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RE: Restrictive Trade Practices under the Competition and Consumer Act 2010.
As it has been the 15 years for the uptake of the computers and mobile phones to be used by the Australian Public at the rate which could be compared to anywhere in the world. Now a days as demand has increased like mobile phones. Laptops and tablets, the producers and retailers of such goods shall also be increased. Another phenomena facilitates the competition is that the number of Australian purchases the goods online which results into increase in the number of online technology retailers. These retailers could sell their product at the very lower prices than the traditional brick and mortar retailers. One of the benefit that some of the online traditional retailers hold is their ability to offer the onsite technical support which includes the advice and repairs.
In the year 2016, the Australian Government establishes a Royal Commission into the overseas hacking of the Federal Government organisations like the Australian Bureau of Statistics and the Bureau of Meteorology. In the month of June 2016, the Australian Government passed the legislation which will enact about 90% of the recommendations of the Commission which includes the development of a single operating system which is to be used for all mobile communications devices by all Australian Government departments and employees. This will also include the Australian Police. The development of security software which is to be used across all mobile phones, laptops and tablets used by Australian Government departments. All the phones and tablets used by the Australian Federal Police (the hardware) were to be replaced after every 12 months. All the software and the programmes etc., were to be sourced from Australian owned businesses, while hardware such as the phones and tablets could be sourced from Australian or the overseas suppliers. After the passing of the legislation, the CEO’s of the technology companies had a meeting together to discuss the issues regarding the new law. After the discussion, they entered into the agreement which will result in JP winning the contract for the development of the single operating system while BA would win the contract for the development of the security software. For their part, AT would receive a ‘failure payment’. That in the late 2016, the CEO of the AT suffered heart attack and got replaced by the CFO and it came to the knowledge of the ACCC that the three companies illegally contracted the agreement.
Now the ACCC is concerned about the conduct of the companies is illegal and against the provisions of the Competition and Consumer Act 2010 (Cth).
After the passing of the new legislation by the parliament, the CEO’s of the JP, BA and AT has a meeting to discuss the legislation and its complications for their companies. After the discussion they realised that they are the only three technology companies who had the sources and the skill to make the operating system and security technology which are required by the government. The three CEO’s had decided in the meeting that it will not be in their interest to compete with each other. So they came to an understanding which will for the benefit of all. As according to that understanding, the three companies had contracted the agreement which results in that the JP will win the contract for the development of the single operating system while the BA will win the contract of the development of the security software and for their part AT will receive the failure payment. In the late 2016, the Australian Government had announced that JP and BA are the winners of the contracts for the development of the security system and the security software respectively. But unfortunately, the CEO of AT had suffered a heart attack and he was replaced by the CFO. While the new CEO was working, it came to his knowledge about the deal with the JP and BA. As he was not sure about the conduct of the companies, the new CEO contacted the ACCC.
In the present case the provisions of the Competition and Consumer Act 2010 (Cth) is applicable. The Competition and Consumer Act 2010 talks about the competition law and the consumer law. The competition law is the examinations that how the Federal Government had attempted to restrain the traders from manipulate the markets for their own benefits. The consumer law is the measures set up by the government which have implemented by the government to protect the consumers from the unfair trade practices. Part IV of the Competition and Consumer Act 2010 (Cth) deals with the Restrictive trade practices. Section 45 of the Act which talks about the “Anti Competitive arrangements.” It means the people of similar trade rarely meet together, even for the playfulness but the conversation ends in the conspiracy against the public or in some of the contrivance to raise the prices. The merchants and the manufacturers complain too much for the bad effect of the high wages in raising the prices. It is also known as the Horizontal Co ordinate conduct in which two or more companies or firms entered into the contract, agreement or the understanding where they tried to eliminate prices against the similar functional level. Section 45 (2) deals with the Cartels, “it is an anti competitive agreement, anti competitive concerted price or the anti competitive arrangements by the companies to fix the prices, establishes the output restrictions or the quotas, dividing the markets by allocating the customers. In the present scenario also, the three companies get together to decide the complications of the new act, whereby they contracted with each other about the business and distribute the functions, which is restrictive under the Consumer law. The conduct of the CEO’s of the companies is restrictive under section 45 of the act, which talks about the Anti Competitive arrangements. Part IV Division 1 Section 44ZZRA of the Act clearly talks about the “Bid Rigging.” The bid rigging is the Manipulation of the tender process. It means if the competitive market price for the bid by company A is $100 million and for Company B is $105 million. But after the collusion they decide to bid for $115 million for company A and $140 million for Company B. In the case of ACCC v CC (New South Wales) P/L (No 8) (1999) ATPR 41-732, it has been held that the contract between the companies for the bidding by the one company and that company will pay the other companies a failure fee, is an offense under the act. So, in the present case, the three CEO’s are liable for the criminal as well as the civil liabilities under section 44ZZRA of the Act.
