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.

ACCC and other regulatory news

Consumer protection enforcement

Cleaning franchisor penalised – 24 Mar 2015

In October 2014, the Federal Court declared that a franchisor that establishes and operates professional cleaning services had engaged in unconscionable conduct, made false or misleading representations, and had contravened the Franchising Code of Conduct in its dealings with two individuals who were prospective franchisees and subsequently signed up to the cleaning franchise (read In touch). The court has now ordered a $500,000 penalty against the franchisor. Read the ACCC media release.

Car insurer pays ASIC infringement notice penalties – 6 Mar 2015

AAI Limited (trading as AAMI) has paid $20,400 in penalties after ASIC issued two infringement notices for false or misleading advertisements relating to car insurance. The advertisements represented that savings could be achieved if consumers switched to AAMI from a competitor. However, ASIC considered that the advertisements did not adequately convey that consumers needed to select the maximum excess level in order to achieve those savings. Although the detail was included in fine print within the advertisements, ASIC considered the disclaimer to be ineffective having regard to the dominant message being conveyed by the advertisements. Read the ASIC media release.

Pharmaceutical product claims – 5 Mar 2015

The ACCC has commenced proceedings against Reckitt Benckiser (Australia) Pty Ltd, alleging that it made false or misleading claims that its Nurofen Specific Pain Products were each formulated to treat a specific kind of pain, when the products were identical. The product range consisted of Nurofen Back Pain, Nurofen Period Pain, Nurofen Migraine Pain, and Nurofen Tension Headache.

The ACCC is seeking declarations, injunctions, an order for the publication of corrective notices, penalties and costs. The matter is listed for a case management conference on 31 March 2015. Read the ACCC media release.

Wealth creation company representations – 3 Mar 2015

The ACCC has commenced proceedings against We Buy Houses Pty Ltd and Rick Otton for alleged contraventions of the Australian Consumer Law (ACL). We Buy Houses is involved in the promotion of wealth creation strategies for real property transactions, and conducts seminars, boot camps and other training programs. Members of the public can attend these programs at costs ranging up to approximately $17,000.

The ACCC has obtained a delegation from ASIC to enable the ACCC to institute proceedings under the financial consumer protection provisions of the Australian Securities and Investments Commission Act 2001 (Cth).

The ACCC is seeking declarations, pecuniary penalties, permanent injunctions and corrective advertising, as well as a disqualification order against Mr Otton. The matter is listed for a directions hearing on 1 April 2015. Read the ACCC media release.

Broadband provider pays infringement notice penalties – 3 Mar 2015

iiNet Limited has paid penalties of $204,000 following the issue of two infringement notices by the ACCC in relation to recent advertisements for iiNet’s Naked Broadband 250GB Plan. The advertisements appeared on a tram and billboard in metropolitan Melbourne in November 2014, and displayed a monthly price of $69.95 for the Plan. Although the total minimum price was included, the ACCC considered that it was not displayed in a prominent way as required by the ACL. Read the ACCC media release.

Mergers

Woodside’s acquisition of Apache Corporation’s interests in the Wheatstone, Balnaves and Kitimat Projects – 5 Mar 2015

The ACCC will not oppose Woodside’s acquisition of Apache Corporation’s interests in the Wheatstone, Balnaves and Kitimat Projects. Both Woodside and Apache are oil and gas companies. The Wheatstone and Balnaves Projects are located in the Northern Carnarvon Basin, offshore WA. The Kitimat Project is located in British Columbia, Canada.

In Australia, Woodside and Apache overlap in the wholesale supply of natural gas to the domestic market in WA. The ACCC considered that, following the acquisition, Woodside would continue to face strong competition from other suppliers in the market. The Balnaves and Kitimat Projects are not expected to supply product to Australia. Read the ACCC media release.

Seven's acquisition of Foxtel's Presto service – 2 Mar 2015

The ACCC will not oppose the acquisition of shares in the Presto Entertainment subscription video on demand (SVOD) service by Seven Network Operations, a subsidiary of Seven West Media.

Presto Entertainment provides subscribers with access to general entertainment content, including premium and library drama and children’s content. Seven proposes to acquire shares to participate in a joint venture with Foxtel for the Presto Entertainment service.

The ACCC determined that, following the acquisition, the Presto Entertainment service would continue to face strong competition from other SVOD services such as Stan (a joint venture between Nine and Fairfax) and Netflix. Read the ACCC media release.

Macquarie & Fairfax radio – 27 Feb 2015

The ACCC will not oppose Macquarie Radio Network Limited’s proposed acquisition of the radio assets of Fairfax Media Limited or Fairfax's proposed acquisition of 54.5 per cent of Macquarie Radio. The ACCC determined that the combined radio business would continue to face strong competition from other commercial radio stations. Read the ACCC media release.

