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

'Root & branch' review news

In recent editions of In touch, we reported on the Federal Government's release of the final terms of reference for the 'root & branch' review of competition laws and the release of the Issues Paper setting out the terms of the review. The period for submissions closed on 10 June 2014. Non-confidential submissions are now being published on the Review website in tranches and, to date, 134 submissions have been made available for review. The next stage is the release of the draft report towards the end of September 2014, after which there will be further opportunity for consultation. We will continue to keep you updated on the review's progress. If you would like to discuss what the review will mean for you, please let us know.

Draft mandatory access code of conduct for bulk wheat export port terminals released

The Federal Government has released a draft mandatory port access code of conduct that would apply to all Australian bulk wheat export port terminals, to replace the existing regulatory framework and the access undertakings approved by the ACCC for terminals operated by the four vertically integrated operators from 30 September 2014 onwards. If the proposed code is implemented in its current form:

• for existing bulk wheat port operators that are vertically integrated exporters of bulk wheat, the code will replace the existing regime under the Wheat Export Marketing Act 2008 (Cth) and existing ACCC-approved undertakings for access with a potentially less prescriptive negotiate-arbitrate access regime;
• for bulk wheat port operators that are not also exporters of bulk wheat, the code will introduce access regulation of their terminals (to a more limited extent than for terminals owned by exporters);
• for bulk wheat exporters utilising terminals operated by others, the code will set new parameters for negotiations with terminal operators; and
• for investors considering acquiring interests in wheat export terminals or investing in the establishment of new terminals, the code establishes important parameters for how terminal operators will be able to deal with future users of their terminals and should be considered in making any investment decision.

The draft is open for consultation, with submissions accepted until 24 June 2014. If, following consideration of the submissions, the Federal Government determines to proceed with the code, it is likely to be implemented by 30 September 2014. Read the Allens Focus: Proposed mandatory access code for Australia's wheat export terminals.

ACCC News

ACCC opposes Healthscope's acquisition of Brunswick Private Hospital – 12 Jun 2014

The ACCC has opposed the acquisition by Healthscope Limited of the Brunswick Private Hospital from Healthe Care Pty Ltd.

Brunswick Private Hospital is the largest private provider of rehabilitation services in the northern suburbs of Melbourne. Healthscope is a large national provider of private hospital services that also operates several private hospitals in the northern suburbs of Melbourne including Dorset Rehabilitation Centre, North Eastern Rehabilitation Centre, John Fawkner Private Hospital and Melbourne Private Hospital.

The ACCC considers that the acquisition would result in Healthscope acquiring its closest and most significant competitor for the supply of private rehabilitation services in northern Melbourne, and would be likely to result in a substantial lessening of competition. The ACCC will publish a Public Competition Assessment in due course. Read the ACCC media release

Gotta Getta Group pays infringement notice penalties for alleged misleading solar offer – 10 Jun 2014

Following the issue of two infringement notices by the ACCC, Disbury Holdings Pty Ltd, trading as Gotta Getta Group (Gotta Getta), has paid penalties totalling $20,400 in relation to two advertisements published during 2013 for Gotta Gettas solar systems.

The ACCC alleged that Gotta Getta had made representations to the effect that:

• consumers would recoup their investment on a solar system purchased from Gotta Getta up to three times faster than a solar system purchased from another supplier by reason of the 60 cent feed-in tariff offer; and
• under the 60 cent feed-in tariff offer, consumers would not have to make any financial contribution in order to receive the benefit of a credit of 60 cents per kWh for excess energy fed back into the grid.

In order to take up the 60 cent feed-in tariff offer, consumers had to enter into a three-year energy plan with Simply Energy.

The ACCC indicated that it believed that the advertisements contained false or misleading representations because:

• Gotta Getta did not take into account the fact that consumers who purchased a solar system from another supplier would receive the benefit of the 9.8 cent minimum retailer payment in addition to the 16 cent South Australian Government feed-in tariff; and
• Gotta Getta charged consumers an amount in relation to the 60 cent feed-in tariff offer, by including in the purchase price of its solar systems an amount in respect of a commission payable by Gotta Getta to Simply Energy.

Read the ACCC media release

Moses and Paul Obeid issue court challenge to ACCC examination notices – 6 Jun 2014

The ACCC has confirmed that an application has been filed in the Federal Court that seeks to challenge compulsory examination notices issued by the ACCC to Paul and Moses Obeid under section 155 of the Competition and Consumer Act 2010 (Cth). The notices require each of Paul and Moses Obeid to attend the ACCC offices, give evidence and produce documents in private examinations. Lawyers acting for Paul and Moses Obeid are seeking a declaration from the Federal Court that the notices are invalid.

These examinations are part of the ACCC's investigation into allegations of cartel conduct regarding the 2009 tender process conducted by the NSW Department of Trade and Investment (formerly the Department of Primary Industries) for an exploration mining licence over the Mount Penny coal tenement in the Bylong Valley.

The ACCC considers that the notices are valid and were properly issued, and consequently opposes the application by Paul and Moses Obeid. The hearing took place on 6 June 2014 and judgment has been reserved. Read the ACCC media release

ACCC reauthorises energy code of practice – 6 Jun 2014

The ACCC has reauthorised an industry code of practice for face-to-face sales conducted by electricity and gas retailers for a further five years.

Energy Assured Limited was formed by energy retailers to develop and manage the code, which applies when energy products are sold through house visits and in other face-to-face settings such as at kiosks in shopping centres. The industry code contains sanctions, including deregistration, for sales agents who do not comply with the code. Deregistered sales agents are not able to be re-employed by any Energy Assured member for five years.

