i Prioritisation and resource allocation of enforcement authorities
The Competition and Consumer Act 20102 (CCA) is the source of Australia’s competition laws. The statutory government authority with responsibility for enforcing the CCA is the Australian Competition and Consumer Commission (ACCC).
The ACCC publishes its compliance and enforcement policy annually; its 2018 compliance and enforcement policy was published on 20 February 2018.3 In a speech on the release of the policy, the Chairman of the ACCC was reported as saying that ‘businesses should bear penalties which are commensurate to their size, in order to achieve specific and general deterrence. Making this happen is a huge priority for the ACCC’.4 As a result, it can be expected that the ACCC will continue to pursue higher penalties for contraventions of the CCA.
The ACCC continues to give enforcement priority to conduct that is of significant public interest or concern, conduct that results in substantial consumer and small business detriment, and national conduct involving a significant new or emerging market issue where its action is likely to have deterrent or educative effect.5
Addressing cartel conduct, anticompetitive practices and misuse of market power remains an ‘enduring priority’ for the ACCC.6 In particular, the ACCC will be seeking to make use of hard-fought-for changes to the misuse of market power prohibition and the new concerted practices prohibition.7 The car retailing, broadband services, digital platform, energy, financial services, commercial construction and agriculture sectors are also areas of particular focus.8
In setting its priorities, the ACCC has regard to its own complaints data, the views of industry and consumer groups, the experience of state fair trading departments and international trends.9 It receives ‘around 200,000 reports from businesses and the public, and around 500 of these are escalated for further consideration and investigation and a much smaller subset for in-depth investigation’.10
ii Enforcement agenda
In implementing its enforcement agenda and giving effect to the twin goals of maintaining and promoting competition and remedying market failure, and protecting the interests and safety of consumers, the ACCC relies upon its statutory powers to investigate possible breaches of the CCA and, where appropriate, to bring proceedings against parties whom it suspects of breaching the CCA. These investigation and prosecution powers go hand in hand with powers to educate the community on compliance with the CCA, to obtain administrative remedies or accept court enforceable undertakings, and to consider applications for immunity from prosecution on various public interest grounds.
To achieve its enforcement agenda, the ACCC uses a ‘mix of enforcement, from warnings to court cases, and education and partnerships’.11 The choice of enforcement process is dependent on many factors, but the overriding priority ‘is always to achieve the best possible outcome for the community and to manage risk proportionately’.12
One method that the ACCC frequently uses to achieve its enforcement objectives is the acceptance of court-enforceable undertakings under Section 87B of the CCA. These undertakings, which are publicly available on the ACCC’s registers, commonly require an admission of contravention of the CCA, an agreement to the provision of remedies for the breach and a requirement to undertake a comprehensive trade practices compliance programme. Such undertakings can include remedies that may not otherwise be obtainable by the ACCC from the courts.
The ACCC will proceed to litigation where it considers it to be the most appropriate way to achieve its enforcement and compliance outcomes, and will commonly use ‘the outcome of one court proceeding to encourage other industry participants in the sector to improve their practices’.13 It is more likely to do so where ‘the conduct is particularly egregious (having regard to the priority factors), where there is reason to be concerned about future behaviour or where the party involved is unwilling to provide a satisfactory resolution’.14
As a litigant the ACCC is subject to directions issued by the Commonwealth Attorney-General, which include the obligation to act as a model litigant. This means that, as a party to litigation, the ACCC must ‘act with complete propriety, fairly and in accordance with the highest professional standards’.15
No matter which process the ACCC uses to achieve its enforcement agenda, it is guided by principles of transparency (it does not do private deals), confidentiality (it conducts investigations confidentially, and does not comment unless an investigation is in the public domain and it is in the public interest to do so), timeliness (both in efficiency of investigation and resolution of enforcement), consistency (it gives business certainty about its actions) and fairness (balancing voluntary compliance with enforcement).16
Cartel conduct in Australia is both a civil penalty offence and a criminal offence under Division 1 of Part IV of the CCA.17 The prohibition against cartel conduct applies to the making or giving effect to a contract, arrangement or understanding between competitors (or parties who would otherwise be in competition with each other) that contains a cartel provision. A cartel provision is one that relates to price fixing, output restrictions in the production and supply chain, allocation of customers, suppliers or territories, or tender or bid rigging.
