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

Country of origin food labelling inquiry report tabled in Parliament

In March 2014, the House of Representatives Standing Committee on Agriculture and Industry was directed to inquire into, and report on, country of origin labelling (COL) for food. The Committee was directed to have particular regard to:

• whether the current COL system provides enough information for Australian consumers to make informed purchasing decisions;
• whether Australia’s COL laws are being complied with and what, if any, are the practical limitations to compliance;
• whether improvements could be made, including to simplify the current system and/or reduce the compliance burden;
• whether Australia’s COL laws are being circumvented by staging imports through third countries; and
• the impact on Australia’s international trade obligations of any proposed changes to Australia’s COL laws.

The Committee received 54 submissions, seven supplementary submissions, held seven public hearings across Australia and met with a number of food manufacturers. The Committee has now tabled its report, A clearer message for consumers. The report proposes a number of recommendations, including that the Federal Government implement the following COL 'safe harbours':

• ‘Grown in’ – 100 per cent content from the country specified;
• ‘Product of’ – 90 per cent content from the country specified;
• ‘Made in [country] from [country] ingredients’ – 90 per cent content from the country specified;
• ‘Made in [country] from mostly local ingredients’ – more than 50 per cent Australian content;
• ‘Made in [country] from mostly imported ingredients’ – less than 50 per cent Australian content.

ACCC news

ACCC releases ACCC & AER annual report 2013-14 – 30 Oct 2014

The ACCC has released the ACCC & AER annual report 2013-14.

The report shows that the ACCC was involved in 53 proceedings relating to consumer protection enforcement, increased competition enforcement and secured over $12 million in penalties and other remedies during the year.

The report highlights the ACCC's notable achievements, including strong court judgments, significant penalties and major regulatory decisions for the year:

• At the end of June 2014, the ACCC had seven cases alleging cartel conduct before the courts. The ACCC has taken court action against cartel conduct operating in the market for ball bearings used in motor vehicles and industrial applications. The Federal Court ordered NSK Australia Pty Ltd and Koyo Australia Pty Ltd to pay $3 million and $2 million respectively.
• The ACCC's 2014 compliance and enforcement policy prioritised protecting vulnerable consumers. In April 2014, Startel Communication Co Pty Ltd was ordered, by consent, to pay $320,000 for misleading consumers about their rights under the ACL when cold calling consumers.
• A total of 267 recalls of consumer goods were received by the ACCC in 2013-14.
• The ACCC helped protect and inform small business operators, including by securing an order against Taxsmart Group Pty Ltd and other related companies to repay franchise fees to five former franchisees for engaging in misleading and deceptive conduct.
• The ACCC considered 297 mergers, conducted a public review of 48 mergers and a confidential review of seven, a decrease of 25 per cent on public reviews and decrease of 42 per cent on confidential reviews in 2012-13.
• In 2014, the ACCC accepted NBN Co’s Special Access Undertaking, which is a key part of the framework for prices and other terms of services supplied to access seekers over the NBN until 2040. The ACCC also approved a range of measures to protect competition and consumers during the migration to the NBN.
• The process of regulating fixed line services continued.

Read the ACCC media release

Competition is delivering benefits on the waterfront – 30 Oct 2014

The ACCC has released its 16th annual container stevedoring monitoring report.

The ACCC began monitoring stevedoring in 1998-99. In 2013-14, capital and labour productivity at Australia’s container ports reached the highest levels the ACCC monitoring program has observed. Average stevedoring prices fell in 2013-14 and, in real terms, are now at one of the lowest levels recorded by the monitoring program.

Over the past two years, the stevedores have also made significant investments in efficiencies and capacity, which has doubled the size of the industry’s asset base.

'The introduction of a third stevedore into Brisbane and Sydney as well as a forthcoming new operator in Melbourne is changing the dynamics of the industry. From 2017, we can expect three container stevedores to be operating at each of Australia’s three largest ports,' ACCC Chairman Mr Sims said.

However, the ACCC has identified two key risks to future performance in the industry. These are the potential impacts of labour outcomes and port privatisations where adequate regard is not given to promoting competition or the appropriate level of economic regulation.

The ACCC has also identified three opportunities to improve productivity in landside connections to container ports in order to handle the expected growth in container volumes:

• reform of road provision and charging;
• using pricing to allocate scarce capacity; and
• industry-led initiatives to improve container flows.

