Restrictive Trade Practices & Exemptions
The ICCC Act prohibits behavior that restricts trade or substantially lessens competition in the market. It is illegal to engage in business conduct, behavior, or practices that have, or, are likely to have the effect of substantially lessening competition in a market. The ICCC Act refers to the prohibitions as Market Conduct Rules (MCR).
There is no precise definition of a substantial lessening of competition (SLC). In practice, it will depend on the circumstances in the market. It includes a reference that defines the consequences or unacceptable competitive behavior prohibited by the ICCC Act.
There are also a range of other exceptions under the ICCC Act. Included in these exceptions are, for example, an exception for acts or things specifically authorized by other legislation; intellectual property agreements; and employment agreements.
Cartel is a form of anti-competitive behavior where competing businesses collude to coordinate their actions in a way that restricts competition between themselves in the market. Cartels typically involve agreements between competitors to fix prices, allocate markets, limit production or supply, and rig bids. Such collusive practices harm consumers by creating an artificial environment where prices are higher, choices are limited, and fair competition is stifled.
Certain business behaviors that can raise cartel concerns are as follows:
Section 50. Any contracts, arrangements, or understandings substantially lessening competition;
The ICCC Act prohibits contracts, arrangements, or understandings that have the purpose or effect or likely effect of substantially lessening competition in a market. That prohibition applies both to making such contracts, arrangements, or reaching understandings and also to those who would give effect to such a contract, arrangement, or understanding that has already been made or reached. Conduct such as bid rigging, market allocation, and supply restrictions may amount to cartel.
Section 51. Covenants substantially lessening competition prohibited;
Covenants over land that have the purpose or effect or likely effect of substantially lessening competition in a market are prohibited by the ICCC Act. The prohibition extends to requiring someone to give a covenant, giving one yourself, or seeking to enforce the covenant.
Section 52. Contracts, arrangements, or understandings containing exclusionary provisions are prohibited;
Exclusionary provisions which are also known as primary boycotts are agreements between businesses that would prevent or limit their dealings with a particular person or class of persons, where the person who is the target of the boycott is a competitor of one or both of the agreed parties. These dealings are likely to lessen competition in the market and it is prohibited. This is a per se offense if proven in court.
Section 53. Price Fixing;
An agreement between competitors to fix prices is an example of serious anti-competitive market behavior. Accordingly, price fixing agreements between competitors are absolute prohibitions under the ICCC Act because they are deemed to have the purpose, effect, or likely effect of substantially lessening competition. This is also a per se offense. Price fixing agreements are defined broadly to include contracts, arrangements, or understandings that have the purpose or effect or likely effect of fixing, controlling, or maintaining the price for goods or services or any discount, allowance, rebate, or credit. There are, however, some exceptions to price fixing prohibition.
Taking advantage of market power
The prohibition of this anti-competitive market behavior may apply in a case where a person or business has a substantial degree of power in a market. They are prohibited from taking advantage of that power for anti-competitive purposes which are to restrict the entry of a competitor, to prevent or deter someone from engaging in competitive conduct, or to eliminate a competitor- in that market or another market. Examples of abuse of market power conduct may include but are not limited to margin or price squeeze, refusal to deal, predatory conduct, and discriminatory conduct, amongst others.
Resale Price Maintenance
Resale price maintenance (RPM) is the practice of a supplier requiring its resellers not to sell its products below a certain price as set by the supplier. Thus, a manufacturer or supplier cannot insist that its retailers do not sell the manufacturer’s products for less than a certain price. RPM would also apply where a manufacturer threatens to withdraw supply to a reseller who was discounting the manufacturer’s products while others were not.
In the context of MCR, exemptions refer to specific situations or categories of conduct that are excluded from the application of certain regulatory requirements or prohibitions. These exemptions are typically granted to recognize that certain activities or participants may not pose significant risks to the market or consumers, or that applying the rules in certain circumstances could be overly burdensome or counterproductive.
Exemptions for market conduct rules include:
Joint venture pricing is exempt from the application of Section 53.
Certain recommendations as to prices for goods and services are exempt from the application of Section 53.
Joint buying and promotion arrangements are exempt from the application of section 53.
Exceptions concerning intellectual property rights
Saving in respect of business acquisitions
Authorization for Restrictive Trade Practices
Part VI of the ICCC Act empowers the ICCC to grant authorizations for certain business practices and arrangements based on public benefit grounds. Otherwise, such practices and arrangements are considered anti-competitive.
The purpose of authorizing restrictive trade practices under Section 76 is to exempt proposed conduct that would otherwise breach the MCR. These exemptions are granted when the conduct is deemed to generate sufficient public benefits despite potentially having some anti-competitive effects.
The Authorization here does not apply to price fixing and taking advantage of substantial market power.
Before filing an Authorization application, businesses are strongly encouraged to seek guidance from the ICCC on an informal basis. This should be done as soon as there is a genuine possibility that a potential anti-competitive arrangement would be entered into; well in advance of the completion of the acquisition.
By obtaining formal approval from the ICCC, parties involved in an arrangement can proceed with their plans confidently, without risking a contravention of the ICCC Act. This is legal and certainly allows businesses to operate within the bounds of the law while enjoying the benefits of the authorized arrangement.
Whilst there is no timeframe for a determination of such an application, the ICCC ensures to expedite the assessment and determination.
Please refer to the Public Register to access information on previous decisions and applications currently progressing.