Australian Stance on Price Signaling - Essay Example

Name Tutor Course Date Australian Stance on Price signaling Introduction According to Australian Consumer and Competition Commission, price signaling involves disclosure of prices to the competitors in private where doing so is not in the ordinary course of business. Price signaling also involves the disclosure of information for the purposes of lessening competition1. However, the provision of Division 1A of part 4 suggests that the price signaling is only applicable to the banking industry. This makes the law regarding competition controversial as price signaling is not applicable in the other industries. According to section 45B, the individuals or corporations are prohibited from making contracts that will lessen the competition in the market. This is also applicable to the banking industry only. The Australian Consumer and Competition Commission have the mandate of protecting the consumers from unfair pricing and competition. However, this is hindered by the lack of policies with regards to price signaling in the other industries. The Commission has been for the idea of repealing section 45 in order to ensure that price signaling is controlled in all the industries. Putting in place measures to regulate price signaling in all the industries will be important in terms of protecting the consumers. Although the Competition and Consumer Act prohibits some of the activities that cause undue competition, the Act needs to be repealed. According to section 44ZZRD, cartels have been criminalized as it promotes uncompetitive behaviors. The paper thus discusses the concepts of price signaling with the view that the price signaling provisions in the Competition and Consumer Act should be repealed for the purposes of fairness and equity. Discussion According to section 44ZZRD, price fixing and market sharing are part of a cartel practices and has been criminalized. However, there is no provision with regards to dishonesty with regards to the criminal law and hence making it complicated for the cartel practices to be proved. It is for this reason that the Competition and Consumer Act 2010 needs to be repealed. In the case of ACCC v Leahy Petroleum Pty, the ACCC filed since there was no way of proving that section 45 had been beached2. This highlighted one of the weaknesses of the Competition and Consumer Act and its inability to address the issues of price fixing. Section 44ZZRF outlines the penalties for those who are found participating in cartel practices. However, it is difficult to determine the actual benefits that the individuals or corporation that have been involved in the cartel practices have obtained and hence adding to the complexity of the Act. The cartel provisions are also difficult to interpret and understand and this may make it difficult to prove that the cartel provisions have been breached. Repealing Act will therefore beneficial in terms of reducing unfair competition and price fixing in the other industry apart from banking which has been addressed by the act. The current provisions of competition and Consumer Act 2010 also make it difficult to Australian Consumer and Competition Commission to enforce some of the regulations in order to protect the consumers. This has led to unfair competition in the market and exploitation of the consumers in most of the industries. Section 44 is quite wide as it contains a lot of sub-provision dealing with competition and unfair practices. On the other hand, it is also dependant on the other subsections for the purposes of implementation. This makes it complicated and hence impacting negatively on the regulation process. Repealing of the Competition and Consumer Act is thus required for the purposes of ensuring that a single provision is made and hence making it easy to implement. According to section 44ZZW(c), corporation must not make a disclosure if the disclosure is not in the ordinary business course of business. This provision is not adequate and it expresses doubts in law withy regards to what the ordinary course of business is. This can lead to different interpretations and hence impacting negatively on the regulation. Section 44ZZX (3), further leads to the expression of doubt in the law with regards to the disclosure of information in the market with regards to lessening the competition. This may make it difficult to determine whether there is a breach or not. In the case of Rural Press Ltd v ACCC, there was a controversy as to whether the actions of Rural press amounted to lessening competition after it entered into an agreement with a rival company that lead to the rival company not circulating its newspapers in the region dominated by Rural press3. The case also highlighted the difficulties in terms of understanding the provisions that have been set out in the Competition and Consumer Act 2010. Section 44ZZU defines disclosure for the purposes of use in the Act. The definition of disclosure is however complicated and it may lead to contradictions. The definition makes it difficult to distinguish between sharing business information that has no impact on competition and disclosure of information that affects the business. The generalization of the term is an indication that it may create doubt in the laws and this may lead to misinterpretation of the provision of the Act. The exchange of information may be pro-competitive or anti-competitive. This means that the lack of clear definition may result to unfairness in the regulation of competition in the market. An overlap exists between section 45 and the subsequent provisions of part 4 division 2. The presence of an overlap has negative impact on the regulation and the competition in the market. This is because a breach in section 45 may not be considered as a breach in the subsequent provisions of part 4 division 2. This is an issue that came to play in the case of ACCC v Visy Paper Pty Ltd. ACCC had alleged that Visy had attempted to breach section 45(2) (a) (i) and