Third line forcing in financial services update

The Competition and Consumer Amendment (Competition Policy Review) Act 2017 amends the Competition and Consumer Act 2010 to prohibit exclusive dealing by third line forcing only where it has the purpose, effect or likely effect of substantially lessening competition. As a result the previous provision in subsection 47(10A) of the Competition and Consumer Act 2010, which specifically deals with notifications for third line forcing, is repealed.

The effect is that a financial services provider can engage in third line forcing without the need for notification to the ACCC unless it substantially lessens competition.

Third line forcing involves the supply of goods or services, or the giving of a particular price or discount, on the condition that the purchaser also acquire goods or services from another unrelated person, or a refusal to supply because the purchaser will not agree to such a condition.

Previously third line forcing was prohibited irrespective of its purpose, effect or likely effect and was only exempted and protected from legal action by filing a notification with the ACCC under section 93 of the Act. The Commission could revoke the notification if it considered that the likely public detriment from the conduct outweighed the likely any public benefit from the conduct.

For example in In Re Kur-ring-gai Cooperative Building Society (No 12 ) Ltd (1978) the society lent money on the condition that insurance was obtained from a named insurer. It was held to be third line forcing.

The Harper Review found there was no need for third line forcing to be prohibited if it was not anti-competitive. The Harper Review acknowledged the availability of an exemption through the notification process, but found that the regulatory cost of lodging a notification is unnecessary, because in most cases the notification will be allowed.

The Harper Review recommended that third line forcing be prohibited only where the conduct has the purpose, effect or likely effect of substantially lessening competition. The amendment reflects that recommendation.

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