Monday, 1 December 2014

A Damp Squib – A Short Note on the Harper Review Draft Report

The recommendations contained in the Harper Review’s Draft Report have not received a great deal of support from either competition law specialists or the general community.  Indeed, a brief review of the 200 plus submissions lodged in response to the Draft Report show a great deal of dissatisfaction with many of the recommendations.  Particular areas of concern relate to the recommendations concerning proposed changes to section 46, retail trading hours and road pricing.  However, the most serious weakness of the Draft Report is its failure to put forward any meaningful recommendations to assist the small business sector.  This is despite Harper’s earlier claims that he would not let small business down. 

In many respects, the Draft Report demonstrates the extent to which the Harper Review is out of touch with the small business sector.  This lack of understanding is amply demonstrated by the claims in the Draft Report that particular recommendations will assist small business, when in reality most of these recommendations will have the opposite effect – ie they will further damage and disadvantage small businesses in their ability to compete with larger businesses.

Competition not competitors
The Harper Review claims throughout its Draft Report that the Competition and Consumer Act 2010 (CCA) should be aimed at protecting competition and not competitors.  Indeed, this statement has become the catchcry of many groups seeking to make the CCA more big business friendly. 

The first concern about this claim is that it is not a correct statement of the actual objects of the CCA.  Section 2 of the CCA states:

The object of this Act is to enhance the welfare of Australian through the promotion of competition and fair trading and the provision of consumer protection.

The CCA is aimed at the promotion of both competition and fair trading.  It is implicit in the term “fair trading” that the CCA is aimed at preventing firms from engaging in unfair trading practices towards both consumers and their competitors. The unconscionable conduct provisions are the clearest example of this legislative intent.

The Second Reading Speech for the Trade Practices Act also made it clear that the policy objectives of the CCA involved a wider range of considerations than suggested in the Draft Report.  As stated by the Hon. Senator Murphy on 30 July 1974:

The purpose of the Bill is to control restrictive trade practices and monopolisation and to protect consumers from unfair commercial practices. The Bill will replace the existing Restrictive Trade Practices Act, which has proved to be one of the most ineffectual pieces of legislation ever passed by this Parliament. The Bill will also provide on a national basis long overdue protection for consumers against a wide range of unfair practices. Restrictive trade practices have long been rife in Australia. Most of them are undesirable and have served the interests of the parties engaged in them, irrespective of whether those interests coincide with the interests of Australians generally. These practices cause prices to be maintained at artificially high levels. They enable particular enterprises or groups of enterprises to attain positions of economic dominance which are then susceptible to abuse; they interfere with the interplay of competitive forces which are the foundation of any market economy; they allow discriminatory action against small businesses, exploitation of consumers and feather-bedding of industries.

The policy objectives of the TPA/CCA are much broader than the promotion of competition, but rather extend to the removal of unfair practices including the prevention of discriminatory action against small businesses.

Similarly, Senator Murphy noted the policy objectives behind section 46 in his Second Reading speech:

The clause [46] covers various forms of conduct by a monopolist against his competitors or would-be competitors. A monopolist for this purpose is a person who substantially controls a market. The application of this provision will be a matter for the Court. An arithmetical test such as one third of the market- as in the existing legislation- is unsatisfactory. The certainty which it appears to give is illusory.

Clause 46 as now drafted makes it clear that it does not prevent normal competition by enterprises that are big by, for example, their taking advantage of economies of scale or making full use of such skills as they have; the provision will prohibit an enterprise which is in a position to control a market from taking advantage of its market power to eliminate or injure its competitors.

The provision will not apply merely because a person who is in a position to control a market engages in conduct within one of the classes set out in the clause. It will be necessary for the application of the clause that, in engaging in such conduct, the person concerned is taking advantage of the power that he has by virtue of being in a position to control the market. For example, a person in a position to control a market might use his power as a dominant purchaser of goods to cause a supplier of those goods to refuse to supply them to a competitor of the first mentioned person- thereby excluding him from competing effectively. In such circumstances the dominant person has improperly taken advantage of his power.

Again, the policy objective behind section 46 was and is to prevent firms with market power from engaging in conduct which will eliminate or injure their competitors. 

Senator Murphy recognised that competition does not occur in a vacuum, but rather manifests itself in a practical sense through rivalrous behaviour between competing firms. In other words, the legislative intention behind the TPA and the CCA was that competition was best safeguarded by preventing unfair trading between competitors.

The reality is that Part IV of the CCA has long been applied in a way which has the practical effect of protecting competition.  Indeed, very few of these provisions could be applied in ways which would protect competitors whilst not at the same time protecting competition.

