Trade Practices Act 1974

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The Trade Practices Act 1974 is an act of the Parliament of Australia. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key antitrust law in Australia. It is administered by the Australian Competition and Consumer Commission and also gives some rights for private action.

1 Application of Act
2 The Dawson Report
3 Key Operative Provisions
4 External links

[edit] Application of Act

The Trade Practices Act (TPA) is an act of the Parliament of Australia and so its application is limited by section 51 of the Australian Constitution , which sets out the division of powers between the federal and state parliaments. As a result, most of the TPA is drafted to apply only to corporations, thus relying on Section 51(xx). Some parts of the TPA have a broader operation, relying for instance on the telecommunications power ( Section 51(v)) or the territories power.

Parts of the Act are mirrored in Fair Trading Acts in each Australian State and Territory, to extend regulation to individuals.

[edit] The Dawson Report

The Review of the Competition Provisions of the Trade Practices Act (Dawson Report) was released in January 2003 and received 212 submissions. The scope of the report was quite broad, with recommendations regarding mergers and acquisitions, exclusionary provisions, third line forcing, joint ventures, penalties and remedies, and the functions and powers of the ACCC. The government has accepted the majority of the recommendations, although the Bill (Trade Practices Legislation Amendment Bill 2005) remained stalled in the Senate for some time. It is currently awaiting royal assent.

[edit] Key Operative Provisions

[edit] Restrictive Trade Practices Provisions: sections 45-50A

The restrictive trade practices, or antitrust, provisions in the Trade Practices Act are aimed at deterring practices by firms which are anti-competitive in that they restrict free competition. This part of the act is enforced by the Australian Competition and Consumer Commission. The ACCC can litigate in the Federal Court of Australia, and seek pecuniary penalties of up to $10 million from corporations and $500,000 from individuals. Private actions for compensation may also be available.

These provisions prohibit:

Most Price Agreements (see Cartel and Price-Fixing)

Primary boycotts (an agreement between parties to exclude another)

Secondary boycotts whose purpose is to cause substantial lessen competition (Actions between two persons engaging in conduct hindering 3rd person from supplying or acquiring goods or services from 4th)

Misuse of market power – taking advantage to eliminate or damage an actual or potential competitor, preventing entry into a market, or lessening competition.

Exclusive dealing – an attempt to interfere with freedom of buyers to buy from other suppliers, such as agreeing to supply a product only if a retailer does not stock a competitor’s product

Third-line forcing: Supply goods or services on condition that acquire goods/services from another supplier (including a related company)

Resale price maintenance – fixing a price below which resellers cannot sell or advertise

A priority of ACCC enforcement action in recent years has been cartels. The ACCC has in place an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide information to the ACCC allowing it to prosecute. This policy recognizes the difficult in gaining information/evidence about price-fixing behaviours.

A unique feature of the Trade Practices Act, which does not exist in similar legislation overseas, is that exemptions may be granted by the ACCC. The ACCC may grant immunity based on assessment of the public benefits and anti-competitive detriments of the conduct, through the ‘notification’ or ‘authorisation’ process. This exemption does not apply to price-fixing, resale price maintenance, or misuse of market power. The ACCC maintains a public register of authorisations and notifications.

[edit] Access regime – Part IIIA of TPA

Part IIIA of the Trade Practices Act deals with third party access to services of facilities of national significance. For example, it covers access to electricity grids or natural gas pipelines. The aim of this part of the act is to encourage competition in upstream or downstream markets.

This part of the act allows services to be ‘declared’ and for parties to negotiate terms and conditions of access. The National Competition Council and the ACCC are both involved in registering agreement and assessing what is fair (to owners, to public, to users). As an alternative non-declared services may be subject to ACCC undertakings.

[edit] Telecommunications Part XIB and Part XIC

The Trade Practices Act also regulates aspects of the Telecommunications market. In Australia the previously government owned Telstra (now 49% privatised) has traditionally dominated the telecommunications sector. The market was partially deregulated in 1992 with the introduction of Optus as a competitor. In 1997 deregulation continued when new entities were permitted to enter the market (see Communications in Australia). However, a feature of the Australian telecommunications market is that it is not feasible/efficient to have multiple networks of, for example, fibre optic cables. For this reason, section XIB and XIC of the Trade Practices Act exist to ensure that competitors (downstream users) have access to Telstra’s networks.

