Friday, 31 May 2019

Final wash up?

Appeal in laundry detergent cartel case unsuccessful No surprises here - the ACCC's evidence was very weak to begin with and compounded by their very strange decision not to cross-examine Professor George Hay, the other side's economic expert, at trial:
401. The Commission submitted, in effect, that the Court should prefer the opinions of Professor Williams. It expressly or implicitly criticised aspects of Professor Hay’s analysis and his opinions. In those circumstances it was somewhat unusual, if not unhelpful, that the Commission elected not to cross-examine Professor Hay.

Time for the ACCC to walk away from this one and forget about an appeal to the High Court.

Big penalty on the way

Kogan in Court for alleged false or misleading discount advertisements If the ACCC's allegations about Kogan, as set out in the ACCC's Media Release, are made out in Court, Kogan could be up for a sizeable penalty. I see the spectre of either a three times the benefit or 10% of annual turnover penalty being imposed.

Overstepping the mark

Court dismisses ACCC proceedings opposing rail freight consolidation I think the Court overstepped the mark in this case. A Court should not simply accept behavioural undertakings from a party in order to allow a merger through, particularly one which the Court acknowledged was going to substantially lessen competition. There is a process of putting the specific details of any undertaking, behavioural or structural, to the market for comment to determine whether the undertaking will work in practice. That didn't happen here. On this point alone, I think the ACCC's prospects on appeal are mighty strong.

Deckers Outdoor Corporation v Australian Leather Pty Ltd

Deckers Lands $450,000 Victory Against "Tiny" Rival in "Ugg" Boots Case Good article but not entirely correct - another outstanding issue is whether the original owner of the ugg "trademark" (Brian Smith) improperly used the registered trademark symbol on his products for almost 10 years prior to obtaining the trademark registration. If we succeed on that issue, Deckers may lose the ability to enforce its trademark.

Deckers Outdoor Corporation v Australian Leather Pty Ltd

Australian ugg boots lose trademark fight against US giant We went down in the jury part of our trial in the US. The jury ordered statutory damages of $US450,000 for $US2000 worth of ugg boots sold in the US! Still waiting for the judge's decision in relation to our application to have Decker's US Ugg trademark declared unenforceable.

Gutsy call

Competition regulator blocks Vodafone and TPG Telecom merger

Gutsy call by the ACCC - let's see if they are prepared for the inevitable litigation!

I can't see that the ACCC are going to have many industry witnesses to put before the court to say that the TPG - Vodafone merger is going to substantially lessen competition. Neither Telstra or Optus are likely to be fronting up as the ACCC's star witnesses.

Maybe the ACCC is relying on some smoking gun documents from TPG and Vodafone which proves that the merger parties believed that the merger will substantially  lessen competition. Having said that, it would be pretty unusual for companies to write that sort of stuff down, but you never know.

Deckers Outdoor Corporation v Australian Leather Pty Ltd

Our trial in the ugg boot case started on 5 May 2019 in the US District Court in Chicago.

ABC story about the case\

Australian Ugg boot manufacturer in legal fight with American footwear company

Current work - Independent Auditor for the divestment of the Bingo waste processing plant in Banksmeadow

Appointed as the Independent Auditor for the divestment of the Bingo waste processing plant in Banksmeadow

Bingo Industries

Recent work - Thermomix

Completed the first independent compliance program review for Thermomix

Thermomix in Australia. Creating Everyday Surprises<sup>®</sup>

Australian Business Law Review Vol 47 Pt 1

Volume 47, Part 1 of the ABLR has just come out. Very exciting for me as it is my first edition as the new General Editor of the ABLR. There are three excellent articles and an excellent Section Note: Cartel Conduct or Permissible Joint Venture? by Ian Wylie The Origins and Evolution of the Statutory Duties of Trade Union Officers by Ian Ramsay and Miranda Webster Chains, Coins and Contract Law: The Validity and Enforceability of Smart Contracts by Buwaneka Arachchi Should Penalties Under the Competition and Consumer Act Be Increased? by Luke Woodward All well worth a read!