To be a cartel provision, the provision must have either the purpose or likely effect of directly or indirectly fixing, controlling or maintaining prices, discounts, allowances, rebates or credits by any of the parties; or the purpose of preventing, restricting or limiting production, capacity or supply, allocating customers or suppliers or territories, or colluding in relation to bids for the acquisition of goods or services by any of the parties.18
Corporations that breach the criminal offence provisions or the civil prohibition are liable to maximum penalties of up to the greater of A$10 million, three times the total value of the benefits gained that are reasonably attributable to the cartel conduct (if that can be determined) or 10 per cent of the annual turnover of the corporate group in the 12 months ending at the end of the month when the cartel conduct began.19
Individuals who breach the criminal offence provisions are liable to up to 10 years’ imprisonment and fines of up to A$420,000.20 Individuals who breach the civil prohibitions are liable to pecuniary penalties of up to A$500,000.21
In July 2016, the first criminal prosecution for cartel conduct in Australia was commenced by the Commonwealth Director of Public Prosecutions against Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company based in Japan, for its participation in a cartel involving the transportation of vehicles, including cars, trucks and buses, to Australia between July 2009 and September 2012. The company pleaded guilty. In August 2017, the Federal Court imposed a penalty of A$25 million. In handing down his decision, Justice Wigney stated that the fine ‘incorporates a global discount of 50 per cent for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation: meaning that but for the early plea and past and future cooperation, the fine would have been A$50 million’.22 This matter was followed by a second criminal prosecution against Kawasaki Kisen Kaisha (K-Line) for the same conduct in November 2016. K-Line is defending the charges, and the matter is listed for trial in Sydney in 2018. In its third and most recent criminal cartel matter, charges were laid against The Country Care Group Pty Ltd, its managing director and a former employee in February 2018, in relation to alleged cartel conduct involving assistive technology products used in rehabilitation and aged care. This is the first time an Australian company and individuals have been prosecuted under the criminal cartel provisions. The ACCC has five other referrals currently with the CDPP and several others at an advanced stage of investigation.23
i Significant cases
In these proceedings, the ACCC alleged that the Australian Egg Corporation (AECL) (an industry association that collects levies for promotional activities and research and development activities from member egg producers, and that, although not a statutory corporation or emanation of the Crown, is a recognised entity under the Egg Industry Services Provision Act 200224) and a number of other corporate and individual respondents (being two other egg-producing companies and directors of the various respondents) attempted to induce egg producers who were members of AECL to enter into an arrangement to cull hens or otherwise dispose of eggs for the purpose of reducing the amount of eggs available for supply to consumers and businesses in Australia. No allegation was made that the attempt was successful.25
Hearing of the matter took place in the Federal Court in mid-2015, with one party reaching settlement with the ACCC shortly before the hearing commenced by admitting to making the attempt. The remaining parties contested the ACCC’s claims, and the judgment was handed down on 10 February 2016.26
Although the ACCC was successful in establishing that the CCA applied to the industry association, it failed to establish that the industry association and the competing egg producers had attempted to make an arrangement in which they each agreed to reduce egg supply and, therefore, share the market in breach of the prohibition on cartel conduct.
The case is significant because of its clarification of the extent to which industry associations and their members can engage in conduct that may be beneficial to the members and the industry without breaching the CCA. In this regard, his Honour stated:
There is a distinction between a circumstance in which industry participants are brought to an appreciation that it is in their interests, independently of what others are doing, to act in a certain way, on the one hand, and a circumstance in which industry participants are invited to agree to act in a certain way in the expectation of reciprocal conduct by others, on the other.27
The former conduct is not a breach of the CCA, but the latter conduct can amount to cartel conduct. The case went on appeal to the Full Federal Court where it was ultimately dismissed on 25 September 2017.28 The Full Court held that in this case it was necessary to show reciprocal obligations among competing egg producers to reduce egg supply, and the ACCC had failed to establish this.
