Andrew Christopher, Partner, Baker & McKenzie, Australia. Predatory Pricing

Transcription

1 Andrew Christopher, Partner, Baker & McKenzie, Australia Predatory Pricing This questionnaire seeks information on ICN members analysis and treatment of predatory pricing claims. Predatory pricing typically involves a practice by which a firm temporarily charges low prices in order to limit or eliminate competition, and thereby allows the firm to raise prices subsequently. This questionnaire concerns only treatment of single product discounts; rather than pricing practices involving multiple products (including bundling, tying, and related prices). Unless otherwise stated, the questions concern conduct by a dominant firm or firm with significant market power. Respondents should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation. Analysis (elements and evidence) 1. Please provide the main relevant texts (in English if available) of your jurisdiction s laws and guidelines on predatory pricing. Until very recently (September 2007) there was no specific predatory pricing provision in Australian law. Instead, predatory pricing could be considered a misuse of market power under section 46 of the Trade Practices Act 1974 (Cth). Australia's Trade Practices Act 1974, section 46 (1) provides: A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of: (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; (b) preventing the entry of a person into that or any other market; or (c) deterring or preventing a person from engaging in competitive conduct in that or any other market (prohibited purposes). The Australian courts have held that predatory pricing is indicated by the use of temporary price reductions: Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978). This case also referred to the judgment in U.S. v Corn Products Refining Co. (1966) 234 F. 964 in concurring that competition which is for a temporary purpose is a hallmark of predatory practice. The Trade Practices Amendment Act 2007 added additional subsections 46(1AA) and 46(1AB) deals uniquely with predatory pricing. The new provisions, which became law in September 2007 read: v1\SYDDMS\1

2 (1AA) A corporation that has a substantial share of a market must not supply, or offer to supply, goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying such goods or services, for the purpose of: (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; or (b) preventing the entry of a person into that or any other market; or (c) deterring or preventing a person from engaging in competitive conduct in that or any other market. (1AB) For the purposes of subsection (1AA), without limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has a substantial share of a market, the Court may have regard to the number and size of the competitors of the corporation in the market. The amendments also allow the Court the ability to consider sustained period below-cost pricing when determining whether there has been a misuse of market power (section 46(4A)). 2. Please list your jurisdiction s criteria for an abuse of dominance/monopolization based on predatory pricing. The following criteria must be met in order to establish that there has been a misuse of market power in breach of section 46. A corporation must: have a substantial degree of market power; have taken advantage of that market power; and have done so for a prohibited purpose. Prohibited purposes include: eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; preventing the entry of a person into that or any other market; or deterring or preventing a person from engaging in competitive conduct in that or any other market." Examples include: predatory pricing; refusal to supply; refusal to deal; refusal to provide access to an essential facility; systematic price discrimination. Predatory pricing is also specifically prohibited as outlined above. Further details of the operation of this prohibition are set out below. 3. Please explain the circumstances under which a firm s pricing is, or may be, considered predatory in your jurisdiction, by responding to the following questions: a. As part of your analysis, does the price have to be below one or more measures of cost? Yes/No i. If yes, please identify which of the following measures is/are used, as applicable: v1\SYDDMS\2

3 Cost benchmark/measure Used? Comment Yes No Below marginal cost (the cost of producing one more unit of output) Below average variable cost (cost that varies with output) Below average avoidable cost (all costs that can be avoided by not producing some or all output) Below average long run incremental cost (average variable costs and productspecific fixed costs) Below average total cost (cost including variable, fixed and sunk non-recoverable costs) Other measure of cost (Please identify) yes yes In Australia in the past the Courts have acknowledged that predatory pricing is price cutting below some particular cost but have not committed to a particular measure. In other words, there is no certainty which is the relevant measure of cost to be applied. b. For each cost measure employed, please provide the definition of the measure used in your jurisdiction. "Average avoidable cost" the cost to the firm of producing an item than not producing an item should the production return a loss: ACCC v Boral Ltd (1999) ATPR c. Is the same cost measure applied in all cases? Yes/No i. If different cost measures can be applied, for example on the basis of industry, please explain and provide examples, as available. NA ii. If more than one cost measure can be applied in any individual case, please explain why and whether, in practice, this has raised issues. NA d. If price must be shown to be below cost, for which of the dominant firm s sales must this be shown? NA i. Is the only relevant comparison between the cost measure and the dominant firm s average price for all of its sales in the relevant market? Yes/No 1. If no, over which of the dominant firm s sales can cost be compared? e. Could a firm s price above average total cost ever be found to be predatory? Yes/No NA i. If so, please explain the instances in which this might occur, and identify whether this has been the basis for actual enforcement v1\SYDDMS\3

