Competition law update

In brief

In touch: Competition law update is a regular publication by the Allens Competition group to keep you informed of the latest news and developments in this area. For more information or for legal advice, please contact one of the Partners listed below. We look forward to hearing from you.

Significant news

ACCC has jurisdiction to arbitrate telecommunications disputes

The Federal Court has determined that the ACCC has jurisdiction under the Telecommunications Act 1997 (Cth) to arbitrate three disputes notified to it by Vocus Fibre Pty Ltd, Adam Internet Pty Ltd and Chime Communications Pty Ltd (the Access Seekers).

Telstra sought judicial review of the ACCC's jurisdiction to arbitrate the three disputes, which concerned Telstra's proposed variations to charges for access to its facilities under agreements with the Access Seekers. These agreements allowed Telstra to notify variations to charges.

While the increases were in line with CPI, the Access Seekers opposed the variations and provided Telstra with a dispute notice in accordance with the agreements. The Access Seekers also notified the ACCC of their respective disputes with Telstra.

The ACCC considered that it had power to arbitrate the disputes under clauses 18(1) and 36(3) of Schedule 1 to the Telecommunications Act 1997 (Cth), which allow the ACCC to act as an arbitrator 'failing agreement' between the parties on the terms and conditions relating to access to telecommunication transmission towers and supplementary facilities. Telstra argued that as the proposed price variations fell within the range of increases previously agreed to by the parties, there was no 'failure to agree'.

Justice Flick found that Telstra did not have a unilateral and unchallengeable power to vary the changes – rather, the power to vary charges was subject to the right of the Access Seekers to 'dispute' the variation under the agreements. Until the 'dispute' was resolved, Justice Flick considered that the parties had 'failed to reach agreement', and the ACCC had the power to arbitrate the disputes. The arbitration of these disputes will now proceed. Read the decision and ACCC media release.

Federal Court focuses on misrepresentations about medical imaging services

In June 2011, the ACCC issued a joint media release with the Cancer Council of Australia and the Therapeutic Goods Administration in relation to various commercial breast imaging technologies, warning that it was investigating whether individual businesses may have engaged in misleading or deceptive conduct in relation to the technologies that it would not hesitate to take enforcement action. The Federal Court has now handed down two decisions resulting from ACCC action in relation to claims about breast imaging services. Although the decisions turn on their particular facts, they demonstrate the willingness of the ACCC to pursue misleading or deceptive conduct and false representations in the medical services industry, and confirm the need for such claims to be backed by clear scientific evidence, or else risk action by the ACCC. For a summary of each case, please see 'Cases' below.

ACCC news

AGL to seek authorisation from the Australian Competition Tribunal for its acquisition of Macquarie Generation – 24 Mar 2014

AGL has filed an application with the Australian Competition Tribunal seeking authorisation that its acquisition of Macquarie Generation be allowed to proceed on public benefit grounds. This application follows the ACCC's decision that it would oppose the proposed acquisition because the ACCC considered that it was likely to have the effect of substantially lessening competition in the retail electricity market in NSW. Read the ACCC media release.

ACCC encourages consumers to review their phone and internet plans – 21 Mar 2014

The ACCC is urging consumers to review their phone and internet plans following the tabling of its Annual Telecommunications Reports for 2012-13 in Parliament.

While the downward trend in prices continued for most services, the pace of price reductions has slowed in recent years. Some service providers have changed the amount of calls, SMS and data included in their plans rather than the price of their plans, meaning that some consumers might be receiving less included value for the same price point. It can also make it difficult for consumers to know if they have the best plan to suit their needs.

The reports show that competition has led to many consumer benefits in the sector over the past 15 years, including lower prices and a wider variety of services and devices. In 2012-13, prices fell overall by around 1.5 per cent in real terms. The most dramatic price reductions were for international calls from a landline telephone, which fell 21.2 per cent, and calls to a mobile from a landline telephone, which fell 11.7 per cent.

The reports also show that non-price factors, such as network quality and customer service, are also becoming important sources of competition. As a result, there has been strong investment in mobile networks and a renewed focus on customer satisfaction. There has also been a significant reduction in the number of complaints reported to the ACCC and Telecommunications Industry Ombudsman in the past year.

The reports also provide further detail on key developments in telecommunications markets and outline the ACCC's regulatory activities during the year, as well as its future regulatory focus. Read the reports and the ACCC media release.

ACCC releases product safety guide for online businesses – 20 Mar 2014

The ACCC has released a new publication, A guide for business: Consumer product safety, that outlines best practice tips for online sellers and marketplaces.

Key points include that:

• All businesses supplying products to Australian consumers, including online businesses, must comply with the Australian Consumer Law (ACL).
• Online shoppers cannot physically examine the products your business sells. To inspire confidence you need to show and tell your customers about all features and information required by Australian safety laws.
• It is wise to embed effective safety compliance measures into your online business model, to avoid the costs of fixing your business system after something's gone wrong.

