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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)

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.

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Last Updated: 31 December 2012
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