Issue J: Halting Conduct while the Commission is Considering an Authorisation Application
Background
141. Section 59A(1) allows the Commission to grant authorisations to parties who have already entered into agreements. This provision recognises that markets can change and that conduct which may not have breached the Act when first entered into may subsequently fall afoul of the Act. Section 59A(2) requires all of the parties to the agreement to discontinue giving effect to the provision of the contract in question until the authorisation is granted. Section 59A(3) empowers the Commission to waive this requirement if stopping the conduct would be likely to result in exceptional hardship to any of the parties.
The issues
142. A purpose of subsection (2) is to protect consumers from the damage of anticompetitive behaviour. Another purpose is to encourage parties to apply for an authorisation before entering into an arrangement that may breach the Act. However, section 59B has the same purpose. It states that an authorisation does not provide retrospective immunity from Part 2 of the Act. Therefore, it is questionable whether section 59A(2) is needed. In addition, there are some potentially more serious problems:
- The requirement to stop giving effect to the conduct may be discouraging parties from seeking authorisation. If the cost of stopping the conduct is significant but does not meet the very high "exceptional hardship" test, then the parties might prefer to keep their heads down and risk being investigated than seek an authorisation;
- Section 59A(2) could be used for strategic purposes because all parties must stop giving effect to the conduct. A party to the conduct who does not like the agreement could force a temporary halt by submitting an application for a variation or revocation; and
- It is unclear what the legal consequences are if the parties do not stop giving effect to the agreement. For example, it is unclear whether the Commission would be able to decline the application if the parties to the arrangement refused to comply with section 59A(2).
Options
143. The alternatives to the status quo are:
- To repeal section 59A(2) – Applicants would not be required to stop giving effect to the relevant provisions while an application is being considered;
- To replace section 59A(2) with a provision that gives the Commission the discretion to order that the conduct be stopped while the application is being considered; and
- To lower the "exceptional hardship" test in section 59A(3).
Analysis
The quality of outcomes
144. Our view is that section 59B provides sufficient incentives to discourage parties from engaging in anticompetitive conduct and that section 59A(2) does not contribute anything extra in that regard. In addition there may be occasions where halting the conduct could harm consumers. Given the other potential detriments outlined above, we do not favour the status quo or Option (c). The choice is between Options (a) and (b). An advantage of option (b) over option (a) is that it provides the flexibility of an additional safeguard against anticompetitive behaviour if necessary.
Transparency, predictability and gaming the legal system
145. The main argument for Option (a) is that it provides greater legal certainty to the applicants and may provide better incentives to applicants to apply for an authorisation where they have a good case. On the other hand, it may be appropriate for the Commission to order a halt to the conduct in question if it considers that there would be a significant risk of irreparable harm to consumers.
Conclusions
146. We consider that there is a need for change. Our preliminary view is that Option (a) is too inflexible. The Commission should have the discretion to require conduct to be halted while it is considering the application and therefore option (b) is preferred.
Questions
Q16. Should the mandatory requirement to halt the conduct while the Commission is considering an application for authorisation (i.e. section 59A(2)) be retained or removed?
Q17. If the mandatory requirement to halt the conduct is to be removed, do you consider that it would be better to repeal section 59A(2) or replace it with a provision that provides the Commission with the discretion to require that the conduct be halted?
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