The Provisions of Australias Competition Policy - Case Study Example

Running header: Competition Policy Student’s name: Instructor’s name: Subject code: Date of submission: Competition policy Introduction For markets to work efficiently, competition must be a vital ingredient since it benefits the consumer through encouragement of enterprise, efficiency, innovation as well as a variety of choices. It enables the buyers to buy the goods and services they want at the best prices possible while contributing to a nation’s competitiveness in the global market. As such, nations come up with competition policies with an aim of encouraging and improving competitiveness in their markets while ensuring that consumers realise the above benefits. At times, companies and similar organisations try to limit competition for their financial gain (Taylor, 2006). As such, the government establishes commissions or authorities charged with the responsibility of preventing and correcting anticompetitive behavior by businesses. Such anticompetitive behavior’s that competition polices aim at restricting include formation of cartels, prevention from abusing a dominant position, regulation on formation of mergers among other unfair trade practices. As such, the effectiveness of a nation’s competition policy will determine how effective its markets will be as well as how competitive the nation becomes globally. The aim of this paper is to analyze and compare Australia’s competition policy with that of Japan. This starts with an overview of competition policies in both countries before analyzing their strengths and weaknesses with an aim of understanding which country between the two has a more effective competition policy. Australia The provisions of Australia’s competition policy are contained in the competition and consumer act of 2010. The objectives of the country’s competition policy are achievement of an efficient provision of publicly provided services and goods through minimized restrictions on competition while promoting competitive neutrality. As such, maintenance of public policies restricting competition has to demonstrate public benefit before their enactment (OECD, 2010). The competition policy for instance prohibits cartel conduct civilly and is considered a criminal offence and includes price fixing, restricting outputs, bid rigging and market division activities. As such, those convicted of criminal offence on the above activities are liable to ten years imprisonment or $220,000. Anticompetitive agreements are also prohibited in the competitive policy. The competition and consumer act of 2010 prohibits understandings or arrangements that contain provisions likely to substantially lessen competition. However, certain collective bargaining agreements and joint ventures that do not have anticompetitive effects are exempted by the act. Exclusionary provisions and output restrictions are also prohibited in the policy. The Australian competition policy also prohibits a business with substantial market power from taking advantage of the market power for an illegal anticompetitive purpose. This aims at preventing predatory pricing in a bid to further control the market. Competition and consumer act of 2010 also prohibits exclusive dealings mainly in the form of conditional supply of services or goods as well as refusing to supply for specified reasons such as because the purchaser does not agree to a conditional supply (Cassidy, 2001). However, the exclusive dealings are only prohibited if they are likely to reduce competition substantially. The act or prohibits businesses from being involved in practices of minimum resale price maintenance both for goods and services. However, maximum resale price maintenance is not prohibited whether or not it leads to substantial reduction in competition. Where it can be demonstrated that mergers will have an effect of substantially reducing competition in the market, they are prohibited by Australia competition policy. However, mergers will be allowed even if they lead to substantial reduction of competition in the market where it is demonstrated that they will lead to a benefit that should be allowed to occur to the society. A number of bodies are charged with the responsibility of ensuring compliance to the competition policy in Australia. They include the Australia competition and consumer commission and are charged with the responsibility of enforcing the competition and consumer act of 2010.The Australian competition tribunal hears appeals that arise from ACCC while the common wealth director of public prosecutions determines the matters to be prosecuted as cartel offenses with recommendation from ACCC. The national competition council on the other hand advices about competition law matters. The remedies available for contraventions of the competition policy are both criminal and civil and include damages, pecuniary penalties among others (Corden, 2009). As such, the Australian competition policy is designed in such a way that it allows healthy competition in the market which makes markets to be effective while Australia has become a globally competitive country as a result of its good competition policy. Japan Japan Fair Trade commission is the body charged with ensuring compliance to Japan’s competition policy. The aims of the competition policy includes that of actively and stringently countering price fixing cartels as well as bid rigging activities which negatively impact on the lives of the people. The policy aims at regulation of practices which unjustly disadvantage small businesses while promoting competitive environment in the market where businesses are autonomously able to engage in competitive business activities (Akinori, 2004). In addition, Japan’s competition policy promotes international liaison with international competition authorities