Outgoing Chair of the ACCC, Rod Sims, has used the CEDA ACCC Annual Enforcement and Compliance Policy Update to signal the ACCC’s intention to focus on exclusive arrangements that have the potential to lessen competition as one of the regulator’s priority factors over the next year.
While the ACCC’s attention will focus on companies that have a strong position in the market (or market power), it will be assessing various markets for these types of arrangements. The Chair recognised that in most cases, these exclusive arrangements were ‘benign’ but in other cases, had the potential to restrict access to bottleneck services that have the effect of prohibiting others from competing.
Mr Sims used the ACCC’s case in the Federal Court against ice cream supplier, Peters as an archetype case from which future investigations to identify other exclusive arrangements that may lessen competition will be built and which may result in further proceedings being commenced.
In that case, the ACCC alleges that Peters, one of two of the largest suppliers of single serve ice cream products in Australia (such as those for sale in petrol stations and convenience stores), entered into an exclusive arrangements with PFD Food Services that contained a condition that PFD could not distribute any competing ice cream products in certain locations in Australia. The ACCC alleges that the exclusivity condition of the agreement prevented other suppliers from competing or new suppliers from entering the market.
Companies that have entered into exclusive supply arrangements should review their agreements and consider:
- their position in the market (for example, its prominence as a supplier or acquirer of goods or services in the market);
- why the arrangement is exclusive and whether it is intended to protect its market position from competitors;
- the likely effect of the arrangement on other suppliers and whether it prevents other companies (or future companies) from competing;
- how long the exclusive arrangement is and the scope of the products or services that it covers.
Exclusivity arrangements that have a purpose or likely effect of substantially lessening competition are unlawful and can result in imposition of significant penalties by a court.
Even though Mr Sims ends his tenure at the ACCC this month, incoming Chair, Gina Cass-Gottleib has signalled that there will not be any changes to the regulator’s enforcement priorities over the next 12 months.