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2002-2003-2004
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
TRADE PRACTICES LEGISLATION AMENDMENT BILL 2004
EXPLANATORY MEMORANDUM
(Circulated by authority of the Treasurer,
the Hon Peter
Costello, MP)
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1.1 This Bill makes amendments to the Trade Practices Act 1974 (the TP Act) that will implement the Government’s response to the Review of the Competition Provisions of the Trade Practices Act (the Dawson Review). The amendments incorporate the Government’s response to recommendations arising from the independent committee of inquiry which comprised of Sir Daryl Dawson, AC KBE CB, Ms Jillian Segal and Mr Curt Rendall.
1.2 The Dawson Review concluded that that the competition provisions of the TP Act have served Australia well, but made recommendations seeking to improve the operation of the Act, specifically in relation to the competition and authorisation provisions, and the administration of the TP Act.
1.3 A voluntary formal merger clearance system will be created that will operate in parallel with the informal clearance system, retaining the advantages of the latter while overcoming some of its disadvantages. The test for considering mergers will remain unchanged — section 50 of the TP Act will continue to prohibit mergers that would have the effect, or be likely to have the effect of substantially lessening competition in a market.
1.4 While the informal system is inexpensive, and can be relatively speedy, the Dawson Review found that the absence of reasons provided by the Australian Competition and Consumer Commission (the Commission) for its informal merger clearance decisions has hindered the development of a body of precedent to assist in the making of consistent and predictable determinations. Moreover, the Dawson Review found that the absence of a meaningful appeals mechanism within the informal clearance system may put the Commission in a position to extract undertakings which go beyond competition concerns arising from a merger. Consequently, the Dawson Review recommended the creation of a formal, but not compulsory, clearance process, operating in parallel with the existing informal system. This should retain the advantages of the current system whilst overcoming some of its disadvantages.
1.5 The optional formal system will provide parties with an alternative process for progressing their merger. Parties will be able to use the informal system and/or use the optional formal system. Under the new formal clearance procedure, the Commission will have 40 days to make a decision on the proposed merger. This 40 day limit would be capable of extension only at the request of the applicant. This will increase the level of certainty for business. Moreover, parties would be presented with reasons for the Commission’s decision and be given the opportunity to have the Australian Competition Tribunal (the Tribunal) review an unfavourable decision.
1.6 The Dawson Review considered that the merger authorisation process is commercially unrealistic for many merger proposals, with concern being contributed to the time taken to make a merger decision and the risk of third party intervention by way of the Tribunal.
1.7 The amendments make the authorisation process more timely and reduce uncertainty. The Tribunal will be responsible for directly assessing merger authorisations on public benefit grounds, it will have to consider an application within a statutory time limit and will consider third party interests as part of the assessment rather than through an appeal process.
1.8 The amendments to the merger authorisation process improve timeliness by placing time limits on the Commission for considering applications. The Commission will have the discretion to waive the filing fee, either in whole or in part.
1.9 The amendments will reduce the regulatory burden on small business by introducing a notification process for collective bargaining by small business dealing with large business. The notification process will provide an alternative to the authorisation process (which will still be the appropriate avenue where arrangements involving more than one target are to be considered). Under the new notification process collective bargaining arrangements will (in the absence of objection by the Commission) receive immunity at the end of 14 days (or such longer period as prescribed by regulation) for a period of three years. The onus will be on the Commission to provide notice that the conduct does not, or is unlikely to benefit the public, or will not outweigh the detriment resulting from the conduct.
1.10 Exclusionary provisions having the purpose of preventing, restricting or limiting the supply or acquisition of goods or services to or from particular persons or classes of persons will remain illegal per se (there is no requirement to prove in addition to the conduct itself, that it substantially lessens competition), consistent with the treatment of price fixing conduct. Genuine joint venture activity which does not substantially lessen competition will be a defence under these provisions. The authorisation process will still be available for other joint ventures in appropriate circumstances.
1.11 Intra party transactions in a dual listed company are treated on the same basis as related party transactions within a group of companies, the aggregate size of a dual listed company will be assessable for the purpose of considering market power, and the forming of dual listed companies will be prohibited where it would substantially lessen competition in a market, with authorisation available in appropriate cases.
1.12 The Dawson Review found third line forcing is often beneficial and pro-competitive. The amendments to the third line forcing provisions subject third line forcing to a substantial lessening of competition test, instead of being per se illegal (that is, it is prohibited outright), to bring its treatment into line with other forms of exclusive dealing.
1.13 The Commission’s extensive regulatory power will be matched with appropriate accountability by subjecting the Commission’s powers to enter premises and inspect documents, to the requirement of obtaining a warrant from a Magistrate for the exercise of those powers. The Commission is granted search and seizure powers, similar to the search warrant provision in the Crimes Act 1914.
1.14 The maximum pecuniary penalty for corporations will be the greater of $10 million, or three times the gain from the contravention, or where gain cannot be readily ascertained, 10 percent of the turnover of the body corporate and all its interconnected bodies corporate (if any). The Court will have the option to exclude an individual implicated in a contravention of the TP Act from being a director of a corporation or being involved in its management and corporations will be prohibited from indemnifying officers, employees or agents against the imposition of a pecuniary penalty.
1.15 `The amendments implement the Government’s response to the Productivity Commission Report No. 23, 14 August 2002, that the current section 2D of the TP Act (exempts the licensing decisions and internal transactions of local government from Part IV of the TP Act) be repealed and replaced with a new section 2D providing explicitly that Part IV of the TP Act only applies to local government in so far is it carries on a business. This is consistent with the exemption currently provided to Commonwealth, State and Territory governments.
1.16 These amendments are the second tranche of the amendments resulting from the constitutional questions raised by the High Court in R v Hughes (2000) 171 ALR 155. Amendments to section 44ZZM and section 44ZZOA of the TPA formed part of the Trade Practices Legislation Amendment Act 2003. The amendments to section 150F will ensure the States and Territories can confer duties on the Commission and the Tribunal pursuant to the Competition Code, in a way that is constitutionally valid (that is, the Commonwealth law will impose the duty on Commonwealth bodies and officers, as opposed to the Commonwealth law merely consenting to a State or Territory law).
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2.1 The financial implications arising from the passage of this Bill will be considered in a budget context. These implications relate to the functions of the Australian Competition Tribunal who may now review merger clearance decisions where parties choose the formal merger clearance system. In addition, the Tribunal will be the primary body when considering merger authorisations.
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3.1 A regulation impact statement was not prepared as the Report prepared by the Dawson Committee was consultative and contained adequate analysis of the impacts of the proposed changes to the Trade Practices Act 1974 (the TP Act). Copies of the Report can be found at http://tpareview.treasury.gov.au/content/report.asp.
3.2 Amendments to the TP Act that are not reflected in the Dawson Review did
not require a regulation impact statement as they were minor or machinery in
nature.
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4.1 This clause provides for this Act to be cited as the Trade Practices Legislation Amendment Act 2004.
4.2 The Bill provides for the following commencement times.
Table item #1 Sections 1 to 3 and anything in the Bill not covered by the commencement information in Clause 2 will commence on the day on which this Act receives Royal Assent.
4.3 Provisions commencing on a single day fixed by proclamation, or six months after this Act receives the Royal Assent, whichever is earlier:
Table item #2 Schedule 1, items 1 to 22 (relating to merger clearances and authorisations, and injunctions and divestiture where an authorisation or clearance is granted on false information);
Table item #4 Schedule 1, item 23 (refers to non-merger authorisation). Due to consequential renumbering of the Trade Practices Act 1974, should item 10 of Schedule 1 to the Trade Practices Amendment (Personal Injuries and Death) Act (No. 2) 2004 commence before that time, the provisions do not commence at all;
Table item #4 Schedule 1, item 24 (refers to non-merger authorisation). Due to consequential renumbering of the Trade Practices Act 1974, should item 10 of Schedule 1 to the Trade Practices Amendment (Personal Injuries and Death) Act (No. 2) 2004 commence before that time, the provisions do not commence at all;
Table item #5 Schedule 1, items 25 to 46 of this Act will commence on a single day to be fixed by Proclamation (these items insert the new merger clearance and authorisation processes);
Table item #6 Schedules 2 to 8 insert the new provisions for non-merger authorisations, collective bargaining, exclusionary provisions, price fixing provisions, dual listed companies, third line forcing and exclusive dealing, and enforcement;
Table item #7 Schedule 9, items 1 to 17 incorporates the new civil penalty provisions, and disqualification from managing corporations.
Table item #8 As consequential amendments Schedule 9, items 18 and 19 will
commence the later of
a) immediately after the commencement of the
provisions in Clause 2, Table item #2; and
b) immediately after the
commencement of Part 3 of Schedule 4 to the Corporate Law Economic Reform
Program (Audit Reform and Corporate Disclosure) Act 2004.
However the items will not commence should the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 not occur.
Table item #9 Schedule 9, items 20 to 24 refer to disqualification from managing corporations and incorporates the new provisions in regard to indemnity.
4.4 Provisions commencing on the day after this Act receives the Royal Assent:
Table item #10 Schedule 10 inserts the new provisions concerning the application of Part IV of the Trade Practices Act 1974 to local government bodies.
Table item #11 Schedule 11 inserts the new provisions regarding functions and powers under the Competition Code.
Table item #12 Schedule 12 is a technical amendment rectifying an incorrect cross reference concerning the Gas Pipelines Access (Commonwealth) Act 1998 and will commence immediately after the commencement of Schedule 1 to the Trade Practices Legislation Amendment Act 2003.
4.5 Where an Act is specified in a schedule in this Act, the specified Act is amended or repealed as required by the particular Schedule, and any other item in a schedule of this Act has effect according to its terms.
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5.1 The Schedule amends the Trade Practices Act 1974 (referred to in this Explanatory Memorandum as the ‘TP Act’) to provide the new merger clearance and merger authorisations processes recommended by the Review of the Competition Provisions of the Trade Practices Act (the Dawson Review).
5.2 Section 50 of the TP Act prohibits mergers that would have the effect, or be likely to have the effect of substantially lessening competition in a market.
5.3 Part VII of the TP Act provides that the Australian Competition and Consumer Commission (the Commission) may, in the public interest, authorise certain anti-competitive conduct (including mergers) that would otherwise be in breach of Part IV of the TP Act. The Dawson Review found that the merger test should remain unchanged but changes to merger processes are necessary, requiring new definitions and some new machinery for aspects of those processes.
5.4 Item 1 inserts a new definition of authorisation for merger authorisation applications under Division 1 of Part VII granted by the Commission or the Australian Competition Tribunal (the Tribunal) on a review of a determination by the Commission (in regard to authorisation decisions made before the commencement of this Act); or under Division 3 of Part VII granted by the Tribunal.
5.5 Item 2 repeals the definition of authorization found in subsection 4(1) of the TP Act.
5.6 Item 3 inserts a definition of clearance in subsection 4(1) under Division 3 of Part VII of the TP Act to mean a clearance that is granted by the Commission or by the Tribunal on a review of a determination by the Commission.
5.7 Item 4 inserts the words 'or a clearance' to follow 'authorization' in subsection 8A(6), thereby ensuring the Chairperson considers whether an associate member should form part of the Commission for the purpose of a clearance decision.
5.8 Item 5 inserts the words 'or a clearance' to follow 'authorization' in subsection 25(1), thereby ensuring the Commission cannot delegate its powers to grant, revoke or vary a clearance to a member of the Commission.
5.9 Item 6 inserts before section 30 a definition of proceedings under section 29P to include applications for authorisations made to the Tribunal under Division 3 of Part VII.
5.10 Item 7 is a consequential amendment inserting criteria for membership of the Tribunal so as to ensure that the Tribunal is constituted by different members when considering: (a) an application to the Tribunal for authorisation under Division 3 of Part VII; and (b) the review of a merger clearance decision in relation to an acquisition it has considered as a merger authorisation previously (and vice versa).
5.11 Different Tribunal members will be required to assess authorisation applications to those that review Commission clearance decisions. The new clearance and authorisation processes involve different tests (authorisation involves a consideration of public benefit, and clearance involves a consideration of substantial lessening of competition) and different Tribunal members are required to ensure that each process is undertaken with a fresh consideration of the relevant matter.
5.12 This item inserts 'or clearance' into subsections 46(6) and 46A(6) to follow 'authorization' ensuring that section 46 (Misuse of market power) does not prohibit a corporation from engaging in conduct that has been formally cleared (and is therefore immune from legal action).
5.13 This item adds a note to the end of subsection 50(1) (which prohibits acquisitions by corporations having the effect or likely effect of substantially lessening competition) that a corporation will not be prevented from making an acquisition pursuant to section 50 if it has been granted a clearance by the Commission or Tribunal or a merger authorisation by the Tribunal (clearance provides immunity from legal action).
5.14 This item adds a note to the end of subsection 50(2) (which prohibits acquisitions by persons having the effect or likely effect of substantially lessening competition) that a person will not be prevented from making the acquisition of shares and assets if it has been granted a clearance by the Commission or Tribunal, or a merger authorisation by the Tribunal (clearance provides immunity from legal action).
5.15 Subsection 50(4) of the TP Act ensures that no breach of section 50 occurs where a contract for an acquisition is subject to a condition that provisions of the contract relating to the acquisition will not come into force until the person has been granted an authorisation. Item 11 extends the protection currently granted to authorisations under paragraph 50(4)(b), to the granting of a clearance.
5.16 Item 12 amends paragraph 50(4)(c) to require that the person must have applied for the clearance (as with authorisation) before the expiration of 14 days after entering into the contract.
5.17 Item 13 amends paragraph 50(4)(d) so that acquisitions will not be regarded as having occurred before the application for the clearance (as with an application for authorisation) is disposed of, or the contract ceases to be subject to the condition (whichever happens first). This ensures the immunity of subsection 50(4) extends to applications for clearances as for authorisations.
5.18 Subsection 50(5) provides that authorisations are taken to be disposed of either 14 days after the Tribunal has made an authorisation decision on review from the Commission, or 14 days after an application for review could have been made to the Tribunal. This item omits 'an authorization' and substitutes it with 'a clearance' as the Commission is no longer the responsible body for authorisation applications. The Tribunal is the only body able to assess authorisation applications.
5.19 This item omits 'an authorization shall be' and substitutes it with 'a clearance is'.
5.20 This item inserts subsection 50(5A) which provides that the applicant has 14 days following the Tribunal’s determination on an authorisation application to consider administrative review processes.
5.21 Item 17 inserts a new section 80AC outlining the conditions under which injunctions may be granted by the Court so as to prevent mergers where clearance or authorisation has been given on the basis of false or misleading information provided by the applicant or body corporate related to the applicant.
5.22 Subsection 80AC(2) provides that the Court must not grant an injunction if: (a) the person was granted a merger authorisation or clearance under Division 3 of Part VII in relation to the acquisition; and (b) the Court could not grant an injunction under this section.
5.23 This item provides the example whereby if the Commission granted a clearance on the basis of false or misleading information but the Tribunal granted an authorisation on the basis of true information, the Court would be unable to grant an injunction under this section.
5.24 Item 18 inserts new section 81A. This section enables the Court, on application of the Commission, to order divestiture where an authorisation or clearance has been granted on the basis of false or misleading material information that was provided by the applicant.
5.25 Subsection 81A(1) outlines the circumstances where divestiture is applicable should the Court be satisfied that the requisite circumstances have been met.
5.26 Subsection 81A(2) provides that the Court, on the application of the Commission, may direct the disposal of shares or assets where a formal clearance or authorisation has been granted on the basis of false or misleading material information that was provided by the applicant.
5.27 Subsection 81A(3) prevents the Court from ordering divestiture should the applicant be granted both a clearance and an authorisation under Division 3 of Part VII and the conditions required in subsection 81A(1) are not met in relation to both the clearance and the authorisation. This item provides the example whereby if the Commission granted a clearance on the basis of false or misleading information but the Tribunal granted an authorisation on the basis of true information, the Court would be unable to order divestiture under this section.
5.28 Subsection 81A(4) provides that the Court may, on the application of the Commission, declare the acquisition of shares or assets void as from the day they were acquired, if in addition to the requirements of subsection 81A(1), the person from whom the assets were acquired (that is, the vendor) was involved in the contravention by the acquirer referred to in subsection 81A(1).
5.29 Subsection 81A(5) provides that should the Court make an order under subsection 81A(4) then the assets affected by the declaration are deemed to not be disposed of by the vendor, and the vendor must refund any amount paid for acquiring assets to the acquirer.
5.30 Subsection 81A(6) provides that the Court cannot make an order under subsection 81A(4) if the acquirer was granted a clearance and an authorisation for the acquisition and the matters in subsection 81A(1) to (4) are not satisfied in relation to both the clearance and the authorisation.
5.31 Subsection 81A(7) provides that the Court may accept an undertaking by the person to dispose of other shares or assets as an alternative to making an order under subsection 81A(2) or (4) of this section.
5.32 Subsection 81A(8) provides that an application for divestiture may be made at any time within 3 years after the day on which the acquisition occurred.
5.33 Subsection 81A(9) provides that, whether or not the Court is satisfied that the requirements of subsections 81A(2) or (4) have been met, and all the parties to the proceedings agree, the Court may make an order for divestiture if the Court determines that to be appropriate.
5.34 Item 18 also amends the heading of section 81.
5.35 This amends subsection 86C(4) paragraph (a) of the definition of contravening conduct by omitting 'or 75AYA' and substituting it with ', 75AYA or 95AZN'. This enables the Court to make non-punitive orders where a person has been negligent as to whether information is false or misleading.
