ACCC Essentials – understanding the Australian Competition and Consumer Commission’s 2022-23 Compliance and Enforcement Priorities

Introduction

It is vitally important for all Australian businesses to have a thorough understanding of the way in which the ACCC prioritises its enforcement activities, given the highly interventionist and aggressive approach which the ACCC takes to both competition law and consumer protection matters.  Indeed, the ACCC is one of the most aggressive enforcers of competition and consumer laws in the world.

Moreover, the penalties which can and are being awarded to breaches of both the competition and consumer laws have risen exponentially in the last few years with two penalties now in excess of $100 million, with many more $100 million plus penalties likely in the next few years.

It is also important to recognise the formidable reputation which the ACCC has amongst consumers as an active and effective regulator. One of the implications of the ACCC’s strong enforcement reputation is that any business pursued by the ACCC is usually judged very harshly by the Australian public, the media and their customers.  As a result, businesses which become the subject of an ACCC investigation or legal proceedings often suffer significant and long-lasting reputational and brand damage.

This paper will outline the Australian Competition and Consumer Commission’s (ACCC) approach to enforcement and identify the key enforcement and compliance priorities for 2022-23 (see link here).

Why does the ACCC have priorities?

The main reason for having priorities is that it provides greater transparency in the way the ACCC will be using its resources. However, there are also important practical reasons for having priorities.

As explained by the ACCC in its most recent Annual Report (see link here) it received 396,190 contacts in the 2020-2021 financial year. The following table shows a breakdown of how those contacts and complaints were processed by the ACCC:

 

ACCC and AER Annual Report 2020-21, page 105

 As is apparent, there is no way that the ACCC could pursue all of these 396,190 contacts. Rather, the only way the ACCC could pursue any of the complaints effectively is by establishing clear and specific enforcement priorities.

While the ACCC received 396,190 contacts last year it determined that only 254 of those complaints merited further assessment. Of those 254 matters the ACCC commenced initial investigations into 157 of those complaints. An initial investigation generally involves the ACCC writing a letter to the business which has been complained about, to ask for an explanation of their conduct.

The next step is an in-depth investigation which involves a much smaller subset of the total complaints – only 68 in 2020-2021. These are investigations which the ACCC Commissioners have determined are important and need to be pursued in more depth.  These investigations have usually been allocated an initial investigatory and/or legal budget and often result in litigation or another formal resolution.

The ACCC listed 15 new litigation matters in its 2020-2021 Annual Report. However, if one considers all formal resolutions, such as section 87B undertakings and infringement notices, the total number of new litigation and formal resolutions each year rises to about 50. For example, 49 formal resolutions in the 2020-2021 period, comprising of 15 news cases, 14 section 87B undertakings and 20 infringement notices.

What are the ACCC’s 2022-23 Enforcement and Compliance Priorities?

On 3 March 2022, Chairman Rod Sims released the ACCC’s Compliance and Enforcement Priorities for 2022-23 (Priorities) (see link to Rod’s speech here).  In a change from previous years the ACCC has decided to align its Priorities with the ACCC’s Financial Year which makes more sense, as it will be easier for the ACCC to report in its Annual Report on its performance in pursuing the areas outlined in its Priorities.  One practical consequence of this change is that the current 2022-23 Priorities will be in effect for closer to 18 months rather than the usual 12 months.

There is a lot more to understanding the Priorities than simply checking to see if you industry or even more concerningly your business is included in the ACCC’s Hit List.  Rather the  priorities must be considered as a whole, as the ACCC takes a multifaceted approach to selecting the matters which it will pursue.

First, the ACCC will consider the overall goals of their legislation when deciding what matters to pursue. Second, it will consider the outcomes which it is likely to achieve by pursuing a particular enforcement matter and the type of conduct which the relevant business is engaging in.  Finally, the ACCC will determine whether the conduct falls into the specific ACCC Priorities or “Hit List”.

The ACCC’s enforcement activity is directed to achieving the following three main goals:

·             promoting competition amongst businesses

·             promoting fair trading by business

·             protecting consumers in their dealings with business.