Part XIB of the act operate by allowing the ACCC power to issue competition notices to telecommunications corporations requiring certain actions. If these notices are breached the ACCC can seek an injunction and financial penalty through the Federal Court. Part XIC is a telecommunications-specific regime, similar to PartIIIA, for facilitating access network by allowing the ACCC to declare services.

[edit] Prices surveillance, Notification, and Monitoring Part VIIA

Part VIIA enables the ACCC to examine the prices of selected goods and services in the Australian economy.

The ACCC’s functions under this part are:

Hold price inquiries in relation to the supply of goods or services, and to publicly report the findings to the responsible Commonwealth minister

To examine proposed price rises on ‘notified’ goods, subject to instruction from Minister. This allows some control over price rises

To monitor the prices, costs and profits of an industry or business under the direction of the minister and to publicly report the results to the minister.

Australia is a free market economy and the Trade Practices Act does not establish the ACCC as a price-fixing body. An example of the use of this section is that, under a direction from the Minister, the ACCC monitors the price of petrol. However, the ACCC cannot set the price of petrol.

[edit] Consumer protection Part V and Part VC

The consumer protection part of the act, contained in Part V and Part VC, is based on the proposition that low consumer power or lack of information is a market failure which needs to be addressed by interference in the market.

These parts deal with:

Unfair Practices (including unsconscionable conduct and misleading and deceptive conduct) —Part V, Division 1 and Part VC, Division 2

Product safety and information —Part V, Division 1A and Part VC, Division 3

Conditions and Warranties in Consumer Transactions — Part V, Division 2

Actions Against Manufacturers/Importers of Goods — Part V, Division 2A

Product Liability — Part VA

[edit] Misleading or Deceptive Conduct

Main article: misleading or deceptive conduct

Misleading and deceptive conduct (s52) is one of the most important consumer parts of the act. It allows both individuals and the ACCC to take action against corporations who engage in conduct that is misleading or deceptive, or likely to mislead and deceive.

[edit] Unconscionable Conduct

The inclusion of unconscionable conduct in the Trade Practices Act is a codification and extension of the equitable principle of ‘unconscionability’ which was clarified as a cause-of-action in the case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447. The High Court of Australia held that an act was unconscionable if a party to a transaction is under a ‘special disability’, the other party is or ought be aware of that disability, and that other party acts in a way that makes it unfair or unconscionable to accept the offer of the weaker party.

Section 51AA codifies the common law by referring to the ‘unwritten law’ (i.e. the common law). However, s51AA allows access to TPA remedies.

Section 51AB bans unconscionability in consumer transactions, and gives factors that indicate unconscionability. This clarifies the application of unconscionability and circumstances where a consumer is at a “special disability”.

The inclusion of s51AC, added in 1998, extends unconscionability by, in effect, classing ‘small business’ as a ‘special disability’.

[edit] Other Unfair Practices

The Trade Practices Act also prohibits a range of other unfair practices including bait advertising (advertising a product that is not reasonably available), pyramid schemes, and certain misrepresentations (e.g. a misrepresentation as to price).

[edit] Conditions and Warranties

The Trade Practices Act implies into contracts with consumers certain conditions and warranties. Similar conditions are implied by the State Sale of Goods Acts, but these acts have slightly different jurisdictional limits (e.g. ‘consumer’ and ‘goods’) and the legislative phrases may have been interpreted slightly differently.

Under the Trade Practices Act implied conditions and warranties are mandatory: they cannot be excluded by a contractual intent to the contrary. The implied conditions are as to title (s69), quiet possession, freedom from encumbrances, fitness for purpose (s71(2), supply by description or sample (s70, s72 ) and that the goods are of merchantable quality (s66(2)).

The most important of these to a consumer is likely to be merchantable quality. If goods fail to reach a basic level of quality (considering the price of the goods) – that is they defective, break, or do not do what they should do – then the TPA has been breached.