In Touch: ACCC not hAPPy with app marketplaces; car rental company pulled over for unconscionable conduct; Garuda proceedings finally touch down; and other developments

The latest in competition and consumer law 6 min read

Federal Court makes landmark decision on data transparency

The Federal Court has found that Google engaged in misleading conduct and made false or misleading representations to consumers about how and when it collects, keeps and uses their location-related personal information. See our detailed analysis here.

ACCC not hAPPy with app marketplaces

The ACCC has expressed 'significant issues' with the operation of the Apple App Store and the Google Play Store in Australia, according to the ACCC's second Digital Platform Services Inquiry interim report. This is the ACCC's second report in its five-year inquiry into markets for the supply of digital platform services in Australia and their impacts on competition and consumers.

The ACCC's concerns include its view that the Apple App Store and Google Play Store are gateways between consumers and app developers, and that Apple and Google both run these marketplaces as well as compete within them with their own applications. According to the ACCC, this gives Apple and Google the ability and incentive to promote their own apps above others.

The ACCC has also expressed concern that developers are required to use Apple and Google's payment systems for any in-app purchases. This requirement is the subject of litigation by Fortnite-maker Epic Games in a number of jurisdictions including the United States, the United Kingdom and Australia. In Australia, Epic Games has alleged that Apple and Google are, among other things, misusing their market power to charge app developers an exorbitant commission on all app and in-app purchases. A number of international competition law regulators have also announced investigations into in-app purchasing rules put in place by Apple.

The ACCC has set out some potential measures that it suggests can be taken to address its concerns, such as allowing consumers to change any default pre-installed app; allowing developers to provide users with information about alternative payment options; and allowing consumers to rate and review all apps, including those developed by Apple and Google. The ACCC has indicated that it will revisit these concerns, and any steps Apple and Google take to address them, in the course of its five-year inquiry.

Car rental company pulled over for unconscionable conduct 

The Federal Court has ordered Smart Corporation (previously trading as Australian 4WD Hire) to pay penalties of $870,000 for engaging in unconscionable conduct and making false or misleading representations. Smart Corporation's former director and fleet manager were also disqualified from managing a company for three years, and ordered to pay penalties of $179,000 and $174,000 respectively, for being knowingly concerned in this conduct.

Smart Corporation's standard form contracts allowed it to charge customers, typically tourists, up to $500 each time a customer drove in a way prohibited by the contract. This included driving above the speed limit; or when visibility was poor, such as in fog or heavy rain, or at night outside of built-up areas. The company used GPS tracking data to monitor compliance. These terms were declared void for being unfair under the Australian Consumer Law.

The Federal Court also found that Smart Corporation engaged in unconscionable conduct by sending 'intemperate, intimidating and threatening' emails to customers, informing them that these amounts were being deducted from their security deposits; and by the practice of actually deducting these amounts irrespective of whether there had been any damage to the vehicle.

Other clauses held to be unfair included a 'non-disparagement clause' designed to silence public consumer complaints, and a clause that permitted Smart Corporation to recover from the customer the full cost of repairing or replacing a damaged vehicle even if it was insured.

ACCC, CMA and Bundeskartellamt coordinate their stance on merger control

The Australian, UK and German competition regulators have released a joint statement on the need for more rigorous and effective merger enforcement. The regulators expressed their concern about the increasing levels of concentration across various markets, and the role of merger control as economies recover from the coronavirus pandemic.

The regulators comment on the uncertainty in assessing dynamic and fast-paced markets, and the importance of challenging 'the presumption often promoted by merging firms and their advisers that mergers are generally efficiency-enhancing and should only be restrained where there is certainty that serious detriment will result'. The ACCC Chair, Rod Sims, said in the webinar releasing the joint statement that we 'can’t continue with a bias to clear mergers'.

The joint statement draws particular attention to technology markets, which often feature higher barriers to entry due to network effects, as well as the risk of 'killer acquisitions' – ie acquisitions by established players of innovative start-ups that otherwise may have grown to become a serious competitor. These concerns were also prevalent in the ACCC’s Digital Platforms Inquiry Final Report in June 2019.

The statement reinforces the ACCC's view on the importance of merger control as the first port of call in curbing concentrated markets. By combining voices with other international regulators, the ACCC is drawing attention to the shortcomings it perceives in Australia's merger laws and its campaign to have them amended.

Garuda proceedings finally touch down

PT Garuda Indonesia Ltd has withdrawn its appeal against the Federal Court's 2019 penalty judgment and entered into a court-approved payment plan to pay its $19 million penalty for price-fixing. In approving the payment plan, the court took into consideration how the coronavirus pandemic has impacted the airline and its ability to pay the penalty. The penalty (and a contribution to the ACCC's costs) is to be paid in monthly instalments over five years.

Between 2008 and 2010, the ACCC commenced legal action against 15 airlines, including Garuda, for the price fixing of surcharges on air cargo services between 2002 and 2006. Thirteen airlines settled, but Garuda and Air New Zealand proceeded to trial. Although the Federal Court initially dismissed the ACCC's case against both airlines, the regulator was successful on appeal to the Full Federal Court. The two airlines appealed to the High Court, but their appeal was unanimously dismissed. The Federal Court ordered Garuda pay a $19 million penalty in 2019, which Garuda appealed. This development finally brings an end to the ACCC's long-running action against the airlines.

ACCC authors report on authorisation under the pandemic

The ACCC has released a report on its approach to authorising competitor collaborations in response to the coronavirus pandemic. The ACCC received 33 applications for authorisation of collaboration linked to the pandemic, most of which it dealt with in a few days, as compared with its standard 28-day timeframe.

The report explains that the ACCC granted broad authorisations (unless the conduct 'would clearly not be merited') without the breadth of consultation it would normally conduct. However, the regulator still retained the ability to revoke or replace interim authorisations.

The ACCC found that the type of conduct it authorised fell into five categories: (i) the provision of health services; (ii) the supply of essential items; (iii) disruptions to ordinary market operations and consumer demand; (iv) relief measures or benefits being extended to consumers and businesses facing financial difficulties; and (v) responding to issues resulting from the medical, economic or social consequences of the COVID-19 pandemic, such as collective bargaining by tenants with landlords.

Overall, the ACCC was content with the flexibility afforded under the Australian law for it to grant authorisations. In New Zealand, the laws had to be changed to introduce interim authorisations; in some countries, intervention was required at the government ministerial level to override competition laws in times of emergency; and in other countries, competition regulators issued statements about how they would exercise their enforcement discretion. According to the report, the Australian approach allowed the ACCC to tailor its approach to the rapidly evolving situation and also allowed it to continuously monitor the overall extent of competitor collaboration across Australia.