Authorisations

Qantas/ China Eastern coordination – 24 Mar 2015

The ACCC has issued a draft determination proposing to deny authorisation for Qantas and China Eastern to coordinate their operations between Australia and China under a proposed Joint Coordination Agreement. The ACCC considers that the agreement is likely to result in significant public detriment by giving Qantas and China Eastern increased ability and incentive to limit capacity and/or increase airfares on the Sydney to Shanghai route. Qantas and China Eastern together account for more than 80 per cent of capacity on direct services on the Sydney to Shanghai route and are the only airlines offering daily flights. Submissions on the draft determination are due by 8 April 2015. Read the ACCC media release.

Bulk Electronic Clearing System regulations – 4 Mar 2015

The ACCC has issued a draft determination proposing to re-authorise the suspension and termination provisions of the Australian Payments Clearing Association’s Bulk Electronic Clearing System regulations for 10 years. Read the ACCC update.

Tasmanian Farmers and Graziers Association – 4 Mar 2015

The ACCC has authorised the Tasmanian Farmers and Graziers Association to continue to collectively negotiate the terms and conditions of growing contracts with vegetable processors in Tasmania for 10 years. Read the ACCC update.

Regulated industries and access

ACCC consults on NBN Co information disclosure – 24 Mar 2015

The ACCC has released a discussion paper seeking submissions from telecommunications companies about what information NBN Co should disclose and the manner in which it should disclose that information. Submissions are due by 24 April 2015. Read the ACCC media release.

Draft access prices for Telstra's copper network – 11 Mar 2015

The ACCC has issued its draft decision on the prices that other operators pay Telstra to use its copper network to provide telecommunications services to consumers. The NBN is replacing Telstra’s legacy network as the infrastructure over which Australians receive fixed line voice and broadband communications. This structural change has significant implications for how Telstra’s fixed line assets are used during the transition.

The draft decision covering 1 July 2015 to 30 June 2019 provides for a one-off uniform fall in access prices of 0.7 per cent for seven access services (namely the unconditioned local loop service, line sharing service, wholesale line rental service, local carriage service, fixed originating access service, fixed terminating access service and wholesale asymmetric digital subscriber line service). There are two reasons underpinning the ACCC's decision:

1. there will be a full allocation of costs across all services supplied over the network and Telstra will no longer bear all the costs of declining consumer demand for fixed line services; and
2. the ACCC is implementing the cost allocation framework outlined in October 2014, under which costs are allocated to NBN Co for its use of leased assets, while assets that are decommissioned or used less because of the NBN are removed from the cost base for the fixed line services. The ACCC will also not allow Telstra to pass on the costs of capital expenditure incurred in making its network ready for the NBN.

Submissions on the draft decision are due by 30 April 2015. The ACCC intends to release its final decision at the end of June 2015. Read the ACCC media release and the draft decision.

Petrol price monitoring: Regional market study and ACCC report – 10 Mar 2015 and 26 Feb 2015

In 2014, the Federal Minister Bruce Bilson directed the ACCC to monitor fuel markets in a more regular and comprehensive fashion. In response to this direction, the ACCC has announced that Darwin will be the first regional location to be studied on micro issues under the new petrol price monitoring arrangements. In particular, the ACCC is using its compulsory information gathering powers under section 95ZK of the Consumer and Competition Act 2010 (Cth) to require various information from fuel companies at every level of the supply chain leading into Darwin. The ACCC is also interested in obtaining information from consumers, industry participants, stakeholders and any other interested parties regarding the petroleum industry in Darwin. Submissions are due by 31 May 2015. Read the ACCC media release.

The ACCC has also released its June to December 2014 report into the Australian petroleum industry, including some additional information to the end of January 2015. The report shows that petrol prices in Sydney, Melbourne, Brisbane, Adelaide, and Perth decreased in a manner consistent with the fall in international crude oil and refined petrol prices. While diesel and LPG prices also fell considerably, this was not by as much as international prices. Read the report and the ACCC media release.

ACCC reporting

ACCC telecommunications report 2013-14 – 6 Mar 2015

The ACCC’s two annual telecommunications reports for 2013-14 were tabled in Parliament on 5 March 2015:

1. Report 1: Telecommunications competitive safeguards for 2013–14; and
2. Report 2: Changes in the prices paid for telecommunications services in Australia 2013–14.

The reports show that:

• retail prices for telecommunications services fell by 2.7 per cent in real terms over the period;
• NBN Co made significant investment in fibre infrastructure during the year while investment in legacy networks declined;
• investment in mobile networks was strong, as mobile network operators responded to consumer demand for high-quality mobile and wireless data services;
• consumers used their mobile phones more intensively during the year, particularly for data services. However, mobile handset and wireless broadband subscriptions started to reach saturation levels after strong growth in recent years;
• consumers downloaded more data across all platforms, but continued to favour a fixed line connection for data-intensive activities, such as downloading movies and gaming. Fixed line connections accounted for 93 per cent of all downloads in 2013-14.

The reports also provide further detail on key developments in telecommunications markets and outline the ACCC’s regulatory activities during the year. Read the reports and the ACCC media release.

