Restrictive Trade Practices: Designed to Achieve Workable or Effective Competition Essay Example

venture and do not significantly reduce competition.Section 45 of the law defines price fixing as having an intention to limit consumer choice, impact product innovation, service quality, and availability. To establish if price fixing has taken place, three conditions must be fulfilled: (1) there must be an agreement, contract, arrangement or understanding between parties.

The text discusses an agreement between competitors that aims to fix, control, or maintain prices. This includes provisions for setting prices based on an agreed formula, setting maximum or minimum prices for goods and services, and offering discounts, rebates, allowances, or credits. However, exemptions to price fixing can be granted in cases of joint buying, selling, or advertising agreements. Such schemes can promote competition, especially when only a small portion of traders are competing in the market. One possible defense against price fixing is when a joint venture leads to the opening up of a market due to the limited financial resources of individual companies. This is illustrated in the case of ACCC v Pioneer Concrete Pty Ltd (6.2), where companies were found to have fixed the prices of pre-mixed concrete in Brisbane, Gold Coast, and Toowoomba.

The text discusses the misuse of market power by companies. It states that companies should not use their market power to eliminate or damage competition, prevent entry into a market, or prevent others from engaging in competitive conduct. The aim is to prevent powerful companies from disadvantaging weaker ones. The text also outlines three steps in determining misuse of market power: determining if the company has substantial power in the relevant market, if it has taken advantage of this power, and if it had

one of three unlawful purposes. The relevant market includes all close substitutes. The case between Singapore Airlines and Taprobane Tours is cited as an example.

Substantial market power refers to a company's significant influence in the market, which is substantial, considerable, solid, or big in comparison to other firms. Market power is the ability of a company to increase prices above the cost of supplying without losing customers to competitors in a timely manner. The cost of supplying refers to the minimum cost that an efficient firm would incur in producing the product. This concept is illustrated in cases such as Qld Wire vs BHP and Mark Lyons Pty Ltd v Bursill Sportsgear (Skiboots) on pages 6 and 23. Market power goes beyond price increases and can involve exclusive dealing, tying arrangements, predatory pricing, or refusal to deal.

2. Has the firm used its market power advantageously? This implies doing something that a weaker competitor would not be able to do. In other words, would the firm have made the same decisions if it did not possess a significant amount of market power?

3. Did the firm have an unlawful intention? Section 46 is violated only when a firm with considerable market power exploits that power for one of three prohibited intentions:

• Eliminating or causing significant harm to a competitor
• Preventing someone from entering the market
• Detering or preventing someone from engaging in competitive conduct

For example, this could involve engaging in predatory pricing, where prices are drastically reduced to force competitors out of the market and then raised again. How can the firm's intention be proven? The intention is subjective and requires evidence of a state of mind. However, proving a

specific state of mind can be challenging, so often the intention can be inferred based on circumstantial evidence. Relevant cases include Melway Publishing v Robert Hicks (Exclusive Distribution of Melb Street Directories) and ACCC v Boral Ltd Pp 6.25 s47 Exclusive Dealing. This refers to conduct that involves vertical restraints imposed by a trader at one level of the market on traders at different levels of distribution chain.

Restrict traders from choosing who, what, or where they can trade with. There are 5 categories of vertical restraint:
1. Suppliers limit customers' freedom to obtain products from competitors (product restraint)
2. Suppliers limit their customers' freedom to resell products to specific people or in specific territories (customer and territorial restraints)
3. Purchases restrict suppliers' freedom to supply to others
4. Suppliers require customers to acquire additional goods from other sources (3rd Line forcing)
5. Restrictions imposed or enforced in leases or licenses involving land and buildings.
3rd Line forcing is completely prohibited, but other forms of exclusive dealing may be allowed as long as they do not reduce competition.

