Introduction
It is vitally
important for all Australian businesses to have a thorough understanding of the
way in which the ACCC prioritises its enforcement activities, given the highly
interventionist and aggressive approach which the ACCC takes to both
competition law and consumer protection matters. Indeed, the ACCC is one of the most aggressive
enforcers of the competition law provisions in the world.
Furthermore, the
ACCC has been successful in its calls for significant increases to the maximum financial
penalties for contraventions of the Australian Consumer Law 2010 (ACL), with
the proposed changes likely to be in effect by 1 July 2018.
It is also
important to recognise the strong reputation which the ACCC has amongst
consumers as an active and effective regulator. One of the implications of the
ACCC’s strong reputation is that any business pursued by the ACCC is usually
judged very harshly by the Australian public, the media and their customers. As a result, businesses which become the
subject of an ACCC investigation or legal proceedings brought by the ACCC often
suffer significant and long-lasting reputational and brand damage.
This paper
will outline the Australian Competition and Consumer Commission’s (ACCC)
approach to enforcement and identify the key enforcement and compliance
priorities.
Why does the ACCC have priorities?
The main
explanation for having priorities is that it provides greater transparency in
the way the ACCC will be using its resources. However, there are also important
practical reasons for having priorities.
As explained
by ACCC in its most recent Annual Report it received 405,382 contacts in the
2016-2017 financial year, of which 234,913 were recorded on the ACCC database.[1]
The following
table shows a rough breakdown of how those contact and complaints are processed
by the ACCC:
As is apparent, there is no way that the ACCC could
pursue all of these complaints. Rather, the only way the ACCC could pursue any
of these complaints effectively is by establishing clear and specific
enforcement priorities.
While the ACCC received 405,282 contacts last year it was
only able to conduct initial investigations into 259 of those complaints. An
initial investigation generally involves the ACCC writing a letter to the
business which has been complained about, to ask for an explanation of their
conduct. This number is significantly lower than in the previous year where the
ACCC conducted 427 initial investigations. One explanation for the reduction is
that the ACCC is becoming much more selective in the matters it is deciding to
pursue.
The ACCC commences in-depth investigations in relation to
a much small subset of the total complaints. These are investigations which the
ACCC Commissioners have determined are important and need to be pursued in more
depth. These investigations would have
been allocated an initial investigatory and/or legal budget and often result in
litigation. The number of in-depth
investigations has also declined significantly, from 167 in the 2015-16 financial
year to 79 in the last financial year.
Finally, the ACCC listed 24 litigation matters in its
2016-2017 Annual Report. However, if one considered all formal resolutions,
such as section 87B undertakings and infringement notices, the total number of
formal resolutions is likely to be much higher at around 50 formal resolutions
in the 2016-2017 period.
What are the ACCC’s 2017 Enforcement and
Compliance Priorities?
ACCC’s
Goals
On 20
February 2018, the ACCC released its Compliance and Enforcement Priorities for
2018 (Priorities).[2] These Priorities must be considered as a
whole, as the ACCC takes a multifaceted approach to selecting the matters which
it will pursue.
First, the
ACCC will consider the overall goals of their legislation. Second, it will
consider the outcomes which it is likely to achieve by pursuing a particular
enforcement matter and the type of conduct which the relevant business is engaging
in. Finally, the ACCC will determine
whether the conduct falls into the specific ACCC 2018 priorities or “hit list”.
As a guiding
principle, the ACCC will not pursue any enforcement matter unless it is
confident that:
(1) it can achieve meaningful remedies;
and
(2) the conduct is of a type which has
caused or may cause significant consumer detriment, including detriment to
small business consumers.
There are
many cases where the ACCC could achieve a meaningful outcome but decides not to
pursue the matter because the complainant has the resources and motivation to
achieve the same outcomes through private action. Similarly, there are many matters that
involve particularly egregious conduct, which the ACCC will not pursue because
it will not be able to achieve worthwhile outcomes, for example in relation to
some phoenix activity.
The ACCC’s enforcement activity is
directed achieving the following three main goals:
·
promoting
competition amongst businesses
·
promoting
fair trading by business
·
protecting
consumers in their dealings with business.
These goals
reflect both the competition and consumer law functions of the ACCC, which is
to fix market failure and to ensure that consumers have as near to perfect
information as possible, so they can make rational purchasing decisions.
ACCC’s 2018
Hit-List
The ACCC has made some changes in the 2018 Priorities document to the way
in which it outlined its Priorities in the past. In previous versions of the
Priorities, the ACCC would set out the general priority factors before listing
the specific priority areas or “Hit List”.
