Competitive trading: the Trade Practices Act
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Industry associations provide valuable assistance to members – they facilitate the flow of knowledge to an industry, effectively represent their members’ interests to government, organise training, promote ethical behaviour, set industry-wide standards of service and quality, and more.
They also play a key role in educating their members on the rules relating to how they deal with other businesses and their consumers, and are often asked for advice from their members about industrial relations, taxes, business structures and relevant laws. The Trade Practices Act (the Act) is one of these laws.
Anti-competitive conduct
Associations bring together a number of competitors, and it is therefore important to be aware of the laws regarding anti-competitive conduct and how these may apply to an association and its members.
Many industry associations require that their members comply with rules or codes of conduct. Compliance with these rules ensures that all members interact with customers and other businesses in a consistent and ethical way. In order to ensure that members comply with these rules, most associations have complaints-handling procedures to deal with customer disputes, and impose sanctions on their members if they break the rules.
There is nothing wrong with requiring members to behave in particular ways – in fact these rules, complaints processes and sanctions may give consumers more faith in an association’s members and industry. However, an association must ensure that the Act is not breached by rules that are overly burdensome, or sanctions that are unnecessarily harsh.
For example, an industry association that facilitates an agreement between members to limit the production of a good is actually facilitating an unlawful agreement between members which will breach the Act. Industry associations may also breach the Act if they are involved in the anti-competitive conduct of members.
Transparent appeals processes
Most industry associations have transparent appeals processes available to members to combat this issue, but some key points should be noted in order to ensure that an association’s rules do not breach the Act.
- Firstly, make sure that rules are clearly stated and transparent so that all members understand their obligations.
- Secondly, make sure that rules do not dictate that members must price their goods or services. If the rules require members to price their products or services in certain ways, this may breach the Act’s rules on price fixing.
- Finally, associations should ensure that any sanctions that are imposed on a member for breaking the rules are reasonable, and not an excuse for associations to exclude the business of certain companies.
Skills standards
It is also common for an association to require their businesses or individuals to obtain certain qualifications or skills before they may become a member of the association. This may be a legitimate way to ensure that members are able to carry out their activities to a particular standard, but an association must be careful to ensure that these restrictions are reasonable and are not imposed to limit competition for its members.
Recommended price lists
Some industry associations provide members with recommended price lists. Associations should be careful when issuing these, as they may be used to form agreements to fix, control or maintain prices, and this type of agreement is prohibited by the Act.
If it is necessary to provide recommended prices or give advice to members on pricing, it is important that associations allow their members to individually set their own prices. Associations may not impose any sanctions if members do not comply with the association’s pricing policies.
Acting in the public interest
Industry associations may also be asked for assistance where members are considering engaging in anti-competitive conduct, in instances where that conduct will benefit a member’s business and also the broader public.
If the ACCC can be satisfied that the particular instance of conduct would be in the public interest, it can guarantee protection for businesses from legal action that the Act would require. These procedures are known as ‘authorisation’ and ‘notification’.
Industry associations can apply for this protection on behalf of their members, and the ACCC has materials available to assist associations and their members in understanding the process, and to decide whether they should apply for this protection.
