White SW Computer Law
Intellectual Property, Information Technology & Telecommunications Lawyers
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1. What does the Trade Practices Act ("TPA") govern?

TPA covers, amongst other things:

  • obligations of corporations to their customers; and
  • Competition between businesses including anti-competitive practices including without limitation, price fixing and misuse of market power.

2. Recent changes to the TPA

  • Unconscionable Conduct (Section 51AC)
    This section prohibits a stronger party dealing with a disadvantaged party in a harsh or oppressive manner. Small business now has the same protection, for transactions of less than $1 million that was previously only available to “consumers”.
  • Industry Code of Conduct (Section 51AD)
    Industry codes of conduct, such as the Franchising Code are now legally enforceable.

Franchising Code of Conduct came into effect on 1 July 1998 and is now mandatory for franchising industry participants. Further provisions, including disclosure and dispute resolution provisions, will come into effect on 1 October 1998.

3. Important issues to consider

  • Refusal to supply
    re are some circumstances where refusal to supply is unlawful under the TPA. se include misuse of market power to damage a competitor by refusing to deal or by offering to do business on such unfavourable terms that the offer amounts to refusal to deal. onus is on the purchaser to show that the supplier's action was taken with the purpose of eliminating or substantially damaging it, or deterring or preventing it from entering or competing in the relevant market.
  • Third line forcing
    A supplier makes acceptance of goods from another party as condition of supply.
  • Boycotts
    Where two or more suppliers getting together and refusing to supply another business.
  • Resale price maintenance
    Cutting off supply or threatening to cut off supplies because the reseller is discounting.
  • Limitations on reseller
    Imposed by suppliers on resellers as to what can be sold and where, if these limitations substantially lessen competition.
  • Price charged by the reseller
    It is illegal for a supplier to cut off, or threaten to cut off, supply to a reseller because they have been discounting goods or advertising discounts below prices set by the supplier. A supplier may recommend an appropriate price for particular goods but may not stop retailers charging or advertising below that price. A supplier may specify a maximum price for resale.
  • Price charged by the supplier
    Price differentiation or predatory pricing, where a supplier supplies the same goods and different prices to different resellers, may be illegal where the supplier has substantial market power and is using discounting to certain resellers with the purpose of damaging other resellers' business. A supplier agreeing with its competitors to fix prices is illegal, regardless of how long the agreement lasts or how effective it is.
  • Unconscionable conduct
    One party must establish that it was in a disadvantageous position that the stronger party knew about (or should have known about) and that the other party took unfair advantage of the situation. For example, if the consumer is known to lack an understanding of the nature of the transaction when ordering a complex software and hardware installation. Court will consider issues such as the parties' relative commercial strengths, whether undue influence has been exerted, whether the contract exceeded what was reasonably necessary for the legitimate interest of the supplier and whether there was evidence of disclosure, good faith and willingness to negotiate. new laws in this area do not apply to publicly listed companies and there is a cap of $1 million per transaction to which the new laws can apply.
  • Market Sharing
    It is unlawful for competitors to agree to share a market. Examples of this include:
    • Agreeing to not sell certain products where those products are sold by a competitor
    • Allocating customers to each competitor in a market with an understanding not to “poach” customers
    • Agreeing to not compete outside a specified area
    • Agreeing to share customers or products so that a sales revenue parity is maintained between competitors.
  • Advertising
    Each representation must be factual, unless it may be considered to be mere puffery or self-evident exaggeration, such as “whiter than white” otherwise your advertising may be considered to be misleading and/or deceptive. Silence can be misleading when it is clear that your customer has the wrong idea about the product or service and is relying on your advice. Predictions can also be misleading if there is no reasonable basis for making them.

4. Penalties

Orders the court can impose include fines and compensation. For breaches of the restrictive trade practices provisions of the Act the penalties can be as high as $10 million for corporations and $500,000 for individuals, for each breach. For breaches of the fair trading provisions of the Act the penalties can be as high as $200 000 for corporations and $40 000 for individuals, for each breach. If the conduct has badly affected consumers the orders for compensation can be greater than the fines.

www.computerlaw.com.au © White SW Computer Law 1998 This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.

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