Tribunal approves Tabcorp–Tatts merger
The Australian Competition Tribunal has granted Tabcorp authorisation to acquire Tatts Group, subject to Tabcorp undertaking that it will divest its Odyssey Gaming business.
Tabcorp supplies wagering and media products, gaming services and Keno, while Tatts supplies lotteries, wagering services, and gaming products and services.
Tabcorp had originally sought informal clearance from the ACCC before approaching the Tribunal. The ACCC issued a statement of issues that identified some preliminary concerns with the merger. Before the ACCC issued its final decision, however, Tabcorp sought authorisation from the Tribunal. While the ACCC had not formed a final view on the merger before authorisation was sought, it took the view during the proceedings that 'the public benefits claimed were not likely to clearly outweigh the public detriments to justify the grant of an authorisation'.
The test the Tribunal applies is different from the informal clearance test, in that the Tribunal looks at whether the merger will result in a net public benefit (ie the public benefits outweigh any public detriment), whereas the ACCC looks at whether a merger will substantially lessen competition.
The Tribunal found that there was a net public benefit as a result of the merger. As it was:
satisfied that the proposed merger is likely to result in substantial public benefits and that the public detriments identified by the ACCC and the interveners are unlikely to either arise or are not of significance, [it was] satisfied in all the circumstances that the proposed merger would result, or would be likely to result, in such a benefit to the public that the acquisition should be allowed to occur.
The Tribunal noted that:
Merger control must be carried out with great care, because it involves a prediction of events which are more or less likely to occur in any given scenario, the substantive analysis being forward-looking. Significantly in this proceeding, the realities must be considered: it is unacceptable to proceed purely on the basis of theory. This is particularly the case in this proceeding where the wagering industry is in a state of change and various views have been expressed as to the future.
This matter is another example of merger parties successfully using the authorisation process through the Tribunal where the ACCC had either refused informal clearance or had issued preliminary concerns. However, that process is likely to change, if reforms that are currently before Parliament are passed. Please see our summary of those reforms.
Stay tuned for a more detailed discussion of the issues raised by this recent Tribunal decision, and of the implications for your business.
Allens acts for DuPont in obtaining clearance for merger with Dow
The ACCC has announced that it will not oppose the proposed merger of E.l. Du Pont de Nemours and Company and The Dow Chemical Company in Australia, being two of the world's largest crop protection and materials science companies. Allens acted for DuPont in securing the clearance.
This follows the conditional clearance of the merger by the European Commission on 27 March 2017, and DuPont's announcement on 31 March 2017 that it would divest parts of its global herbicide, insecticide and research and development businesses to FMC Corporation. Separately, Dow previously announced it would divest its ionomer and acid copolymer businesses to SK Global Chemical Co.
In November 2016, the ACCC published a Statement of Issues identifying preliminary concerns that the merger may result in a lessening of competition in the supply of insecticides, particularly chewing and sucking insecticides, as well as certain material science products including ionomers and acid copolymers. The ACCC also raised preliminary concerns in relation to the effect on innovation and the development of canola seed.
However, the ACCC was ultimately satisfied that its crop protection, material science and innovation concerns would be sufficiently addressed by the divestitures announced by Dow and DuPont. The ACCC was also satisfied by further information from the parties and market participants that the presence of alternative canola breeders would sufficiently maintain competition in the supply of canola seeds.
The merger clearance reflects the state of flux that the agribusiness sector is experiencing with several major mergers being proposed recently, including ChemChina's cleared acquisition of Syngenta, Bayer's proposed acquisition of Monsanto, and AGT's proposed acquisition of InterGrain (both still currently under review by the ACCC). It also highlights innovation as a potential new area of concern for antitrust authorities.
High Court rejects Airlines' cartel appeal on 'market'
The High Court has upheld the decision of the Full Federal Court in the air cargo cartel case involving international airlines Air New Zealand and PT Garuda.
The court at first instance found that the alleged conduct, which involved setting surcharge rates for certain international cargo, did not occur in a 'market in Australia' and on those grounds the airlines had not contravened Australian cartel laws (as they were at the time). On appeal, the Full Federal Court held that the conduct did occur in a 'market in Australia'. This position was confirmed by the High Court on 14 June.
The High Court held that:
- even where the airlines were found to be competing in other markets (eg Hong Kong), they could still be found to be competing in a market in Australia (ie competition in one geographic market is not exclusive of competition in another); and
- the factors relevant to determining if companies are competing in a 'market in Australia' will not be the same in every case.
The following factors were considered relevant by the court in determining the market was 'in Australia':
- the end of the line for the airline services was in Australia;
- shippers in Australia were a substantial source of demand for the airlines' services;
- the airlines competed with each other, seeking to match their services with that demand;
- the airlines met, negotiated and partnered directly with shippers in Australia;
- the airlines tracked the shippers' activities in the market for provision of the air cargo services; and
- the airlines marketed the services to large importers in Australia.
