Last updated: October 2018

Introduction

The object of Australia's Competition and Consumer Act 2010 (Cth) (CCA) is “to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”. To achieve this objective, the CCA has a far-reaching scope, which has led to it being one of the most frequently litigated pieces of legislation. It has also made the Australian Competition and Consumer Commission (ACCC), principal competition and consumer law regulator in Australia, one of the most active and high-profile regulators in Australia. The ACCC is a prosecutorial agency, which means it can only obtain remedies by bringing matters before the Federal Court of Australia. It does not have the power to impose remedies on its own, such as fines or merger prohibitions.

The ACCC vigorously enforces the CCA’s cartel provisions, which can lead to civil penalties or criminal sanctions for cartel conduct, including substantial fines and jail terms of up to 10 years.

The CCA:

  • prohibits cartels and anti-competitive conduct such as concerted practices and abuses of market power
  • provides for private damages actions for anti-competitive conduct on a ‘single damages’ basis
  • imposes personal liability for individuals, such as executives and management personnel knowingly involved in cartel conduct
  • imposes access obligations on monopoly infrastructure owners, which allows others to access and use that infrastructure in certain circumstances
  • prohibits misleading or deceptive conduct, as well as unconscionable conduct, in commercial and consumer transactions
  • prohibits unfair terms in contracts involving small businesses and consumers
  • sets out statutory guarantees related to the safety and quality of goods and services in consumer contracts
  • establishes a strict liability regime for manufacturers that produce defective goods.

The last two categories are partly the province of product liability law, which is covered in the Product liability chapter of this guide. This section primarily addresses the competition aspects of the CCA.

A series of amendments made to the CCA in November 2017 broadened its scope by:

  • prohibiting businesses from engaging in concerted practices that may substantially lessen or hinder competition in Australian markets
  • prohibiting businesses with a substantial degree of market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening or hindering competition in relevant Australian markets.

Competition provisions

The CCA’s competition provisions seek to regulate conduct in Australian markets and, to a lesser extent, the structure of those markets.

These provisions:

  • prohibit certain conduct absolutely – including cartel conduct, for which criminal and civil sanctions apply
  • prohibit other unilateral, horizontal and vertical conduct in markets where the conduct has the purpose or effect of substantially lessening or hindering competition in an Australian market
  • prohibit mergers or acquisitions that have the effect or likely effect of substantially lessening or hindering competition in an Australian market
  • require owners of monopoly infrastructure to provide access, in limited circumstances, to third parties on reasonable terms under an access regime.

Cartels

Cartel conduct is strictly prohibited. It includes agreements, arrangements or understandings between competitors designed to fix, control or maintain prices; or restrict supply to particular people or groups of people, or rig tenders (including collective boycotts, bid rigging and market allocation).

The ACCC vigorously enforces the CCA’s cartel provisions, breach of which may lead to civil or criminal sanctions, including substantial fines and jail terms of up to 10 year. ‘Follow on’ damages actions are also available for private persons affected by the conduct, including via class actions.

The Commonwealth Director of Public Prosecutions can bring a criminal prosecution against corporations and management personnel knowingly involved in cartel conduct.

Many corporations and individuals have been prosecuted for cartel conduct as at June 2018. These include two shipping companies and an Australian rehabilitation and aged care company, as well as three banks and six of their executives. Most of these matters remain before the courts.

The maximum civil penalty for each individual breach of the CCA’s cartel provisions for a corporation is the greater of A$10 million, three times the gain from the unlawful conduct, or 10 per cent of the annual turnover in the relevant market. The maximum penalty for an individual is A$500,000.

The highest civil penalty for cartel conduct to date is A$46 million, which was imposed on Japanese company Yazaki in a civil case in May 2018. In August 2017, a A$25 million criminal fine was awarded against NYK, an international shipping line that admitted giving effect to cartel provisions in an arrangement or understanding with other shipping lines relating to the transportation of motor vehicles to Australia between 2009 and 2012.

Resale price maintenance – that is, setting the minimum price at which goods or services can be on-sold – is also strictly prohibited, although the ACCC has the power to authorise such conduct on efficiency or public benefit grounds.

Other competition law prohibitions

Australian competition law includes two significant recent changes.

First, a prohibition against concerted practices that have the purpose, effect or likely effect of substantially lessening competition in Australian markets. This change, which draws on lessons from UK and European competition law, catches communication between competitors that involves cooperation but something less than an understanding or agreement between them.

Concerted practices can arise between competitors who share information in a way that affects their independence as competitors. And such conduct need not involve any element of ‘commitment’ between the parties for there to be a breach, as is otherwise required under the cartel provisions.

