TRADE PRACTICES
COMPLIANCE
MANUAL
February 2007
FOREWORD
On 21 July 1996, as part of the National Competition Policy, all State
Government Departments and associated agencies became subject to the
restrictive trade practices provisions of the Trade Practices Act 1974 (Cth)
when “carrying on a business”.
The purpose of these provisions is to encourage competition in markets by
prohibiting certain practices that are seen as unreasonably restricting
competition. The Queensland Government is committed to complying with
the Trade Practices Act 1974 and the National Competition Policy.
This Compliance Manual has been developed and revised to explain the
obligations of the Department of the Premier and Cabinet and its employees
under the Trade Practices Act 1974. The consequences of non-compliance
can be extremely serious, including potential personal liability for breaches.
The Compliance Manual is commended to you.
Ross Rolfe
Director-General
TABLE OF CONTENTS
1.
INTRODUCTION ........................................................................................................................................ 4
1.1 BACKGROUND ........................................................................................................................................ 4
1.2 KEY ELEMENTS OF THE RESTRICTIVE TRADE PRACTICES PROVISIONS ................................................... 4
1.3 PENALTIES .............................................................................................................................................. 5
(a) Department of the Premier and Cabinet ........................................................................................ 5
(b) Departmental Employees .............................................................................................................. 5
1.4 THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION ............................................................ 6
(a) Role of the ACCC ......................................................................................................................... 6
(b) Powers of the ACCC ..................................................................................................................... 6
1.5 YOUR RESPONSIBILITIES AS AN EMPLOYEE OF DEPARTMENT OF THE PREMIER AND CABINET ............... 6
1.6 WHO TO CONTACT FOR ASSISTANCE ...................................................................................................... 6
2.
APPLICATION OF THE TPA TO GOVERNMENT ACTIVITIES ...................................................... 7
2.1 CARRYING ON A BUSINESS ...................................................................................................................... 7
2.2 FEATURES OF BUSINESS ACTIVITY .......................................................................................................... 7
2.3 APPLICATION TO THE DEPARTMENT ....................................................................................................... 8
3.
GENERAL TRADE PRACTICES CONCEPTS ....................... ERROR! BOOKMARK NOT DEFINED.
3.1
3.2
3.3
3.4
3.5
3.6
4.
Market ................................................................................................................................................. 10
Market Power ...................................................................................................................................... 10
Competition ......................................................................................................................................... 12
Substantial Lessening of Competition ................................................................................................. 12
Contract, Arrangement or Understanding ............................................................................................ 12
PURPOSE OR EFFECT ............................................................................................................................ 13
CONDUCT THAT IS STRICTLY PROHIBITED ................................................................................. 14
4.1 EXCLUSIONARY PROVISIONS – SECTION 45(2)(A)(I) AND SECTION 4D ................................................. 14
Guidelines to Avoid Exclusionary Provisions ..................................................................................... 14
4.2 PRICE FIXING – SECTION 45A ............................................................................................................... 14
Guidelines to Avoid Price Fixing ........................................................................................................ 15
4.3 THIRD-LINE FORCING – SECTION 47(6) ................................................................................................ 16
Guidelines to Avoid Third-Line Forcing ............................................................................................. 16
4.4 RESALE PRICE MAINTENANCE – SECTION 48........................................................................................ 16
Guidelines to Avoid Resale Price Maintenance .................................................................................. 17
5.
CONDUCT THAT IS CONDITIONALLY PROHIBITED ................................................................... 18
5.1 ANTI-COMPETITIVE CONTRACTS – SECTION 45 .................................................................................... 18
5.2 SECONDARY BOYCOTTS – SECTION 45D .............................................................................................. 18
5.3 EXCLUSIVE DEALING – SECTION 47...................................................................................................... 19
Product Exclusivity .............................................................................................................................. 19
Tying Arrangements ............................................................................................................................ 20
Customer and Territory Exclusivity Arrangements ............................................................................. 20
5.4 MERGERS AND ACQUISITIONS – SECTION 50 ........................................................................................ 20
5.5 GUIDELINES FOR CONDITIONALLY PROHIBITED CONDUCT ................................................................... 20
6.
MISUSE OF MARKET POWER ............................................................................................................. 22
6.1 MISUSE OF MARKET POWER – SECTION 46 .......................................................................................... 22
(a) Proscribed Purposes .................................................................................................................... 22
(b) More than One Purpose ............................................................................................................... 22
(c) Market Power .............................................................................................................................. 22
(d) Take Advantage of Market Power ............................................................................................... 22
(e) Legitimate Business Reasons ...................................................................................................... 23
(f) Conduct likely to be a Problem ................................................................................................... 23
Guidelines to Avoid the Misuse of Market Power ............................................................................... 23
7.
FORMULATION AND ADMINISTRATION OF DEPARTMENTAL LEGISLATION .................. 24
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8.
EXEMPTIONS TO THE TPA .................................................................................................................. 25
8.1
8.2
8.3
8.4
8.5
9.
SECTION 2C EXEMPTIONS .................................................................................................................... 25
SECTION 51(1)(B) EXEMPTIONS............................................................................................................ 25
CONTRACTS ENTERED INTO BEFORE 19 AUGUST 1994 ......................................................................... 26
AUTHORISATION ................................................................................................................................... 26
NOTIFICATION ...................................................................................................................................... 26
HANDLING TRADE PRACTICES COMPLAINTS ............................................................................. 27
10. GUIDELINES TO AVOID RESTRICTIVE TRADE PRACTICES ..................................................... 28
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1.
INTRODUCTION
1.1
Background
In 1995 all States and Territories and the Commonwealth signed the Conduct Code Agreement and
the Competition Principles Agreement. As a result, from 21 July 1996, the restrictive trade practices
provisions in Part IV of the Trade Practices Act 1974 (Cth) (the TPA) apply to all areas of the
Queensland Government that represent the Crown and that carry on a business, including the
Department of the Premier and Cabinet.
Officers of the Department of the Premier and Cabinet must be aware of the TPA when performing
duties to ensure that its provisions are not breached and that the activities of the Department are not
compromised. This is especially so if an officer’s duties involve the conduct of a “business” activity,
or the development of legislation.
This Compliance Manual aims to provide a general explanation of the restrictive trade practices
provisions of the TPA. These provisions deal with anti-competitive conduct and will apply to all
business activities carried on by the Department of the Premier and Cabinet.
This Compliance Manual:

explains what may be regarded as a “business” activity;

explains general trade practices concepts;

explains the types of business conduct that are strictly prohibited or conditionally prohibited;

explains how the restrictive trade practices provisions may impact on the formulation and
administration of legislation administered by the Department of the Premier and Cabinet; and

gives examples and makes recommendations designed to ensure that neither officer(s) nor the
Department of the Premier and Cabinet breach the restrictive trade practices provisions.
1.2
Key Elements of the Restrictive Trade Practices Provisions
To understand, interpret and apply the provisions of Part IV of the TPA it is important to examine the
following five key elements:

market;

competition;

substantial lessening of competition;

contract, arrangement or understanding; and

purpose or effect.
These concepts are explained in more detail in Part 3 of this Compliance Manual.
Some conduct is considered to be so serious that it is illegal no matter what its effect on competition.
In this Compliance Manual, this conduct is called strictly prohibited conduct. Other conduct is
illegal only if it has the purpose, effect or likely effect of substantially lessening competition in the
relevant market. In this Compliance Manual, this conduct is called conduct that is conditionally
prohibited. Misuse of market power is a separate category of conduct that does not come within
either of these categories and is discussed separately.
These concepts are explained in more detail in Parts 4, 5 and 6 of this Compliance Manual.
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1.3
Penalties
(a)
Department of the Premier and Cabinet
The TPA expressly provides that a State Government will not be liable to a pecuniary penalty under
the Act. However, a breach of the restrictive trade practices provisions of the TPA by the Department
of the Premier and Cabinet may render the Queensland Government liable to pay damages to a person
who suffers a loss because of that breach.
A Government Department may be liable for damages for a breach of the TPA if it is knowingly
concerned in, or a party to, a contravention of the provisions of Part IV of the TPA. This includes a
person who participates in or assents to the contravention and, in this case, the Department may be
considered to be liable as the employer of that person or as being responsible for the actions of that
person.
An injunction prohibiting any further breach of the TPA may also be obtained against the
Government.
The penalty for corporations and authorities of the State may exceed $10 million. The underlying
motivation for penalties under Part IV, is to compensate society for the damage inflicted on the
competitive process (and hence on consumer welfare) by the breach.
(b)
Departmental Employees
An individual employee can be liable for a pecuniary penalty for a breach of the TPA even where the
person is acting within the scope of his or her duties. The maximum penalty for individuals is
currently $500,000.
This means that officers must be extremely careful to ensure that, both they, on behalf of the
Department, and parties that they are dealing with in business activities are not breaching the TPA.
The TPA provides that pecuniary penalties may be imposed on any person who has, among other
things:

attempted to breach a restrictive trade practices provision;

aided, abetted, counselled or procured a person to contravene such a provision;

induced, or attempted to induce, a person, whether by threats or promises or otherwise, to
contravene such a provision;

has been in any way, directly or indirectly, knowingly concerned in, or party to, the
contravention by a person of such a provision; or

has conspired with others to contravene such a provision.
These provisions could easily be applied to Departmental officers, particularly those involved in
business negotiations, including facilitation roles.
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1.4
The Australian Competition and Consumer Commission
(a)
Role of the ACCC
The ACCC is an independent statutory authority which administers the TPA. It also has additional
responsibilities under other legislation.
The ACCC is the only national agency dealing generally with competition matters and the only
agency with responsibility for enforcement of the TPA and the associated State and Territory
application legislation.
The ACCC’s consumer protection work complements that of State and Territory consumer affairs and
fair trading agencies, which administer the mirror legislation of their jurisdictions. This Compliance
Manual does not deal with the consumer protection provisions of the TPA or Fair Trading
Legislation.
The ACCC administers the TPA by:

encouraging compliance by investigating possible breaches of the TPA and taking steps to
eliminate these breaches (including court proceedings);

adjudicating on whether business should be exempted from the prohibition of certain conduct
or agreements on the grounds of public benefit; and

providing guidance through education programs, publications and the media to make business
and consumers aware of their rights and responsibilities under the TPA.
(b)
Powers of the ACCC
The ACCC has the power to compel any person to provide information or documents about a possible
breach of the TPA. It may require evidence to be given on oath. Authorised ACCC staff may enter
any premises and inspect or copy documents. If you are served with a notice to produce documents
you should contact Legal Services, Constitutional and Administrative Law Services immediately.
If the ACCC considers that there is sufficient evidence to establish a possible breach of the TPA, the
ACCC decides what action is appropriate. Court action could be taken against the Department of the
Premier and Cabinet or its officers for serious breaches. Other alternatives for breaches of the TPA
include publicising the matter or obtaining undertakings (enforceable in Court) from the offending
business.
1.5
Your Responsibilities as an Employee of Department of the Premier and Cabinet
You must be familiar with the TPA. You are responsible for your own actions. Individuals may be
fined and ignorance of the law is no excuse.
The Department’s Professional Indemnity Insurance Policy may not cover you for any penalties or
fines imposed under the TPA. Further, the policy does not cover you for reckless or knowing
breaches of the TPA and, as a result, having damages awarded against you.
This Compliance Manual is a guide to the requirements of Part IV of the TPA and to the procedures
to be implemented to reduce the risk of contravention. You must be familiar with these requirements
and procedures.
1.6
Who to Contact for Assistance
This Compliance Manual will not cover every situation and it is not intended to answer all trade
practices questions that may arise in the performance of your duties. If you have any doubt or
question about the application of the TPA to a particular situation, you should refer the matter to
Legal Services, Constitutional and Administrative Law Services and complete a template “Request for
Legal Advice” (published on the Legal Services intranet website).
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2.
APPLICATION OF THE TPA TO GOVERNMENT ACTIVITIES
2.1
Carrying on a business
The restrictive trade practices provisions of the TPA apply to the Department of the Premier and
Cabinet when it is “carrying on a business”. Although “business” is defined to include a business not
carried on for profit, the phrase “carrying on a business” is not specifically defined in the TPA. It has,
however, been interpreted by the Courts.
2.2
Features of business activity
An activity need not be carried on for profit for it to be a business activity. Even activities aimed at
providing a community service may be a business activity for the purpose of the TPA.
The Courts have held that “business” generally relates to the conduct of trading or corporations “that
compete in a market for the provision of goods and services … or that are engaged in trade or
commerce or are otherwise involved in the provision of goods and services”. See: Corrections
Corporation of Australia Pty Ltd v. Commonwealth of Australia [2000] F.C.A. 1280 at 12. Generally,
it relates to activities of a commercial enterprise or that are a going concern.
When considering whether an activity is a business activity there are a number of matters that the
Courts have taken into account:

anything that could be carried on commercially or as a going concern could be classified as a
business activity;

repetition, system and regularity may indicate carrying on a business, but they are not
conclusive – there should be an element of commerce or trade;

degrees of commerciality are a question of fact;

isolated transactions do not normally indicate that an activity is a business activity;

functions such as the maintenance of law and order, the administration of justice and defence
are normally considered governmental in nature and not carrying on a business;

funding or government grants to enable community organisations to provide community
services would ordinarily be considered to be governmental activities and not carrying on a
business;

a business can be carried on even when the activities are charitable;

purely regulatory activities are generally governmental activities; and

if the activities are in the nature of services to Government then it is likely that they will be
classified as governmental rather than as a business activity. Examples of these activities
would include the Department’s Human Resource Services.
If an activity is considered to be carrying on a business, the activity must be examined in light of the
particular conduct to determine whether the conduct was engaged in as part of that activity or whether
it was unrelated to the business activity. See: GEC Marconi Systems Pty Limited v. BHP Information
Technology Pty Limited [2003] F.C.A 50 at 1370-1374.
There are a number of activities that the TPA specifically excludes from the meaning of “carrying on
a business”. Those that may be relevant to the Department of the Premier and Cabinet are:

imposing or collecting taxes or levies;

imposing or collecting fees for licences;

granting, refusing to grant, revoking, suspending or varying licences;

transactions between State Government Departments; and

transactions between a State Government Department and a “non-commercial” State authority.
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A “non-commercial” State authority is a body which is constituted by only one person (a corporation
sole) and is not a trading or financial corporation. For example, the Coordinator-General is constituted
as a corporation sole under the provisions of the State Development and Public Works Organisation
Act 1971. There are very few “non-commercial” State authorities in existence.
It should be noted that a transaction between a Government Department and an authority of the State
will be exposed to the TPA. An “authority of the State” means a body corporate established for a
purpose of the State, by or under a law of the State or an incorporated company in which the State has
a controlling interest. This would include Government Owned Corporations, statutory authorities and
corporations sole. For example, transactions with Queensland Rail, South Bank Corporation or the
Queensland Performing Arts Trust may be exposed to the TPA.
Some examples of activities considered by the Courts include:

The sale of the assets of a government business was not considered to be carrying on a
business. See: J.S. McMillan Pty Ltd v. Commonwealth (1997) 147 A.L.R. 419;

The generation and selling of electricity and the ownership and use of infrastructure was
considered to be carrying on a business. See: NT Power Generation Pty Ltd v. Power and
Water Authority [2004] H.C.A 48;

The enhancement of a communications network was considered to be a governmental activity
and not carrying on a business and the exploitation of the network within government was not
considered to be carrying on a business. However, had the technology been exploited
commercially as part of a whole of government policy, the aggregate of the actions could have
evidenced the carrying on of a business. See: GEC Marconi Systems Pty Limited v. BHP
Information Technology Pty Limited [2003] F.C.A. 50;

Undertaking a Government compensation scheme to recompense stock owners for compulsory
herd depopulation to combat the spread of disease was not considered to be carrying on a
business, even though the Government acquired the carcasses and later sold them. See: R.T. &
Y.E. Falls Investments Pty Ltd v. State of New South Wales [2003] N.S.W.C.A. 54; and

The operation of a detention centre and request for tenders was not considered to be carrying on
a business. See: Corrections Corporation of Australia Pty Ltd v. Commonwealth [2000] F.C.A.
1280;

The provision of medical services to patients in public hospitals was not considered to be
carrying on a business. See Australian Competition and Consumer Commission v The
Australian Medical Association Western Australia Branch Inc & Ors [2003] F.C.A. 686.
2.3
Application to the Department
Previous TPA compliance audits have considered activities undertaken by the Department of the
Premier and Cabinet. The 2002 Compliance Report noted that the publication of the Governing
Queensland suite of handbooks is arguably “carrying on a business”. However, the Report concluded
that, overall, it is unlikely that this activity would be considered a breach of Part IV of the TPA. It is
also arguable that the publication of the handbooks is undertaken as part of a Governmental activity
purely for the purpose of the Queensland Government.
There is evidence to suggest that procurement areas of Government Departments, in their purchasing
activities and their negotiation of transactions and deals are more than likely to be carrying on a
business. This is particularly the case where the procurement of goods and services is an integral part
of conducting the business aspect of the agency. The Agency Purchasing Procedures (published on
the Financial Management intranet website) contain information relating to procurement activities.
The State Purchasing Policy has been prepared with careful regard to the implications of competition
law and policy. The State Purchasing Policy is consistent with the requirements of the TPA and the
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National Competition Policy. A copy of the State Purchasing Policy is also available on the Financial
Management intranet website. Further information can be obtained at www.qgm.qld.gov.au.
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3.
GENERAL TRADE PRACTICES CONCEPTS
3.1
Market
A market is a market for goods or services. It has been defined as the “area of close competition
between firms”. Within a market there is substitution between products and services and between
sources of supply in response to changes in prices. See: Queensland Co-operative Milling
Association Ltd/Defiance Holdings, re proposed merger with Barnes Milling Ltd (1976) A.R.P.R. 40012. The TPA reinforces this definition by examining goods or services that are substitutable with
other goods or services. See: section 4E of the TPA.
There are three dimensions to be taken into account when defining the market:

