Australia-United States Free Trade Agreement - Guide to the Agreement
14. Competition - Related Matters
1. Purpose and structure
The Competition - Related Matters Chapter commits the Parties to take measures to:
- proscribe anti-competitive business conduct;
- cooperate in the area of competition policy and law enforcement;
- ensure that monopolies and government enterprises do not abuse their position in the marketplace; and
- enhance cooperation between government agencies in both countries in the area of consumer protection.
These objectives recognise that business conduct that is anticompetitive or that defrauds, deceives or misleads consumers has the potential to restrict bilateral trade and investment, in addition to impairing the welfare of the citizens of either country.
The Chapter consists of 12 articles and an associated side letter between the two governments on strengthening cooperation, competition policy and law enforcement.
2. Competition Law and Anticompetitive Business Conduct (Article 14.2)
Under Article 14.2 of the Chapter, each Party is obliged
- to maintain or adopt measures to proscribe anticompetitive business conduct and take appropriate action with respect thereto; and
- maintain an authority or authorities responsible for the enforcement of its national competition laws
These obligations are framed in general terms, reflecting the fact that, while both the United States and Australia have highly developed and extensive competition and antitrust legislation, there are differences in the legal and institutional frameworks in which they operate.
Article 14.2 also addresses the treatment of companies or individuals of either country in relation to the enforcement of each other's competition laws. It states that the enforcement policy of each Party's national competition authorities includes treating non-nationals no less favourably than nationals in like circumstances, and that both Parties intend to maintain their policy in that regard.
There is also an obligation to ensure that a company or individual subject to the imposition of a sanction or remedy (e.g. a financial penalty) for anticompetitive business conduct is afforded due process in terms of having an opportunity to be heard, and to present evidence, and to seek review in a court or independent tribunal.
This Article is not subject to dispute settlement, and does not require any legislative or regulatory change.
3. Cooperation on Competition/Antitrust (Article 14.2 and Side Letter)
Article 14.2 of the Agreement also commits the Parties to strengthening their existing cooperation on competition law enforcement and policy. Competition matters often have a cross-border dimension, when companies subject to investigation for anticompetitive conduct may have engaged in business activity in another country's jurisdiction. Australia and the United States have well-established channels of practical cooperation on such matters with a cross-border dimension, between the Australian Competition and Consumer Commission (ACCC) and its United States counterparts, the Department of Justice Antitrust Division and the Federal Trade Commission (FTC). The current framework for cooperation is set out in two bilateral treaties relating to Cooperation on Antitrust Matters (1982) and Mutual Antitrust Enforcement Assistance (1999) (antitrust is the preferred United States term).
Existing forms of cooperation include mutual assistance, notification, consultation, and exchange of information. Article 2 of the Chapter also obliges the respective competition authorities to consider, where feasible and appropriate, requests from their counterparts in the other country to initiate or expand activities to enforce competition. This will strengthen the basis of bilateral competition on competition law enforcement. Existing agreements do not include such provisions - sometimes known as "positive comity" - which would allow either government to encourage the other to address particular business conduct that might affect the interests of the first country. Implementation of this provision is likely to be taken up in discussions on strengthening bilateral cooperation that the United States Department of Justice and the United States Federal Trade Commission have offered, on behalf of the United States, in an associated side letter.
Article 14.2 also establishes a joint working group that will examine the scope for strengthening support for, and minimising legal impediments to, the effective enforcement of each country's competition laws and policies.
4. Monopolies and Government Enterprises
(Articles 14.3, 14.4 and 14.5)
These articles contain obligations to ensure that the activities of monopolies (private or public), and state (i.e. government) enterprises do not create obstacles to trade and investment. The provisions on monopolies only apply to private monopolies created after the Agreement comes into force, and to government monopolies at the central government level. Both governments are obliged to ensure that any monopoly or government enterprise exercises any regulatory, administrative or other governmental authority delegated to it in a manner consistent with the Party's obligations under the Agreement.
Both monopolies and government enterprises must accord non-discriminatory treatment in the sale of their goods or services. Monopolies must also accord non-discriminatory treatment in the purchase of their goods or services
In addition, a monopoly must act solely in accordance with commercial considerations in purchasing or selling a monopoly good or service in the relevant market - except where this is to comply with any terms of its designation (i.e. the legislative or other authority that confers exclusive rights on a particular enterprise).
However, the latter exception overrides neither of the above-mentioned requirements to treat enterprises of the other country in a non-discriminatory fashion. Nor does it exempt monopolies from a further requirement not to use their monopoly position to engage in anticompetitive activities in markets where they are not a monopoly. As an example, Australia Post is a public monopoly as defined in the Agreement with respect to collection and delivery in Australia of standard letters (as defined in the Australian Postal Corporation Act 1989). It would be exempted from acting solely in accordance with commercial considerations in the price it charges for letter delivery around Australia, insofar as this is necessary to comply with the universal service obligations, which are the basis for the monopoly. However, that would not allow it to charge one price for stamps for delivering standard letters for Australian companies and a higher price to equivalent United States companies. Nor would it be entitled to use any advantages derived from its standard letter monopoly to undertake anticompetitive practices in areas of the postal services market that are open to competition.