the matter involved exclusive dealing4. However, section 45(6) does not capture issues regarding exclusive dealing which means that it is not prohibited. ACCC at some point ha to admit that there was a bias in the Act which contributed to the overlap and hence making it difficult to determine whether there was a breach or not. The Competition and Consumer Act 2010 should therefore be repealed to deal conclusively with the issues of overlap. Price signaling has the potential of lessening competition within the market. However some of the practices may lessen competition in the market without necessarily involving prices signaling. It is therefore important for the Competition and Consumer Act 2010 to be repealed in order to provide clear directions with regards to price signaling in the different sectors and also the issue of lessening competition. According to section 50, mergers and acquisitions that would lead to the lessening of competition is prohibited. The provision fails to take into account that mergers could be useful for the purposes of preventing businesses from collapsing. This is because the acquisition can be made on a company that is performing poorly in the market due to internal problems and hence preventing it from collapse. On the other hand, the issues of price signaling may come into play before an acquisition takes place even in situations where the competition is not lessened. Information is required by both parties in order to make the decision of making an acquisition or a merger5. The provisions Competition and Consumer Act 2010 should therefore be repealed to ensure that the issue is adequately addressed and hence preventing price signaling. This is considering that both parties will require the information regarding the other company before the merger or acquisition is carried out. Repealing the Competition and Consumer Act will also play an important role in ensuring that the issues of mergers and acquisition are adequately addressed. This will be beneficial to the different stakeholders in the market. The price signaling provisions in the Competition and Consumer Act 2010 should be repealed in order to ensure that the competition in the market is fair. The international cartels may be operating in Australia which leads to unfair competition in the market. However, the price signaling provisions does not provide directions how to deal with the international cartels who contribute to price signaling in the local market. This therefore has a negative impact on the Australian Market. It is important for Price signaling provisions to be amended in order to deal with such issues. Some foreign companies are involved in the supply and acquisition of goods in the local market but do not have any presence in Australia6. Such companies may be liable for price signaling but it is difficult to regulate such activities and hence impacting negatively on the competition in the local market. The price signaling provision therefore exposes the Australian consumers and market as a whole to unfair competition and it needs to be repealed. According to section 50(6), the market refers to a place for goods and services within Australia, its states, territories and Australian region. This is an indication tat the Competition and Consumer Act 2010 is only applicable to the companies that are operating in Australia. This also indicates that the although the cartels have been prohibited in the market, they can still operate through the foreign corporations and hence negative consequences on the Australian market and companies. Repealing the price signaling provisions will also play an essential role in enhancing the regulation process. This will ensure that the Australian Consumer and Competition Commission is able to perform its duties effectively. This will also ensure that the doubts created by the current provisions are removed and hence making it easy to interpret and understand the provisions. The overlapping provisions will also be removed and hence enabling the commission to carryout its duties effectively. Various definitions have been provided in section 44ZZRB for the term likely. The use of such a term can be misleading when it comes to law. This is because it gives rise to doubt with regards to the law and hence different interpretations. It is also important to note that the term has been used in various provisions regarding price signaling and hence leading to controversies with regards to the provisions. The difficulties in terms of definitions have a negative impact on the interpretations of the laws and it contributes to its misuse. On the other hand, the use of words that are not clear in terms of meaning only benefits the cartels. This is because they can easily hire lawyers to argue in their favor. On the other hand, the understanding of the law by the common business people may be hindered by the lack of clear definitions7. Repealing the price signaling provisions is therefore beneficial to the local business people, the consumers and the Australian Consumer and Competition Commission. The main purpose of the provisions in the Competition and Consumer Act 2010 is to preserve and enhance competition, eliminate boycotts, prevent misuse of the market power and eliminate resale price maintenance. However, the price signaling provisions have not been able to effectively achieve these goals due to its weaknesses and hence the need for repealing it. According to section 47(6), a corporation engages in the practice of exclusive dealings when it acquires good or services from another person or body that is not the supplier of the company. This provision prohibits third line forcing as it may also lead to price signaling. However, it is important to note that third line forcing may not necessarily lead to price signaling. In some instances, third line forcing may be cheap and it may ensure that goods or services are delivered on time. Third line forcing may also have positive impacts on the public sector