ACCC set to make first port of call in misuse of market power test case

In late 2019, Qube Ports Pty Ltd (Qube) and the Australian Competition and Consumer Commission (ACCC) each commenced proceedings against major Australian ports alleging misuse of market power pursuant to section 46 of the Competition and Consumer Act (CCA) 2010 (Cth). Major amendments were made to this provision in 2017 to introduce the ‘effects test’, which aimed to significantly lower the threshold for establishing a misuse of market power. Both actions were the first, and remain the only, proceedings brought under this newest iteration of section 46 of the CCA.

However, with Qube’s private claim against Port of Newcastle recently being discontinued, there is one less chance for the Court to give its long-awaited view on the new ‘effects test’. All hope now rests with the ACCC’s regulatory proceeding against Tasmanian Ports Corporation Pty Ltd (TasPorts). In this article, Moulis Legal senior associate Emily Jennings, and lawyer Lochlan Worrell, consider the impact of the recent discontinuance of Qube’s private damages action, and report on why all eyes are now firmly on the ACCC’s regulatory prosecution.

Section 46: An untested part of competition law

Prior to the introduction of the effects test in November 2017, section 46 of the CCA prohibited a corporation with a substantial degree of power in a market from taking advantage of that power in any market for the purpose of eliminating or substantially damaging a competitor; preventing the entry of a competitor to the market or preventing a person from engaging in competitive behaviour.

Following years of confusion and a perpetual struggle to successfully invoke section 46 before the Courts, the 2015 Competition Policy Review lead by Professor Ian Harper (‘Harper Review’) determined the existing test to be ineffective. The Harper Review found that the requirement to prove that a corporation had ‘taken advantage’ of their market power for the ‘purpose’ of reducing competition was not a useful test to separate competitive and anti-competitive unilateral conduct.[1] It recognised that the test had ‘given rise to substantial difficulties of interpretation, which ha[d] been revealed in the decided cases, undermining confidence in the effectiveness of the law.[2]

After recommendations were made in the Harper Review, section 46 of the CCA was amended in November 2017 to introduce the ‘effects test’. Section 46 of the CCA now provides that a corporation with a substantial degree of market power is prohibited from engaging in conduct that ‘has the purpose, effect or likely effect of substantially lessening competition in that or any other market’.[3]

The new and improved Section 46 is yet to be considered by the Courts, leaving regulators and the private sector in the dark as to how the new effects test would be interpreted when it comes to establishing that there has been misuse of market power. As a result, the very difficulties in interpretation and undermined confidence in the law, which led to the amendments in Section 46, will arguably remain till the Court has an opportunity to decide on the application of this new provision.

Australian ports targeted in simultaneous private and regulatory test cases

With a seemingly easier test now in place, the door has been opened for the ACCC and private enterprises to be able to pursue cases of misuse of market power. Although it took a while, in late 2019, two proceedings took place in relation to Section 46 – one being a private action for damages by Qube, and the other being a regulatory prosecution by the ACCC.

In the first private action for damages, Qube commenced proceedings in the Federal Court of Australia in November 2019, targeting Port of Newcastle Operations Pty Ltd (Port of Newcastle). Qube alleged that following the installation of new quayside equipment, the operators of the Port of Newcastle not only attempted to establish themselves in the stevedoring business by providing crane services directly but used their market power to force existing users to make use of the newly offered services. As an existing stevedoring business at Port of Newcastle, this impacted Qube’s position in the market by limiting access to equipment necessary for Qube’s operations, and accordingly, its market access.

After making its way through the litigation progress, including a Court-ordered mediation, the proceedings were discontinued by Qube a year later in November 2020. Like most disputes, the matter appears to have been settled behind closed doors, resulting in the reasons for the discontinuance being unclear. The only known outcome of these proceedings is that the Court will not have an opportunity to give its view on the new Section 46 in a private claim for damages.

In December 2019, just a month after Qube’s proceedings commenced, the ACCC, being the regulator of competition law, took aim at TasPorts in the first regulatory prosecution under the new Section 46. TasPorts owns and operates all but one of the ports in Northern Tasmania and offers various ancillary services including pilotage and towage. The ACCC alleges that TasPorts:

‘…sought to stop a new entrant, Engage Marine Tasmania Pty Ltd (Engage Marine), from competing effectively with TasPorts’ marine pilotage and towage businesses, with the purpose, effect and likely effect of substantially lessening competition.’[4]

In particular, the ACCC alleges that TasPorts prevented the expansion of Engage Marine in Tasmania by refusing to provide long term berths for Engage Marine tugboats and refused to place Engage Marine on the shipping schedule. The ACCC also alleges that TasPorts:

‘…prevented Engage Marine from providing pilotage services at Port Latta by failing to provide training to Engage Marine’s employees, which only they could provide, and demanding that Engage Marine’s sole customer pay about $750,000 a year in fees to TasPorts’.[5]

Like Qube’s matter, the ACCC and TasPorts are set to undertake mediation in early March 2021 with a final hearing listed for early May 2021 if no agreement is reached prior to that.

All eyes are now set on ACCC vs TasPorts

Being the first proceedings which commenced under Section 46, the test cases initiated simultaneously by Qube and the ACCC have been closely watched and were set to provide a fascinating race to the finish line. Had both matters resulted in a judgment from the Court, they would have provided the ideal dichotomy of judicial consideration between a regulatory prosecution and private action for damages. Alas, it is not meant to be.

With Qube’s proceedings discontinued, all eyes are now firmly on the ACCC’s prosecution of TasPorts as the next (but unlikely to be the last) opportunity in obtaining the Court’s view on the effects test. TasPorts may want to avoid proceeding to the final hearing, but as the regulator for competition law and an advocate for the amendments made to Section 46, the ACCC is likely to batten down the hatches and continue its pursuit for a judicial interpretation of Section 46.

Anything other than a judgment in the ACCC vs TasPorts case will mean an even longer wait for the Court to give its view on this key aspect of Australian competition law. We, like many others, will be watching the outcome of this important test case with great interest.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2021

[1] Competition Policy Review Panel, Parliament of Australia, Competition Policy Review (2015) 61.

[2] Ibid.

[3] Competition and Consumer Act 2010 (Cth) s 46.

[4] https://www.accc.gov.au/media-release/action-against-tasports-for-alleged-misuse-of-market-power.

[5] Ibid.

Key contacts
Emily Jennings
Senior Associate and Head of Brisbane office
Lochlan Worrell
Lawyer
M.