A wellfed watchdog Law Reporter

More power to the ACCC - money and a nice decision

The Australian Com-petition and Consumer Commission has been voted a very significant funding increase in the latest Federal Budget. This will be welcome news for those who argue that the ACCC is the only organisation that can assist consumers in their fight against big business. Others, will be worried that this will enhance the role of an aggressive administrator that at times takes advantage of its strong position to impose unusual solutions on the market. Big business is at this time trying to cut back the powers of the ACCC, or at least modify its authority in the area of mergers; consumers on the other hand, are not satisfied that the ACCC can deliver them effective remedies in areas such as pricing of petrol where the allegations are made (without much substantiation as is clear from official reports published) that some form of market abuse is occurring on the part of the oil companies. Those complaints are old, have been repeated many times, and have never been substantiated. While the ACCC has been given additional funds, it has also been given a boost in its arsenal of weapons by another decision on section 46 of the Trade Practices Act - the misuse of market power provision. This was the subject of a number of recent decisions - Melway and Boral (Law Reporters, October 1999 and April 2001, respectively).

The rather unusual decision of Northern Territory Power Generation Pty Ltd v Power and Water Authority (2001) ATPR 41-814 however, is a case which does not involve the ACCC. It was an application by Northern Territory Power Generation (NT Power) alleging contraventions of section 46 of the Trade Practices Act (and corresponding Northern Territory legislation) against the Power and Water Authority (POWA) and its subsidiary company. The facts are adapted form the CCH report. POWA generates electricity and distributes, reticulates and sells electricity to consumers in the Northern Territory. In June 1998, POWA licensed NT Power to generate and sell electricity under a licence agreement. The area licensed was the Northern Territory. NT Power acquired a power generating plant in the Northern Territory. It wished to generate power at that plant and to sell the power to, among others, consumers in the Darwin/Katherine region of the Northern Territory. It was however, unable to do so. The infrastructure in and around Darwin for electricity distribution was owned by POWA which did not permit NT Power to have access to that infrastructure.

POWA, in exercising its powers and performing its functions was subject to the directors of the Northern Territory Minister for Essential Services. NT Power claimed that in a practical sense the licence that had been granted was of no real value. It alleged that POWA had contravened section 46 of the Trade Practices Act by failing or refusing to supply it with access to its infrastructure for anti-competitive purposes. Without that access it could not distribute power to the relevant region. NT Power alternatively sought proceedings against the subsidiary of NT Power on similar grounds. The parties agreed that there was a market for the supply of electricity to persons in relevant Northern Territory markets. They also agreed that the generation of electricity was a market, and that there was also a market for distribution. POWA acknowledged that it controlled access to the infrastructure and that it would, in practical terms be impossible for anyone to supply or sell electricity without access. However, POWA argued that the Trade Practice Act and the relevant Competition Code did not apply to it by virtue of the fact that POWA and its subsidiary were in effect an emanation of the Crown in right of the Northern Territory. It suggested that it was immune from the operation of the Trade Practices Act.

Mansfield J in the Federal Court agreed with the contention that POWA had been established as a Crown enterprise subject to control of the Minister and was entitled to immunity, and therefore the Trade Practices Act did not apply to it. Despite this finding, the judge went on to consider the section 46 claim. This part of this decision was of course beside the point or as lawyers put it obiter dicta. But, in terms of interpretation of the Trade Practices Act, it is very important. The judge felt that he should deal with these matters just in case he was overruled on the question immunity. In his view, POWA's infrastructure constituted a natural monopoly. POWA's decision to refuse access was made by taking advantage of its market power, not by virtue of the ministerial directions it pursued. It knew what the existing market power was and that to decline access to NT Power would be to prevent it from competing against POWA, or its subsidiary, in the relevant market. In effect, the decision to decline access to POWA's infrastructure was an integral part of the decision to establish an access regime that would be controlled by POWA thus enabling it to control the relevant market. In all of the circumstances the Judge held that POWA exercised its power for the purpose of limiting or restricting the ability of NT Power to compete in the marketplace. Thus, the terms of section 46 of the Trade Practice Act had been established and NT Power's action would have succeeded on those facts if the immunity argument had not been established.

The decision by Mansfield J is very important. Normally, in a situation where a company or organisation such as POWA has the necessary control of the relevant market it would not be regarded as taking advantage of its market power in exercising its administration of its statutory obligations. But, the judge felt that, POWA was going beyond merely administering its administrative role. It was in fact making decisions which impacted on the financial and market operations of a competitor. In these circumstances, it was misusing its market power in breach of section 46 of the Trade Practices Act. If this aspect of the judgment is allowed to stand it will have a significant impact on a number of energy markets in operation in Australia where there are licences granted by companies or organisations such as POWA established by governments. They will have to be extremely careful in how they exercise these powers in the future. But the decision may have wider ramifications. All aspects of this judgment will be considered in an appeal by the Full Federal Court. We will await with interest the opportunity the Federal Court will have to reconsider section 46 in the context of this very interesting scenario.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.