with the aim of promoting fair trade even beyond Japan. In other word’s, Japan competition policy aims at promoting the consumers welfare while ensuring fair trade practices for an efficient market. Japan’s competition policy prohibits businesses from employing unfair trade practices such as concerted refusal to trade, unjust low price sales, discriminatory pricing, and abuse of superior bargaining position as well as resale price restrictions. Abuse of superior bargaining position involves making the junior party to purchase goods on the superior party’s conditions or refusing to receive goods from the junior party. Japan’s competition policy also entails antimonopoly provisions which are the country’s fundamental law. The provisions prohibit a number of anticompetitive conducts including unreasonable restraint to trade, unfair competition methods and private monopolization. As such, the competition policy ensures that the consumer gets goods at the most fair price in the market while ensuring fair dealings between various businesses with the ultimate goal being the promotion of the welfare of the consumer. A number of remedies are available for contraventions of the competition policy in Japan. Some of the remedies include cease and desist order specifically for monopolistic activities. On the other hand, concerted refusal to trade, unjust low price sales, discriminatory pricing abuse of superior bargaining position and resale price restriction attract surcharge payment order. However, it should be noted that the above activities are only subject to surcharge where the business has conducted the practices within ten years with exception of abuse of superior bargaining position. Comparison of Australia and Japan As observed above, Australia and Japan has a lot in common as far as competition policy is concerned. For instance, both countries aim at bettering the consumer’s welfare through ensuring competition is promoted. This ensures that the consumer is given variety and innovative goods and services at the most competitive prices in the market (Fels, 2010). Some of the common features between the two countries competition policies include prohibition of cartel practices, unfair pricing, monopoly and related unfair competition practices. However, the two countries’ competition policies differ in terms of their implementation and the penalties involved. This on the other hand determines how effective the policies are. In this regard, Australia seems to be very effective in implementation of its competition policies thus making Australia’s markets very efficient and also making Australia to be very competitive globally. Australia’s competition policies have for instance been successful in the fight against cartels and unfair trade practices owing to seriousness in enforcement by various enforcement agencies as well as the hefty penalties associated with failing to comply by the competition policy. On the other hand, although Japan has a strong competition policy, its implementation as well as the levels of penalties involved are wanting. This makes its implementation less effective compared to Australia (Toshiyuki, 2013). For instance, cartels known as Keiretsu are still legal. One of the reasons cited by courts for the existence of these cartels is lack of contempt powers for ensuring compliance with JFTC’s orders. JFTC also needs to be strengthened in order to deal with official involvement in such activities as bid rigging. The maximum fines for unfair competitive practices also need to be increased while prosecution for such activities needs to be taken seriously. For instance, there have only been fifteen cases involving private monopolization for over fifty years (Shibata, 2009). Worse still, most of the cases only end with an order to stop the unfair trade act which has been less effective in curbing monopolizing practices. Conclusion As has been discussed above, although both Japan and Australia have similar competition policies which are very strong, their approach to enforcement differs. Australia has been found to take enforcement of its competition policy much seriously (Clayton, 2010). As such, those who act contrally to the competition policy are faced with hefty penalties which act as a deterrent from failing to observe the competition policy. This has resulted in substantial success in the fight against cartels among other unfair trade practices. On the other hand, Japan seems to be less effective in implementation. There is also leniency when it comes to penalizing those who offend the policy (James, 2010). As such, cartels and other unfair trade practices are still rampant in Japan. As such, Australia is more effective in its approach to competition policy when compared to Japan. References: Akinori, U2004, Where Japanese competition policy is going- Prospect and reality of Japan, Fair trade commission of Japan. Cassidy, B2001, Can Australia and US competition policy be harmonized? Australian competition and consumer commission, Canberra Clayton, U2010, Doing business in Australia, Melbourne, Prentice Hall. Corden, S2009, Australia’s national competition policy: Policy implications for Mexico, OECD. Fels, A2010, Lessons from Australia’s competition policy reforms, The Australia and New Zealand school of government ANZSOG Annual conference, Melbourne. James, D2010, Japan’s antitrust enforcement regime, International Business Journal, vol.31, no.1, pp.77-82. OECD, 2010, OECD reviews of regulatory reform: Competition policy in Australia, OECD. Shibata, J2009, Issues of dominance: Japanese competition law, Kagawa University, Japan. Taylor, M2006, International competition law: A new dimension for the WTO, Cambridge, Cambridge University Press. Toshiyuki, N2013, Competition policy in Japan: Differing policies, different approaches, Japan Fair Trade Commission. Read More