5.36 Item 20 inserts new subsection (1A) to clarify the existing application of undertakings as a result of the Dawson Review amendments. The Commission is responsible for undertakings consistent with Division 3 of Part VII for both clearances and authorisations.
5.37 Item 21 repeals the heading of Part VII to be replaced with
Part
VII — Authorisations, notifications and clearances in respect of
restrictive trade practices
5.38 Part VII will be amended to provide that Division 1 relates to authorisations other than mergers, and will insert Division 3 which outlines the processes for merger clearances and authorisations.
5.39 Item 22 repeals the heading of Division 1 of Part VII to be replaced
with:
Division 1 — Authorisations (other than section 50 merger
authorisations)
5.40 This inserts a definition of authorisation into subsection 87D(1) to mean an authorisation other than section 50 merger authorisations. (Technical amendment relating to renumbering of the TP Act dependent on commencement of item 10 of Schedule 1 to the Trade Practices Amendment (Personal Injuries and Death) Act (No. 2) 2004).
5.41 This inserts a definition of authorisation to mean an authorisation other than section 50 merger authorisations. (Technical amendment relating to renumbering of the TP Act dependent on commencement of item 10 of Schedule 1 to the Trade Practices Amendment (Personal Injuries and Death) Act (No. 2) 2004).
5.42 This item repeals the ability of the Commission to grant an authorisation for mergers. The Commission retains the ability to grant an authorisation for acquisitions outside Australia pursuant to section 50A.
5.43 Item 26 amends subsection 90(9) removing the ability of the Commission to grant an authorisation for a merger. The Commission retains the ability to make a determination and apply the public benefit test with regard to acquisitions outside Australia (section 50A).
5.44 Item 27 inserts a new Division 3 to the end of Part VII which includes four subdivisions:
Subdivision A — Preliminary
Subdivision B — Merger clearances
Subdivision C — Merger authorisations
Subdivision D — Miscellaneous
5.45 Section 95AA inserts a box that contains a simplified outline summarising Division 3 regarding the differences between merger clearances and authorisations, the process for merger clearances (reference to Subdivision B) and the process for merger authorisations (reference to Subdivision C).
Different bodies decide whether they should be granted;
Different timeframes apply for when the body must make its decision;
They have different tests that need to be satisfied for them to be granted;
Merits review is not available for decisions by the Tribunal on authorisations.
The Commission grants them;
The Commission must make its decision whether to grant within 40 business days (which can be extended with the applicant’s agreement). If the Commission does not make a decision within 40 business days, the application is taken to be refused;
The Commission cannot grant a clearance unless it is satisfied that the acquisition would not have the effect, or be likely to have the effect , of substantially lessening competition in a market;
If the Commission refuses to grant a clearance, or grants a clearance subject to conditions, then the person who applied for the clearance may apply to the Tribunal for review of the Commission’s decision.
The Tribunal grants them;
The Tribunal must make its decision whether to grant within 3 months (which can be extended to 6 months in special circumstances). If the Tribunal does not grant the merger authorisation, the application is taken to be refused;
The Tribunal cannot grant the authorisation unless it is satisfied that the acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to take place.
This contains a prohibition on providing false or misleading information to the Commission or Tribunal under this Division or Division 3 of Part IX.
5.46 Section 95AB defines a number of terms used in the Division. These
include:
• authorisation being an authorisation for a
merger by the Tribunal;
• business day means a day that
is not a Saturday, a Sunday, or a public holiday in the Australian Capital
Territory;
• clearance means a clearance granted by the
Commission, or on review by the Tribunal, under this Division;
• merger authorisation register refers to
the register of applications for merger authorisations maintained by the
Tribunal under new section 95AZ;
• merger clearance
register refers to the register of merger clearance applications
maintained by the Commission under new section 95AH; and
• minor
variation in relation to a clearance or authorisation is a single
variation that does not involve a material change in the effect of the clearance
or authorisation.
5.47 The Dawson Review found that the Commission’s current informal system is relatively speedy and inexpensive — the voluntary nature of the process minimises the possibility of unduly delaying mergers that are unlikely to be in breach of section 50. The Dawson Review considered that the weaknesses of the system are evident in the absence of an effective mechanism for review and the absence of reasons for the Commission’s decisions.
5.48 This Subdivision creates a voluntary formal mergers process that will operate in parallel with the existing informal system, retaining the advantages of the informal system, and overcoming some of its disadvantages.
5.49 These proposed amendments require the Commission to provide detailed reasons for its decisions so as to achieve greater accountability and transparency for merger clearance decisions. The formal clearance procedure will provide an effective appeals mechanism and timeliness in determinations and the granting of a formal clearance will provide immunity from legal action under section 50 (whether by third parties or by the Commission).
5.50 The informal and formal system are seen as working not only in parallel but in a complementary fashion. Difficulties may be raised and addressed informally without setting the clock running under the legislated formal process. However, once a decision is sought, the legislated time frame, immunity from legal action where a clearance is granted, and an effective appeals mechanism will provide a level of certainty for business unavailable under any non-legislated informal system.
5.51 Section 95AC provides that the Commission may grant a clearance to a person: (a) to acquire shares in the capital of a body corporate; and (b) to acquire assets of another person. The prohibition on anti-competitive mergers will not prevent the acquisition of shares or assets in accordance with the clearance. It is noted that the Commission may not grant a clearance unless it is satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition.
5.52 Section 95AD states that a person who wants a clearance for the purpose of acquiring shares or assets must apply to the Commission. (A third party may make an application on the person’s behalf in accordance with normal agency principles.)
5.53 Section 95AE establishes the requirements for a valid formal clearance application. The application must be: (a) in a form prescribed by the regulations and contain the information required by the form; (b) accompanied by such other information or documents as are prescribed by regulations; and (c) accompanied by the fee (if any) prescribed by the regulations.
5.54 The regulations may prescribe that the application form contain a requirement that the applicant give an undertaking consistent with section 87B that it will not make the acquisition while the application is being considered by the Commission.
5.55 Section 95AF obligates the Commission to notify an applicant if their application for clearance is invalid within 5 business days: (a) stating that the application is invalid; and (b) giving reasons as to why the application does not comply with the requirements for a valid application in new section 95AE.
5.56 Section 95AG requires the Commission to: (a) publish applications for a clearance as well as accompanying information on its website subject to confidentiality; and (b) invite submissions in respect of the application within a period specified by the Commission.
5.57 Under this section, the Commission will be required to maintain a merger clearance register of all applications including minor variations, revocation of clearances and withdrawn or abandoned proposals. The Commission will be required to include documents given to the Commission, particulars of oral submissions, and the Commission’s determination and reasons in relation to a clearance application or proposal (subject to confidentiality requirements in new section 95AI).
5.58 Subsection 95AI(1) allows a person who gave information in regard to any of the applications outlined in section 95AH(1) to request that information be excluded from the Commission’s website and the merger clearance register on grounds of confidentiality.
5.59 The Commission must not include information in the merger clearance register, or its website, until it has determined any request to address claims of confidentiality.
5.60 Upon such a request the Commission must exclude:
particulars of a secret formula or process;
the cash consideration offered for the acquisition of shares or assets;
the current costs of manufacturing, producing or marketing goods or services.
5.61 The Commission may exclude information from its register and website upon request if it is satisfied that it is desirable to do so because of the confidential nature of the information.
5.62 If the Commission is not satisfied by the request, it must return the documents (or part thereof) to the applicant upon the applicant’s request, and must not include them in the register or its website.
5.63 An applicant can withdraw all or part of their oral submission should their request for confidentiality be refused by the Commission.
5.64 The section also provides that the Commission may exclude information from the register and its website for reasons other than confidentiality.
5.65 The Commission will be able to seek additional information from an applicant in determining a clearance application.
5.66 The Commission will be able to undertake consultation with persons it deems appropriate for the purposes of making its determination for an application.
5.67 The applicant will be able to withdraw their application at any time by notice in writing.
5.68 The Commission must make a determination (a) granting or (b) refusing the clearance of the application in writing, taking into account submissions received by States, Territories, the Commonwealth, the applicant and any other person when making its determination. (It is noted that if the Commission does not make a determination within the requisite time period, it is deemed to have refused to grant the clearance). The Commission will be required to notify the applicant in writing of the outcome of the determination on a merger clearance and give written reasons supporting its decision.
5.69 This proposed provision states the test for granting a clearance — the Commission must not approve a clearance unless it is satisfied that the acquisition would not have the effect, or be likely to have the effect of substantially lessening competition (as consistent with the definition and interpretation under section 50 of the TP Act).
5.70 If an acquisition has already occurred, a clearance cannot be granted.
5.71 Section 95AO states that if the Commission has not made a determination on an application by the end of 40 business days from the time of the applicant giving the application to the Commission, then it is taken to have refused the clearance. Subsection 95AO(2) allows the applicant to agree to the Commission taking a specified longer time to make a determination, provided it occurs before the end of the period referred to in subsection 95AO(1), that is before the end of the 40th business day, or such other period as is substituted with the agreement of the applicant.
5.72 Section 95AP enables the Commission to grant a clearance subject to explicit conditions that are specified. For example, a person may be granted a clearance subject to complying with an undertaking under section 87B.
5.73 Section 95AQ specifies the date a clearance takes effect. Subsection 95AQ(1) states that a clearance takes effect on the day of the determination if it is not subject to any conditions. Subsection 95AQ(2) states that, in cases where a clearance is subject to conditions, the clearance determination will take effect:
on the day the Tribunal makes a determination of an application for a review of the Commission’s decision (where the application has not been withdrawn); or
on the day on which the application for a review of the Commission’s decision is withdrawn from the Tribunal; or
the day notice is given to the Commission for withdrawing an application for review by the Tribunal; or
in any other case at the end of the period in which an application for review may be made to the Tribunal.
5.74 Subsection 95AQ(3) provides for a clearance to be in force for a specified time period only.
5.75 Subsection 95AR(1) provides for a person to apply for a minor variation of a clearance.
5.76 Subsection 95AR(2) outlines the conditions for validity of an application for a minor variation. The application must: (a) be in a form prescribed by the regulations, and contain the information required by the form; (b) be accompanied by such other information and documents prescribed by the regulations; and (c) be accompanied by the prescribed fee (if any).
5.77 Subsection 95AR(3) requires the Commission to: (a) put the application on its website (subject to confidentiality); and (b) invite submissions concerning the application to be made within a period specified by the Commission.
5.78 Subsection 95AR(4) requires that the Commission make a determination either (a) varying the clearance or (b) dismissing the application and notify the applicant in writing giving reasons.
5.79 Subsection 95AR(5) reiterates the test for a clearance, stating that the Commission must not make a determination varying a clearance unless it is satisfied the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition (within the meaning of section 50 of the TP Act).
5.80 Subsection 95AR(6) allows the Commission to deal with more than one minor variation simultaneously if a person applies at the same time or so close together in time that the Commission considers they can be conveniently dealt with at the same time, and if the Commission is satisfied that there would not be a material change in the effect of the clearance if all of the minor variations are dealt with together.
5.81 Subsection 95AR(7) allows the applicant to withdraw their application (providing written notice) at any time.
5.82 Subsection 95AS(1) allows the Commission to revoke a clearance or revoke a clearance and substitute it with a new clearance upon application by the person who was granted the clearance.
5.83 Subsection 95AS(2) requires the application for revocation to contain or be accompanied by information prescribed in the regulations and be accompanied by the prescribed fee (if any).
5.84 Subsection 95AS(3) requires the Commission to put a copy of the application for revocation on its website (subject to confidentiality) and invite submissions on the application.
5.85 Subsection 95AS(4) enables the Commission to revoke a clearance, or revoke a clearance and substitute a new clearance without an application in the following circumstances:
the clearance being granted on the basis of false or misleading information; or
non compliance with a condition of the clearance; or
there has been a material change of circumstances since the clearance was granted.
5.86 Section 95AS(4)(c) addresses the situation where a clearance is granted but there is a delay from the time of granting and the date at which the acquisition takes place. This provision allows the Commission the flexibility to prevent an anti-competitive merger taking place, when the clearance no longer applies to that particular set of circumstances. If an acquisition has in fact occurred in reliance on the merger clearance, and there has been no change in circumstance between the time of the clearance and the acquisition, the corporation obtains immunity from section 50 at the time of the acquisition, so the Commission would not be seeking a revocation in those circumstances.
5.87 Subsection 95AS(5) requires the Commission to give notice to the person granted clearance to the effect that the Commission is considering making a determination of revocation and put a public notice on its website indicating the basis on which the revocation is being proposed and calling for submissions on the proposed revocation within the period specified by the Commission.
5.88 Subsection 95AS(6) requires that, after considering any submissions, the Commission make a determination in writing revoking the clearance or revoking the clearance and substituting a new clearance or deciding not to revoke the clearance. The Commission’s decision and reasons for the decision must be given in writing to the person originally given the clearance.
5.89 Subsection 95AS(7) requires the Commission to give consideration to submissions received regarding revocation of a clearance and must not revoke the clearance unless it is satisfied that, had the clearance not been granted, the Commission would have been prevented from approving the clearance through not being satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition (as consistent with the definition and interpretation under section 50 of the TP Act).
5.90 Subsection 95AS(8) requires that the Commission must not make a determination revoking a clearance and substituting it with another clearance unless it is satisfied it would not have been prevented from approving the new clearance through not being satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition (as consistent with the definition and interpretation under section 50 of the TP Act).
5.91 Subsection 95AS(9) enables the applicant to withdraw their application for revocation to the Commission at any time, provided it is done in writing.
5.92 The Dawson Review identified that dissatisfaction with the merger authorisation process has largely resulted from concerns about the time which may be taken by the Commission to reach a decision. The merger authorisation process will be made more attractive to business by making it more timely and reducing uncertainty.
5.93 The proposed subdivision outlines the procedure for merger authorisation applications. It removes the power of the Commission to assess merger authorisation applications and creates a new process whereby the Tribunal will have the power to directly assess merger authorisation applications. This subdivision provides that applications should be considered by the Tribunal within a statutory time limit and that there be no merits review of decisions made by the Tribunal. Third party interests will be considered as part of the Tribunal’s assessment rather than through an appeal process.
5.94 These amendments are consistent with the findings and recommendations of the Dawson Review.
5.95 Section 95AT enables the Tribunal to grant an authorisation for a merger: (a) to acquire shares in the capital of a body corporate; and (b) to acquire assets of another person. The prohibition on anti-competitive mergers will not prevent the acquisition of shares or assets in accordance with the authorisation. It is noted that, pursuant to the test for merger authorisations in section 95AZH, the Tribunal may not grant an authorisation unless it is satisfied that the acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to take place.
5.96 Section 95AU requires a person who wants an authorisation for the purpose of acquiring shares or assets to apply to the Tribunal. A third party may make an application on the person’s behalf in accordance with agency principles.
5.97 Section 95AV specifies the requirements for a valid formal authorisation application. The application must be: (a) in a form prescribed by the regulations and contain the information required by the form; (b) accompanied by such other information or documents as are prescribed by regulations; and (c) accompanied by the fee (if any) prescribed by the regulations.
5.98 The application form may contain a requirement (to be prescribed by regulation) that the applicant give an undertaking consistent with section 87B that it will not make the acquisition while the application is being considered by the Tribunal.
5.99 Section 95AW obligates the Tribunal to notify an applicant if their application for clearance is invalid within 5 business days of receiving the purported application (a) stating that the application is invalid and (b) giving reasons as to why the application does not comply with the requirements for a valid application required by new section 95AV.
5.100 Section 95AX requires the Tribunal to notify the Commission within 3 business days of receiving an authorisation application and provide it with a copy of the application.
5.101 Section 95AY requires the Commission to publish a copy of the application for authorisation on its website subject to confidentiality and also invite submissions in respect of the application within a period specified by the Tribunal.
5.102 Section 95AZ requires the Tribunal to maintain a merger authorisation register of all applications including minor variations, revocation of authorisations and withdrawn or abandoned proposals. The Tribunal is required to keep details of documents, particulars of oral submissions and the Tribunal’s determination and reasons in relation to an authorisation application or proposal (subject to confidentiality).
5.103 Subsection 95AZA(1) allows a person who gave information in regard to any of the applications outlined in section 95AZ(1) to request that information be excluded from the Commission’s website and the merger authorisation register on grounds of confidentiality.
5.104 The Tribunal must not include information in the merger authorisation register, or the Commission’s website, until it has determined any request for confidentiality.
5.105 The Tribunal must exclude information concerning:
particulars of a secret formula or process;
the cash consideration offered for the acquisition of shares or assets; or
the current costs of manufacturing, producing or marketing goods or services.
5.106 The Tribunal may exclude information from the register and its website on request if it is satisfied that it is desirable to do so because of the confidential nature of the information.
5.107 If the Tribunal refuses the confidentiality request, it must return the documents (or relevant parts thereof) to the applicant on request and must not include them in the register or on the Commission’s website.
5.108 An applicant can withdraw all or part of their oral submission should their request for confidentiality be refused by the Tribunal, which must exclude the relevant material from the register and the Commission’s website.
5.109 The section also provides that the Tribunal may exclude information from the register and its website for reasons other than confidentiality.
5.110 This section provides the Tribunal with discretion for determining merger authorisation applications with as little formality and technicality, and as expeditiously, as possible consistent with the requirements of the TP Act and the proper consideration of the matters before the Tribunal. The Tribunal is not bound by the rules of evidence.
5.111 Subsection 95AZB(2) provides the presidential member of the Tribunal with discretion in respect of procedural matters.
5.112 The Tribunal will be able to seek additional information from an applicant in determining a merger authorisation application.