Read the ACCC media release

Proposed franchising powers set to boost code compliance – 27 Oct 2014

Addressing the National Franchise Convention’s Legal Symposium in Sydney on 26 October, ACCC Deputy Chair Dr Michael Schaper discussed the changes to the Franchising Code of Conduct likely to take effect on 1 January 2015.

Based on the exposure draft of the new Code released in April 2014, the ACCC will be able to issue infringement notices of up to $8500 and seek penalties up to $51,000 in the Federal Court for contraventions of the Code. Dr Schaper said that the possible new tools will provide flexibility and balance in dealing with breaches of the Code at both ends of the severity spectrum.

Dr Schaper said the ACCC will focus on particularly serious conduct, including breaches of the ‘key pillars’ of the revised Code, including failure to act in good faith, failure to provide a disclosure document, refusal to attend mediation and unlawful termination of a franchise agreement. Read the speech and the ACCC media release

'Drip pricing' investigation leads to clearer ticket pricing – 23 Oct 2014

Ticketek and Ticketmaster have improved their pricing practices in response to concerns raised by the ACCC as part of its 'drip pricing' investigation. The ACCC identified instances where it considered that these companies had failed to state single minimum total prices. The two ticketing companies will now include unavoidable fees in prices earlier in the online booking process and incorporate the minimum payment processing fees into the displayed ticket prices. Ticketek also now incorporates its service/delivery fee into the total price as soon as it is calculable. Similarly, Ticketmaster now incorporates its handling fee into the total price displayed once the user has selected the total number of tickets for purchase. Read the ACCC media release

Reebok Australia to pay $350,000 for false and misleading representations – 23 Oct 2014

The Federal Court has, by consent, ordered Reebok Australia to pay a pecuniary penalty of $350,000 for making false and misleading representations about the benefits of Reebok EasyTone shoes. Reebok had represented to consumers that EasyTone shoes would increase the strength and muscle tone of their calves, thighs and buttocks more than if they were wearing traditional walking shoes. These representations were made on the shoe boxes and swing tags on the shoes, as well as information cards, booklets and in-store promotional material. The court found these representations were false and misleading as Reebok had no reasonable grounds for making the representations. Read the ACCC media release

ACCC releases position statement on treatment of Telstra-NBN Co arrangements for Telstra's fixed line prices – 22 Oct 2014

The ACCC has released a position statement on how it intends to account for the effect of arrangements between Telstra and NBN Co in its final access determinations (FADs) for Telstra’s regulated fixed line services. The ACCC identified arrangements regarding the migration of customers to the NBN and the use of Telstra's assets by NBN Co as the key issues in setting prices for declared services.

The ACCC will use the regulatory value of Telstra's assets, not the higher payments agreed between Telstra and NBN Co in their Definitive Agreements, to adjust the cost base for NBN effects when determining regulated charges. A 'regulatory values' approach uses the values assigned to affected assets in the regulatory asset base to adjust for assets sold or leased to NBN Co. The use of regulatory values maintains the current cost-based approach to setting regulated access and wholesale charges on Telstra’s fixed line network.

The ACCC considers that an adjustment should also be made to account for assets becoming redundant as a consequence of the migration of customers to the NBN. The ACCC will adjust the cost base to remove the regulatory values of decommissioned assets and to account for the declining utilisation of assets due to NBN migration prior to full decommissioning. This will ensure that Telstra does not recover, through regulated prices, the costs of assets that are no longer used to supply the declared services.

The ACCC’s position on this issue is part of its current inquiry to make FADs for Telstra’s seven declared fixed line services. The ACCC released a discussion paper on the FAD primary price terms on 24 July 2014, and expects to release its draft decision for consultation in early 2015, before making a final decision in mid-2015. Read the ACCC media release

First conditional authorisation of resale price maintenance by the ACCC – 21 Oct 2014

The ACCC has been very active in pursuing resale price maintenance (RPM). However, in a recent statement, the ACCC has recognised that RPM can, in certain circumstances, address market failures and, as a result, generate public benefits.

In the first application for authorisation under the Competition and Consumer Act 2010 (Cth) to set minimum retail prices, the ACCC has issued a draft determination proposing to grant conditional authorisation to Tooltechnic Systems Pty Ltd to set minimum retail prices on Festool power tools.

Tooltechnic is the exclusive importer and wholesaler of Festool power tools, which are complex, highly differentiated products that require a high level of both pre- and post-sales services. The ACCC considers that although some customers might face higher retail prices for Festool products, customers will still have a very wide range of alternate trade quality power tools available to them, which means that Tooltechnic will have little incentive to set minimum retail prices above competitive levels as that would likely lead to reduced sales of Festool products.

