A Strategic Behaviour Approach to Evaluating Competitive Conduct

Abstract

1concerning a proposed merger of flour millers. Here, the Trade Practices Tribunal (now the Australian Competition Tribunal, ACT) determined a methodology for analysing competition issues which was subsequently adopted by the Trade Practices Commission (now the Australian Competition and Consumer Commission, ACCC) as well as by the Federal and High Courts. The QCMA approach is to define the relevant market and then to assess whether the conduct at issue could result in an increase in market power and consequently a substantial lessening of competition. The approach is structural, based largely on the measurement of non-behavioural factors. The Tribunal concentrated on what can be called ‘group-structural’ features of the market because of its concern that, after a merger, the market could exhibit collusive tendencies as a result of increased concentration. The emphasis was on potential as well as actual substitute products and on the height of entry barriers. Little account was taken of the dynamic, rivalrous interaction between current sellers or between these incumbents and potential entrants. Much concern was expressed about the price effects of the merger; and price issues have dominated most of the subsequent applications of this methodology. The QCMA methodology did refer to the broad dimensions of competition, including non-price elements; it was noted that ‘there should be independent rivalry in all dimensions of the price-product-service packages offered to consumers and customers’. 2 Nevertheless, dynamic non-price rivalry, which individual firms undertake in orRhonda Smith is a Commissioner of the Australian Competition and Consumer Commission. David Round is Associate Professor of Economics at the University of Adelaide and an Associate Commissioner of the Australian Competition and Consumer Commission. The opinions expressed in this article are those of the authors alone.