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

Over the past weeks, Professor Ian Harper, Chair of the Review Panel for the 'root & branch' review, has presented and spoken in relation to various aspects of the review:

Key issues for the Competition Policy Review – 6 Aug 2014

Professor Harper presented to the UNSW Competition Law and Policy Conference on how the Review Panel is approaching the review by focusing on three main themes:

• the unfinished National Competition Policy reforms, including the remaining priorities, what we have learned and where can competition be applied further (eg, health and education);
• institutional and governance arrangements to drive reform for the next two decades; and
• whether competition law is fit for purpose.

Speech to the 12th National Small Business Summit – 8 Aug 2014

In this speech, Professor Harper discussed the Review Panel's engagement with small business during the consultation period and the issues raised (market concentration, competitive neutrality, planning and zoning laws, and the difficulties small businesses have accessing justice and enforcing their rights); his thoughts about the role and place of small business and its relationship to competition policy; and some of the questions the Review Panel will consider.

View the presentation and the transcript of the speech.

ACCC news

ACCC institutes proceedings against OmniBlend Australia – 14 Aug 2014

The ACCC has instituted proceedings against OmniBlend Australia Pty Ltd, alleging it attempted to engage in price fixing with a competitor. The ACCC also alleges that when the attempt failed, OmniBlend induced a supplier to engage in resale price maintenance by refusing to supply the competitor unless it stopped discounting the price of certain blenders.

OmniBlend supplies various kitchen blenders through its online store to businesses and consumers in Australia, New Zealand and the United Kingdom. OmniBlend and its competitor are the two major distributors of OmniBlend branded blenders in Australia.

The ACCC has joined OmniBlend’s sole director, Mr Neal Bowhay, to the proceedings for aiding and abetting the alleged conduct.

The ACCC is seeking pecuniary penalties, injunctions, declarations, compliance training and costs. Read the ACCC media release

ACCC takes action against online betting agency for alleged misleading 'Free' and 'Bonus' offers – 14 Aug 2014

The ACCC has commenced proceedings against three Bet365 Group companies (collectively Bet365) alleging that Bet365 made misleading representations in breach of the Australian Consumer Law in relation to offers of ‘free bets’ and ‘deposit bonuses' to new customers who joined up online.

The ACCC alleges that these offers conveyed the dominant message that new customers would be entitled to up to $200 in bets without limitation or restriction. In fact, the offers were subject to a number of conditions that were not prominently displayed, including that:

• consumers must first risk their own deposit to receive a ‘free bet’ or ‘deposit bonus’, so that consumers would only receive a $200 ‘free bet’ or ‘deposit bonus’ if they paid and gambled $200 of their own money first;
• to be eligible for the offers, consumers must have gambled three times the value of their deposit and bonus within 90 days before being able to withdraw any winnings. As a result, a consumer who made an initial deposit of $200 and received $200 in bets was required to then gamble $1,200 before being able to withdraw any money;
• to meet the offers' terms and conditions, consumers were required to bet at odds of no less than 1.5, meaning that they were required to bet on higher risk transactions.

The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective advertising, a compliance program and costs. Bet 365 has changed its website since the ACCC contacted it about its concerns. Read the ACCC media release

Compare The Market pays penalty for misleading health insurance advertising – 11 Aug 2014

Compare The Market Pty Ltd has paid a penalty of $10,200 following the issue of an infringement notice by the ACCC in relation to claims made in advertising promoting Compare the Market’s health insurance comparison service.

Between 17 March and 19 May 2014, Compare The Market distributed a letterbox pamphlet in Queensland, New South Wales and Victoria, in which it claimed 'We now compare more health funds than any other website in Australia' and 'Compare more health funds than anywhere else'. In fact, there were two other websites that compared the policies of more health insurance funds than Compare The Market. Compare The Market also made the same or similar representations in other media, including its website, banner advertising, flyers, television infomercials and a digital display in its office foyer. Read the ACCC media release

ACCC issues carbon tax substantiation notices and issues second carbon monitoring report – 8 Aug 2014

The ACCC has issued over 250 carbon tax removal substantiation notices to certain suppliers of regulated goods, including businesses that retail electricity and natural gas, produce electricity or bulk import synthetic greenhouse gases. These businesses are required to:

• respond to the notice within 21 days by providing a written statement which explains how the repeal is affecting their prices;
• provide the ACCC with a carbon tax removal substantiation statement by 18 August 2014; and
• publish the statements on their websites until 30 June 2015.

Customers should expect to see the substantiation statements on the websites of these businesses after 18 August 2014.

These are the first of the public statements by suppliers of regulated goods required under the Competition and Consumer Act 2010 (Cth). Electricity retailers, producers and natural gas retailers will also be required to issue customers with statements between 18 August and 15 September that show the average annual percentage or dollar savings attributable to the carbon tax repeal.

