ACCC Essentials – understanding the Australian Competition and Consumer Commission’s 2018 Compliance and Enforcement Priorities

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:

1. competition perspective – for example, the nature of all agreements with competitors, suppliers and service providers, and other third parties and

2. 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:

1. Compliance Policy

2. The appointment of a Compliance Officer

3. Other relevant policies such as a Complaints Handling Policy and a Whistle-blower Policy

4. The establishment of an effective Complaints Handling procedure and

5. 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.

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[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

[4] Treasury Laws Amendment (2018 Measures No.3) Bill 2018 (Cth).

Stepping Over the Line?

It seems to me that Justice North's comments about the Australian Building and Construction Commission's case against CFMEU officials may have gone too far: "the ABCC should be publicly exposed as having wasted public money without a proper basis for doing so..." '...it was a completely unnecessary waste of public money" "If you want to make a case that the ABCC should not be criticised, well, you know, let’s hear – bring it on." "I must say it's a terrible waste of everybody's time." "...external forces that are beating up what's just a really ordinary situation that amounts to virtually nothing." He also described the ABCC's decision to take legal action as "outrageous"  I remember Justice North making similar comments 20 years ago about the ACCC's case against the Maritime Union of Australia during the Waterfront Dispute. At that time he said that our case was a waste of public money. 

This was after the MUA had taken illegal boycott action to close down half of Australia's ports and after the MUA had called on its overseas affiliated unions particularly in the US to take sympathy boycott action against vessels loaded with non-union labour.

Click in this link to see the recent article in the Sydney Morning Herald:

https://www.smh.com.au/business/workplace/judge-blasts-building-cop-for-wasting-public-money-on-tea-cup-case-20180808-p4zwb0.html

Here is a story from the Canberra Times, 12 June 1998, p4 about Justice Norths's comments about the MUA case:

CFMEU case collapses

I was pretty surprised at these reported comment by the lawyer for the defendants about the Victorian DPP's decision to withdraw charges against Mr Setka and Mr Reardon: "Crucially it's been exposed that neither of the Boral men viewed the coffee shop conversation as any kind of threat at the time and did not think of it as any kind of threat for over a year," Mr Gordon said. "And after a year, their view of that coffee shop conversation, their recollection of it got changed. "It got changed only after various lawyers got involved, internal lawyers for Boral, external lawyers for Boral, lawyers for the ACCC, and crucially lawyers for Dyson Heydon's Trade Union Royal Commission." He said multiple drafts were made of witness statements that changed an "entirely innocent" coffee shop conversation into a blackmail threat. I wonder how the lawyers referred to above will respond to those claims? I know what I'd be doing.

https://www.afr.com/news/policy/industrial-relations/cfmmeu-boss-john-setka-has-blackmail-charges-dropped-over-alleged-boral-ban-20180516-h104d5

Overview of the activities of the ACCC, lessons learnt and predictions for the near future

Paper presented at the Tonkin’s 3rd Annual Competition and Consumer Law Conference, 6 March 2013

If you would like a PDF copy of this presentation please let me know via email at michael@terceiro.com.au


Introduction

A couple of years ago this paper would have been the most difficult paper to prepare for this entire conference. That was because the previous Chairman of the ACCC, Mr Graeme Samuel, was not a big fan of priorities.

However, the current Chairman of the ACCC, Mr Rod Sims, could not be more different. From the first day in the job, he made it crystal clear which particular areas he would be focusing the ACCC’s resources on. In a speech given to the Law Council’s Competition and Consumer Law Workshop on the Gold Coast in August 2011, Mr Sims set out a seven-point plan of the areas that he would be focusing the ACCC on in the coming year.[1]

About a year after that speech, Mr Sims reported back to the Workshop about how the ACCC had gone in achieving those goals.[2]

The approach which Mr Sims has taken to clearly stating what the ACCC’s priorities will be and then reporting back on the ACCC’s success in achieving those priorities, is a very welcome development.


Structure of paper

In this paper, I will first outline why the ACCC needs to set priorities.

I will then discuss the ACCC’s priorities for 2013, which were only announced by the ACCC about two weeks ago.

I will then discuss some further guidance provided by Mr Sims about how the ACCC is going to be enforcing the law.

