Hard bargaining between two trading parties operating at different levels of the supply chain can be consistent with competitive markets and can deliver benefits to consumers. Hard bargaining between two trading parties operating at different levels of the supply chain can also create inefficiencies which lead to economic harm. How can competition agencies tell the difference and prohibit hard bargaining that crosses the line? This question was at the heart of the Australian Competition and Consumer Commission’s recent inquiry into Perishable Agricultural Goods released at the end of 2020. This article sets out when hard bargaining between trading parties risks causing economic harm and comments on the approach taken by the ACCC in its recent inquiry.
By George Siolis & Jennifer Swart1
“Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to “injure” each other in this way.” 2
Those comments by two High Court justices in the Queensland Wire case described the nature of competition between two firms competing against each other at the same level of the supply chain – that is, firms competing in a horizontal relationship. Firms in such a relationship are expected – and, indeed, are driven by the profit motive – to act ruthlessly (and lawfully) to exploit any advantage they have to succeed in!-->…