anti-competitive mergers
. A person who engages in a prohibited practice will be
liable for a pecuniary penalty and to other civil remedies.
Private persons as well as the Attorney-General and the
Commission will be able to take action in the Court against a
person who engages in such a practice.
7. The Bill recognizes that in certain circumstances some
prohibited practices may be capable of justification.
To meet these cases a procedure is provided by which
the Commission can grant authorizations to persons to
engage in conduct that is otherwise prohibited. Before
granting an authorization the Commission must be
satisfied that an authorization is justified on
certain broad grounds that are specified in the Bill.
A person dissatisfied with the Commission's refusal to
grant an authorization will be able to have the
decision reviewed by the Trade Practices Tribunal.
8. Conduct that is covered by an authorization that is
currently in force will be immune from enforcement
4.
action. Thus to gain the protection of an
authorization parties will need to apply in advance
for an authorization in relation to conduct that they
propose to engage in. An initial four month period
will be allowed after the Act comes into operation to
enable parties to existing arrangements that may be
covered by the prohibition of contracts in restraint
of trade or commerce and exclusive dealing to seek
authorizations from the Commission.
9. In relation to the restraint of trade or commerce,
exclusive dealing and merger provisions, the Bill
enables parties to seek clarification of the question
whether a proposed practice would affect competition
to the extent necessary for the application of the
relevant provisions. This can be done by an
application to the Commission for a 'clearance'. A
clearance by the Commission will protect a party from
enforcement action. If, in a particular case, the
Commission were not prepared to grant a 'clearance'
enforceability would depend on the applicability of
the relevant provision and this would be a matter for
the Court to determine in the usual way.
10. The difference between a clearance and an authorization
is that the former results in the Act being treated as
inapplicable while the latter assumes that the Act is
applicable but grants a dispensation.
5.
Main Provisions with Respect to Restrictive Trade Practices
Constitutional Foundation
. The Bill is drawn primarily around the corporations
power, but clause 6 provides for the Act to have an additional
operation in reliance on other available powers.
The Trade Practices Commission
. Clauses 7-provide for a Trade Practices Commission.
The number of members of the Commission that may be appointed
is left to the Governor-General. No specific qualifications
are required for members of the Commission. There is to be a
Chairman and one Deputy Chairman of the Commission.
Remuneration and allowances will be at rates fixed by the
Remuneration Tribunal, but until so fixed will be at rates
prescribed by regulation.
. The Commission will be able to function in Divisions
constituted by no less than 3 members including the Chairman.
The Chairman will not be required to attend all meetings of a
Division (clause 19).
. Clause 17 provides for the Chairman and members of the
Commission to disclose conflicting interests. These provisions
are in line with those that have applied to the Tribunal and
the Commissioner.
15. There is provision with respect to meetings of the
Commission (clause 18) and with respect to public hearings
(clause 21).
16. The Commission is to have a staff employed under the
Public Service Act, and the Chairman of the Commission is to
have the powers of a Permanent Head (clause 27). This staff
will replace the existing staff of the Commissioner of Trade
Practices.
. The Commission will be subject to any written
direction that the Attorney-General may give in relation to
6.
the performance of its functions or the exercise of its powers
other than its functions and powers in relation to the
granting of authorizations and clearances (clause 29(1)). Any
such direction must be published in the Gazette as soon as
practicable after it is given (clause 29(2)). The Commission
will also be required to comply with any request by the
Parliament for information about the performance by the
Commission of its functions (clause 29(3)).
The Trade Practices Tribunal
. The Trade Practices Tribunal is to be continued in
existence (clause 30).
. The Tribunal will be a body to review decisions of the
Commission on applications for authorizations (Part IX). The
existing provisions for a Review Division constituted by three
presidential members become unnecessary and are to be omitted.
Contracts, arrangements and understandings in restraint of
trade or commerce
. These are dealt with by clause 45. Contracts,
arrangement and understandings covered by the clause are
prohibited by sub-clause (2). In addition sub-clause (1)
declares such contracts, if made before the commencement of
the clause, to be unenforceable.
. Clause 45(3) makes it clear that a contract,
arrangement or understanding is not prohibited if it has such
a slight effect on competition as to be insignificant.
