ACCC Guidelines on Concerted Practices outline the new risks for interactions with competitors ‒ is your business ready?

By Michael Corrigan, Alexander Vial and Amy Hayes
11 Oct 2018
Australian businesses need to educate their employees about the risks of sharing information or otherwise co-operating with competitors.

The ACCC has recently finalised its Guidelines on the new prohibition of anti-competitive concerted practices. Given the heavy penalties of up to10% of annual turnover or $10m per contravention that can be imposed for engaging in anti-competitive concerted practices, the final Guidelines are a useful reminder that Australian businesses need to educate their employees about the risks of sharing information or otherwise co-operating with competitors.

Examples of risky concerted behaviour include:

  • sharing with your competitors pricing and competitively sensitive information and data (eg. sales revenues; changes in product design or availability, location of customers, quantities sold, future restrictions in output), including via third parties;
  • signalling to your competitors the timing or size of future price increases or reductions in discounts;
  • discussing with competitors your business concerns or challenges to industry profitability (eg that margins are low or discounts need to be "reined in"); and
  • sharing details of proposed tender responses with a competitor prior to the tender completing.

Following the Harper Reforms in November 2017, the Competition and Consumer Act 2010 (Cth) (CCA) now prohibits a corporation from engaging in a concerted practice with one or more persons if it has the purpose, effect or likely effect of substantially hindering or lessening competition in an Australian market.

What may constitute a “concerted practice” is left at large and is not defined in the CCA, making it difficult to know how this provision will be interpreted and applied.

Key takeaways from the ACCC's final Guidelines on concerted practices

While the ACCC's final Guidelines do not attempt to list out all the circumstances in which a concerted practice may be found, the Guidelines set out a few examples and pose a number of issues which are likely to be relevant in identifying a concerted practice.

The risky circumstances identified by the ACCC include:

  • Co-operative versus independent behaviour: A concerted practice may involve "any form of co-operation" with competitors including privately sharing information, but according to the ACCC final Guidelines, this doesn’t necessarily require the parties to act in the same way, nor is it always necessary for a recipient of information from a rival to alter their behaviour in response in order for it to amount to a concerted practice.
  • "One-off" conduct can be unlawful: The ACCC considers that a single information exchange may in some circumstances be sufficient to constitute a concerted practice. The ACCC's final Guidelines state that "a concerted practice may arise from a single instance of information being provided by one person".

    We note that this is controversial, particularly given the Oxford and Macquarie dictionary definitions of "practice" each include requirements of "a customary or habitual" way of doing something, "a habit or custom", or "repeated performance".

  • Parallel conduct of itself is not unlawful: The ACCC's final Guidelines explain that concerted practices "should be distinguished from parallel behaviour arising simply as a result of a person's independent response to market conditions" and is "not by itself evidence that those competitors are engaged in a concerted practice".

    Publishing prices to customers is not usually considered risky unless new prices are signalled well before they apply and are distributed to competitors as well as bona fide customers;

  • Using the information provided by a rival increases the risks: According to the Guidelines, the ACCC is more likely to conclude a concerted practice has the purpose of harming competition where competitively sensitive information is exchanged between competitors where the recipient acts (intends to act, or is expected to act) on the information.
  • Conduct must satisfy the "substantially lessening of competition" test: A concerted practice will only contravene the CCA if it has the purpose, or has or is likely to have the effect, of substantially lessening or hindering competition in a relevant Australian market. This requires an assessment of the likely impact of the shared communications on the market, compared to the likely state of the market had the information not been shared.

How can you manage your risk of contravening the prohibition on concerted practices?

In accordance with the recommendations set out in the ACCC final Guidelines, the following risk management initiatives may be taken:

  • compliance programs need to be updated and reinforced;
  • employees should not attend industry gatherings or industry association discussions without some understanding of the legal risks and how to manage them;
  • social contact with competitors can also be risky; and
  • industry associations which have arrangements to collect and share data (eg sales or product information) among members should have their arrangements reviewed to ensure they are compliant.

If you or your business unexpectedly receives unsolicited, commercially sensitive information from a competitor, you should:

  • take immediate steps to make it clear that you do not wish to receive or act upon the information;
  • act in a which gives effect to this intention (i.e. reply immediately, and do not use or act upon the information in any way); and
  • where appropriate, you may wish to consider whether to notify the ACCC of the conduct.

It remains to be seen how useful the ACCC's final Guidelines will prove to be given the Australian courts will reach their own interpretation on the new law, and are of course not bound to follow the ACCC's final Guidelines.

Nevertheless, the final Guidelines do provide an insight on how the ACCC is likely to approach concerted practices during an investigation.

Please contact us if you would like our help to ensure your business is compliant.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.