The guide includes a number of compliance tips, such as clearly displaying warnings and product labeling, providing clear product descriptions, and checking the requirements of Australian safety standards and bans before listing a product for sale. Read the ACCC media release.

ACCC re-authorises collective negotiations by the AMA – 19 Mar 2014

The ACCC has re-authorised a collective bargaining arrangement by the Australian Medical Association (AMA) for 10 years. The application was lodged by the AMA and its state/territory AMA organisations in Victoria, South Australia, Western Australia, Northern Territory, Queensland and Tasmania. The arrangement allows each state and territory AMA to negotiate on behalf of general practitioners who provide services in public hospitals and health facilities in rural and remote areas. Read the ACCC media release.

ACCC Chairman speaks about protecting consumers in the digital age – 13 Mar 2014

ACCC Chairman Rod Sims addressed the 2014 National Consumer Congress in Sydney on 13 March 2014 to discuss the ACCC's consumer protection activities as new technologies have emerged, giving an update on the ACCC's recent work in the areas of consumer guarantees, credence claims, unfair contract terms and issues involving vulnerable consumers, outlining its 2014 compliance and enforcement priorities and discussing the 'Root and Branch' review. Read the speech and the ACCC media release.

Cases

Federal Court cracks down twice on misleading health check promotions

ACCC v Safe Breast Imaging Pty Ltd [2014] FCA 238 (Justice Barker, 18 March 2014)

Key issues

• The ACCC is focused on claims in the medical services industry that must be supported by scientific evidence.
• The 'public' constitutes both well and poorly educated consumers within the class of consumers likely to be affected by the conduct.

Summary

Between April 2009 and August 2011, Safe Breast Imaging (the first respondent), of which Ms Firth (the second respondent) was the sole director, shareholder and business manager, conducted a breast imaging services business using a device known as a multifrequency electrical impedance mammograph (MEM Device). The service was offered to customers in various parts of Australia.

Safe Breast Imaging ordinarily charged a fee of about $145 for its services, which consisted of taking images of the customer's breasts using the MEM Device, interpreting those images and the customer's answers to a questionnaire, and preparing a 'Breast Health Report', which was provided to each customer with an information package that contained information on the MEM device, an explanation of risk profile scores disclosed in the report and a 'Frequently Asked Questions' document. Safe Breast Imaging promoted its business to the public using Google AdWords, a website, a video published on the internet, including on YouTube, and a double sided pamphlet.

The ACCC alleged that the promotional materials and the breast health report, together with the information pack conveyed a number of false or misleading representations, including that:

• breast imaging using the MEM Device could provide an adequate scientific medical basis for assuring a customer that they do not have breast cancer and for assessing whether a customer may be at risk of breast cancer;
• there was an adequate scientific medical basis for breast imaging using the MEM Device as a substitute for mammography; and
• Australian registered medical doctors were involved in providing the breast imaging service, particular in interpreting the images, and in preparing the breast health reports.

In addition, the ACCC claimed that Ms Firth was knowingly concerned in or a party to the contraventions by Safe Breast Imaging.

Justice Barker reviewed the materials and the expert evidence led by the ACCC and found that each of the representations alleged arising from the promotional materials and the information pack was misleading or deceptive, false or misleading and, in relation to the promotional materials, was liable to mislead the public as to the nature, characteristics and suitability for purpose of the breast imaging service using the MEM device. Ms Firth was found liable as an accessory for Safe Breast Imaging's contraventions of the ACL on the basis that she caused Safe Breast Imaging to engage in the contravening conduct and knew of those matters which established the misleading nature of each of the representations. A hearing will be held later in the year to determine the appropriate relief. Read the ACCC media release.

Source: AustLII

ACCC v Breast Check Pty Ltd [2014] FCA 190 (Justice Barker, 10 March 2014)

Key issues

• A second instance of the ACCC demonstrating its focus on claims in the medical services industry that must be supported by scientific evidence.
• The fact that members of the public entering the clinic and collecting a copy of the pamphlet and posting pamphlets to those who requested information over the phone may constitute distribution of the pamphlet to a section of 'the public'.

Summary

Breast Check was a clinic that provided a service to capture images of customer's breasts using a Multifrequency Electrical Impedance Mammograph (the MEM Device) and a digital infrared thermographic camera. Breast Check published three pamphlets, which were distributed in the clinic waiting room and posted to customers who expressed an interest in the breast imaging services over the phone.

The ACCC alleged that, between October 2010 and May 2011, Breast Check falsely represented that breast imaging performed with a thermography device alone, or in conjunction with the MEM device, could provide an adequate scientific basis for assessing whether a customer was at risk from breast cancer and the level of that risk, and assuring a customer that they did not have breast cancer. The ACCC also alleged that Breast Check had falsely represented that these services provided an adequate substitute for mammography. Finally, the ACCC alleged that former director Dr Alexandra Boyd was knowingly concerned in the conduct of Breast Check.

