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Competition, misuse of market power and the role of the 'purpose test' in Section 46 of the Trade Practices Act
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posted on 22.03.2017by Quo, Shirley Sou Li
Section 46 of the Trade Practices Act 1974 (Cth) ('TPA') prohibits corporations with a substantial degree of market power from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a competitor into the market or deterring or preventing a competitor from engaging in competitive conduct.
This thesis examines the role and efficacy of the 'purpose test' in s 46 of the TPA.
Section 46 plays a unique and important part in competition law in Australia because it is the only provision that focuses on single-firm or unilateral anticompetitive conduct.
The distinction between unilateral and concerted action has been recognised by the United States ('US') Supreme Court in antitrust jurisprudence. As will be demonstrated, this distinction between unilateral and concerted behaviour helps to explain the role of the 'purpose test' in s 46 and how it assists in identifying anticompetitive single-firm conduct. The 'purpose test' ensures that liability under s 46 will only attach to intentional conduct not inadvertent conduct. Judging unilateral behaviour in this manner reduces the risk that s 46 will deter pro-competitive conduct and harm competition.
The High Court of Australia has given the 'purpose test' a multifaceted role in helping to distinguish between anticompetitive and pro-competitive behaviour. This is illustrated in the inter-relationship between purpose and the other core elements of s 46. The 'purpose test' has also been used as a forensic tool to aid in characterisation of the relevant conduct. The link between the 'purpose test' and legitimate business reasons for the impugned conduct is another way in which purpose helps to infer or refute liability under s 46.
A legal comparison of the role of purpose in US monopolisation cases provides further validation of the fundamental role and efficacy of the 'purpose test' in identifying or distinguishing between illegitimate (anticompetitive) and legitimate (pro-competitive) conduct.