These goals reflect both the competition and consumer law functions of the ACCC, which is to fix market failure and to ensure that consumers have as near to perfect information as possible, so they can make rational purchasing decisions.

Moreover,  he ACCC will generally not pursue any enforcement matter unless it is confident that:

 

(1)   it can achieve meaningful remedies; and

 

(2)   the conduct is of a type which has caused or may cause significant consumer detriment, including detriment to small business consumers.

There are many cases where the ACCC could achieve a meaningful outcome but decides not to pursue the matter because the complainant has the resources and motivation to achieve the same outcomes through private action.  Similarly, there are many matters that involve particularly egregious conduct, which the ACCC will not pursue because it will not be able to achieve worthwhile outcomes, for example in relation to some phoenix activity.

As stated by the ACCC, before pursuing a matter included on the ACCC’s Hit List it will weigh up the following issues – namely whether:

• the conduct is of significant public interest or concern
• the conduct at results in substantial consumer or small business detriment
• it involves national conduct by large traders, recognising the potential for greater consumer detriment and the likelihood that conduct of large traders can influence other market participants
• the conduct involved a significant new or emerging market issue or where its action is likely to have an educative or deterrent effect
• where action will assist to clarify aspects of the law, especially newer provisions of the Act.

ACCC’s 2022-23 Hit-List

The ACCC’s Hit List identifies the areas where the ACCC will be focusing a large part of its enforcement resources in the coming 12 or in this case 18 months.  The reasons why the ACCC has selected these particular areas is explained by the ACCC Chairman at the launch of the ACCC Priorities which occurs as the annual CEDA Committee for Economic Development Australia address.

The 2022-23 “Hit List” is as follows:

 

The first listed Priority for 2022-2023 is consumer and fair trading issues in relation to environmental claims and sustainability.  This issue has been an ACCC priority in the past and makes another welcome return to this year’s Priority Hit List. The ACCC has added this issue to this year’s Hit List because, as stated by Rod Sims, the ACCC is “hearing growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on … consumer preferences”. The ACCC sees this as a critical issue for both consumers and for competition. Consumers obviously value green products and sustainable manufacturing processes, but it is also important in markets that companies which are investing in “greener” technologies do not lose sales to other companies which are making false or misleading claims.

The second listed Priority is an obvious one - manipulative or deceptive advertising and marketing practices in the digital economy, in particular the use of dark patterns. The ACCC is concerned that consumers are facing a growing number of manipulative or ‘dark pattern’ techniques to exploit or pressure them into making incorrect or irrational purchasing decisions. Dark patterns are defined as a user interface which has been designed to trick or nudge consumers to do things which they do not wish to do or which are not rational responses. The choice architecture which forms the basis of dark patterns relies heavily on behavioural economics for its success, such as cognitive biases, endowment effect, herding behaviour, prospect theory, status quo bias, and so on – for definitions of these terms see here.

Rod Sims in his speech gave a few examples of dark patterns, such as low-stock warnings, false sales countdown timers, targeted advertising utilising consumers’ own data to exploit their individual characteristics, pre-selected add-ons, design interfaces that discourage unsubscribing, manipulation of online reviews and search results, and social media influencers who do not disclose they are paid to promote the products they are pitching. 

In particular, Rod Sims mentions the Trivago case as an example of dark pattern conduct, but the Viagogo case is probably a better example. In Trivago the court found that Trivago did not sufficiently disclose to consumers that it used an algorithm to boost the rank of accommodation providers which paid Trivago a higher payment fee (cost per click). This meant that consumers were being misled as to the cheapest offers for accommodation. In Viagogo, the Court found in 2019 that the company misled customers that:

·         it was the ‘official’ seller of tickets to particular events,

·         certain tickets were scarce, and

·         consumers could purchase tickets for a particular price when this was not the case because significant fees were not disclosed until late in the booking process.

The creation of a belief in the shortage of tickets would be characterised as classic example of the scarcity heuristic in behavioural economics.