I will then be turning to a discussion of the likely impact that a change in government at the Federal level in September may have on the ACCC’s 2013 priorities. The Coalition has a number of different competition and consumer law policies to the government. For example, the Coalition has committed itself to extending the unfair contract term legislation to the small-business sector.

Finally, I will discuss some of the overseas developments in competition and consumer law, which will invariably become significant issues in Australia. Without a doubt, the hottest issue currently in the competition law / anti-trust circles overseas relates to patent ambush in the context of standard-setting organisations. It is inevitable that such issues will also arise for consideration by the ACCC in Australia.


Why does the ACCC have priorities?

The first question to address is why the ACCC believes that there is a need to establish priorities. While the main explanation for having priorities is that it provides greater transparency in the way the ACCC will be using its resources, there are also important practical reasons for having priorities.

As explained by Mr Sims in a recent speech about the ACCC’s priorities, the ACCC receives 160,000 complaints and enquiries each year.[3] The following table shows the breakdown of how those complaints are processed by the ACCC:

Complaints and queries each year	160,000
Initial review / assessment of complaints	3,000
Initial investigations	550
In-depth investigations	140
Formal resolutions	60 plus

By formal resolutions, Mr Sims is referring to either court proceedings (30 plus), court enforceable undertakings (30 plus) and the payment of infringement notices.

As is apparent, there is no way that the ACCC could pursue all of these complaints. Furthermore, the only way the ACCC could pursue any of these complaints effectively is by establishing clear and specific enforcement priorities.

As stated in the above table, the ACCC receives 160,000 complaints and enquiries a year but is only able to consider 3000 of those complaints.

Of these 3000, it will commence what it calls an initial investigation in relation to 550 complaints. An initial investigation generally involves the ACCC writing a letter to the business which has been complained about, to ask them for an explanation of their conduct.

Of this number, the ACCC will then commence about 140 in-depth investigations a year. These are the investigations which the ACCC Commissioners have been briefed about and which they have decided are important and should be pursued more vigorously. These are also the cases where the ACCC has decided to start spending some serious money, usually by retaining external lawyers.

One thing that you should note from the above table is the statement that the ACCC commences 30 plus court cases a year and obtains 30 plus s87B undertakings.

While the numbers in relation to s87B undertakings are accurate, the numbers in relation to court cases are significantly overstated. For example, in 2012 the ACCC commenced 16 court cases and 21 in 2011. However, at least five of the cases commenced in 2011 were contempt of court proceedings, which arose because the business had breached an earlier court order. Therefore, the actual average number of new court cases commenced by the ACCC over the last two years has been 16 and not “30 plus”.[4]

I think the 30 plus court case estimate made by Sims in his speech may be an aspirational target. In other words, I think it is likely Sims has set himself the goal of pursuing about 30 new court cases a year. If I am right about this, it means the ACCC may be looking to double the amount of litigation which it is currently commencing each year.

I also believe that when one looks at the specific cases taken by Sims in the first two years there is a trend for the ACCC to pursue more significant cases against larger businesses than was generally the case under the previous Chairman. For example, the ACCC has commenced legal proceedings against such global multinationals as Visa[5], Apple,[6] Hewlett Packard[7] as well as number of large local businesses such as Harvey Norman[8] and Flight Centre.[9]


What are the ACCC’s 2013 Enforcement and Compliance Priorities?

Goals
On 21 February 2013, the ACCC released its 2013 Compliance and Enforcement Policy.[10]

What businesses must first realise about the ACCC’s Priorities, is that they have to be considered as a whole. This is because 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 both the outcomes which it is likely to achieve by pursuing a particular enforcement matter and also the type of conduct which the relevant business is engaging in. Finally, the ACCC will determine whether the conduct falls into their specific 2013 “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 detriment to consumers, including small business consumers.

There are many cases where the ACCC could achieve a good outcome but decides not to get involved because the complainant also has the resources and motivation to achieve the same outcome through private action. By the same token, there are many matters which involve particularly egregious conduct, which the ACCC will not pursue because it will not be able to achieve worthwhile outcomes.

It is also the case that all of the ACCC’s enforcement activity should be directed to achieving the following two main goals:
to maintain and promote competition and remedy market failure, and
to protect the interests and safety of consumers and support fair trading in markets.

Obviously, these goals reflect both the competition and consumer law functions of the ACCC – to fix market failure and to ensure that consumers have perfect information so they can make rational purchasing decisions.