However, in
the 2018 Priorities the ACCC effectively started with its “2018 Hit-List” or
the specific areas where the ACCC will be focusing a large proportion of its
enforcement resources in the coming year.
The 2018 “Hit
List” is as follows:
- consumer issues in new car retailing, including responses by retailers and manufacturers to consumer guarantee claims, and other matters identified in the ACCC’s 2017 New Car Retailing Industry Report
- consumer issues in the provision of broadband services, including addressing misleading speed claims and statements made during the transition to the NBN
- systemic issues involving large or national traders avoiding or misrepresenting consumer guarantee rights
- competition issues in the financial services sector
- competition and consumer issues in the provision of energy as an essential service, including matters identified in the ACCC’s retail electricity pricing inquiry report and the ACCC’s wholesale gas inquiry
- competition and consumer issues concerning the use of digital platforms, algorithms and consumer data, with a focus on emerging markets and matters identified by the ACCC’s digital platforms inquiry
- ensuring small business receives the protections of industry codes and the unfair contract terms law, with a focus on Franchising Code of Conduct issues involving large or national franchisors
- ensuring better product safety outcomes for consumers in the online marketplace
- issues arising from the Takata airbags recall
- conduct that may contravene the new misuse of market power provisions and concerted practice provisions of the Act
- competition and consumer issues in the agriculture sector, with a focus on the dairy inquiry, Horticultural Code of Conduct enforcement, and analysis of the viticulture industry
- competition issues in the commercial construction sector
The
interesting aspect of the 2018 Priorities is that many of these Priority areas
were identified as Priorities in 2017. For example, new car retailing, agriculture,
commercial construction, unfair contracts, franchising, product safety issues
in relation online platforms and broadband speed and performance claims were
all identified as Priorities in 2017. This suggests that the ACCC did not
achieve everything it wished to achieve in relation to these areas in 2017.
The ACCC has
also identified a number of new Priority areas in 2018 - namely:
- financial services
- energy
- digital platforms, algorithms and consumer data
- Takata airbags recall
- misuse or market power and
concerted practices.
That these specific areas would be Priority areas in 2018 was to be
expected. For example, it was
anticipated that financial services would be a priority area given:
- that the government gave the ACCC additional resources in the 2017-2018 Budget to establish a dedicated Financial Services Unit; and
- the commencement of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in February 2018
The ACCC has also been doing extensive work in the energy sector for
some time, through market studies into the areas of gas and electricity. The inclusion of energy in the 2018
Priorities may suggest that the ACCC will be looking at taking enforcement
action in the energy sector in 2018.
Digital platforms, algorithms and
consumer data is clearly a priority area in 2018 due to the commencement of the
Digital Platforms Enquiry. In December 2017, the Government directed the ACCC
to conduct an 18 months investigation into digital platforms, focusing on such
companies as Google and Facebook amongst others.
The ACCC has also had a long running
involvement in the Takata airbag voluntary recall. However, the ACCC’s role was
escalated significantly in February 2018 when the Assistant
Minister to the Treasurer decided to issue a compulsory recall of the Takata
airbags.
Finally, the ACCC will be focusing its attention in 2018
on the investigation and enforcement of conduct which is caught by the new
changes to the Competition and Consumer
Act 2010 (CCA), primarily the changes to the misuse of market power
provisions and the introduction of the concerted practices provisions.
One interesting addition to the 2018 Priorities is the
reference to “systemic issues involving large or national traders avoiding or
misrepresenting consumer guarantee rights”. It would appear specific area that this has
been added to the 2018 Priorities due to a concern within the ACCC about large
national traders are continuing to mislead their consumers about their consumer
guarantee rights.[3]
There are also a number of industries which were on the
2017 Priority Hit List which can now breathe a collective sigh of relief as
they did not make the cut in 2018 – namely:
- airlines in
relation to their consumer guarantees;
- businesses involved
in country of origin labelling;
- businesses
involved in commission-based sales business models; and
- private health insurers.
Enduring priorities
The ACCC has also
adopted a practice of identifying a number of enduring priorities defined as
conduct which is so detrimental to consumer welfare and to the competitive
process that the ACCC will always regard them as a priority. The enduring
priority areas have not changed in 2018:
Cartel conduct
The ACCC will always prioritise cartel conduct causing detriment in Australia. When dealing with international cartels, the ACCC will focus on pursuing cartels that have a connection to, or cause detriment in Australia; that is, cartels that involve Australians, Australian businesses or entities carrying on business in Australia
Anti-competitive conduct
The ACCC will always prioritise anti-competitive agreements and practices, and the misuse of market power.