product market:

geographic market; and

functional market.
If products can be substituted for each other, it is said that they are in the same market. In this case,
if the price of one product rises and another product can be substituted for it, they will be in the same
market. Similar considerations apply to sources of supply. For example, if one supplier raises its
prices, another supplier may be able to be substituted to supply the good or service. In this case, the
suppliers would be competitive with each other in the same market.
The characteristics of the product and its uses need to be examined to determine the relevant market.
Factors that may indicate that a product is in the same market include:

physical similarity;

end-use interchangeability;

relative price levels and price movements;

potential substitutes;

sharing the same production facilities; and

public recognition.
Similar tests are applied to determine the geographic market. That is, if the price of a product rises,
will consumers travel to other vendors to purchase the same or a similar product? The distance that
consumers will travel can determine the market’s geographic boundary.
A market will generally have a product/service and a geographic area. For example, the market for
motor vehicles in South East Queensland.
The final level of the market is the functional level which examines the level of production of goods
or services. For example, manufacturing, wholesale or retail.
In some cases, economic evidence will be required to determine the relevant market. However,
employees may be in a very good position to determine who competitors are and to determine relevant
substitutes for goods or services produced.
3.2
Market Power
Market power is the ability of an organization to insulate itself from competition without adverse
effects. In determining market power it is important to determine the extent of the market in question.
One way to determine market power is to look at the ability of a corporation to raise prices above
product cost without rivals taking away customers.
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Market power is discussed more fully in Part 6 of this Compliance Manual.
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3.3
Competition
“Competition” must be analysed in terms of the market in which the competition is occurring. In
theory, perfect competition exists when consumers obtain the “best deal”, all firms maximise their
profits, there is no collusion, products are homogenous, there is no market leader to influence price
and there are no barriers to entering the market.
The aim of the TPA is to achieve “workable” competition, rather than “perfect” competition. By
overcoming the anti-competitive behaviour of firms in the market, the TPA attempts to achieve a
“level playing field” for all market participants.
Competition may take the form of competition as to price, product or service. To determine whether
there is competition an examination can be made of prices. If a seller raises the price for goods or
services, without altering anything else, and the seller sells less of the good or service, there is most
likely competition in the market.
3.4
Substantial Lessening of Competition
The word "substantial" may mean "large or weighty", "considerable or big", "real or of substance" or
not "insubstantial or nominal". The TPA also provides that substantial lessening of competition also
includes preventing or hindering competition. See: section 4G of the TPA.
In assessing whether conduct has the effect of substantially lessening competition, the following
factors can be relevant:

the number, size and distribution of competitors and the degree of market competition;

the width of the market definition - the wider the defined market, the less likely it will be that
conduct will result in a substantial lessening of competition;

the nature of any formal, stable and fundamental arrangements between market participants that
restrict their ability to function as independent entities;

the ease with which new participants can enter the market;

the extent to which products in the same market are differentiated, whether by sales promotions
or otherwise;

the character of vertical relationships and the extent of vertical integration – that is, the
relationships between manufacturers, retailers and customers;

whether competitors rely on others to produce the product so as to reduce their capability to
function independently; and

the term of any relevant contract - the longer the term the more likely the contract may involve
a substantial lessening of competition.
The analysis of whether conduct results in a substantial lessening of competition is largely an
economic one that involves the definition of the relevant market, an examination of competition and
the effect of conduct on that competition.
3.5
Contract, Arrangement or Understanding
Contracts, arrangements or understandings need not be in writing, nor be legally enforceable. All
there need be is communication with another person from which each person has an expectation of
how the other will act.
An arrangement or understanding involves a meeting of the minds between parties. Examples include
parallel conduct, collusion, similar pricing, evidence of opportunities for parties to arrive at an
understanding or evidence that parties are acting according to a plan.
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3.6
Purpose or Effect
The purpose need not be a sole purpose but must be a substantial purpose which can be inferred from
the nature of the arrangement, the circumstances in which it was made and its likely effect.
Conduct that is conditionally prohibited is only prohibited if it has the “purpose, effect or likely
effect” of substantially lessening competition in the relevant market. These words are very wide and
cover situations where an entity:

intends to substantially lessen competition and succeeds;

intends to substantially lessen competition and fails; or

does not intend to substantially lessen competition but its actions have that effect.
An entity’s conduct might consist of more than one purpose and only one purpose might be anticompetitive. The TPA will be breached if the anti-competitive purpose is a substantial one.
If in doubt you should contact Legal Services, Constitutional and Administrative Law Services
immediately to seek clarification in relation to this matter.
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4.
CONDUCT THAT IS STRICTLY PROHIBITED
Although it has been identified that there are very limited occasions in which the Department of the
Premier and Cabinet could be considered to be carrying on a business, it is nevertheless important for
officers to be familiar with key trade practices concepts and activities that could result in a breach of
the provisions of Part IV of the TPA.
The TPA strictly prohibits the following conduct:

exclusionary provisions or primary boycotts (section 45(2)(a)(i) and section 4D);

price fixing (section 45A);

third-line forcing (section 47(6)); and

resale price maintenance (section 48).
These types of conduct are prohibited regardless of the effect the conduct has on competition.
4.1
Exclusionary Provisions – Section 45(2)(a)(i) and Section 4D
Exclusionary provisions are also known as primary boycotts and occur when competitors agree not to
supply (or buy) goods or services to a particular person or class of persons, or when competitors agree
to prevent or hinder the acquisition of goods or services from a particular person or class of persons.
Example – Exclusionary Provisions
If, for example, a Government Owned Corporation agrees to share information about defaulting trade
debtors with several of its competitors and the competitors agree not to supply those debtors, this would be
an exclusionary provision.
If competitors agree to keep their own customers within a particular area and not attempt to take customers
from each other, this is a form of exclusionary agreement.
(These examples are hypothetical.)
Guidelines to Avoid Exclusionary Provisions
To avoid exclusionary provisions or primary boycotts do not:

agree with a competitor not to supply or buy from a particular entity or to supply or buy from
that entity only on agreed terms;

circulate to competitors a list of defaulting debtors or information about customers; or

agree with a competitor to share market areas.
4.2
Price Fixing – Section 45A
A contract, arrangement or understanding with a competitor that has the purpose or the effect, or the
likely effect, of fixing, controlling or maintaining prices, discount levels, allowances, rebates or
credits in relation to goods or services is strictly prohibited.
The “arrangement” does not need to be a formal contract. It can be an informal understanding. For
example, if you raise the expectation in the mind of the other party that you will act in a particular
way and there is a “meeting of minds”, you have formed an arrangement or understanding.
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Examples - Price Fixing