While the cartel laws have since been amended so that it is no longer a requirement that the conduct relate to a 'market in Australia', the requirement remains a central component of many other prohibitions in the Competition and Consumer Act. Courts may therefore look to this case and the methodology used when deciding whether conduct has the purpose, effect or likely effect of substantially lessening competition in an Australian market. The decision may also be relevant under proposed amendments to the cartel regime, which will require that cartel conduct relates to trade or commerce in Australia. (Please see our summary of those changes)
Thermomix in hot water
The ACCC has instituted proceedings against Thermomix In Australia Pty Ltd for a suite of ACL contraventions in relation to its appliances and the October 2014 recall of its TM31 model.
This action comes just over a year after Choice's mass incident report to the ACCC on Thermomix product failures. The report cited 87 incidents, of which 83 related to the TM31 model; and in 45 of which, consumer injuries were reported; and in 18 of which, there were reports of having to receive medical treatment.
Thermomix's alleged contraventions include:
- misleading consumers about their consumer guarantee rights under the ACL – namely, that consumer guarantees would only apply if consumers agreed to non-disclosure terms and other terms preventing them from criticising Thermomix, and also that consumers were not entitled to refunds or replacements from Thermomix at any time;
- breaching mandatory reporting requirements in 14 instances by failing to notify the responsible Federal Minister within two days of becoming aware of a serious injury from use of a Thermomix appliance;
- making false representations regarding the safety of the TM31 model by continuing to supply it despite being aware of the safety issue that led to the 2014 recall and by failing to disclose that issue to consumers as soon as it became aware of it; and
- making false and misleading statements in March 2016, which downplayed the nature of its 2014 recall.
The ACCC is seeking declarations, pecuniary penalties, injunctions, corrective publication orders, compliance program orders and costs. The first case management conference is scheduled for 21 July 2017.
Optus to compensate customers
Following an investigation, Optus Mobile Pty Ltd has given an enforceable undertaking to the ACCC that requires Optus to compensate customers affected by Optus's decision to reduce some of the data, call and text inclusions it offered with certain prepaid products. Consumer advocacy group Choice reported that, in total, 45,000 customers would be compensated.
The changes to consumer plans, which the ACCC alleged Optus did not disclose to customers, occurred on three occasions in 2015 and 2016, and resulted in some customers receiving reduced benefits when they activated or recharged the SIM card provided with the products. Customers who delayed activating or recharging their SIM cards for longer than a certain period received less than half the advertised data allowance. Optus did not ensure that the changes applied only to customers who bought the products after the changes were implemented.
In the undertaking, Optus acknowledged that it was likely to have contravened the Australian Consumer Law by engaging in misleading and deceptive conduct and making false or misleading representations as to the characteristics of goods or services.
In addition to providing compensation, Optus undertook to report to the ACCC on the progress of compensation arrangements, donate to a nominated charity any amounts not claimed by affected consumers, amend its product development submission template, and implement an upgraded product development compliance program to minimise the risk of future contraventions.
oOh!media and APN walk away from merger
The $1.6 billion merger between oOh!media Limited and APN Outdoor Group Limited was called off after the ACCC raised concerns that the merger was likely to substantially lessen competition. The companies have decided against trying to convince or appease the ACCC, as this would likely require making 'unacceptable' concessions, such as divestments.
The ACCC raised its concerns in a Statement of Issues released on 4 May 2017. Importantly, the ACCC focused on the out-of-home (or outdoor) advertising sector when defining the relevant market, rather than an Australian advertising market as a whole. The ACCC adopted the view that other advertising services, such as online and television, are not sufficiently close substitutes for out-of-home advertising services and therefore cannot exert strong competitive constrains on out-of-home providers.
The proposed merger would have combined the two largest providers of out-of-home advertising services in Australia, and created a market leader with a share of between 50 and 60 per cent in the out-of-home advertising industry. The ACCC believed the proposed merger was likely to lead to increased prices for advertisers, lower service and innovation levels, and lower rent for out-of-home advertising sites. The ACCC also expressed concern that the merged entity would operate more than 90 per cent of large format billboard services in numerous Australian capital cities, and could bundle this service with other out-of-home advertising services to squeeze competitors out of the market.
The ACCC's preliminary view can be contrasted with the decisions of the ACCC last year in relation to two newspaper mergers, where, although the ACCC did not believe it was necessary to form a definitive view on the relevant market, it found that newspaper advertisers in the relevant areas would be willing to substitute alternate media or advertising methods for their newspaper advertising. The ACCC found that various advertising alternatives, including online, radio and television, would collectively impose sufficient constraint. Allens acted for News Limited in both decisions.
advocacy group Choice