Competition Law Analysis: Trump, Bush, Ford, and Teamsters

Question 1.1:

The key provisions of the Competition and Consumer Act 2010 (Cth) (CCA) that are potentially relevant to Trump's conduct are:

1. Predatory pricing (Section 46)
2. Misuse of market power (Section 46)

Predatory Pricing (Section 46)

Section 46(1)(a) of the CCA prohibits a corporation with substantial market power from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing entry of a person into a market, or deterring or preventing a person from engaging in competitive conduct.

For predatory pricing to occur, the following elements must be satisfied:

1. The corporation must have substantial market power
2. The conduct involves supply of goods or services below the relevant cost for a sustained period
3. The purpose of the conduct is an anti-competitive purpose, such as eliminating or substantially damaging a competitor

Market Power Assessment: To determine if Trump had substantial market power, the relevant market needs to be defined. Based on the facts, the relevant market appears to be the retail supply of petrol in the Strathfield-Homebush-Burwood-Enfield area. Trump operated a service station in Strathfield, while its main competitors (Biden, Obama, Clinton) operated in surrounding suburbs. Given the geographical proximity and the nature of the petrol retail market, it is likely that Trump had a significant market share and ability to influence the market.

Supply Below Relevant Cost: Trump engaged in an aggressive pricing strategy by dropping petrol prices to $1.00 per litre for 12 months. Assuming the normal retail price was around $1.50 per litre, Trump was supplying petrol well below the market price and likely below its relevant cost of supply for a sustained period.

Anti-Competitive Purpose: The facts state that Mr. Trump's purpose was to force Biden, Obama, and Clinton out of business, giving Trump the "upper hand" in the market. This indicates an anti-competitive purpose of eliminating or substantially damaging competitors, which satisfies the third element of predatory pricing.

Therefore, based on the available facts, there is a strong argument that Trump contravened Section 46(1)(a) of the CCA by engaging in predatory pricing. However, it's important to note that predatory pricing cases are highly fact-specific, and a detailed economic analysis would be required to conclusively determine if Trump's conduct breached the CCA.

Misuse of Market Power (Section 46)

Section 46(1) of the CCA prohibits a corporation with substantial market power from engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition in a market.

To establish a contravention of Section 46(1), the following elements must be satisfied:

1. The corporation must have substantial market power in a relevant market
2. The corporation must have engaged in conduct
3. The conduct must have had the purpose, effect, or likely effect of substantially lessening competition in a relevant market

As discussed earlier, Trump likely had substantial market power in the relevant petrol retail market. The aggressive pricing strategy constitutes "conduct" under the CCA.

However, the purpose element may be difficult to establish, as Trump's strategy aimed to gain the "upper hand" in the market, which could be interpreted as competitive rather than anti-competitive conduct. Additionally, the effect or likely effect of substantially lessening competition is not clearly evident, as only one competitor (Biden) went into liquidation, while others remained in the market.

Therefore, while Trump's conduct was aggressive and may have harmed competitors, it is less clear whether it contravened Section 46(1) by substantially lessening competition in the relevant market.

Question 1.2:

The key provisions of the CCA that are potentially relevant to Bush's conduct are:

1. Third-line forcing (Section 47)
2. Exclusive dealing (Section 47)
3. Anti-competitive agreements (Sections 45 and 45E)

Third-line Forcing (Section 47)

Section 47(6) of the CCA prohibits third-line forcing, which occurs when a corporation engages in conduct that has the purpose, effect, or likely effect of requiring a person to acquire goods or services from a particular third party as a condition of acquiring goods or services from the corporation.

In the conversation between Mr. Bush and Mr. Trump, Mr. Bush stated that as a new condition of supply, Trump must buy all of its motor engine oil from Bush in addition to petrol. This conduct potentially falls within the definition of third-line forcing, as Bush (the supplier) is requiring Trump (the acquirer) to acquire motor engine oil (goods or services) from Bush itself (a particular third party) as a condition of acquiring petrol from Bush.

While there are some exceptions to the prohibition on third-line forcing, none appear to be clearly applicable in this case. Therefore, based on the available facts, there is a strong argument that Bush contravened Section 47(6) of the CCA by engaging in third-line forcing.

Exclusive Dealing (Section 47)

Section 47(2) of the CCA prohibits exclusive dealing conduct, which includes imposing restrictions on the acquisition of goods or services from competitors of the supplier. This provision aims to prevent suppliers from unreasonably restricting the freedom of customers to acquire goods or services from competitors.

In the conversation, Mr. Bush stated that as a new condition of supply, Trump "cannot buy any fuel from any other supplier." This condition constitutes exclusive dealing conduct, as Bush is imposing a restriction on Trump's ability to acquire petrol (goods) from competitors of Bush.

While there are some exceptions to the prohibition on exclusive dealing, such as the conduct being reasonable in the circumstances, it is unlikely that these exceptions would apply in this case, given the potential for the conduct to substantially lessen competition in the relevant market.