In 2016, following an investigation by the ACCC, the Commonwealth Department of Public Prosecutions (CDPP) charged Nippon Yusen Kabushiki Kaisha (NYK) with giving effect to cartel provisions in contravention of the CCA. The cartel related to vehicles transported to Australia by NYK and other shippers. On 18 July 2016, NYK pleaded guilty to the charges, and on 3 August 2017 was convicted and ordered to pay a fine of A$25 million in the Federal Court of Australia.29
This decision is the first criminal fine imposed by the courts since the criminal laws were introduced in 2009. It is the second-highest monetary penalty for cartel conduct in Australia. The A$25 million fine incorporated a 50 per cent discount for cooperation and an early guilty plea.
In December 2014, following a number of ‘user complaints’, the ACCC commenced proceedings against five companies, six individuals and an industry association for alleged cartel and exclusionary conduct in the supply and acquisition of electrical cable throughout Australia.
The ACCC alleges that the cartel conduct occurred mainly at industry association meetings and that the industry association, the Electrical Wholesalers Association of Australia Limited aided, abetted or was knowingly concerned in the contraventions of the manufacturers and wholesalers. The case also includes allegations of bid rigging by some of the parties. The hearing of the case on liability commenced in November 2015, and on 10 March 2017 the Federal Court dismissed the proceedings. In handing down its decision, the Court noted that the ACCC failed to establish the existence of a bidding agreement. The ACCC was ordered to pay the respondents’ costs.
This case was commenced by the ACCC against Prysmian Cavi E Sistemi SRL, Nexans SA and Viscas Corporation in 2009, alleging that those companies and J-Power Systems (which received immunity from prosecution) had engaged in cartel conduct in the markets for land cables and submarine cables worldwide in the form of bid rigging and market allocation. The allegations, which involved the predecessor sections of the Trade Practices Act, included price fixing in breach of Section 45 of that Act and engaging in a primary boycott (exclusionary provision) in breach of Sections 45 and 4D. In July 2016, Prysmian was found to have engaged in price fixing but not a primary boycott, and the claim against Nexans was dismissed.30 Viscas had admitted liability and received a penalty of A$1.35 million in 2013.31 In July 2017, the Federal Court imposed a pecuniary penalty of A$3.5 million against Prysmian.32
Cases awaiting judgment
In May 2015, the ACCC commenced proceedings against Cascade Coal Pty Limited and a number of other companies and individuals (including a high-profile former New South Wales (NSW) politician) alleging bid-rigging conduct involving mining exploration licences in the Bylong Valley in NSW. The case was heard in April 2016, and judgment was reserved and is expected to be handed down in March 2018.
The alleged conduct relates to the 2009 tender process conducted by the NSW Department of Trade and Investment (then the Department of Primary Industries) for exploration licences over the Mount Penny and Glendon Brook coal tenements in the Bylong Valley. It followed a report by the NSW Independent Commission Against Corruption on its investigation into the same tender process.
Cases on appeal
These proceedings33 were brought by the ACCC against two manufacturers of laundry detergents (Colgate-Palmolive and PZ Cussons), a former sales director of Colgate-Palmolive and a major Australian supermarket, Woolworths, for involvement in an alleged cartel in which the manufacturers, together with Unilever Australia Limited, were alleged to have agreed to cease supplying standard concentrate laundry detergents and transition to ultra-concentrated detergents at the same time, and to sell the ultra-concentrated detergents at the same price per wash as the standard concentrated detergents had been sold. The ACCC alleged that the former sales director and Woolworths were knowingly concerned in that alleged cartel. No proceedings were brought against Unilever, it being an immunity applicant in the matter. Colgate-Palmolive, the former sales director and Woolworths all reached a settlement with the ACCC before the matter proceeded to hearing. Penalties of A$18 million (Colgate-Palmolive) and A$9 million (Woolworths) were ordered by the Court. On 22 December 2017, the Federal Court dismissed the ACCC’s case against PZ Cussons Australia Pty Ltd. On 20 February 2018, the ACCC appealed the decision and is asking the Full Federal Court to consider whether the trial judge should have inferred an understanding involving Cussons based on the uncontested evidence in the case.