Section 45 prohibits agreements between firms which have the purpose and or effect of substantially lessening competition.  Most of the provisions of section 47 are also subject to a requirement that the prohibited conduct must substantially lessen competition. 

Even section 46 states that a firm with a substantial degree of market power must not use that power for the purpose of either eliminating or substantially damaging a competitor, preventing entry or preventing competitive conduct.

It is apparent that under section 46 conduct by a firm with market power which has the purpose of eliminating or substantially damaging its competitor will also inevitably have the effect of further entrenching that firm’s market power, which in turn will substantially lessen competition. 

In addition, conduct by a firm with market power which is aimed at preventing entry by another firm will have a profoundly negative effect on competition.  Indeed, successfully preventing new entry will permit the firm with market power to continue charging high prices.

The final proscribed purpose in section 46 is the clearest example of a prohibition on conduct which damages competition. This proscribed purpose is aimed at preventing firms with market power from engaging in conduct which deters or prevents competitive conduct.

As is apparent, each of the prohibitions contained in section 46 is aimed at protecting the competitive process by protecting competitors.  All the provision does is recognise the practical reality that businesses with market power will seek to achieve the goal of substantially lessening competition by taking steps to damage their competitors.

Given the vigor with which various commentators claim that section 46 needs to be changed so to protect competition rather than competitors, one would think that section 46 litigation is replete with examples of the section being used to protect competitors and not competition.  This is not the case.  It is clear that all successful section 46 cases have shown damage to competition through actions aimed at damaging competitors.

Small Business concerns
The Harper Review’s failure to make meaningful recommendations in relation to small business can be traced back to a more fundamental failure – namely, a failure to gain a proper understanding of small business concerns. It is quite apparent from reading the Draft Report that the Harper Review does not understand small business or small business issues.  This is disappointing as it is not particularly difficult to identify the main concerns facing small businesses.

One of the major concerns of small business is that they are often unable to buy goods from their suppliers at the wholesale level at prices which are lower than the prices at which their larger competitors are selling the same products at the retail level.  For example, small businesses are often concerned that they are paying their supplier, say, $10 for an item at the wholesale level, whilst their major competitor is selling the same product to consumers at, say, $8. 

As is apparent, small businesses find it hard to understand how such a situation can arise.  Is it a case of their suppliers selling goods to their larger competitors at extremely low prices or is it rather that their larger competitors are engaging in predatory pricing? 

Small businesses will often challenge their suppliers about these pricing disparities, only to be told by their suppliers that they are in fact paying similar wholesale prices to their major competitors.  However, what is often not made clear to small businesses is that their suppliers are also providing these large competitors with a wide range of additional discounts and rebates which significantly reduce their final wholesale unit price.

Small businesses also have some difficulty differentiating whether their large competitors pricing is loss leader pricing or predatory pricing.  This is understandable given that it is often very difficult to distinguish between loss leader pricing and predatory pricing.

From an economics perspective, the whole concept of loss leader pricing is irrational.  Consumers should not form the view based on loss leader pricing on a small number of goods that a particular retailer is generally cheaper and as a consequence make a decision to purchase a number of other higher priced items from that retailer.   Indeed, the entire concept of loss leader pricing relies on the consumer making irrational decisions, based largely on customer inertia.

The Harper Review has not demonstrated that it has gained any understanding of the above issues. Nor has the Review spent any time investigating the reasons for such large pricing discrepancies or the distinctions between loss leader pricing and predatory pricing.

Another concern which small business suppliers have relates to the rise of homebrands.  The increase in homebrands amongst the two major retailers is having the effect of squeezing smaller brands off shelves.  While there is little that can be done about decisions by the two major retailers to offer more and more homebrands, there is valid concern about the pricing of such homebrands. 

The Chicago School has expressed a great deal of scepticism about the prevalence of predatory pricing.  As a result, many commentators appear to have dismissed predatory pricing as a mere historical and theoretical curiosity. However, this is not to say that predatory pricing cannot and does not occur.

A particular area where predatory pricing is likely to be occurring is in relation to homebrands. As is apparent, both of the two major retailers are offering their homebrand products at very low prices.

The effect of this conduct is to drive smaller lower cost manufacturers out of business, as they are unable to secure shelf space and match the lower homebrand prices.  This trend is likely to result, over time, in markets being populated by a lesser numbers of brands and suppliers. Indeed, it is likely that over time many markets will be characterised by a two or three higher priced or premium brands and two or three homebrand products.

It is inevitable in such narrow markets that the major retailers will decide increase the prices of their homebrand products so that they approach the prices of the higher priced premium brand products available in their stores.  This conduct sounds like classical predatory pricing.