The ACCC accepts that there is a market failure in this case caused by the 'free riding' of some Festool retailers (where some retailers gain the benefit of services offered by other retailers). The ACCC considers that this 'free riding' will be limited by the authorisation, as it will encourage Festool retailers to offer better services to attract customers.

As it is the first authorisation application for RPM, the ACCC proposes to grant the authorisation for three years rather than the five years sought by Tooltechnic. The ACCC also proposes to impose conditions on the authorisation, requiring Tooltechnic to provide certain information during the authorisation period to assist the ACCC to monitor the impacts of RPM.

The ACCC is currently seeking submissions from interested parties in relation to its draft determination. Read the ACCC media release

Telstra commits to improving its compliance with the ACL – 21 Oct 2014

The ACCC has reached a resolution with Telstra after an investigation into representations by Telstra to consumers who complained about faulty mobile phones. The ACCC was concerned that, on some occasions, Telstra may have misled consumers about their consumer guarantee rights in relation to faulty mobile phones. Telstra’s representations may have caused some consumers to believe they were not entitled to a refund, replacement or repair, when these remedies may have been available under the ACL. The ACCC identified around 400 complaints made between January 2011 and November 2013 which raised concerns over possible misrepresentations about consumers’ rights under the ACL.

As a result, Telstra has made various commitments to address the ACCC's concerns, including providing induction training for staff, conducting annual independent assessments of staff awareness of consumer guarantee rights, and maintaining a consumer guarantees webpage and in-store information for consumers about the consumer guarantees regime. Read the ACCC media release

ACCC proposes to strengthen new individual reporting in pharmaceutical code – 17 Oct 2014

The ACCC is proposing to grant conditional authorisation to edition 18 of Medicines Australia’s Code of Conduct for five years. The Code sets the standards for the marketing and promotion of prescription pharmaceutical products in Australia by member companies.

In edition 18, Medicines Australia has proposed a regime which requires reporting of individual 'transfers of value' (such as speaking fees, advisory board fees or sponsorship to attend a conference) made to healthcare professionals, except where the healthcare professional has not consented to the disclosure. The ACCC proposes to impose a condition to ensure that all relevant transfers of value by pharmaceutical member companies to individual healthcare professionals are reported. The ACCC is also considering requiring ongoing hospitality reporting. Read the draft determination and the ACCC media release

ACCC releases Statement of Issues on proposed acquisition of Dux by Rheem – 17 Oct 2014

The ACCC has released a Statement of Issues in relation to the proposed acquisition by Rheem Australia Pty Ltd of the Dux hot water heater business. The ACCC notes that gas-powered continuous flow water heaters appear to have increased in popularity in Australia but is concerned that they are not a viable option for many customers, particularly in areas where reticulated gas is unavailable. The ACCC will explore whether imports of storage water heaters are likely to provide a sufficient competitive constraint on Rheem post-acquisition. While imports of storage water heaters do occur, market participants have questioned the viability of importing larger-size storage water heaters, particularly if the Australian dollar continues to decline in value. The ACCC invites further submissions from the market by 31 October 2014, and has deferred its final decision until 20 November 2014. Read the ACCC media release

ACCC authorises owner drivers to collectively bargain with Toll Transport at Brisbane Airport depot – 16 Oct 2014

The ACCC has granted authorisation until 31 October 2017 for a group of small business owner drivers to collectively bargain with Toll Transport Pty Ltd for the supply of air freight courier transport services at the Toll Priority Brisbane depot. The authorisation allows the Transport Workers Union to represent owner-driver members engaged by Toll to provide air freight courier transport services at the Toll Brisbane depot in collective negotiations with Toll Transport. Read the ACCC media release

ACCC releases Statement of Issues on CSR and Boral proposed clay brick joint venture – 16 Oct 2014

The ACCC has released a Statement of Issues in relation to CSR Limited and Boral Limited’s proposed clay brick joint venture. CSR and Boral are both suppliers of a range of products including plasterboard, insulation, fibre cement, and roof tiles to the building and construction industry in Australia. CSR and Boral propose to form a joint venture for the manufacture, marketing, and supply of clay bricks in eastern Australia. The joint venture would reduce the number of major clay brick suppliers in eastern Australia from three to two, with the other being Austral Bricks. In NSW and Queensland, these two remaining suppliers, the joint venture and Austral Bricks, would account for approximately 99 per cent of the supply of clay bricks.