In the present scenario, at the beginning of 2017, the JP management decided as they wanted to be able to promote their phones as the only phones in the market to be made from the 100% Australian Products. As JP is already a Australian phone manufacturer company, but the new company FN phones had entered into the market. Then JP management decided to enter into the agreement with BAP who is the only Australian Battery manufacturer company to stop selling the battery to the FN. Furthermore, the JP management entered into an agreement with the BAP to stop purchasing the speakers from the BA, so that JP can bargain with BA in purchasing the speakers to be used in the phones.
The present act of the JP management comes under the ambit of the Unilateral Conduct. Unilateral Conduct means where the one corporation, with the substantial amount of the market power, takes the benefit of that power to lessen the competition in the market. In the present scenario also JP with a view to lessen the competition in the market contracted with the BAP for the non supply of the phone battery to the FN phones and also contracted for not purchasing the speakers from the BA so, that JP could become the only company who manufactures the 100% Australian Phones. Under the Competition and Consumer Act 2010 (Cth) it is restrictive trade practice. Section 46 of the said act specifically deals with the present situation. Section 46 of the act deals with the misuse of the market power. Market power means the company have the ability to engage in the discretionary behaviour such as increasing in the prices. Section 46 (6A) talks about the determining of the process as by engaging in the conduct, the company has taken the benefit of its substantial degree of power in the market. So, under the provisions of the act, JP is liable to be punished criminally as well as civil for its illegal conduct.
The co-founder and CEO of JP, Loretta Smith, have always been interested in promoting Australian products. In November, 2016, Loretta sent a letter to TW. TW sells more technology equipment, straight to the public, than any other bricks and mortar store in Australia. One of the reasons for their success is because they were the first to introduce, ‘Tech Lounges,’ where you could get top quality, free coffee, while you discussed your tech needs with an expert. TW also promoted their Tech Lounges as being just another way TW was a responsible corporate and global citizen because they only used organically grown coffee from South American co-operative growers. When the CEO of TW read the letter he thought it was a joke and threw it in the bin. One week later the Loretta rang the CEO of TW and told him directly that she would be cancelling the supply of all JP technologies to TW until they ‘fix their coffee problem.’ In the present scenario, the conduct of the JP is not illegal as the demand of fixing the problem is not illegal in any way nor it was mentioned in the act itself. So while discussing the present scenario, there is no liability of the JP, as the conduct of the JP is not illegal as per the provisions of the Competition and Consumer Act 2010 (Cth).
TT is the manufacturer of the smart phones and in January 2015, sold about 25% of the smart phones in Australia. In the year 2013, they started manufacturing the lightweight and affordable tablets. But by January 2015, the TT could able to sale only 7% of its tablets across Australia. After that in 2015, the TT became the major sponsor of the National Rugby League. It was so successful that the market of their phones has grown about 65 to 70% by the mid of 2016. After this boom, TT with a view to increase profits, TT has decided to raise the prices of their phone by 4% in the month of August 2016 which results into the backlash from the public and the market of the phones lowered to 45%. TT quickly put back to their original prices. In the mid of 2016, TT controlled the 50% of the laptop market in the Australian which is more than any competitor in Australia. In the late 2016, FN who were the manufacturers of the laptops entered into the manufacturing of the smart phones and tablets and to protect their interest and share, TT sent a letter to their customers whereby they offering their products at very lowest prices. No doubt the board was informed that due to this scheme they might not be able to recover their losses sustained but they believed that the strategy will give benefit in the long run.