5.113 The Tribunal will be able to undertake consultation with persons it deems appropriate for the purposes of making its determination for a merger authorisation application.
5.114 The applicant will be able to withdraw their merger authorisation application from the Tribunal at any time by notice in writing.
5.116 The Commission must provide information, make reports and provide such other assistance to the Tribunal to enable it to make a determination as the presiding member of the Tribunal requires.
5.117 The Tribunal must make a determination (a) granting the authorisation or (b) refusing the authorisation of the application in writing, taking into account submissions received from the Commonwealth, States, Territories, the applicant and any other person when making its determination. The Tribunal will be required to notify the applicant in writing of the outcome of the determination on a merger authorisation and give reasons supporting its decision.
5.118 It is noted that the Tribunal must make its determination within the time limit set out in section 95AZI. If it does not then it is taken to have refused to grant the authorisation.
5.119 This proposed provision states the test for granting an authorisation — the Tribunal must not grant an authorisation unless it is satisfied the acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur. Subsection 95AZH(2) outlines the criteria the Tribunal should have regard to when determining what amounts to a benefit to the public:
a significant increase in the real value of exports;
a significant substitution of domestic products for imported goods; and
all other relevant matters that relate to the international competitiveness of any Australian industry.
5.120 These criteria are not to be taken as limiting any other benefits to the public that may be taken into account by the Tribunal.
5.121 An authorisation cannot be granted for an acquisition that has already taken place.
5.122 If the Tribunal has not made a determination on an application within the relevant period, it is taken to have refused to grant the authorisation. Subsection 95AZI(2) defines the relevant period as 3 months commencing on the day an application is given to the Tribunal with provision for the Tribunal to extend this period by another 3 months if the Tribunal determines in writing that the matter cannot be dealt with properly within the first three months either because of its complexity or because of other special circumstances.
5.123 The Tribunal is required to notify the applicant in writing of the outcome of its determination, either before the end of the initial 3 months or the further three month period as extended by the Tribunal.
5.124 This new section enables the Tribunal to grant an authorisation subject to explicit conditions specified by the Tribunal (this would include making and complying with an undertaking given to the Commission under section 87B).
5.125 This specifies when an authorisation comes into force. Subsection 95AZK(1) states that an authorisation takes effect on the day the determination is made. Subsection 95AZK(2) provides for an authorisation to be in force for a specified time period only.
5.126 This provides for minor variations of authorisations. Subsection 95AZL(1) provides for a person to apply to the Tribunal for minor variations to an authorisation. Subsection 95AZL(2) outlines the conditions for validity of an application including that it be:
in a form prescribed by the regulations and contain the information required by the form; and
accompanied by such other information or documents as are prescribed by the regulations; and
accompanied by the fee (if any) prescribed by the regulations.
5.127 Subsection 95AZL(3) requires the Tribunal to provide a copy of the application for a minor variation to the Commission within 3 business days of receiving it, if it is satisfied that it is minor.
5.128 Subsection 95AZL(4) requires the Commission to put a copy of the application for a minor variation on its website (subject to confidentiality) and invite submissions by notice on its website in respect of the application to be made within a period specified by the Tribunal.
5.129 Subsection 95AZL(5) states that following consideration of the application and any submissions received within the time period specified by the Tribunal, the Tribunal must make a determination varying the authorisation or dismissing the application in writing and give reasons for its decision.
5.130 Subsection 95AZL(6) states that the Tribunal must not make a determination varying an authorisation unless the variation would not result, or be likely to result, in a reduction in the benefit to the public that arose from the original authorisation.
5.131 Subsection 95AZL(7) allows the Tribunal to deal with more than one minor variation simultaneously if a person applies at the same time, or in close succession, and if the Tribunal is satisfied that there would not be a material change in the effect of the authorisation.
5.132 Subsection 95AZL(8) allows the applicant to withdraw their application from the Tribunal (providing written notice) at any time.
5.133 Section 95AZM allows the Tribunal to revoke an authorisation or revoke an authorisation and substitute it with a new authorisation.
5.134 Subsection 95AZM(1) allows the Tribunal to revoke an authorisation or revoke an authorisation and substitute it with a new authorisation upon the application of the person to whom the authorisation was granted.
5.135 Subsection 95AZM(2) requires the application for authorisation to contain or be accompanied by information prescribed in the regulations and, if required in the regulations, be accompanied by a fee.
5.136 Subsection 95AZM(3) requires the Tribunal to provide a copy of the application to the Commission within 3 business days of receiving the application.
5.137 Subsection 95AZM(4) requires the Commission to put a copy of the application on its website (subject to confidentiality) and invite submissions in respect of the application to be made within a period specified by the Tribunal.
5.138 Subsection 95AZM(5) enables the Commission to apply to the Tribunal to have an authorisation revoked, or for an authorisation to be revoked and substituted with a new authorisation, if the Commission is satisfied that: (a) the authorisation was granted on the basis of false or misleading information; (b) a condition of the authorisation had not been complied with; or (c) there has been a material change of circumstances since the authorisation was granted.
5.139 Subsection 95AZM(6) requires the Tribunal to give notice to the person granted authorisation to the effect that the Tribunal is considering making a determination and put public notice on the Comission’s website indicating the basis on which the determination is being proposed and calling for submissions on the determination to be received within a time period specified by the Tribunal.
5.140 Subsection 95AZM(7) requires the Tribunal after considering any submissions received in the specified period, to make its determination in writing revoking, or revoking and substituting a new authorisation, or not revoking and notify, in writing, the person originally granted the authorisation.
5.141 Under subsection 95AZM(8) the Tribunal must not revoke an authorisation unless it is satisfied that it would not have been granted under the new section 95AZH (the authorisation would result, or be likely to result, in such a benefit to the public that it should be granted).
5.142 Under subsection 95AZM(9) the Tribunal must not revoke an authorisation and substitute it with another authorisation unless it is satisfied that the authorisation would result, or be likely to result, in such a benefit to the benefit to the public that it should be granted.
5.143 Subsection 95AZM(10) enables the applicant or the Commission to withdraw their application for revocation from the Tribunal at any time, provided it is done in writing.
5.144 This Subdivision contains prohibitions on providing false or misleading information to the Commission or the Tribunal.
5.145 This provides that a person must not be negligent as to whether information given to the Tribunal or the Commission is false or misleading in a material particular. Subsection 95AZN(2) indicates that proof that a person knew, or was reckless as to whether information was false or misleading in a material particular can be taken as proof of negligence for the purposes of subsection 95AZN(1).
5.146 Negligence as to the giving of false or misleading information may attract a pecuniary penalty under section 76. Remedies would also be available for such negligence under sections 80AC, 81A and 86C.
5.147 Item 28 repeals the heading Division 1 of Part IX and substitutes it with:
5.148 Division 1 of Part IX contains the processes by which a person dissatisfied with a determination by the Commission can seek a review of their application other than for merger clearance determinations.
5.149 Item 29 amends subsection 101(1) to provide for a person dissatisfied with a determination by the Commission relating to authorisations other than mergers to apply to the Tribunal for a review of the determination.
5.150 Item 30 amends subsections 102(1) and 102(2) to enable the Tribunal to make a determination, varying, affirming or setting aside a determination by the Commission relating to authorisations other than for mergers. Subsection 102(2) provides that the determination made by the Tribunal (with respect to authorisations other than merger authorisations) can be taken to be a determination of the Commission.
5.151 Item 31 amends subsection 102(6) to insert 'under this Division' to follow after the first occurring 'Tribunal'. This provides the Tribunal with authority to request that the Commission make relevant information available at the Tribunal’s request.
5.152 Item 32 amends subsection 102(7) to insert 'under this Division' to follow after the first occurring 'review'. This provides that the Tribunal may consider information provided by or in evidence given to the Commission in making its determination when the Tribunal considers its review of non-merger authorisations.
5.153 Item 33 repeals the heading to Division 2 of Part IX and replaces it with
5.154 Item 34 inserts a new section 102A stating that the Division applies for the purposes of review under Division 1.
5.155 Item 35 amends subsection 109(1) to insert 'under Division 1 of Part VII' after the first occurring 'authorization'.
5.156 This item inserts Division 3 to follow on from the end of Part IX.
5.157 The Dawson Review found that dissatisfaction with the informal clearance process resulted largely from the absence of an effective appeal mechanism within the system. Accordingly, the formal clearance process will provide parties with a right of review to the Tribunal. Third parties do not have a right of review from the ACCC’s determination on formal clearance, however, the view of third parties will be considered during the course of the ACCC’s formal clearance determination.
5.158 This new section outlines the process for review of the Commission’s determinations on merger clearances.
5.159 Subsection 111(1) enables a person who has applied for a clearance, a minor variation, a revocation of a clearance or a revocation of a clearance that has been substituted with another clearance, to apply to the Tribunal for a review of the determination within the time specified by the regulations.
5.160 Subsection 111(2) enables a person granted a clearance that was revoked or revoked and substituted with another clearance by the Commission to apply to the Tribunal for a review of the determination within the time specified by the regulations.
5.161 Subsection 111(3) requires the Tribunal to review the determination upon receiving the application and the prescribed fee.
5.162 Subsection 111(4) enables the Tribunal to make a determination by consent of the applicant and the Commission as to whether it is satisfied that the application would not have the effect, or be likely to have the effect, of substantially lessening competition.
5.163 Subsection 111(5) enables a presidential member of the Tribunal to shorten the time period prescribed in the regulations for review of the determination at the request of the applicant, if the member is satisfied that special circumstances exist, and that it would not be unfair to do so.
5.164 Section 112 requires the Tribunal to notify the Commission of the application for review.
5.165 Section 113 requires the Commission to provide the Tribunal with all information relevant to the making of the determination, including confidential information, within 2 business days of being notified of the application for review.
5.166 Section 114 enables the Tribunal to consult for the purposes of clarifying information presented for the review application. Subsection 114(1) enables the Tribunal to seek relevant information and consult those as it considers reasonable and appropriate to assist in clarifying information and material provided for the purposes of determining the review application. Subsection 114(2) enables the Tribunal to disclose confidential information to the legal representative of the applicant if it is considered necessary for the purposes of clarifying information and material presented.
5.167 Section 115 enables a member of the Tribunal presiding at the review to require assistance from the Commission (including giving information and making reports), as the member specifies.
5.168 Section 116 requires the Tribunal to have regard only to material that has been presented to the Commission and that has then been given to the Tribunal under section 113, information that was referred to in the Commission’s reasons for the determination to which the review relates and information given to the Tribunal under section 114 when making its review determination.
5.169 Section 117 requires the Tribunal to make a determination affirming, varying or setting aside the Commission’s determination.
5.170 Section 118 requires the Tribunal to make its decision on the application review within 30 business days although this period may be extended by a further 60 business days because of its complexity or because of other special circumstances. If the Tribunal makes a decision to extend this period, it must notify the applicant before the conclusion of 30 business days.
5.171 Business day refers to a day that is not a Saturday, a Sunday, or a public holiday in the Australian Capital Territory.
5.172 Section 119 makes it clear that the Tribunal’s determination for the purposes of this Act will replace the Commission’s determination.
5.173 Item 37 provides a consequential amendment to section 150J which inserts 'clearance' to follow 'notification'.
5.174 Item 38 amends paragraph 157(1)(a) by inserting 'or Subdivision B of Division 3 of Part VII' after '91C'. This is a consequential amendment requiring the Commission to disclose documents where various types of applications have been made to the Commission. The required disclosure will include material relating to applications for merger clearances.
5.175 Item 39 inserts paragraph 157(1)(ba) to make a consequential amendment requiring the Commission’s obligation to disclose documents to include material where the Commission proposes to revoke, or revoke and substitute, a clearance under new section 95AS.
5.176 Item 40 makes a consequential amendment to paragraph 157(1)(c) (provision of documents by the Commission in relation to legal proceedings under sections 77, 80 or 81) to include a reference to proceedings under section 80AC or 81A (injunctions or divestiture for providing false or misleading information in relation to merger processes).
5.177 Section 157A outlines the procedure for disclosure of documents by the Tribunal in relation to merger authorisations. Subsection 157A(1) requires the Tribunal to provide a copy of all documents obtained by, given to, or in the possession of, the Tribunal in relation to the application for a merger authorisation or a proposal to revoke or substitute an authorisation application to the corporation that applied for the authorisation, upon payment of the prescribed fee, where those documents tend to establish the corporation’s case.
5.178 Subsection 157A(2) does not require the Tribunal to give the corporation documents that were obtained from the corporation or prepared by an officer or professional advisor of the Tribunal.
5.179 Subsection 157A(3) states that the Court must direct the Tribunal to comply with disclosure of documents should the Tribunal not provide copies of documentation to the corporation, unless subsection 157A(4) applies.
5.180 Subsection 157A(4) states that the Court may refuse to make the order under subsection (3) for the Tribunal to provide copies of the documentation to the corporation if it considers that disclosure of the documents, or part of the documents, would be prejudicial to any person, or for any other reason.
5.181 Subsection 157A(5) states that the Court may examine the contents of the documentation before making a decision as to whether the Tribunal must comply with a request for documentation.
5.182 Subsection 157A(6) states that an order given by the Tribunal may be subject to conditions, which must be specified in that order.
5.183 This item makes a consequential amendment to paragraph 170(3)(a) by inserting 'authorisation under Division 1 of Part VII or a clearance under Division 3 of Part VII' in place of 'authorization', extending the ability to apply for legal and financial assistance to clearance proceedings before the Commission (as well as continuing to apply to authorisations).
5.184 This item is a consequential amendment to insert references to the Tribunal’s functions of reviewing merger clearance decisions by the Commission, and making merger authorisation decisions, ensuring that legal and financial assistance may be applied for in relation to these proceedings before the Tribunal (as well as continuing to apply for proceedings by the Tribunal in relation to declarations under section 50A).
5.185 Subsection 46(6) ensures that where there is an authorisation or notification in force for conduct relating to sections 45, 45B, 47 and 50, or section 93, that conduct is immune from action under section 46. Subsection 46(6) is extended to include where there is a clearance in force.
5.186 Item 45 states that the amendments to the TP Act made by Schedule 1 (the new clearance and merger authorisation processes) apply in relation to applications for clearances or authorisations made after the commencement of the item. Consequently (subject to item 46) authorisations applied for before the new merger processes commence will be subject to the procedures existing prior to the commencement of the new processes. Applications for a minor variation or revocation of an authorisation applied for before commencement of the amendments, will be considered by the review procedures existing prior to the commencement of the amendments.
5.187 This item introduces transitional provisions for authorisations under proposed new Division 3 of Part VII of the TP Act (the new merger processes). Subsection (1) provides that a person who applied for an authorisation under the old procedures may not apply for an authorisation under the new procedures unless the Commission is yet to make its determination on the application and the person withdraws their old application.
5.188 The Schedule amends non-merger authorisations in the TP Act.
5.189 Item 1 repeals the existing subsection 89(1) and replaces it with a new subsection that requires that applications for authorisation, minor variation, revocation or revocation substituted with another authorisation, must be:
in a form prescribed by the regulations and contain the information required by the form; and
accompanied by all documentation and other information as prescribed by the regulations; and
accompanied by any fee (if any) prescribed by the regulations.
5.190 New subsection 89(1A) requires that the Commission give 5 business days notice to an applicant if their application is invalid and provide reasons why the purported application does not comply with the requirements in subsection 89(1).
5.191 New subsection 89(1B) defines a business day to mean Monday to Friday except for those days which are public holidays in the Australian Capital Territory.
5.192 Item 2 amends subsection 89(2) to omit 'such an application' and replace it with 'an application referred to in subsection (1)'. This provides for the Commission to make public an application for a non-merger authorisation, upon receipt.
5.193 Item 3 repeals subsections 90(10) and (10A) and replaces them with new text.
5.194 New subsection 90(10) provides that the Commission will be taken to have granted an application for authorisation if it does respond in the relevant period.
5.195 New subsection 90(10A) provides that where the Commission has prepared a draft determination in respect of a non-merger application before the end of 6 months beginning on the day the Commission received the application, the Commission may seek an extension of up to 6 months with the consent of the applicant in addition to the initial 6 month period.
5.196 Item 4 amends subsection 90(11) by omitting '(12), (13) and (15)' and substituting it with '(12) and (13)'. This prevents parties to a joint venture making two or more applications for authorisations at the one time.
5.197 Item 5 amends subsection 90(12) to omit the first occurring '(10) or'. This removes the reference to non-merger authorisations which will be subject to new time provisions in Schedule 1.
5.198 Item 6 amends subsection 90(12) to omit '(10) or (11), as the case may be' and substitute it with '(11)'. This amends the section so that applications for non-merger authorisation will be subject to provisions in Schedule 1.
5.199 Item 7 amends subsection 90(13) to omit '(10) or'. This amendment removes the reference to non-merger authorisation so as to ensure consistency with the provisions of Schedule 1.
5.200 Item 8 amends subsection 90(14) to omit 'period referred to in subsection (10) of this section' to be substituted with 'relevant period (worked out under subsection (10A) of this section)'. This amends the section to enable the time period for consideration of an extension of a determination to be consistent with subsection 90(10A).
5.201 Item 9 amends subsection 90(15) to insert '(other than an application for an authorisation under subsection 88(9))' after the first occurring 'authorizations'. This amendment excludes the new formal merger authorisation process from the operation of the subsection.
5.202 Item 10 amends paragraph 90(15)(b) to omit 'period referred to in whichever of subsections (10) and (11) is applicable' and substitutes 'relevant period (worked out under subsection (10A))'. This amendment limits the application of the subsection to non-merger applications as the Commission and Tribunal have different time frames for clearance procedures.
