08 Jul 2021

All aboard: First misuse of market power judgment offers insight into new provision of the competition law

By Michael Corrigan, Damiano Fritz, Caroline De Paoli

Good intent aside, businesses with a substantial degree of market power need to be alert to the likely effects of their activities on competition particularly when imposing charges or fees on competitors. The Federal Court has, for the first time, applied the new misuse of market power provision in Australia's competition law, with the possibility that the ACCC will pursue more "effect on competition" cases in the future.

On 7 May 2021, the Federal Court delivered judgment in ACCC v Tasmanian Ports Corporation Pty Ltd [2021] FCA 482 – the first decision under the new misuse of market power prohibition in the Competition and Consumer Act 2010 (Cth) (CCA). The Court made declarations as agreed by the parties, and accepted a court-enforceable undertaking offered by TasPorts.

Section 46: What's changed?

In 2017, section 46 of the CCA was replaced with a new misuse of market power prohibition which covers the effect of conduct as well as its purpose. The new provision prevents:

  • a corporation with a substantial degree of power in a market;
  • engaging in conduct with either the purpose, effect or likely effect of substantially lessening competition in:
    • the market in which the corporation has market power;
    • a market in which the corporation directly or indirectly supplies or is likely to supply goods or services; or
    • a market in which the corporation directly or indirectly acquires or is likely to acquire goods or services.

The amendments align the Australian misuse of market power prohibition more closely with the approach in the EU and US.

TasPorts' misuse of market power

TasPorts is a State-owned company responsible for the management of port berths, channels and wharves at 11 Tasmanian ports.

TasPorts is vertically integrated and provides downstream services to port users. For a number of years prior to July 2018, TasPorts was the sole provider of pilotage and towage services in Tasmania.

On 31 October 2017, following notice by one of its pilotage and towage service customers, Grange, that it would switch to another service provider, TasPorts advised Grange it would need to start paying TasPorts a ''marine precinct tonnage charge'' (MPTC), which TasPorts had never previously imposed.

On 6 December 2019, the ACCC commenced proceedings against TasPorts alleging contravention of the new section 46(1) of the CCA on the basis that:

  • TasPorts imposed the MPTC after Grange notified TasPorts it would be switching its supplier of the relevant services;
  • TasPorts did not have a legal right to require Grange to pay the charge, without Grange's agreement;
  • TasPorts sought to impose the MPTC without having conducted a full assessment of the costs of providing the services at Port Latta; and
  • there was a real commercial likelihood that if Grange agreed to pay the MPTC, this would have the effect of raising Grange's future costs of acquiring services from TasPorts' competitors, compared to the counterfactual if no MPTC was imposed.

A declaration and an undertaking, but no penalty?

TasPorts admitted that it had a substantial degree of market power in managing and maintaining infrastructure in ports (other than Port Latta) in northern Tasmania.

TasPorts also admitted it had contravened section 46 of the CCA by engaging in conduct, in response to the entry or attempted entry of a competitor, which had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania, by maintaining to Grange that they were required to pay the MPTC.

The Federal Court made a declaration giving effect to TasPorts' admission.

TasPorts also provided a court enforceable undertaking in which TasPorts undertakes to: 

  • only charge the MPTC:
    • with Grange's agreement;
    • where TasPorts would be entitled to do so pursuant to legislation; or
    • where the amount charged has been determined to be reasonable by an independent expert approved by the ACCC;
  • offer berth space to a competitor on reasonable commercial terms;
  • invest a minimum of $1,000,000 in wharf infrastructure at Inspection Head over five years; and
  • enable port users to book towage services provided by a competitor using TasPorts’ port communications system.

Given the significant admissions made by TasPorts, it may seem curious that the ACCC opted not to pursue any penalties or injunctive relief. Breaches of the CCA attract serious penalties, including for a corporation, the greater of:

  • $10,000,000;
  • three times the benefit obtained by the breach; or
  • if the court cannot determine the benefit obtained, 10% of the corporate group's annual turnover in Australia for the preceding year.

ACCC Chairman Rod Sims has shed some light on the regulator's approach, stating that:

Accepting this consent outcome ensures towage customers in northern Tasmania will receive the benefits from competition quickly. This competition should make a real difference at Tasmanian ports, ultimately to the benefit of consumers.

The case's significance in applying the new misuse of market power provision

The decision is an important reminder of the wide scope of the new section 46 – in particular, the effects (or likely effects) test that did not previously feature in the provision.  Further, the substantial lessening competition test is not limited to the market in which the corporation has market power – it is sufficient that competition is restricted or hindered in any market in which the firm directly or indirectly acquires or supplies (or is likely to acquire or supply) products or services.      

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.