Feds to crack down on market power abuse

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Resellers have welcomed the Federal Treasurer’s announcement of a major package of reforms to the Trade Practices Act, a move aimed at helping smaller businesses fight anti-competitive behaviour by bigger companies.

Resellers have welcomed the Federal Treasurer's announcement of a major package of reforms to the Trade Practices Act, a move aimed at helping smaller businesses fight anti-competitive behaviour by bigger companies.

Federal treasurer Peter Costello, said the Trade Practices Act 1974 would be amended to incorporate most suggestions made by the 2002 Dawson review – including higher penalties for anti-competitive conduct -- and to incorporate eight of 17 recommendations made by a Senate inquiry into the Act's effectiveness at protecting small business.

'Most changes are directed at clarifying the prohibition on the misuse of market power, and extending the application of the prohibition of unconscionable conduct in business transactions,' Costello said in a statement.

Ben Morgan, director at reseller AppleCentre Taylor Square, said some of the proposed changes would potentially help smaller resellers fight unethical practices by some larger vendors.

'I'd also like to see Apple's strategy towards target-setting put under the spotlight. In terms of yanking up targets and forcing [resellers] to sell iPods, and other practices that are just a little bit unethical,' he said.

He said Apple had made resellers agree in writing that AppleCentre customers were always Apple's customers. Some large vendors, including Apple and HP, maintained rights to access reseller customer data – a practice that could be used to gain unfair advantage, he pointed out.

'They like to mix their cake, ice and eat it,' Morgan said.

Safa Joumaa, sales and marketing GM at distributor Altech Computers, said the changes would have a 'reasonable' effect on IT. Some larger IT resellers had acted anti-competitively in what was a competitive industry mainly populated by smaller resellers trying to get a foothold.

'By introducing tougher guidelines for larger resellers, it will certainly dampen anti-competitive ambitions, thus making it easier for the smaller reseller,' he said. 'The second, and probably the most important, effect is the flexibility in regards to collective bargaining benefits.'

A small reseller moving a lot of product at low margin would be treated differently to one that traded to the same level but at a higher margin. This change would greatly ease the difficulty faced by smaller resellers trying to compete with larger, more established resellers, he noted.

'Overall some things obviously won't change. It will always be a hard battle for the smaller resellers to compete with major franchised establishments, but any move by the government to lighten the current load on the smaller resellers must be a good thing,' Joumaa said.

Andrew Rayment, MD at integrator Ethan SI, said his company had grown too big to benefit from the Act's reforms.  'Otherwise, I think they are excellent, particularly in relation to joint ventures for smaller companies anxious to avoid an inference that they are colluding,' Rayment said.

Treasurer Costello said that section 46 should be amended to provide 'additional guidance' to courts considering cases of predatory pricing, and to ensure it could stop 'anti-competitive' tactics while taking business partner relationships into account, he said.

Section 51AC should be amended to apply to sales worth up to $10 million. The section should also be amended to make it clear that courts are able to consider terms that enabled variation of a contract by one signatory, he said.

'The maximum fine for corporations will be the greater of $10 million or three times the value of the benefit from anti-competitive conduct or, where the value cannot be determined, 10 percent of the annual turnover of the body corporate and all its related bodies,' he said.

However, the Commonwealth did not agree with the ACCC's proposal that courts should be able to force corporations to disclose information after trials had started. 'The Government considers the extensive existing powers of courts to compel corporations to disclose information before trial to be adequate,' Costello said.

The Dawson review suggested that changes to the collective bargaining process and the way mergers were cleared by the ACCC were needed.

The Commonwealth planned to introduce a notification process for collective bargaining by small business as an alternative to the authorisation process. Third parties would be permitted to make such a notification on behalf of a group of small businesses that had a specific goal.

Government believed that the move would reduce the regulatory burden on small businesses.

Also, the transaction limit of $3 million in any 12 month period would be increased to reflect that some businesses had high turnover but small profit margins. A new, higher limit for some types of businesses would be decided.

Fees charged for notification would be required to be 'substantially less' than those charged for authorisation.

With regards to mergers, a voluntary formal merger clearance system would be added to the existing informal system. The addition meant that merger authorisation applications could be considered by the Australian Competition Tribunal.

'The formal system will provide the certainty of legislated time limits, require disclosure of reasons, allow the applicant to appeal to the Australian Competition Tribunal and provide immunity from legal action should the clearance be granted,' Costello said.

Time limits on the ACCC's consideration of merger proposals would also be imposed.

However, exclusionary and price-fixing provisions would now be open to the defence of being a 'genuine' joint venture. Whether a joint venture was genuine would be subject to a competition test, he said.

Apple and HP were contacted for comment but had not responded at the time of going to press.

However, HP Imaging and Printing Group head Rebekah O'Flaherty released a statement in March that officially denied allegations HP had used end-user data gleaned via channel marketing programs to go direct, cutting out resellers in the process. That statement was issued as a direct response to a series of reports in the news media.

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