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2019 Change to Competition Law rules regarding Intellectual Property (IP)

In September 2019 the Federal Government deleted section 51(3) from the Competition and Consumer Act (CCA). This section had exempted some IP transactions from the rules against anti-competitive conduct. IP transactions will now be governed by the basic CCA ban that prohibits conduct with the purpose or likely effect of substantially lessening competition in relevant markets. As some IP transactions may fall within those parameters, parties planning to deal with IP should keep that in mind.

The Competition Commission has issued some guidelines, the effect of which we  summarise below:

  1. A ‘bare exercise’ of IP rights created by statute -eg patents trademarks or copyright- will not breach the CCA rules. This would include an outright sale or licence to use such rights for a specific period.
  2. Some arrangements that go beyond a ‘bare exercise’ of IP rights may breach the rules.
  3. Possible examples  could be:
    1. Where they involve ‘cartel’ conduct between 2 or more competitors, designed to limit the supply of their product to the market for the benefit of those parties.
    2. Where they have an anti-competitive purpose or effect, such as unduly favouring one party over another in relation to allowable production volumes or market pricing.
    3. Where they constitute ‘exclusive dealing’ defined by the CCA, such as where a party is granted a licence to distribute a film on condition that it is limited to specific cinema outlets.