Horses for courses

APRA releases new Enforcement Approach

I'm a bit surprised that APRA asked Deputy Chair John Lonsdale to do an Enforcement Review of APRA. Looking at his CV, it is pretty clear that he has absolutely no prior enforcement experience. "Prior to joining APRA, John worked for the Australian Treasury. He was a member of Treasury’s Executive Committee and held the position of Deputy Secretary, Markets Group at Treasury. In this role John had responsibility for financial system, consumer and foreign investment policy. In 2014 he led the Secretariat to the Financial System Inquiry, based in Sydney. John had been with the Treasury since 1986 and worked across key areas in the Department including Budget policy, tax policy, retirement incomes and the financial system. In 2008 and 2009 he worked as the Chief Advisor in the Secretariat supporting Australia’s Future Tax System Review, a major review of Australia’s tax and transfer systems."

ACCC and FBI sign inter-agency cooperation agreement

Excellent to hear that the ACCC will be seeking to learn from the best when it comes to criminal cartel investigations.

The FBI has been doing these types of investigations for the Antitrust Division of the US Department of Justice many years and very few of their cases fall over due to mistakes in the investigatory process.

Sub judice contempt

Charges laid against alleged forex price fixing cartel Very disappointing that the ACCC decided to put out such an opinionated media release in relation to this criminal prosecution. It is simply inappropriate for a regulator to make the following comments about a pending criminal matter: “This alleged behaviour is extremely serious and relates to over two thirds of all the number of money transfer transactions, and almost a quarter of the amount of money transferred, from Australia to Vietnam during the relevant period,” ACCC Chair Rod Sims said. “Price fixing involves competitors agreeing on a price rather than competing fairly against one another. Such cartel behaviour cheats consumers, and does damage to other businesses and the economy as a whole,” Mr Sims said. “Most businesses in Australia compete fairly and earn their profits honestly, as they are required to do under the Competition and Consumer Act. If businesses behave anti-competitively, others, including consumers, have to bear the cost of their illegal profits.” Looks like sub judice contempt to me!

Nothing to brag about

Corporate regulator ASIC prosecuted more than 200 small businesses in second half of 2018 This is probably a number I wouldn't be bragging about if I was the head of ASIC. What annoys me about these type of cases is when regulators like ASIC complain that they are out-resourced in litigation against large companies, such as major banks, and need more money whilst at the same time throwing hundreds of thousands of dollars at small businesses who in most cases don't have the resources to fight back. The small business is usually forced to give up due to these financial pressures even in circumstances where they may have had a valid defence. In addition, it seems to me that 50 of these "small business cases" would be worth one big business case against a major bank in terms of achieving what should be the goal of every regulator - achieving general deterrence.

Getting a bonus for underperformance?

Australia budget lifts funding for financial regulators What incentive do ASIC and APRA have to do a better job when they keep getting more money precisely because they are doing a poor job - $400 million more for ASIC and $150 million more for APRA. ...and what incentive does the ACCC have to keep doing such a great job when it ends up with absolutely no funding increase in the budget!

Allan Fels

Allan Fels lends his skills to fighting the exploitation of workers Great article about a great man.

Kicking goals

ACCC Global Competition Agency Of The Year Pretty impressive achievement by the ACCC. These types of awards are generally dominated by US and European competition agencies. I think the ACCC would have probably also won the Global Consumer Law Agency Of The Year if there was such an award, as they have been very strong in that area as well.

New Mergers Commissioner

Stephen Ridgeway set to become new ACCC Mergers Commissioner I saw a news article in The Australian speculating that Stephen Ridgeway is likely to be appointed as the next ACCC Mergers Commissioner with Roger Featherston's retirement. If that speculation is right, it will be a great appointment! He knows his stuff and will be good to deal with - firm but fair. The article also described Stephen as a veteran lawyer, which sounds particularly harsh - he's not that old!

Keeping a straight face

Samuel: Cultural change must come from the top Definitely a candidate for most ironic article of the year!

Why Kenneth Hayne got it wrong on loan brokers

Excellent article focusing in the competitive detriments of banning mortgage broker commissions - ie they will hinder the ability of smaller lenders to sell their loans. NB I am not entirely impartial on this issue as I sit on the MFAA's Disciplinary Tribunal.

The operation and effectiveness of the Franchising Code of Conduct

The final report of the Parliamentary Joint Committee on Corporations and Financial Services had just been released. 

 While I have only flicked through the report, it is looking like the biggest ever shakeup for the franchising industry. By my count, there are 71 recommendations, with many of these recommendations proposing very substantial changes. 