Secondly, a prohibition on unilateral conduct or misuse of market power. The CCA now prohibits corporations with a substantial degree of market power in Australia from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in the Australian markets in which they directly or indirectly participate. This is a substantive change from the previous law, as it now incorporates both an ‘effect on competition’ test as well as purpose test. This will help align Australian law with the concept of market abuse as understood in Europe.

A range of other vertical and horizontal conduct that has the purpose or effect of substantially lessening competition in an Australian market is also prohibited, including:

  • agreements, arrangements or understandings of any kind that have this purpose or effect
  • any arrangement involving the exclusive supply of goods or services to particular people
  • some tying arrangements.

ACCC exemptions

The ACCC has the power to authorise some conduct that may otherwise infringe the CCA and grant an exemption if it passes a public benefit test.

Merger control in Australian markets

The CCA prohibits any acquisition of Australian assets or shares that has the effect or likely effect of substantially lessening competition in any market in Australia as a whole, or in a state, territory or region of Australia.

An acquisition of property outside Australia can also be reviewed if the acquirer or target carries on business in Australia and the acquisition affects competition in an Australian market.

The ACCC does not have a compulsory pre-notification requirement for mergers and acquisitions. However, refer to the Foreign investment section of this guide for details on Foreign Investment Review Board (FIRB) requirements. If FIRB approval is required, the FIRB will consult with the ACCC, which may then require a clearance application to be submitted.

The ACCC has an informal clearance process that enables merger parties to seek the ACCC’s view on whether it will grant informal clearance for a merger or oppose it (ultimately by seeking an injunction in the Federal Court).

The ACCC encourages merger parties to notify it where both of the following apply:

  • the products of the merger parties are either substitutes or complements
  • the merged firm will have a post-merger market share in Australia of more than 20 per cent in the relevant market/s.

The ACCC’s Merger Guidelines outline the analytical and evaluative framework the ACCC applies when reviewing mergers and acquisitions. It also provides guidance on the factors the ACCC considers relevant to its review. In considering the effect of a merger, the ACCC will examine a range of factors, including:

  • the level of import competition
  • the barriers to entry
  • the level of market share concentration in the market
  • whether the acquisition would result in the removal of a vigorous and effective competitor
  • the degree of countervailing power in the market
  • the ability of the merged entity to effect a significant and sustainable price increase
  • the extent to which substitutes are available in the market
  • the extent to which the market is undergoing change in terms of technological innovation, growth or concentration, or product differentiation
  • the nature and extent of vertical integration in the market.

It is common practice for merger parties to approach the ACCC for an informal clearance of a proposed merger. This can be done confidentially. Simple matters can be cleared through a pre-assessment process involving a desktop review. In more complex cases, the ACCC will usually reserve the right to make market inquiries once the transaction becomes public and will insist that the parties not complete the transaction until the review is finalised.

The ACCC can also authorise a merger on public benefit or efficiency grounds even if it is likely to have an anti-competitive effect. This test is rarely satisfied and the process is seldom used.

Access regulation to monopoly infrastructure

Australia has introduced a range of statutory mechanisms that create a right of access to monopoly infrastructure of national significance, sometimes colloquially called ‘essential facilities’.

Australia has a general access regime in the CCA as well as industry-specific regimes that are found in specific legislative instruments and industry codes and schemes.

The following industries are regulated under industry-specific regimes: telecommunications, gas, electricity, water, rail infrastructure, airports and postal services. The complexity and level of intervention in these regimes varies.

Australian Consumer Law

The Australian Consumer Law (ACL) took effect on 1 January 2011 and applies at the state, territory and federal levels.

The ACL establishes a national scheme for unfair contract terms, covering consumer terms, and terms in small business ‘standard form’ contracts.

It also sets out non-excludable consumer guarantees related to the quality of goods and services supplied in consumer transactions.

In addition, the ACL outlines a national regulatory framework for product safety, including penalties, enforcement powers and consumer redress options.

The ACL’s consumer protection provisions can be grouped into four broad categories:

  • product safety provisions, which outline mandatory consumer standards, product information standards and notification requirements for voluntary recalls, as well as the power to order mandatory recalls
  • consumer guarantee provisions, which provide that goods and services must be of ‘acceptable quality’ and fit for purpose. These provisions also set out remedies, including refund rights and compensation, which cannot be excluded
  • unconscionable, and misleading or deceptive conduct provisions, which are extremely wide-ranging
  • unsafe and defective goods provisions, which include a strict liability prohibition on manufacturing and importing unsafe or defective goods.

Misleading or deceptive conduct, and unconscionable conduct

Misleading or deceptive conduct in trade or commerce is prohibited. This strict liability prohibition covers advertising and marketing claims, product labelling claims and other business communications.

Anyone affected by misleading or defective conduct has a cause of action in damages and may be entitled to other compensatory remedies. These provisions have been relied on in a wide variety of cases, including pre-contractual negotiations and misleading advertising.