As expected the ACCC is continuing to focus on consumer and fair-trading issues arising from the COVID-19 pandemic. The principal areas of concern are travel and event refunds, and price gouging in relation to RAT tests. However, it is expected that the ACCC’s activities in this area will reduce significantly over the next 12 months, unless there is a further variant.

Pricing and selling of essential services, primarily energy and telecommunications is a Priority in 2022-23. Complaints about the transparency of agreements and mis-selling continue to be high

Consumer guarantees with a focus on high value goods including motor vehicles and caravans remain a Priority area for the third year running. In his speech Rod Sims said that “non-compliance with consumer guarantees continues to be the issue most reported to the ACCC by consumers, particularly in relation to motor vehicles and caravans.” The culture of repair remains very strong amongst most car and caravan manufacturers.  For example the recent Mazda case where the company refused to provide refunds in situations where some motor vehicles had experience up to three engine failures in a relatively short period of time.  For more insights into this case have a look at my YouTube video here.

The ACCC has again noted the unwillingness of individual car and caravan dealers to deviate from the manufacturers’ wishes which means many consumers are not getting the remedies to which they are entitled.  In order to enhance compliance, the ACCC is also pressing government for penalties for breaches of consumer guarantees. The ACCC’s prospect getting this change through look good as the situation with consumer guarantees has some parallels with business’s highly reactive response to the unfair contract terms (UCT) laws. In relation to UCT’s companies were arguably not being proactive in responding to the new laws, which gave the ACCC a compelling argument to put to Government for the need toughen up the UCT laws. For more details of the proposed changes to UCT laws have a look at my YouTube video here.

Small business, particular those involved in agriculture and franchising are to be a focus in 2022-23. The two main agricultural Codes namely the Horticulture and Dairy Codes will be more actively enforced. Moreover, the franchising sector is clearly going to become a larger enforcement focus for the ACCC due to significant increases in penalties in that sector.

Many regulators around the world are concerned that the pricing of global supply chains has risen steeply in the last 12 months, in some cases by up to seven fold for a 40 foot container.  There are also lengthy delays in the importation to Australia of stock which is playing further havoc with retail businesses ability to forward plan sales. Assorted reasons have been put forward for these developments, including the large volumes of empty containers in Australia, Chinese energy restrictions and COVID.  However, it seems that the ACCC and a number of other overseas regulators are suspicious of these price rises and believe that there may be collusion occurring.  It is fair to say that the shipping industry has developed a very poor reputation for compliance in recent times as evidenced by the recent roll on roll off cartel which saw total penalties of $83.5 million being imposed in Australia on NYK, K-Line and Wilhelmsen collectively. In this regard, Sims announced that the ACCC has joined with its fellow competition authorities in the US, the UK, Canada and New Zealand to form a ‘five eyes’ working group to “share intelligence and work together to detect any attempts by businesses to use the pandemic conditions as a veil for illegal conduct, such as collusion, in our global supply chains”. 

A Priority for 2022-23 will be exclusive arrangements by firms with market power that impact competition. In his speech Sims did not provide much context for this Priority referring only to the existence of most favoured nation clauses and the Peter’s ice cream case.  I again suspect that this Priority will be focused on the conduct of digital platforms and the various exclusive arrangements they habitually enter into with various suppliers and customers.

The ACCC will be also focusing on promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services. Sims referred to emerging issues relating to de-banking, digital currency and cross-border payments. He also referred to the Visa case in 2021 where the ACCC accepted a court enforceable undertaking to address concerns that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants. That case may be seen very much as a warning shot across the bows of other financial institutions which be minded to engage in similar conduct in the future. There seems little doubt that the ACCC will pursue a litigated outcome and seek substantial penalties in relation to similar conduct if it reoccurs. Sims also mentioned the increasing use by consumers of digital wallets on mobile devices and Apple’s practice of restricting third party access to near field communication technology. Clearly digital platforms will also be a focus of this Priority.