Product safety
The ACCC will always prioritise product safety issues which have the potential to cause serious harm to consumers.
Vulnerable and disadvantaged consumers
The ACCC recognises that vulnerable and disadvantaged consumers can be disproportionately impacted by conduct in breach of the Act. The ACCC therefore prioritises conduct that impacts these consumers.
Conduct impacting Indigenous Australians
The ACCC acknowledges that certain conduct in breach of the Act has the potential to specifically impact on the welfare of Indigenous Australians. The ACCC also recognises that Indigenous consumers living in remote areas face particular challenges in relation to asserting their consumer rights. The ACCC will always prioritise its work in these areas while these challenges remain.
Priority factors
Finally, the
ACCC outlines the general priority factors which it will weigh up when making a
decision to pursue a “non-Priority area” matter. These general priority areas
are:
- conduct that is of significant public interest or concern
- conduct that results in substantial consumer or small business detriment
- national conduct by large companies, recognising the potential for greater consumer detriment and the likelihood that conduct of large businesses can influence other market participants
- conduct involving a significant new or emerging market issue or where our action is likely to have an educative or deterrent effect
- where our action will assist to clarify aspects of the law, especially newer provisions of the Act.
The above
factors largely duplicate the general priority factors set out in 2017. Notably two factors which the ACCC will no
longer take into consideration when deciding whether to pursue an enforcement
action are the blatancy of the conduct and whether the relevant business is a
serial offender – both of which appear to be surprising omissions.
Increased ACL penalties
Without doubt
the most important development in 2018 will be the introduction of vastly
higher penalties for contraventions of the ACL.
Currently,
the maximum penalties for contravening the ACL are $1.1 million for corporations
and $220,000 for individuals for each contravention.
However, in
late 2017, Parliament released the draft amendment bill on ACL penalties.[4] If
passed this bill will increase the maximum penalties for civil and criminal
contraventions of the ACL to:
- $10 million; or
- if the court can determine the total value
of the benefit obtained from the offence, three times the value of that
benefit; or
- if the court cannot determine the value of the benefit, 10% of the corporation’s annual turnover in the preceding 12 months.
The
maximum penalties for individuals will increase to $500,000 per
contravention.
These changes
are scheduled to take effect from 1 July 2018.
As is
apparent, this amendment represents a quantum leap in terms of the size of
penalties which may be awarded by the Court for contraventions of the ACL. This change should be of particular concern
for businesses with a history of previous contraventions of the ACL. Courts are much more likely to impose multi-million-dollar
penalties against companies which have engaged in multiple prior contraventions
of the ACL.
Essentials
In order to
minimise risks and avoid problems with the ACCC (and other State and
territories regulators) it is important for businesses to conduct a detailed
Competition and Consumer Law Risk Assessment of every aspect of their
operation. This would start with an identification of all risks in the business
both from a:
- competition perspective – for example, the nature of all agreements with competitors, suppliers and service providers, and other third parties and
- consumer law perspective – for example, the representations made to consumers in marketing and promotional materials, the fairness of standard form contract terms and how complaints handling procedures are managed
Once the
business has conducted detailed Competition and Consumer Law Risk Assessment, businesses
should take steps to implement a comprehensive and up-to-date Compliance
Program, consisting of the following elements:
- Compliance Policy
- The appointment of a Compliance Officer
- Other relevant policies such as a Complaints Handling Policy and a Whistle-blower Policy
- The establishment of an effective Complaints Handling procedure and
- Regular Competition and Consumer Law Compliance Training.
Taking steps to conduct a Risk Assessment and implement a
Compliance Program will benefit the business by helping them to better identify
and manage all competition and consumer law risks in the business. Taking these
steps will also benefit the business in terms of mitigating the extent and
severity of the much larger pecuniary penalties which the ACCC will be seeking from
the Courts for ACL contraventions in second half of 2018.
[1] ACCC, ACCC – AER Annual Report 2016-2017, Commonwealth
of Australia, p 143 at https://www.accc.gov.au/system/files/ACCC%20and%20AER%20Annual%20Report%202016-17_0.pdf
[2]
ACCC, 2018 ACCC Compliance and
Enforcement Policy, at https://www.accc.gov.au/about-us/australian-competition-consumer-commission/compliance-enforcement-policy-priorities
[3]
Rod Sims, 2018 compliance &
enforcement priorities, Speech presented at CEDA Sydney, 20 February 2018
at https://www.accc.gov.au/speech/2018-compliance-enforcement-priorities
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