4 f. If prices do not have to be below a cost benchmark to be considered predatory, please explain the circumstances under which the firm s prices are considered predatory. The position in Australia is not clearly defined. A corporation must have substantial market power and have taken advantage of its market power for an anti-competitive purpose (prohibited purpose). It has not been established whether recoupment indicates predatory pricing but this may soon become clearer with the introduction of specific predatory pricing provisions. A corporation who uses their substantial market power to cut prices without loss of market power, with a view to recoupment by raising prices without fear of reprisal after, may be an indication of predatory pricing. On the other hand, where the particular market is highly competitive, then the pricing fluctuation may be in response to competitive pressure (Boral Besser Masonry Ltd v ACCC [2003] HCA 5). The newly enacted provisions imply that recoupment is no longer a necessary factor in determining predatory pricing. Under the new prohibition on predatory pricing a corporation that has a "substantial share of a market" must not: supply, or offer to supply, goods or services for a "sustained period" at a price that is "less than the relevant cost" of supplying the goods or services; for the purpose of: eliminating or substantially damaging a competitor in a market; preventing the entry of a person into a market; or deterring or preventing a person from engaging in competitive conduct in a market. To determine what constitutes a "substantial" market share a court may have regard to the number and size of the corporation's competitors. Apart from this, there is no guidance on what constitutes a "substantial" market share. Further, there is no guidance on what amounts to a "sustained period" or what is meant by "less than the relevant cost". 4. To be unlawful, must the alleged predatory pricing occur in the market in which the firm holds a dominant position/substantial market power? Yes/No a. If no, please explain. A substantial market share is required-this is an arguably lower threshold than dominance. 5. Apart from the cost criteria referenced in question 3 above, must other objective criteria, such as the duration or continuity of the pricing behavior, be demonstrated for a finding of liability under a predatory pricing theory? Yes/No 6. a. If so, please explain. For example, if the behavior must be sustained over a certain time period, why, and for what period? 7. On what type of evidence do you rely to prove predatory pricing? Please explain, including examples as appropriate. a. Are cost data used? Yes/No v1\SYDDMS\4

5 i. If so, are cost data from the firm used? Yes/No b. Are there circumstances when cost data of other firms can be used? Yes/No. i. If so, please specify the circumstances. c. What other data or information is used, if any? Please provide examples as relevant. 7. Does pricing below a particular cost benchmark create a presumption of predatory pricing? Yes/No Pricing below average variable cost may be grounds for inferring a proscribed purpose in the absence of countervailing evidence according to the Explanatory Memorandum for the Trade Practices Act. a. If yes, is this presumption rebuttable or irrebuttable? Please explain. b. If the presumption is rebuttable, what must be shown to rebut the presumption? 8. Is there a safe harbor from a finding of predatory pricing for pricing above a particular cost benchmark? Yes/No a. If yes, please explain, including the terms of the safe harbor. 9. Is recoupment (obtaining additional profits that more than offset profit sacrifices stemming from predatory pricing) required for a finding of liability under predatory pricing rules in your jurisdiction? Yes/No (see question 5) If so: a. Is this assessment conducted separately from the analysis of the firm s market power and the predation? Yes/No Where recoupment has been considered in the past, it has been seen as both relevant and irrelevant for the application of section 46. It may indicate when a corporation takes advantage of its market power in violation of section 46. There is a link between recoupment and market power. The greater the ability of a corporation to recoup its losses, the greater its market power: Boral Besser Masonry Ltd v ACCC [2003] HCA 5. The new provisions do not require proof of recoupment when determining whether there has been a misuse of market power. b. What factors are employed in assessing recoupment in your jurisdiction? NA c. Is there a specific recoupment calculation or amount to be shown? Yes/No i. If so, what is this? d. Is there a relevant time period for recoupment? Yes/No i. If so, what is it? v1\SYDDMS\5