Outcomes
The next part of the Priorities discusses the outcomes which the ACCC will be seeking to achieve – namely to:

• stop unlawful conduct 
• deter future offending conduct 
• where possible, obtain remedies that will undo the harm caused by the contravening conduct (for example, by corrective advertising or securing redress for consumers and businesses adversely affected) 
• encourage the effective use of compliance systems 
• where warranted, take action in the courts to obtain orders which punish the wrongdoer by the imposition of penalties or fines and deter others from breaching the Act. 

The ACCC will be seeking to achieve the first two outcomes listed above in relation to virtually every enforcement action it pursues – namely, to stop the unlawful conduct and to deter future offending conduct.

However, the ACCC will not seek all of the other outcomes listed above in every case. Rather it will pick and choose which remedies are appropriate.

For example, the ACCC rarely seeks consumer redress in cartel cases, preferring instead to leave consumer redress to plaintiff law firms to pursue through private class actions. More recently, the ACCC did not seek consumer redress in relation to Samsung’s allegedly misleading energy rating claims.[11]

The ACCC will also not require every business against which it has taken enforcement action to introduce a comprehensive compliance program. Whilst large and medium sized business will be required to implement a compliance program, smaller businesses will have lower level obligations, such as attending some compliance training.

Types of conduct
The ACCC then lists the types of conduct where it will be focusing its efforts:

• conduct of significant public interest or concern 
• conduct resulting in a substantial consumer (including small business) detriment 
• unconscionable conduct, particularly involving large national companies or traders 
• conduct demonstrating a blatant disregard for the law 
• conduct involving issues of national or international significance 
• conduct detrimentally affecting disadvantaged or vulnerable consumer groups 
• conduct in concentrated markets which impacts on small business consumers or suppliers 
• conduct involving a significant new or emerging market issue 
• conduct that is industry-wide or is likely to become widespread if the ACCC does not intervene 
• where ACCC action is likely to have a worthwhile educative or deterrent effect, and/or 
• where the person, business or industry has a history of previous contraventions of competition, consumer protection or fair trading laws. 

As a general rule above, the ACCC will not pursue an enforcement matter unless it is satisfied that the offending conduct meets the first two criteria listed above – namely it:
is of significant public interest or concern and
has resulted or will result in substantial consumer (including small business) detriment.

The other factors listed above are more relevant to the type of enforcement response which the ACCC may decide to take. For example, if the ACCC forms the view that a business had demonstrated a blatant disregard of the law, it would be more likely to pursue a litigated outcome than say a court enforceable undertaking.

Another longstanding priority area, which will often result in a litigated outcome, is whether the conduct impacts on disadvantaged or vulnerable consumer groups. The ACCC sees such conduct as an aggravating factor which will usually justify a stronger enforcement response.

A relatively new slant on the ACCC’s priority list is the particular focus on unconscionable conduct involving large national companies and traders. While the ACCC has been searching for a good unconscionable conduct case for many years, it has not had much success.

However, the way this priority has been phrased suggests to me that it may be a reference to the ACCC’s investigation into the two major grocery retailers, Coles and Woolworths. In a recent Senate Estimates committee, Mr Sims identified five specific allegations against Coles and Woolworths which the ACCC was investigating. It seems to me that four of these allegations may in fact constitute unconscionable conduct rather that misuse of market power cases.[12]

I believe it is likely that the ACCC will end up taking some legal action against Coles and Woolworths for unconscionable conduct arising from its grocery investigation.

The ACCC has also said in its Priorities that it is on the lookout for illegal conduct:

• in concentrated markets; and 
• in new or emerging markets. 

Focusing on conduct in these areas makes a great deal of sense, as the competitive harm arising from illegal conduct in concentrated markets and emerging markets is likely to be significant.

Sims has also shown a willingness to explore creative approaches to solving industry wide problems. He has done this by:

• getting different regulators to work together on a particular issue; 
• working out an enforcement program; and 
• then supplementing the enforcement program with educational initiatives. 

For example, Sims took such a coordinated approach in relation to ring tones, by getting the major regulators to work together, taking a number of enforcement actions and also educating the consumers about what to look out for when buying a ring tone.

Sims appears to have taken a similar approach in relation to free-range egg claims and representations about virgin olive oil – namely a mix of enforcement and education.

This is a much more sensible way of trying to achieve industry-wide compliance rather than the old-fashioned way of suing the biggest and ugliest player in the market in the hope that all the smaller players in the market will be scared into complying with the law.

