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:
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.
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.
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.
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.
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:
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.
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.
[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
[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
[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
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