6 e. Is it possible for recoupment to occur in a market different than the one in which the predatory pricing took place? Yes/No NA i. If so, please explain and provide relevant examples. f. What degree of likelihood of recoupment is required (e.g., possibility or probability)? NA i. Please provide examples of the recoupment standard of likelihood employed as part of your recoupment assessment. 10. Is the firm s intent relevant in predatory pricing cases? Yes/No a. If so, please describe the relevant type(s) of intent, and the evidence used to show the required intent, providing available examples. Predatory pricing must be anticompetitive and violate one of the prohibited purposes, mentioned in question 1, namely: a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; (b) preventing the entry of a person into that or any other market; or (c) deterring or preventing a person from engaging in competitive conduct in that or any other market (prohibited purposes). b. If objective conditions for predatory pricing -- for example, pricing exceeding a certain cost benchmark or recoupment are not demonstrated, does intent matter? Yes/No i. If so, please explain. Cost benchmarks and recoupment are not consistent indicators of predatory pricing and they have not been applied or interpreted consistently in the Australian courts. Under Australian trade practices law, what is relevant is where a corporation has misused their market power for an anti-competitive purpose. Any allegation that there has been a misuse of market power, the anti-competitive intent must be shown. Intent matters for the purposes of section 46 of the Trade Practices Act, under which predatory pricing may fall as one of several indicators of misuse of market power. Under the new provisions there is no specific guidance provided as to what is meant by "less than the relevant cost of providing such services". 11. In addition to proving below-cost pricing, must effects, such as market foreclosure or consumer harm, be demonstrated to establish liability? Yes/No NA a. If yes, please explain the elements assessed (e.g., exit or delayed entry of competitors, price increases, prevention or delay of price decreases) and the types of evidence required to do so. Justifications and Defenses 12. What type of justifications or defenses, if any, are permitted for predatory pricing, e.g., an efficiency, meeting competition or objective necessity defense? Please explain and provide examples, as relevant v1\SYDDMS\6

7 Where there is a legitimate business reason for the conduct, for example a market is highly competitive and a reduction in prices is necessary in order to stay competitive, a corporation will not have misused its market power for an anti-competitive purpose. Purpose is to be assessed subjectively. This may also be true for a specific allegation of predatory pricing: Boral Besser Masonry Ltd v ACCC [2003] HCA 5. Enforcement a. What is the standard of proof applicable to these defenses? Who bears the burden of proof? What evidence is required to demonstrate that these defenses or justifications are met? 13. Please provide the following information for the past ten years (as information is available): NA a. The number of predatory pricing cases your agency reviewed (investigated beyond a preliminary phase). NA b. The number of these cases that resulted in (i) an agency decision that the conduct violates antitrust rules; (ii) a settlement with relief. NA c. The number of agency decisions issued, if any, that held that the practice did not violate your jurisdiction s predatory pricing rules (i.e., clearance decisions ). NA d. Each of the number of agency decisions or settlements that were (i) challenged in court and, of those, either (ii) overturned by court decision or (iii) confirmed by court decision. NA 14. Does your jurisdiction allow private cases challenging predatory pricing? Yes/No. a. Please provide a short description of representative examples, as available. A private action may be brought alleging misuse of market power in contravention of section Is predatory pricing a civil and/or a criminal violation of your jurisdiction s antitrust laws? civil however pecuniary penalties may be imposed on a violator. a. If both, what are the differences in the criteria applied to these categories? b. On what basis does the agency choose to bring a criminal or civil case? 16. As relevant, please provide a short English summary of the leading predatory pricing decisions/cases in your jurisdiction, including information on the method used to calculate costs, to the extent applicable, and, if possible, a link to the English translation, an executive summary or press release of the case. ACCC v Eurong beach Resort Ltd [2005] FCA 1900: the respondent consented to orders that it had misused its market power in the supply of passenger and vehicle ferry services by dropping its prices to levels lower than the cost of wages and fuel to drive out a competitor. Penalties totaled $900,000 by consent but were lower than warranted according to the court. Boral Besser Masonry Ltd v ACCC [2003] HCA 5: the appellant was found not to have breached section 46 by selling products at below avoidable cost v1\SYDDMS\7

8 Charlick Trading Pty Ltd v national rail Corp Ltd [1999] FCA 452: the applicant failed to establish that reducing freight rates on a particular rail corridor was a breach of section 46. Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd (1978) 33 FLR 294: the marketing board had a virtual monopoly over the supply of eggs in Victoria and negotiated to supply eggs to retailers holding about 25% of the retail market for eggs in the ACT at prices below those of the applicant. The applicant obtained an interlocutory injunction. 17. Please provide any additional comments that you would like to make on your experience with predatory pricing rules and their enforcement in your jurisdiction, including, as appropriate but not limited to: a. Whether there have there been or you expect there to be major developments or significant changes in the criteria by which you assess predatory pricing, explaining these developments as relevant. b. Whether there are significant policy and/or practical considerations that may lead to greater or lesser agency enforcement against predatory pricing pursuant to unilateral conduct rules in your jurisdiction, e.g., concern with the risks of false positives/false negatives, the existence of related laws such as a general ban on below-cost pricing, limited evidence of consumer harm, and/or difficulties in obtaining reliable cost data (please provide explanation as relevant). As mentioned above the Trade Practices Legislation Amendment Act (No. 1) 2007 introduced amendments to section 46 of the Trade Practices Act to specifically prohibit predatory pricing. This practice was however caught by the general prohibition against misuse of market power in section 46 which is of long standing origin v1\SYDDMS\8

