EXPLANATORY STATEMENT

 

Select Legislative Instrument 2009 No. 178

Issued by the authority of the

Minister for Small Business, Competition Policy and Consumer Affairs

 

Trade Practices Act 1974

 

Trade Practices Amendment Regulations 2009 (No. 3)

 

The object of the Trade Practices Act 1974 (the Act) is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

 

Section 172 of the Act provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters that are required or permitted by the Act to be prescribed, or are necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

Section 88 of the Act enables the Australian Competition and Consumer Commission (ACCC) to authorise a corporation to engage in conduct that would otherwise be considered to breach the prohibitions in Part IV of the Act, other than those relating to the misuse of market power. The effect of the authorisation is to provide a corporation with immunity from action under the relevant provision. Subsection 89(1) sets out the minimum requirements for a valid authorisation application. Forms A and B in the Trade Practices Regulations 1974 (TP Regulations) prescribe the form that authorisation applications relating to exclusionary provisions and agreements affecting competition under section 45 of the Act must take in order to comply with subsection 89(1) of the Act.

 

Section 93AB of the Act enables a corporation to lodge a collective bargaining notice with the ACCC where the corporation has made or proposes to make, a contract that contains an exclusionary provision, a price fixing provision, or a provision that may substantially lessen competition. Form GA in the TP Regulations prescribes the form that collective bargaining notifications must take in order to comply with subsection 93AB(6) of the Act.

 

The Regulations amend the TP Regulations to enable the notification and authorisation procedures to operate as envisaged by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (the Cartels Act). The Regulations extend the application of Forms A, B and GA to include both the existing prohibitions under Part IV, as well as the new prohibitions contained in Division 1 introduced to Part IV as a result of the Cartels Act.

 

The Cartels Act, which received the Royal Assent recently, was introduced into Parliament on 3 December 2008, giving effect to the 2007 election commitment to introduce legislation to criminalise cartel conduct within the first 12 months of office. The Cartels Act introduces, for individuals, criminal penalties for cartel conduct of an imprisonment term of up to 10 years and/or fines of up to $220,000. For corporations, maximum fines are the greater of $10 million, three times the value of the benefits obtained through the conduct, or where that benefit cannot be calculated, 10 per cent of the firm’s annual revenue.

 

The Regulations amend the TP Regulations to ensure that corporations that are currently able to lodge collective bargaining notices or authorisation applications with the ACCC for conduct that may otherwise breach Part IV continue to be able to do so following the commencement of the Cartels Act.

 

The development of the Regulations has been the subject of targeted consultation with the ACCC. However, the framework for the TP Regulations was the subject of consideration by the Review of the Competition Provisions of the Trade Practices Act, which reported in January 2003, and involved extensive consultation. In addition, the Cartels Act itself was subject to broad consultation prior to its introduction, with a discussion paper, and roundtables involving targeted consultations with key stakeholders. These consultation processes have assisted the Government in the preparation of the Regulations. In addition, existing Forms already apply under the Act, and the amendments to the TP Regulations extend the application of those forms to the prohibitions introduced by the Cartels Act.

 

Details of the Regulations are set out in the Attachment.

 

The Act does not specify any conditions that need to be satisfied before the power to make the Regulations may be exercised.

 

The Regulations would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

The Regulations would commence on the commencement of Schedule 1 to the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009.

 

 

 

Attachment

 

Details of the Trade Practices Amendment Regulations 2009 (No. 3)

 

Regulation 1 specifies the name of the Regulations as the Trade Practices Amendment Regulations 2009 (No. 3).

 

Regulation 2 provides that the Regulations commence on the commencement of Schedule 1 to the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009.

 

Regulation 3 provides that Schedule 1 amends the Trade Practices Regulations 1974.