Third line forcing and RPM
The Harper Review recommendations in relation to third line forcing amply demonstrates its blasé attitude to small business concerns.  In their draft report there is no consideration of the likely market effects of this recommendations on small business.  Rather, the Harper Review limits its discussion to the following two paragraphs:

As a general principle, the CCA should not interfere with trading conditions agreed between buyers and sellers in connection with the acquisition and supply of goods and services unless those conditions have the purpose, or would have or be likely to have the effect, of substantially lessening competition.

Consistent with that principle, the Panel sees no need for third‑line forcing to be singled out from other forms of vertical trading conditions and prohibited per se. As notifications to the ACCC demonstrate, third‑line forcing is a common business practice and very infrequently has anti‑competitive effects.

It is quite staggering for the Harper Review to conclude that third line forcing “very infrequently has anti-competitive effects”, given that this conclusion is in direct contradiction to the finding reached by the Swanson Committee in 1976 on the same issue. As stated in the Swanson Committee report:

In the opinion of the Committee the practice of forcing another person's product may be justifiable in certain cases. However, the Committee is of the opinion that the practice will, in virtually all cases, have an anti-competitive effect and that it should accordingly, continue to be capable of justification upon the ground only of public benefit.

As correctly pointed out by the Swanson Committee, third line forcing will virtually always be anti-competitive.  Such conduct is by its very nature anti-competitive as it involves one firm forcing another firm to purchase a product which it either does not wish to purchase from that particular firm or does not wish to purchase at all. 

Furthermore, the practice of third line forcing offends another fundamental legal principle – namely, freedom of contract. As a general rule, a party should be able to choose the products it wishes to purchase, and to purchase such products from whomever it wishes. 

The main concern about removing the per se prohibition on third line forcing is that it will no doubt result in an explosion of such arrangements. Furthermore, it is small businesses which will bear the brunt of any such explosion of third line forcing arrangements.

The Harper Review’s treatment of RPM was similarly cursory. The following is the extent of it discussion of this issue:

The appropriateness of a per se prohibition of resale price maintenance (RPM) has been debated for many years, both in Australia and overseas. When the per se prohibition was enacted in Australia in the mid‑1970s, it reflected the law in many comparable jurisdictions. However, over the last 20 years some countries — particularly the US and Canada — have moved away from the per se prohibition of resale price maintenance. Other countries, including Europe and New Zealand, have retained the per se prohibition.

The Panel considers that there is not a sufficient case at this time for changing the prohibition of RPM from a per se prohibition to a competition‑based test. It would be appropriate, though, to allow business to seek exemption from the prohibition more easily. This could be achieved through allowing RPM to be assessed through the notification process, which is quicker and less expensive for businesses than authorisation. This change would also have the advantage of allowing the ACCC to assess RPM trading strategies more frequently, and thereby provide better evidence as to the competitive effects of RPM in Australia.

Unfortunately, the Harper Review does not appear to have examined the issue of RPM in any depth.  It noted that other jurisdictions have removed the per se prohibition, and then recommends the extension of the notification process to cover RPM. However, there is no discussion on whether the practice of RPM is anti-competitive or pro-competitive.

The idea that one firm should be permitted to force another firm to sell a good, which that second firm has purchased and has title in, at a higher price than they wish, is the very definition of anti-competitive conduct. Unfortunately, this very simple truth has been entirely lost in the debate, particularly in the US, which is dominated by esoteric and unrealistic arguments about free riding and intra-brand and inter-brand competition.  As a result, the US Supreme Court has effectively concluded in Leegin that RPM is likely to be pro-competitive in most cases, despite the clear evidence showing the opposite effect.

Any relaxation of the rules in relation to RPM is again going to adversely affect small businesses, particularly small business discounters. As a result, small businesses will be prevented from engaging in vigorous price competition to both their own competitive detriment and the detriment of competition more generally.

The Harper Review’s Draft Report is a great disappointment. The Harper Review has failed to look deeply into many important issues, instead taking a cursory and simplistic approach. Of particular concern is the failure of the Harper Review to come to grips with the challenges facing small businesses, particularly in relation to significant pricing differentials and the rise of homebrand products.  It is hoped that the Harper Review will spend more time listening to small business and trying to understand their concerns before finalising its deliberations.

[1] A squib is a type of firework consisting of a small container filled with chemicals which explodes to produce bright lights and loud noises. However, damp or wet squib will not explode.

Friday, 29 August 2014

Trial by Media Revisited - the ACCC and the sub judice rule

In a recent post, I discussed the practice of the ACCC making sub judice comments about the cases which they are litigating in the Federal Court.  In that post, I argued that the ACCC’s conduct was exposing the organisation and its senior officials to an action for sub judice contempt. I also called on the Commonwealth Attorney General to intervene to direct the ACCC to cease engaging in this conduct.

