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.

Harper Review news

The final report of the Harper Review Panel was released on 31 March 2015. The Allens Competition team has put together a number of briefing tools to assist our clients to consider the impact of the recommendations, which are set to drive major regulatory reforms and will have an impact on Australian businesses across a wide range of sectors. The tools include:

1. Key issues for General Counsel – a concise two-page summary of the major recommendations in relation to misuse of market power; mergers; cartels, price signalling and joint ventures; vertical restraints, third line forcing and resale price maintenance; exemption and authorisation; enforcement; extraterritorial application; institutional changes and the introduction of market studies; access; and policy.
2. What the Harper Review recommendations mean for your company – a diagrammatical representation of the recommendations across the major areas; and
3. Detailed analysis of the recommendations across the areas of:
• access and Part IIIA;
• cartels, price signalling and joint ventures;
• class actions;
• extra-territoriality;
• competition regulation of Government activity;
• health, education and community services;
• intellectual property; and
• mergers.

You can also listen to Allens Competition Partner Kon Stellios interviewing Simon Troeth of Newgate Australia regarding the Government's response to the recommendations.

We will continue to add useful tools to the website and keep you informed of future developments. If you would like to discuss what the recommendations will mean for you please let us know.

ACCC News

Regulated industries: Wholesale gas price inquiry – 13 Apr 2015

The Federal Government has directed the ACCC to commence a 12-month inquiry into the competitiveness of the wholesale gas prices in eastern and southern Australia. The ACCC will distribute an Issues Paper in May 2015 on matters relevant to the inquiry, and will call for public submissions. The ACCC will also be conducting public and private hearings. This inquiry is due to report to the Government by April 2016. Read the direction notice and the ACCC media release.

Regulated industries: Wheat code exemptions – 10 Apr 2015

The ACCC proposes to grant exemptions for Emerald's Melbourne Port Terminal (MPT) and GrainCorp's Geelong terminal under the mandatory wheat code, but not for GrainCorp's Portland port terminal. The code regulates bulk wheat port terminal service providers to ensure that exporters have fair and transparent access to terminal facilities. The ACCC may reduce regulation at a specific port terminal by exempting port terminal service providers from certain provisions of the code.

The ACCC considers that there is sufficient competition between Emerald's MPT and GrainCorp's Geelong port terminal, but that GrainCorp's Portland terminal faces less competitive constraints. Read the draft assessments and the ACCC media release.

Authorisation: Port of Fremantle terminal – 2 Apr 2015

The ACCC will not oppose the proposed acquisition by Victoria Quay International of a long-term lease to develop and operate the terminal at the Port of Fremantle, after accepting a court-enforceable undertaking. The undertaking requires that Victoria Quay complies with open access conditions in its operation of the terminal and provides mechanisms for independent resolution of price and non-price related disputes if parties consider they have been discriminated against in the supply of terminal services. Read the ACCC media release.

Regulated industries: South Australia wheat port shipping agreements – 2 Apr 2015

The ACCC is seeking comment on Viterra's application to introduce long-term agreements for shipping at its six South Australian wheat port terminals. Currently, Viterra allocates port terminal capacity to exporters for one year at a time via annual auctions. The proposal would allow third party exporters to Viterra's ports the opportunity to negotiate long term access arrangements to the port terminals for between two to five years. The ACCC is assessing Viterra's proposal in accordance with the Port Terminal Access (Bulk Wheat) Code of Conduct, which gives the ACCC a role approving the capacity allocation system used by a port terminal service provider. Read the ACCC media release.

Spectrum licences: ACCC consults on spectrum competition limits – 1 Apr 2015

The ACCC has been asked to provide advice on the potential competition limits for the proposed auction of spectrum licenses. The proposed auction, to be conducted by the Australian Media and Communications Authority, will be for licences covering segments of the 1800 MHz band in regional Australia, a highly sought-after spectrum for 4G and mobile broadband services. Read the ACCC media release.

False or misleading advertising: Chinese made 'Aussie Beer' – 30 Mar 2015

The Independent Liquor Group (ILG) has paid a $10,200 infringement notice penalty issued because the ACCC found ILG had made false or misleading country of origin representations. ILG supplied a product made in China named 'Aussie Beer' with labelling that incorporated the statement '100% owned' within a green and gold map of Australia and the statement 'Australia's finest malt'. Read the ACCC media release.

NBN: ACCC consults on NBN Co information disclosure – 24 Mar 2015

The Department of Communications has asked the ACCC to consult with industry as part of developing a new carrier licence condition for NBN Co, the object of which is to provide symmetry between Telstra and the other retail service providers to ensure that Telstra does not have any actual or perceived information advantage because of its role as the owner of the copper networks being acquired by NBN Co. Telstra's work with NBN Co in the planning, design and construction of the network will result in Telstra having access to sensitive information about the rollout, including progress towards milestones and the technology mix that will be used in particular areas. The ACCC is asking telecommunication companies for feedback on the information that NBN Co should disclose about the rollout of its network. Read the ACCC media release.

