In Touch looks at what's been happening in Competition this month, and what it means for your business.
We hope you find this issue interesting and helpful. Please let us know if you would like us to investigate any competition news in the next month and, as always, get in touch.
Interesting Competition facts – August 2016
- A raid: The ACCC has raided the Canberra office of the Construction, Forestry, Mining and Energy Union. The dawn raid occurred on 26 July 2016 as part of an investigation into alleged price-fixing between union officials and employers in the ACT construction sector.
- A disagreement: The Federal Treasurer, Scott Morrison, has strongly rejected the Productivity Commission's recommendations that the Government drop its plan to add an effects test to the abuse of market power provision and also to unwind stricter foreign investment rules in the agriculture sector.
- An expansive interpretation: a recent cartel case confirms that Australian courts will take a broad approach to the extraterritorial application of Australia's competition laws. This means that more foreign businesses could be caught by Australia's criminal and civil cartel laws. Read more here.
Mergers: ACCC accepts rare behavioural undertaking
The ACCC generally prefers structural undertakings (undertakings to divest part of the merged firm) due to their permanence and relatively low compliance costs. However, Metcash has been granted clearance to bid for competing hardware wholesaler Home Timber & Hardware from Woolworths after it offered an undertaking that:
- it will not limit the ability of independent hardware retailers to purchase products from other sources; and
- its own hardware stores would not be favoured over independent retailers.
Metcash must also clearly outline its obligations to retailers, who can contact the ACCC if they suspect that Metcash has failed to comply with the terms of the undertaking. The ACCC also assessed potential concerns around enforceability of the behavioural undertaking, ultimately finding that the undertaking would resolve any competition issues. The ACCC's press release is available here.
What this means
- Indicates a willingness on the part of the ACCC to accept behavioural undertakings in a merger context.
If you would like more information on this issue, get in touch with Jacqui Downes.
Market studies: ACCC raises concerns about small business
The ACCC has experienced a rise in complaints from small businesses in the first half of 2016, according to its six-monthly small business report. The report also includes a new section on the agriculture sector, which has been a recent area of focus for the ACCC.
The ACCC's report encourages small businesses operating in the agriculture sector to review the standard form contracts offered to farmers and other small operators. As previously reported, the unfair contract terms provisions will be extended to cover small businesses from 12 November 2016. Another development highlighted in the report includes the recent commencement of new rules regarding country of origin labelling. The report is available here.
What this means
- Small business remains a priority area of concern for the ACCC, particularly in advance of the expansion of the unfair contract terms regime in November.
- The ACCC has continued to focus on the agriculture sector on the basis that bargaining power imbalances are particularly common in agricultural supply chains.
If you would like more information on this issue, get in touch with Carolyn Oddie.
Unconscionable conduct: Late fees are not unconscionable
In a landmark decision, the High Court has found that the imposition of late payment fees by ANZ on credit card accounts did not contravene prohibitions against unconscionable conduct or unfair consumer contract terms. Customers raised concerns that a late payment fee of $35 before December 2009 and $20 thereafter was imposed by ANZ if a customer did not pay, within a specified time period, a minimum monthly repayment plus any amounts due.
ANZ put forward expert evidence of the costs incurred as a result of late payment by customers. The court considered that these costs affected the bank's legitimate interests and that none of the usual indicators of unconscionability or unfairness existed. The court emphasised that the existence of an imbalance in bargaining power alone is not enough to establish that the party with superior power has acted unconscionably by exercising it. The court also considered ANZ's legitimate interests in imposing the fees, finding that they did not amount to a penalty. Read more here.
What this means
- Late payment fees that can be objectively justified are unlikely to be 'unconscionable' under Australian competition law.
- An imbalance in bargaining power alone is not enough to establish that the party with superior power has acted unconscionably by exercising it.
- Other industry sectors, such as banking, telecommunications and utilities, where late payment fees are common, will welcome the decision.
If you would like more information on this issue, get in touch with Kon Stellios.
Mergers: Tribunal approves another merger knocked back by ACCC
The Australian Competition Tribunal has granted authorisation for a merger previously rejected by the ACCC. Sea Swift has been authorised to acquire Toll Marine Logistics Australia's Northern Territory and far north Queensland marine freight business. The authorisation is subject to a number of conditions, including a cap on future prices, and a continuation of scheduled services to remote communities.
The ACCC previously opposed the acquisition on the basis that a merger between the two largest suppliers of marine freight in the Northern Territory and far north Queensland would likely substantially lessen competition.
In contrast, the Tribunal reached a different conclusion as to the appropriate counterfactual, based on the expert evidence before it. The Tribunal considered Toll Marine would exit the market in the short term and Sea Swift would likely become the provider to Toll Marine's major customers. Competition in the market following authorisation would likely be enhanced by reason of the conditions imposed in relation to the transferred contracts which prevent Sea Swift from relying on any exclusivity or minimum freight volume clauses in the transferred contracts during their term. This means those transferred contracts would be contestable by Sea Swift's competitors, and that this outcome would be more competitive than if the merger were not to occur. The Tribunal therefore found that the counterfactual would have been less competitive. The Tribunal's reasons are available here.
What this means
- The decision highlights the potential utility of considering merger clearance from the Tribunal for acquisitions that have identifiable public benefits and limited public detriments.
- The Tribunal is willing to consider 'failing firm' arguments.
If you would like more information on this issue, get in touch with Fiona Crosbie.