Valve Corporation
Just when one thought it could not get any worse, we have today seen an even more clear cut example of the ACCC making sub judice comments about one of its court cases.

Earlier today, the ACCC commenced legal proceedings against Valve Corporation alleging that the company made false or misleading representations regarding the application of the consumer guarantees under the Australian Consumer Law (ACL).[1] In particular, the ACCC claimed that Valve had represented that:

·     consumers were not entitled to a refund for any games sold by Valve via Steam in any circumstances;
·     Valve had excluded, restricted or modified statutory guarantees and/or warranties that goods would be of acceptable quality;
·     Valve was not under any obligation to repair, replace or provide a refund for a game where the consumer had not contacted and attempted to resolve the problem with the computer game developer; and
·     the statutory consumer guarantees did not apply to games sold by Valve.

While the ACCC should have ended its commentary about the case at this stage, it chose to go much further by making the following sub judice comments:

The Australian Consumer Law applies to any business providing goods or services within Australia. Valve may be an American based company with no physical presence in Australia, but it is carrying on business in Australia by selling to Australian consumers, who are protected by the Australian Consumer Law.

In other words, the ACCC decided to include an analysis in its media release of the key jurisdictional issue which will arise in the case. Such a jurisdictional issue should not be the subject of media comment, but rather should be left to the judge hearing the case to consider and decide.

The publication of the ACCC’s media release was followed by further comment by the ACCC, including this quite remarkable discussion of the case:

ACCC Chairman Speaks: Here's Why We're Suing Valve[2]


“Under Australian Consumer Law, everybody who buys a product or a service has a right to a refund if the product doesn’t work. They have a right to a refund, or a repair. Those rights are enshrined in Australian Law, and our allegation is that Valve sought to remove those consumer rights which is a breach of Australian Consumer Law,” Sims said in an interview this morning. “The fact that they [Valve] are an offshore company doesn’t affect the rights for consumers.”

So how many customers have been affected by the alleged Valve refund drama?

Speaking to us this morning, Sims believes that that’s the wrong way to think about it.

He says that Valve misrepresented itself to each and every one of its 1.3 million Australian Steam customers.

“We’re focussing on liability here. We’re not thinking about a [specific] number of breaches in this case. Step one in this case is the Court deciding if there’s been a breach of [Australian Consumer Law]. We know they’ve got about 1.3 million active customers in Australia. I’m not sure we know how many have been affected by denying their rights, but the representations themselves are on their websites and in their agreements with [all of] those customers. Those representations are going out to all 1.3m customers.”

“We’ve also had a large number of complaints from individuals and consumer organisations. There’s a lot of concerns. We allege that the denial of consumer guarantee rights is pretty clear in that case.”

The Chairman added that the watchdog had been in contact with Valve over the issues, but added that the alleged breaches of the Australian Consumer Law are so severe that they need to go in front of a judge.

“We felt that the nature of this behaviour was better to be put before the court,” the Chairman said, adding that sometimes the ACCC needs to make an example out of big companies to keep the others in line.

“If every time a company — and I’m speaking generally now — said they’d stop [breaching the Act] when we asked them to, companies in Australia would have carte blanche to know that if we just knocked on the door and asked them to stop, they [wouldn't have to pay penalties],” Sims specifies.

This is the Chairman who has led the consumer watchdog to some of its most profitable wins yet against some of its biggest opponents. The ACCC in the last few years has taken Optus for $3.5 million, Apple for $2.5 million over the iPad 4G and a number of energy companies to the tune of $1.5 million. Rod Sims and his independent agency are out to set a fierce precedent that Australia is not somewhere you can misrepresent yourself as a big company.

“We want all companies doing business in Australia, even if they’re doing business offshore to comply [with Australian Consumer Law]. Big media companies doing business in Australia have to comply with Australian consumer law. Point number one is if you’re going to do business in Australia, you have to comply with Australian law. The second is don’t have blanket conditions around the world without bothering to check,” Sims warns.

“Whether or not we accept an undertaking prior to court depends very much on how blatant the behaviour was. In each of these cases it depends on the approach of the company that we’re taking action against. They can either move quickly [to settle]…or they can fight the case.

“If they [Valve] want to reach an early resolution it could be over in a month or two. They’re a huge company with massive resources, so if they want to fight it could go one or two years.

“We’ll wait and see to see if they want to do.”

