ACCC to crackdown on predatory pricing

Posted by Daniel Palmer on 29th April 2008

The Federal Government has mooted changes to legislation which will provide the ACCC with greater powers to crackdown on companies engaging in the practice of predatory pricing. The legislation is another attempt by the government to stimulate competition and reduce spiralling prices, particularly in the food industry.

Minister for Small Business, Chris Bowen, outlined the changes at the Trade Practices and Corporate Compliance Conference and indicated the changes would help stimulate competition. “The new rules will make it easier to prosecute businesses engaging in anti-competitive behaviour,” Mr Bowen told News Ltd. “Amendments will deal with predatory pricing while allowing businesses to engage in genuine competition and discounting to the benefit of consumers.”

Currently the Trade Practices Act provides the ACCC with very limited powers to deal with predatory pricing despite changes to the Act in the Howard Government’s final term. Consequently, there have been concerns that many large businesses have been allowed to cut prices to below cost in order to counter the competitive threat of small business. Then, once the small businesses have been forced to sell – due to an inability to compete, the larger companies have capitalised on the lack of competition by increasing their prices.

The reforms will enable the ACCC to fully investigate any suspected breaches and scrap the previous requirement of victims of predatory pricing needing to prove the predator has the capability to recoup their losses from engaging in the technique. Other proposed changes include the reduction in costs for the judicial process and, the requirement that small business is represented by at least one ACCC deputy chairperson.

Australian Chamber of Commerce and Industry Chief Executive Peter Anderson was supportive of the reforms. “It will make it easier for small business and the ACCC to take action where there is predatory pricing under way or an abuse of market power, and that will generally be welcomed by the small business community,” he was quoted as saying by News Ltd. “Equally, the Government has made sure the concept of market power is balanced, and that simply because a company has a large market share doesn’t automatically mean they’re in breach of the law.”

The changes are expected to become law before the end of the year with jail sentences proposed for individuals found guilty of engaging in cartel behaviour.