Trade Practices Amendment Act 1991
No. 49 of 1991
An Act to amend the Trade Practices Act 1974
[Assented to 24 April 1991]
The Parliament of Australia enacts:
Short title etc.
1. (1) This Act may be cited as the Trade Practices Amendment Act 1991.
(2) In this Act, “Principal Act” means the Trade Practices Act 19741.
Commencement
2. This Act is taken to have commenced on 21 December 1990.
Mergers and other acquisitions
3. Section 50 of the Principal Act is amended:
(a) by inserting in subparagraph (1)(b)(i) “, or associated with,” after “related to” (twice occurring);
(b) by inserting after subsection (1) the following subsection:
“(1aa) A body corporate that is related to, or associated with, a corporation must not acquire, directly or indirectly, any shares in the capital, or any assets, of any other body corporate (in this subsection called ‘an acquired body corporate’) if:
(a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to dominate a market for goods or services; or
(b) where the corporation is in a position to dominate a market for goods or services:
(i) the acquired body corporate, or another body corporate related to, or associated with, it, is, or is likely to be, a competitor of the corporation or of any body corporate related to, or associated with, the corporation; and
(ii) the acquisition would, or would be likely to, substantially strengthen the power of the corporation to dominate that market.”;
(c) by inserting in subparagraph (1a) (b) (i) “, or associated with,” after “related to”;
(d) by inserting in paragraph (2) (a) “, or likely to be in a position,” after “position”;
(e) by inserting in paragraph (2) (b) “, or likely to be in a position,” after “position”;
(f) by adding at the end of subsection (2) “, or to be likely to be in a position to dominate that market, as the case may be”;
(g) by inserting after subsection (2) the following subsection:
“(2aa) In subsection (2), the reference to bodies corporate, or a corporation and a body or bodies corporate, together being in a position to dominate a market is a reference to their being in that position whether or not they would need to act in concert to achieve such domination and whether or not they have acted in concert to put themselves in that position.”;
(h) by inserting in subsection (2a) “, or to be likely to be able to exert” after “exert”;
(i) by inserting after subsection (2a) the following subsection:
“(2ab) In subsection (2a), the reference to bodies corporate, together with another body corporate or other bodies corporate, being in a position to exert a substantial degree of influence is a reference to their being in that position whether or not they would need to act in concert to exert such influence and whether or not they have acted in concert to put themselves in that position.”;
(j) by inserting in subsection (2b) “, or to be likely to be able to exert,” after “exert”.
NOTE
1. No. 51, 1974, as amended. For previous amendments, see Nos. 56 and 63, 1975; Nos. 88 and 157, 1976; Nos. 81, 111 and 151, 1977; Nos. 206 and 207, 1978; No. 73, 1980; Nos. 61 and 176, 1981; No. 80, 1982; No. 39, 1983; Nos. 63, 73 and 165, 1984; No. 65, 1985; Nos. 8, 17 and 168, 1986; Nos. 23 and 141, 1987; Nos. 8, 20 and 87, 1988; Nos. 28 and 34, 1989; and No. 11, 1990.
[Minister’s second reading speech made in—
House of Representatives on 21 December 1990
Senate on 11 March 1991]
Overview
The Trade Practices Amendment Act 1991, enacted by the Parliament of Australia, serves to amend the Trade Practices Act 1974 with the primary objective of enhancing competition and preventing market dominance by corporations. The legislation introduces stricter controls over corporate acquisitions, particularly focusing on scenarios where such acquisitions could lead to or strengthen a corporation's dominant market position. By addressing gaps in the existing legislation, the Act aims to protect market integrity and ensure fair competition. The Act received assent on 24 April 1991 and is designed to maintain a competitive business environment in Australia, preventing entities from unfairly dominating markets through strategic acquisitions.
Scope and Application
The Trade Practices Amendment Act 1991 applies to corporations, both existing and those formed in the future, as well as any bodies corporate that are related to, or associated with, a corporation. The Act specifically addresses the acquisition of shares or assets by these entities, focusing on preventing the domination of markets for goods or services. The Act’s jurisdictional reach is federal, as it amends the Trade Practices Act 1974, which is a Commonwealth Act. The Act extends its application through the insertion of new subsections and amendments to existing ones, thereby providing greater detail and specificity to the conditions under which acquisitions by related or associated corporations may occur without contravening the prohibition on market domination. The Act does not specify any exclusions or exemptions but sets clear thresholds and conditions that must be met to avoid contravening the provisions against market domination.
Key Provisions
The Trade Practices Amendment Act 1991 primarily concerns amendments to Section 50 of the Trade Practices Act 1974. This amendment (Section 3) is significant in that it introduces new provisions regarding mergers and acquisitions by corporations and their related or associated entities. Under the new subsection (1aa), a corporation related to or associated with another entity is prohibited from acquiring shares or assets of another corporate entity if such an acquisition would result in the former corporation, or a related entity, dominating a market for goods or services (Section 3(a)). This also applies where the acquiring corporation is already in a dominant position in a market, and the acquisition would strengthen its ability to dominate that market or substantially weaken a competitor (Section 3(b)). The amendment further expands the definition of market domination to include situations where entities do not need to act in concert to dominate the market or have already done so (Section 3(2aa) and (2ab)).
The obligations imposed by the Trade Practices Amendment Act 1991 on corporations and their related or associated entities are stringent. Specifically, these entities must refrain from engaging in acquisitions that would lead to market domination, as defined by the Act. This includes acquisitions that would result in the acquiring corporation, or a related entity, being in a position to exert substantial influence over a market or dominate it. The Act mandates that these entities must not only avoid acting in concert to achieve market domination but also refrain from actions that would place them in a dominant position, even if they have not previously acted in concert. This requires a careful review of any proposed acquisition to ensure compliance with the Act's provisions.
The Trade Practices Amendment Act 1991 imposes civil and criminal penalties for breaches of its provisions. Section 82 of the Principal Act outlines the penalties, which can include fines for corporations and imprisonment for individuals, depending on the severity of the breach. The maximum penalties can vary, but for corporations, the fines can be substantial, reflecting the serious nature of market domination and anti-competitive practices. For individuals, the penalties can include fines and imprisonment, with the exact amounts and durations depending on the specific circumstances of the breach. The Act's intent is to deter corporations and their associated entities from engaging in practices that could harm market competition and consumer interests.