9 Exclusive Dealing/Single Branding This questionnaire seeks information on the analysis and treatment of exclusive dealing (referred to as single branding in some jurisdictions) by ICN member competition authorities. For purposes of this questionnaire, we refer to exclusive dealing and single branding as conduct that requires or induces customers or suppliers to deal solely or predominantly with that firm. Nevertheless, this questionnaire does not cover tying, bundling, loyalty discounts, rebates or related practices, which your responses should therefore not address. Unless otherwise stated, the questions concern conduct by a dominant firm or firm with significant market power. Respondents should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation. Legal Basis and Specific Elements 1. Please provide the main relevant texts (in English if available) of your jurisdiction s laws and guidelines on exclusive dealing/single branding. 47 Exclusive dealing (1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing. (2) A corporation engages in the practice of exclusive dealing if the corporation: (a) supplies, or offers to supply, goods or services; (b) supplies, or offers to supply, goods or services at a particular price; or (c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation; on the condition that the person to whom the corporation supplies, or offers or proposes to supply, the goods or services or, if that person is a body corporate, a body corporate related to that body corporate: (d) will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; (e) will not, or will not except to a limited extent, re-supply goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or (f) in the case where the corporation supplies or would supply goods or services, will not re-supply the goods or services to any person, or will not, or will not except to a limited extent, re-supply the goods or services: (i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or v1\SYDDMS\9

10 (ii) in particular places or classes of places or in places other than particular places or classes of places. (3) A corporation also engages in the practice of exclusive dealing if the corporation refuses: (a) to supply goods or services to a person; (b) to supply goods or services to a person at a particular price; or (c) to give or allow a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services to a person; for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate: (d) has acquired, or has not agreed not to acquire, goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; (e) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or (f) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired from the corporation to any person, or has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired from the corporation: (i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or (ii) in particular places or classes of places or in places other than particular places or classes of places. (4) A corporation also engages in the practice of exclusive dealing if the corporation: (a) acquires, or offers to acquire, goods or services; or (b) acquires, or offers to acquire, goods or services at a particular price; on the condition that the person from whom the corporation acquires or offers to acquire the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description: (c) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or (d) in particular places or classes of places or in places other than particular places or classes of places. (5) A corporation also engages in the practice of exclusive dealing if the corporation refuses: v1\SYDDMS\10

11 (a) to acquire goods or services from a person; or (b) to acquire goods or services at a particular price from a person; for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has supplied, or has not agreed not to supply, goods or services, or goods or services of a particular kind or description: (c) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or (d) in particular places or classes of places or in places other than particular places or classes of places. (6) A corporation also engages in the practice of exclusive dealing if the corporation: (a) supplies, or offers to supply, goods or services; (b) supplies, or offers to supply, goods or services at a particular price; or (c) gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation; on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation. (7) A corporation also engages in the practice of exclusive dealing if the corporation refuses: (a) to supply goods or services to a person; (b) to supply goods or services at a particular price to a person; or (c) to give or allow a discount, allowance, rebate or credit in relation to the supply of goods or services to a person; for the reason that the person or, if the person is a body corporate, a body corporate related to that body corporate has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation. (8) A corporation also engages in the practice of exclusive dealing if the corporation grants or renews, or makes it known that it will not exercise a power or right to terminate, a lease of, or a licence in respect of, land or a building or part of a building on the condition that another party to the lease or licence or, if that other party is a body corporate, a body corporate related to that body corporate: (a) will not, or will not except to a limited extent: (i) acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; or (ii) re-supply goods or services, or goods or services of a particular kind or v1\SYDDMS\11