In this case,34 the ACCC commenced proceedings against a Japanese company, Yazaki Corporation (Yazaki) and its wholly owned Australian subsidiary, Australian Arrow Pty Ltd ACN 071 956 057 (AAPL), alleging that one or both had made and given effect to a cartel arrangement with another Japanese company, Sumitomo Electric Industries Ltd, or its Australian subsidiary, SEWS Australia Pty Ltd. The cartel arrangement concerned the supply and pricing of wire harnesses to Toyota in Japan and Australia. The Sumitomo companies were not joined to the proceedings by the ACCC, having cooperated with the ACCC in the prosecution of the case.
The proceedings were brought for breach of the civil cartel prohibition in Section 44ZZRK(1) of the CCA, and for breach of the prohibitions on making and giving effect to agreements, arrangements or understandings that contain exclusionary provisions or have the purpose, effect or likely effect of substantially lessening competition in Section 45(2) of the predecessor Trade Practices Act, together with the equivalent sections in the Competition Code of Victoria applied as a law of Victoria by Section 5 of the Competition Policy Reform (Victoria) Act 1995.35
The Court was required to consider whether the parties made and gave effect to four separate agreements containing alleged cartel and exclusionary provisions (referred to as the ‘overarching cartel agreement’, the ‘2002 Toyota Camry Minor RFQ agreement’, the ‘2003 agreement’ and the ‘2008 agreement’). The Court was also required to determine whether the extraterritorial application of the CCA and the Victorian Competition Code extended to conduct that occurred in Japan.
After a detailed analysis of the factual matrix between the parties and the question of whether the conduct occurred in a market in Australia, the Court found that Yazaki had not breached the cartel conduct prohibition because the offending price-fixing conduct did not occur in a market in Australia. It found, however, the following breaches of the prohibitions on exclusionary conduct and agreements, arrangements or understandings that substantially lessen competition, which occurred by reason of the prevention, restriction or limiting of the supply of wire harnesses to Toyota in Australia.
AAPL made and gave effect to the 2002 Toyota Camry Minor RFQ agreement that contained an exclusionary provision and had the purpose, effect or likely effect of substantially lessening competition.
Yazaki made and gave effect to the 2003 agreement and the 2008 agreement, both of which contained exclusionary provisions and, in so doing, gave effect to an exclusionary provision in the overarching agreement.
In finding against Yazaki, the Court held that it was carrying on business in Australia in relation to the supply of wire harnesses to Toyota such that the extraterritorial coverage of the CCA extended to such conduct, or alternatively that it had the necessary connection with the jurisdiction of Victoria to bring its conduct within the Competition Code.
A hearing on penalty took place in August 2016, and Besanko J handed down penalties of A$9.5 million against Yazaki Corporation on 9 May 2017. The ACCC has since appealed against the penalty imposed, believing that significantly higher penalties of between A$42 million and A$55 million are appropriate in this case to reflect both the size of Yazaki’s operation and its deliberate conduct.
The case is significant for the analysis of the extraterritorial reach of the CCA and the Competition Code, and demonstrates that conduct occurring outside Australia that has an effect on a market in Australia can be caught.
In June 2016, the ACCC commenced proceedings in the Federal Court against four companies and three individuals for alleged cartel conduct in relation to the supply of polycarbonate roof sheeting to retailers in Australia. The ACCC alleges that the conduct took place over a five-year period from 2008 to 2013, and that the agreements that they made, which had the purpose of preventing or restricting the supply of polycarb to retailers, also had the purpose and likely effect of substantially lessening competition. The matter is listed for hearing on 5 March 2018.
Following an investigation by the ACCC, criminal charges were laid against The Country Care Group Pty Ltd, its managing director and a former employee in February 2018. The charges relate to alleged cartel conduct involving assistive technology products used in rehabilitation and aged care, including beds and mattresses, wheelchairs and walking frames.