One leading case on price fixing arose out of a lunchtime meeting of Adelaide publicans. The
conversation turned to the level of discounting in the market place. The practice in Adelaide was to
sell up to 16 bottles of beer for the price of a dozen. One publican announced that he was going to
start selling only 14 bottles of beer for the price of a dozen.
The publican did not demand that everyone else do the same thing. He did not say that he would not
do it unless everyone else did. He did not even get much of a reaction from the publicans present.
Nevertheless, the Court found that it was enough that he clearly raised in the minds of the other
publicans that he was going to reduce his discount, and the reason that he announced it was to
encourage the other publicans to do the same.
See: Trade Practices Commission v. Nicholas
Enterprises (No.2) (1979) 40 F.L.R. 83; Morphett Arms Hotel Pty Ltd v. Trade Practices Commission
(1980) 30 A.L.R. 80.

Another case concerned the three major suppliers of motor vehicle replacement windscreens in
Australia. Between them they shared approximately 90% of the market Australia wide. There was
regular contact between these suppliers concerning the price of windscreens. Within Australia they
identified one separate market for windscreens as being Southern Queensland (from Mackay to Tweed
Heads) and another as the State of Victoria.
Over a period of 18 months, representatives of each supplier met on six occasions and made separate
pricing arrangements to fix the level of discounts in 1984 and 1985 for replacement windscreens in the
Southern Queensland and Victorian markets. In 1988, the Federal Court imposed penalties on the
suppliers totalling $195,000.00. See: Trade Practices Commission v. Australian Autoglass Pty Ltd
(1988) A.T.P.R. 40-881.
Guidelines to Avoid Price Fixing
Do not discuss with a competitor or exchange information with a competitor about:

prices;

discounts;

price rises;

profits, profit margins or costs;

tenders or bids for goods or services;

production capacity;

terms or conditions of sale, including credit arrangements;

publishing price lists or recommended prices; or

uniform discounts, rebates, credits or other allowances for different classes of purchasers.
If you go to a meeting with your competitors and any of these matters are discussed, you should
immediately object and leave the room.
It is not a breach of the TPA for the Department of the Premier and Cabinet to obtain market
information about its competitor’s business. However, it must be obtained from an independent
source.
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4.3
Third-Line Forcing – Section 47(6)
Requiring a customer to acquire goods or services from another person as a condition of the supply of
your goods or services to that customer is prohibited, regardless of the effect on competition.
Similarly, refusing to supply because the customer has not accepted the condition to acquire goods or
services from another if also prohibited.
It is also illegal to set your prices according to whether a customer has acquired goods or services
from another person.
A common example of third-line forcing is a lender requiring that, as a condition of its lending
money, the borrower must take out insurance with the lender’s nominated insurer.
The forcing condition need not be express, it can be inferred from the circumstances.
Example – Third-Line Forcing
Third-line forcing conduct would occur if, for example:

a Government Department agrees to grant a lease to a person subject to a condition that Q-Build does
the lessee’s fit out; or

the Queensland Performing Arts Trust contracts with a company to stage a musical. The Queensland
Performing Arts Trust imposes a condition that the company must purchase its theatre props from a
third party supplier nominated by the Queensland Performing Arts Trust.
(These examples are hypothetical.)
Guidelines to Avoid Third-Line Forcing
Do not require a customer to obtain goods or services from a third person as a condition of obtaining
goods or services from the Department or the Queensland Government.
4.4
Resale Price Maintenance – Section 48
The law gives resellers the freedom to sell and to advertise products at any price and prohibits
insisting that resellers sell or advertise at minimum prices.
Resale price maintenance involves a supplier setting a minimum price below which resellers must not
resell goods. It is permissible to set a maximum resale price, but not a minimum.
A contract that expressly provides that a product cannot be resold except at or above a minimum price
is prohibited. Other less obvious conduct which may constitutes resale price maintenance can be:

refusing to supply resellers who will not adopt your pricing policy (or making that threat
known);

requiring that the resale price is linked to something else, for example, what a competitor’s
resellers are charging;

using a formula to work out a minimum resale price; or

prohibiting the advertising of discount prices.
A supplier can legally recommend a resale price, but only if the price is, in every sense of the word,
recommended only. There must be no obligation of any nature to follow the recommendation and this
must be made clear to the reseller to whom the recommendation is made.
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Example - Resale Price Maintenance
In 1990, two retailers decided to discount products. Sony withheld supply of the goods ordered by the two
stores. Sony was found to have engaged in resale price maintenance. Sony was fined $250,000 and two
executives involved were fined a total of $37,000. See: Trade Practices Commission v. Sony (Aust) Pty Ltd
(1990) A.R.P.R. 41-031.
Guidelines to Avoid Resale Price Maintenance
To avoid resale price maintenance, do not:

set minimum prices;

penalise resellers who sell or advertise below a particular price;

refuse to supply a reseller for the reason that the reseller has sold or advertised below a
particular price;

threaten a reseller for selling below a particular price; or

do anything else that would inhibit resellers setting their own selling prices (other than
maximum prices).
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5.
CONDUCT THAT IS CONDITIONALLY PROHIBITED
Certain conduct is conditionally prohibited. That is, it is only prohibited if its purpose, effect or likely
effect results in a substantial lessening of competition in the relevant market. Examples include:

anti-competitive contracts, arrangements or understandings (section 45);

secondary boycotts (section 45D);