*Case: Outboard Marine Aus Pty Ltd v Hecar Investments Pp 6.27*
The court ruled that while customer convenience may play a role in competition, it is not the primary focus. There is no evidence to suggest that exclusive dealing would harm the market structure or reduce price competition. Actions that disadvantage one party and benefit another do not necessarily qualify as anticompetitive, unless they are widespread and carried out by a leading market participant. This falls under s47 Thirdline Forcing.

*Third line forcing involves customers entering into two separate contracts - one with the supplier engaging in exclusive dealing and another with a third party benefiting

from the arrangement. This practice involves three parties and two products, with the requirement that obtaining the first product is conditional on acquiring a second product from a designated third party. Third line forcing is strictly prohibited.

*Case: Re Ku ring gai Cooperative Building Society Pp 6.28*
There are two ways to obtain immunity from proposed exclusive dealing, one being when it serves public interest. Under s93, authorization for exclusive dealing can be granted if the ACCC determines that the public benefit outweighs concerns about competitionFirms must notify the ACCC before engaging in any form of exclusive dealing conduct, regardless of its nature. This notification should be done following prescribed guidelines.

The Australian Competition and Consumer Commission (ACCC) offers protection against anticompetitive conduct through notification. However, this protection can be revoked if the ACCC deems the conduct to be anticompetitive according to section 48 of the Resale Price Maintenance Act.

Resale Price Maintenance (RPM) happens when a supplier sets a minimum price for resellers to sell or advertise goods and services. It should not be confused with price fixing (horizontal agreement) under section 45, which involves competitors agreeing on fixed prices. RPM, on the other hand, involves an agreement between a supplier and a reseller (vertical agreement).

The practice of resale price maintenance is carried out by withholding supplies from resellers who refuse to sell at a specified minimum price or are likely to sell below such a price.

There are three steps involved in determining if resale price maintenance has taken place:

1. Has the supplier specified a price?

2.

Is the price a minimum price? Has the supplier made efforts to maintain the specified resale price? According to Recommended Retail Price *s97,

suppliers are prohibited from compelling resellers to adhere to a specific price unless certain conditions are met. If a supplier applies a recommended retail price, it must be labeled as "RRP." Additionally, if an invoice includes an "RRP," there must be a statement clarifying that it is merely a recommendation and not obligatory. Failure to comply with these requirements does not automatically constitute a breach but limits the supplier's available defenses. Has the supplier taken action to ensure the specified retail price is maintained? Actions such as refusing supply, inducing compliance, entering agreements, using statements of price, or withholding supply may likely be taken. This proposition finds support in Trade Practices Commission v Madad Pp 6 where withholding supplies (specifically mattresses) could be deemed illegal resale price maintenance. Justification for refusal of supply relies on non-compliance with specified prices or likelihood of selling at lower prices.As per the TP Act, a supplier has the right to withhold supply under certain circumstances. These include refusing to supply, offering supplies on unfavorable terms, treating the buyer poorly in terms of delivery details, or arranging for someone else to withhold supply. However, when it comes to resellers, the supplier can only withhold supplies if the reseller engages in loss leader selling. In situations where the reseller buys goods with the intention of selling them at a price below cost, the supplier can withhold supply as a means of safeguarding its product's reputation.

If a reseller has the supplier's permission or conducts a legitimate clearance sale under section 50 of the Mergers and Acquisitions Act, which forbids acquisitions that greatly reduce competition in an important market, this rule does not

apply. To ascertain if a merger is unlawful, two measures need to be taken: 1) acquiring shares directly or indirectly, and 2) determining if the merger will diminish competition. To assess if the merger will reduce competition, it is crucial to identify the pertinent market.

When evaluating the impact of competition on a merger, it is crucial to compare competition levels both before and after the merger takes place. If there is a significant difference in competition, this would violate section 50. Various factors should be taken into consideration such as entry barriers, potential price and margin increases for the acquiring party, as well as the availability of substitutes in the market.

The parties involved in the merger have the option to seek clearance or authorization from either the ACCC or the Australian Competition Authority under Part IVA for unconscionable conduct. Unconscionable conduct refers to actions that exploit others in a manner that goes against moral principles. This applies to transactions involving both consumers and businesses, as defined by sections 51AA, 51AB, and 51AC.

