Water Week

EWN Publishing

Penalty for competing: corporation with “substantial share” of a market could face financial penalty of $10 million or 10 per cent of annual turnover if it supplies goods or services below cost price

Posted by waterweek on 3 October 2007

A corporation with a “substantial share” of a market would now be liable for a financial penalty of $10 million or 10 per cent of its annual turnover (if that is greater), if that corporation supplied goods or services for a sustained period at a below-cost price for a purpose such as substantially damaging a competitor or preventing entry by another person into a market, reported The Australian Financial Review, (28/09/2007, p.79), quoting Peter Armitage, Practice head, competition and consumer protection, Blake Dawson Waldron, Sydney, NSW.

Increased uncertainty: Under this amendment, no company would be able safely to know whether it had a “substantial share of a market”, what the “relevant cost” would be for assessing its price cutting and how long was a “sustained period”, Armitage said.

Too harsh on misjudgements: An error of judgement on any these issues could result in the imposition of massive financial penalties. The inevitable consequence of such vague language was that the vigorous price competition from which all consumers benefit would be suppressed. These amendments were a fundamental attack on the processes of competition and the benefits it delivered.

Not fit for a robust economy: Australia had a robust economy that had withstood numerous external shocks in recent times, said Armitage. This was, in no small part, because of the efforts by governments over the past 15 years or so to make the economy more competitive and to root out anti-competitive protections and cross-subsidies. These amendments would undo some of that good work.

Will cool off competitive pressures: The fact that there was no equivalent law in other countries in the Organisation for Economic Cooperation and Development (OECD) reflected their understanding that it was highly undesirable to chill the flames of competition, and was no basis for thinking that these amendments were progressive or beneficial.

The Australian Financial Review, 28/9/2007, p. 79

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