Therefore, based on the available facts, there is a strong argument that Bush also contravened Section 47(2) of the CCA by engaging in exclusive dealing conduct.

Anti-competitive Agreements (Sections 45 and 45E)

Section 45 of the CCA prohibits corporations from making or giving effect to a contract, arrangement, or understanding that has the purpose, effect, or likely effect of substantially lessening competition in a market. Section 45E extends this prohibition to include agreements between competitors that involve price-fixing.

In the conversation between Mr. Bush and Mr. Trump, Mr. Bush stated that Trump "need[s] to sell [its] fuel at $1.50 or above, or else" face the loss of promotional discounts and have to comply with new supply conditions. This statement could be interpreted as an attempt by Bush to enter into an arrangement or understanding with Trump regarding the pricing of petrol, which would constitute price-fixing under Section 45E.

Furthermore, Bush's conduct in imposing new supply conditions (third-line forcing and exclusive dealing) could be viewed as giving effect to an anti-competitive arrangement or understanding with Trump, which would contravene Section 45.

While the facts do not explicitly state that Bush and Trump reached a formal agreement, the CCA covers informal arrangements and understandings, and the nature of the conversation suggests that Bush was attempting to impose anti-competitive conditions on Trump.

Therefore, based on the available facts, there is a reasonable argument that Bush contravened Sections 45 and/or 45E of the CCA by attempting to engage in anti-competitive agreements or arrangements with Trump.

Question 2.1:

Ford's conduct and the conduct of its representatives, including Mr. Ford, potentially contravene several provisions of the Competition and Consumer Act 2010 (Cth) (CCA), specifically:

1. Anti-competitive agreements (Sections 45 and 45E)
2. Misuse of market power (Section 46)
3. Exclusive dealing (Section 47)

Anti-competitive Agreements (Sections 45 and 45E)

Section 45 of the CCA prohibits corporations from making or giving effect to a contract, arrangement, or understanding that has the purpose, effect, or likely effect of substantially lessening competition in a market. Section 45E extends this prohibition to include agreements between competitors that involve price-fixing.

At the Meeting, Mr. Ford proposed that all attendees (who were competitors in the Ford motor vehicle market) agree to sell the Ford Falcon at $65,000 and the Ford Mustang above $150,000. This conduct clearly constitutes price-fixing, which is a per se violation of Section 45E.

Furthermore, the attendees agreed to hire an accountant to monitor their books and impose fines for non-compliance, indicating the existence of an arrangement or understanding to fix prices and enforce the agreement.

The subsequent conversation about pushing out smaller competitors (Washington, Jefferson, Lincoln, and Roosevelt) by targeted customer poaching and the formation of the "Gentleman's Club" further reinforces the argument that Ford and the attendees were engaging in anti-competitive agreements and arrangements in contravention of Sections 45 and 45E.

Misuse of Market Power (Section 46)

Section 46(1) of the CCA prohibits a corporation with substantial market power from engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition in a market.

As the manufacturer and exclusive wholesale supplier of Ford motor vehicles in Australia, Ford likely had substantial market power in the relevant market.

The conduct of proposing and enforcing the price-fixing agreement, as well as the discussions about pushing out smaller competitors, could be considered as conduct that had the purpose, effect, or likely effect of substantially lessening competition in the relevant market.

Therefore, there is a strong argument that Ford contravened Section 46(1) of the CCA by misusing its substantial market power to engage in anti-competitive conduct.

Exclusive Dealing (Section 47)

Section 47(2) of the CCA prohibits exclusive dealing conduct, which includes imposing restrictions on the acquisition of goods or services from competitors of the supplier.

During the Meeting, Mr. Reagan suggested that Ford should "stop supplying [Washington, Jefferson, Lincoln, and Roosevelt] with Ford motor vehicles" and "find a reason to tear up [their] supply contracts." This conduct could be interpreted as an attempt by Ford to engage in exclusive dealing by restricting the supply of Ford motor vehicles to certain dealers.

While Mr. Ford initially rejected the suggestion, the subsequent agreement to target those dealers' customers and push them out of the market could be viewed as giving effect to an exclusive dealing arrangement or understanding, which would contravene Section 47(2).

Liability of Mr. Ford

Under Section 76 of the CCA, individuals can be held personally liable for being involved in a corporation's contravening conduct. "Involvement" includes aiding, abetting, counselling, procuring, inducing, or being directly or indirectly knowingly concerned in, or party to, the contravention.

Based on the facts presented, Mr. Ford actively participated in and facilitated the anti-competitive agreements, arrangements, and understandings at the Meeting. He proposed the price-fixing agreement, agreed to the customer poaching strategy, and approved the formation of the "Gentleman's Club." Additionally, as the owner of Ford, he likely had knowledge of and authority over Ford's conduct.

Therefore, there is a strong argument that Mr. Ford was directly involved in Ford's contravening conduct and could be held personally liable under Section 76 of the CCA.