It can be challenging to avoid consequences if a contract is deemed unfair or harsh since it falls under unconscionable conduct. Unfair deals can be invalidated if one party takes advantage of another's weakness or special disability while being fully aware of this disadvantage. Noteworthy cases that illustrate such situations include Commercial Bank v Amadio (where elderly guarantors were exploited for their son's debt) and Bloomley vs Ryan (where farmland was sold to an intoxicated individual).Factors such as poverty, dependence, illness, age, sex, mental or physical disabilities, drunkenness, illiteracy, and lack of education can contribute to special disabilities. According to s51AA of the Trade

Practices Act (TPA), a corporation is prohibited from engaging in conduct that is unconscionable under the unwritten law. Relief may be granted under s51AA if the stronger party unfairly exploits the disadvantages of the weaker party or takes advantage of them in a harsh or oppressive manner based on legal rights. It also applies when incorrect assumptions are made by the weaker party, unfair benefits are gained from the deal, misrepresentation occurs, or when they are unable to understand the deal. This was exemplified in ACCC vs Samton Holdings (2002) where New York Fries engaged in misconduct during lease renegotiations. Additionally, s51AB forbids unconscionable behavior in consumer transactions involving goods or services typically used for personal, domestic, or household purposes.The text specifies that certain goods are excluded from s51AB, which pertains to goods not intended for resupply or trade. When considering s51AB, factors such as the company's bargaining power, consumer conditions for company protection, document understanding by the consumer, and comparison of price or acquisition circumstances with other suppliers should be taken into account. The purpose of s51AC is to prevent unconscionable conduct in business transactions involving non-listed companies in trade or commerce, as long as the transaction value does not exceed $10 million. This provision aims to offer greater protection for business consumers compared to s51AA. Previous complaints have primarily involved commercial tenancy agreements, loan guarantees, interactions between financial institutions and small businesses, small business loans, and franchising. The question arises: when can conduct in business transactions be considered unconscionable? Part V - Consumer Protection's s51AC references criteria that determine if a supplier's conduct towards a business consumer is deemed appropriate.Title: Misleading or Deceptive

Conduct in Advertising

In the realm of advertising, it is crucial to adhere to certain criteria that include complying with industry codes, willingness to negotiate contract terms and conditions, acting in good faith, and maintaining consistency in conduct with other business consumers. Part V of the law aims to protect both private consumers and ethical traders who may be losing business to competitors engaging in deceptive or misleading conduct. It addresses various aspects such as misleading or deceptive representations, misleading conduct related to goods and services, bait advertising, and catch-all provisions.

According to s52 of the law, a company is prohibited from engaging in conduct that is misleading or deceptive or likely to mislead or deceive. The determination of whether such conduct exists depends on whether it would mislead or deceive a naive or gullible person rather than on intent. While this provision entitles the affected party to civil remedies, no criminal liability is imposed under Part VC.

To ensure adherence to company standards, marketing and advertising activities should be monitored by a company's board. It is vital for advertisements to convey truthful impressions, thus aligning with the principle of truth in advertising. In the field of advertising, having a misleading or deceptive intention plays a significant role as specific standards are used to distinguish between puffery and deception.Comparative advertising often includes fine print to accurately present its claims. Additionally, imitation can damage a company's reputation. Establishing a breach under section 52 does not always require an intention to mislead or deceive; the focus is on the effect of the conduct rather than the wrongdoer's state of mind. There is an exception when one party simply passes information

from one entity to another, as seen in the case of Eva vs Mazda Motors (Servo Assisted Brakes). The standards for evaluating misleading or deceptive conduct are not universally applied across different products. The perception and level of attention vary depending on the product being purchased; selecting goods and services from a supermarket shelf may differ from choosing luxury items. When assessing how an advertisement affects the target audience, "reasonable persons within that audience" define the individuals considered. Using the reasonable person test ensures most individuals adhere to a specific standard, although it is important to recognize that some consumers may fall below this standard, forming a significant consumer group.