Finally, businesses which have breached the relevant legislation before are automatically placed in the high-priority category whenever the ACCC receives a further serious complaint about that business.

Specific 2013 hit-list
The ACCC then goes on to list the specific areas where the ACCC will be focusing its resources in 2013. This could be considered the ACCC’s 2013 “hit-list”:

• consumer protection in the telecommunications and energy sectors 
• online competition and consumer issues including conduct which may impede emerging competition between online traders or limit the ability of small businesses to effectively compete online 
• competition and consumer issues in highly concentrated sectors, in particular in the supermarket and fuel sectors 
• credence claims, particularly those in the food industry with the potential to have a significant impact on consumers or the competitive process 
• misleading carbon pricing representations 
• the ACL consumer guarantees regime 
• consumer protection issues impacting on Indigenous consumers. 

The ACCC’s focus on the telecommunications industry has been a long-standing one. The previous Chairman was particularly active in terms of pursuing telecommunications companies for misleading and deceptive conduct. This trend of taking aggressive enforcement action against the telecommunications companies is likely to continue, given the propensity of these companies to push the boundaries in relation to their marketing claims

Mr Sims has also made the energy sector a much stronger focus of the ACCC‘s work. This is probably due to Mr Sims’ background as the former Chairman of IPART, which gives him considerable insight into the way energy markets work. Mr Sims has shown particular interest in investigating electricity companies for misleading and deceptive conduct, primarily though illegal door-to-door sales techniques.

It is apparent that a major focus of the ACCC over the last year and over the coming year will be the supermarket sector. As stated earlier, the ACCC is conducting a large and in-depth investigation into the conduct of Coles and Woolworths. Given the amount of expectation which Mr Sims has created about these investigations, it seems inevitable that the ACCC investigations will result in some litigation.

Having said that, Mr Sims is going to have a great deal of difficulty winning these cases unless he can get some of the alleged victims of this conduct to give evidence in court. Mr Sims has said that he is proposing to run these cases on the documents alone, without calling the suppliers as witnesses. I think it will be impossible to win an unconscionable conduct case without putting the alleged victim in the witness box. We will have to wait and see.

Finally, there is a distinct possibility that the ACCC may conclude that the fuel discount dockets scheme introduced by Coles and Woolworths is anti-competitive and should be either dismantled or restructured in some way.

The focus on online selling is one area which has been a central focus of many competition and consumer law agencies around the world. Mr Sims has also pursued a number of cases which demonstrate the ACCC’s focus on this area, including:

• the Ticketek case where the ACCC alleged that Ticketek had breached section 46 by preventing competition from an online seller of discount tickets. Ticketek consented to pay, what for it was a mere parking fine of $2 million[13]

• the Google Ad Words case, which the ACCC recently lost quite comprehensively in the High Court. While the ACCC lost this case, the case also resulted in Google changing much of its conduct in relation to sponsored links.[14] Therefore, in that sense I believe that this case was effectively a win for the ACCC; and 

• the Flight Centre case which involves allegations that Flight Centre attempted to enter into a price-fixing arrangement with its on-line competitors. This case is still before the courts. 

It seems clear that the ACCC will be looking for more cases in the on-line area, particularly attempts by bricks and mortar businesses to stop manufacturers and wholesalers from supplying online sellers at discounted prices or at all.

An interesting area where the ACCC will be focusing its efforts in 2013 is on what it describes as credence claims. This appears to be a reference primarily to food manufacturers which make claims about the origin or composition or their products. The most notable examples appear to be free-range egg claims and virgin olive oil representations.

The ACCC has stated that it will only be looking at credence claims where such claims have the potential to “cause significant impact on consumers or the competitive process.” This would suggest that the ACCC will not be focusing its attentions on small businesses, but rather looking at large companies which make misrepresentations about the origin or nature of their products.

The ACCC has again included misleading carbon pricing representations in its list of priority areas. However, in reality the ACCC has received very few serious complaints about carbon pricing and it is not expecting to receive a many more serious complaints in 2013. The main interest this year will be if the Coalition are elected in September and decide to repeal the carbon tax as promised.

An area where the ACCC has been very active and will continue to be very active is in relation to consumer guarantees. The ACCC has taken actions against a number of large businesses for allegedly making misrepresentations about a consumer's right to receive a refund for a defective good. The most significant cases in this regard are the Hewlett-Packard and the Harvey Norman cases.