exclusive dealing (section 47); and

mergers and acquisitions (section 50).
This means that the Department of the Premier and Cabinet can do these things provided the conduct
does not have the purpose, effect or likely effect, of substantially lessening competition in a relevant
market.
5.1
Anti-Competitive Contracts – Section 45
The TPA contains a general provision that prohibits the making or giving effect to general anticompetitive contracts, arrangements or understandings. These are any contracts, arrangements or
understandings that have the purpose or effect (or likely effect) of substantially lessening competition
in a market.
Arrangements with competitors about matters such as the extent to which entities will participate in a
market, the rationalisation of distribution networks or schemes to increase profits of participants may
be anti-competitive in nature. This conduct will be prohibited if it has the purpose, effect or likely
effect of substantially lessening competition in a market.
Arrangements which involve price discrimination may also be anti-competitive arrangements (as well
as a misuse of market power). Price discrimination can occur if the Department supplied goods or
services to customers at different prices or with different discounts, rebates, allowances or credit
arrangements.
An examination of the contract, arrangement or understanding and its effect on the particular market
must be undertaken in order to determine whether its purpose, effect or likely effect results in a
substantial lessening of competition in that market.
5.2
Secondary Boycotts – Section 45D
The main elements of secondary boycotts are:

A person must act in concert with a second person;

The conduct must hinder or prevent the supply of goods or services by a third person to a fourth
person;

The conduct must have the likely effect of substantially lessening competition in any market in
which the third person operates; and

The conduct must have the purpose and likely effect of lessening competition in any market in
which the fourth person operates.
The conduct must have both the purpose and the effect of substantially lessening competition in the
market in which the fourth person operates for this section to operate. This section is primarily
designed to combat union boycott activity and is unlikely to relate to any conduct that the Department
might engage in.
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5.3
Exclusive Dealing – Section 47
Government entities frequently enter into arrangements where they seek to impose certain restrictions
which might arguably amount to exclusive dealing. Exclusive dealing covers:

product exclusivity;

tying arrangements; and

customer and territory exclusivity.
Exclusive dealing involves:

the supply of goods or services on condition that the buyer will not buy goods or services from
a competitor;

refusal to supply goods or services because the buyer refuses to meet these conditions;

buying goods or services on condition that the supplier will not supply the goods or services to
particular persons;

refusal to buy goods or services because the supplier will not supply goods or services to
particular persons.
The conduct must result in a substantial lessening of competition in the relevant market for the section
to apply.
Product Exclusivity
A product exclusivity arrangement would be one in which the Department:

supplies or offers to supply goods or services to a customer; or

gives a customer a discount, rebate, credit or allowance,
on condition that the customer buy all or some of its requirements for those goods or services from the
Department. It would also apply if the Department refused to supply goods or services to a customer
for the reason that the customer has acquired, or has not agreed not to acquire, those goods and
services from a competitor.
Each kind of exclusive dealing involves the imposition of some sort of condition.
“condition” is used very broadly and is defined to include:

any direct or indirect condition;

any condition whether or not it is enforceable; or

any condition, the existence of which is ascertainable by inference only.
The term
There must be elements of compulsion and “the future” for a condition to be found - “if we do this,
you must do that”.
If the arrangement results in a substantial lessening of competition in the relevant market, it will be
prohibited.
Example - Product Exclusivity
The Department has developed a database for searching information relating to activities of any Australian
Government and now wishes to sell this database on the condition that the purchaser does not purchase a
similar database from someone else. This could be exclusive dealing if the arrangement had the purpose,
effect or likely effect of substantially lessening competition in the relevant market.
If the Department refused to supply the purchaser because the purchaser had bought a similar database
elsewhere or had refused to agree not to buy a similar database elsewhere this could also be exclusive
dealing if the refusal was for the purpose or had the effect or likely effect of substantially lessening
competition in the relevant market.
(This example is hypothetical.)
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Tying Arrangements
Under a tying arrangement, the Department may supply a purchaser with goods or services on the
condition that the purchaser buys some other good or service or a whole line of goods or services
from the Department.
Example - Tying Arrangement
There would be a tying arrangement if the Department agreed to supply its database to a purchaser only on
condition that the purchaser subscribes to another related database service provided by Department or
obtains its computer maintenance services from the Department.
This would breach the TPA if it
substantially lessened competition in the relevant market.
(This example is hypothetical.)
Customer and Territory Exclusivity Arrangements
Under these arrangements, goods and services are supplied to a purchaser with restrictions placed on
the purchaser as to the people to whom the purchaser can resell the goods or services, or as to the
geographic areas in which the purchaser can resell the goods or services.
Example - Customer and Territory Exclusivity Arrangements
Office of the Queensland Parliamentary Counsel agrees to supply its database to resellers in different
States and Territories on condition that each reseller will not resell the database to purchasers outside their
own State or Territory. This would breach the TPA if it substantially lessened competition in the relevant
market.
(This example is hypothetical.)
5.4
Mergers and Acquisitions – Section 50
The TPA prohibits an entity from buying shares in another entity or the assets of another entity or
person if the effect of the purchase would be to substantially lessen competition in a market. This
provision was designed to prevent an entity from building up market power through acquisitions of
other businesses or assets.
Although it is unlikely that a controversial merger or acquisition will arise in the context of general
Government business, Departmental officers should be conscious of the implications of any major
purchase of company shares or business assets. Specific advice should be obtained before entering
into any transaction of this nature.
5.5
Guidelines for Conditionally Prohibited Conduct
It is difficult to set down a precise set of guidelines on how to minimise trade practices contraventions
for conduct that is conditionally prohibited. This is because the determination of whether conduct
substantially lessens competition depends upon the effect of the conduct on the market. The relevant
market must be assessed on a case by case basis.
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The following are general guidelines only:

specific legal advice should be obtained from Constitutional and Administrative Law Services,
State Affairs, for exclusivity or general anti-competitive arrangements;

keep the term of any agreement as short as practicable;

do not include restraints that last after the end of an agreement;

do not discriminate in the application of discounts and other allowances;

if there is any doubt as to the legality of particular conduct, obtain legal advice immediately
from Constitutional and Administrative Law Services, State Affairs; and