The Trade Practices Act does not involve a reasonable person, unlike common law. However, ads are now evaluated based on a lower threshold test applied at common law, requiring a higher standard of conduct in advertising. The evaluation of advertising is based on its effect on gullible or credulous consumers, rather than reasonable or knowledgeable individuals. When seeking remedies for s52 inducement, satisfaction of inducement is necessary to obtain s82 damages or invoke s87 (VA), which allows for the rescission or alteration of contracts through a statutory mechanism. Puffery refers to exaggerated promotion statements and claims for a product or service. It can serve as a legitimate defense against an alleged breach of the TP Act. Puffery usually involves superlatives and comparatives that are obviously exaggerated and unlikely to mislead anyone. In the case of Dewhirst Kay Rent A Car vs Budget Rent a Car (Luxury Car Market), where misrepresentations are qualified with references to the comparison, it becomes misleading conduct.Case: Byers vs Dorotea (Staged Units

bought off a plan)
Comparative Advertising is allowed if it is not false, misleading, or deceptive. The ACCC has endorsed this proper use, as long as it is factual and informative. However, using comparative advertising comes with risks, and accuracy is crucial. It's important to compare products that are similar to ensure that test results are accurately represented.

Case: Makita vs Black and Decker (Ads comparing the two products)
The overall impression created by an ad is important when judging it from the perspective of the average member of the target audience. Terms like "up to" and "conditions apply" can be examples of ads that are literally true but still give a misleading impression. The use of the word "free" can also be misleading if not accurately qualified when there are associated charges with an offer.

Imitation and Business Reputation
Even if brand names and logos are not registered as trademarks, they can still be protected. If they are copied and imitated in a way that misleads or deceives consumers into purchasing one product over another, remedies will be granted to the original user of the logo. The use of a distinctive package does not grant exclusive rights unless it has been registered as an industrial design or trademark.*Case: Apand v The Kettle Chip Co Pty Ltd *s52 also applies to safeguard a business name or reputation, granted that the name or reputation has gained distinctiveness in the market. This protection is applicable regardless of whether the name has been officially registered or not.53 False and Misleading Representation
In connection with the supply, promotion, or use of a good and service, companies are prohibited from making false and

misleading representations. Unlike the generalized s52, specific clauses are applied to false and misleading representations. A key difference is that s53 requires falsely representing the position, which makes it a criminal offense. S53 can be found in s75AZC of Part VC. If a company in trade or commerce falsely represents that goods are of a particular standard, quality, value, grade, composition, or have had a particular history or previous use, they are breaching s53. Similarly, if they represent that goods and services have sponsorship, approval, performance characteristics, accessories, uses or benefits they don't have, they are also breaching s53. Other breaches of s53 include making a false or misleading representation regarding the price of a good or service or concerning the origin of the goods. Companies also breach s53 if they make false or misleading representations concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy. Some examples of breaches of s53 include falsely representing the standard of a vehicle that turned out to be an ex rental (Eva vs Southern motors), falsely advertising top-quality shoes with imperfections (McFarlane vs John Martin), marketing children's clothing as low fire danger when it should be marked high fire danger, describing furniture made out of particle board as solid pine, and selling skirts as 50% wool when the wool component was much less (Wilkinson vs Katies). Furthermore, breaches of s53 also include falsely representing that Prince Rainer of Monaco sponsored a circus, falsely claiming that a car model had assisted brakes, advertising a tour for 16 days when it was actually for 15 days, and advertising fire extinguishers as having passed a test when

they hadn't. Advertisers must be cautious in ensuring the accuracy of their price claims, given how sensitive consumers are to price reductions and discounts.

Product has never been offered for sale at that price; it's 50% off. It has never been offered for sale at 100%. It is currently being offered at a special price of $10.