 My personal submission was mentioned once in the report in relation to allegations of some franchisors seeking to set retail franchisee margins (p98).

Pay party clauses

‘They’re gouging hotel owners’: Labor to outlaw pay parity clauses to challenge Expedia, duopoly Labor has announced another competition and consumer policy - namely a commitment to "outlaw" target pay parity clauses amongst online travel agents. Labor has been very active announcing a number of proposed policies in the competition and consumer area. On the other hand, as as far as I can tell, the Coalition hasn't announced any policies in this area.

Thursday, 30 May 2019

Australian Business Law Review (ABLR)

ABLR Volume 46 Part 6 has just come out featuring three excellent articles: "Commercial Imperatives and Public Benefit: Recognising Commercial Purposes as Charitable Purposes" by Derwent Coshott "Moving Beyond Murry – From Attraction of Custom to Everything that Adds Value" by Tyrone M Carlin '“Knowledge” and Pre-contract Disclosure under the Insurance Contracts Act' by Julie-Anne Tarr Well worth a read!


Mergers slowed by regulation hurdles Not too sure if we should be blaming the regulators entirely for blocking more mergers. I think a share of the blame has to fall on the lawyers who advise their clients that they can get mergers through which are simply no-brainers. I advised a former client a few years back that they would have no chancein getting a particular merger through the ACCC. They decided to pursue the merger anyway with a different law firm. The deal was ultimately rejected by the regulator after a prolonged and no doubt very expensive merger investigation. Lawyers have to learn to say "no" to their least some of the time!

ACCC's 2019 Priorities

ACCC 2019 focus on consumer guarantees and anti-competitive practices ACCC has released its 2019 enforcement priorities. Some interesting additions including: • opaque and complex pricing of essential services, in particular those in energy and telecommunications • collection and use of consumer data by digital platforms • customer loyalty schemes and • advertising and subscription service practices on social media platforms

No alternative text description for this image

Puffery pastry

Retail Food Group breached consumer law in $400,000-plus franchise bungle, Court finds Important case in relation to the obligations of franchisors to franchisees, particularly the representations about likely future financial performance. Still scratching my head at RFG's claim that its pre-contractual representations, including those about likely future financial performance, were mere puffery. It's almost likely saying no reasonable person could believe anything which RFG says about the likely performance of its stores, particularly Michel's Patisserie stores!

Living on the moon

Private dinner between Deloitte, EY, KPMG and PwC chiefs in spotlight I was a bit surprised by the statement attributed to Geoff Carter of Minter Ellison in the following article about the ACCC's investigation of the Big 4 in relation to alleged cartel conduct: "In my experience, it would be an incredibly unusual outcome for people of that seniority to engage in conduct which they would clearly understand would be inappropriate...." Maybe Geoff hasn't been following the Banking Royal Commission very closely.

ASIC shell games

ASIC shells out over $100,000 on ‘new’ logo — but we can barely see the difference

Sometimes I think ASIC is it's own worst enemy - spending $100,000 to change the font on its logo - seriously!

ACCC investigating outdoor advertising companies

It has been reported that the ACCC is investigating alleged exclusive dealing conduct (rebates) in the outdoor advertising industry. Needless to say, it is very strange for the ACCC to clear a couple of major mergers in an industry and then almost immediately commence an investigation into alleged exclusive dealing in that industry.
If the ACCC had been aware of the alleged rebates when they cleared the mergers, they must have concluded that these agreements did not substantially lessen competition. So why the investigation? However, on looking at the Statement of Issues re the APN Outdoors - oOh!media merger and the media releases in the subsequent Adshel and JCDecaux matters there is no reference to the payment of rebates. It may be that the ACCC was unaware of the alleged payment of rebates in the outdoor advertising industry when it cleared the earlier mergers.

Deloitte, EY, KPMG, PwC probed by ACCC over cartel conduct

One aspect I found amusing was the following comment attributed to PwC:
"Late last year, we received an information request from the ACCC and we have been working with the regulator since that time." "Working with" must go down as one of the greatest euphemisms of all time - companies don't "work with" the ACCC in relation to a potential criminal cartel investigation.