The ACCC invites further submissions from interested parties in response to the Statement of Issues by 6 November 2014, and will announce its final decision on 18 December 2014. Read the ACCC media release

ACCC accepts undertaking over restrictions on Townsville Taxis booking apps and mobile phones – 15 Oct 2014

The ACCC has accepted a court-enforceable undertaking from Standard White Cabs Limited, trading as Townsville Taxis, relating to restrictions on the use of booking apps. The ACCC’s investigation followed allegations that Townsville Taxis had been restricting its affiliated taxi drivers from using third party taxi booking applications and mobile telephones to accept taxi bookings from customers.

Townsville Taxis has acknowledged that its conduct was likely to have breached the exclusive dealing and exclusionary provision prohibitions in the Competition and Consumer Act. As part of its undertaking, Townsville Taxis will ensure that its affiliated drivers are free to use third party booking applications and/or a mobile telephone to receive taxi bookings from customers, and will also implement a competition and consumer law compliance program. 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

Long-standing covert forklift gas supply cartel conduct heavily penalised

ACCC v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135 (Justice Gordon, 24 October 2014)

Key issues

• The court will consider what penalty it would impose that is proportionate to the gravity of the contravening conduct, even where it receives proposed agreed orders from the parties

Summary

Speed-E-Gas and Renegade Gas were competitors in the supply of liquid petroleum gas cylinders for use in forklifts in Sydney. Following an investigation, the ACCC commenced proceedings against Renegade and Speed-E-Gas in August 2012 alleging that between August 2006 and June 2011 they had an understanding in respect of the supply of forklift gas in Sydney that neither would try to secure the other business' forklift gas customers in Sydney, and if one did, the other business would retaliate for the customers it lost.

The ACCC sought declarations, injunctions, pecuniary penalties, disqualification orders and compliance program and training orders. The parties filed statements of agreed facts and orders with the court.

The court made the following penalty orders, by consent, totalling $8.3 million:

• Renegade Gas to pay a pecuniary penalty of $4.8 million;
• Speed-E-Gas to pay a penalty of $3.1 million;
• Mr Berman (previously Managing Director at Renegade) to pay a pecuniary penalty of $250,000 as accessory to Renegade's contraventions;
• Mr Smith (Sales Supervisor at Renegade) to pay a pecuniary penalty of $100,000 as accessory to Renegade's contraventions; and
• Mr Wilson (Sales Manager at Speed-E-Gas) to pay a pecuniary penalty of $50,000 as accessory to Speed-E-Gas's contraventions.

The court also imposed orders for declarations, injunctions and the implementation and completion of competition and consumer law compliance and training programs by consent.

Pecuniary penalties – Renegade and Speed-E-Gas

Justice Gordon highlighted some significant factors in assessing the appropriateness of the quantum of penalties to be paid by Renegade and Speed-E-Gas.

Culture of compliance

Justice Gordon noted that Renegade's corporate culture was not conducive to compliance, and that it had no compliance programs or other training systems or processes. Speed-E-Gas had an online compliance training program.

Cooperation with the ACCC

Renegade's cooperation with the ACCC was limited, and resulted in only a 4 per cent discount from the starting point of $5 million for settling the proceedings six weeks prior to trial, and no further discount for any other aspect of Renegade's conduct during the investigation and the proceedings.

Speed-E-Gas's level of cooperation from the initial stages of the ACCC's investigation attracted a substantial discount, from the starting point of $5 million to $3.1 million.

Orders against Mr Berman

Before the hearing, Mr Berman had not expressed contrition or remorse for his conduct. Justice Gordon accepted the ACCC's submission that features of Mr Berman's conduct placed it towards the top end of an individual's culpability for a cartel contravention. However, taking into account the three-year disqualification order, which had the potential to have a pecuniary impact on Mr Berman, Justice Gordon accepted that a mid-range penalty was appropriate. Justice Gordon agreed with the terms of the proposed declarations and injunction against Mr Berman. Mr Berman was also ordered to attend a tailored program of trade practices compliance training to be undertaken annually for five years, and to contribute to the ACCC's costs.

Orders against Mr Smith

Mr Smith was ordered to pay a penalty of $100,000, taking into account that he worked at the direction of Mr Berman, his contrition and early admission of the contravention, and his cooperation with the ACCC.

Orders against Mr Wilson

Similarly Mr Wilson was ordered to pay $50,000, taking into account the timing and scope of his cooperation with the ACCC and that he was subject to the direction of his employer. Read the ACCC media release

Source: AustLII