keep a register of all formal and informal agreements and arrangements and review it on a
regular basis.
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6.
MISUSE OF MARKET POWER
6.1
Misuse of Market Power – Section 46
A misuse of market power happens when an entity that has a substantial degree of market power,
takes advantage of that power for one of the proscribed purposes.
(a)
Proscribed Purposes
The proscribed purposes are:

eliminating or damaging a competitor;

preventing a person from entering a market; or

deterring or preventing a person from engaging in competitive conduct.
(b)
More than One Purpose
An unlawful purpose need not be the only purpose for engaging in the conduct. It will be a breach of
the TPA if an entity has a number of purposes (including a legitimate one) and one of them is an
unlawful one and is substantial, though not necessarily the dominant purpose.
(c)
Market Power
It is necessary to determine the precise market involved before it can be determined whether an entity
has a substantial degree of market power. This will usually require economic analysis of the market.
This does not, however, preclude Departmental officers from making informed observations as to the
markets in which they are dealing. Should some doubt exist, after having consulted Legal Services,
Constitutional and Administrative Law Services, consideration is to be given to seeking the advice of
economists who specialise in the area.
A substantial degree of market power is not the same as having a large market share. For example, a
market-share as low as 30% can amount to a substantial degree of market power in a particular
market. A combination of factors must be examined to determine market power in any particular
market, including:

the market share of the product or service in question;

barriers to entering into the market (i.e. how difficult is it for a new participant to break into the
market?);

the financial strength of the entity;

the ability of the entity to behave with little regard to what its competitors, suppliers or
customers will do;

an analysis of the market as a whole; and

the impact of the entity’s conduct on the market.
(d)
Take Advantage of Market Power
An entity need only use its market power to take advantage of it. There must, however, be a causal
connection between the entity’s market power and the conduct in question. The market power must
be used for one of the proscribed purposes. There does not have to be any malice in the action.
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(e)
Legitimate Business Reasons
Not all conduct engaged in by an entity with a substantial degree of market power will be prohibited.
If the conduct is engaged in for legitimate business reasons, there may not be a misuse of market
power. This is so even if the conduct has the effect of damaging a competitor.
(f) Conduct likely to be a Problem
It is unlikely that the Department of the Premier and Cabinet will set out to exercise its market power
for one of the proscribed purposes. Nevertheless, where the Department has significant market
power, the potential for a breach of the provision cannot be ignored. Misuse of market power is most
likely to be an issue with the following types of conduct:

price discrimination between customers;

refusal to supply;

predatory pricing (below cost); and

general exclusive dealing (for example, product exclusivity and tying arrangements).
Example - Misuse of Market Power

In 1993, Telstra was sued for misusing its market power. It had contracted with a company to print
telephone directories on condition that the printer not use its printing presses for any other printing
except with Telstra’s consent. It was alleged that Telstra had done this to deny printing services to
its competitors. The court found on this occasion that the restraint was entered into for legitimate
reasons, being to ensure that the printing services were available. However, it was clear that conduct
of this nature could have amounted to a misuse of market power if an anti-competitive purpose had
existed. See: General Newspapers Pty Ltd v. Telstra Corporation (1993) 45 F.C.R. 164.

In 1984 BHP was sued for misusing its market power to prevent a company from entering a market.
BHP was responsible for about 97% of Australia’s steel output and was the sole Australian
manufacturer of steel “Y-bar”.
Y-bar is used to make star pickets for agricultural fencing.
Queensland Wire Industries asked BHP to supply it with Y-bar so that it could begin manufacture of
star pickets to supplement its existing range of fencing products. BHP effectively refused. The
Court found that, in refusing to supply Y-bar, BHP had misused its market power for one of the
proscribed purposes. See: Queensland Wire Industries v. Broken Hill Proprietary Co. Ltd (1989)
167 C.L.R. 177.
Guidelines to Avoid the Misuse of Market Power
To avoid the misuse of market power, do not:

use the Department’s market power to damage a competitor, to stop new competitors entering
the market, or to prevent competitive behaviour;

attempt to injure or damage competitors by using methods such as unreasonably low prices or
refusal to supply; or

use the Department’s market power to interfere with the contractual arrangements of the
Department’s competitors, customers or others.
The Department should always:

engage in conduct for legitimate business reasons only; and

when decisions are made on important strategic matters, properly record the reasons for those
decisions.
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7.
FORMULATION AND ADMINISTRATION OF DEPARTMENTAL
LEGISLATION
In the formulation and day-to-day administration of Departmental legislation, officers must be aware
of the restrictive trade practices provisions of the TPA to ensure that:

new legislation does not contain provisions which are inconsistent with Part IV of the TPA;

new legislation does not require any person to engage in conduct that may be in breach of Part
IV of the TPA; and

conduct in breach of Part IV of the TPA does not arise out of the administration of existing
Departmental legislation.
There are different legal tests to be applied to determine whether a provision may be directly
inconsistent with the TPA. Legislation will be directly inconsistent with the TPA where:

the Departmental legislation and the TPA include contradictory provisions upon the same topic
so that compliance with one law will or may involve non-compliance or breach of the other;

where one law takes away rights conferred by the other;

where the legislation detracts from the full operation of a right or immunity granted by the
TPA;

where powers conferred by the TPA are disclosed as purporting to be dealt with by
Departmental legislation in a manner that impairs or inhibits their exercise; or

where legislation, if valid, would vary, impair or detract from the operation of the TPA.
However, Departmental legislation and the TPA will not be inconsistent merely because they both
regulate or prohibit the same or substantially the same conduct. A mere difference in rules applied by
both is not sufficient to amount to an inconsistency.
It is necessary to inquire whether the TPA, in prescribing the rule to be observed, appears to intend
that it should cover subject matter to the exclusion of any other law. After applying this test,
provisions that are directly inconsistent with the TPA must be identified. It is then necessary to
determine whether these provisions are protected by an authorisation.
Queensland Treasury is responsible for the coordination of National Competition Policy
implementation across Government. Queensland Treasury must be consulted at an early stage:

on all proposals for Cabinet's consideration that have competition implications, including
consideration of restructuring options for Government business activities; and