. Sub-clause (4) excludes from the operation of the
clause resale price maintenance and exclusive dealing, because
they are dealt with by other provisions. Sub-clause (5)
excludes mergers in respect of which a clearance or
authorization has been granted. Sub-clause (6) excludes
contracts, arrangements and understandings between companies
that are related to each other. Sub-clause (7) enables a
7.
contract to be made conditional upon the grant of an
authorization or clearance.
. The prohibitions in clause 45 are subject to any
authorization or clearance that may be granted under Part VII
(contracts etc. for which authorizations are not possible are
indicated in para. 41 below). Clause 45 will not operate until
four months after the commencement of the Act (clause 2(4))
and in this period parties to existing contracts, arrangements
and understandings will be able to seek clearances,
authorizations, or interim authorizations, from the
Commission.
Monopolization
24. Clause 46 prohibits a monopolist (being a person who
is in a position substantially to control a market) from
taking advantage of the power he has by virtue of being in
that position to -
a) eliminate or substantially damage a competitor,
b) prevent the entry of a person into the market,
or
(c) deter or prevent a person from engaging in competitive
behaviour.
25. Clause 46 does not apply to mergers that may lead to
the acquisition by a person of a monopoly position. (Sub-
clause (3)) Such mergers are dealt with separately by clause
50.
. There is no provision for authorizations or clearances
in respect of monopolization as such, but the practice does
not cover agreements or arrangements that have been authorized
or cleared under other provisions (clause 46(3)).
Exclusive dealing
27. Exclusive dealing is defined in clause 47. It covers
arrangements in accordance with which a supplier of goods or
8.
services has entered into an arrangement with a person
acquiring those goods or services from him and the effect of
the arrangement is to limit the freedom of that person to deal
as regards persons or places.
. Under clause 47 there are three forms of exclusive
dealing. In general, exclusive dealing will be prohibited only
where the practice is likely to have the effect of
substantially lessening competition in a market.
. This requirement, however, does not apply to two
specific forms of exclusive dealing. One of these is where a
person's ability to supply goods or services is entirely
dependent on a licence, permit, authority or registration
under a law of Australia and that person insists, as a
condition of supply to another person, that the other person
acquire all or part of his requirements of other goods or
services directly or indirectly from the first mentioned
person.
. The other specific form of exclusive dealing to which
the requirement of reduction of competition does not apply is
where a third person is involved. This covers the practice by
which a supplier requires a customer to acquire other goods or
services from a third person. This is often done pursuant to
arrangements under which the supplier obtains a commission or
other benefit on sales by the third person to the customer.
. Clause 47 does not cover restraints that apply to
suppliers. The clause will not cover the ordinary grant of an
exclusive franchise to market a supplier's goods. The granting
of such a franchise may not involve a restraint of trade or
commerce. Where a restraint is involved, and where its effect
on competition is significant, clause 45 will apply.
. As mentioned in paragraph 9 above, a clearance
procedure will enable clarification of the question whether
clause 47 applies to a particular practice (clause 93).
9.
. The prohibition of exclusive dealing in clause 47 is
subject to any authorization that may be granted under Part
VII. Clause 47 will not operate until four months after the
commencement of the Act (clause 2(4)) and in this period
parties to existing arrangements will be able to seek
clearances, authorizations or interim authorizations from the
Commission.
Resale Price Maintenance
. This practice is dealt with in clause 48 and Part VIII
in the same way as in the existing Act, except that:
(a) a corporation engaging in the practice will be liable
to a pecuniary penalty as well as an injunction;
(b) the provisions for exemptions in respect of the
practice are omitted;
(c) the definition of resale price maintenance is amended
to ensure -
(i) that it covers action by a manufacturer to
induce a retailer, who has obtained the
manufacturer's goods through a wholesaler, to
maintain resale prices specified by the
manufacturer (clause 96(3)(b)); and
(ii) that it covers the practice by which a supplier
stipulates minimum prices at which a
distributor may advertise, as distinct from
sell, goods (clause 96(7));
(d) clause 100 clarifies the existing evidentiary
provision; and
(e) permissible methods of recommending resale prices are
clarified (clause 97)0
Price Discrimination
. Clause 49 is to replace existing section 36(1)(a) and
(b), which applies only to the obtaining of preferential terms
10.