December quarter 2014 report – 3 Mar 2015

The ACCC has published its December 2014 quarterly report, ACCCount. The report highlights the following as significant achievements during the quarter:

• responding to more than 59,000 complaints and enquiries from businesses and consumers;
• securing more than $19 million in penalties for breaches of the Competition and Consumer Act;
• commencing eight new civil proceedings in the Federal Court and obtaining four court enforceable undertakings;
• receiving $224,400 for four infringement notices under the ACL; and
• rolling out an educational campaign in relation to the changes to the Franchising Code of Conduct.

Read the ACCC media release.

Industry codes

Food and Grocery Code introduced – 2 Mar 2015

The new Food and Grocery Code of Conduct has been registered and commenced on 27 February 2015.

The code is a voluntary code and binding on corporations that opt-in, either as a retailer or a wholesaler, by giving written notice to the ACCC. It prohibits specific types of unfair conduct by retailers and wholesalers in their dealings with suppliers and provides a framework for these dealings. Key provisions of the code:

• set out the requirements of agreements between retailers or wholesalers and suppliers, including that they be in writing;
• limit when retailers or wholesalers can unilaterally or retrospectively vary an agreement with a supplier, and requires any variation and the reason for it to be in writing; and
• set out a dispute resolution process.

The ACCC has developed guidance material on the code. Read the ACCC media release and Food and Grocery Code of Conduct.

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

Cases

Misuse of market power and exclusive dealing – Pfizer successfully defends ACCC action in relation to pharmaceutical drug supply

ACCC v Pfizer Australia Pty Limited [2015] FCA 113 (Justice Flick, 25 February 2015)

Key issue

• Imminent entry of generic pharmaceutical manufacturers into a market following the expiry of a patent may reduce the degree of market power held by the patent owner to the point where it no longer has 'substantial' market power before patent expiry.

Summary

Until May 2012, Pfizer held the patent for atorvastatin, a cholesterol-lowering drug, which it sold under the brand name Lipitor. For many years, Lipitor was the highest selling prescription medicine in Australia.

The ACCC commenced proceedings against Pfizer in February 2014. The ACCC's case centred on the strategy Pfizer developed in anticipation of its patent expiring, when Pfizer anticipated that there would be significant competition from generic manufacturers. The conduct in question primarily involved Pfizer's:

• decision announced in December 2010 to supply prescription pharmaceutical products direct to pharmacy (DTP) and to cease supply though wholesalers;
• establishment of an accrual funds scheme in January 2011, under which funds on purchases of Lipitor up until patent expiry accrued to pharmacies and were held in an account created for each pharmacy; and
• making an offer in January 2012 to pharmacies concerning the supply of Lipitor and its generic product atorvastatin, on terms which linked the release of the accrued rebates to the quantity of generic atorvastatin purchased by the pharmacy.

Misuse of market power

The ACCC alleged that Pfizer misused its market power in breach of section 46 of the Competition and Consumer Act in January 2012 when it made its atorvastatin offers. The Federal Court rejected the ACCC's allegations on the basis that:

• Pfizer did not have substantial market power in January 2012;
• Pfizer did not have an anticompetitive purpose in either establishing DTP or in making the offers in January 2012; and
• even if Pfizer had substantial market power, its offer did not amount to a use of market power.

Exclusive dealing

The ACCC also alleged that Pfizer's conduct contravened s47 of the Competition and Consumer Act, which prohibits exclusive dealing. The Federal Court found that Pfizer's purpose in imposing the condition that pharmacies not, except to a limited extent, acquire atorvastatin from a competitor was to ensure its own corporate survival or to remain competitive. This was not a purpose of substantially lessening competition.

The Federal Court dismissed the ACCC's application and ordered the ACCC to pay Pfizer's costs.

Source: AustLII

Read the ACCC media release.

The ACCC has appealed this decision – read the ACCC media release.

Misleading or deceptive conduct – Eye treatment medication representations

Novartis Pharmaceuticals Australia Pty Ltd v Bayer Australia Ltd [2015] FCA 35 (Justice Robertson, 6 February 2015)

Key issue

• Representations made to professionals may not be considered misleading or deceptive when considered in the context of their high level of training, knowledge and experience.

Summary

Novartis and Bayer both produce intra-vitreal injection medicines – Lucentis and Eylea respectively – used to treat an eye condition. Novartis alleged that Bayer had made misleading or deceptive representations in various publications to the effect that Bayer's Eylea patients needed fewer injections for treatment than Novartis' Lucentis patients.

The Federal Court dismissed Novartis' claim. It held that the relevant audience was ophthalmologists. While the words used in the representations were directed at both optometrists and ophthalmologists, optometrists did not play a role in selecting what treatment to use. The Federal Court also found that the alleged representations would not have been conveyed to a reasonable ophthalmologist, and, even if they had, they would not be likely to mislead or deceive. This is because ophthalmologists would understand any claims in the context of their level of training, knowledge and experience, and, in particular, would not proceed on the basis that the necessary treatment for each patient was relevantly identical but would make their own decision based on their experience and knowledge.

Source: AustLII