To assist businesses to comply with their obligations and explain more broadly its role, the ACCC has issued guidance on both the carbon tax removal substantiation notices and carbon tax removal substantiation statements. Further information about the effects of the carbon tax repeal on suppliers of regulated goods can be found on the requirements for suppliers of regulated goods page.

Background

The issuing of substantiation notices, substantiation statements and customer statements with strict timeframes are required under the amendments to the Competition and Consumer Act for the carbon tax repeal. If a recipient does not respond to a substantiation notice it could face a penalty of up to $34,000. If a regulated supplier does not publish its substantiation statement the penalty is up to $85,000. Failure to issue a customer statement may incur a penalty of up to $68,000. These provisions are strict liability criminal offence provisions. See the timeline of key requirements under the Competition and Consumer Act in the ACCC media release.

The ACCC has also provided the second carbon monitoring report to the Federal Treasurer, detailing the ACCC’s monitoring activities for the June 2014 quarter. Read the ACCC media release

ACCC to not oppose the acquisition of Hudson Building Supplies by Woolworths/Lowe's JV – 7 Aug 2014

The ACCC will not oppose the acquisition of Hudson Building Supplies Pty Limited (Hudson) by Woolworths Limited and Lowe’s Companies Inc (together, the Joint Venture). Hudson operates a chain of stores in New South Wales and Queensland that supply building materials, hardware, and home improvement products. The ACCC concluded that the proposed acquisition would not be likely to substantially lessen competition in any local market for the retail supply of building supplies, hardware and home improvement products.

The ACCC noted that the primary customer segment serviced by Hudson is builders who have materials delivered to building sites, with some overlap between Hudson and the Joint Venture’s Masters stores in the supply of products and services to smaller trade customers from their respective retail outlets. While the ACCC found that the degree of overlap in this customer segment was limited, it nevertheless found that the Joint Venture would be likely to be competitively constrained by a number of retail competitors in each of the relevant local markets following the proposed acquisition. Read the ACCC media release

ACCC invites views on the high cost of mobile calls and SMS – 1 Aug 2014

The ACCC has released a discussion paper on pricing of the declared mobile terminating access service (MTAS). This consultation is part of the MTAS final access determination inquiry which commenced in May 2014. In the recent MTAS declaration inquiry, the ACCC decided to continue to regulate terminating services for mobile voice calls until 2019, and to regulate terminating SMS services for the first time. Whenever a call is made from a mobile phone to a phone on a different network, the receiving (or terminating) network may charge a fee, such as a per minute rate, to receive (or terminate) the call on its network. The ACCC regulates this termination service to ensure that mobile operators do not set termination fees at a level above the actual cost of providing this service.

The discussion paper seeks views on ways to determine appropriate pricing. The ACCC will also set a new regulated price for mobile voice termination services, which is currently 3.6 cents per minute. The ACCC invites submissions in response to the discussion paper until 29 August 2014. Read the ACCC media release

ACCC Chairman discusses current priorities – 28 Jul 2014

On 28 July 2014, ACCC Chairman Rod Sims addressed the Sydney Business Chamber CEO's Leadership Roundtable, discussing the ACCC's role in relation to the carbon tax repeal, general competition issues, emerging product safety matters, regulation of the NBN, as well as the Harper Review. Mr Sims confirmed that the ACCC is investigating the Boral/CFMEU matter, as previously advised to the Senate Economics Committee during the June Estimates hearings. Mr Sims also confirmed that the ACCC is looking into allegations of anti-competitive conduct involving the Transport Workers Union and Toll. The allegations were made during hearings of the Royal Commission on union corruption. The Chairman said that the ACCC will only indicate its involvement in a matter if it considers that there is a clear public interest in doing so. 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.

New cases

Federal Court considers representations made in relation to a hair straightening product

ACCC v Dateline Imports Pty Ltd [2014] FCA 791 (Justice Rangiah, 30 July 2014)

Key issues

• When considering the ordinary consumers' understanding of a representation, the court will not give weight to an 'artificial construction' (at [322]).

Summary

Dateline Imports Pty Ltd imported and sold a product called Keratin Complex Smoothing Therapy (Keratin Complex) in Australia from 2009-10 which was used to straighten frizzy or curly hair.

The ACCC commenced proceedings against Dateline alleging that Dateline contravened a number of sections of the Trade Practices Act 1974 (Cth) by publishing false, misleading or deceptive representations that Keratin Complex did not contain formaldehyde, was safe for its recommended use, complied with all global health and safety regulations, and contained 35 per cent or 40 per cent of natural keratin.

