A new “effects test” for Misuse of Market Power?

A new “effects test” for Misuse of Market Power?

With a focus on small businesses lately, the Government is planning to introduce new legislation after lobbying from the ACCC and recommendations by the Harper Competition Policy Review.

The proposed change will likely make it easier for the ACCC to crack down on businesses under Section 46 of the ACL’s ‘misuse of market power’.

Currently, a business is said to contravene Section 46 if they:

  1. Have substantial market power,
  2. Took advantage of that market power; and
  3. Did so for the purpose of eliminating or substantially damaging a competitor/related party, prevented entry into that/another market, deterred or prevented a person from engaging in competitive conduct in that or any other market.

The proposed reforms are set to remove parts 2 and 3 (above) to replace with an “effects test”, as proving that a business “took advantage” of their market power is currently very difficult to prove.

What is the “Effects Test”?

The “effects test” will, rather than asking whether a business took advantage of market power for a particular purpose, instead consider whether a business has taken advantage of market power with the effect or likely effect of substantially lessening competition in the market.

Though the proposed reforms are intended to support small businesses and encourage venturing into markets that have been largely controlled by big business, they have been controversial as many are worried that the reforms will capture non-anticompetitive activities due to how broadly it can be interpreted.

If you would like advice regarding your business or conduct relating to market power, contact me on 1300 033 934 or email me at for a no obligation chat.

Source: ABC News