by a threat or promise. Clause 49 prohibits both the granting
and obtaining of prices which discriminate between purchasers
of goods. The clause prohibits discriminatory pricing which is
of such magnitude or is of such a recurring or systematic
character that it is likely to have the effect of
substantially lessening competition in a market, being a
market in which the parties to the discriminatory dealing
supply goods. There is no provision for authorizations and
negative clearances in relation to this practices
Mergers
36. A merger (involving the acquisition of shares or
assets) is prohibited by clause 50 if its likely effect will
be to substantially lessen competition in a market.
. The clearance procedure in clause 94 will, as
mentioned in paragraph 9 above, enable the parties to a
proposed merger, if they desire, to obtain the Commission's
opinion on the application of clause 50 to their merger. Where
a merger is covered by clause 50 it will be possible for the
parties to seek an authorization from the Commission to
proceed with the merger on the ground that it is justified
(see paras. 40 to 48 below).
. In addition the Commission will be able to provide
general guidance information pursuant to clause 28(1)(a).
. If a merger proceeds in contravention of clause 50 it
will be liable to divestiture - i.e., the compulsory sale of
shares or assets by direction of the Court (clause 81).
Authorizations
. The Commission is to be able to grant authorizations
to permit persons to engage in conduct which would otherwise
be prohibited by the Act (clause 88).
. Such authorizations may be granted in respect of -
11.
� contracts arrangements or understandings in restraint of
trade or commerce (other than those, not being in
connection with business conducted on a joint basis, fixing
or controlling or providing for the fixing or controlling
of prices for the supply of goods),
� exclusive dealing,
� mergers.
42. The provisions for authorizations in respect of
mergers take account of the Companies (Foreign Take-overs) Act
1972. The broad objective is to avoid so far as possible
duplication that could be involved in the examination of one
merger under two Acts. Clause 89(7) requires copies of certain
applications for authorizations in respect of mergers to be
furnished to the Minister administering the Companies (Foreign
Take-overs) Act. Clause 90(10) requires the Commission to
defer consideration of such an application while the
applicability of that Act is under consideration and clause
90(11) requires the Commission to authorize a merger that the
Minister administering that Act has concluded is in the
national interest.
. Clause 90(9) requires the Commission to authorize a
merger that is considered by the Government to be desirable in
the interests of national economic policy.
. The Commission may grant an interim authorization
pending final determination of an application (clause 91(2)).
Other provisions enable authorizations to be granted on
conditions, or for a limited time (clause 91(1) and (3)).
. Applications for authorizations, supporting
submissions and the determinations of such applications will
be kept in a public register (clause 89(3) and (4)), subject
to provisions for the protection of confidential information
where appropriate (clause 89(5)).
12.
. The Commission will be able to conduct a public
hearing in relation to an application for an authorization
where it considers this course to be desirable (clause 90(2)).
. In determining applications for authorizations the
Commission will be bound to have regard to the grounds set out
in clause 90(5). The Commission must be satisfied that an
authorization is justified by reason of a specific and
substantial benefit resulting to the public from the practice
in question.
. The Commission will be able to revoke an authorization
if it was granted on false or misleading information, if a
condition of the authorization has not been complied with or
if there has been a material change of circumstances (clause
91(4)).
Enforcement of restrictive trade practices provision
49. A person who engages in a prohibited practice is
liable to a pecuniary penalty. The amount of such a penalty is
to be determined by the Court having regard to all relevant
matters, including those matters specified in clause 76. The
maximum amount in the case of a corporation is $250,000 and in
the case of a natural person $50,000. Civil proceedings for
the recovery of such a penalty may be instituted by the
Attorney-General or the Commission (clause 77). Criminal
proceedings are not available in respect of a breach of a
prohibited practice (clause 78).
. Clause 80 provides for an injunction to restrain a
person from engaging in a prohibited practice. An application
for such an injunction may be made to the Court by the
Attorney-General, the Commission or by any other person.
