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

A number of further non-confidential submissions to the 'root & branch' review of competition laws have now been uploaded to the Review website, and the Review Chair, Professor Ian Harper, has released a video in which he outlines the progress of the review and discusses broadly the submissions received to date.

Professor Harper notes that of the approximately 300 submissions received, nearly half have been from business, around one quarter each from individuals and from peak and industry bodies, and five per cent from government. The top five topics raised in the submissions have been:

• competition law, including access, secondary boycotts, mergers, the effectiveness of s46 (including whether an 'effects test' should be introduced), and of the current exemptions;
• small business, on market concentration issues (including in the grocery and energy markets), competitive neutrality, planning and zoning laws and access to justice when competition issues arise;
• competitive neutrality – where businesses compete with government – business concerns about government, in particular local government, having unfair advantages over business (such as being able to secure debt finance at lower costs, and to cross-subsidise), and the handling of complaints about competitive neutrality;
• the ACCC, including from consumer advocates calling for additions to the ACCC's toolkit such as the power to conduct market studies (contrasting with other submissions such as that from the Business Council of Australia cautioning against extending the ACCC's powers), the merger review process and the merger provision itself; and
• supermarkets, most notably the behaviour and market share of the two largest operators, the impact on suppliers and creeping acquisitions.

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.

ACCC News

ACCC calls for comment on proposed acquisition of Supa IGA stores in WA by Coles – 10 Jul 2014

The ACCC has released a Statement of Issues outlining potential competition concerns with the proposed acquisition by Coles Supermarkets Australia Limited of four Progressive Supa IGA stores from Progressive Trading Pty Ltd. Metcash Limited has a 45 per cent interest in Progressive Trading Pty Ltd. The stores are located in Busselton, Halls Head, Bunbury Forum and Dianella in Western Australia, with the Busselton and Halls Head stores each having an attached liquor licence.

The ACCC’s preliminary view is that the proposed acquisition may result in a substantial lessening of competition in one or more of the local markets for supermarket retailing.

Further submissions are invited in response to the Statement of Issues by 24 July 2014 and the final decision will be deferred until 14 August 2014. Read the Statement of Issues and the ACCC media release

ACCC and ASIC revise guidelines for businesses and consumers about debt collection activities – 8 Jul 2014

The ACCC and ASIC have launched an updated version of their combined publication Debt Collection Guideline: for Collectors and Creditors, to reflect significant changes to the law such as the introduction of the Australian Consumer Law, the National Consumer Credit Protection Act 2009 (Cth), and the new privacy laws and principles. The guideline provides practical guidance about:

• when it is appropriate to contact a debtor, including what constitutes contact and reasonable contact hours, methods or frequency of contact;
• how the need for collection activity will be greatly reduced when debtors act promptly and responsibly, and collectors are flexible, fair and realistic; and
• the pitfalls to avoid when using new communication technologies developed since the initial publication, including the use of social media platforms and auto diallers.

Read the ACCC media release

ACCC warns gyms about 'no contracts' membership advertising – 3 Jul 2014

The ACCC has put the fitness industry on notice for using the phrase 'no contracts' in advertising, where consumers are required to sign membership contracts with conditions for termination and payment of the membership. The ACCC considers that it is likely to be misleading for a gym to use the term ‘no contracts’ in the following circumstances:

• when a consumer is required to sign a membership agreement that includes conditions relating to termination of the membership which consumers cannot cancel at any time;
• when a consumer is required to make a non-refundable advance payment for a membership term;
• when a gym requires a written termination notice for a consumer to exit a membership;
• when a consumer is required to make payments during the notice period in order for termination of the membership to take effect; and
• when payments are applied if the consumer fails to provide notice of termination, for example, full payment for a subsequent membership period.

In response to the ACCC’s concerns, several gyms have agreed to stop using this term. The ACCC will continue to monitor gyms on this issue and will contact gyms identified as engaging in potentially misleading advertising of its membership contracts. Read the ACCC media release

ACCC calls for comment on Aquis' proposed acquisition of the Reef Hotel Casino – 3 Jul 2014

The ACCC has released a Statement of Issues outlining potential competition concerns with the proposed acquisition by Aquis Reef Holdings Pty Ltd (Aquis) of the Reef Hotel Casino in Cairns.

Aquis is a privately held company ultimately wholly owned by Mr Tony Fung, a Hong Kong resident. Aquis currently has no existing casino interests in Australia but proposes to develop a large resort, including a casino located 15km north of Cairns. If developed, this resort will be the second casino in Cairns.

In a related transaction, Aquis is also proposing to acquire the Casino Canberra from one of the main unit holders in the Reef Casino Trust (RCT). The proposed acquisition is for all the units in the ASX-listed RCT and all of the issued shares in Reef Corporate Services Limited and Casinos Austria International Pty Ltd (the responsible entity of the RCT and manager of the casino respectively).