The representations related to:

• advertising on Dateline's website which claimed that Keratin Complex did not contain toxic or dangerous chemicals such as formaldehyde;
• a letter sent by Dateline's Managing Director, Mr Taylor, to Dateline's sales representatives and retailers of Keratin Complex informing them that Keratin Complex was 'totally safe – no harmful chemicals' and that a product ban in Ireland would be overturned; and
• advertisements in various women's magazines and in newspapers claiming that Keratin Complex infused 35 per cent or 40 per cent of natural keratin into hair.

Judgment

Justice Rangiah found that the representations in relation to the absence of formaldehyde in Keratin Complex were not false, misleading or deceptive. After considering scientific evidence, his Honour concluded that Keratin Complex contained a complex chemical solution which was not treated by persons in the chemical industry as formaldehyde. Justice Rangiah also held that the ACCC had not established that Dateline had made false or misleading representations in relation to its claims that Keratin Complex did not contain any toxic or dangerous chemicals, or was safe for its recommended use.

However, Justice Rangiah found that Dateline did not have reasonable grounds for representing that the product ban in Ireland would be overturned, in breach of s52 of the Trade Practices Act, and that Dateline's Managing Director, Mr Taylor, was knowingly concerned in that contravention.

Justice Rangiah also found that Dateline’s representation that Keratin Complex was comprised of at least 35 per cent or 40 per cent natural keratin was false and misleading, as it actually contained less than 7 per cent natural keratin. Justice Rangiah rejected Dateline's suggestion that ordinary consumers would have understood the representation to mean that Keratin Complex contained an ingredient which contained natural Keratin, and that at least 35 per cent of that ingredient consisted of natural keratin.

A court will set a date for a hearing on relief and costs. The ACCC is considering the judgment. Read the ACCC media release

Source: AustLII

Federal Court upholds validity of examination notices issued to Paul and Moses Obeid

Obeid v ACCC [2014] FCA 839 (Justice Farrell, 8 August 2014)

Key issues

• 'Services' can include the right to apply for ministerial consent and subsequent right to apply for an exploration licence where those rights amount to a 'commodity'

Summary

The ACCC issued the applicants, Paul and Moses Obeid, with compulsory examination notices (the Notices) under section 155(1)(c) of the Competition and Consumer Act, requiring them to attend the ACCC offices, give evidence and produce documents in private examinations. The Notices related to the ACCC's investigation into the 2009 tender process conducted by the NSW Department of Trade and Industry for an exploration licence over the Mount Penny coal tenement in Bylong Valley. The ACCC's investigation sought to determine whether the applicants had engaged in cartel conduct, or had entered or given effect to a contract, arrangement or understanding that restricted competition, in relation to expressions of interest (EOIs) they or their associates (including various companies) lodged during the 2009 tender process.

The applicants sought declarations that the Notices were not validly issued. The issues for the court to determine were:

• whether the 'right to apply for approval for mining activities' that was specified as a 'service' in the Notices fell within the meaning of 'services' in the Competition and Consumer Act; and
• whether the contract, arrangement or understanding alleged by the ACCC contained a 'cartel provision'.

The parties agreed that the Notices would only be valid if they identified a 'service' in relation to which the applicants had sought to restrict competition. The applicants argued that the right to seek approval for mining activities was not an acquisition of a 'service'.

Judgment

Justice Farrell found that the Notices were valid.

Justice Farrell rejected the applicants' claim that the services specified in the Notices should be characterised narrowly as the 'right to apply for ministerial consent'. Justice Farrell identified the 'services' specified as encompassing:

• ministerial consent given to the successful applicant under the Expression of Interest Process (EOI Process);
• the statutory right (which flowed from the ministerial consent) to apply for the exploration licences for the relevant areas; and
• a possible contractual right conferred on the successful applicant in the EOI Process to apply for the exploration licences which may have encompassed contractual remedies if the licences were not granted.

After considering the legislative history of the definition of 'services', Justice Farrell concluded that 'services' was to be given a wide meaning. Justice Farrell highlighted that the EOI Process was conducted on a commercial basis '… designed to maximise competition for, and financial gain from, the right to explore for the State's coal reserves' (at [108]). Justice Farrell found that the right to apply for an exploration licence, which by force of s 22 of the Mining Act 1922 (NSW) required the Minister to consider the application before deciding whether to grant or refuse to grant a licence, could be considered a 'service', as the ministerial consent and statutory right to apply for exploration licences was a 'commodity … which gave the State the opportunity to realise large sums of money through the EOI Process' even when there was no subsequent mining of the area. On this basis, Justice Farrell held that the Notices were valid.

Justice Farrell also held that the possible contractual right to apply for the exploration licences could not be characterised as a 'service'.

Accordingly, Justice Farrell did not need to consider the question of whether the contract, arrangement or understanding contained a cartel provision, as this would have required the applicants to make the same arguments in relation to the question of 'services'. Justice Farrell ordered the applicants to pay the ACCC's costs. Read the ACCC media release

Source: AustLII