proposed new or amended legislation (or reviews of legislation) which could contain provisions
that restrict competition. Legislation that restricts competition will need to be subjected to a
public benefit assessment.
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8.
EXEMPTIONS TO THE TPA
There are five main types of, or methods of obtaining exemptions to the application of the provisions
of Part IV of the TPA. They are:

section 2C exemptions;

section 51(1)(b) exemptions;

contracts entered into before 19 August 1994;

authorisation; and

notification.
Each of these will be examined in detail.
8.1
Section 2C Exemptions
Section 2C of the TPA lists activities which will not constitute “carrying on a business” for the
purposes of the Act.
Those that may be relevant to the Department of the Premier and Cabinet are:

imposing or collecting taxes or levies;

imposing or collecting fees for licences;

granting, refusing to grant, revoking, suspending or varying licences;

transactions between State Government Departments; and

transactions between a State Government Department and a “non-commercial” State authority.
“Licence” is defined to mean a licence that allows a licensee to supply goods or services. For
example, a licence to sell a product would be considered to come within this definition.
Transactions between Government Departments would also come within the exemption. However,
transactions between a Department and a commercial authority of the State will not come within the
exemption.
8.2
Section 51(1)(b) Exemptions
Section 51(1)(b) of the TPA allows the State to enact legislation which will exempt particular conduct
if the conduct is:

specifically referred to in the legislation or in the regulations made under that legislation; and

specifically authorised and approved, with particular reference being made in that legislation to
the TPA.
Queensland is a party to the Competition Principles Agreement. This Agreement provides that the
State may not enact new legislation exempting particular anti-competitive conduct unless it can show
that the:

benefits of the restriction to the community as a whole outweigh the costs; and

objectives of the legislation can only be achieved by restricting competition.
All legislative exemptions are to be notified to the Australian Competition and Consumer
Commission within 30 days of enactment. This notification will be made by the NCP Unit within
Queensland Treasury.
The process for seeking legislative exemptions will involve the application of a “Public Benefit Test”
and consideration by Cabinet. Further inquiries about seeking a legislative exemption are to be
directed to the Executive Director, Economic Policy, Department of the Premier and Cabinet in the
first instance. It will also be necessary to consult with the NCP Unit of Queensland Treasury.
These legislative exemptions may be subject to review by the Commonwealth.
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8.3
Contracts entered into before 19 August 1994
Section 89 of the Competition Policy Reform Act 1995 (Cth) provides that Part IV of the TPA does
not apply to contracts entered into by the Crown prior to 19 August 1994. However, if such a contract
is varied, it may not be exempt following the variation. Although, the variation may not be exempt,
things done to give effect to an existing contract do not lose protection merely because the contract
has been varied.
It may be unlikely that any contract of this nature remains in operation. However, if such a contract is
still operational, any variation or extension of the term should be carefully considered in terms of its
effect on competition.
8.4
Authorisation
Rather than exempting conduct by way of Queensland Government Legislation under section 51(1)(b)
of the TPA, conduct may be authorised by the ACCC. Authorisations are available for:

anti-competitive agreements (section 45);

exclusionary provisions or primary boycotts (section 45(2)(a)(i) and section 4D);

price fixing involving goods or services (section 45A);

anti-competitive exclusive dealing (section 47);

third-line forcing (section 47(6));

resale price maintenance (section 48); and

mergers (section 50).
An application for authorisation will only be successful if it can be shown that there is a public
benefit that outweighs the detriment to the public resulting from a lessening of competition. The
activity will not be protected and should not be embarked on until the authorisation is obtained.
Departmental officers must not directly approach the Australian Competition and Consumer
Commission to seek an authorisation. All inquiries in the first instance are to be made with Legal
Services, Constitutional and Administrative Law Services who will discuss the matter with the
Director, Economic Policy and the NCP Unit, Queensland Treasury. As authorisation is expensive
and difficult to obtain, such a request should be seen as an exceptional, rather than a routine, step.
8.5
Notification
Certain practices can be “notified” to the ACCC. A notification works in reverse to the authorisation
process. If notification is made, the conduct will be protected from the operation of the provisions of
Part IV of the TPA unless and until the ACCC revokes the notification. Notification is limited,
however, only to the practice of exclusive dealing under section 47 of the TPA.
The notification will be revoked if the ACCC is satisfied that the conduct has the purpose or likely
effect of substantially lessening competition and there is no likely benefit to the public, or any benefit
to the public would outweigh the detriment to the public that results from lessening competition.
Departmental officers should not directly approach the Australian Competition and Consumer
Commission to make a notification. All inquiries in the first instance are to be made with Legal
Services, Constitutional and Administrative Law Services, who will discuss the matter with the
Director, Economic Policy and the NCP Unit, Queensland Treasury.
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9.
HANDLING TRADE PRACTICES COMPLAINTS
If you receive a question, inquiry or complaint (whether in writing, on the telephone or in person from
a customer, competitor, the ACCC or any other person), the appropriate response is:
“I am not authorised to make a response to the matter you have raised. The policy
of the Department of the Premier and Cabinet is that the matter be referred for
legal advice.”
You must then refer the matter immediately to the Director, Constitutional and Administrative Law
Services. Under no circumstances are you to say anything else or make any admission or concession
or try to explain or justify the matters raised.
If the matter is raised orally, you should request that the information be provided in writing so that the
matter can be properly assessed.
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10. GUIDELINES TO AVOID RESTRICTIVE TRADE PRACTICES
The following guidelines provide a summary of your obligations with regard to TPA compliance.
Departmental officers should always:

be very cautious in suggesting recommended resale process, to ensure that recommendations
are not taken as requirements;

act independently when making decisions about prices;

allow others to compete fairly with the Department;

supply goods and services to your customers on a commercial basis;

encourage competition and not misuse market power (if the Department has it);

adopt commercial pricing strategies for goods and services that the Department provides; and

follow the strategies set out in the Department’s Agency Purchasing Procedures (published on
the Financial Management intranet website).
Departmental officers should not:

impose restrictions on a customer’s ability to resell goods;

impose restrictive requirements on customers or suppliers; or

enter into any collusive arrangements (even though you may be aware of what the Department’s
competitors are doing).
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