5.203 Item 11 inserts a new subsection (1AAA) to follow subsection 101(1). This provides for a person dissatisfied with a determination by the Commission in relation to an application for varying or reviewing an authorisation to apply to the Tribunal for review, except for matters where the Commission has received an invalid application and has given notice that the application is invalid.
5.204 Item 12 inserts new subsections (2A) and (2B) to follow subsection 172(2). It provides that regulations may prescribe the circumstances in which the Commission may waive fees that would otherwise be payable. This does not apply to applications for authorisation under subsection 88(9) or minor variations, revocations or revocations substituted with another authorisation.
5.205 Item 13 states that the amendments made in Schedule 2 are applicable to all applications made after the commencement of the Schedule.
5.206 Item 14 provides that regulations of this Act already in force for the purposes of non-merger authorisations will continue to have effect until they have been replaced and that applications received for non-merger authorisations but not yet determined will be subject to the old procedures.
5.207 The Dawson Review concluded that collective bargaining should not be completely exempted from Part IV of the TP Act (Restrictive trade practices). However, it recommended that, as an alternative to authorisation, a notification process should be introduced along the lines of the process contained in section 93 of the TP Act (Notification of exclusive dealing) for collective bargaining by small business (including co-operatives that meet the definition of small business) dealing with large business. This Schedule amends the TP Act to provide for such a notification process.
5.208 Item 1 expands the section dealing with associate members of the Commission. Under the current provisions of the TP Act, for the purpose of making a determination in regard to an application for an authorisation or a decision in regard to notification of exclusive dealing, the Chairperson of the Commission may direct that one or more associate members of the Commission be deemed to be members of the Commission. Item 1 provides for similar powers to be bestowed on associate members for the purpose of making a decision (issuing an objection notice) in regard to notification of collective bargaining.
5.209 Subsection 45(2) of the TP Act restricts corporations from making a contract or arrangement or arriving at an understanding if an exclusionary provision is included or a provision of the proposed contract, arrangement or understanding has the purpose or likely effect of substantially lessening competition. Further, no corporation may give effect to a provision of a contract, arrangement or understanding if that provision is an exclusionary provision or has the purpose or likely effect of substantially lessening competition. Consequently, section 45 generally prohibits collective bargaining as a form of collusive conduct.
5.210 Item 2 inserts a new subsection 45(8A) which exempts a corporation from the restrictions of subsection 45(2) so long as it has given the Commission a collective bargaining notice describing the conduct and the notice is in force.
5.211 Subsection 46(6) of the TP Act provides for certain exemptions from section 46(1) which proscribes misuse of market power by corporations which have a substantial degree of power in a market. Corporations exempted from the requirements of subsection 46(1) by subsection 46(6) are those for whom an authorisation is in force or those operating via a notification of exclusive dealing.
5.212 Item 3 expands the exemptions to include a corporation that has given the Commission a notification of collective bargaining describing the conduct and for whom the notification is in force.
5.213 Section 46A of the TP Act proscribes misuse of market power by those corporations with a substantial degree of power in a trans-Tasman market. Subsection 46A(6) outlines those corporations exempted from subsection 46A(1), specifically those corporations for whom an authorisation is in force or those operating via a notification of exclusive dealing.
5.214 Item 4 expands the exemptions to include a corporation that has given the Commission a notification of collective bargaining describing the conduct and for whom the notification is in force.
5.215 As a result of the amendments to the TP Act to provide for the collective bargaining recommendations from the Dawson Review, Division 2 of Part VII of the TP Act which deals with notifications is expanded. Item 5 inserts the label:
5.216 Before section 93 to indicate that the notification provisions in section 93 relate to exclusive dealing.
5.217 Item 6 makes a consequential amendment to the exclusive dealing provisions, for purposes of consistency.
5.218 This is a consequential amendment to the exclusive dealing provisions for purposes of consistency and provides that to be valid a notice under subsection 93(1) must be:
in a form prescribed by the regulations and contain the information required by the form; and
accompanied by any other information or documents prescribed by the regulations; and
accompanied by the fee (if any) prescribed by the regulations.
5.219 This is a consequential amendment to the exclusive dealing provisions for purposes of consistency and provides that, if the Commission receives a purported exclusive dealing notice that it considers is not valid, it must give the applicant a written notice within five business days:
stating that the person has not given a valid notice; and
providing reasons why the purported notice does not comply with subsection 93(1A) which deals with validity of a notice.
5.220 A business day is a Monday to Friday inclusive, not including a public holiday in the Australian Capital Territory.
5.221 Item 9 makes provision for collective bargaining to be included in the division on notifications and outlines the process by which notification of collective bargaining will operate.
5.222 Prior to the Dawson Review, sections 88 and 90 of the TP Act allowed the Commission to authorise collective bargaining where it was satisfied that the public benefit would outweigh any lessening of competition that would result. However, the process of obtaining authorisation was claimed to be expensive and time consuming. The Dawson Review recommended that, as an alternative to authorisation (which would still be an available option for small business), a notification process should be introduced for collective bargaining proposals. The significance of the proposed change is that, under the authorisation process, the applicant was required to establish that there would be a net public benefit from the proposed collective bargaining arrangement. Under the new notification process, however, the onus is on the Commission who will have a relatively short period of time to establish that there is no public benefit.
5.223 Part VII of the TP Act deals with authorisations and notifications and, in particular, Division 2 addresses notifications. Item 6 inserts a new subdivision dealing with notification of collective bargaining.
5.224 Section 93AA of the TP Act provides definitions for the terms collective bargaining notice, conference notice, contract and objection notice.
5.225 Section 93AB then deals with the procedure by which, and the limits within which, corporations are entitled to obtain statutory protection in relation to collective bargaining conduct which may otherwise breach section 45 of the TP Act.
5.226 In particular, subsection 93AB(1) provides that a corporation that has acted or proposed to act in the manner prescribed in subsection 45(2) may file a notice with the Commission setting out the full particulars of the conduct.
5.227 However, three additional requirements must be satisfied and are outlined in this section of the TP Act. These requirements restrict the collective bargaining process to small business in negotiation with big business where experience has shown that collective bargaining may do little or no harm to the competitive process and may generate public benefit. The first two restrictions outline the behaviour of the small businesses, the contracting parties, both between themselves and with a third party large business, the target, while the third requirement uses a transaction value approach to provide a definition of small business for the purposes of this section of the TP Act.
5.228 First, subsection 93AB(2) prescribes the behaviour of the contracting parties with each other. Specifically, an initial contract must be proposed or made between two or more corporations (the contracting parties) planning to collectively bargain about goods or services supplied to or acquired from a third party (the target).
5.229 Second, subsection 93AB(3) prescribes the behaviour of the contracting parties with the target. In particular, the contracting parties must reasonably expect that they will make at least one contract with the target in regard to selling or acquiring at least one of the goods or services.
5.230 Third, subsection 93AB(4) aims to ensure that the notification process for collective bargaining targets only the desired small businesses. The Dawson Review considered that a transaction value approach to defining small business was deemed to be simpler and less intrusive than using the features of the business (e.g., turnover, employee numbers or ownership structure) to provide a definition of small business. This subsection prescribes that the individual corporation must reasonably expect that the total value of the transactions that it will conduct with the target in any 12 month period in regard to the goods and services specified in subsections 93AB(3) and (4) will not exceed $3 million or another amount prescribed by regulations. The regulations may vary according to industry.
5.231 Subsection 93AB(5) outlines the timing requirements of reasonable expectation. Specifically, it requires that, at the time of giving the collective bargaining notice or at the time that the initial contract was made, whichever is earlier, the individual corporation to the collective bargaining arrangement must have reasonably expected to make at least one contract with the target about the specified goods or services and have expected the total value of all its contracts with the target in regard to those goods and services in any 12 month period not to exceed $3 million (or the prescribed amount).
5.232 Subsection 93AB(6) provides that to be valid a collective bargaining notice must be:
in a form prescribed by the regulations and contain the information required in the form; and
accompanied by any other information or documents prescribed by the regulations; and
accompanied by the fee (if any) prescribed by the regulations.
5.233 Subsection 93AB(7) provides for third parties to make a collective bargaining notification on behalf of a group of small businesses. This might be relevant, for example, to rural producers who may wish to bargain through the structure provided by a single industry body. The Dawson Review concluded that this provision would increase the utility of a collective bargaining notification process. However such a notice may only be given if the individual parties to the collective bargaining arrangement could have given the notice on their own behalf. This limits the collective bargaining arrangements to corporations who wish to collectively bargain with one company. If parties wish to seek immunity for a variety of similar arrangements with a variety of targets, the authorisation process with its longer time frame is the appropriate process.
5.234 Subsection 93AB(8) outlines the conditions under which a collective bargaining notice may not be given. Specifically, a collective bargaining notice in relation to conduct may not be given if the corporation has applied for an authorisation in relation to the same conduct, and a determination has been made dismissing the application, and if the review period has ended with either a determination by the Tribunal or no application for review.
5.235 Subsection 93AB(9) provides that, if the Commission receives a purported collective bargaining application that it considers is invalid, it must within 5 business days of receiving the purported notice provide written notice to the applicant that the notice is not valid and provide reasons for that lack of validity as required by subsection 93AB(6).
5.236 Business day means Monday to Friday inclusive, excluding a public holiday in the Australian Capital Territory.
5.237 Section 93AC of the TP Act deals with the Commission’s objection notice and covers two types of provisions. The first provision (subsection 93AC(1)) relates to exclusionary conduct as proscribed in subparagraphs 45(2)(a)(i) and (b)(i) of the TP Act. The second (section 93AC(2)) relates to the substantial lessening of competition as outlined in subparagraphs 45(2)(a)(ii) and (b)(ii) of the TP Act. In either case, section 93AC provides that if the Commission is satisfied that the likely benefit to the public from the collective bargaining conduct will not outweigh the likely detriment to the public from the conduct (or if there is no likely benefit to the public), it may give the corporation a written notice (an objection notice) making that statement.
5.238 Subsection 93AC(3) of the TP Act states that the Commission must give a written statement of its reasons at the time of giving the objection notice.
5.239 In following the process for deciding whether to give notice in regard to a notification of collective bargaining, the Commission must also comply with section 93A which requires that it afford opportunity for a conference before giving notice (subsection 93AC(4)).
5.240 Subsection 93AC(5) outlines further obligations of the Commission in reaching its decision which include seeking such relevant information as it considers reasonable and appropriate and utilising any information it obtains through any channel as a basis for its decision.
5.241 Section 93AD outlines the time at which a collective bargaining notice comes into force and the time at which it ceases to be in force. In recommending a notification approach for collective bargaining in addition to the existing authorisation process, the Dawson Review concluded that such a notification process should provide a speedier, simpler and less expensive mechanism. The Dawson Review, therefore, recommended a delay of 14 days after the date of lodgement of the notification before the notification takes effect. The Dawson Review suggested that any extension of this period would impair the speedy and effective nature of the process.
5.242 Consequently, subsection 93AD(1) of the TP Act provides that a collective bargaining notice comes into force period at the end of 14 days or a longer period if prescribed by regulation, starting on the day the corporation gave the Commission the notice. However, if a conference notice is given by the Commission during the waiting period and it then decides an objection notice is not to be given, then the collective bargaining notice comes into force at the time the Commission makes that decision. It is proposed that the period referred to subsection 93AD(1) be set by regulation at 28 days. It is envisaged that this will give the Commission sufficient time to consider notification applications in the initial stages of the amendment, but the time period will be monitored and reviewed after 12 months with a preference for 14 days.
5.243 Subsection 93AD(2) outlines the circumstances under which a collective bargaining notice does not come into force. Specifically, if the notice is withdrawn or taken to be withdrawn before the period in subsection 93AD expires, or if the Commission gives the corporation a conference notice during that period and then gives the corporation an objection notice, then the collective bargaining notice does not come into force.
5.244 Subsection 93AD(3) describes the time at which a collective bargaining notice ceases to be in force. A notice can cease to be in force in one of three different ways and does so at the earliest of those times. First, the notice may be withdrawn or taken to be withdrawn. The notice ceases to be in force at the time of withdrawal. Second, the Commission may give the corporation an objection notice. If this is the case then the collective bargaining notice ceases to be in force on the 31st day after the relevant day or on a later day specified in writing by the Commission. (The relevant day varies depending on whether an application is made to the Tribunal for a review of the Commission’s decision to give the objection notice.) Third, the notice may expire. In this case the notice ceases to be in force at the end of the period of three years, beginning on the day that the corporation gave the Commission a collective bargaining notice.
5.245 The relevant day is worked out in accordance with the table in subsection 93AD(4). If an application for review of the Commission’s objection notice is not made to the Tribunal then the relevant day is the day the Commission gave the objection notice. If an application is made for a review of the objection notice, the relevant day could be one of three different possibilities. In the simplest cases, either the application for review of the objection notice is withdrawn — in which case the relevant day is the day of the withdrawal — or the Tribunal makes a determination — in which case the relevant day is the day on which the determination is made. If, however, on application by a relevant party the Tribunal declares that the applicant is not proceeding with the review application with due diligence, then the relevant day is the day of the declaration.
5.246 Section 93AE deals with withdrawal of a collective bargaining notice.
5.247 Subsection 93AE(1) and (2) discuss withdrawal by a corporation. Specifically, a corporation may withdraw a collective bargaining notice at any time before the Commission gives it an objection notice in relation to the collective bargaining notice. Written notice requesting the withdrawal must be provided to the Commission.
5.248 The collective bargaining notice can also be deemed to have been withdrawn and this is described in subsection 93AE(3). Such a situation can arise if, before or after a corporation gives a collective bargaining notice in relation to conduct, the corporation applies to the Commission for an authorisation to engage in that conduct and the Commission makes a determination of any kind and the time for making an application for review ends with either a determination made by the Tribunal or no application for review made. In this case, the collective bargaining notice is taken to be withdrawn.
5.249 Section 93AF restricts corporations to submitting only one collective bargaining notice in relation to specific conduct. Consequently, if a corporation gives the Commission a collective bargaining notice in relation to specific conduct and the Commission gives the corporation an objection notice in relation to the conduct or the collective bargaining notice is withdrawn or deemed to have been withdrawn then the corporation cannot give the Commission a further collective bargaining notice in relation to the same conduct or in relation to conduct to the like effect.
5.250 Item 10 inserts the label:
5.251 Before section 93A to indicate that the provisions in section 93A relate to the process the Commission must undertake before giving an objection notice.
5.252 Item 11 expands subsection 93A(1) of the TP Act (which formerly applied only to notification in relation to exclusive dealing) to prescribe that, before giving notice in relation to collective bargaining conduct or proposed conduct, the Commission must prepare a draft notice in relation to that conduct or proposed conduct.
5.253 Item 12 further alters section 93A of the TP Act to include collective bargaining.
5.254 Subsection 93A(3) requires the Commission, upon invitation to interested parties to attend a conference, to provide a copy of the draft notice and a summary of reasons why it proposes to give the notice.
5.255 Subsection 93A(4) prescribes that, if no conference is required (either because the Commission was notified in writing that no conference was required or because it was not notified that a conference was required within the specified time period), then the Commission must decide whether to give notice about the collective bargaining conduct or proposed conduct.
5.256 Subsection 93A(10A) prescribes that, if a conference is held, then after the conference the Commission must decide whether or not to give notice about the collective bargaining conduct or proposed conduct.
5.257 Item 13 enables the Commission, where it believes two or more collective bargaining notices have been given which describe essentially the same or similar conduct, to treat the notices as one single notice and prepare one draft notice and hold one conference in relation to that draft notice.
5.258 Item 14 inserts the label:
5.259 Before section 95 to indicate that the provisions in section 95 relate to the Commission’s procedures for maintaining a register of notifications.
5.260 Item 15 expands paragraph 95(1)(c) to prescribe that the Commission must maintain a register of collective bargaining notices given to it.
5.261 Item 16 expands paragraph 95(1)(f) to prescribe that the Commission must maintain a register of the particulars of any notices that the Commission gives in relation to notification of collective bargaining.
5.262 Item 17 expands paragraph 95(1)(ga) to prescribe that the Commission must maintain a register with details of the date on which a collective bargaining notice ceases to be in force when the Commission gives a corporation an objection notice to take effect from a specified (written) date.
5.263 Item 18 provides that a document in relation to a collective bargaining notice or any oral submission to the Commission in relation to that notice may be excluded from the public register on request of the person due to the confidential nature of the contents.
5.264 Item 19 expands section 101A of the TP Act to allow that a person who is dissatisfied with a notice given by the Commission in relation to a notification of collective bargaining may apply to the Tribunal for a review of the giving of the notice, in addition to review of notices given in regard to notification of exclusive dealing.
5.265 Subsection 102(5AA) relates to an objection notice given by the Commission in relation to contracts involving the per se provisions. It provides for the Tribunal to set aside the Commission’s objection notice if it is satisfied that the likely benefit to the public from the conduct to which the notice relates would outweigh the likely detriment to the public from the conduct or affirm the notice if it is not so satisfied.
5.266 Subsection 102(5AB) relates to an objection notice given by the Commission in relation to contracts involving the competition provisions. It provides for the Tribunal to set aside the Commission’s objection notice if it is satisfied that the likely benefit to the public from the conduct to which the notice relates would outweigh the likely detriment to the public from the conduct or affirm the notice if it is not so satisfied.