Authorisation: Qantas/China Eastern coordination agreement – 24 Mar 2015

The ACCC proposes to deny authorisation for Qantas and China Eastern to coordinate their operations between Australia and China as it considers this would greatly reduce competition between them and 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 – Shanghai route. 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

False or misleading conduct: Coles penalised for misleading bread claims

ACCC v Coles Supermarkets Australia Pty Limited [2015] FCA 330 (Chief Justice Allsop, 10 April 2015)

Key issues

• The need for specific deterrence is a significant factor in calculating an appropriate penalty, even where there is little danger that the offending conduct will be repeated.
• The financial resources of the contravener can be taken into account in considering the appropriateness of a penalty, in addressing the need for specific deterrence and general deterrence, and the ability to pay the penalty.

Summary

In June 2014, the Federal Court found that Coles had engaged in misleading conduct in contravention of the ACL in relation to the promotion of certain of its bread products as 'freshly baked' and using other similar phrases.

This penalty hearing was held on 24 February 2015. The Federal Court ordered Coles to pay penalties of $2.5 million for making false or misleading representations and engaging in misleading conduct in relation to the promotion of its baked bread products. In considering the penalty factors, Justice Allsop noted the following:

• While it was very difficult to quantify actual loss or damage to consumers in this case, he was not prepared to say that Coles' conduct did not harm its competitors;
• The recently settled proceedings in relation to Coles' interactions with its suppliers was not 'similar conduct' that should be taken into account in calculating the penalty, but was still a relevant matter to consider;
• From the evidence, although the court could not say that Coles deliberately engaged in the contraventions, the court did conclude that as some risk was objectively evident in the conduct it ought to have been apprehended; and
• The need for specific deterrence should feature prominently in determining the appropriate penalty.

In considering whether there was one or many courses of conduct, Justice Allsop decided to identify a single penalty in respect of all contraventions in accordance with the totality principle, bearing in mind that what can be seen as four courses of conduct formed part of a single marketing strategy. The four courses of conduct were the various types of packaging and signage bearing the contravening phrases.

Justice Allsop noted that the conduct was substantial and serious, had significant potential to mislead or deceive consumers, occurred over a three-year period and was in relation to 'consumer staples'. His Honour also noted that Coles engaged in these activities with the clear purpose of improving its market share. In relation to Coles' prior breaches of the ACL, Justice Allsop noted that their character did not call for a higher penalty than that which the court would otherwise impose.

His Honour also noted that while Coles' financial resources did not alone justify a higher penalty than might otherwise be imposed, they are relevant to considering the size of the penalty required to act both as specific deterrence to Coles reoffending and to being seen as proportionate to the seriousness of the contravention for the purposes of achieving general deterrence. Read the ACCC media release.

Source: AustLll

False or misleading representations: Gas supplier penalised for false carbon tax claims

ACCC v Actrol Parts Pty Limited [2015] FCA 312 (Justice Besanko, 2 April 2015)

Key issue

• The court should carefully consider whether the impugned representations overlap to a substantial degree to ensure that the party making the representations is not penalised twice.

Summary

The ACCC commenced proceedings against Actrol Parts Pty Ltd, a supplier of refrigerant gas, in relation to alleged misleading or deceptive representations made in a letter sent to its customers in June 2012 regarding the reasons for increasing product prices. The parties filed a statement of agreed facts and draft orders.

Justice Besanko found that Actrol had represented in the letter that price increases for some of its products were due to the introduction of the carbon tax scheme and changes in input costs and general market conditions, when in fact it increased its prices to increase its margins and to take into account changes in supply costs. The carbon tax representation was found to be implied from the entirety of the letter (as opposed to an explicit statement).

Justice Besanko made the proposed orders, including a penalty order of $520,000 against Actrol Parts for making false or misleading representations. In accepting the proposed penalty of $520,000, his Honour noted Actrol's deception was deliberate and approved by senior management. He also noted that Actrol did not have a formal compliance program in place, but recognised that Actrol had not previously been found to have contravened the ACL and had cooperated with the ACCC's investigation.

Justice Besanko also noted that although the parties contended that there were two contraventions (the express representation and the implied representation), and that there was substantial overlap between the representations, which should be taken into account when determining penalty amounts.

His Honour made the other orders proposed by the parties, including declarations, an injunction, a publication order and an order to implement and maintain a compliance program. Read the ACCC media release.

Source: AustLll

Misleading sales tactics: Energy retailer penalised for telemarketing activity

ACCC v Energy Australia Pty Ltd [2015] FCA 274 (Justice Gordon, 27 March 2015)

Key issue

• The court is concerned to ensure that a penalty is not regarded as an 'acceptable cost of doing business' and will not consent to an order where it considers that may be a risk.

Summary

EnergyAustralia Pty Ltd, an electricity and gas retailer, engaged Bright Choice Australia Pty Ltd to telemarket its electricity and gas plans. Bright Choice representatives telephoned consumers to market the plans. Bright Choice did not obtain the consent of consumers to enter into a plan or to have their electricity or gas supply transferred to EnergyAustralia. Despite this, following the calls, Bright Choice submitted a sale report to EnergyAustralia for each consumer and EnergyAustralia sent the consumers contractual documents.