Optus penalised $10 million for misleading customers over digital purchases

$10 million sounds like a pretty significant penalty until you read further down in the ACCC's media release where it states: "Optus earned about $65.8 million in commissions for products sold through the DCB service, which launched in 2012. Its customers were charged about $195 million for the content." Optus has also paid $8 million in refunds to consumers, so it sounds to me that Optus is still $47.8 million ahead! I'm not too sure that this penalty achieves either specific or general deterrence.

Ultra Tune to pay $2.6 million penalty

While the full judgment is not out yet, it promises to be a very interesting read given these comments by Justice Bromwich, quoted in the ACCC Media Release: “The cover up that Ultra Tune attempted reflects a significantly heightened need for deterrence, in relation to conduct that was already a most serious and fundamental breach of the Franchising Code in taking the deposit in the first place, reflecting as it does Ultra Tune’s attitude in relation to its contravening conduct,” Justice Bromwich said. “There must be no tolerance for manufacturing evidence to deceive a regulator, and even less when the deception is maintained in this Court.” Justice Bromwich also ordered Ultra Tune to pay the ACCC's costs on an indemnity costs.

ACCC cartel investigations boosted with $35 million in new funding

I like the way Josh Frydenberg referred to the $35 million of new funding for the ACCC to fight cartels as an "investment". He clearly knows that he will be getting his $35 million "investment" back pretty quickly, if the record $46 million penalty imposed on Yakazi Corporation earlier in the year is any guide.

Competition and Consumer Protection Law Blog

Pretty happy that my "Competition and Consumer Protection Law" Blog has just hit 175,000 all-time page views at around 1500 page views a month. On the other hand, I still only have one loyal follower after running my blog for 10 years (and no, it's not my mum!)

No alternative text description for this image

Changes afoot in Franchise Mediation

Mediation under the Franchising, Horticulture and Oil Codes has been moved to the Department of Jobs and Small Business, with support from the Australian Small Business and Family Enterprise Ombudsman "New contact details for the franchising Mediation Adviser Dear Michael, We would like to provide you with information about changes to the Mediation Adviser under the Franchising Code (the Code). The Mediation Adviser is now the responsibility of the Department of Jobs and Small Business, with support from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO). The franchising Mediation Adviser is appointed under the Code and can assist in the resolution of franchising disputes by appointing a suitable mediator including where the parties cannot agree on what mediator to use. You can contact the Mediation Adviser on 1300 650 460 or by visiting the ASBFEO website. Visit the ACCC website for more information on resolving franchising disputes. Kind regards, Small Business team Australian Competition and Consumer Commission (ACCC)"

ACCC takes action against NSW Ports

This looks like both a fascinating and pretty gutsy case for the ACCC to be pursing. The ACCC has alleged that NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd entered into agreements with the State of New South Wales to prevent the Port of Newcastle from developing a container terminal. One interesting aspect of the case (in addition to likely claims of sovereign immunity), is that it was the NSW Government which had to pay the compensation if the Port of Newcastle set up a competing container terminal. The ACCC has also sought an injunction to restrain the operators of Port Botany and Port Kembla from seeking compensation from the NSW Government under these provisions. Therefore, if the Botany and Kembla Port Commitment Deeds are declared illegal three things seem likely to follow (1) the Port of Newcastle can set up a container terminal, (2) the NSW Government avoids having to pay any compensation and (3) the NSW Government gets to keep all the cash it raised from privatising the ports.

Pet hate - "vigorously defend" the proceedings.

Why do companies always say that they are intending to vigorously defend proceedings when they get taken to court by a regulator? Firstly, what exactly is the word "vigorously" intended to add to the description of the company's intent to fight the case? Is it used to distinguish the company's defence strategy from other possible litigation strategies such as an intention to "lethargically", "feebly" or even "apathetically" defend the proceedings? Secondly, what sort of message does the statement by a company that it will be "vigorously defending the proceedings" send to its shareholders. Do shareholders interpret such as statement as meaning that the company is confident that the regulator is entirely mistaken about the alleged contravention and that by stating that they will be vigorously defending the case, the regulator will simply skulk away with its tail between its legs? Or does such a statement suggest to shareholders that management have stuffed up, exposed the company to significant regulatory penalties and are now proposing to burn hundreds of thousands of shareholder funds fighting a case which everybody knows the company will most likely be trying to settle in 12 to 18 months time anyway?