While the ACCC has been very interested in the non-excludable consumer guarantees, it has shown much less interest in other consumer rights such as warranties against defects. This is a sensible approach given how problematic those laws are.

Finally, the ACCC has made it clear that it will be focusing on consumer protection issues which impact on indigenous communities. This is a very important priority given that the high incidence of outrageous behaviour by traders in these communities.

What other guidance has the ACCC provided?

In addition to releasing the ACCC Compliance and Enforcement Policy, Mr Sims has provided further guidance to the business community about the way the ACCC will be approaching enforcement this year. This guidance was provided by Ms Sims in a speech he gave to the Committee for Economic Development of Australia on 21 February 2013.[15]

In this speech, Mr Sims identified six insights which will guide and inform the ACCC’s enforcement activities in 2013.

First, Mr Sims said that “strong enforcement by the ACCC is at the top of the list”. The obvious implication of this statement is that the ACCC will be pursuing matters more aggressively in 2013, most likely through litigation. This may be a response to the view held by some groups that the previous Chairman was less willing to litigate matters, preferring instead to settle investigations and contentious mergers without litigation.

What one has to realize is that Mr Sims inherited a large number of court cases from his predecessor, most notably the ACCC’s litigation against the Metcash –Franklins merger and the Google Ad Words case, both of which the ACCC ended up losing quite comprehensively.

Mr Sims has not had much of an opportunity in 2011 and for most of 2012 to put his stamp on the organization by pursuing his own signature cases. Therefore, one can expect that Sims will want pursue a number of high profile cases in 2013 to define his Chairmanship of the ACCC.

There have already been some good examples of Sims’ approach.

For example, the litigation against Apple concerning its iPad was very much a Sims case. As you would recall the ACCC sued Apple for saying its iPad was 4G compatible. After some initial fighting words from Apple, it ended up meekly settling the case.

I think that this case signalled that the ACCC is willing to take on some of the largest companies in the world in relation to key representations about their products. Most significantly, this case signalled that the ACCC was willing to pursue cases against a large company despite the fact that many of the ACCC’s overseas counterparts, primarily in Europe, had decided not to take legal action in relation to the same claims.

The same observations could be made about the ACCC’s recent decision to sue Visa International for alleged breaches of section 46 in relation to currency conversion services.

Both of these cases suggest that Sims is willing to be a global first mover in relation to both competition and consumer law issues, and not a mere follower of the enforcement activities of his overseas counterparts.

Second, the ACCC will be seeking to be more proactive. Every regulator in the world states that it is intending to be more proactive, but rarely does any regulator achieve this goal. The reason regulators can’t be proactive is because there are law enforcement agencies which have to react to complaints and tip-offs.

What the ACCC probably means is that it will be seeking to anticipate broader compliance problems earlier by more carefully analysing complaint data. It can no longer wait until there are 100 complaints about a particular trader or industry practice before acting. Rather, it has to be able to work out earlier, on the basis of only a few complaints, whether a particular trader is going to be trouble or whether a particular practice is going to become an industry wide problem and then take pre-emptive action.

One practical way that the ACCC could be more proactive is by releasing guidelines about new powers and provisions much more quickly than it has in the past. For example, it took the ACCC more than 2 ½ years to issue any substantive Guidelines about to how it was going to use its new infringement notice powers. The ACCC has also not released any Guidelines on when it is likely to seek to have a person disqualified as a director or manager of a business. This is despite the ACCC having the ability to seek this remedy since 2010 and having sought this order against at least six individuals.

Third, Mr Sims somewhat cryptically said that the ACCC “need(s) to seek to get the big and usually very public decisions right”. This seems like a veiled reference to decisions made by the previous Chairman which Sims believes were incorrect, for example the case theory advanced by the ACCC in the Metcash – Franklins case.

Fourth, Sims states that the ACCC will be seeking to be more practical in the future. In particular, he states that the ACCC will be “grounding (its) decisions in real world understanding, gained in part through detailed discussion with the parties and, importantly, those familiar with the industry and circumstances.” This again seems to be a fairly pointed reference to the Metcash decision which saw the ACCC being rebuffed by the court both at first instance and on appeal for its failure to show a good understanding of commercial realities.

