01 Mar 2018
ACCC announces compliance and enforcement priorities for 2018
Mihkel Wilding, Noni Nelson, and Naomi Zhang
Expect the ACCC's enforcement activity to increase on the back of the outcome of numerous market studies, and a renewed focus on large and small cartels, as well as higher penalties for Australian Consumer Law breaches such as false and misleading conduct.
2018 is shaping up as another very busy year for competition and consumer law. Following the changes to the Competition and Consumer Act 2010 (Cth) which took effect in November 2017, and Treasury's ongoing public consultation on proposed changes to the Australian Consumer Law (ACL), the announcement of the ACCC's investigation and enforcement priorities should not be entirely unexpected or surprising. However, there are specific areas which should result in more ACCC activity. A snapshot of those areas is set out below:
When announcing the Australian Competition and Consumer Commission's plans for the coming year, Chairman Rod Sims emphasised an intention to focus on the areas and issues that "are really relevant to the lives of ordinary Australians" such as competition in electricity and gas markets. He also stressed the ACCC's desire for increased penalties in consumer law cases where the ACCC's view is that the detriment is at least commensurate to cartels and in many cases higher.
The ACCC has recently completed, and has several ongoing, market studies in relation to the new car retailing industry, communications sector, residential mortgages, gas, electricity supply and prices, dairy, and cattle and beef. For example, on 26 February, the ACCC invited public submissions in response to an Issues Paper it released as part of its inquiry into digital platforms. Submissions are due 3 April 2018 and the ACCC is interested in assessing the market power of digital platforms, implications for content creators, advertisers and consumers, longer term trends in media and advertising, and the effectiveness of current regulation.
Banking and financial services
The Banking Royal Commission and financial services inquiries by APRA are not the only areas that will be keeping banks and other financial institutions busy this year.
In the 2017-18 Budget, the ACCC was given a funding of $13.2 million over four years to establish a Financial Services Unit to undertake regular inquiries into competition issues across the financial system. An additional $1.2 million has been provided for a price inquiry into residential mortgage products; an interim report is expected in the next couple of months.
Targeting misuse of market power and concerted practices
The new concerted practices and misuse of market power provisions will be a major focus for an ACCC that fought hard for these provisions and intends to use them in cases which it could not bring before the provisions were introduced.
For concerted practices, expect it to be used where there are communications or practices which do not amount to an agreement or an understanding as to any specific plan, but which nonetheless assist the parties to reduce or avoid competing with each other by reducing the uncertainty that competition on the merits brings.
In the cases of concerted practices, unilateral conduct by a firm with substantial market power may now also breach the Act where it has the purpose or effect of substantially lessening competition.
The "substantial lessening of competition unit" established following the Harper Review will focus on investigations and enforcement under the concerted practices prohibition and other provisions of the CCA where the test is whether conduct has the purpose or effect of substantially lessening competition. This is an area where the ACCC is keen to increase its activity, on the basis that it has not done enough to test problematic conduct under this test.
Higher penalties for breaches of the consumer law
One of the key messages of Chairman Sims was a desire for increased penalties in competition and consumer law cases under the "percentage of turnover" limb of the penalty provisions of the CCA . For some time, the ACCC has considered the penalties for unlawful conduct in Australia are too low and is keenly awaiting an OECD report at the end of March which will compare penalties in OECD jurisdictions. It is expected that that OECD report will show that penalties for competition and consumer law breaches in Australia are less than in Europe, the US and some Asian countries.
If this is the case, it is likely to give further momentum to the Bill which was introduced to Parliament last week to increase consumer law penalties from a current maximum of$1.1m per contravention to the greater of $10m, three times the benefit obtained or, where benefit cannot be calculated, 10% of total annual turnover (i.e. the standard which applies to competition law breaches). This "profound change" is designed to ensure that the current low penalties are not seen as a cost of doing business (especially by big business such as large multinationals).The idea is that large businesses should "bear penalties which are commensurate to their size, in order to achieve [the ACCC's objectives of] specific and general deterrence".
More cartel prosecutions
Cracking cartels are always an enduring priority for the ACCC. ACCC action against cartel conduct is set to ramp up with Chairman Sims noting the recent prosecutions involving Japanese shipping companies as well as the first criminal cartel prosecution against an Australian company and its managers, Country Care Group Pty Ltd (the first Australian action where individuals have been prosecuted).
This year Mr Sims has indicated that the ACCC is "working very hard on a number of live investigations at an advanced stage" and that it intends to be very deliberate in referring up to five potential criminal cartel actions to the DPP. Its focus will not be on technical cartels, but on cartels, large and small, which take advantage of the vulnerable or have widespread consumer detriment ‒ that is cartels where the public would say "of course you should take them on".
As always, business should expect the ACCC to be proactive during 2018 and to seek to enforce the new provisions of the CCA. Businesses, especially those which are well established, should familiarise themselves with the ACCC's agenda and prepare for scrutiny. Should you require assistance with any of these issues please get in touch.