As was to be expected a Priority will be enforcement issues relating to digital platforms.  The concern in relation to this Priority is that the ACCC does not believe it has the enforcement tools necessary to prevent anti-competitive conduct by digital platforms on a timely basis. As stated by Sims the “risk is that the ACCC, like our overseas counterparts, is effectively engaging in a ‘whack a mole’ strategy, attempting to remedy one manifestation of anti-competitive conduct while even more problematic conduct surfaces elsewhere.” Therefore the ACCC may only be able to achieve this Priority if the incoming Government agrees to give the ACCC the new powers it requires to attack such conduct. For an overview of the ACCC’s recent discussion paper in relation to the potential enforcement tools needed to curb the alleged harm being caused by digital platforms have a look at my YouTube video here.

Enduring priorities

The ACCC has also adopted a practice of identifying a number of enduring priorities which is defined as conduct which is so detrimental to consumer welfare and to the competitive process that the ACCC will always regard them as a priority. The enduring priority areas have not been added to in 2022-23:

 

Cartel conduct

An enduring priority is the pursuit of criminal cartel conduct.  In this regard the ACCC has had mixed success.  It has three guilting pleas in the roll on roll off cartel, as well as two guilty pleas in the Alkaloids Australia and six guilty pleas in the forex price fixing cartels, but has lost the only two contested cases, namely the Country Care and Banking cartel cases.

In particular the Banking Cartel case has highlighted a number of apparent deficiencies in both the ACCC’s investigatory skills in relation to criminal cartels as well as the Commonwealth Director of Public Prosecutor’s (CDPP) ability to draft a valid indictment in relation to more complex cartel allegations.  There is no doubt that the Banking Cartel case has prompted a great deal of reflection by both the ACCC and the CDPP, with the former commissioning an internal review.  Clearly an external review by an experienced criminal cartel investigator, say a former official from the US Department of Justice Antitrust Division such as Scott Hammond is much more likely to cast light on the shortcomings of the ACCC’s training and capabilities in conducting criminal cartel investigations. For more of an insight into what went wrong in relation to the Banking cartel case see my YouTube video entitled The banking Cartel: From Go to Woe (sic) here.

Anticompetitive conduct

Anticompetitive conduct is an area where the ACCC is seeking to take on significant cases and to push the boundaries of the law. In this regard, the ACCC is likely to have its hands full running their appeal in relation to the NSW Ports case where they failed on all issues – ie sovereign immunity and that the purpose and effect of the agreements were to substantially lessen competition. While I believe the ACCC is likely to have a degree of success on its appeal, it also seems clear that this case will ultimately only be finally resolved before the High Court.

Product Safety

We can expect the ACCC to continue its excellent work in relation to Product Safety in the next 18 months.  Indeed, there may be a step up in terms of work in this area now that the Takata airbag recall is behind the ACCC.  We can expect the ACCC to continue looking for new safety risks which it believes require the introduction of new mandatory safety standards, such as was the case with button batteries and Quad bikes.

It also seems likely that the new Chair of the ACCC, Gina Cass-Gottlieb will take up the cause of advocating for the introduction of a new general safety standard in Australia. It also seems inevitable that such a general safety standard will be introduced at some stage, with the only questions being when it will occur and what will the standard require manufacturers and importers to do to ensure and be able to prove that their products are safe.

Vulnerable communities

One of the key highlights over the last few years in relation to the ACCC’s protection of vulnerable communities has been its cases against unscrupulous Vocational Education Training (VET) companies.  Whilst these cases have not generated any actual penalty payments due to every company which was taken to court by the ACCC going into liquidation, these cases greatly assisted vulnerable consumers by providing the Commonwealth Government a basis for writing off the student debts for the vast majority of VET students, a substantial proportion of which were vulnerable consumers.

Indigenous Australians

Under the leadership of Rod Sims the ACCC has done an outstanding job in relation to protecting indigenous communities from illegal conduct, culminating in the $50 million penalty against Telstra for unconscionable conduct. The various VET cases also assisted indigenous Australians in remote communities who were often the prime target of VET salespersons.