5.267 Subsection 102(5AC) describes the procedures if the Tribunal sets aside the objection notice given by the Commission. Specifically, if the Commission gave the notice following a conference notice issued during the waiting period, then the Commission is deemed not to have given an objection notice and the collective bargaining notice comes into force on the day the objection notice is set aside by the Tribunal.
5.268 Item 21 alters subsection 109(1A) to provide that a person to whom an objection notice was given by the Commission (either in regard to exclusionary provisions or competition provisions) is entitled to participate in any proceedings before the Tribunal instituted by another person in relation to that notice. This is of particular importance for a notification of collective bargaining since there will be at least two and possibly many parties (the contracting parties) for whom the objection notice will be relevant.
5.269 Section 151AJ of the TP Act describes the circumstances in which a carrier or a carriage service provider is said to engage in anti-competitive conduct. Specifically, item 22 amends the section to prescribe that a carrier or carriage service provider is not deemed to be engaging in anti-competitive conduct if a collective bargaining notification is in force which covers the relevant conduct.
5.270 Item 23 alters paragraph 151AY(1)(b) of the TP Act to allow that, if the Commission receives an application for an exemption order and a notification of collective bargaining which relate to the same conduct, the Commission may delay considering an application or delay the convening of a conference until one of a number of events have taken place.
5.271 Section 151AY is further altered by item 24 which amends one of the triggering events for considering an application or convening a conference to be the Commission deciding whether or not to give a notice in regard to a collective bargaining notification.
5.272 Section 155 of the TP Act outlines the Commission’s power to obtain information, documents and evidence. Specifically, Item 25 alters the TP Act to ensure that the Commission has the same powers in making a decision in regard to a notification of collective bargaining as it does in relation to making a decision in regard to notification of exclusive dealing.
5.273 Item 26 amends subsection 46(6) of the Schedule to allow for notification of collective bargaining.
5.274 Item 27 states that only contracts or arrangements made, or understandings arrived at, after the commencement of this Schedule are affected by the amendments within the Schedule.
5.275 Regulations made pursuant and notices given according to section 93(1) of the TP Act in force immediately prior to the commencement of Schedule 3, have effect after that commencement as if they had been made for the purposes of new subsection 93(1A).
5.276 Schedule 4 contains two items to provide for a defence to proceedings relating to exclusionary provisions, proscribed by subparagraphs 45(2)(a)(i) and (2)(b)(i) of the TP Act. The amendments in this Schedule reflect the Government’s reconsideration of recommendations 8.1 and 8.2 of the Dawson Review.
5.277 The Dawson Review found that the per se prohibition of exclusionary provisions (that is, the outright prohibition of such provisions without regard to the impact on competition) was unnecessarily broad as it extended to co-operative contracts, arrangements or understandings that are unlikely to be anti-competitive and may be either socially beneficial or pro-competitive. Recommendation 8.2 was thus designed to narrow the prohibition.
5.278 However, in light of the August 2003 High Court decision in News Limited v South Sydney District Rugby League Football Club Limited [2003] HCA 45 — which took a more restrictive approach to the per se prohibition — the Government now considers it is unnecessary to implement recommendation 8.2.
5.279 Recommendation 8.1 of the Dawson Review proposed that the TP Act be amended so that it is a defence in proceedings based upon the prohibition of an exclusionary provision to prove that the exclusionary provision did not have the purpose, effect or likely effect of substantially lessening competition.
5.280 The Government now considers that the recommended defence would be too broad as it would prevent unambiguously anti-competitive conduct from being prohibited per se in appropriate cases. The defence has therefore been restricted so that it only applies where the exclusionary provision is for the purposes of a joint venture (as defined in section 4J) and does not substantially lessen competition. This change also has the benefit of providing a consistent defence for joint ventures to the per se prohibition of exclusionary provisions and price fixing provisions.
5.281 Item 1 inserts a new section 76C that provides a defence to proceedings against a person under Part VI in relation to an alleged contravention of subparagraphs 45(2)(a)(i) or (b)(i) in respect of an exclusionary provision.
5.282 It is a defence if the person establishes on the balance of probabilities that the provision is for the purposes of a joint venture and that it does not have the purpose, and does not have and is not likely to have the effect, of substantially lessening competition. Placing the burden of proof upon the respondent or defendant is justified by the prima facie illegality and undesirability of exclusionary provisions.
5.283 Section 4J defines a joint venture to be 'an activity in trade or commerce...carried on jointly by two or more persons' or 'an activity in trade or commerce...carried on by a body corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly'. Satisfying this requirement will ordinarily require the parties to provide evidence that the activity in question is separable from the activities they are individually engaged in and evidence of each party’s contribution to that activity, for example, the capital or skill.
5.284 If the only activity being carried on jointly by the parties is the activity of making, or giving effect to, a contract, arrangement or understanding containing an exclusionary provision or other illegal provision, then the provision in question cannot be for the purposes of a joint venture.
5.285 Joint ventures that may satisfy the requirements of section 4J include joint ventures directed to research and development, the production of goods, the supply of services and marketing. The section 4J definition of joint ventures will also encompass other arrangements, for example, the enforcement by clubs of the rules of a professional sporting competition.
5.286 Once a provision is assessed as being for the purposes of a joint venture, the assessment of whether that provision has the purpose, effect or likely effect of substantially lessening competition is to be consistent with the assessment made under subparagraphs 45(2)(a)(ii) and (b)(ii) of the TP Act.
5.287 Item 2 specifies that the defence is to apply in relation to proceedings instituted after the commencement of the Schedule, irrespective of when the contract, arrangement or understanding was made or given effect to.
5.288 Thus, the defence may apply to contracts, arrangements or understandings made prior to the commencement of the Schedule. Although potentially retrospective, the application provision is considered appropriate because the amendment introduces a defence that is of potential benefit to persons who are alleged to have made or given effect to a contract, arrangement or understanding that contains an exclusionary provision.
5.289 Schedule 5 contains four items to provide for a defence to proceedings relating to price fixing. Price fixing provisions are deemed, by subsection 45A(1), to be a contravention of subparagraphs 45(2)(a)(ii) and (2)(b)(ii) of the TP Act.
5.290 The amendments in this Schedule implement recommendation 9.1 of the Dawson Review.
5.291 This item repeals subsection 45A(2) in Part IV which provides an exemption to section 45A(1) for a limited range of joint ventures. This exemption was found by the Dawson Review to be too narrow for some pro-competitive joint ventures.
5.292 Item 2 inserts a new section 76D that provides a defence to proceedings against a person under Part VI in relation to an alleged contravention of subparagraphs 45(2)(a)(ii) or (b)(ii) in relation to a price fixing provision.
5.293 It is a defence if the person establishes on the balance of probabilities that the provision is for the purposes of a joint venture and that it does not have the purpose, and does not have and is not likely to have the effect, of substantially lessening competition.
5.294 Section 4J defines a joint venture to be 'an activity in trade or commerce...carried on jointly by two or more persons' or 'an activity in trade or commerce...carried on by a body corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly'. Satisfying this requirement will ordinarily require the parties to provide evidence that the activity in question is separable from the activities they are individually engaged in and evidence of each party’s contribution to that activity, for example, the capital or skill.
5.295 If the only activity being carried on jointly by the parties is the activity of making, or giving effect to, a contract, arrangement or understanding containing a price fixing or other illegal provision, then the provision in question cannot be for the purposes of a joint venture.
5.296 Joint ventures that may satisfy the requirements of section 4J include joint ventures directed to research and development, the production of goods, the supply of services and marketing. The section 4J definition of joint ventures will also encompass other arrangements, for example, the enforcement by clubs of the rules of a professional sporting competition.
5.297 Once a provision is assessed as being for the purposes of a joint venture, the assessment of whether that provision has the purpose, effect or likely effect of substantially lessening competition is to be consistent with the assessment made under subparagraphs 45(2)(a)(ii) and (b)(ii) of the TP Act.
5.298 This item repeals subsection 45A(2) in Schedule 1 which provides an exemption to section 45A(1) for a limited range of joint ventures. This is a consequential amendment flowing from Item 1.
5.299 Item 4 specifies that the subsection 45A(2) exemption for a restricted range of joint ventures will continue to apply to contracts, arrangements or understandings made prior to the commencement of the Schedule.
5.300 However, item 4 also specifies that the new defence is to apply in relation to proceedings instituted after the commencement of the Schedule, irrespective of when the contract, arrangement or understanding was made or given effect to.
5.301 The objective of these complementary application provisions is to ensure that a person who is alleged to have made a contract, arrangement or understanding containing a price fixing provision before the commencement of the Schedule can have the benefit of both the exemption and the defence.
5.302 Recommendation 9.3 of the Dawson Review stated that the TP Act should be amended to allow intra-party transactions in a dual listed company to be treated on the same basis as related party transactions within a group of companies and that the aggregate size of the dual listed company should be recognised for the purposes of assessing market power. In addition this Schedule amends the TP Act to prohibit the forming of a dual listed company where it would substantially lessen competition in a market and provides a mechanism whereby authorisation may be able to be sought for this conduct.
5.303 This item inserts a definition of dual listed company arrangement. It provides that dual listed company arrangement has the same meaning as in section 125-60 of the Income Tax Assessment Act 1997.
5.304 This item inserts a new subsection 4A(5A) into the TP Act. The new section makes it clear that dual listed companies are treated as corporate groups for the purposes of Part IV, section 76 and Part VII. This reflects the fact that it is only these areas of the TP Act that are relevant to the making of dual listed companies.
5.305 This is a consequential amendment to include reference to new section 49 in paragraph 6(2)(h).
5.306 This item inserts a new subsection 45(6A) into the TP Act. This new subsection governs the potential overlap between section 45 and the new section 49. The effect of this section is that dual listed company arrangements will be regulated only by the new section 49 and not section 45.
5.307 This item amends subsection 46(6) of the TP Act to refer to the new section 49. The effect of this amendment is that a dual listed company arrangement will not contravene section 46 (Misuse of market power) if the dual listed company arrangement has been authorised or if a valid notification is in force.
5.308 This item amends subsection 46A(6) of the TP Act to refer to the new section 49. The effect of this amendment is that a dual listed company arrangement will not contravene section 46A (Misuse of market power — corporation with substantial degree of power in trans-Tasman market) if the dual listed company arrangement has been authorised or a valid notification is in force.
5.309 This item inserts a new section 49 prohibiting dual listed companies which substantially lessen competition.
5.310 Subsection 49(1) provides that a corporation must not:
(a) make a
dual listed company arrangement if a provision of the proposed arrangement has
the purpose, or would have or be likely to have the effect of substantially
lessening competition; or
(b) give effect to a provision of a dual listed
company arrangement if that provision has the purpose, or has or is likely to
have the effect, of substantially lessening competition.
5.311 A note is inserted at the end of subsection 49(1). This note makes it clear that conduct that would otherwise contravene section 49 can be authorised under subsection 88(8B).
5.312 Subsection 49(2) provides an exception to the prohibition contained in
subsection 49(1). Specifically, subsection 49(2) provides that a corporation
does not contravene the section if:
(a) the arrangement is subject to a
condition that the provision will not come into force unless and until the
corporation is granted an authorisation to give effect to the provision;
and
(b) the corporation applies for the grant of such an authorisation within
14 days after the arrangement is made.
5.313 The new subsection 49(2) also makes it clear that a corporation is not permitted to give effect to such a provision prior to the granting of the authorisation.
5.314 Subsection 49(3) provides the meaning of competition for the purposes of new section 49 to be:
competition in any market in which a party to the dual listed company arrangement, or any related body corporate, does, or is likely to or would or would be likely to supply or acquire goods or services apart from the arrangement;
the provisions of all contracts or arrangements of the party to the dual listed company arrangement.
5.315 This item inserts new subsections 88(8B), (8C) and (8D).
5.316 Subsection 88(8B) provides that subject to this Part, the Commission
may, upon application by or on behalf of a corporation, grant it an
authorisation:
(a) to make a dual listed company arrangement; or
(b) to
give effect to a provision of a dual listed company arrangement.
5.317 The new subsection 88(8B) clarifies that, while an authorisation to make a dual listed company arrangement remains in force, section 49 does not prevent the corporation from: (i) making the arrangement in accordance with the authorisation; and (ii) giving effect, in accordance with the authorisation, to any provision of the arrangement so made.
5.318 In addition, while an authorisation remains in force to give effect to a provision of a dual listed company arrangement, section 49 does not prevent the corporation from giving effect to the provision in accordance with the authorisation.
5.319 The new subsection 88(8C) provides that an authorisation granted by the Commission to a corporation under subsection 88(8B) provides the same protection to the other corporation named or referred to in the application for the authorisation as a party to the arrangement or proposed arrangement. Parties to a dual listed company arrangement are, consequently, not required to lodge separate authorisation applications.
5.320 New subsection 88(8D) provides that, subject to subsection 49(2), the Commission does not have power to grant an authorisation to a corporation to make a dual listed company arrangement if the arrangement has been made before the Commission makes a determination in respect of the application.
5.321 This section makes it clear that, subject to the exception provided in subsection 49(2), authorisation for dual listed company arrangements may not be sought retrospectively.
5.322 This item inserts new subsections 90(8A) and (8B). The new subsections 90(8A) and (8B) make it clear that the Commission must not make a determination authorising the making of or giving effect to a dual listed company arrangement unless it is satisfied in all the circumstances that the making of the arrangement would result, or be likely to result, in such a benefit to the public that the arrangement should be allowed to be made. The new subsections also make it clear that the meaning of benefit for these purposes is made by reference to the existing subsection 90(9A).
5.323 This item makes a consequential amendment to subsection 90(9) of the TP Act to refer to the amended subsection 90(9A) which outlines the criteria to be regarded when considering any benefit to the public.
5.324 This item makes a consequential amendment to subsection 90(9A) to refer to the new subsections 90(8A) and 90(8B). This provides criteria for the Commission to consider in regard to public benefit when assessing whether to grant an authorisation for a dual listed company arrangement.
5.325 This item makes a consequential amendment to subsection 91A(5) to refer to the new subsections 90(8A) and 90(8B). As a result, the Commission may not vary an authorisation for a dual listed company arrangement without ensuring that there will be no reduction in the benefit to the public as a result of the variation.
5.326 This item makes a consequential amendment to subsection 91B(5) to refer to the new subsections 90(8A) and 90(8B). Consequently, the Commission must follow the process prescribed in section 91B when considering the revocation of an authorisation of a dual listed company arrangement.
5.327 This item makes a consequential amendment to subsection 91C(7) to refer to the new subsections 90(8A) and (8B). Consequently, the Commission must follow the process prescribed in section 91C when considering revoking an authorisation of a dual listed company arrangement and substituting another authorisation.
5.328 This item amends subsection 101(1A) to refer to the new subsections 90(8A) and (8B). This item extends the Tribunal’s review powers to include determinations in regard to dual listed company arrangement authorisations.
5.329 This item amends subsection 101(2) to refer to the new subsections 90(8A) and (8B). Consequently, the Tribunal is conferred the same powers and obligations in regard to the review of a determination as the Commission in regard to the making of that determination.
5.330 This item amends subsection 46(6) of the Schedule to refer to the new section 49.
5.331 This item makes it clear that amendments made by items 1, 4, 7, 8 and 9 apply in relation to arrangements made after the commencement of those items. It also makes it clear that the amendment made by item 2 applies in relation to conduct engaged in after the commencement of that item.
5.332 Under section 47 of the TP Act, exclusive dealing is only prohibited if it has the purpose, or has or is likely to have the effect of substantially lessening competition. Third line forcing, when a corporation sells goods or services, or gives a discount, but only on the condition that the purchaser acquires other goods from a third person, is currently prohibited per se (that is, prohibited outright) by sections 47(6) and (7) of the TP Act.
5.333 The Dawson Review of the competition provisions of the TP Act considered that third line forcing is often beneficial and pro-competitive, and recommended that third line forcing should instead be subject to a substantial lessening of competition test, consistent with other forms of exclusive dealing. The Commission opposes very few of the hundreds of third line forcing notifications received annually. The notification process, while relatively cheap and quick, was found to mostly be an unnecessary imposition in the case of third line forcing. However, the Dawson Review found that notification should continue to be available for third line forcing activities that may substantially lessen competition.
5.334 These amendments implement the Dawson recommendation that third line forcing be subject to a competition test bringing the treatment of third line forcing into line with that of other forms of exclusive dealing.
5.335 This item omits 'or (3A)' from subsection 8A(6).
5.336 This removes a reference to a subsection that is repealed in item 8 of this Schedule, aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.337 This item omits 'or (3A)' from paragraph 45DD(7)(a).
5.338 This removes a reference to a subsection that is repealed in item 8 of this Schedule, aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.339 Item 3 omits 'or (5) or paragraph (8)(a) or (b) or (9)(a), (b) or (c)' from subsection 47(10), substituting ', (5), (6), (7), (8) or (9)' to ensure that third line forcing activities are not prohibited under the TP Act unless such activities have the purpose or the effect of substantially lessening competition.
5.340 This section makes it clear that the per se prohibition of third line forcing activities is removed.
5.341 Item 4 repeals subsection 47(10A), which allows third line forcing activities to continue provided the corporation had previously provided the Commission with notification of these activities under section 93 of the TP Act.
5.342 This subsection is no longer necessary due to the amendments made in item 3 of this Schedule, which removes the per se prohibition of third line forcing activities.
5.343 All types of exclusive dealing are able to be authorised by the Commission. The general test for authorisation of exclusive dealing is whether or not the benefit to the public of the activity taking place outweighs the detriment arising from the substantial lessening of competition arising from the activity. The current test for third line forcing activity is whether or not the Commission considers that the activity is of such benefit to the public that it should be allowed to take place.
