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Let's talk antitrust: Discussing recent cases and emerging competition issues
Recent cases and judgments have shone a light on some emerging themes and trends that companies will want to consider as part of their risk management framework.
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Australia | Publication | mei 2022
This article was co-authored with Charlotte van Beek.
Competition law and competitive neutrality considerations feature variously in Government procurement, including:
In this article, we briefly address considerations for Government to optimise competitive outcomes and to not inadvertently engage in (or facilitate) anti-competitive conduct or create an uneven playing field for competition. These considerations are particularly pertinent given the ACCC’s express warning to public sector agencies at the end of last year to be alert to the potential for illegal collusion between bidders during procurement processes. The warning came after an ACCC investigation into departmental processes that may have facilitated collusion by competing respondents on government tenders.
Usually, price fixing, bid-rigging and similar anti-competitive conduct relating to procurement would contravene Part IV of the Competition and Consumer Act 2010 (Cth) (Act). However, the Commonwealth and Commonwealth authorities are bound by the Act only where their conduct is undertaken in the course of ‘carrying on a business’.1 The justification is that persons dealing with the Commonwealth in relation to the conduct of a business should have the same protection as when dealing with a private trader that is carrying on a business, but will not have such protection in other dealings with the Commonwealth.
For all activities that are not ‘carrying on a business’, Crown immunity applies and the Commonwealth is exempt from the Act.
What does ‘carrying on a business’ mean, and does it apply to Commonwealth procurement?
It has been noted that the ‘carrying on business’ test suffers from a lack of clarity, and may be ill-equipped to deal with an increasing amount of government commercial activity, in particular, government procurement.
Factors that may suggest particular conduct by a Commonwealth authority is done in the course of ‘carrying on a business’ include where the conduct:
Factors that suggest particular conduct by a Commonwealth authority is not done in the course of ‘carrying on a business’ include where the conduct:
The Act provides some express carve-outs from what constitutes ‘carrying on a business’, which include:2
Even though Commonwealth departments and authorities themselves may sometimes have the benefit of Crown immunity, its tender respondents will usually be subject to the Act.3
Government tenders can be susceptible to manipulation by anti-competitive conduct. A tender process can create an environment for bidders to collude, including by bid-rigging, which occurs when two or more competitors agree not to genuinely compete with each other for tenders. The outcome of such conduct can harm competition, and usually harms the procurer by not resulting in the best-priced or otherwise most competitive outcome.
Indeed, Commonwealth departments may sometimes need to exercise caution to ensure that they are not including tender requirements which could lead to anti-competitive conduct, putting respondents at risk of breach. The risk of including such requirements was at the heart of the ACCC’s recent warning to public sector bodies. As ACCC Chair Rod Sims put it, “encouraging businesses to discuss their bids with each other, or to make agreements about who will bid for a particular tender, is likely to amount to cartel conduct which is against the law.”
Commonwealth procurement processes are also subject to the competitive neutrality principles agreed to by each Australian government in 1995.4 The competitive neutrality principles aim to ensure that government businesses do not enjoy a net competitive advantage over private sector competitors (or potential competitors), simply because of their public sector ownership.
Relevant to procurement, competitive neutrality principles mean that Commonwealth procurement should seek to:
It will often seem efficient for different government entities to achieve economies by jointly procuring goods or services or otherwise working together to achieve favourable acquisition terms.
However, if Government entities that would otherwise compete to acquire goods or services in the course of ‘carrying on a business’ make arrangements:
they may be at risk of a breach.
There are certain exceptions to the competition law that can permit joint procurement by Government and, failing that, authorisation from the ACCC may be available where the public benefits of the coordinate conduct outweigh the anti-competitive downside. Nonetheless, organisations must be wary of this risk.
Competitive outcomes tend to result in better, more efficient cost outcomes. The following practical tips may assist:
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Recent cases and judgments have shone a light on some emerging themes and trends that companies will want to consider as part of their risk management framework.
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