To avoid potential CCA liability, Mr. Ford should do the following:

1) Immediately discontinue and remove himself and any other party from any anti-competitive agreements, arrangements, or understanding;

2) Roll out an intensive compliance program throughout the entire Ford corporate family to ensure compliance with competition laws;

3) Cooperate and divulge fully all relevant facts and situations to the ACCC, shire probe the agency decides conduct an investigation ; and

4) Lastly, Mr. Ford should consider seeking legal counsel and potentially applying for leniency or immunity under the ACCCs Immunity Policy for Cartel Conduct.

Question 2.2:

The Teamsters' conduct potentially contravenes several provisions of the Competition and Consumer Act 2010 (Cth) (CCA), specifically:

1. Secondary boycotts (Sections 45D and 45DB)
2. Anti-competitive agreements (Sections 45 and 45E)

Secondary Boycotts (Sections 45D and 45DB)

Section 45D of the CCA prohibits secondary boycotts, which occur when two or more persons engage in conduct that hinders or prevents a third party from supplying goods or services to another person, or from acquiring goods or services from another person.

Section 45DB further prohibits a person from engaging in conduct that constitutes or would constitute the involvement in a contravention of Section 45D.

In this case, the Teamsters engaged in conduct by setting up picket lines and blockades to prevent Washington, Jefferson, Lincoln, and Roosevelt (the third parties) from acquiring Ford motor vehicles from Ford (another person).

The Teamsters' conduct also hindered or prevented Ford from supplying Ford motor vehicles to those third parties.

The purpose of the Teamsters' conduct was to "hurt them [Washington, Jefferson, Lincoln, and Roosevelt] in the hip pocket" and "make their businesses suffer" because they were not members of the Teamsters union.

Anti-competitive Agreements (Sections 45 and 45E)

Section 45 of the CCA prohibits corporations from making or giving effect to a contract, arrangement, or understanding that has the purpose, effect, or likely effect of substantially lessening competition in a market.

The Teamsters' conduct, as directed by Mr. Hoffa and Mr. Fitzs, could be interpreted as giving effect to an arrangement or understanding between the Teamsters and Ford (or its representatives) to substantially lessen competition in the relevant market by targeting and hindering the operations of Washington, Jefferson, Lincoln, and Roosevelt.

While there is no explicit agreement mentioned in the facts, the conversation between Mr. Hoffa and Mr. Ford's statement that "none of the employees at Washington, Jefferson, Lincoln and Roosevelt are union members" could potentially be construed as an implied understanding or arrangement.

Additionally, Section 45E prohibits agreements between competitors that involve price-fixing. While the Teamsters is not a competitor in the relevant market, its conduct in attempting to influence the prices charged by Washington, Jefferson, Lincoln, and Roosevelt could potentially be viewed as engaging in or giving effect to a price-fixing agreement or arrangement.

Permitted Conduct under the CCA

The CCA recognizes certain exceptions and exemptions for specific types of conduct, including conduct by employees and employers in relation to their employment relationships.

Section 51(2)(a) of the CCA provides an exemption for anything done by employees or employers in relation to their employment relationship, such as negotiations for employment terms and conditions.

Therefore, if the Teamsters' conduct is considered to be directly related to the employment relationship between the union members and their employers (Washington, Jefferson, Lincoln, and Roosevelt), it may potentially be exempt from the application of the CCA under Section 51(2)(a).

However, the extent of this exemption is not clearly defined, and the Teamsters' conduct in this case appears to go beyond mere negotiations for employment terms and conditions. The conduct involves targeted actions aimed at hindering the businesses of Washington, Jefferson, Lincoln, and Roosevelt, which may fall outside the scope of the exemption.

Finally, it is important to note that even if the conduct of the Teamsters would not be considered a contravention, the uncertainty of exemptions and reliance on the employment relationship in section 51 2(a) would still leave the organization at a risk of being found liable. Ultimately, the analysis of whether the Teamsters, in this case, have contravened the CCA would require a detailed examination of all the provided facts and precedents in relevant case law.

Nevertheless, based on the available information, there is a high risk that the actions of the Teamsters, and especially the nature of the secondary boycott, may be found a contravention. To ensure their conduct is compliant with the CCA, they must act extremely cautiously and ascertain they are not performing any prohibited activities.

Moreover, it is crucial to remember that exposing the organization to such risks may result in serious outcomes, including heavy pecuniary penalties, serving injunctions, and possibly criminal liability for the individuals engaging in carteling.

To avoid the contraventions, the Teamsters should Immediately cease any potential establishment of the secondary boycott, or any other prohibited activity, Develop a CCA compliant program of adherence to the legislation. Provide guidelines to members on activities allowed under the law, Seek advice from the ACCC on the possibility of voluntarily disclosing Teamsters compelling evidence under the Immunity Policy for Cartel Conduct . Failing to these actions, they risk serious liability under the CCA.

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