ACCC v Ticketek: A non-event?

This article first appeared in Keeping good companies, the Journal of Chartered Secretaries Australia Ltd, April 2012, Volume 63 No. 3, pp. 158-161.

Introduction

In December 2011, the Federal Court found that Ticketek Pty Ltd (Ticketek) had engaged in four contraventions of s 46 of the Trade Practices Act 1974 - now the Competition and Consumer Act 2010 (CCA) and imposed a civil pecuniary penalty of $2.5 million (ACCC v Ticketek Pty Ltd (Ticketek case)[1]). While this headline figure of $2.5 million may sound significant, in reality the penalty was very much at the low end of the scale. Indeed, given the size of Ticketek in the market, the deliberateness of the conduct and the involvement of senior management there is a strong argument that the penalty was manifestly inadequate.

The Ticketek case was also noteworthy, as it continued the Australian Competition and Consumer Commission’s (ACCC) excellent record in winning s 46 cases. Contrary to popular belief, the ACCC’s record in winning s 46 cases is better than 70%. The more significant concern is that the ACCC is failing to pursue enough s 46 cases – it has only commenced 18 s 46 cases in the last 38 years.

Outline of Ticketek case

The Federal Court found that Ticketek took advantage of its substantial degree of market power in the market for the supply of Ticketing Related Services for the substantial purpose of deterring or preventing Lasttix from engaging in competitive conduct.[2]

The Court defined a national market for the supply of Ticketing Related Services as consisting of the following services:[3]

• Preparation and printing of tickets for sale; 
• Selling and distribution of tickets; 
• Collecting of monies for tickets; 
• Provision of ticketing information. 

Ticketek was found to have a substantial market power in the market for Ticketing Related Services through of its 45% market share of the total number of tickets sold for live entertainment events across Australia.[4] The ACCC argued that Ticketek only faced one other full service provider in the market, namely Ticketmaster. There were also a range of small competitors which provided partial ticketing services, including Lasttix, which was a relatively small player, that focused on discount tickets which it offered through “MyTickets” and “Lasttix.”

Contraventions

The Court found that Ticketek had used its substantial degree of market power on four separate occasions to hinder and prevent Lasttix from competing in the market for the supply of Ticketing Related Services.[5]

On the first occasion, Ticketek refused to implement a discount ticket offering, which was to be supplied through Lasttix, on Ticketek’s Ticketing System for the Dr Phil event which was scheduled to occur in August 2009. Ticketek’s State Manager for Victoria explained Ticketek’s reason for not agreeing to include this discount offer in the following terms:

[The Promoters] have requested a discounted MyTickets price type for Dr Phil. This price is cheaper than the current discounted tickets we are selling for this particular event...this price type will not be added to this event.

The second occasion related to two events being promoted by the same promoter – namely, the Liza Minelli Event and World Dog Games Event. In October 2009, the promoter of these events asked Ticketek to implement discounted prices, which were to be sold by Lasttix, in Ticketek’s Ticketing System. Ticketek refused the promoter’s request because it did not want to assist Lasttix’s business through its own Ticketing System.

The third occasion related to a production of Les Ballets Trockadero De Monte Carlo which was to be held in November 2009. Again, a request was made by the promoter to Ticketek that it implement a discounted price offering though Lasttix in Ticketek’s Ticketing System. Ticketek’s Accounts Manager responded to the promoter in the following terms:

Unfortunately, we do not facilitate offers from Lasttix.com as they are considered by Ticketek as a competitor.

Ticketek have no affiliation with Lasttix and are opposed to facilitating offers to their members by allowing them to piggyback off our transactional website, and in particular when those offers are more favourable than what has been made available to our own customers.

We believe that by facilitating the offer we would be providing Lasttix with a perceived credibility as a location to receive special offers, and giving their customers and ours the illusion of partnership between our two websites, which would be wholly incorrect.

The final occasion related to the Warriors of Brazil event. The promoter contacted Ticketek to implement a discounted price of $20 on its Ticketing System. Ticketek prepared and issued the URL’s for the discounted tickets and provided them to the promoter who then provided them to Lasttix to be uploaded onto their website.