Fifth, Mr Sims stated that whilst competition will generally yield the best outcomes, there is still a need for effective regulation. This is likely to be a reference to the continuing importance of the Australian Energy Regulator, which some state governments would like to disband.

Finally, Mr Sims said it is crucially important for the ACCC to explain “what we are and are not doing, and why”. He added that this is “fundamental in order to achieve strong compliance with the law and to ensure that people can have a better understanding of how or why a market economy works for them”. Sims already gets full marks on this particular criteria.

While working out the full implications of these six points requires some reading between the lines, I think the main take-home point is that:

The ACCC under the Chairmanship of Mr Sims will be more aggressive, more litigious, more practical, and less prone to making mistakes on the big decisions that was the case under the previous Chairman.

What if the Coalition win in September 2013?

In the event that the Coalition win the next Federal election in September 2013, they are likely to make a number of changes to both the legislation and, by implication, the ACCC’s priorities.[16]

The most significant change will be the repeal of the carbon tax. Not only will the ACCC no longer have to prevent carbon price misrepresentations, but it may be given a role in ensuring that businesses which have added the carbon tax to their prices are forced to remove the tax from their prices. If the Coalition passes laws to that effect, it will be a very complicated law for the ACCC to enforce.

Another significant change which the Coalition has said it will introduce is to extend unfair contract terms legislation to small businesses. The introduction of this law will be a very significant change, not only in terms of the level of legal protection which will be available to small businesses but also in terms of the ACCC’s workload. It is likely that the Coalition government would direct the ACCC to make enforcement of this new law a priority area.

Another area where I believe there may be more pressure on the ACCC to step up its enforcement activities is in relation to the Franchising Code. The Shadow Minister for Small Business, Competition and Consumer Affairs, Mr Bruce Billson, has stated that the ACCC should have the power to seek civil pecuniary penalties against franchisors for breaches of the Franchising Code.

I think that there will also be considerable pressure on the ACCC to increase its enforcement of the Franchising Code, given that it has only pursued 17 noteworthy court cases and investigations in relation to the Franchising Code in the last 10 years.

Another area where changes in government at the Federal level, have a significant impact is in relation to union boycotts. It is a quite well-known that when Labor is in power at the Federal level, the ACCC generally goes pretty quiet on the enforcement of the primary and secondary boycott laws against unions. I think the ACCC has gone a lot quieter than usual on this front over the last few years, with the ACCC not taking any litigation against a union for a primary or secondary boycott since 2006, over six years ago, just before Kevin Rudd was elected as Prime Minister.[17]

It is likely that the ACCC will be under considerably more pressure to investigate and take legal action against unions which may be breaching the boycott provisions. 

What can we learn from overseas?

As is the case with most things, overseas developments eventually find their way to Australian shores. This trend is also evident in relation to competition and consumer law issues

For example, on the election of the Obama administration in the US, the US Department of Justice immediately announced that it would be increasing its enforcement activities in relation to breaches of section 2 of the Sherman Act, which is the counterpart of section 46, the misuse of market power provision in the Competition and Consumer Act.[18] Sims similarly stated shortly after becoming Chairman in 2011 that the ACCC would be focusing more on section 46 cases.

The ACCC has a very poor record in taking section 46 cases. Since the provision was introduced to the Trade Practices Act in 1974 the ACCC has only taken 19 cases – in other words 19 cases in 39 years or less than one case every two years.

Interestingly, and contrary to popular belief, when the ACCC actually pursues a section 46 case it usually wins – ie it has won 11 of the 19 cases it has taken, lost 4 and had no result in the remaining four cases (two of these cases are currently before the courts). In other words, the ACCC’s success rate in concluded section 46 cases is a highly respectable 73%.[19]

There has been a considerable amount of activity overseas in relation to suppliers seeking to stop on-line traders from competing with bricks and mortar businesses. In the European Community, there have been a number of decisions which have found that bans on on-line traders constituted a breach of competition laws. It is clear that this particular overseas development has been picked up by the ACCC in its priorities.

There is also increasing pressure on the ACCC to commence its first criminal prosecution in relation to a hardcore cartel, preferably a global hardcore cartel. While hardcore cartels have been subject to criminal sanctions since July 2009, the ACCC is yet to initiate its first criminal prosecution. I personally believe that the first criminal prosecution is still a number of years away.