Other issues

Rod Sims in his speech also mentioned two other areas – namely infrastructure and mergers. In  relation to infrastructure he identified the challenges which will be facing the ACCC in the future in developing the appropriate NBN regulatory framework. Other important infrastructure issue include regional telecommunications, airlines and airports and insurance monitoring. It appears that these areas were mentioned by Sims as potential problem areas which had to be closely monitored in order to prevent market failures and uncompetitive behaviours.

The final issue was Australia’s mergers regime which Rod Sims has been very vocal in critiquing over the last 12 months. In particular he mentioned the practical challenges that the ACCC is increasingly facing with the informal system as demonstrated in the Virtus/Adora merger.  For an outline of this case see my You Tube Video here.

In August 2021, Rod Sims put out his roadmap for proposed reforms to Australian merger law. As stated by Rod:

I outlined our reform proposals to better ensure that merger control in Australia is fit for purpose and in line with international best practice. The speech was intended to trigger a much-needed debate on these issues, and I am pleased that the discussion has begun.

The changes if accepted by Government will make very substantial and very substantive changes to the Australian merger scene.

We will have to wait and see whether the next Chair of the ACCC, Gina Cass-Gottlieb shares Rod’s enthusiasm for these changes and if so whether Gina can convince the next Government to implement these far reaching proposals.

For a more a detailed outline of the ACCC’s Proposed merger reforms have a look at my You Tube video here.

Essentials

In order to minimise risks and avoid problems with the ACCC (and other State and territory regulators) it is important for businesses to conduct a detailed Competition and Consumer Law Risk Assessment of every aspect of their operation. This would start with an identification of all risks in the business both from a:

• competition perspective – for example, the nature of all agreements with competitors, suppliers and service providers, and other third parties and
• consumer law perspective – for example, the representations made to consumers in marketing and promotional materials, the fairness of standard form contract terms and how complaints handling procedures are managed.

Once the business has conducted a detailed Competition and Consumer Law Risk Assessment, businesses should take steps to implement a comprehensive and up-to-date Compliance Program, consisting of the following elements:

1. The appointment of a Compliance Officer
2. Implementation of a Compliance Policy
3. Implementation of other relevant policies such as a Complaints Handling Policy and a Whistle-blower Policy
4. The establishment of an effective Complaints Handling procedure and
5. Regular Competition and Consumer Law Compliance Training.

Taking steps to conduct a Risk Assessment and implement a Compliance Program will benefit the business by helping them to better identify and manage all competition and consumer law risks. Taking these steps will also benefit the business in the unfortunate event that it becomes the subject of ACCC litigation in terms of mitigating the extent and severity of the much larger pecuniary penalties which the ACCC will be continuing to seek from the Courts for CCA and ACL contraventions in 2022 and beyond.

For more guidance on how to set up an effective compliance program see my You Tube Video here.

Farewell

Finally, I wish to say a farewell to Rod Sims who finishes his term at the longest serving Chair of the ACCC on 22 March 2022. Rod has done a truly remarkable job in his work in relation to digital platforms which in many respects has led the world in examining and thinking through the challenges raised by digital platforms. Other significant achievements include his tremendous work in terms of achieving law reform through the Harper Review and the introduction and likely expansion of Unfair Contract Term laws, his diligent and meaningful work in assisting indigenous communities and trailblazing work in relation product safety. 

There are also the many successful cases which Rod’s ACCC has taken which have resulted record fines, the expansion of the boundaries of the existing laws which have greatly benefited both consumers and competition and the significant improvements in market conduct in many areas including door to door selling, drip pricing, online reviews and testimonials, excessive surcharges, was/now pricing and consumer guarantees.

Whilst there are good and bad elements of any Chair’s leadership of the ACCC, it seems to me that the good greatly outweighed the bad elements of Rod’s eleven years at the helm of the ACCC.  For a more comprehensive appraisal of the good and the bad of Rod’s term as Chair see my You Tube video here.

All the best for the future Rod!