The ACCC does not seem to understand that making such statements as the above is likely to raise sub judice concerns on a number of grounds. As stated by the NSW Law Reform Commission Report in its report “Contempt by publication”:[3]

6.3 Under existing law, a publication relating to civil proceedings may amount to contempt in three sets of circumstances. These are where the publication:

·    has the potential to prejudice a juror or witness; or
·    places pressure on a party to litigation to discontinue or compromise that party’s action or defence; or
·    prejudges the issues at stake in particular proceedings

6.4 This last ground of contempt, prejudging issues at stake, is commonly referred to as the “prejudgment principle”. The prejudgment principle is part of the sub judice rule, but does not rely on the traditional formulation of a tendency to cause prejudice to specific proceedings. It is concerned with ensuring that media publicity does not compromise the general administration of justice, as distinct from administration of justice in a particular case, by usurping the courts’ role and undermining public confidence in the court system.

The ACCC’s comments in relation to the Valve case appear to be prejudging a number of the issues at stake in the proceedings, including whether there ACL applies to Valve, whether there has been a breach of the law, and the level of detriment caused by Valve’s alleged illegal conduct. As made clear in the NSW Law Reform Commission Report, these types of comments are of particular concern because of their potential to compromise the general administration of justice by “usurping the courts’ role and undermining public confidence in the court system”.

The ACCC’s comments about the Valve case may also be objectionable sub judice comments to the extent they could be seen a placing pressure on Valve to compromise any defence which they were proposing to make to the ACCC proceedings.  As stated at paragraph 6.22 of the NSW Law Reform Commission report:

6.22 A publication may constitute contempt if it tends to impose improper pressure on a party to civil proceedings as to the conduct of those proceedings. In particular, a publication may exert undue pressure on a party to discontinue or settle a claim which he or she has instigated or is defending. The basis for restricting the publication of material in this context is concern that the individual party, as well as litigants and potential litigants generally, will be discouraged from seeking access to the courts for vindication of their legal rights, and in this way the due administration of justice will be impeded.

Indeed, it is hard to imagine a clearer example of sub judice commentary than the ill-advised comments by the ACCC in relation to the Valve proceedings. 

The case for intervention by the Commonwealth Attorney General is getting stronger each day. In my view, some action must be taken to make it clear to the ACCC that litigation is supposed to be tried in the court according to law, and not in the media.

Wednesday, 27 August 2014

Trial by Media – the ACCC and the sub-judice rule

Over the last 18 months, there has been a noticeable shift in the Australian Competition and Consumer Commission’s (ACCC) approach in relation to the content of their media releases when commencing legal proceedings. Prior to that time and for as long as most practitioners in the competition and consumer law area can remember, the ACCC had a policy of limiting the content of their media releases to the bare facts when commencing legal proceedings.  The ACCC was also very careful not to include any quotes or commentary about the case in their media releases.

This earlier practice appears to have changed over the last 18 months. Most ACCC media releases now include extensive and quite unnecessary commentary on various issues, for example the major issues likely to arise in the case, the merits of the ACCC case and the impacts of the respondent’s “illegal” conduct on consumers and competitors. The ACCC’s new approach to the content of its media releases is compounded by the practice of some senior ACCC representatives of giving further interviews about their cases to various media organisations.

While the ACCC’s actions may be unlikely to prevent the respondent from getting a fair trial in the traditional sense (given that ACCC cases are not currently heard by a jury) this does not mean that the ACCC’s actions are not interfering with the administration of justice and unfairly prejudicing respondents. It is quite clear that ACCC’s comments are resulting in the media and the community prejudging issues which are properly the domain of the court. Both the media and consumers are assuming, based on the ACCC’s sub judice comments, that respondents are guilty of illegal conduct, long before any such finding has been made by the Court.  It is essential that the ACCC stop engaging in this practice so that the integrity of the legal system and the rights of respondents can be protected.

Sub Judice rule
Sub judice contempt has been defined by the Victorian Government Solicitors Office in their guide entitled “Managing the Risk of Sub Judice Contempt” as follows:[1]

Sub judice contempt is the common law offence of publishing material which has a tendency to interfere with the administration of justice while proceedings are sub judice; that is, ‘under a judge’.  The rationale for the offence is to avoid a ‘trial by media’ by prohibiting the publication of material which might prejudge issues at stake in particular proceedings, or which might influence or place pressure on persons involved in the proceedings, including jurors, witnesses or potential witnesses, and parties to the proceedings. In deciding whether material is prejudicial, the court will attempt to balance the public interest in free speech with the public interest in ensuring a fair trial.

As is apparent, sub judice contempt may occur when a relevant party's comments prejudge the issues in a case.

The three elements of sub judice contempt are:

  1. the material is published;
  2. publication occurs while proceedings are sub judice; and
  3. the publication has the requisite tendency to interfere with the administration of justice in those proceedings.
 It is also well established that information provided by a public official to a journalist, reporter or media agency in a media interview or media release would be regarded as having been published. Publication will occur at the moment the information is provided to the media.[2]

Sub judice contempt can also arise in relation to civil proceedings, not solely in relation to criminal proceedings.  The sub judice period in civil proceedings begins when the statement of claim or other initiating process is issued.

