Criminal Law Australia case Study 2022

COMMERCIAL LAW
ANSWER – 1:
Management of Faltex has to keep in mind that in the Australian markets, The
Competition and Consumer Act, 2010 (CCA) keeps a close watch on the market
relationships between wholesalers, suppliers, retailers and consumers1. It is an
established fact that competition does harm the less efficient as these companies have
reduced sales and this forces most of them to exit the market. On the other hand, the
consumer is the real beneficiary from such competition. Keeping this in mind, Part IV
of CCA primarily focuses at enhancing welfare of the consumer although it also
protects the smaller entities from competition by prohibiting the anti-competitive
conduct of large corporations2.
CCA is primarily trying to protect competition and is not supressing competitors but is
in particular supressing the injuries which give rise to practises that increase the prices
by cutting competition. CCA’s per se prohibitions are aimed at disarming the Cartel
Conduct, such as restricting outputs through price fixing and prioritising customers or
suppliers or territories. Such practises have been banned as per Division 1 of Part IV.
Sections 45AF, 45AG, 45AJ and 45AK have, in conjunction with section 45AD, given
CCA enough powers to curb these practices. The restrictive trade practices provisions
in Part IV do overlap the doctrine of restraint of trade as practised under common
law3.
1 Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374;
[2003] HCA 5, Gaudron, Gummow and Hayne JJ at [159]-[160].
2 Air New Zealand Ltd v Australian Competition and Consumer Commission (2017) 91 ALJR 648; [2017]
HCA 21, Gordon J at HCA [68]-[69].
3 Frank Zumbo, ‘Don’t Bank on Bank Competition: The Case for Effective Laws Against
Anticompetitive Mergers and Creeping Acquisitions’ (2010) 18 Trade Practices Law Journal 26, 1-2.
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Keeping in view all the above factors and also the share of various companies dealing in
petroleum products (See Table below), it can be easily concluded that Faltex is not
involved in overstepping the various provisions/sections of the CCA. With a 35%
market share, Faltex is operating in a level playing field where two of its nearest
competitors are holding 40% (Kangaroo Petroleum Ltd-KP) and 20% (Scottish
Petroleum Ltd-SP). Although the combined share of the big three is 95%, they have not
totally suppressed competition as they are allowing 5% share to small, independent
companies.
Table Showing Market Share of Petroleum Companies in Australia
S.
No.
Name of Company Share of 90
Unleaded
Share of 95
Unleaded
Share of 98
Premium
Share of
Ethanol
01. Faltex Limited 35% 35% 35% 0%
02. Scottish Petroleum Ltd (SP) 20% 20% 20% 0%
03. Kangaroo Petroleum Ltd (KP) 40% 40% 40% 0%
04. Independent Operators 5% 5% 5% 0%
05. Redback Oil Ltd (RO) 0% 0% 0% 100%
ANSWER – 2
As stated above in Answer-1, Faltex is not contravening any law or section of CCA. It is
not creating or practicing a monopolistic trend in the market nor is it trying to suppress
the small operators. In fact, it is not even the biggest player in the retailing segment of
the petroleum products. This place is in the hands of KP, which holds nearly 50% of the
market share. In fact, if Faltex acquires RO, it will be opening up a large distribution
network, through its already existing retail network, for the monopolistic Ethanol
product presently being marketed solely by RO. This will be a boon for the consumers,
as they will be getting the advantage of choosing from four variants of the petroleum
products (90 Unleaded, 95 Unleaded, 98 Premium and Ethanol) at a single outlet.
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Hence, the step of Faltex towards acquiring RO will be breaking of a monopolistic trend
in the market and opening of an advantageous path for consumers4.
In case Faltex carries forward its acquisition of Redback Oil Ltd (RO), it shall do so
through “creeping acquisition” route. Such acquisition method, as explained in s50 of
CCA, refers to large number of small individual acquisitions. Such isolated acquisitions
by Faltex, will not make a visible impact to attract imposition of s50, but in fact will
make a big impact in the market when considered cumulatively. In this context, The
Australian Competition and Consumer Commission5 (ACCC) lacks adequate tools for
preventing creeping acquisitions, although s50 of CCA does prohibit large corporations
such as Faltex from acquiring shares in other competitors if it finds that such an
acquisition is likely to have an effect to substantially lessen competition in the market.
Taking into account the fact that s50 has been brought into force to prevent those
acquisitions which may create the effect or are likely to create such an effect, of
substantially reducing competitiveness in the market, then this s50 should not make
distinction between a single acquisition that can create such outcome or a group of
acquisitions which can collectively create same outcome6.
No doubt, creeping acquisitions do occur at a large scale in Australia and have taken
place in the Grocery, Pharma, Newsagents and Liquor trades7. In the last 4 decades,
Australia has witnessed demise of large number of small bakers, butchers, grocery
outlets, greengrocers, florists, newsagents, pharmacists and liquor outlets. This has been
happening because of continuing expansion being made by large supermarket chains.
4 Sarah Whyte, Pharmacies Next Target Of Big Two, Say Analysts (2013) The Sydney Morning Herald.
http://www.smh.com.au/data-point/pharmacies-next-target-of-big-two-say-analysts-20130927-
2ujm0.html.
5 Allens Linklaters, ‘The Allens Handbook on Takeovers in Australia’ (2017) 11. Retrieved on 25
September 2019 from https://www.allens.com.au/pubs/pdf/ma/takeovers-handbook.pdf.
6 Australian Competition and Consumer Commission, Parliament of Australia, ‘Media Merger
Guidelines’ (2007). Retrieved on 25 September 2019 from
https://www.accc.gov.au/system/files/Media%20Merger%20Guidelines%202017_0.pdf.
7 Deloitte Access Economics, ‘Analysis Of The Grocery Industry’ (2012) 3. Retrieved on 25 September
2019 from http://www.academia.edu/7969473/Analysis_of_the_grocery_industry.
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