The ACCC expressed concerns in its draft determination that the scheme did not focus sufficiently on the accountability of energy retailers for the behaviour of sales agents employed by them. The ACCC proposed amendments to the way the scheme operates, to strengthen:

• the independent auditing of members, particularly in relation to whether any underlying systemic issues may be contributing to identified instances of sales agents not complying with the standards set by the code;
• the provisions relating to sanctioning energy retailers where systemic breaches of the code are identified; and
• the code as it applies to energy 'comparators' engaged in face-to-face sales. Comparators compare products offered by different energy retailers within the Energy Assured scheme, generally by way of the internet, but in some cases, using face-to-face sales. The draft determination requires comparators engaged in face-to-face sales, who recommend a particular energy contract or retailer to a customer for which the comparator will receive a higher commission than for energy contracts against which the recommended contract has been compared, to disclose this fact to the customer. The code also requires comparators to disclose all the retailers available to a customer and the underlying assumptions on which the comparison or recommendation is made.

Energy Assured has amended the code to address these concerns. Read the ACCC media release

ACCC requires improved dispute resolution in performing rights arrangements – 6 Jun 2014

The ACCC has reauthorised the Australasian Performing Rights Association's (APRA) arrangements for the acquisition and licensing of performing rights in music for five years, subject to certain conditions.

APRA holds the rights for the performance of almost all music in Australia. A large number of businesses, including retail businesses, hospitality venues and broadcasters must purchase a licence from APRA to broadcast music. APRA collects and distributes the royalties to its member composers, songwriters and music publishers.

Under the conditions of authorisation, APRA is required to produce a comprehensive plain English guide to its licences, as well as a guide that increases awareness of the licence back and opt out provisions. The conditions also require APRA to implement a new alternative dispute resolution scheme, and to arrange an independent review of that scheme after it has been in operation for three years. Read the ACCC media release

ACCC calls for comment on Elgas' proposed acquisition of Kleenheat's east coast LPG business – 5 Jun 2014

The ACCC has released a Statement of Issues (SOI) outlining its concerns with the proposed acquisition by Elgas Limited of Wesfarmers' Kleenheat Gas Pty Ltd's east coast LPG business. Elgas is a member of the BOC Group of companies, which is owned by the Linde Group, an international gases and engineering company. Kleenheat is a wholly-owned subsidiary of Wesfarmers Limited.

The three major distributors of non-automotive LPG on the east coast are Elgas, Kleenheat and Origin, which together have a combined east-coast share of approximately 90 per cent. In certain regional areas the only distributors are Elgas and Kleenheat, or dealers supplied exclusively by them.

Generally, LPG distributors acquire wholesale LPG from oil refineries, oil and gas processors, and import terminals. Elgas owns Australia's largest LPG import terminal, the Elgas Cavern in Sydney.

The ACCC's preliminary view is that the proposed acquisition raises significant competition issues for the distribution of LPG to customers in a number of different markets. Market inquiries by the ACCC have identified concerns that the transaction would remove Kleenheat as a significant competitor to Elgas and Origin.

At a national level, there have been concerns raised that the proposed acquisition would remove Kleenheat as the only competitor to Elgas that has the ability to distribute non-automotive LPG, including leisure cylinders, to large national customers on competitive terms. The ACCC is concerned that the proposed acquisition would leave customers vulnerable to price increases.

Market inquiries suggest that barriers to new entry and expansion by existing market participants are already high and would increase further if the acquisition was to proceed. Some parties are particularly concerned about access to a competitive source of non-automotive LPG, given the importance of the Elgas Cavern terminal. Concerns also have been raised that the proposed acquisition would give Elgas additional incentive to deny its downstream rivals access to competitively priced wholesale LPG.

The ACCC invites further submissions from interested parties in response to the SOI by 26 June 2014, and has proposed a final decision date of 24 July 2014. Read the ACCC media release

Competition issues at the forefront in aviation – 4 Jun 2014

On 4 June 2014, ACCC Commissioner Dr Jill Walker spoke at the Swinburne Aviation Industry Conference in Melbourne on competition issues that have featured prominently in the rapidly changing aviation sector.

Dr Walker discussed the rapid expansion and transformation of the competitive landscape in the airline market and features including changes in airline structures and increased competition on international routes from mid-point carriers. Dr Walker noted that there has been extensive alliance and code-sharing activity to provide 'virtual networks' in international markets, which can promote efficient and competitive markets, but can also raise competition concerns and may require scrutiny under the Competition and Consumer Act.

Dr Walker said competition also depends on consumers being able to exercise effective choice based on the services airlines provide and the fares they charge. She commented on online sales which create opportunities for increased competition, but some booking systems may soften or distort that competition. Dr Walker identified 'drip pricing', where components of the total price are revealed sequentially and the full price is not revealed until the end of the reservation process, as an enforcement priority.

Dr Walker also highlighted the ACCC's role in monitoring prices, costs, profits and quality of aeronautical and car parking services at major airports, and reviewing price notifications for air traffic control and rescue firefighting services. Read the ACCC media release

ACCC proposes to allow poultry growers to collectively bargain – 29 May 2014

The ACCC proposes to grant authorisation to enable members of the NSW Farmers' Association, who grow chicken, turkey and duck meat, to collectively bargain with processors. Under the proposed arrangements, poultry growers will form common interest 'grower groups' to collectively bargain the terms and conditions of contracts with the relevant poultry processor.

Under existing NSW legislation, chicken and turkey growers can currently collectively bargain with processors. Authorisation would allow them to continue the arrangements if the NSW legislation is removed. Authorisation would also allow duck growers not covered under legislation to begin collective bargaining. Read the ACCC media release