A short time later Ticketek discovered that the discount URL’s had been put on Lasttix’s website and linked back to the Ticketek website. Accordingly, Ticketek immediately disabled each of the URL’s and advised the promoter that:

Unfortunately, Ticketek do not facilitate offers via Lasttix.com as they are considered a competitor.

After further discussions, Ticketek agreed to reinstate the discounted prices on the condition that they receive a fee of $1.75 per ticket sold.

Penalties

The Court accepted the ACCC and Ticketek’s joint submission that the civil pecuniary penalties for the four contraventions should be $2.5 million in total, broken down as follows:

• Dr Phil event - $725,000

• Liza Minelli and World Dog Games events - $725,000

• Les Ballets Trockadero De Monte Carlo event - $725,000

• Warriors of Brazil event - $325,000.

The court noted that:

• Ticketek’s conduct had not driven Lasttix out of the market and Lasttix appeared to have suffered no ongoing commercial damage; 

• the extent of the conduct was relatively limited considering the large number of events for which Ticketek sold tickets; 

• there was no evidence that Ticketek had engaged in similar conduct previously; 

• there had been no adverse effects on the functioning of the market; and 

• Ticketek had cooperated fully with the ACCC in its investigation and litigation. 

In making the orders, Justice Bennett stated:[6]

The four incidents comprising the conduct were not accidental. They each arose due to a deliberate decision and, apparently, reflected a policy or practice not limited geographically within Australia. The conduct was engaged in both by lower level employees and by more senior management. There is no dispute that certain senior management within Ticketek were aware of the conduct. This is particularly relevant to the questions of specific deterrence.

Since 1 January 2007, the maximum penalties for anti-competitive conduct, including contraventions of s 46 of the CCA, have been the higher of:

• $10 million; or 

• three times the gain from the illegal conduct; or 

• 10% of the offender’s annual turnover (if the gain cannot be calculated). 

Seen in this light, the civil pecuniary penalties are well and truly at the lowest end of the scale.

Furthermore, a consideration of Ticketek’s likely annual revenue shows that the agreed penalties were much lower than they should have been. Although Ticketek’s annual turnover was not made public during the hearing as Ticketek claimed that such information was confidential, its annual revenues were disclosed in 2007 when the organisation was still part of Publishing and Broadcasting Limited.[7] In 2007, Ticketek’s annual revenue was reported to be $105 million. Based on this figure, one can safely assume that even the total civil pecuniary penalty of $2.5 million does not represent anywhere near 10% of Ticketek’s current annual revenues. Rather the number is likely to represent less than 2.5% of Ticketek’s current annual revenue, even assuming it had experienced no revenue growth since 2007.

The Ticketek penalty also stands in stark contrast to the civil pecuniary penalties imposed against Cabcharge Ltd (Cabcharge) in September 2010. In that case, Cabcharge was fined $9 million for a post 1 January 2007 contravention of s 46, $2 million for a pre-2007 contravention of s 46 and $3 million for a pre-2007 contravention of s 47.[8] The $9 million penalty was derived by working out 10% of Cabcharge’s total annual revenue (or $12 million on total revenue of approximately $120 million) and then imposing a penalty equivalent to 75% of that maximum to reflect the relative seriousness of the conduct.

Indeed, following this case the then Chairman of the ACCC, Graeme Samuel said:[9]

The decision reflects the determination by the ACCC to seek significantly higher penalties for breaches of the competition provisions of the Trade Practices Act under the higher penalty regime that applies to post 2007 contraventions.

It is disappointing that the ACCC did not follow through by seeking larger penalties in the Ticketek case. It is also disappointing that the Federal Court did not reject the proposed pecuniary penalties as being manifestly inadequate and set its own penalty amount.

ACCC’s record on section 46 cases

The ACCC has been more successful in winning s 46 cases than is generally thought. The popular view is that the ACCC rarely wins such cases. This view has been given considerable credence by comments made by the ACCC, for example the following statements made by former ACCC Chairman Graeme Samuel in 2010:[10]

The tests involved in proving allegations of abuse of market power have been inconsistently interpreted in the courts over recent years. As a consequence, it has become unrealistically difficult to overcome the hurdles necessary to prove contraventions of the law – resulting in few successful cases.