in terms of saving costs8. The provision should therefore be repealed in order to ensure that flexibility is put in place when dealing with the issues of third line forcing. The promotion of public welfare should also be part of the law. The impact on competition should be a factor that should be considered as opposed to total banning of the third line forcing. It is also important to note that the economic benefits should be considered when a situation does no lead to unfair competition in the market. It will also be beneficial to the parties involved in terms of reducing costs. Over the years, the business practices have been undergoing changes due to various practices and policies. Innovations in business are one of the changes that has recently become common. However the price signaling provisions does not consider the issues of innovations and hence impacting negatively on the ability of the law to create a level play and protect business from unfair competition. On the other hand, it is also important to note that most of the businesses in the market are small businesses. The price signaling law tends to deal with the big businesses as opposed to the small businesses. This means that the law does not fully protect the small businesses and hence the need for it to be repealed. There is a lot of differences between the small businesses, the medium business and the large business. Most small and medium businesses have no ability to compete with the huge business and this result into exploitation as the laws does not consider this. A lot of concern has also been raised regarding the unfairness that the small business have when competing with big businesses. The Australian Consumer and competition Commission has also noted with concern and it also supports amendments for the purpose of benefiting the small businesses. Amendments have also been proposed for the purposes of ensuring that the small businesses benefit9. The provisions of price signaling should therefore be amended for the purposes of ensuring g that it represents the interests of the small businesses. The refusal to supply competition is also prohibited by the Competition and Consumer Act 2010. This is because it may limit the participation of the other organizations from being involved in a certain business and hence offering competitive advantage to the participants. This issue was brought about in the case of Dowling v Dalgety, where two companies had agreed that their sales yard should not be used by any other companies to participate in an auction10. The court held tat this was refusal to supply competition as more companies would have participated in the auction had the companies not made the decisions. It is important to note that the law could hinder agreements within parties in the name of refusal to supply competition. This may also be used as an excuse to prevent the small businee3s from entering into agreement with the big business. The provision in the Competition and Consumer Act 2010 therefore tends to interfere with how some of the business dealing are carried out. This could also amount to the government interference ion the market for the purposes of creating competition where it is not necessary. It is thus important for the provisions in the Competition and Consumer Act 2010 to be repealed in order to promote fair competition. This will also be useful in ensuring that the genuine competition is encouraged in the market. Conclusion In conclusion, the price signaling provisions should be repealed for the purposes of ensuring that a fair and competitive environment is created for business. It is evident that the current provisions are flawed and gives room for unfair completion in the market. On the other hand, the price signaling provisions are difficult to interpret with some overlapping and hence impacting negatively on the process of maintain a fair and competitive market. It is evident that the cartels have been prohibited in the Competition and Consumer Act 2010. However, due to the weaknesses of the provisions in the Act, the cartels still continue to operate. It is evident that the Australian Consumer and Competition Commission also have difficulties in terms of regulating the price signaling provisions due to its weaknesses. On the other hand, the price signaling Provisions are only applicable to the banking industry and hence exposing the other industries to exploitation by cartels. It is also important to note that the price signaling provisions do not consider some of the aspects of business and hence affecting the small businesses that are competing with the big businesses. Repealing of the price signaling provisions will therefore be useful in ensuring that fair and equal competition is promoted. Works Cited Competition and Consumer Act 2010 (Cth). ACCC v Leahy Petroleum Pty Ltd [2007] FCA 784. Dowling v Dalgety (1992) 34 FCR 109 Reading, Rural Press Ltd v ACCC [2003] HCA 75 ACCC v Visy Paper Pty Ltd (2001) HC Australian Competition and Consumer Commission. Price signaling. Retrieved on 3rd September 2014 from, 2014. Avery, Elizabeth, and Christoph van Opstal. "Competition Law: Too Much Information?: A Brief on the Government's Proposed Price Signaling Legislation." Keeping Good Companies 63.4 (2011): 227. King, Stephen P. "Twenty-first Colin Clark lecture: November 2011 Competition regulation in Australia: A report card." Economic Analysis and Policy 42.1 (2012): 17. Li, Zhaolin, Lusheng Shao, and Cheng Qian. "Equity-Based Incentives and Effective Signaling Strategies." Available at SSRN 2174188 (2012). Cejnar, L. (2011). After the global financial crisis: key competition law developments in Australia, the United States, the EU and the UK. Law and Financial Markets Review, 5(3), 201-212. Park, Seung-Joon. "12. Price signal or tax signal? An international panel data analysis on gasoline demand reaction." Environmental Taxation and Climate Change: Achieving Environmental Sustainability through Fiscal Policy 10 (2011): 169. Read More