12 description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; (b) will not supply goods or services, or goods or services of a particular kind or description, to any person, or will not, or will not except to a limited extent, supply goods or services, or goods or services of a particular kind or description: (i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or (ii) in particular places or classes of places or in places other than particular places or classes of places; or (c) will acquire goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation. (9) A corporation also engages in the practice of exclusive dealing if the corporation refuses to grant or renew, or exercises a power or right to terminate, a lease of, or a licence in respect of, land or a building or part of a building for the reason that another party to the lease or licence or, if that other party is a body corporate, a body corporate related to that body corporate: (a) has acquired, or has not agreed not to acquire, goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; (b) has re-supplied, or has not agreed not to re-supply, goods or services, or goods or services of a particular kind or description, acquired directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation; (c) has supplied goods or services, or goods or services of a particular kind or description: (i) to particular persons or classes of persons or to persons other than particular persons or classes of persons; or (ii) in particular places or classes of places or in places other than particular places or classes of places; or (d) has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation. (10) Subsection (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in subsection (2), (3), (4) or (5) or paragraph (8)(a) or (b) or (9)(a), (b) or (c) unless: (a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or (b) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening v1\SYDDMS\12

13 competition. (10A) Subsection (1) does not apply to a corporation engaging in conduct described in subsection (6) or (7) or paragraph (8)(c) or (9)(d) if: (a) the corporation has given the Commission a notice under subsection 93(1) describing the conduct; and (b) the notice is in force under section 93. (11) Subsections (8) and (9) do not apply with respect to: (a) conduct engaged in by, or by a trustee for, a religious, charitable or public benevolent institution, being conduct engaged in for or in accordance with the purposes or objects of that institution; or (b) conduct engaged in in pursuance of a legally enforceable requirement made by, or by a trustee for, a religious, charitable or public benevolent institution, being a requirement made for or in accordance with the purposes or objects of that institution. (12) Subsection (1) does not apply with respect to any conduct engaged in by a body corporate by way of restricting dealings by another body corporate if those bodies corporate are related to each other. (13) In this section: (a) a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having legal or equitable force or not, and includes a reference to a condition the existence or nature of which is ascertainable only by inference from the conduct of persons or from other relevant circumstances; (b) a reference to competition, in relation to conduct to which a provision of this section other than subsection (8) or (9) applies, shall be read as a reference to competition in any market in which: (i) the corporation engaging in the conduct or any body corporate related to that corporation; or (ii) any person whose business dealings are restricted, limited or otherwise circumscribed by the conduct or, if that person is a body corporate, any body corporate related to that body corporate; supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the conduct, supply or acquire, or be likely to supply or acquire, goods or services; and (c) a reference to competition, in relation to conduct to which subsection (8) or (9) applies, shall be read as a reference to competition in any market in which the corporation engaging in the conduct or any other corporation the business dealings of which are restricted, limited or otherwise circumscribed by the conduct, or any body corporate related to either of those corporations, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the conduct, supply or acquire, or be likely to supply or acquire, goods or services v1\SYDDMS\13

14 2. Please list your jurisdiction s criteria for an abuse of dominance/monopolization based on exclusive dealing. NA Exclusive Purchasing and Supply Arrangements 3. How does your jurisdiction define single branding or exclusive dealing? For example: Must a firm require that all purchases come from it or that all sales go to it? Can something less than all purchases or all sales be considered single branding or exclusive dealing? Please specify (providing actual percentages, as relevant). Exclusive dealing is defined expressly in section 47, in question 1 above. 4. Is the duration of the arrangement relevant to your assessment? Yes/No a. If so, please explain how and why, providing examples. 5. Must the firm s use of such arrangements cover a substantial portion of the market? Yes/No a. If so, how do you interpret this requirement, including any relevant percentage thresholds for the purchase or supply covered, and the evidence needed to determine whether this is met? 6. Does it matter whether the arrangement was requested by the non-dominant customer or supplier? Yes/No a. If so, how and why? 7. Might otherwise legal exclusive dealing/single branding arrangements be deemed abusive if they contain other provisions, e.g., an English Clause (requiring e.g., the customer to report any better offers to the supplier, and prohibiting the customer from accepting the offer unless the supplier does not match it), rights of first refusal (right of, e.g., the supplier to enter into an agreement with the customer according to specified terms, before the customer is entitled to enter into an agreement with a third party)? Yes/No NA a. If so, please explain and provide examples. Presumptions and Safe Harbors 8. Are there circumstances under which a firm s use of single branding or exclusive dealing arrangements is presumed illegal? Yes/No a. If so, please identify the circumstances. See Question 1. b. Is the presumption rebuttable? Yes/No NA i. If so, what must be shown to rebut the presumption? 9. Is there a safe harbor from a finding of liability under your single branding/exclusive dealing provisions? Yes/No a. If so, please explain, including its terms v1\SYDDMS\14