By far the biggest issue in global anti-trust/competition law at the moment is a phenomenon called “patent ambush” or “patent hold-up”.

The phenomenon arises when a company lobbies a standard setting organisation to make a particular technology part of a national or international standard for a product. If these arguments are accepted by the standards setting body, the technology becomes part of the relevant standard and all the companies supplying that product must use that technology to comply with the relevant standard.

The problem arises when it is discovered that the company which has been promoting the use of particular technology in a standard, actually owns or has the exclusive licence for the patent in respect of that particular technology. As is apparent the competitors to the proposer will need to get access to the patent in order to manufacture a product which complies with the relevant standard. However, the proposer may decide to charge its competitors exorbitant licence fees to gain access to the patent or even refuse to licence the patent at all, thus forcing its competitors out of the market.

Anti-trust and competition law agencies around the world have been trying to counter this conduct by establishing guidelines on the use of patents in the context of standard-setting organisations. The focus has been very much on requiring companies which are part of the standard-setting process to provide an undertaking that, in the event that a patent which they own, or have control over, is included in a relevant standard, they will grant their competitors a licence to use their patent on reasonable commercial terms.

I think it is inevitable that the ACCC will have to start looking at this particular area. Indeed, there is evidence that this practice has already been attempted and failed in Australia.

Case Study – Smorgon Steel – BHP Steel and Tempcore patent[20]

In 1999, Smorgon Steel was proposing to acquire Australian National Industries, another local steel manufacturer. In the course of the ACCC’s investigation into this merger, it discovered that representatives of Smorgon Steel were seeking to have the Australian Standard for Reinforcement Bar changed so that it was equivalent to the reinforcement bar which was produced through the use of the Tempcore manufacturing process

The only problem with this proposal was that the Tempcore process was subject to a patent which was initially licensed exclusively to Smorgon Steel in Australia. Quite surprisingly, Smorgon Steel subsequently decided to grant a sub-licence of the Tempcore patent to its major competitor in the Australian market, BHP Steel.

The ACCC was very concerned that if the Tempcore patent was made the basis of the relevant Australian Standard for reinforcement bar, this would have had the effect of excluding imported reinforcement bar from the Australian market. This was because many large building contracts specified that the reinforcement bar used in the project had to comply with the relevant Australian standard.

In order to prevent the situation from arising, the ACCC made it a condition of granting Smorgon Steel approval to buy ANI that it agree not to exercise its voting rights on the relevant Australian Standards Committee for Reinforcement Bar until the Tempcore patent had expired.[21]
By taking out the Smorgon representatives on the Committee, the ACCC was able to ensure that independent steel manufacturers and suppliers on the Committee had a sufficient voting majority to prevent the Australian Standard from being changed to make it equivalent to the Tempcore patent.

Smorgon’s undertaking was timed to expire at the same time as the Tempcore patent expired.

Conclusions

There are no excuses for businesses not to know where the ACCC will be focusing its enforcement energies in 2013 – this is because the current Chairman of the ACCC has made it crystal clear what the ACCC’s priorities will be in 2013.

Furthermore, Mr Sims has explained how the ACCC will be approaching its enforcement– namely, the ACCC is going to be more aggressive, more litigious, more practical and hopefully less prone to making mistakes on the bigger decisions.

The main downside of setting priorities so rigidly, is that there will be a tendency amongst ACCC staff not to consider matters which fall outside those priorities. While this is a likely result of such rigid priority setting, it is probably a necessary evil given the extremely large number of complaints which the ACCC receives every year.

The final message, I would like to leave with you today is what you should do if you receive a letter from the ACCC.

If you receive a letter from the ACCC about an issue which is identified as one of the ACCC’s specific priority areas, you can be fairly certain that the ACCC will pursue that matter vigorously and aggressively to a final conclusion. You should expect that that the ACCC will most likely be seeking a formal outcome, such as court orders or an s87B undertaking, and also be looking to publicise the outcome heavily in the media.

If, on the other hand, the ACCC writes to you about a matter which is not within its priority areas, you should argue quite strongly that the ACCC should resolve that matter informally or forget about the matter entirely given that the matter is outside ACCC’s stated priority areas. By the ACCC’s own admission, the matter could not really be that important after all, if it did not make it into the ACCC’s 2013 priorities document.