The obligations above do not affect Australia's existing agricultural single desk export arrangements (such as the AWB International).
With respect to government enterprises, Australia commits itself, as it did in the Singapore-Australia FTA, to take reasonable measures to ensure that governments at all levels do not provide any competitive advantage to any government businesses simply because they are government owned. This reflects the policy of competitive neutrality to which all Australian governments are committed. For its part, the United States is obliged to ensure that anticompetitive activities by state and local government enterprises are not excluded from the reach of its national antitrust laws solely because they are state or local, as opposed to federal government, enterprises. This commitment is conditioned by the fact that state and local government enterprises are often immune from United States antitrust law. This particular obligation is not subject to dispute settlement.
Article 14.5 makes an important clarification - that charging of different prices in different markets, or within the same market, where such differences are based on normal commercial considerations, such as taking account of supply and demand conditions, is not in itself inconsistent with the obligations on monopolies and state enterprises. For example, an Australian monopoly supplier may charge a US company operating in Australia a higher price than an Australian company in the Australian market where commercial conditions would warrant it, but it would be considered discriminatory if a United States-owned company were charged higher rates simply because it was US-owned.
5. Cross Border Consumer Protection (Article 14.6)
The Parties agree to strengthen their cooperation in areas covered by their consumer protection laws, in particular fraudulent and deceptive commercial practices against consumers. This builds upon existing cooperation between the ACCC and the United States FTC. Strengthening cooperation will include the development of appropriate procedures for detecting and notifying breaches of laws, and assisting in investigating cases and enforcing consumer protection laws; and in the development of coordinated strategies to combat fraudulent and deceptive commercial practices both bilaterally and internationally.
Australia and the United States also agree to identify obstacles to effective cross-border cooperation in the enforcement of consumer protection laws, and to consider changing their domestic frameworks to enhance their ability to cooperate, share information and assist in the enforcement of their respective consumer protection laws, including, if appropriate, adopting or amending national legislation.
6. Recognition and Enforcement of Monetary Judgments
Article 14.7 seeks to facilitate the efforts of government agencies to undertake civil (non-criminal) legal proceedings for the purpose of obtaining monetary restitution to consumers, investors or customers who have suffered economic harm as a result of being deceived, defrauded or misled. The agencies concerned are the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC), the U.S. Federal Trade Commission (FTC), U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.
This provision applies in particular to civil proceedings where the offending company or individual has assets in the second country and the relevant agency, or interested parties, seek to have a judgment by a court in the first country to repay money defrauded from customers recognised and enforced by a court in the other country. The article states that when one of the agencies listed above obtains a civil monetary judgment from a judicial authority for the purpose of providing monetary restitution to consumers, investors or customers who have suffered economic harm as a result of being deceived, defrauded or misled, a judicial authority of the other Party generally should not disqualify such a monetary judgment from recognition or enforcement as penal or revenue in nature or based on other foreign public law.
While this provision is not binding on courts in either Australia or the United States, it seeks to provide courts with interpretative guidance on the purpose of such legal actions. Common law judicial interpretations in this area have tended to interpret broadly actions by governments as being either penal in nature or undertaken in pursuit of governmental interests and thus inappropriate for recognition. The purpose here is for consideration to be given to each case on its merits in a manner that favours restoring money to consumers, investors or customers who have been defrauded, deceived or misled.
More broadly, the Parties also agree to examine the scope for establishing greater bilateral recognition of foreign judgments of their respective judicial authorities obtained for the benefit of deceived or defrauded consumers, investors or customers. This could include consideration of current regulatory provisions for recognition of judgments of each other's courts and how they apply in this area. This is only in relation to monetary restitution, and not to penalty orders.
7. Transparency, Cooperation and Consultations
(Articles 14.8, 14.9 and 14.10)
Both sides undertake to make available to each other, on request, public information concerning the enforcement of their measures proscribing anticompetitive business conduct, exemptions and immunities to their measures proscribing anticompetitive business conduct; and public information concerning monopolies and government enterprises.
The Parties agree to enter into consultations on request of the other Party to address specific matters that arise under this Chapter.
There is also a broad commitment to cooperate to promote policies related to matters covered by this Chapter that foster free trade and investment and competitive markets.
8. Dispute Settlement (Article 14.11)
Most of the articles in this Chapter will not be subject to dispute settlement. The only obligations that will be subject to dispute settlement are those relating to monopolies; the provisions on government enterprises relating to exercise of delegated authority and non-discriminatory treatment; transparency; and the obligation to consult at the request of the other Party to address specific matters.
March 6, 2004