In their guide, the VGSO makes particular mention of the possibility of sub judice contempt being engaged in by public officials:[3]

Comments made by prominent figures such as Ministers, senior public officials and members of the police force will be seen to have more impact. This was the case in Director of Public Prosecutions v Wran (1987) 86 FLR 92, where the former Premier of NSW, Mr Wran, publicly stated that his friend Justice Murphy was innocent of the charges laid against him while standing outside the court where a retrial had just been ordered. This comment was later published in The Daily Telegraph. Both Mr Wran and the publisher were found guilty of contempt and fined on the basis that the comments could influence potential future jurors to acquit Justice Murphy in his retrial.

Statements by senior ACCC officials about ACCC cases before the courts are also likely to have a greater impact on community perceptions about the case than comments made by other parties, including comments made by the respondents in these cases.

In the following, I will identify a number of examples where it is arguable that the ACCC may have breached the sub judice rule.

On 15 March 2013, the ACCC commenced legal proceedings against Luv-a-Duck Pty Ltd alleging false, misleading and deceptive conduct in relation to the promotion and supply of its duck meat products. The ACCC’s media release commenced with an explanation of the allegations raised by the ACCC in its case. 

The ACCC then added the following commentary:[4]

Consumers must be able to trust that what is on the label is true and accurate. Businesses need to make sure they are not misleading consumers into paying a premium for products that don’t match the claims made on the label.

In this example, the ACCC has commented on the case in a way which suggested that the respondent had in fact engaged in illegal conduct – ie “businesses need to make sure they are not misleading consumers…” The ACCC then suggested that Luv a Duck had engaged in conduct which resulted in consumers paying more than they should have for the products.

Both of these statements are sub judice comments which had the potential to cause third parties to prejudge relevant issues.

Coles Freshly Baked
On 12 June 2013, the ACCC commenced legal proceedings against Coles for alleged false, misleading and deceptive conduct in the supply of bread that was partially baked and frozen off site, transported to Coles stores and ‘finished’ in-store. 

In the ACCC’s media release, it outlined its case as follows:[5]

The ACCC alleges that labels on these par baked products stating ‘Baked Today, Sold Today’ and in some cases ‘Freshly Baked In-Store’, and nearby prominent signs stating ‘Freshly Baked’ or ‘Baked Fresh’, were likely to mislead consumers into thinking that the bread was prepared from scratch in Coles’ in-house bakeries on the day it was offered for sale and that it was entirely baked on the day it was offered for sale.

The ACCC’s comments in relation to this case up to this stage were entirely appropriate.  However, the ACCC then decided to include the following additional commentary about the case:

There are two important issues at stake. First, consumers must be able to make informed purchasing decisions. Bread is an important grocery basket staple and customers need to be confident in claims made about food they buy.

We believe consumers are likely to have been misled by Coles that the entire baking process, including preparation, occurred in-store, when in fact the bakery products were prepared and partially baked off site, frozen, transported and then ‘finished’ in store. Indeed, the Cuisine Royale products were partially baked overseas.

Second and just as important, is the detrimental impact on the businesses of competitors. Misleading credence claims can undermine the level playing field and disadvantage other suppliers. In this case those suppliers are the smaller, often franchised bakeries that compete with Coles.

As is apparent from the above, the ACCC went far beyond simply reporting the bare facts of the case. Rather, the ACCC decided to provide a detailed commentary on:

·        what it saw were the main issues at stake in the case;

·        its view that consumers had been misled by Coles’ representations; and

·        finally that Coles’ competitors had been detrimentally impacted by Coles misleading conduct.

Indeed, the ACCC paints a vivid picture of Coles apparently seeking to use these misrepresentations to tilt the playing field in its favour and to cause financial detriment to its smaller competitors.  In many respects, the ACCC media release appeared more like a preview of the ACCC’s submissions on penalty than a fair, balanced and factual summary of the allegations made in their case.

Titan Marketing
On 17 June 2013, the ACCC commenced legal proceedings against Titan Marketing Pty Ltd (Titan) and its sole director, Paul Giovanni Okumu.

In its media release, the ACCC alleged that Titan representatives engaged in misleading and unconscionable conduct when conducting door-to-door sales of first aid kits and water filters in Indigenous communities and other locations in Queensland, New South Wales and the Northern Territory.  

The ACCC also added the following commentary about the case in its media release:[6]

The allegations against Titan include alleged conduct which took place in Indigenous communities, where some consumers were particularly vulnerable and did not understand the contract documents.  The ACCC will continue to take action to protect consumers in their homes from misleading and unconscionable conduct, particularly where the conduct affects disadvantaged or vulnerable consumers.