This sentiment has also been echoed more recently by the current Chairman of the ACCC, Rod Sims:[11]

Further, over the years only a handful of cases under section 46 have succeeded in court. Indeed, section 46 cases are always hard fought, as major companies are necessarily involved, and they are usually defending what they may see as a key par of their business strategy.

The guidance to be derived from case law – at least in successful cases – is relatively modest.

So, the ACCC finds itself in the middle, with high public expectations on one side and high legal standards and few successful cases on the other.

However, in reality the ACCC has won more than 70% of the s 46 cases which it litigated to a conclusion:

ACCC and TPC Section 46 cases – 1974 to 2012

Since the introduction of s 46 in 1974, the ACCC, and its predecessor the TPC, has instituted 18 cases alleging a contravention of s 46. Of these 18 cases, the ACCC:

• achieved successful outcomes in 11;

• lost four, 

• dropped the market power allegation in one case,

• effectively drew one case and 
• 
  
• is awaiting judgment in the final case.

The ACCC has won 11 of the 15 s 46 cases which have gone to a final decision, a success rate of 73%. Further, the ACCC has resolved 8 of its 11 successful cases by consent, which would suggest that the ACCC is very good at “picking winners”.

Conclusions

The real issue in relation to s 46 is not that the ACCC regularly loses such cases (which is not borne out by the numbers), but rather that it simply does not take enough s 46 cases. In the 38 years since s 46 was enacted, the ACCC (and the TPC before it) only commenced 18 cases which alleged a contravention of s 46, or only one s 46 case every two years. The ACCC should be much more active in investigating and litigating s 46 allegations - only by taking such cases will the law in relation to s 46 be clarified.

In this regard, the comments of the current ACCC Chairman, Rod Sims, soon after he took up his position, are welcomed:[12]

The ACCC now believes that it is time to resolve the unanswered questions surrounding section 46. Recent amendments to the Act and likely future court actions are providing guidance on how to successfully prosecute companies that misuse their market power.

However, the ACCC must also make sure that when it does come across a promising s 46 case that it does not sell the case short by settling the case for an insignificant penalty. Parliament’s decision to amend s 76 of CCA to introduce vastly increased penalties from 1 January 2007 for anti-competitive conduct should have made it abundantly clear to both the ACCC and the Federal Court that Parliament expects such conduct to be punished much more severely than it has in the past. Unfortunately, the size of the penalty in the Ticketek case is quite out of step with Parliament’s intent – namely, to get serious about punishing anti-competitive conduct.

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[1] Ticketek Pty penalised $2.5 million for misusing market power, ACCC news release, dated 22 December 2011 - http://www.accc.gov.au/content/index.phtml/itemId/1023878/fromItemId/2332

[2] ACCC v Ticketek Pty Ltd [2011] FCA 1489 - http://www.austlii.edu.au/au/cases/cth/FCA/2011/1489.html

[3] Ibid., Agreed Statement of Facts, para. 59.

[4] Ibid., para. 68.

[5] Ibid., para. 29-58.

[6] Ibid, Judgment, para. 42.

[7] Concise Annual Report 2007 , Publishing and Broadcasting Limited - http://newcms.crown.roadhouse.com.au/Assets/Files/PBL%20ANNUAL%20CONCISE%20REPORT%202007.pdf

[8] Cabcharge penalised for misuse of market power, ACCC news alert, dated 24 September 2010 - http://www.accc.gov.au/content/index.phtml/itemId/948779/fromItemId/927069

[9] Ibid.

[10] Delivering for Australian consumers: making a good Act better, Speech to the National Press Club of Australia, 25 June 2008, p. 3 - http://www.accc.gov.au/content/item.phtml?itemId=833067&nodeId=34ec17ef9b3c69fc153b357156c9d6e0&fn=Delivering%20for%20Australian%20consumers:%20making

[11] Some compliance and enforcement issues, Speech to the Law Institute of Victoria Breakfast Series, 25 October 2011, p. 4 - http://www.accc.gov.au/content/item.phtml?itemId=1014098&nodeId=19e390ff37e28f4162412d52635be1a4&fn=Some%20compliance%20and%20enforcement%20issues.pdf

[12] ACCC Chairman to pursue misuse of market power, ACCC news release, dated 25 October 2011 - http://www.accc.gov.au/content/index.phtml/itemId/1014108