Tuesday, 1 March 2011

ACCC Investigatory Insights – Part 1


While a great number of Australian businesses have been the subject of an ACCC investigation at some time in the past, it is likely that most of these businesses did not gain a good understanding at the time of how the ACCC actually conducts its investigations. However, it is only by gaining a good understanding of how the ACCC conducts its investigations, that businesses may be able to avoid having further problems with the ACCC in the future. In this article, I will endeavour to provide some insights about how the ACCC conducts its investigations in order to assist businesses in avoiding the ACCC’s unwanted attentions in the future.

Case selection

Cases come to the ACCC from a variety of sources. Most complaints come from telephone complainants through the ACCC’s centralised call centre.

The call centre operators are able to answer most enquiries, including simple complaints about contraventions of the consumer protection provisions of the Competition and Consumer Act 2010 (CCA) (formerly the Trade Practices Act 1974). These complaints are recorded on a national database usually on the same day they have been received by the ACCC.

Call centre operators are required to refer complainants about alleged contraventions of the restrictive trade practices and unconscionable conduct sections of the CCA to a regional office. These calls are automatically referred to regional offices because the ACCC sees them are more complex and thus more appropriately directed to more experienced officers. Call centre staff are also required to refer particular complainants about cartel conduct directly to a senior officer in a regional office. Usually these types of complaints involve a whistleblower or a person with direct evidence of a suspected cartel.

The call centre operators have developed a good sense of what complaints may constitute a significant breach of the CCA. Accordingly, call centre operators will often refer promising consumer protection matters to regional offices or flag them on the database.

The way the ACCC call centre operates is a particular strength of the ACCC. There are very few antitrust or consumer protection regulators in the world that could claim that significant complaints are escalated to an investigator on the very same day that the complaint is received.

Despite the bulk of complaints coming to the ACCC through the call centre, most investigations begin with a written complaint. This is because written complaints are generally more substantive as they provide more evidence in support of the allegations.

The main groups which write to the ACCC to lodge a complaint are:

  • companies complaining about the conduct of one of their competitors 
  • sophisticated consumers 
  • government departments 
  • non-government organisations, particularly in the environmental area 
  • industry associations 
  • politicians 
  • companies which are self-reporting their conduct. 
Only a small proportion of total complaints received by the ACCC are escalated to a regional office for further investigation.

The types of matters that are routinely not investigated by the ACCC include:
  • conduct which may be more suitable for private action, such as misleading representations about a competitor 
  • matters which are very difficult to investigate for jurisdictional reasons, for example an overseas-based lottery scam which required consumers to send money to an overseas post office box 
  • franchise matters where the franchisee complainant has not already been to the Office of Mediation Advisor 
  • contraventions which do not appear to cause a great deal of consumer detriment 
  • matters involving small local traders or unincorporated businesses
Each regional office around Australia may received between 10 and 40 written complaints a week plus a further 20 call centre referrals. This means that ACCC directors have to make difficult decisions about which matters to pursue. Obviously, directors will try to take on a manageable number of cases. Director will also try to ensure that their case load is somewhat representative of the major enforcement areas under the CCA – ie restrictive trade practices, consumer protection, unconscionable conduct, franchisee matters and product safety.

Unfortunately, given the volume of complaints, there can be a tendency for the ACCC directors to select matters which may be easier to prove, rather than matters which may raise more complex issues. Therefore, an ACCC director may decide to pursue a resale price maintenance complaint, rather than a misuse of market power complaint, because the former case is generally much easier to prove.

Another source of complaints to the ACCC are private law firms. These firms approach the ACCC to either – 
  • advise the ACCC that their client has engaged in a contravention of the CCA; or 
  • complain to the ACCC about an alleged contravention of the CCA by their client’s competitor. When a company complains about a competitor, the ACCC will generally ask the company why it is not taking its own legal action, particularly if it is a large publicly listed company.
Another source of potential cases investigations from publicly available information which may come to the attention of an ACCC staff member. For example, a report in a newspaper may suggest that a company has engaged in conduct which contravenes the CCA or a staff member may see an advertisement in the newspaper or on television which they believe is misleading.

The ACCC’s regional offices have considerable discretion whether to commence an investigation into a complaint. The absence of clear priorities gives staff considerable discretion to pursue whatever matters they want.

However, there are a number of informal priorities within the ACCC at any one time. For example, it appears that the following areas are informal ACCC’s priority areas at the current time: 
  • cartels; 
  • environmental misrepresentations; 
  • health related misrepresentations; 
  • two price advertising; 
  • failure to state the full cash price; 
  • misrepresentations in relation to telecommunications products and services; 
  • misrepresentations about statutory warranties. 

Next instalment

In the next instalment of ACCC Investigatory Insights, I will discuss the ACCC’s Investigatory Processes.

No comments: