‘The Big Chill’? A Comparative Analysis of Effects-Based Tests for Misuse of Market Power

Posted by Social Science Research Network

‘The Big Chill’? A Comparative Analysis of Effects-Based Tests for Misuse of Market Power

By Katharine Kemp (University of New South Wales)

Abstract:     In November 2016, the Australian government recently made the controversial announcement that it plans to amend the prohibition of misuse of market power in section 46(1) of the Competition and Consumer Act 2010 (Cth) (‘CCA’) to incorporate an effects-based test, the ‘substantial lessening of competition’ test, in line with the recommendations of the Competition Policy Review Panel. This proposal has met with vigorous opposition, particularly by those who argue that the amendment would in fact deter firms with substantial market power from engaging in conduct which is procompetitive and in the interests of consumers: that is, it would ‘chill’ competition. This article provides vital context for this debate by explaining the origins of these arguments and making a comparative analysis of the proposed amendment to section 46(1) of the CCA against several effects-based tests for unilateral anti-competitive conduct proposed or adopted in other jurisdictions. It concludes that, while claims regarding the ‘chilling’ effects of the proposed amendment have been overstated, there are more subtle weaknesses in the proposal which may create disincentive effects for dominant firms.

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