15 Exemptions from liability under section 47 can be obtained by either lodging a notification or obtaining an authorization from the Australian competition regulator, the ACCC. There are also exceptions for conduct engaged in by, or by a trustee for, a religious, charitable or public benevolent institution, and conduct engaged in by related companies pursuant to which one of the related companies restricts the dealings of another related company. Additional exceptions are listed in section 51 of the Trade Practices Act. Effects 10. Must a market foreclosure effect be shown for an abuse? Yes/No NA a. How is market foreclosure defined in your jurisdiction? b. Which factors are taken into account to assess a market foreclosure effect (level of dominance, percentage of market demand/purchases or supply covered by the arrangement, existence of alternative sources of supply, entry barriers, scale economies, possibility and practicability of switching, others)? Please specify the factors considered, including, as relevant, the percentage of demand/supply covered. c. What evidence is used to demonstrate these effects and must the effects be actual, likely or potential effects? 11. Must other effects, e.g., on consumer welfare, be shown for an abuse? Yes/No NA a. If yes, please specify what must be demonstrated and the evidence required. Under section 47 (10) exclusive dealing only occurs where the conduct has the purpose or is likely to have the effect of substantially lessening competition. Justifications/Defenses 12. What justifications/defenses are available to the dominant firm, e.g., an efficiency, meeting competition or objective necessity defense? Please specify. a. If there is an efficiencies defense, what efficiencies are considered (e.g., relationship-specific investments, facilitating innovation, reduced transaction costs)? How are claims of improved service quality or reputation assessed? NA b. Are efficiencies balanced against competitive harm to determine whether liability attaches, or do they provide a complete defense without consideration of harm? NA c. Is there a meeting competition defense? Yes/ No. i. If yes, please explain. NA d. What is the standard of proof applicable to these defenses? What type of evidence is required to demonstrate that the defenses are met? NA Exemptions from liability under section 47 can be obtained by either lodging a notification or obtaining an authorization from the Australian competition regulator, the ACCC. There are v1\SYDDMS\15

16 also exceptions for conduct engaged in by, or by a trustee for, a religious, charitable or public benevolent institution, and conduct engaged in by related companies pursuant to which one of the related companies restricts the dealings of another related company. Additional exceptions are listed in section 51 of the Trade Practices Act. Enforcement 13. Please provide the following information for the past ten years (as information is available): NA a. The number of exclusive dealing/single branding cases your agency reviewed (investigated beyond a preliminary phase). b. The number of these cases that resulted in (i) an agency decision that the conduct violates antitrust rules; (ii) a settlement with relief. c. The number of agency decisions issued, if any, that held that the practice did not violate your jurisdiction s exclusive dealing/single branding rules (i.e., clearance decisions ). d. Each of the number of agency decisions or settlements that were (i) challenged in court and, of those, either (ii) overturned by court decision or (iii) confirmed by court decision. 14. Does your jurisdiction allow private cases challenging exclusive dealing/single? Yes/No a. Please provide a short description of representative examples, as available. 15. As relevant, please provide a short English summary of the leading exclusive dealing/single branding cases in your jurisdiction and, if possible, a link to the English translation of the decision, an executive summary or the press release of the case. Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35: there was no breach of section 47 because encouragement to buy through a wholesaler which does not give rise to any feeling of compulsion resulting from the imposition of a sanction does not amount to a condition. ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861: no breach of section 47 where there was a policy of not stocking bread from manufacturers who gave other supermarkets lower prices. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193: Universal was found to have breached section 47 when they instituted policies of reviewing the terms on which they traded with stores which stocked parallel import compact discs in order to discourage those stores from parallel importation of compact discs. Penalties of $1 million. SST Consulting Services Pty Ltd v Rieson [2006] HCA 31: a loan, made on the basis that the borrower was to use a company with the applicant for its freight forwarding needs, constituted third line forcing. The High Court held that, whilst it was third line forcing, the offending provisions could be severed v1\SYDDMS\16

17 16. Please provide any additional comments that you would like to make on your experience with exclusive dealing/single branding rules and their enforcement in your jurisdiction, including, as appropriate but not limited to whether there have there been or you expect there to be major developments or significant changes in the criteria by which you assess exclusive dealing/single branding, explaining these developments as relevant v1\SYDDMS\17