. A person who suffers loss or damage by reason of a
prohibited practice may sue in the Court and recover as
damages the amount of his loss or damage (clause 82).
13.
Exceptions
. Clause 51 provides a number of exceptions to the
restrictive trade practices that are prohibited. The
exceptions cover a number of specific instances of conduct to
which special considerations apply. They are generally in line
with the exceptions in the existing Act. New exceptions in
respect of covenants in contracts of employment and in
partnership agreements have been included. Another new
exception in respect of practices relating exclusively to
exports has also been included but practices covered by this
exception have to be notified to the Commission. The exception
in respect of practices authorized by State legislation may
now be withdrawn by regulations made under the Act. Clause 51
(1)(a) removes doubts that the exemptions provided in relation
to patents and other forms of industrial property are those
provided in clause 51(3) and are not to be found under clause
51(1)(a).
. The existing power to exempt primary industry
arrangements by regulation is retained (clause 171(2)).
. A power to exempt arrangements pursuant to or for the
purposes of inter-governmental arrangements is provided in
clause 171(3).
Overseas Cargo Shipping
55. The overseas cargo shipping provisions in Part X are
the same as the provisions in the existing Act.
Transitional provisions
. Necessary transitional provisions are included in Part
XI. In particular, the Commission is authorized to retain the
existing register, subject to the maintenance of
confidentiality (clauses 148 and 149).
CONSUMER PROTECTION
14.
. The Bill prohibits a number of commercial practices
that are unfair to consumers. Unlike the position with
restrictive trade practices, there is no provision for persons
to be authorized to engage in conduct that is otherwise
prohibited. The Bill also includes provisions to prevent the
exclusion from consumer transactions of certain conditions and
warranties designed to protect the consumer. The Trade
Practices Commission is given a role in the enforcement of the
consumer protection provisions
. Most of the consumer protection provisions are
contained in Part V. Division 1 of this Part deals with
'unfair practices'; Division 2 deals with conditions and
warranties in consumer transactions. Some relevant provisions
are also to be found in -
(a) the definitions in clause 4(1) of 'special price' and
'unsolicited goods';
(b) the provisions in clause 4(3) with respect to the
meaning of a consumer;
(c) the provisions in clause 6 for operation in reliance
upon constitutional power other than the corporations
power;
(d) clause 28 -providing for the Commission to have
functions in relation to law reform, research and
dissemination of information.
Unfair Practices Prohibited
59. The Bill prohibits the following practices -
(a) misleading or deceptive conduct,
(b) false representations,
(c) deceptive offering of prizes in connection with
promotion of goods or services,
(d) misleading conduct to which Industrial Property
Convention applies,
15.
(e) bait advertising,
(f) referral selling,
(g) accepting payment without intending to supply as
ordered,
(h) misleading statements about home-operated businesses,
(i) coercion at place of residence,
(j) pyramid selling,
(k) supplying products that do not comply with safety
standards,
(l) supplying products without disclosing information
required by product information standards, and
(m) inertia selling (unsolicited goods and services),
including certain practices involving entries in
business directories.
These practices are discussed below.
. Misleading or Deceptive Conduct : Conduct of this kind
is dealt with in general terms in clause 52. The operation of
this clause overlaps that of other provisions in Division 1 of
Part V. Breach of clause 52 gives rise to an injunction only
- see the express exclusion of the clause from the offence
provisions in clause 79.
. False representations : Clause 53 prohibits a number
of specific forms of false representations with respect to
goods and services.
. Deceptive offering of prizes in connection with
promotion of goods or services : Clause 54 prohibits the
offering of such prizes etc. with the intention of not
providing them as offered.
. Misleading conduct to which Convention for the
Protection of Industrial Property as revised at Lisbon
applies : Conduct of this kind, i.e. conduct that is liable to
mislead the public as to the nature, the manufacturing
process, the characteristics, the suitability for their
purpose or the quantity of the goods, is prohibited by clause
16.
55. This clause does not come into operation until the
Convention enters into force for Australia -see clause 2(2).
. Bait advertising : Clause 56 prohibits the advertising
of a bargain which either does not exist, or unbeknown to
customers is available for a very short time only, in order to
attract customers to the advertiser's store.
