The Trade Practices Act 1974 (Com) (the Act) was drafted on the basis of the well-developed United States and E.E.C. models. The objectives of this thesis are to consider the way in which the substantive prohibitions in Part IV of the Act have been construed and applied since 1974; to compare them with the way in which their United States and E.E.C. counterparts have been construed and applied; to trace the influence of United States and E.E.C. competition law and policy in Australia; to indicate defects in the present Australian law; and to suggest recommendations for reform.
Chapter 1 considers the policy objectives of the competition laws in each jurisdiction and administrative arrangements for enforcing the laws in each jurisdiction. The objectives adopted in each jurisdiction have not been clearly expressed and have tended to evolve over time. When the Act became law in Australia the “mainstream” approach of the Harvard School and industrial organisation economists prevailed in the United States. The "mainstream” tradition favours a multi-goal approach and regards the so-called "social and political purposes" of antitrust as legitimate concerns. Throughout the 1980s, however, the "revisionist" approach of the Chicago School has gained ascendency with the United States enforcement authorities and some courts. The Chicago School regards business efficiency as the only legitimate goal of antitrust and ignores distributional concerns.
In the E.E.C. and Australia a multi-goal approach has been adopted and there is a greater emphasis on distributional concerns with consumers rather than producers being the ultimate beneficiaries of competition law. The thesis reasserts the relevance of the mainstream approach for Australia. It draws attention to the criticisms that have been levelled at Chicago School theories and questions the relevance of some Chicago School theories for Australia given the small size of the economy. Chapter 2 reviews some of the literature on economic theory which provides the foundation for competition law and policy, and introduces some of the concepts which are discussed in subsequent chapters.
Chapter 3 is concerned with three concepts - markets, competition and market power. The chapter begins with an examination of market definition and argues in favour of a flexible, pragmatic approach. Instead of attempting to define markets precisely, attention should focus on the level of competition in the market or the degree of market power. Judicial approaches to measuring market power in Australia have relied heavily on the approach taken by Court of Justice of the European Communities and the relevant Community authorities are considered in detail.
The remainder of the study is a detailed analysis of the principal substantive prohibitions in Part N of the Act. Chapters 4 and 5 consider mergers and merger policy in Australia and the United States. Australia's current merger law reflects Chicago School thinking according to which mergers should generally be allowed to the point of duopoly in the name of efficiency. According to Chicago School theory, the market mechanism works well and it is the best judge of the merits of a merger. Chapter 5 questions the relevance of this theory for Australia. Given the small size of the Australian economy markets are not likely to provide a sufficient protection against the harmful effects of mergers. It is argued that the law should be amended to prevent positions of market power arising. Such a preventative approach is seen as being preferable to the reactive approach which currently prevails.
Chapter 6 provides a comparative survey of misuse of market power and then concentrates on the High Court's decision in the Queensland Wire Industries case. In seeking to distinguish between hard competiton and exclusionary conduct the High Court appears to have adopted a test similar to that applied in a number of United States decisions, namely that the corporation with substantial power must have recourse to methods that differ from those in a competitive market. These United States cases and conduct prohibited by s. 46 are examined generally.
Chapter 7 deals with the law relating to horizontal restraints, in particular price fixing and exclusionary provisions. In relation to exclusionary provisions the law in Australia differs from that in the United States and the need for reform is considered. Joint ventures pose considerable problems for competition policy and for enforcement authorties. Co-operation between competitors reduces competition, but it can also result in efficiencies which could not be accomplished if the joint venturers acted separately. The methodology adopted in the United States, the E.E.C. and Australia for analysing joint ventures is compared.
Chapter 8 is concerned with vertical restraints. This is an area in which Chicago School thinking has had considerable influence in the United States. Chicago School theorists regard vertical price and non-price restraints as efficiency enhancing since they are necessary to deal with the so-called "free-rider" problem. The Chapter analyses the Australian law relating to exclusive dealing and resale price maintenance against the backround of United States and E.E.C. law. The methodology adopted in the United States, the E.E.C. and Australia for analysing franchises is compared. It is suggested that there may be scope for applying Chicago School theories in relation to vertical restraints, for example, by making resale price maintenance the subject of authorisation.
Chapter 9 considers the law relating to price discrimination. The conclusion reached is in accordance with Chicago School theory, namely, that s. 49 has failed to achieve its objective of preserving small business and has produced anti-competitive side effects. It is probably redundant and should be repealed.
The concluding Chapter considers the affinity between E.E.C. and Australian competition policy and the changes to the Act which the adoption of an efficiency oriented Chicago School approach would necessitate. Given the small size of the Australian economy and high levels of concentration that prevail, the market mechanism is not likely to work as well in Australia as it does in larger economies such as the United States. A strong regulatory authority is required to investigate and enforce cases of market failure.
The law is stated as at 30 June 1 990.