 

SCHEDULE 1 – AMENDMENTS

 

Amendments to Form A

 

Background

 

Section 88 of the Trade Practices Act 1974 (the Act) enables the Australian Competition and Consumer Commission (ACCC) to authorise a corporation to engage in conduct that may otherwise breach the prohibitions in Part IV, other than those relating to the misuse of market power. The ACCC may only do so if it determines that the matters subject to authorisation will generate a net public benefit, consistent with the tests applied by the ACCC under section 90 of the Act. The effect of the authorisation is to provide a corporation with immunity from action under the relevant provision. Form A in the TP Regulations prescribes the form that an authorisation application for conduct involving, or potentially involving, exclusionary provisions must take in order to comply with subsection 89(1) of the Act.

 

The Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cartels Act) inserts subsection 88(1A) which enables the ACCC to authorise a corporation to make a contract, arrangement or understanding, or give effect to a contract, arrangement or understanding where it contains a cartel provision. The term ‘cartel provision’ is defined in section 44ZZRD of the Cartels Act. The scope of the section 44ZZRD ‘cartel provision’ definition may capture provisions which may also be an ‘exclusionary provision’ under section 45 and section 4D of the Act.

 

Amendments

 

Item 5 and Item 6 amends the heading (Item 5) and title (Item 6) to Form A by deleting the words ‘Exclusionary provisions’, and substituting with the words ‘Exclusionary provisions and associated cartel provisions’. This clarifies that Form A applies to ‘cartel provisions’, as defined in the Cartels Act, in so far as they are, or might be exclusionary provisions. Form A continues to apply to the existing exclusionary provisions in section 45 of the Act.

 

Item 7 amends the preamble to Form A so that it is clear that an application for authorisation under Form A applies to both the existing prohibitions in relation to exclusionary provisions in section 45 of the Act (under subsection 88(1)), as well as the new cartel provisions introduced by the Cartels Act (under subsection 88(1A)) in so far as they are, or would, or might be exclusionary provisions.

 

Item 8 amends paragraph 2(b) of Form A to show that Form A applies to ‘cartel provisions’ (in so far as they are exclusionary provisions).

 

 

 

 

Amendments to Form B

 

Background

 

Section 88 of the Act enables the ACCC to authorise a corporation to engage in conduct that may otherwise breach the prohibitions in Part IV, other than those relating to the misuse of market power. The ACCC may only do so if it determines that the matters subject to authorisation will generate a net public benefit, consistent with the tests applied by the ACCC under section 90 of the Act. The effect of the authorisation is to provide a corporation with immunity from action under the relevant provision. Form B in the TP Regulations prescribes the form that authorisation applications for agreements affecting competition must take in order to comply with subsection 89(1) of the Act.

 

The Cartels Act inserts subsection 88(1A) which enables the ACCC to authorise a corporation to make a contract, arrangement or understanding, or to give effect to a contract, arrangement or understanding, where it contains a ‘cartel provision’ (defined in section 44ZZRD of the Cartels Act).

 

Amendments

 

Item 11 and Item 12 amend the heading (Item 11) and title (Item 12) to Form B, by deleting the words ‘Agreements affecting competition:’ and inserting the words ‘Agreements affecting competition or incorporating related cartel provisions: application for authorisation’. This amendment clarifies that Form B applies to the new cartel provisions in the Cartels Act, and that parties can seek authorisation under the new subsection 88(1A).

 

Item 13 amends the preamble to Form B so that it is clear that an application for authorisation under Form B applies to both the existing prohibitions in Part IV of the Act (under section 88), other than those relating to the misuse of market power, as well as the new cartel provisions introduced by the Cartels Act (under subsection 88(1A)), in so far as they are not exclusionary provisions.

 

Item 14 amends paragraph 2(b) of Form B to show that Form B applies to ‘cartel provisions’ (in so far as they are not exclusionary provisions).

 

 

Amendments to the Directions attached to Form A and Form B

 

Attached to Form A and Form B in the TP Regulations are Directions designed to assist users to use the Forms in order to comply with subsection 89(1) of the Act.

 

Item 10 amends Direction item 4 to Form A to ensure that when applicants use Form A, they also provide information in relation to any contract, arrangement or understanding which is, or might be, a cartel provision, and which is also, or might also be, an exclusionary provision.

