Thursday, 12 September 2019

Australian Business Law Review Vol 47 Pt 3

Volume 47, Part 3 of the ABLR has just come out. Four excellent articles and a timely section note: * Utmost Good Faith and Accountability in the Spotlight of the Banking Royal Commission – Time to Revisit the Scope, Applicability and Enforcement of the Duty by Julie-Anne Tarr, Jeanette Van Akkeren, Amanda-Jane George and Sue Taylor * Blowing the Whistle: A Critical Analysis of the Treasury Laws Amendment (Enhancing Whistleblowing Protections) Act (Cth) 2019 by David A Chaikin * A Game-changer or a Routine Drill? Cooperation in the Indo-Pacific Securities Markets by Sonia Khosa * The “National Interest” and Australian Agriculture by Leopold Oscar Bailey * Australian Competition and Consumer Commission v Pacific National Pty Ltd (No 2) [2019] FCA 669: Access Undertaking Derails ACCC Case Under S 50 by Brent Fisse

Medibank in court for alleged misrepresentations to members about benefits

I wonder how big a penalty the ACCC is hoping to get out of Medibank Private given they self-reported the conduct and are in the process of compensating affected members. Having said that the absence of fighting words from Medibank Private in the media may suggest that a deal has already been done and a penalty figure provisionally agreed. One concerning aspect is the significant commentary about the case by the ACCC. It all comes back to the issue of sub judice contempt - government regulators should not be holding press conferences to discuss the factual and legal issues to be determined in the case. It is frustrating to see the ACCC continually doing this. I wonder when a presiding judge is going to pull the ACCC up on this issue?

Travel sickness: Consumers overpay millions on foreign money, says ACCC

I think the ACCC may have missed the boat on this one. A few years ago, the banks started effectively closing down most of the small ethnically based FX dealers. It was common in many ethnic communities for there to have been between 10 - 20 FX brokers running their businesses at very low margins. They saw the provision of FX services as more of a community service rather than a money making venture.
The banks started closing down these operations under the guise of anti-money laundering and anti-terrorism laws. I recall that virtually all Nepalese FX dealers in Australia had to close down because the banks refused to deal with them. It was particularly problematic as Nepal was at that time trying to rebuild after the Gorkha earthquake. I was also puzzled by this as I have never associated Nepal with global terrorism! Having said that, maybe it isn't too late for the ACCC to go back and investigate the conduct of the big banks under section 46 the misuse of market power provisions.

'Walk away': ACCC finds franchisors failing to outline rent, wages

I've been thinking about the legal position of the former franchisee if a prospective franchisee approaches them to ask for what could be considered business and financial advice about a franchise system. Could the former franchisee be liable for their advice, even if given gratuitously? I think that is a definite possibility, which then raises the question of whether former franchisees should refuse to provide any assistance unless they get some form of waiver from the prospective franchisee. I am also wondering whether the ACCC is effectively encouraging franchisors to transfer risk from themselves to former franchisees. The ACCC needs to think through these legal issues before encouraging prospective franchisees to approach former franchisees for business advice.

Global shipping company Wallenius Wilhelmsen charged with criminal cartel conduct

Another shipping company has been charged over the alleged ro-ro cartel - Wallenius Wilhelmsen. Interesting to see if they decide to fight the case or settle. The main thing to avoid is that bizarre half way house between an immediate guilty plea and a fight to the end which inevitably results in a low cooperation discount and a very high criminal fine. Given that two companies have already tapped the mat on this cartel , you would think that a guilty plea is likely.

New watchdog, bigger fines floated for $182b franchise sector

Big changes ahead for the franchising sector, including potentially a new "single body to manage franchising disputes through mediation or mandatory arbitration which could be funded through a levy paid by the franchisors". I think that is a good idea, particularly as I suggested that idea in my own submission to the Franchising Enquiry (although admittedly I was not the only one to make that suggestion!)

'Begging for chairs': Grant competition reveals schools' funding struggle

I'm getting very tired of the SMH's cynical scare campaign against non-government schools in relation to capital funding. Their reporting is so far from the truth its not funny. The reality is that about 90% of capital funding for independent schools comes from fees, donations and loans - governments only contribute 10% of total capital funds - see In 2017, the total capital expenditure by independent schools was $1.98 billion of which $1.78 billion came from fees, donations an loans. In other words, government contributed about $200 million in capital funding to independent schools. By contrast governments paid $2 billion in capital funding to government schools in 2016-2017 financial year - There is inequity but it is the other way around - independent schools educate 35% of all students in Australia (41% of secondary school students) but receive 1/10th of the government funding for capital works!

$2.3M penalty for fake Indigenous Australian art

I recently had a look at the penalty decision in the Birubi Art case. While Birubi Art Pty Ltd was in liquidation and will not pay one cent of the $2.3 million penalty, the penalty figure arrived at was an absolute nonsense. Birubi's turnover in the 2018 financial year was measly $223,976 (para 95). That means the penalty imposed in the case was 10 times Birubi's annual turnover! Cases like this do not help anybody, particularly legal practitioners, in trying to make sense of the appropriate penalties which should be imposed in Australian Consumer Law matters.