As is apparent from the above, the ACCC did not restrict its comments to an outline of the relevant allegations. Rather, it decided to comment on the characteristics of the consumers which were the targets of Titan’s alleged conduct – namely that these consumers were vulnerable and did not understand the contract documents.  Importantly, the question of whether these consumers were vulnerable and could understand their contracts were issues of fact which the judge in the case was required to decide based on the admissible evidence.

The ACCC also added a further comment in its media release that it would continue to take action “to protect consumers from misleading and unconscionable conduct”.  It seems that Titan and Mr Okuma’s conduct was no longer “alleged” conduct but rather had become a clear example of “misleading and unconscionable conduct” which adversely affected “disadvantaged or vulnerable consumers”.

Alleged egg cartel
On 28 May 2014, the ACCC instituted proceedings in against the Australian Egg Corporation Limited, two egg producing companies and a number of individuals. In this case, the ACCC alleged that the various respondents had attempted to enter into a price fixing arrangement.

Here, the ACCC decided to add the following commentary:[7]

Detecting, stopping and deterring cartels operating in Australian markets remain an enduring priority for the ACCC, because of the ultimate impact of such anti-competitive conduct on Australian consumers who will pay more than they should for goods.

Industry associations need to be conscious of competition compliance issues when they bring competing firms together. Today’s action sends a clear message that attempts by industry associations to coordinate anti-competitive behaviour by competitors will not be tolerated.

This statement suggests that the alleged attempted cartel was in fact an actual cartel which had a demonstrable anti-competitive effect. 

Interestingly, the ACCC also decided to state that the case sends a clear warning to other industry associations which may attempt to coordinate anticompetitive behaviour amongst their members.  In reality, the case could only sound as a warning to industry associations once the case had been successfully litigated by the ACCC, which has not yet occurred.

Coles alleged unconscionable conduct case
On 5 May 2015, the ACCC commenced legal proceedings against Coles in relation to alleged unconscionable conduct.  The following extensive additional commentary was included in the ACCC’s media release:[8]

The conduct of Coles alleged by the ACCC in these proceedings was capable of causing significant detriment to small suppliers’ businesses. This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment.

The ACCC alleges that Coles used undue pressure and unfair tactics in negotiating with suppliers, provided misleading information and took advantage of its superior bargaining position, so that its overall conduct was in all the circumstances unconscionable.  If this conduct is established in court, the ACCC expects that the community will share the ACCC’s view that business should not be conducted in this way in Australia.

In this example, the ACCC speculates about the detriment which Coles’ alleged conduct could have caused to small suppliers. This speculation seems somewhat premature given that the ACCC was (and is) still to prove that Coles’ conduct was in fact unconscionable. 

The ACCC then speculates that Coles’ conduct could have resulted in less innovation, reduced economic efficiency and consumer detriment.  This is yet another example of the ACCC jumping the gun by some considerable margin, given these types of arguments are only relevant to the imposition of penalties at the end of the case.

Finally, the ACCC claims that the community would be equally unimpressed with Coles’ conduct, subject to one important qualification – namely that the ACCC is actually able to establish its case to the satisfaction of the court.

The prejudicial nature of the comments made by the ACCC in its media release were further compounded by statements made by senior ACCC officials about the case in number of subsequent of media interviews. 

Coverall Manufacturing
On 21 July 2014, the ACCC commenced legal proceedings against Coverall Cleaning Concepts South East Melbourne Pty Ltd and two individuals involved in the management of the company. 

The ACCC included in its media release the following statement:[9]

The ACCC will not hesitate to take court action to enforce compliance with laws that are specifically designed to protect small business from unfair practices.

Micro-sized firms, franchisees and self-employed individuals should not be treated in a manner which goes beyond the bounds of commercially-acceptable practice, or which is more than just hard bargaining.

It appears from the above, that Coverall’s actions were no longer “alleged” unfair practices but rather clear examples of actual “unfair practices”.

Furthermore, the ACCC decided to include the gratuitous suggestion into its media release that Coverall had in fact engaged in conduct which went “beyond the bounds of commercially-acceptable practice”, and was “more than just hard bargaining”.

Omni Blend
On 14 August 2014, the ACCC commenced legal proceedings against OmniBlend Australia Pty Ltd (OmniBlend) and its sole director, Mr Neal Bowhay, for an alleged attempt to enter into in a price fixing agreement with a competitor.

After outlining its allegations, the ACCC included the following commentary about the case in its media release:[10]

Price fixing and resale price maintenance affect consumers by increasing prices, reducing consumer choice and distorting the competitive process.

