Strategic entry deterrence : does it constitute a misuse of market power?

A challenge for regulators and the courts has been establishing the boundary between behaviour is exclusionary and should be condemned under s 46 of the then Trade Practices Act 1974 (Cth) (TPA), now s 46 of the Competition and Consumer Act 2010 (Cth) (CCA), and behaviour that is not exclusionary and might even be pro-competitive. This boundary can be especially difficult to draw in the case of entry deterring strategies. Section 46(1) prohibits corporations with a substantial degree of market power from taking advantage of that market power for one of the statutorily proscribed purposes which include preventing the entry of a person into that or any other market. Section 45(2) separately prohibits corporations from making and giving effect to contracts arrangements and understandings that have the purpose, effect or likely effect of substantially lessening competition in a market. The latest case in which the ACCC has failed to satisfy the s 46 criteria is the decision of Greenwood J in ACCC v Cement Australia Pty Ltd [2013] FCA 909 (Cement Australia case). Final orders were published in a separate judgment, in ACCC v Cement Australia Pty Ltd [2014] FCA 148 (28 February 2014). The case concerned an entry deterring strategy, namely the pre-emptive buying of input factors in an upstream market to protect an incumbent with substantial market power in a downstream market and to prevent new entry in the downstream market. Greenwood J found that while Cement Australia Pty Ltd, formerly known as Queensland Cement Ltd (QCL), had substantial market power, its conduct in entering into the pre-emptive contracts was not a contravention of s 46, because Cement Australia had not “taken advantage” of its market power. However, since Cement Australia’s purpose in entering into the pre-emptive contracts was anti-competitive, they were held to contravene s 45(2) of the TPA. The purpose of this Note is to consider only the reasons for judgment in the Cement Australia case in relation to the “taking advantage” element. The judgment was handed down on 10 September 2013. The final hearing date was 15 July 2011, so it was long-awaited. At 714 pages, it is carefully drafted.