Exports and the Trade Practices Act/Australia

Exports and the Trade Practices Act

Guidelines to the Commission's approach to mergers,
acquisitions and other collaborative arrangements that aim to
enhance exports and the international competitiveness
of Australian industry

Australia

September 1997

Section 3. Forming other collaborative arrangements

Apart from mergers and joint ventures there are other vehicles in which firms may organise themselves that can be used to enhance international competitiveness. Firms may choose to form a consortium in respect of export operations, or make an export agreement which can be registered with the Commission.

This section outlines the sorts of issues the Commission takes into account when considering these other forms of collaborative arrangements.

Export agreements

Most nations exempt export agreements or export associations from competition regulation, and Australia is no exception. Some countries (including the United States and Australia) are, however, concerned that competition-reducing spillover effects be avoided in domestic markets, and require some sort of registration and disclosure of the arrangement. ¹⁹

How does the export agreement exemption operate?

The Trade Practices Act already provides for making export agreements in s. 51(2)(g). This excludes the Commission from considering under Part IV of the Act (which contains the restrictive trade practices provisions) any provision of a contract, arrangement or understanding that relates exclusively to the export of goods from Australia, or to the supply of services outside Australia provided that particulars are submitted to the Commission within 14 days of the contract, arrangement or understanding being arrived at.

In relation to information to be submitted to the Commission the following should be noted.

Particulars must be full and accurate.

Particulars are to include any method of fixing, controlling or maintaining prices for the goods or services, but not actual particulars of such prices.

The particulars are recorded by the Commission on a register that is not open to the public.

On an application by a party to the export agreement the Commission will provide that party with a certificate signed by a member of the Commission specifying the particulars so furnished and the date on which they were furnished. ²⁰

The consequence of failure to submit particulars is that the provision will not be excluded from consideration in the context of a contravention of Part IV.

The provision must relate exclusively to the export or supply, and to no other matters except such export or supply, to fall within the exemption. A provision in the same agreement that is concerned with the ancillary aspects of export or supply (e.g. movement of goods from the point of manufacture to the point of departure in Australia) may be regarded as being part of the export contract.

However, if a provision of an export agreement relates to supply or pricing in the domestic market in any way, it will not fall within the exemption. For instance, if an export pricing arrangement is notified to the Commission under s. 51(2)(g), any part of the arrangement that might relate to pricing on the domestic market will not relate exclusively to the export of goods and will not fall within the exemption.

Over the years around 400 export agreements have been notified to the Commission.

Export consortia

Firms might wish to build a consortium to jointly develop products or marketing strategies to service export markets. The formation of export consortia can help achieve such efficiencies as economies of scale in distribution and in information gathering which are necessary to penetrate a foreign market.

As with export agreements, a concern of the Commission will be that exporters can use the formation of such consortia to increase market power in the domestic market. The Commission is open to arguments that an export consortium has been structured in a way such that domestic competition will not be substantially lessened, so that coordination of supply to overseas markets and information exchanged in an export consortium is quarantined from activities undertaken on the domestic market. The consortium may be structured so as to include, for example, the institution of 'ring fencing' arrangements to contain information flows, or of pricing methods for the domestic market which use import or export parity prices as competitive benchmarks.

Clearly, proposals will need to be addressed on a case-by-case basis. This is particularly so given the fact that each export consortium will differ according to industry, market, level of technology etc.

Where the operations of export consortia may impact adversely on the competitiveness of the domestic market, the Commission would encourage parties to apply for authorisation on net public benefit grounds. As mentioned above in respect of the authorisation process, export enhancement, import replacement and international competitiveness issues will be taken into account as public benefits.

Export agreements and export consortia provide alternative avenues for firms that want to enhance exports. In any examination of such arrangements, Commission procedures allow for the taking into account of international competitiveness issues.

Endnotes

Section 3

¹⁹ Scherer F., Competition Policies for an Integrated World Economy, The Brookings Institution, Washington, 1994, at 46. back

²⁰ See s.166 of the Act. back

[Section 1. Background to the guidelines]
[Section 2. The process of merger review and authorisation]
[Section 3. Forming other collaborative arrangements]
[Section 4. The international framework of collaborative arrangements]
[Section 5. Suggested checklist]
[ACCC export contact officers]