. Referral selling : Clause 57 prohibits the practice by which
a supplier induces a consumer to acquire goods or services by
indicating that the consumer, after paying for the goods or
services, will get rebates or commissions on subsequent sales
by the supplier to other persons whose names are provided by
the consumer or who view the work done for the consumer by the
supplier.
. Accepting payment without intending to supples as
ordered : This practice is prohibited by clause 58.
. Misleading statements about home-operated businesses :
This practice is prohibited by clause 59.
. Coercion at place of residence : Clause 60 prohibits
coercive conduct by salesmen or debt collectors at a person's
place of residence.
. Pvramid selling : Such selling is prohibited by clause
61. The actual prohibition is in sub-clauses (1) and (2). Sub-
clause (5) defines a scheme of the kind to which the clause
applies.
. Product Safety Standards : Clause 62 requires
compliance with prescribed safety standards for consumer
products. Prescription of such standards is to be by
regulation.
. Product Information Standards : Clause 63 requires
compliance with prescribed information standards in respect of
consumer products.
Unsolicited Goods and Directory Entries : Clause 64
prohibits the assertion of a right to payment for unsolicited
goods or directory entries. This provision does not apply if
17.
the person against whom a right to payment for goods is
asserted ordinarily uses like goods in the course of his
profession, business, trade or occupation. Sub-clause (9)
provides that in proceedings in respect of a contravention the
burden is on the supplier or the publisher to prove that it
had reasonable cause to believe that there was a right to
payment.
. A person who has received unsolicited goods is
relieved by clause 65 of liability for loss or damage to the
goods other than loss or damage resulting from the doing by
him of a wilful and unlawful act.
Conditions and Warranties in Consumer Transactions
. Division 2 of Part V provides for a number of
conditions and warranties to apply to, and to be incapable of
being excluded from, consumer transactions (the meaning of
consumer being indicated in clause 4(3)).
. Clause 67(a) prevents the inclusion in consumer
contracts of provisions rendering Australian law inapplicable
to contracts the proper law of which is otherwise Australian.
Clause 67(b) prevents the substitution of provisions in the
law of another country for provisions in Division 2.
. Clause 68 renders void a term of a consumer contract
that purports to exclude, restrict or modify the application
of Division 2.
. Clause 69 provides for certain conditions as to title,
encumbrances and quiet possession to be implied in every
consumer contract.
. Clause 70 implies certain conditions in consumer
contracts for the supply of goods by description.
. Clause 71 implies certain undertakings in consumer
contracts as to quality or fitness.
. Clause 72 implies certain conditions in consumer
contracts for the supply of goods by reference to sample.
18.
. Clause 73 deals with the rights of parties in hire-
purchase transactions.
. Clause 74 implies certain conditions in consumer
contracts for the supply of services.
Concurrent Operation of State laws
83. This is provided for in clause 75.
Other Rights and Remedies
84. These are preserved by clause 75.
Enforcement of Consumer Protection Provisions
85. A contravention of a provision of Part V (other than
the general provision in clause 52) is to be an Offence. The
maximum penalty for such an Offence is to be, in the case of
a corporation, a fine not exceeding $50,000 and in the case of
an individual, a fine not exceeding $10,000 or imprisonment
for not more than six months (clause 79). Provision for
injunction is included in clause 80. A right to recover
damages is conferred by clause 82. Apart from that right
clause 87(2) empowers the Court, upon finding that there has
been a contravention, to direct a refund of money or a payment
to a person who has suffered loss or damage.
MISCELLANEOUS
86. Pending the establishment of the Superior Court of
Australia, the Australian Industrial Court will have exclusive
jurisdiction under the Act (clauses 86 and 168). The
Australian Industrial Court has exclusive jurisdiction under
the existing Act.
. The extent to which the legislation will operate
extra-territorially is indicated in clause 5. The definition
of market in clause 4 is also relevant in this regard.
19.
. The Commission is given powers to obtain information
and documents to assist it in the investigation of
contraventions of the Act (clause 155).
. Provision for legal aid under the legislation is
contained in clause 169.
. The Commission will be required to furnish an annual
report (clause 170).
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