The ACCC and the Australian Energy Regulator (AER) commenced proceedings against EnergyAustralia and Bright Choice. The ACCC proceedings concerned consumers in New South Wales, Victoria and Queensland. The AER proceedings concerned consumers in South Australia and the Australian Capital Territory and were commenced under the National Energy Retail Law (NERL) as it applies in SA and the ACT.

EnergyAustralia and Bright Choice admitted that their conduct had contravened the ACL and EnergyAustralia also admitted contraventions of the NERL in relation to the consumers in SA and the ACT.

Justice Gordon ordered EnergyAustralia to pay penalties of $1 million and Bright Choice to pay penalties of $100,000 in relation to the ACL contraventions, and EnergyAustralia to pay $500,000 in relation to the NERL contraventions. However, his Honour did not agree to the proposal that Bright Choice pay its penalty by instalments, noting that permitting instalment payments in this case would not have the appropriate deterrent value, and could be regarded by Bright Choice (or others) as an acceptable cost of doing business, instead ordering Bright Choice to pay its penalty within 30 days.

Justice Gordon also ordered the declarations, injunctions and costs orders proposed by the parties. Read the ACCC media release.

Source: AustLII

Misleading and unconscionable conduct: Origin Energy penalised for unlawful door-to-door selling practices

ACCC v Origin Energy Electricity Limited [2015] FCA 278 (Justice Katzmann, 27 March 2015)

Key issue

• Even if the court calculates a penalty amount that differs from that proposed by the parties, as long as the agreed amount is within the permissible range, the court will make the agreed order.

Summary

Origin Energy Electricity Limited engaged SalesForce Australia Pty Ltd to provide sales representatives to sign up consumers at their homes to electricity supply agreements. The ACCC commenced proceedings against Origin and SalesForce, alleging breaches of the ACL, unconscionable conduct, undue harassment, false or misleading representations and breaches of the unsolicited consumer agreement provisions of the ACL.

The parties filed a statement of agreed facts and joint submissions on penalties. In ordering Origin Energy to pay $2 million and SalesForce to pay $325,000 in penalties, Justice Katzmann emphasised that the sales representatives had practised 'deliberate deceptions' on consumers in order to secure their custom, and did this at the private homes of those consumers to which the representatives had not been invited.

In calculating the penalty amount, Justice Katzmann arrived at a figure slightly above that agreed by the parties for Origin's penalty, and substantially above the agreed penalty for SalesForce. However, his Honour considered that, as the agreed amounts were within the permissible range, he made the agreed penalty orders. He also made the agreed declarations, compliance, costs and publication orders. Read the ACCC media release.

Source: AustLII

Unconscionable conduct: cleaning franchise penalised for ACL contraventions

ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (Formally Known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (No 2) [2015] FCA 257 (Justice Murphy, 23 March 2015)

Key issue

• The court may consider a range of factors in mitigating a penalty amount, including the financial position of the company, the sums of money involved and whether full compensation for those losses will be made.

Summary

In October 2014, the Federal Court declared that South East Melbourne Cleaning Pty Ltd (Coverall) had engaged in unconscionable conduct by failing to pay franchisees for work they had completed, made false or misleading representations concerning the payment of franchisees, and contravened the Franchising Code of Conduct in its dealings with franchisees by failing to notify one of the franchisees of the need to seek independent advice before entering into the franchise agreement.

The ACCC submitted that a total penalty of $600,000 was appropriate. Justice Murphy noted that Coverall showed a sustained intentional or reckless disregard for its legal obligations and repeatedly employed unfair tactics so it could preserve its own interests at the expense of those of franchisees. Further, Coverall enjoyed a stronger bargaining position than franchisees and used it to cause financial harm to franchisees. However, Justice Murphy considered that a penalty of $500,000 better reflected the contravening conduct, the circumstances in which the contraventions occurred and the losses they caused. He took into account certain mitigating factors, including that Coverall was a small company in a relatively weak financial position, the sums of money involved were relatively small, and the victims would be fully compensated for their losses. Read the ACCC media release.

Source: AustLII

Misleading or deceptive conduct: 3D television representations

Samsung Electronics Australia Pty Limited v LG Electronics Australia Pty Limited [2015] FCA 227 (Justice Nicholas, 16 March 2015)

Key issue

• The court may consider that viewers will make allowance for readily discernable parody or exaggeration in assessing whether representations in advertisements are misleading.

Summary

LG produces 3D televisions which operate using a different form of technology from that of its competitors. Samsung, a competitor, alleged that LG produced marketing material that exaggerated its 3D televisions' technical features in relation to competitor products, and in doing so was misleading or deceptive, in contravention of the ACL.

Justice Nicholas found that although the material conveyed technical information that would normally be taken seriously by viewers, the humorous style was a contextual matter that had to be borne in mind when determining whether reasonable viewers would make significant allowance for what was readily discernible as exaggeration and parody. However, his Honour found certain representations made by LG relating to specific technical features contravened the ACL. His Honour directed the parties to file draft minutes of orders in relation to relief and stood the matter over for further orders.

Source: AustLII