Then again, maybe the only real benefit to business in the ACCC having such clear priorities is that now all businesses will know, without a shadow of a doubt, when they are in VERY BIG trouble with the ACCC, as opposed to just being in BIG trouble with the ACCC.

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[1] ACCC Future Directions - speech given by Mr Rod Sims to the 36th Law Council Competition and Consumer Workshop on 28 August 2011 at http://www.accc.gov.au/speech/accc-future-directions

[2] Looking back, looking forward – the ACCC’s approach to making markets work for Australian Consumers - speech given by Mr Rod Sims to the 37th Law Council Competition and Consumer Workshop on 25 August 2012 at http://www.accc.gov.au/speech/looking-back-looking-forward-%E2%80%93-the-accc%E2%80%99s-approach-to-making-markets-work-for-australian

[3] The ACCC’s 2013 Priorities - speech given by Mr Rod Sims to Committee for Economic Development of Australia, Sydney on 21 February 2013 at http://www.accc.gov.au/speech/the-accc%E2%80%99s-2013-priorities

[4] Source ACCC website at http://www.accc.gov.au

[5] ACCC commences Federal Court proceedings against Visa Inc, ACCC News Release dated 4 February 2013 at http://www.accc.gov.au/media-release/accc-commences-federal-court-proceedings-against-visa-inc

[6] ACCC to seek orders against Apple for alleged misleading iPad "4G" claims, ACCC News Release, dated 27 March 2012 at http://www.accc.gov.au/media-release/accc-to-seek-orders-against-apple-for-alleged-misleading-ipad-4g-claims

[7] ACCC institutes proceedings against Hewlett-Packard Australia Pty Ltd for allegedly misrepresenting consumer rights, ACCC News Release, dated 16 October 2013 at http://www.accc.gov.au/media-release/accc-institutes-proceedings-against-hewlett-packard-australia-pty-ltd-for-allegedly

[8] ACCC starts legal proceedings against Harvey Norman franchisees, ACCC News Release, dated 20 November 2012 at http://www.accc.gov.au/media-release/accc-starts-legal-proceedings-against-harvey-norman-franchisees

[9] ACCC takes court action against Flight Centre Limited, ACCC News Release, dated 9 March 2012 at http://www.accc.gov.au/media-release/accc-takes-court-action-against-flight-centre-limited

[10] At http://www.accc.gov.au/media-release/accc-releases-new-compliance-and-enforcement-policy

[11] Samsung Electronics Australia provides ACCC with undertaking over energy savings claims, ACCC News Release, dated 21 January 2013 at http://www.accc.gov.au/media-release/samsung-electronics-australia-provides-accc-with-undertaking-over-energy-savings

[12] Senate Estimates – Tabled Document No 3 at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=economics_ctte/estimates/add_1213/index.htm

[13] Ticketek Pty Ltd penalised $2.5 million for misusing its market power, ACCC News Release, dated 22 December 2011 at http://www.accc.gov.au/media-release/ticketek-pty-ltd-penalised-25-million-for-misusing-its-market-power

[14] Google appeal upheld, ACCC news release, dated 6 February 2013 at http://www.accc.gov.au/media-release/google-appeal-upheld and Google Inc v ACCC [2013] HCA 1 at http://www.austlii.edu.au/au/cases/cth/HCA/2013/1.html

[15] See footnote 3.

[16] For the Coalition’s policies in relation to competition and consumer law see the Hon Bruce Billson MP’s website at http://brucebillson.com.au

[17] Secondary Boycotts, CCH Australian Competition and Consumer Law Reporter, Volume 1 – Competition Law, 2013

[18] Justice Department Withdraws Report on Antitrust Monopoly Law, Antitrust Division Press Release, dated 11 may 2009 at
http://www.justice.gov/atr/public/press_releases/2009/245710.htm

[19] ACCC v Ticketek – a non-event? Keeping Good Companies, Journal of the Chartered Secretaries Australia Ltd, April 2012, Volume 63 No. 3, pp. 158-161.

[20] The author was the Director in charge of this particular ACCC investigation. The views expressed in this paper are his own and should not be attributed to the ACCC.

[21] Undertaking to the Australian Competition and Consumer Commission given under s87B by Smorgon Steel Group Pty Ltd, dated 29 January 1999 at http://transition.accc.gov.au/content/item.phtml?itemId=361052&nodeId=0f46c363009b8602499a35369e29e460&fn=s87B_99_3S.pdf