5.344 Item 5 omits '(other than conduct to which subsection 47(6) or (7) applies)' from subsection 90(6). This brings the test for authorisation of third line forcing activity that has been found to substantially lessen competition into line with that of all other types of exclusive dealing, so that it is necessary to demonstrate that the benefits of the activity to the public outweigh the detriment to the public of the substantial lessening of competition.
5.345 Item 6 repeals subparagraph 90(8)(a)(iii), which allows third line forcing conduct that has been found to substantially lessen competition to be authorised only where the Commission considers it is of such a benefit to the public that it should be allowed to take place. This ensures that authorisation for third line forcing activity will be considered under the same test as other forms of exclusive dealing.
5.346 Notification is a procedure available for all types of exclusive dealing. Notification confers immediate immunity from the prohibition on exclusive dealing unless and until the Commission gives a notice. In the case of third line forcing, the notice does not come into effect (that is, provide immunity) until 14 days following lodgement (the proscribed period). The following amendments bring the ratification procedures for third line forcing into line with other forms of exclusive dealing.
5.347 Item 7 omits 'or (5) or paragraph 47(8)(a) or (b) or (9)(a), (b) or (c)' from subsection 93(3), substituting ', (5), (6), (7), (8) or (9)'. This allows the Commission to notify a corporation that the corporation’s third line forcing activities are likely to substantially lessen competition and that any public benefit which may result from these activities is unlikely to outweigh the detriment to the public caused by the lessening of competition.
5.348 This brings the treatment of Commission notices for third line forcing activities into line with that of other forms of exclusive dealing.
5.349 Item 8 repeals subsection 93(3A), which allowed the Commission to give notice to a corporation that benefits to the public from proposed third line forcing conduct is unlikely to outweigh the public detriment caused by the conduct.
5.350 This subsection is no longer necessary due to the amendments made in item 7 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.351 Item 9 omits 'or (3A)' from subsections 93(4), (5) and (6).
5.352 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.353 Item 10 repeals subsections 93(7A), (7B) and (7C), which provide for when a notification comes into effect for third line forcing activities as per se prohibited activities.
5.354 These subsections are no longer necessary due to the amendments made in item 3 of this Schedule removing the per se prohibition of third line forcing.
Item 11 omits 'or (3A)' from subsection 93(9).
5.355 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.356 Item 12 omits 'or paragraph (7C)(b)' from subsection 93(9).
5.357 This removes a reference to a subsection that is repealed in item 10 of this Schedule removing the differentiation between notification for third line forcing activities and other types of exclusive dealing.
5.358 Item 13 omits 'or (3A)' from paragraph 93(10)(a).
5.359 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.360 Item 14 omits 'or (3A)' from subsections 93A(1), (3), (4) and (10A).
5.361 This removes a reference to a subsection that is repealed in item 8 of this Schedule, aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.362 Item 15 repeals paragraph 95(1)(ga), which states that the Commission shall keep a register containing details of the specification of any day by the Commission under paragraph 93(7C)(b).
5.363 This paragraph is no longer necessary, as subsection 93(7C) was repealed in item 10 of this Schedule, which removed the differentiation in notification procedures between third line forcing and other exclusive dealing activity.
5.364 Item 16 omits 'or (3A)' from section 101A.
5.365 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.366 The heading to section 101A is also amended to omit a reference to the same subsection.
5.367 Item 17 repeals subsections 102(5A), (5B) and (5C) dealing with Tribunal processes in relation to Commission notices regarding third line forcing under subsection 93(3A). Subsection 93(3A) was repealed in item 8 of this Schedule, aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.368 Item 18 omits 'or (3A)' from subsection 109(1A).
5.369 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.370 Part X of the TP Act deals with international liner cargo shipping.
5.371 Item 19 repeals subsection 10.18(2) which states that the exemption of conduct which gives effect to a provision of a registered conference agreement in relation to an outwards liner cargo shipping service or an inwards liner cargo shipping service from section 47 does not apply to subsections 47(6) and (7) (which relate to third line forcing conduct).
5.372 This brings the treatment of such conduct insofar as it relates to third line forcing into line with the other exclusive dealing provisions outlined in section 47.
5.373 Item 20 repeals subsection 10.18A(3) which states that the exemption of certain freight rate agreements from section 47 does not apply to subsections 47(6) and (7) (which relate to third line forcing conduct).
5.374 This brings the treatment of such conduct insofar as it relates to third line forcing into line with the other exclusive dealing provisions outlined in section 47.
5.375 Item 21 repeals subsection 10.20(2) which states that the exemption of conduct engaged in by a party to a loyalty agreement in relation to another party to the agreement so far as the conduct gives effect to a provision of the agreement in relation to an outwards liner cargo shipping service or an inwards liner cargo shipping service from section 47 does not apply to subsections 47(6) and (7) (which relate to third line forcing).
5.376 This brings the treatment of such conduct insofar as it relates to third line forcing into line with the other exclusive dealing provisions outlined in section 47.
5.377 Item 22 repeals subsection 10.24(3) which states that the exemption from section 47 of certain negotiations outlined in subsections 10.24(1) and (2) do not apply to subsections 47(6) and (7) (which relate to third line forcing).
5.378 This brings the treatment of such conduct insofar as it relates to third line forcing into line with the other exclusive dealing provisions outlined in section 47.
5.379 Item 23 repeals subsection 10.24A(4) which states that the exemption from section 47 of certain negotiations, conduct or dealings relating to stevedoring contracts outlined in subsections 10.24A(1), (2) and (3) do not apply to subsections 47(6) and (7) (which relate to third line forcing).
5.380 This brings the treatment of such activities insofar as they relate to third line forcing into line with the other exclusive dealing provisions outlined in section 47.
5.381 Part XIB relates to the telecommunications industry.
5.382 Item 24 omits 'or (3A)' from paragraph 151AY(2)(c) which allows the Commission to refuse an application for an exemption order or to convene a conference in relation to an exemption order under Part XIB if it relates to the same conduct as an exclusive dealing notification.
5.383 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.384 Section 155 deals with power to obtain information, documents and evidence.
5.385 Item 25 omits 'or (3A)' from subsection 155(1).
5.386 This removes a reference to a subsection that is repealed in item 8 of this Schedule aligning the treatment of third line forcing with that of the other forms of exclusive dealing.
5.387 Item 26 omits 'or (5) or paragraph (8)(a) or (b) or (9)(a), (b) or (c)' from subsection 47(10) of the Schedule, substituting ', (5), (6), (7), (8) or (9)'. This will ensure that third line forcing activities undertaken by a person, rather than a corporation, are not prohibited under the TP Act unless such activities have the purpose or the effect of substantially lessening competition.
5.388 This brings the treatment of third line forcing activities into line with that of other forms of exclusive dealing outlined in section 47, and removes the per se prohibition of third line forcing activities for individuals. This is in line with the amendments to subsection 47(10) of the TP Act made in item 3 of this Schedule.
5.389 Item 27 repeals subsection 47(10A) of the Schedule, which allows third line forcing activities conducted by a person, as opposed to a corporation, to continue provided the individual had previously provided the Commission with notification under section 93 of the TP Act.
5.390 This subsection is no longer necessary due to the amendments made in item 26 of this Schedule. This is in line with the amendments to subsection 47(10) of the TP Act made in item 4 of this Schedule.
5.391 Item 28 ensures that the amendments made in this Part apply to notifications made and conduct engaged in after the commencement of those items.
Trade Practices Act 1974
5.392 Third line forcing conduct, whereby a corporation sells goods or services, or gives a discount, but only on the condition that the purchaser acquires other goods from a third party, is currently prohibited per se. If the same practice were undertaken by a single corporate entity, it would be subject to a substantial lessening of competition test. The Dawson Review recommended that related companies should be treated as a single entity for the purposes of section 47, bringing the treatment of third line forcing activity into line with that of the other forms of exclusive dealing.
5.393 Item 29 adds 'not being a body corporate related to the corporation' to the end of subsections 47(6) and (7).
5.394 This ensures that related companies are treated as a single entity for the purposes of sections 46(6) and (7).
5.395 Item 30 inserts 'subsections 47(6) and (7) and' after 'omitted from' in paragraph 151AJ(5)(f).
5.396 This ensures that the exemption to subsections 47(6) and (7) for related companies, whereby related companies are treated as a single entity for the purposes of subsections 47(6) and (7), does not apply to a carrier or carriage service provider that is not a corporation when the conduct in question relates to the telecommunications market.
5.397 Item 31 ensures that the amendments made by this Part apply to conduct engaged in after the commencement of this Part.
Trade Practices Act 1974
5.398 Item 32 omits 'or granting an authorisation (whether or not the authorisation is still in force)' from paragraph 93(2)(b). This ensures that conduct that has previously been authorised, whether or not that authorisation is still in force, can still be the subject of a notification.
5.399 Item 33 ensures that the amendment made in this Part applies in relation to notices given after the commencement of this Part, whether or not the application for authorisation was dismissed before or after that commencement.
5.400 This Schedule inserts a new Part XID (Search and seizure) into the TP Act. The new Part sets out an enforcement regime for the purposes of determining whether there has been a contravention of the TP Act, Part 20 of the Telecommunications Act 1997 or Part 9 of the Telecommunications (Consumer Protection and Service Standards) Act 1999.
5.401 Item 1 amends section 79A (Enforcement and recovery of certain fines) so as to refer to the new section 154Q (Occupier to provide reasonable facilities and assistance).
5.402 Item 2 amends section 79A (Enforcement and recovery of certain fines) so as to refer to section 149.1 of the Criminal Code that refers to the new Part XID.
5.403 Item 3 amends section 10.91 (application of section 155 to investigations under Part) so that it refers to the new Part XID and section 155. This item also amends the heading to section 10.91 so that it refers to the new Part XID.
5.404 Item 4 inserts the new:
5.405 After Part XIC. Part XID sets out an enforcement regime for the purposes of finding out whether there has been a contravention of the TP Act. This replaces section 155(2) authorisations, which provide the Commission with the power to enter premises and inspect documents without a warrant. The Commission is granted search and seizure powers, similar to the search warrant provision in the Crimes Act 1914.
5.406 The Dawson Review expressed concern that the section 155(2) powers are not subject to adequate safeguards. Recommendation 13.1 of the Dawson Review indicated that the Commission should continue to give careful consideration to the financial implications of requests for information that are made to businesses consistent with the Commission guidelines on this matter. The Government accepted this recommendation, considering that while the Commission needs broad investigative powers for the purpose of detecting and prosecuting contraventions of the TP Act, it should be concerned about the effect of information requests on recipients. Recommendation 13.3.1 of the Dawson Review indicated that the TP Act should be amended to require the Commission to seek a warrant from a Magistrate for the Commission to enter premises and inspect documents. Recommendation 13.3.2 indicated that the TP Act should be amended to extend the Commission’s powers to include searching for and seizing information.
5.407 Part XID has five Divisions:
Division 1 — Preliminary
Division 2 — Appointment of inspectors and identity cards
Division 3 — Entry to premises with consent
Division 4 — Entry to premises under a search warrant.
This division consists of seven subdivisions:
– Subdivision A — Powers available under a search warrant
– Subdivision B — Availability of assistance and use of force in executing a search warrant
– Subdivision C — Obligations of executing officer and officers assisting
– Subdivision D — Occupier’s rights and responsibilities
– Subdivision E — General provisions relating to seizure
– Subdivision F — Search warrants
– Subdivision G — Powers of magistrates
Division 5 — General provisions relating to electronic equipment
5.408 This provides a simplified outline of this Part.
5.409 Section 154A introduces a number of defined terms. These definitions apply in proceedings subject to Part XID, unless a contrary intention appears in Part XID.
5.410 The definitions in section 154A are:
consultant means a person engaged under section 27A;
evidential material means a document or evidence relating to a contravention of this Act, Part 20 of the Telecommunications Act 1997, or Part 9 of the Telecommunications (Consumer Protection and Service Standards) Act 1999;
executing officer for a search warrant, this means the inspector named in the warrant as being responsible for executing the warrant;
inspector means a person appointed to this function under section 154B;
occupier in relation to premises, includes a person present at the premises who apparently represents the occupier;
officer assisting for a search warrant this means (a) an inspector assisting in executing the warrant; or (b) a person authorised under section 154K, in relation to the warrant;
premises means (a) an area of land or any other place (whether or not it is enclosed or built on); or (b) a building or other structure; or (c) a vehicle, vessel or aircraft; or (d) a part of any such premises;
search warrant means a warrant issued by a magistrate under section 154X or signed by a magistrate under section 154Y;
thing includes a thing in electronic or magnetic form.
5.411 Division 2 provides for the appointment of inspectors and the issue of identity cards. Recommendation 13.2 of the Dawson Review indicated that the function of conducting an examination of a person who is in receipt of a section 155(1)(c) notice should be delegable to senior staff of the Commission. The Government endorsed this recommendation because it provides greater flexibility to the Commission, as Commissioners need not be directly involved in the detail of particular investigations.
5.412 Section 154B allows for the appointment of inspectors.
5.413 Subsection 154B(1) bestows power upon the Chairperson to appoint inspectors.
5.414 Subsection 154B(2) ensures that inspectors have suitable qualifications and experience.
5.415 Subsection 154B(3) makes it clear that inspectors must comply with any directions of the Chairperson in exercising powers or functions.
5.416 Section 154C prescribes the requirements for inspectors who are issued with and who carry identity cards.
5.417 Subsection 154C(1) provides that the Chairperson must issue an identity card to an inspector.
5.418 Subsection 154C(2) indicates that the identity card must be in the form prescribed by the regulations, and must contain a recent photograph of the inspector.
5.419 Subsection 154C(3) provides that a person commits an offence if
(a) the person has been issued with a card; and
(b) the person ceases to be an inspector; and
(c) the person does not return the identity card to the Chairperson as soon as practicable.
5.420 The penalty applicable under section 154C(3) is one penalty unit.
5.421 Subsection 154C(4) makes it clear that the offence created by section 154C(3) is a strict liability offence.
5.422 Subsection 154C(5) makes it clear that subsection 154C(3) does not apply if the card was lost or destroyed.
5.423 Subsection 154C(6) requires the inspector to carry their card at all times when exercising powers or performing functions as an inspector.
5.424 Subsection 154C(7) provides that an inspector is not entitled to exercise any powers in relation to premises if the occupier of the premises has requested the inspector to produce the card and they fail to comply with the request.
5.425 Division 3 concerns entry to premises with the consent of the occupier of the premises.
5.426 Section 154D provides that inspectors and their assistants may enter premises with the voluntary consent of the occupier where there are reasonable grounds for suspecting that there may be evidential material on the premises.
5.427 Subsection 154D(1) prescribes the conditions under which the inspector may enter premises, namely where there are reasonable grounds to suspect that evidence is being held on the premises, and the inspector has obtained the consent of the occupier of the premises to enter the premises. Subsection 154D(2) allows an inspector to be accompanied by one or more assistants.
5.428 Subsection 154D(3) requires the inspector to inform the person they are seeking consent from, that the person may refuse consent. Subsection 154D(4) requires consent to be voluntary.
5.429 Section 154E provides powers to inspectors in relation to premises.
5.430 Subsection 154E(1) provides that an inspector or assistant may exercise powers once they have entered the premises, including searching for evidence, making copies of evidence including electronic materials, removing evidence with the consent of the occupier, securing evidence pending a warrant to seize it, and taking equipment onto the premises to achieve any of these aims. It is noted that Division 5 also addresses the operation of electronic equipment at the premises.
5.431 Subsection 154E(2) provides that prior to obtaining consent to remove evidence from the premises, the inspector or assistant must inform the person of the purpose for which the material is required and that the person may refuse consent. It also provides that only voluntary consent is effective.
5.432 Subsection 154F(1) indicates that an inspector or assistant has two options when evidential material is accessible by operating electronic equipment at the premises.
5.433 Subsection 154F(2) provides that one option is to use the electronic equipment at the premises to put the evidential material in documentary form and remove the documents so produced .
5.434 Subsection 154F(3) provides that the other option is to operate the equipment at the premises to transfer the evidential material onto a storage device (for example, disk or tape) and remove that storage device from the premises.
Division 4 — Entry to premises under a search warrant
5.435 This Division deals with entry to premises under a search warrant issued by a magistrate. It sets out the powers available under a search warrant, the obligations of persons entering the premises, and the rights and responsibilities of the occupier of the premises.
5.436 The Dawson Review identified the concern that the Commission’s investigative powers under section 155 lack adequate safeguards, particularly in relation to section 155(2), which provides the Commission with power to enter premises and inspect documents without the need for a warrant.
5.437 Recommendation 13.3.1 of the Dawson Review stated that the Commission’s powers to enter premises and inspect documents should be subject to the Commission seeking and obtaining a warrant from a Federal Court Judge or Magistrate for the exercise of those powers. The Government endorsed this recommendation noting that the Commission’s powers are extensive, and that regulatory power must be matched with appropriate accountability. Accordingly, Division 4 requires the Commission to seek a warrant for the exercise of its powers to gather evidence, and grants search and seizure powers to the Commission.
5.438 Recommendation 13.3.2 of the Dawson Review stated that section 155(2) of the TP Act should be amended to provide the Commission with the power to search for and seize information. The Government accepted this recommendation on the basis that it would provide greater clarification and certainty, as the elements of these powers are generally well known.