In the present scenario the legal implications which are found from the facts that the TT is liable for the illegal conduct under section 46 of the Competition and Consumer Act 2010 (Cth). Section 46 of the said act deals with the purpose of eliminating or the substantially damaging the competitor is punishable under the act. It means that the company has the substantial degree of MP in one market but could actually be in breach of the section 46 if the company takes the advantage of that power to eliminate the competitor in the different market. Section 46(1)(c) of the said act deals with the situations in which the purpose of the conduct is to restrain or prevent a person from engaging in the competitive conduct in that market or any other market. So, as per the present situation TT is liable for criminal as well as civil punishment under the provisions of the Competition and Consumer Act 2010 (Cth).
In the month of May 2016, the CEO of JP decided that it will be important for the success of their all Australian made mobile phones, if the company can create perception in the market that the JP phones were not only the Australian made but also the best phones in the world. This will allow JP to sell their phones at slightly higher rates. With a view to this, JP spent much money in advertising their product but it came to the knowledge of the management of the JP that some of the retailers are selling the JP phones at the discounted prices. The CEO of the Just Phones sent a letter to all their retailers to not to sell the Just Phones at the discounted prices as it will damage the market of the Phones and moreover it is in contravention of the agreement signed between them in 2015. But one of the retailers continued to sell the Just Phones at the discounted prices to attract the customers to their shop.
That the present scenario came under the ambit of section 18 schedule 2 of the Competition and Consumer Act 2010 (Cth) which provides that the person should not in the trade or commerce engage in the conduct that is misleading or deceptive or is likely to mislead or deceive. As per the act, mislead or deceptive conduct means, leads into the errors and to make the general public believe which is actually false. In the present situation also, just to increase their profits, JP misleads the public by advertising that the JP Phones are the world best phones and in view to this also, the company restrained all their retailers to sell the just phones at the discounted prices. It proves from the bare reading of the situation that the intention of the CEO of the JP is to increase the profit of the company. No doubt, every company has the right to think of the profit of the company but it should not be at the cost of the misleading the general public. Whether or not the CEO has the intention of misleading people or not? The intention of the party does not matter, the only thing which is required to be seen is the conduct of the party, which itself proves the misleading conduct of the company. So, as per the provisions of the Competition and Consumer Act 2010 (Cth), the CEO as well as the Just Phones Company is liable for the criminal as well as the civil liability.
References
Braithwaite, J. and S. Vale, “Law Enforcement By Australian Consumer Affairs Agencies” (1985) 18 Australian & New Zealand Journal of Criminology
Connolly, A., “Restrictive Regulatory Practice” (2015) 45 Internal Medicine Journal Decker, christopher, “concepts of the consumer in competition, regulatory, and consumer protection polices” (2017) 13 Journal of Competition Law & Economics “Distribution Arrangements” (2000) 47 Anti-Corrosion Methods and Materials
Dorman, Terri, “Framework For Reducing Restrictive Practices Framework For Reducing Restrictive Practices” (2013) 16 Learning Disability Practice
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?uczak, Anna, “Evolution Of Consumer Protection Law In The Light Of The Proposal For A Horizontal Directive On Consumer Rights And Rome I Regulation” (2011) 1 Wroclaw Review of Law, Administration & Economics
Milius, Susan, “Unfair Trade” (2003) 164 Science News
Nottage, Luke, “The New Australian Consumer Law: What About Consumer ADR?” (2010) 9 QUT Law Review
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?uczak, Anna, “Evolution Of Consumer Protection Law In The Light Of The Proposal For A Horizontal Directive On Consumer Rights And Rome I Regulation” (2011) 1 Wroclaw Review of Law, Administration & Economics
Milius, Susan, “Unfair Trade” (2003) 164 Science News
Nottage, Luke, “The New Australian Consumer Law: What About Consumer ADR?” (2010) 9 QUT Law Review
Pengilley, Warren, “Consumer Redress, Voluntary Codes Of Conduct And The Trade Practices Commission: Some Strange Results Of ‘Deregulation'” (1989) 61 The Australian Quarterly
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