11 Dec 2012

Australian enforcement priorities: The Australian Competition and Consumer Commission gets focused

by Elizabeth Richmond, Linda Evans

The ACCC will not wait for consumer complaints, but will take a strategic approach to enforcement by identifying the areas that it considers deserve its focused attention

Australia is experiencing change in the way the Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), is approaching its enforcement role. Consequently, Australian antitrust law practitioners have greater insight into the issues vexing the ACCC than ever before.

Until now, the ACCC, like many regulators, has primarily used complaints from customers and competitors as the trigger for investigations and the institution of proceedings.

That has led to an ad hoc collection of investigations and cases. The ACCC has recently decided that there must be a better way to do things. So it has decided to take a “strategic” approach to enforcement by identifying the areas that it considers deserve its focused attention and could involve substantial detriment to consumers or competition.

The ACCC’s clear intent is to put its money where its mouth is in the coming financial year and devote more than half of the ACCC’s investigation and enforcement resources to these priority areas.

ACCC objectives for 2012/2013

The ACCC has identified five high-level objectives for 2012/2013. These are to:

  • make full use of the changes in the Australian Consumer Law (ACL) (see in particular Schedule 2 to the Competition and Consumer Act 2010 (CCA)) concerning consumer-related matters, such as misleading and deceptive, and unconscionable, conduct;
  • act against widespread consumer detriment with a particular focus on vulnerable consumers;
  • maintain or enhance competition in concentrated markets;
  • invigorate debate on the effective regulation of monopolies;
  • increase the ACCC’s engagement internationally, particularly within the Asia-Pacific region.

Within these high-level objectives, the ACCC has also articulated a number of very specific enforcement and compliance priorities over the medium-term. These include (1) acting against conduct that impedes emerging competition in online trading; (2) acting on competition and consumer issues in highly concentrated sectors – in particular, supermarkets and fuel; (3) education and enforcement in relation to cartels; (4) ensuring carbon pricing representations are accurate and not misleading; (5) raising awareness of the ACL consumer guarantees regime; and (6) providing consumer protection that impacts positively on vulnerable consumers (including indigenous consumers).

Why does this matter?

To companies operating in Australia, the ACCC’s clear articulation of enforcement goals provides an insight into the ACCC’s priorities that has never previously been available. This enables companies to take a more proactive approach towards monitoring and enforcing compliance by focusing on the priority areas.

Examples of enforcement priorities

Online trading. While bricks and mortar retailers in Australia are still grappling with the notion of competing effectively with online stores, for the ACCC, the real focus is on the kinds of conduct that may be occurring on the web in breach of the law. To a certain extent, the conduct that has been targeted by the ACCC has occurred as a consequence of the competitive dynamic between bricks and mortar stores and online retailers.

For example, within the last year, the ACCC has brought actions in the Federal Court of Australia for resale price maintenance against three different wholesalers who were distributing their products via traditional stores and online retailers. In each case, the online retailers were required by the wholesaler to sell products above a specified minimum price so as not to cannibalise sales from the wholesaler’s retail stores.

Penalties, court enforceable undertakings and corrective advertising were ordered, and, in the one case, a director was ordered to pay a penalty of A$10,000 due to her personal involvement in the conduct.

Similarly, the ACCC has taken aim against an online retailer of airline tickets, Flight Centre. In Federal Court proceedings, the Commission alleges that, on six occasions between 2005 and 2009, Flight Centre attempted to induce international airlines Singapore Airlines, Malaysian Airlines and Emirates to agree to stop directly offering and booking their own international airfares (including over the internet) at prices less than Flight Centre offered. The ACCC says that the purpose and likely effect of the arrangements sought by Flight Centre is to maintain the level of Flight Centre’s commissions, amounting to price-fixing in contravention of section 45 of the CCA.

The claim is being defended on the basis that the ACCC has misinterpreted Flight Centre’s legitimate attempts to seek access to the airlines’ fares available over the internet for its own customers, and that it is an agent for airlines, not a competitor to them. The matter went to hearing in October and judgment is currently reserved.

Finally, the ACCC took issue with an Australian online seller of tickets, Ticketek, over its refusal to permit a competing retailer of tickets to access its ticket sales system for the purposes of selling last-minute tickets to events. This, it was alleged and subsequently held, was a misuse of market power in the ticketing-related services market, and a penalty of A$2.5m was imposed. What is apparent from these examples is that, while the enforcement issues being addressed by the ACCC relate to cyberspace, they are not unique but are another manifestation of anticompetitive conduct, albeit with an online dimension.

Concentrated sectors. Australia is characterised by a number of business sectors where there are few suppliers of goods or services. Banking, supermarkets and petrol are examples of such business areas. The ACCC has consistently reviewed the levels of competition with these sectors.

For example, the ACCC is currently conducting inquiries into the business-to-business supply chain practices in the supermarket sector. The fundamental question here is whether the large and concentrated supermarket chains are misusing their market power or engaging in unconscionable conduct when purchasing products from suppliers.