 

Item 16 amends Direction item 4 to Form B to ensure that when applicants use Form B, they understand that they must also provide information in relation to any contract, arrangement or understanding which is, or might be, a cartel provision.

 

Item 9 and Item 15 amend Direction item 1 to Form A (Item 9), and Direction item 1 to Form B (Item 15) to assist users in determining under what circumstances it would be appropriate to lodge an application for authorisation under Form A or Form B, or both Forms A and B.

 

The Directions advise that Form A be used if the contract, arrangement or understanding includes a provision of which is, or might be, a cartel provision and which is also, or might also be, an exclusionary provision.

 

The Directions advise that Form B be used if the contract, arrangement or understanding includes a provision which is, or might be, a cartel provision or a provision which would have the purpose, or would or might have the effect, of substantially lessening competition.

 

The Directions advise that in some circumstances both Form A and Form B could capture a single contract, arrangement or understanding. In this case, the Directions advise that it would be necessary to lodge applications for authorisation under both Form A and Form B.

 

Amendments to Form GA

 

Background

 

Section 93AB enables a corporation to lodge a collective bargaining notice with the ACCC, where the corporation has made or proposes to make a contract that contains an exclusionary provision, a price fixing provision, or a provision that may substantially lessen competition. Form GA in the TP Regulations prescribes the form that collective bargaining notifications must take in order to comply with subsection 93AB(6).

 

Section 44ZZRL of the Cartels Act provides an exception to the proposed criminal and civil sanctions (in sections 44ZZRF, 44ZZRG, 44ZZRJ and 44ZZRK), if a corporation lodges a collective bargaining notice setting out particulars of a contract or proposed contract that contains a provision relating to price fixing, restricting outputs or allocating customers, suppliers or territories. A collective bargaining notification would not be able to be lodged in relation to bid rigging under paragraph 44ZZRD(3)(c).

 

Amendments

 

Item 17 amends the title of Form GA to reflect that Form GA applies to all collective bargaining notifications under section 93AB, including under the existing subsection 93AB(1) and the new subsection 93AB(1A) introduced by the Cartels Act.

 

Item 18 amends the preamble to Form GA so that it is clear that Form GA applies to all collective bargaining notifications under section 93AB, including under the existing subsection 93AB(1) and the new subsection 93AB(1A) introduced by the Cartels Act.

 

List of Forms provided by the TP Regulations

 

Regulation 70 in the TP Regulations displays a table of Forms, which briefly states the circumstances under which each Form should be used.

 

Item 3 and Item 4 amend the existing headings to reflect the broadened application of Form A and Form B to include prohibitions introduced by the Cartels Act.

 

Fees Payable for Lodgement of Forms

 

Schedule 1B of the existing TP Regulations provides a table of fees payable to the ACCC or the Australian Competition Tribunal for the lodging of applications for authorisations and notifications.

 

Item 19 amends Schedule 1B, item 1 to ensure that the existing fees for authorisation applications apply to applications under the existing subsection 88(1), as well as subsection 88(1A) as introduced by the Cartels Act.

 

Item 20 amends Schedule 1B, item 10 to ensure that the existing fees for collective bargaining notifications apply to notifications under the existing subsection 93AB(1), as well as subsection 93AB(1A) as introduced by the Cartels Act.

 

Concessional Fee Regime for Lodgement of Forms

 

Subregulation 28(7) provides for a concessional fee rate for the lodging of applications for authorisation and collective bargaining notifications in certain circumstances.

 

Item 1 amends subregulation 28(7)(c) to ensure the existing concessional fee regime for collective bargaining notifications applies to notifications under both the existing subsection 93AB(1), and the new subsection 93AB(1A) introduced by the Cartels Act.

 

Item 2 amends subregulation 28(7) to ensure that the existing concessional fee regime for authorisation applications applies to authorisations under both the existing subsection 88(1), and the new subsection 88(1A) introduced by the Cartels Act.