The ACCC invites further submissions from interested parties in response to the Statement of Issues by 17 July 2014. The ACCC's proposed final decision date is 21 August 2014. Read the Statement of Issues and the ACCC media release

ACCC takes action against Electrodry alleging fake testimonials or reviews – 2 Jul 2014

The ACCC has instituted proceedings in the Federal Court against a franchisor of the Electrodry Carpet Cleaning business, alleging that it was involved in the posting of fake online testimonials. Electrodry is a franchised business that provides carpet, drapery, grout, upholstery and mattress cleaning services with over 100 franchises in Australia. The ACCC alleges that Electrodry’s conduct resulted in fake testimonials that appeared on a number of review sites, including Google and True Local. It is alleged that the testimonials were written and posted by people associated with, or contracted to Electrodry, and not by genuine clients as the testimonials implied. The ACCC is seeking declarations, penalties, injunctions and corrective notices. Read the ACCC media release

* The summaries provided are a condensed version of the relevant ACCC media release linked at the conclusion of each news item.

Cases

Full Federal Court concludes the ACCC has no power to arbitrate dispute between Telstra and Vocus Fibre

Telstra Corporation Limited v Vocus Fibre Pty Ltd [2014] FCAFC 77 (Justices Besanko, Middleton and Griffiths, 2 July 2014)

Key issues

• The court will not enliven the ACCC's jurisdiction to arbitrate a dispute where the parties have agreed terms and conditions in relation to charges and the disputes related to the implementation of those agreed terms and conditions

Summary

This case concerned an appeal from a decision in which the Federal Court found that the ACCC had the power to arbitrate a dispute over a price variation between Telstra and Vocus Fibre, Adam Internet and Chime Communications (together, the Respondents).

In this appeal to the Full Federal Court, the primary decision was overturned, with the court finding that the ACCC had no such power. The decision turned on the court's interpretation of clause 6.4 of the parties' Customer Relationship Agreement, which provided that:

Disputes

6.4 If the Acquirer disputes (whether under the Agreement or otherwise) the variation of any Charge under clause 6.1, then:

1. pending resolution of the dispute the Acquirer must pay the Supplier the Charges in the Price List as varied; and
2. if the resolution of the dispute results in the Charge being set at a different rate (“Varied Charge”) then, within 20 Business Days of the date of the resolution of the dispute, the Supplier must pay any refund necessary (including Interest) to put the Acquirer in the position it would have been in had the Varied Charge been applied from the time the Charge was varied.

The Respondents argued that this clause entitled them to dispute a price variation if they considered an increase to be 'too high'. Rejecting this argument, the court considered that the clause did not give the Respondents the opportunity to dispute the price variation – rather, it merely provided a mechanism for dealing with the situation if a dispute arose, and required payments to be made pending resolution, and appropriate adjustments to be made upon resolution of a dispute. The court considered that clause 6.4 could potentially cover situations where a price variation was challenged as not compliant with clause 6.3 (which concerned pricing caps), or challenged under legislative provisions, such as those dealing with unconscionable behaviour or misleading and deceptive conduct. However, it did not cover a situation where the Respondents complained that the price increase was 'too high'. The court also considered it was significant that the parties, after negotiation, had determined the price, and had chosen not to include any resolution mechanism if they failed to reach agreement.

The court allowed the appeal, declaring the ACCC had no power to hear or determine the matter, and ordered the Respondents to pay Telstra's costs. Read the ACCC media release

Source: AustLII

GE Capital ordered to pay a $1.5 million penalty for misleading credit cardholders into giving their consent

Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 (Justice Jacobson, 1 July 2014)

Key issues

• The court will impose penalty amounts in the higher permissible range where it finds deliberate and systematic contraventions to ensure the deterrent effect of the penalty

Summary

From 1 July 2012, changes to the National Consumer Credit Protection Act prohibit credit providers under a credit card contract from inviting cardholders to raise their credit limit (CCL invitation), unless the cardholder expressly consents to receiving such invitations. Before the changes commenced, GE Capital Finance Australia (GE Capital) deliberately embarked on a strategy to obtain cardholders' consent before the July cut-off date. This strategy involved bundling consents for CCL invitations with the acquisition of other services, was implemented through telephone activation scripts and letters to cardholders, and was successful in obtaining the consent of numerous cardholders.

In this case brought by ASIC, the court found that GE Capital had implied to cardholders that they could not activate new credit cards, or apply for or obtain an increased credit limit, unless they agreed to receive CCL invitations. This conduct represented a clear contravention of s12DB of the Australian and Securities and Investments Commission Act 2001 (Cth).

In determining the appropriate penalty, the court emphasised that GE Capital's conduct was extensive and substantial. GE Capital had engaged in a systematic and deliberate attempt to mislead cardholders into giving up the need to give specific consent to receive CCL invitations, in order to avoid predicted losses of up to $6 million which would stem from the 'tightening regulatory environment' (at [94]). This strategy had been pursued despite concerns expressed by a number of senior employees.

The court imposed a pecuniary penalty of $1.5 million, a larger amount than the $1 million penalty agreed to by the parties, consisting of an amount for each of the three categories of contravention the court found had occurred.

In addition, the court ordered GE Capital to:

• pay ASIC $50,000 for its costs;
• send an email or letter to cardholders who registered to receive future CCL invitations, advising them the representations were false or misleading; and
• place a notice on its website for one month which stated the representations made by the company were false or misleading.

Source: AustLII