Similarly, the ACCC is also currently reviewing the petrol industry (1) seeking further information to assess the impact on competition arising from the current approach by market participants to the level and frequency of “shopper-docket” discounts, these being discounts awarded to shoppers by the supermarket chains who are affiliated with petrol suppliers for the purchase of petrol; and (2) considering concerns raised by consumers that the prominent display of discounted petrol prices on fuel price boards are misleading.

In 2011, the ACCC was instrumental in causing the CCA to be amended to introduce a prohibition against “price signalling”. Specifically directed at the banking sector, this amendment (which came into effect in June 2012) prohibits banks from making a private disclosure of pricing information to a competitor, and from making a wider disclosure of other material information if the purpose of doing so is to lessen competition in a market substantially.

These provisions were introduced because of the ACCC’s concern that the banks were signalling to one another their likely response to a change in interest rates by the Reserve Bank in advance of such a change.

Although these provisions have not yet been the subject of any litigation, the ACCC’s position is clear that such conduct can only be addressed through legislation, followed as necessary by enforcement action.

Enforcing against cartels. The ACCC has always maintained a focus on enforcing against cartel conduct that affects a market in Australia, and has previously made clear statements to the effect that stamping out cartel conduct is an enforcement priority. To this end, it first introduced an immunity policy in 2003.

However, in recent times, it has pursued this goal with vigour. Indeed, in his first speech as chairman of the ACCC, Rod Sims expressed the view that the ACCC should litigate more frequently, and take more cases where the outcome is unpredictable and ACCC success less assured.

Mr Sims’s litigious approach is now reflected in the ACCC’s enforcement goals and in the ACCC actively seeking to test the law in areas where its scope and application are uncertain. In a speech in August 2012, Mr Sims said that the ACCC was then involved in (1) 12 cartel investigations, including approaches under the immunity policy; (2) eight in-depth investigations; and (3) 10 proceedings in the Federal Court alleging cartel conduct or price-fixing agreements between competitors.

Since the introduction of criminal penalties and imprisonment for individuals for cartel conduct in July 2009, the ACCC has stepped up its campaign to educate the public about cartel conduct, and about its immunity policy, which remains the most important tool in its possession for combating cartels. For example, in August 2012, the ACCC released a short online film called “The Marker” as part of this campaign, with the intention of publicising both the role of the immunity policy and the criminal penalties attaching to cartel behaviour. This film was specifically focused on white-collar cartel conduct, and the ACCC took the step of notifying corporations and industries within Australia of the film’s release, and getting the express endorsement of the CEO of a leniency applicant.

The ACCC is yet to commence proceedings in Australia under the criminal provisions of the CCA. However, it is currently conducting all of its investigations in a manner consistent with its expectation that criminal proceedings will be brought in due course.

Enforcing the ACL. In a substantial amendment to the CCA, the Australian federal government introduced the ACL in 2010, and it came into effect on 1 January 2011.

Since then, the ACCC has been very active in making full use of the ACL regime. This includes using the investigative powers granted by the Australian Consumer Law and pursuing enhanced pecuniary penalties for non-compliant conduct. In the year to June 2012, more than A$10.7m in penalties had been awarded by the Federal Court, and 34 infringement notices for lesser breaches of the ACL were also issued.

In 2012, the ACCC commenced actions against major international corporations carrying on business in Australia under the ACL. Both Apple and Google, for example, have been the target of proceedings for misleading and deceptive conduct. Apple paid a penalty by agreement with the ACCC of A$2.25m plus costs, while Google is currently appealing the decision against it to the High Court of Australia.

Most recently, in October 2012, the ACCC commenced proceedings against Hewlett Packard (HP), alleging that it made false or misleading representations about statutory warranties, and consumer guarantee rights, refunds and replacements, by telling customers that an HP product would need to be repaired multiple times before they were eligible for a replacement; that customers would need to pay for repairs to faulty products if they were made following the expiry of an express warranty period; and that products purchased from HP could not be returned or exchanged without authorisation from the vendor.

Of particular note, in the proceedings against both Apple and HP, the ACCC chose to take action by instituting proceedings under the Federal Court’s fast-track procedures. These provide for a compressed timetable, and therefore a swift outcome. They also attract intense media interest and therefore serve as a component of the ACCC’s educative campaign.

What next from the ACCC?

The ACCC will continue to pursue these goals actively and will bring enforcement actions when necessary. Having started on the path of identifying its enforcement priorities, it is likely that it will continue to do so, thus providing guidance to practitioners and corporates alike. To that end, there is, perhaps, less scope for corporates within Australia, or those that seek to do business with Australia, to say they have been taken by surprise.

Given there is a fine line between behaviour that represents robust market behaviour that benefits society and conduct that breaches the law, in the current environment in Australia, the risk of enforcement must therefore be factored into decisions that come close to the line.

This article was first published in Competition Law Insight, 11 December 2012

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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.