Competition & Trade Practices
6. Misuse of Market Power
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 11 Jul 2015
- The misuse (as opposed to use) of market power occurs when a company takes advantage of their possession of ‘substantial market power’ for an illegal purpose.
- It is important to understand that there is a distinction between possessing market power and using it appropriately and possessing market power and misusing it. While it is illegal for a company to misuse their market power for illegal purposes it is not unlawful to use market power to encourage healthy market competition.
- When deciding whether a business has misused its substantial market power the Australian Competition and Consumer Commission (ACCC) will investigate three elements:
- Does the business have substantial market power?
- Is the business taking advantage of its substantial market power?
- Is the business using its substantial market power for an illegal purpose?
- A company is considered to have substantial market power when it can act without worrying about any competitors, suppliers or customers.
- The ACCC will look at the following factors when evaluating if a business has taken advantage of its market power:
- whether the substantial degree of market power made it easier for the company to engage in the conduct complained of;
- whether the business relied on its substantial degree of market power when taking part in the conduct;
- whether the business would still have engaged in the conduct without a substantial degree of market power; and
- whether the conduct was connected in any other way to the substantial degree of market power.
- The Australian Competition and Consumer Commission (ACCC) will determine whether the company’s substantial market power has been used for an illegal purpose by considering whether the company was attempting to:
- eliminate or substantially damage a competitor;
- interfere with another person or business attempting to enter the market; or
- damage the ability of another person or business to compete in the market.
- If a business with substantial market powers is taking advantage of its powers for an illegal purpose the anti-competitive behaviour of misusing market power will usually be established.
- Another prohibited behaviour relating to the misuse of market power is predatory pricing. Predatory pricing occurs when a company with substantial market power misuses that power by supplying or offering to supply goods or services below cost in order to achieve an illegal purpose.
- Whether there is an illegal purpose behind the predatory pricing will require consideration of the same factors as misuse of market power.
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