The ACCC views these types of anticompetitive conduct very seriously and will not hesitate to investigate and where appropriate take enforcement action against businesses who engage in this behaviour.

In one fell swoop, the ACCC transformed OmniBlend’s alleged attempt to enter into a price fixing arrangement into an actual price fixing arrangement which apparently had the effect of “reducing consumer choice and distorting the competitive process”.  Not only is this is a clearly sub judice statement but it is also a wildly inaccurate statement. As is apparent, an attempted price fix can have neither of the two claimed effects of reducing consumer choice or distorting the competitive process.

Finally, any lingering doubt that OmniBlend’s conduct was an allegation which still had to be proved by the ACCC is dispelled in the ACCC’s second paragraph where is states that it views OmniBlend’s “anticompetitive” conduct “very seriously”.

Informed Sources
On 20 August 2014, the ACCC commenced legal proceedings against Informed Sources and five separate petrol retailers for alleged anticompetitive conduct.  After outlining the various allegations in its media release, the ACCC included the following background about the case:[11]

A key priority for the ACCC is anti-competitive conduct in the fuel sector. The ACCC is concerned about any possible impact on competition in the fuel market because of the potential impact on consumers of even a small increase in price.

It is difficult to quantify the likely effect on petrol prices of the Informed Sources arrangements with petrol retailers or of shopper docket discounts above 4 cents. The ACCC has not quantified any effect but notes that even a small increase in petrol pricing can have a significant impact on consumers overall. For example, if net petrol prices increase by 1c per litre over a year, the loss to Australian consumers would be around $190 million for the year.

First, it is notable that the ACCC omitted the word “alleged” when referring to “anticompetitive” conduct.  This omission has the risk of leading readers to conclude that the respondent’s conduct has already been proven to be anti-competitive, when this is not the case.

Second, the ACCC sought to quantify the detriment which Australian consumers may have suffered as a result of the respondent’s alleged illegal conduct - namely, $190 million a year in the form of lower petrol prices.  This wild speculation by the ACCC about potential losses arising from the alleged illegal conduct was highly irresponsible, given that the statement was made at the commencement of the legal proceedings. 

It is also clear that this statement has caused and will continue to cause the respondents considerable detriment throughout the course of the litigation, as it suggests that the respondents have illegally deprived Australian consumers of annual savings of at least $190 million in the form of lower petrol prices.

As the above examples show, the ACCC is now regularly providing much more comment in its media releases about matters which it has before the courts. The ACCC’s comments are clearly going far beyond a bare statement of the facts. Rather the ACCC is commenting on a wide range of factual issues which should be the sole responsibility of the judge hearing the case to determine.  

The ACCC must rethink its current approach of making gratuitous sub judice comments about its cases.  Unless the ACCC changes this practice, the organisation and its senior officials are at risk of being pursued for sub judice contempt.

If the ACCC fails to change its approach to commenting on cases which are sub judice or “under a judge” there may be a need for third party intervention.  Given the ACCC is a Commonwealth Government agency, its seems that such third party intervention could be initiated by the Commonwealth Attorney General, as Australia’s first law officer. Indeed, there is a strong argument that it is well within the responsibilities of the Commonwealth Attorney General to intervene in relation to this matter to direct the ACCC to cease engaging in conduct which may constitute sub judice contempt. Such an intervention would be consistent with the Commonwealth Attorney General’s responsibilities to safeguard both the integrity of the legal system and the rights of respondents.

[1] Managing the Risk of Sub Judice Contempt, Victorian Government Solicitors Office at
[2]  Attorney-General (NSW) v TCN Channel Nine Pty Ltd (1990) 20 NSWLR 368 at 378-379.
[3] VGSO, above n 1.

[4] ACCC institutes proceedings against Luv-a-Duck for false, misleading and deceptive conduct, ACCC media release, dated 15 March 2013 – at

[5] ACCC institutes proceedings against Coles for alleged false, misleading and deceptive bakery claims, ACCC media release, dated 12 June 2013 at

[6] ACCC alleges misleading and unconscionable door-to-door sales conduct, ACCC media release, dated 17 June 2013 at

[7] ACCC takes action following alleged egg cartel attempt, ACCC media release, dated 28 May 2014 at

[8] ACCC takes action against Coles for alleged unconscionable conduct towards its suppliers, ACCC media release, dated 5 May 2014 at

[9] ACCC takes action against cleaning franchisor alleging unconscionable conduct, ACCC media release, dated 21 July 2014 at

[10] ACCC institutes proceedings against OmniBlend Australia, ACCC media release, 14 August 2014 at

[11] ACCC takes action against Informed Sources and petrol retailers for price information sharing, ACCC media release, dated 20 August 2014 at