5.439 Subsection 154G(1) details the conduct permitted under the warrant. It provides that an executing officer or an officer assisting may:
Enter the premises;
Search the premises;
Make copies of the kind of evidential material specified in the warrant;
Operate electronic equipment at the premises (see Division 5);
And take equipment and material onto the premises and use it for these purposes
5.440 Subsection 154G(2) provides that the executing officer or assistant may seize other material that is not specified in the warrant, where they have reasonable grounds to believe both that the material is evidence of an indictable offence against the TP Act, or Part 20 of the Telecommunications Act 1997 or Part 9 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 and seizure is necessary to prevent it from being destroyed or concealed.
5.441 Subsection 154H(1) indicates that the executing officer may do one of the three things if they find that the kind of evidential material specified in the warrant is accessible by operating electronic equipment at the premises.
5.442 Subsection 154H(2) provides that one thing they may do is seize the equipment and any disk, tape or other associated device.
5.443 Subsection 154H(3) provides that one thing they may do is operate the equipment or other facilities at the premises to put the evidential material into documentary form, and the remove the documents so produced.
5.444 Subsection 154H(4) provides that the final thing they may do is operate the equipment at the premises to transfer the evidential material to a disk, tape or storage device and then remove that device.
5.445 Subsection 154H(5) provides that seizure under subsection 154H(2) is limited to cases where it is not practicable to put the evidential material in documentary form or transfer the evidential material to a storage device (subsections 154H(3) or (4)), or where possession of the thing by the occupier could constitute an offence against a law of the Commonwealth.
5.446 Subsection 154J(1) allows for an executing officer who has reasonable grounds to believe that the kind of evidence specified in the warrant may be accessible by operating electronic equipment at the premises, and expert assistance is required to operate the equipment and the material may be destroyed, altered or interfered with, then the officer may do whatever is necessary to secure the equipment, such as locking it up or placing a guard.
5.447 Subsection 154J(2) requires the executing officer to give notice to the occupier of the premises of their intention to secure the equipment and of the fact that the equipment will be secured for up to 24 hours.
5.448 Subsection 154J(3) allows the equipment to be secured for a period not exceeding 24 hours or until the equipment has been operated by the expert, whichever happens first.
5.449 Subsection 154J(4) allows the executing officer or assistant to apply to a magistrate for an extension of time where there is reasonable grounds for belief that the expert assistance will not be available within 24 hours.
5.450 Subsection 154J(5) requires the executing officer or assistant to give notice to the occupier of their intention to apply for an extension for a specified period, and the occupier is entitled to be heard regarding the application.
5.451 Subsection 154J(6) allows the magistrate to order an extension for a period specified in the order if they are satisfied that the extension is necessary.
5.452 Section 154K provides that the executing officer may, by writing, authorise a member of staff assisting the Commission or a consultant to assist in executing the warrant.
5.453 Section 154L provides that in executing a warrant: (a) the executing officer is able to obtain such assistance as is necessary and reasonable in the circumstances; (b) the executing officer, or another inspector who is an officer assisting, may use such force against persons and things as is necessary and reasonable in the circumstances; and (c) a person who is not an inspector, but who is an officer assisting, to use such force against things as is necessary and reasonable in the circumstances.
5.454 Subsection 154M(1) provides that before any person enters premises under a search warrant, the executing officer must (a) announce that he or she is authorised to enter the premises; and (b) give any person at the premises an opportunity to allow entry to the premises. Subsection 15AM(2) makes it clear that the executing officer is not required to comply with subsectionAM(1) if he or she believes on reasonable grounds that immediate entry to the premises is required to ensure that the effective execution of the warrant is not frustrated.
5.455 New section 154N Details of warrant to be given to occupier
5.456 This section makes it clear that if a search warrant in relation to premises is being executed and the occupier of the premises is present at the premises, the executing officer or an officer assisting must make available to the occupier a copy of the warrant or a copy of the form of warrant.
Subdivision D — Occupier’s rights and responsibilities
5.457 Subsection 154(1) provides that if a search warrant in relation to premises is being executed and the occupier of the premises is present at the premises, the occupier is entitled to observe the search being conducted. Subsection 154P(2) makes it clear that the occupier’s right to observe the search being conducted ends if the occupier impedes the search. Subsection 154P(3) provides that section 154P does not prevent 2 or more areas of the premises being searched at the same time.
5.458 Section 154Q obligates the occupier of premises in relation to which a search warrant is being executed to provide the executing officer and any officer assisting with all reasonable facilities and assistance for the effective exercise of their powers. An offence is committed, punishable by 30 penalty units for non-compliance with this section.
5.459 Subsection 154R(1) provides that if a search warrant in relation to premises is being executed, the executing officer or an officer assisting may: (a) require a person at the premises to answer questions or produce evidential material to which the warrant relates; and (b) seize that evidential material. Section 154R(2) makes it clear that a person commits an offence if the person fails to comply with a requirement under subsection 15AR(1). The penalty for non-compliance with this section is 30 penalty units.
5.460 Subsection 154(3) makes it clear that an individual is not excused from answering a question or producing evidential material on the ground that the answer, or the production of the material, might tend to incriminate the individual or make the individual liable to a penalty.
5.461 Subsection 154R(4) provides that the answer or the production of the material and any information or thing (including any document) obtained as a direct or indirect result of the answer or the production of the material is not admissible in evidence against the individual in any criminal proceedings, or in any proceedings that would expose the person to a penalty, other than for an offence against subsection 15AR(2) or proceedings for an offence against section 137.1 or 137.2 of the Criminal Code that relates to this Part. This is consistent with section 187 of the Evidence Act 1995.
5.462 Subsection 154S(1) provides that if under a search warrant relating to premises, the executing officer or an officer assisting seizes: (a) a document, film, computer file or other thing that can be readily copied; or (b) a storage device the information in which can be readily copied; then he or she must, if requested to do so by the occupier of the premises, give a copy of the thing or the information to the occupier as soon as practicable after the seizure. Subsection 154S(2) makes it clear that subsection 154S(1) does not apply if possession of the document, film, computer file, thing or information by the occupier could constitute an offence against a law of the Commonwealth.
5.463 Subsection 154T(1) provides that if a thing is seized under a search warrant, the executing officer or an officer assisting must provide a receipt for the thing. Subsection 154T(2) makes it clear that two or more things are seized, they may be covered in the one receipt.
5.464 Section 154U deals with the return of seized things. Subsection 154U(1) indicates that a thing which is seized under this Division must be returned if the reason for seizure no longer exists, or the item will not be used in evidence, or the period of 60 days after seizure ends, whichever occurs first, unless the item is forfeited to the Commonwealth or is the subject of disputed ownership. Subsection 154U(2) indicates that at the end of the 60 day period, the seizer must take reasonable steps to return the thing to the person from whom it was seized, unless it is being used in current proceedings, or the inspector may retain the thing under section 154V (Magistrate may permit a thing to be retained) or the seizer is otherwise authorised to retain, destroy or dispose of the thing.
5.465 Section 154V allows for a magistrate to permit a thing to be retained.
5.466 Subsection 154V(1) allows an inspector to apply to a magistrate for an order to extend the time that the thing may be retained if proceedings have not commenced either: (a) before the end of 60 days after the seizure; or (b) before the end of a period previously specified by a magistrate under this section.
5.467 Subsection 154V(2) allows the magistrate to grant an extension of time for the inspector to retain the thing for the purposes of investigation under the TP Act, Part 20 of the Telecommunications Act 1997, or Part 9 of the Telecommunications (Consumer Protection and Service Standards) Act 1999. The maximum allowable period for retention is three years.
5.468 Subsection 154V(3) makes it clear that before making an application for an extension of time, the inspector must: (a) take reasonable steps to discover who has an interest in the retention of the thing; and (b) if it is practicable to do so, notify each person whom the inspector believes to have such an interest of the proposed application.
5.469 New section 154W allows for the disposal of a thing in an appropriate manner if a thing is seized under this Division and there is no owner or the owner cannot be located despite reasonable efforts.
5.470 New section 154X provides for the issue of search warrants.
5.471 Subsection 154X(1) provides that an inspector may apply to a magistrate for a warrant under this section in relation to premises.
5.472 Subsection 154X(2) allows the magistrate to issue a warrant if the magistrate is satisfied that there are reasonable grounds for suspecting that there is evidential material on the premises or that there may be evidential material on the premises within the next 72 hours.
5.473 Subsection 154X(3) makes it clear that the magistrate must not issue the warrant unless the inspector or some other person has given to the magistrate, either orally or by affidavit, such further information (if any) as the magistrate requires concerning the grounds on which the issue of the warrant is being sought.
5.474 Subsection 154X(4) prescribes the matters which must be stated in the warrant.
5.475 Section 154Y deals with search warrants by telephone, fax etc.
5.476 Subsection 154Y(1) allows an inspector to apply to a magistrate by telephone, fax or other electronic means for a warrant under section 154X in relation to premises, where the inspector considers it urgent and necessary.
5.477 Subsection 154Y(2) allows the magistrate to require communication by voice as far as is practicable.
5.478 Subsection 154Y(3) provides that before applying for the warrant, the inspector must prepare an information of the kind mentioned in subsection 154X(2) in relation to the premises that sets out the grounds on which the warrant is sought. It also provides that if it is necessary to do so, the inspector may apply for the warrant before the information is sworn or affirmed.
5.479 Subsection 154Y(4) allows the magistrate to complete and sign the same warrant that the magistrate would issue under section 154X if the magistrate is satisfied that there are reasonable grounds for doing so after having considered the terms of the information; and after having received such further information (if any) as the magistrate requires concerning the grounds on which the issue of the warrant is being sought.
5.480 Subsection 154Y(5) requires the magistrate to inform the applicant, by telephone, fax or other electronic means, of :(a) the terms of the warrant; (b) the day on which and the time at which the warrant was signed; and (c) the day (not more than one week after the magistrate completes and signs the warrant) on which the warrant ceases to have effect.
5.481 Subsection 154Y(6) requires the applicant to complete a form of warrant in the same terms as the warrant completed and signed by the magistrate, stating on the form the name of the magistrate and the day on which and the time at which the warrant was signed.
5.482 Subsection 154Y(7) requires the applicant to send to the magistrate, not later than the day after the day of expiry or execution of the warrant, whichever is the earlier: (a) the form of warrant completed by the applicant; and (b) the information referred to in subsection 154Y(3) (which must have been duly sworn or affirmed).
5.483 Subsection 154Y(8) requires the magistrate to attach to the documents provided under subsection 154Y(7) to the warrant completed by the magistrate.
5.484 Subsection 154Y(9) makes it clear that a form of warrant duly completed under subsection 154Y(6) is authority for the same powers as are authorised by the warrant signed by the magistrate.
5.485 Subsection 154Y(10) makes it clear that if it is relevant in any proceedings for a court to be satisfied that an exercise of a power was authorised by section 154Y and the warrant signed by the magistrate authorising the exercise of the power is not produced in evidence; then the court must assume unless the contrary is proved, that the exercise of the power was not authorised by such a warrant.
5.486 Section 154Z deals with offences relating to warrants.
5.487 Section 154Z imposes important safeguards upon inspectors by creating a number of offences relating to warrants
5.488 Subsection 154Z(1) provides that inspector must not make, in an application for a warrant, a statement that the inspector knows to be false or misleading in a material particular. The penalty for non-compliance with this section is imprisonment for 2 years.
5.489 Subsection 154Z(2) prohibits an inspector from engaging in various conduct, that an inspector meet certain obligations when carrying out a warrant The penalty for non-compliance with any contravention of this section is imprisonment for 2 years.
5.490 Subsection 154ZA(1) makes it clear that a power conferred on a magistrate by this Division is conferred on the magistrate in a personal capacity and not as a court or a member of a court and that the magistrate need not accept the power conferred. Subsection 154ZA(2) provides that a magistrate exercising such a power has the same protection and immunity as if he or she were exercising that power as, or as a member of, the court of which the magistrate is a member.
5.491 Division 5 contains general provisions regarding the operation of electronic equipment.
5.492 Section 154ZB makes it clear that a person may operate electronic equipment at premises in order to exercise a power under this Part only if he or she believes on reasonable grounds that the operation of the equipment can be carried out without damage to the equipment.
5.493 Section 154ZC addresses compensation for damage to electronic equipment.
5.494 Subsection 154ZC(1) indicates that this section applies where electronic equipment, recorded data, or programs are damaged in the operations mentioned in sections 154E, 154F, 154G, 154H or 154J, and the damage occurs because of insufficient care in the operation or choice of person to operate the equipment. Subsection 154ZC(2) requires the Commonwealth to pay the owner of the equipment or the user of data or programs reasonable compensation for the damage, as the owner and Commonwealth agree.
5.495 Subsection 154ZC(3) provides that if the owner and Commonwealth are unable to agree, then the owner may commence proceedings in the Federal Court of Australia. Subsection 154ZC(4) indicates that when determining the compensation, regard is to be had as to whether the occupier or their agents and employees who were available at the time provided any appropriate warning or guidance on the operation of the equipment.
5.496 Subsection 154ZC(5) provides that compensation is payable from the money appropriated by the Parliament. Subsection 154ZC(6) defines damage in relation to data for the purposes of subsection 154ZC(1) (that is, by erasure of data or addition of other data).
5.497 Item 5 amends subsection 155(1). This is to extend the Commissions powers under section 155 when it is considering a revocation under sections 91B and 91C. This applies recommendation 13.4.1 of the Dawson Review, which indicated that section 155 should be amended to extend the availability of the Commission’s investigative powers to circumstances where the Commission is considering the revocation of an authorisation under sections 91B and 91C. The Government accepted this recommendation because these technical adjustments will improve the general application of the Commission’s investigative powers.
5.498 Item 6 amends subsection 155(1)(c) to allow the function of conducting an examination of a person who has received a notice to appear before the Commission to give evidence to be delegated to a member of staff assisting the Commission who is an SES employee or an acting SES employee.
5.499 Item 7 repeals the existing section which authorises an approved officer of the Commission to obtain documents and evidence from premises. This section is replaced by the new enforcement provisions outlined under section 154 of Part XID which include provisions for search and seizure powers subject to judicial approval.
5.500 Item 8 omits 'or an authorisation under subsection (2)' from subsection 155(2). This is a consequential amendment arising from Item 7 which repeals section 155(2).
5.501 Item 9 repeals subsection 155(3) and substitutes two new subsections. The new subsection 155(3) allows the Commission to require evidence under subsection 155(1) to be given under oath or affirmation, which may be administered by a member of the Commission. The new subsection 155(3A) allows a staff member assisting the Commission to require evidence that is given under subsection 155(1) to be given under oath or affirmation, and may administer the oath or affirmation.
5.502 Item 10 repeals subsection 155(4) as the legislation to which it refers is no longer in force.
5.503 Item 11 omits 'or' as the subsequent item is repealed (see item 12).
5.504 Item 12 repeals the paragraph as the legislation to which it refers, section 155(2), is repealed.
5.505 Item 13 repeals the subsection as the legislation to which it refers, section 155(2), is repealed.
5.506 Item 14 omits 'or (6)' from subsection 155(6A). This is because subsection 155(6) is repealed by item 13.
5.507 Item 15 omits 'or permitting the inspection of' from subsection 155(7). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.508 Item 16 omits 'or made available to an authorised officer for inspection' from subsection 155(7). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.509 Item 17 omits 'or permit inspection of' from paragraphs 155(7A)(b) and (c). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.510 Item 18 inserts subsection 155(7B). Subsection 155(7B) provides that the section does not require a person to produce a document that would disclose information that is the subject of legal professional privilege.
5.511 A note appears at the end of subsection 155(7B). This note makes it clear that a defendant bears an evidential burden in relation to the matter in this subsection (see subsection 13.3(3) of the Criminal Code).
5.512 The insertion of subsection 155(7B) implements recommendation 13.5 of the Dawson Review which stated that section 155 should be amended to ensure that the TP Act does not require the production of documents to which legal professional privilege attaches. The Government endorsed this recommendation because preserving legal professional privilege is in the public interest, as it facilitates the obtaining of legal advice and promotes the observance of the law.
5.513 Item 19 adds subsection 155(10) at the end of section 155. Subsection 155(10) provides that in this section legal professional privilege includes privilege under Division 1 of Part 3.10 of the Evidence Act 1995.
5.514 Item 20 inserts 'Part XID or' after 'under' in paragraph 155AA(3)(a). This amendment expands the definition of protected Part IV information to include information that is obtained by the Commission under the new Part XID and relates to a matter arising under Part IV.
5.515 Item 21 inserts 'Part XID' after 'under' in subparagraph 155AA(3)(a)(i). This amendment expands the definition of protected Part VB information to include information that was obtained by the Commission under the new Part XID and relates to a matter arising under Part VB.
5.516 Item 22 inserts 'or Part XID' after '155' in subparagraph 155AB(3)(a)(i). This amendment expands the definition of protected Part XIB or XIC information to include information that is obtained by the Commission under the new Part XID and relates to a matter arising under Part XIB or XIC.
5.517 Item 23 inserts '154Q' after '118' in subsection 163(5). The effect of this amendment is that a prosecution for an offence against section 154Q may be commenced at any time after the commission of the offence.
5.518 Item 24 repeals subparagraph 171(3)(a)(ii). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.519 Item 25 omits 'or authorisations' in paragraph 171(3)(b). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.520 Item 26 omits 'or authorisations' in paragraph 171(3)(c). This is a consequential amendment arising from the repeal of section 155(2) by item 7.
5.521 Item 27 repeals paragraph 171(3)(d) and substitutes paragraphs 171(3)(d), (da), (db) and (dc). Section 171 concerns the Annual Report issued by the Commission. The old paragraph 171(3)(d) refers to section 155(2), which is repealed by item 7. The new paragraphs include items that must be addressed in the Annual Report. Specifically, the new paragraph 171(3)(d) requires the inclusion of the number of search warrants issued or signed by a magistrate under sections 154X and 154Y respectively. Paragraph 171(3)(da) requires the inclusion of a general description of the matters over which the warrants were issued or signed. Paragraph 171(3)(db) requires the inclusion of the number of proceedings challenging the validity of the search warrants. Paragraph 171(3)(dc) requires the reporting of the number of entries onto premises under Part XID.
5.522 Item 28 makes it clear that the Commission will be able to use its information gathering powers, as amended by item 4, after the commencement of that item, to facilitate the prosecution of contraventions which may have occurred either before or after the commencement of that item.
5.523 Item 29 provides for the continued effect of an authorisation given under subsection 155(2) prior to the commencement of this item after that commencement, but only in relation to any entry to premises that occurs before the 14th day after the day on which this item commences.
5.524 The Schedule has three parts:
Part 1 — Civil penalties;
Part 2 — Disqualification from managing corporations; and
Part 3 — Indemnities.
5.525 Part 1 of the Schedule amends the TP Act and the Corporations
Act 2001 to implement recommendation 10.2.1 of the Dawson Review which
provided that the maximum pecuniary penalty for corporations be raised to be the
greater of $10 million or three times the gain from the contravention or, where
the gain cannot be readily ascertained, 10 per cent of the turnover of the body
corporate and all of its interconnected bodies corporate (if any).
Trade Practices Act 1974
5.526 This item makes a consequential amendment to subsection 75B(1) to refer to the new section 95AZN.
5.527 This item makes a consequential amendment to subsection 76(1)(a) to refer to the new section 95AZN.
5.528 This item is a technical amendment to improve the expression of subsection 76(1).
5.529 This item repeals and substitutes a new subsection 76(1A). The new
subsection makes it clear that the pecuniary penalty payable by a body corporate
for each act or omission relating to a provision of Part IV (apart from sections
45D, 45DB, 45E or 45EA of Part IV which remains at $750,000 alone) is to be the
greatest of the following:
(i) $10,000,000;
(ii) if the Court can
determine the value of the benefit that the body corporate, and any body
corporate related to the body corporate, have obtained directly or indirectly
and that is reasonably attributable to the act or omission — 3 times the
value of that benefit;
(iii) if the Court cannot determine the value of that
benefit — 10% of the annual turnover of the body corporate during the
period (the turnover period) of 12 months ending at the end of the month in
which the act or omission occurred.
5.530 This item also inserts a note at the end of subparagraph 76(1A)(b)(iii). This note makes it clear that the term annual turnover is defined by reference to the new subsection 76(5).
5.531 The new subsection 76(1A) also makes it clear that the pecuniary penalty payable by a body corporate for each act or omission relating to the new section 95AZN (Providing false or misleading information) is not to exceed $33,000.
5.532 This item repeals and substitutes a new subsection 76(1B). The new section makes it clear that the pecuniary penalty payable by a person other than a body corporate for each act or omission relating to the new section 95AZN (Providing false or misleading information) is not to exceed $6,600, and for each act or omission involved in section 76, must not exceed $500,000.
5.533 This item amends subsection 76(4) to refer to the relevant paragraphs ((a) and (b)) of the new subsection 76(1A). Under subsection 76(3) a person is only liable for one pecuniary penalty for the same conduct which may relate to more than one contravention.
5.534 Subsection 76(4) ensures that where a range of penalties are applicable, the highest penalty will apply.
5.535 This item inserts new subsections 76(5) and (6).
5.536 New subsection 76(5) introduces a definition of annual
turnover. The definition provides that, for the purposes of section 76,
the annual turnover of a body corporate during the turnover period is the sum of
the values of all the supplies that the body corporate, and any related body
corporate, have made, or are likely to make, during that period other
than:
(a) supplies made from any of those bodies corporate to any other of
those bodies corporate; or
(b) supplies that are input taxed;
or
(c) supplies that are not for consideration (and are not taxable supplies
under section 72-5 of the A New Tax System (Goods and Services Tax)
Act 1999); or
(d) supplies that are not made in connection with an
enterprise that the body corporate carries on; or
(e) supplies that are not
connected with Australia.
5.537 This item makes it clear that for the purposes of calculating annual turnover these items are excluded.
5.538 This item inserts a definition of contravention into subsection 76A(1). This definition provides that contravention, in relation to a section, includes conduct referred to in paragraph 76(1)(b), (c), (d), (e) or (f) that relates to a contravention of section 75AYA (Prohibition on misrepresenting the effect of new tax system changes) and new section 95AZN (Providing false or misleading information).
5.539 This amendment reflects the various ways in which a person may be involved in a contravention for the purposes of section 76A.
5.540 It will be a defence to proceedings under section 76 relating to a contravention of new section 95AZN (Providing false or misleading information) if the respondent establishes reasonable mistake, reasonable reliance on information supplied by another, factors beyond the respondent’s control or the respondent exercised due diligence to avoid the contravention.
5.541 This item repeals the definition of contravention of section 75AYA.
5.542 This item amends subsection 76A(2) to refer to the new section 95AZN (Providing false or misleading information).
5.543 This item inserts a definition of contravention into subsection 76B(1). This definition provides that contravention, in relation to a section, includes conduct referred to in paragraph 76(1)(b), (c), (d), (e) or (f) that relates to a contravention of this section.
5.544 This amendment reflects the various ways in which a person may be involved in a contravention for the purposes of section 76B.
5.545 This item inserts a note. This note makes it clear that the heading to section 76B is altered by inserting 'or section 95AZN' after '75AYA'. This insertion ensures the provision applies to new section 95AZN (Providing false or misleading information). Section 76B provides for the interaction of pecuniary penalty and offence proceedings.
5.546 This item repeals the definition of contravention of section 75AYA.
5.547 This item amends subsections 76B(2), (3) and (4) to refer to the new section 95AZN (Providing false or misleading information).
5.548 This item amends paragraph 76B(5)(a) to refer to the new section 95AZN (Providing false or misleading information).
5.549 This item makes it clear that the amendments made by this Part apply in relation to contraventions occurring after the commencement of this Part.
5.550 The following amendments to the Corporations Act 2001 and the TP
Act implement recommendation 10.2.2 of the Dawson Review which provides that the
Court be given the option to exclude an individual implicated in a contravention
from being a director of a corporation or being involved in its
management.
Corporations Act 2001
New section 206EA Disqualification under the Trade Practices Act 1974
5.551 This item insets a new section.
5.552 This new section provides that a person is disqualified from managing corporations if a court order disqualifying the person from managing corporations is in force under section 86E of the TP Act.
5.553 The new section 206EA makes it clear that a disqualification under the new section 86E is taken to be a disqualification from managing a corporation under Part 2D.6 (Disqualification from managing corporations) of the Corporations Act 2001.
New section 206GA Involvement of ACCC — leave orders under section 206G
5.554 This item inserts a new section.
5.555 Subsection 206GA(1) provides that this section applies in relation to a person who is disqualified from managing corporations under section 206EA.
5.556 Subsection 206GA(2) makes it clear that if a person lodges a notice with ASIC under subsection 206G(2) then ASIC is required to give the Commission a copy of the notice.
5.557 Subsection 206GA(3) makes it clear that if a person lodges a copy of a leave order with ASIC under subsection 206G(4), then ASIC is required to give the Commission a copy of the order.
5.558 Subsection 206G(4) requires ASIC to consult the Commission before making an application for an order under subsection 206G(5).
5.559 Subsection 206(5) defines ACCC to mean the Australian Competition and Consumer Commission.
5.560 This item amends paragraph 1274AA(1)(a) to refer to the new section 206EA.
5.561 Item 11 amends paragraph 1274AA(2)(a) to refer to the new
section 206EA. The effect of this item is to require ASIC to keep a
register of disqualifications made pursuant to section
206EA.
Trade Practices Act 1974
5.562 This item insets a new section after section 86D.
5.563 Subsection 86E(1) provides that on application by the Commission, the Court may make an order disqualifying a person from managing corporations for a period that the Court considers appropriate if two items are satisfied. These are that: (a) the Court has ordered the person to pay a pecuniary penalty under subsection 76(1) for a contravention of a provision of Part IV; and (b) the Court is satisfied that the disqualification is justified.
5.564 Item 20 also inserts a note at the end of the new subsection 86E(1). This note observes that section 206EA of the Corporations Act 2001 provides that a person is disqualified from managing corporations if a court order is in force under this section and that the Corporations Act 2001 contains various consequences for persons so disqualified.
5.565 Subsection 86E(2) provides that in determining whether the disqualification is justified, the Court may have regard to a number of items. These are: (a) the person’s conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate.
5.567 Subsection 86E(3) requires the Commission to notify ASIC if the Court makes an order under section 86E. This subsection also requires the Commission to give ASIC a copy of the order. These obligations are necessary to enable ASIC to meet its obligation to maintain a register of persons who have been disqualified from managing corporations pursuant to section 1274AA of the Corporations Act 2001.
5.568 Item 20 also inserts a note at the end of subsection 86E(3). This note confirms that ASIC must keep a register of persons who have been disqualified from managing corporations.
5.569 Subsection 86E(4) provides that for the purposes of the new section 86E, ASIC means the Australian Securities and Investments Commission.
5.570 This item makes it clear that amendments made by this Part apply in relation to contraventions occurring after the commencement of this Part.
5.571 Part 3 of this Schedule amends the Trade Practices Act 1974 to
implement recommendation 10.2.3 of the Dawson Review which provides that
corporations be prohibited from indemnifying, directly or indirectly, officers,
employees or agents against the imposition of a pecuniary penalty upon an
officer, employee or agent.
Trade Practices Act
1974
5.572 This item amends paragraph 6(2)(h) to refer to the new section 77A.
5.573 This item inserts new sections 77A, 77B and 77C.
5.574 New subsection 77A(1) provides that a body corporate (the first
body), or a body corporate related to the first body, must not indemnify
a person (whether by agreement or by making a payment and whether directly or
thorough an interposed entity) against:
(a) a civil liability incurred as an
officer, employee or agent of the first body; or
(b) legal costs incurred in
defending or resisting proceedings in which the person is found to have such a
liability.
5.575 Paragraph 77A(1)(a) makes it clear that indemnification may include a corporation who pays the legal cost incurred in defending or resisting proceedings in which an officer, employee or agent of the company is found liable. This amendment addresses the fact that significant assistance may be provided through the payment of legal expenses and is necessary for comprehensive deterrence.
5.576 The offence prescribes a penalty of 25 penalty units.
5.577 Subsection 77A(2) makes it clear that for the purposes of subsection 77A(1), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.
5.578 Subsection 77A(3) inserts a definition of civil liability and officer. These definitions apply in proceedings under this section. For these purposes:
civil liability means a liability to pay a pecuniary penalty under section 76 for a contravention of a provision of Part IV;
officer has the same meaning as in the Corporations Act
2001.
New section 77B Certain indemnities not authorised and
certain documents void
5.579 Subsection 77B(1) makes it clear that section 77A does not authorise anything that would otherwise be unlawful.
5.580 Subsection 77B(2) confirms that anything that purports to indemnify a person against a liability is void to the extent that it contravenes section 77A.
5.581 The new section 77C enables individuals to be implicated as a result of the offence created by the new section 77A. The offence is punishable by a fine not exceeding 5 penalty units.
5.582 This item makes it clear that amendments made by this Part apply in relations to contraventions occurring after the commencement of this Part.
5.583 Section 2D of the TP Act currently exempts the licensing decisions and internal transactions of local government from Part IV of the TP Act. A Productivity Commission inquiry into the operation of section 2D was undertaken in accordance with the legislation review process under the National Competition Policy agreements between the Commonwealth, States and Territories to review regulations that have the potential to restrict competition.
5.584 The Productivity Commission found that, on balance, section 2D provides a net benefit to the community, but that greater benefits would be obtained by directly limiting the application of Part IV to the business activities of local government, consistent with the original intention of the National Competition Policy reforms (Productivity Commission Report No. 23, 14 August 2002).
5.585 Schedule 10 repeals section 2D and replaces it with provisions having the explicit effect that Part IV of the TP Act only applies to the business activities of local government. This is consistent with the exemption currently provided to Commonwealth, State and Territory governments.
5.586 This item inserts section 2BA into the TP Act.
5.587 Section 2BA(1) ensures that Part IV of the TP Act applies only to the activities undertaken by local government bodies, or incorporated companies in which local government bodies have a controlling interest to the extent they carry on a business.
5.588 Section 2BA(2) provides the definition of a local government body to be applied for the purposes of this section. It means a body established by or under a law of a State or Territory for the purposes of local government, other than a body established solely or primarily for the purposes of providing a particular service, such as the supply of electricity or water.
5.589 Item 2 omits the words 'sections 2A and 2B' from subsection 2C(1) and substitutes 'sections 2A, 2B and 2BA'. This clarifies those things that do not involved carrying on a business for the purpose of those sections.
5.590 Item 3 adds to the end of paragraph 2C(1)(c) a subparagraph (viii) to the effect that internal transactions between persons acting for the same local body, or for the same incorporated company in which such a body has a controlling interest, do not amount to transactions carrying on a business for the purposes of the section. This brings the treatment of internal transactions within local government bodies into line with that of internal transactions within Commonwealth, State and Territory governments.
5.591 Item 4 omits 'sections 2A and 2B' from subsection 2C(2) substituting 'sections 2A, 2B and 2BA' in order to clarify that the activities listed in subsection 2C(1) do not limit the things that do not amount to carrying on a business for local government bodies. This brings into line the treatment in this regard of local government bodies within this section.
5.592 Item 5 repeals section 2D.
5.593 The Competition Code is essentially a Commonwealth–State/Territory co-operative scheme, consisting of the Schedule version of the competition provision (Part IV) of the TP Act and associated provisions. The Competition Code provides national coverage to the competition provisions of the TP Act.
5.594 Under the Competition Code, State and Territory laws confer functions and powers on the Commission and the Tribunal to deal with anti-competitive conduct by individuals. Section 150F of the TP Act consents to this conferral.
5.595 The proposed amendments are in response to the constitutional questions raised by the High Court in R v Hughes (2000) 171 ALR 155 regarding the operation of co-operative schemes and are proposed to address concerns with respect to conferrals under section 150F that there may be a constitutional imperative for any duties imposed on Commonwealth bodies or officers to be imposed by Commonwealth law. That is, it may not be sufficient that a Commonwealth law merely consents to a State or Territory law imposing a duty on a Commonwealth body.
5.596 Section 150F of the TP Act also consents to 'powers and functions' conferred by State or Territory legislation in the Competition Code. In the context of the Competition Code, such powers and functions are likely to be characterised as duties.
5.597 Section 150F will be amended to expressly provide for the imposition of duties rather than merely functions and powers so as to avoid a potential challenge to the Competition Code.
5.598 This Bill is the second tranche of the amendments resulting from the Hughes decision. Amendments to section 44ZZM and section 44ZZOA of the TP Act formed part of the Trade Practices Legislation Amendment Act 2003.
5.599 The amendments to section 150F of the TP Act ensure that the States can confer duties on the Commission and the Tribunal as originally intended by the Competition Code Agreement, and as they are of a minor or machinery of government nature, and do not substantially alter existing arrangements, a Regulation Impact Statement is not required.
5.600 This inserts a definition for Commonwealth entity into
Section 150A of the TP Act. This definition is to improve the clarity of the
Code and defines Commonwealth entity as:
(a) an authority of
the Commonwealth; or
(b) an officer of the Commonwealth.
5.601 This item repeals the existing section 150F and replaces it with new section 150F. Subsection 150F(1) provides that a State or Territory application law may confer functions or powers or impose duties on Commonwealth entities and notes that section 150FB will set out when such a law imposes a duty on a Commonwealth entity.
5.602 Subsection 150F(2) provides that the Commonwealth does not authorise consent to the conferral of functions if the conferral, or the imposition, or the authorisation would contravene any constitutional doctrines restricting the duties that may be imposed on a Commonwealth entity or if the authorisation would exceed the legislative power of the Commonwealth.
5.603 Subsection 150G(3) provides that a Commonwealth entity cannot perform a duty or function, or exercise a power under an application law made under a relevant State or Territory law unless the conferral of the function or power, or the imposition of the duty is in accordance with an agreement between the Commonwealth and State or Territory concerned.
5.604 This new section provides how a duty will be imposed.
5.605 Subsection 150FA(1) finds that section 150A is applicable when an application law made by a relevant State or Territory purports to impose a duty on a Commonwealth entity. It is noted that section 150FB sets out when an application law imposes a duty on a Commonwealth entity.
5.606 Subsection 150FA(2) provides that State or Territory legislative power is sufficient to support the duty where the duty will be taken to be imposed by force of the law of the State or Territory (the Commonwealth having consented under section 150F to the imposition of the duty by that law).
5.607 Subsections 150FA(3) to (5) provide that where Commonwealth legislative power is sufficient to support the duty but State or Territory legislative powers are not, in order to ensure the validity of the purported imposition, the duty will be taken to be imposed by Commonwealth law, through the Trade Practices Amendment Act 2004.
5.608 Subsection 150FA(6) provides that earlier subsections in 150FA do not limit the scope of section 150F.
5.609 This new section provides that for the purposes of sections 150F and
150FA, an application law made by a relevant State or Territory law
imposes a duty on a Commonwealth entity if:
(a) the law confers
a function or power on the entity; and
(b) the circumstances in which the
function or power is conferred give rise to an obligation on the entity to
perform the function or to exercise the power.
5.610 This item fixes an incorrect cross reference.