Breast Check challenged the ACCC's allegation that their pamphlets were distributed 'to the public', arguing the materials were only distributed to the clinic's existing customers. Justice Barker found that:

• by reason of Breast Check's signage and pink painted premises, an ordinary member of the public passing by would have little difficulty in identifying the clinic;
• any person wishing to enter the clinic was free to do so;
• there was no controlled distribution of the materials available in Breast Check's waiting room; and
• pamphlets were disseminated by post to people who enquired about the services by telephone.

Justice Barker concluded that the pamphlets were published to a section of the public and conveyed the alleged representations. Justice Barker accepted expert evidence which confirmed that the three representations were inaccurate. Dr Boyd was found to have been knowingly concerned in the contraventions of Breast Check, given her involvement in the development of the pamphlets and her general involvement in the administration of the business.

A hearing will be held in May 2014 to determine the appropriate relief. Read the ACCC media release.

Source: AustLII

Exploiting decent human tendencies is cause for strong court comment

ACCC v Exclusive Media & Publishing Pty Ltd [2014] FCA 228 (Justice Dowsett, 14 March 2014)

Key issues

• Conduct that tends to exploit decent human behaviour may be considered an aggravating factor in the court's assessment of appropriate relief.
• Continuing with conduct that is the subject of an ACCC investigation may also be considered as an aggravating circumstance by the court.

Summary

During February 2009 and August 2010, the four respondent publishing companies provided advertising materials in printed publications regarding child safety. The fifth respondent, Mr Andrew Clifford, was the sole director, secretary and shareholder of each respondent.

In 2011, the ACCC commenced proceedings against the respondents seeking declarations, injunctions and pecuniary penalties for misleading and deceptive conduct, false or misleading representations and harassment (read the ACCC media release). The parties agreed on proposed orders and the court made those orders in 2012. The reasons for the orders have now been published.

Justice Dowsett identified three categories of behaviour:

(a) A representative of a respondent company would telephone a target company (the recipient) purportedly with reference to a publication distributed by the respondent, and tell the recipient that it was to be sent a document and that:

• the recipient had paid or agreed to pay to advertise in the publication or that the recipient needed to indicate how many complimentary copies of the publication it wanted to receive; and
• if the recipient signed the document, it would not constitute an order form.

These representations were false in that:

• the recipient had not agreed to pay for advertisements ; and
• the document was in fact an order form, which if signed and returned, was treated by the respondents as a binding order.

(b) The document sent to each recipient contained representations regarding the proposed distribution of the publication, which were false.

(c) After the signed document was returned to the respondents, a small number of recipients were pursued for payment.

The ACCC sought pecuniary penalties in respect of 289 specific transactions. Mr Clifford was found to have been knowingly involved in each transaction.

Justice Dowsett considered that the dealings with each recipient should be treated as one transaction or course of conduct, and any harassment and coercion was an aggravating circumstance in connection with that transaction. Justice Dowsett identified a number of concerning aspects in the respondents' conduct, including that the conduct was sustained and had the potential to affect a large number of people, and that the use of publications concerning child safety suggests a deliberate attempt to exploit a human tendency to treat that matter as worthy of support. In addition, Mr Clifford had continued with the offending behaviour after receiving notice from the ACCC that it was investigating his businesses.

Justice Dowsett made the agreed orders, imposing penalties of $400,000 across three of the respondent companies and $100,000 on Mr Clifford.

Source: AustLII

Federal Court criticises inaccuracies in statement of agreed facts

ACCC v Avitalb Pty Ltd [2014] FCA 222 (Justice Griffiths, 7 March 2014)

Key issues:

• The court will examine statements of agreed facts carefully and will not automatically accept them on their face.

Summary

This case was one of a series of proceedings that the ACCC commenced against a number of Harvey Norman franchisees for breaches of the ACL in relation to statements about consumers' remedies and refund rights (read the ACCC media release).

This case concerned three statements made to a consumer by two sales representatives on two occasions on the one day concerning the consumer's rights and remedies under the ACL in relation to a faulty laptop. The parties filed a statement of agreed facts, which Justice Griffiths criticised on a number of bases:

• it suggested that the subject matter of the proceedings was one statement made by one sales representative, when the pleadings had raised three statements made by two separate representatives on two occasions – the ACCC clarified during the hearing that it had agreed to proceed only in relation to one of the statements on the basis of the available evidence, but this had not been clarified in the statement;
• in one instance, it referred to the product as a fridge rather than a laptop; and
• it suggested that a settlement had been reached at an early stage in the proceedings as a matter that should attract a penalty discount, which did not sit comfortably with the history of the proceedings.

Justice Griffith had regard to the fact that the proceedings involved only one statement made on one day to a consumer who received a full refund on that same day, and notwithstanding that the proceeding did not settle at an early stage, ordered a penalty of $10,000, along with declarations and injunctions in the agreed terms.

Source: AustLII