The ACCC is vigilant when it comes to misleading or defective conduct in consumer advertising.

Unconscionable conduct in trade or commerce is also prohibited. What is unconscionable is determined by considering a range of criteria, including:

  • the relative bargaining positions of the parties
  • whether the conditions imposed were reasonably necessary to protect legitimate interests
  • whether the alleged victim of unconscionable conduct was able to understand the relevant documents
  • the terms and conditions on which equivalent goods or services could have been obtained from another supplier
  • whether any undue influence or pressure was placed on a party, or unfair tactics used against them
  • any applicable industry code
  • the extent to which the parties acted in good faith.

The mere fact that one party to a transaction has superior bargaining power does not render their conduct unconscionable. Only where one takes advantage of their position so as to act without conscience or without regard to what is right and reasonable will one have acted unconscionably.

Consumer guarantees

Since January 2011, businesses that manufacture, sell, hire or lease consumer goods or services have been under an obligation to honour certain statutory guarantees. Consumer goods or services are those sold for:

  • less than A$40,000
  • more than A$40,000 if they are normally bought for personal or household use.

The CCA contains a number of automatic guarantees that apply regardless of any express warranties offered by the supplier. A supplier cannot exclude these guarantees, and penalties apply for attempting to do so. In addition, a consumer cannot sign away their rights to these guarantees.

Consumers can request a repair, replacement or refund if a product is faulty, and cancel a service if it has a major problem. They can also seek compensation for damages and loss.

The statutory guarantees can be summarised as follows:

  • the product acquired must be of acceptable quality (that is, it must have no faults and be in the condition that could be expected of the product) and match the product description
  • a service must be provided with acceptable care and skill or technical knowledge, taking all necessary steps to avoid loss and damage, and must be fit for the purpose for which it was acquired.

A consumer may claim against the guarantees for a ‘reasonable time’ after acquiring the relevant product or service. A reasonable time may change depending on the nature of the particular good or service. The guarantees do not apply where goods are acquired at auction or in the course of one-off sales from private sellers, or where the goods or services cost more than A$40,000.

Unfair contract terms

The prohibition on unfair contract terms applies to terms in ‘standard form’ contracts. A term in such a contract will be unfair, and therefore void and severable, if:

  • it is ‘one-sided’ – that is, it would cause a significant imbalance in the parties’ rights and obligations under the contract
  • it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term
  • it would cause detriment (financial or otherwise) to a party if it were to be applied or relied on.

Whether a term is unfair must be considered in the context of the contract as a whole. Terms that set out the price or define the product or service being supplied are not unfair. This also applies to terms that are required or permitted by another law, such as limitation of liability terms permitted under the ACL.

In November 2016, the ACL was amended to extend the prohibition on unfair terms to small business contracts.

A contract is a small business contract if:

  • it is a standard form contract
  • it is for the supply of goods or services, or a sale or grant of an interest in land
  • at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 people, and
  • the upfront price payable under the contract does not exceed A$300,000, or
  • the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed A$1,000,000.

In determining whether a term is unfair, a court must consider both the extent to which the term is transparent and the contract as a whole. Terms are likely to be considered transparent if they are expressed in plain language, legible and presented clearly

Country-of-origin labelling

The CCA contains specific rules about country-of-origin labelling.

Country-of-origin labelling is mandatory for some products, including food intended for human consumption, pharmaceuticals and some other products such as devices that emit or receive electromagnetic radiation or contain lasers (including many consumer electronics, which have specific regulations). Where country-of-origin claims are made, these rules must be followed.

In the case of food, different labelling requirements apply depending on whether it was:

  • grown, produced or made in Australia
  • packaged in Australia
  • grown, produced or made in another country
  • packaged in another country.

To be able to say that a food was ‘made’ in a specific country, it must have undergone its last ‘substantial transformation’ in that country.

To be able to label goods as the ‘product of’ or ‘grown in’ a certain country (for example, ‘Product of Australia’), each significant ingredient or component of the goods must be derived from the named country and all – or virtually all – processes involved in producing or manufacturing the goods must have occurred in that country.

There are also related provisions concerning the use of logos intended to designate a country of origin, such as the mark used to indicate that an article is made in Australian.

On 1 July 2018, a new country-of-origin food labelling system commenced under the ACL. Under the new system, if all the food in a display or package was produced, grown or made in Australia exclusively from Australian ingredients, it must display a label with:

  • the ‘kangaroo in a triangle’ symbol so that the food’s Australian origin can be easily and quickly identified
  • a statement indicating that the food was grown, produced or made in Australia and that its ingredients are exclusively Australian
  • a full bar chart to indicate that the food’s ingredients are exclusively Australian.

For most imported food – that is, food grown, produced, made or packaged in a country other than Australia ¬– the country of origin will need to be specified on a label in a clearly defined box.

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