No wagyu for you: ASIC loses landmark case against Westpac

This has to go down as one of the most embarrassing court losses by an Australian regulator. ASIC and Westpac go to the Federal Court with a done deal - Westpac admits to breaches of the responsible lending laws and agrees to pay a penalty of $35 million. Justice Perram throws out the settlement because the agreed facts were not specific enough. He asks two fairly pertinent questions - (1) How did Westpac break the law? and (2) How many times did Westpac break the law? It appears that ASIC could not answer either of these questions to Justice Perram's satisfaction. ASIC is then forced to run the case and loses the case. Not too sure who should be more embarrassed - ASIC or the lawyers who advised Westpac to settle the case in the first place. Regardless of the above, ASIC should appeal. Not too sure Federal Court judges should be rejecting settlements and appointing an amicus curiae to act as a contradictor.

Lacoste, Converse and Lululemon: Taxpayers fund ACCC's wellness shop

What's wrong with a few perks? I remember picking up a few perks while I was at the ACCC:
* a trip on a luxury fishing cruiser with an open bar (in order to get in behind the angry mob manning the picket lines during the Waterfront dispute),
* a helicopter ride with Chris Corrigan (in order to avoid getting beaten up by the same angry mob manning the picket lines during the Waterfront dispute),
* $100 of petty cash to buy beers (in the course of an investigation into an alleged beer price fixing arrangement between a number of gay bar operators in Sydney),
* a trip to an ice cream factory (in the middle of Winter in Adelaide to learn more about the cold storage industry),
* another $50 for beers and meal at an RSL Club (as I tried to eavesdrop on an alleged cartel meeting between participants in the scrap metal industry), and
* getting to drive around in a brand new Tarago for a few days (for the purposes of taking my team out to Caltex Banksmeadow Refinery to execute a s155(2) notice (effectively a search warrant) in relation to the ACCC's ill-fated petrol price fixing case).

K-Line convicted of criminal cartel conduct and fined $34.5 million

The penalty judgment in the K-Line criminal cartel case has come down. K-Line was fined $34.5 million after receiving a discount of 28%. It seems that the discount would have been substantially higher had K-Line provided a higher level of cooperation and not fought the matter through the committal stage . Given that NYK received a 50% discount for cooperating at the earliest opportunity, it looks like K-Line's decision not to provide a high level of cooperation and to fight the committal may have cost it an additional $10.5 million in penalties.

SME Committee 2019 Annual Conference

The SME Committee of the Law Council of Australia Business Law Section, in partnership with the Law Institute of Victoria, welcomes you to attend the annual SME Conference on 11 October 2019 in Melbourne.
It is promising to be a great event with lots of fantastic speakers including Professor Allan Fels and Kate Carnell. Click on this link for more information

ACCC Independent Reviews and Audits

If you are looking for a compliance professional to conduct a professional and cost effective ACCC Independent Review drop me a line. I have been conducting ACCC Independent Compliance Program Reviews for over 10 years. My clients have included Airbnb, ALDI Stores, Aveling Homes, Dell Computers, InvoCare Limited, LG Electronics, Ozsale, Thermomix and Wilson Security. I also have experience as an ACCC approved independent auditor in relation to: * the Takata Airbag Recall; and * asset divestitures under section 50 of the Competition and Consumer Act 2010 (Bingo - Dial-A-Dump merger)

Samsung in court for misleading phone water resistance advertisements

Samsung has been taken to court by the ACCC for allegedly falsely claiming that their Galaxy phones were water resistant. There is little doubt that if the ACCC are successful in establishing liability in this case they will be going for a huge penalty. Most likely the ACCC will make a play for the 10% of turnover penalty which could be a very big number, given that Samsung Australia generated an annual turnover of $2.67 billion in 2018. Could this be the first multi-million dollar penalty under the Australian Consumer Law?

Special Children's Christmas Party

Happy to be supporting the Special Children's Christmas Party again in 2019. We first started supporting this event eight years ago, in 2011.

Australian Business Law Review Vol 47 Pt 2

Volume 47, Part 2 of the ABLR has just come out. A bunch of excellent articles and section notes: • Selling Printed Goods or Facilitating Printing Gigs: The Redbubble Puzzle – David J Brennan • The 2018 Review of the Franchising Code of Conduct: Epicentre of a Year of Scrutiny for Australian Franchising – Jenny Buchan • Confessions of an Earnest Regulator – Michael T Schaper • Harper Report Implementation Breakdown: Repeal of Section 51(3) of Competition and Consumer Act 2010 (Cth) and Lack of Proposed Supply/Acquisition Agreement Cartel Exception – Brent Fisse • The Privileges against Self-incrimination and Self-exposure to Penalties in Commercial Litigation: Sadie Ville v Deloitte – Michael Legg and Stephanie Crosbie I suspect folk at the ACCC will be particularly interested in and entertained by the third article "Confessions of an Earnest Regulator" by the former Deputy Chair and Small Business Commissioner of the ACCC, Dr Michael Schaper.

Construction union trio snared in Sydney cocaine bust

While the alleged conduct of the three CFMMEU officials is very serious, of further concern is the Commonwealth Attorney General weighing in with sub judice comments about a pending criminal case for the purpose of scoring some political points. This conduct is entirely inappropriate and ill befitting the role of the Commonwealth's First Law Officer.