The charges have been filed in the Magistrates’ Court of Victoria. If the Magistrate determines that there is sufficient evidence for the matter to proceed, it is likely that the matter will be heard in the Federal Court of Australia. This is the first criminal prosecution of an Australian corporation and individuals under the criminal cartel provisions of the CCA.
ii Trends, developments and strategies
The ACCC currently has five criminal cartel referrals with the Commonwealth Director of Public Prosecutions (CDPP) and a portfolio of investigations at an advanced stage.36 The ACCC will be seeking sanctions that are much more than a ‘cost of doing business’, and has sent a strong message that this must also be done by holding individual officers and directors of companies personally to account for their conduct.37
The ACCC continues to have a dedicated group with exclusive responsibility for investigating serious cartel conduct that works with the CDPP on criminal cartel investigations.38 While there were initial concerns that criminal prosecutions may be difficult to achieve where cartel conduct straddled the period before and after criminal sanctions were introduced in 2009 (with juries possibly reluctant to convict someone for a criminal offence where the conduct commenced at a time when it was not punishable as a criminal offence), sufficient time has now passed for this to no longer be a concern. It is significant that the first criminal cartel prosecution involved a cartellist who pleaded guilty, thereby enabling the CDPP to avoid the need to establish the requisite fault elements of the offence. That opportunity should come this year when the criminal prosecution of K-Line is expected to be heard.
The ACCC’s focus on detecting and prosecuting cartels was enhanced by the introduction in September 2014 of its amended immunity and cooperation policy for cartel conduct,39 which removed the reference to a party being a ‘clear leader’ of a cartel as a disqualification for immunity and provides for a two-step process for the CDPP to grant criminal immunity for cartel conduct (in which the CDPP will ordinarily issue a letter of comfort first, and subsequently provide an undertaking under the Director of Public Prosecutions Act 1983).
In November 2015, the ACCC announced that it had entered into a memorandum of understanding with the National Development and Reform Commission of the People’s Republic of China (NDRC) that ‘paves the way for increased engagement between the ACCC and NDRC on international cartel investigations affecting Australian and Chinese markets’.40 This follows the ACCC’s entry into a cooperation agreement with the Japan Fair Trade Commission in April 2015. The ACCC also has close working relationships with North America and Europe.41
The detection and prosecution of cartels will be a continuing focus of the ACCC, with figures of an estimated 80 per cent of cartels identified with the assistance of whistleblowers seeking immunity under the immunity and cooperation policy for cartel conduct.
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
Section 46(1) of the CCA prohibits what is referred to in Australia as ‘misuse of market power’, rather than abuse of dominance. In November 2017, following two years of intense debate on the topic, the misuse of market power prohibition was amended to include an ‘effects test’. The Section now prohibits a corporation with a substantial degree of power in a market from engaging in conduct that has the purpose or effect of substantially lessening competition in a market. It had been notoriously difficult for the ACCC to successfully prosecute a case of misuse of market power under the old provision, and the changes made were, in part, intended to overcome difficulties that had arisen in establishing the required ‘taking advantage’ of a substantial degree of market power.
Another significant amendment to the CCA in November 2017 was the extension of the prohibition concerning anticompetitive agreements to include a new ‘concerted practices’ prohibition. Corporations are now prohibited from engaging in a ‘concerted practice that has the purpose, or has or is likely to have the effect, of substantially lessening competition’. While this new prohibition is intended to bring Australia’s laws into line with that of other developed jurisdictions, its impact will only be known once a number of cases have come before the courts and the uncertainties of the breadth of its application are judged.
The ACCC has issued interim guidelines on how it proposes to interpret the reformed misuse of market power prohibition and the new concerted practices provisions. The ACCC has also set up a ‘SLC Unit’ (which stands for ‘substantial lessening of competition’ – the test applied in both these new provisions), and this SLC Unit is expected to focus heavily on enforcing these two new laws.
Various forms of exclusive dealing, including tying and bundling and other forms of conditional supply or acquisition, are also prohibited under Section 47 of the CCA. Exclusive dealing is only prohibited if it has the purpose, effect or likely effect of substantially lessening competition. Third line forcing is no longer per se prohibited under the CCA, and is now treated like all other forms of exclusive dealing.
Breaches of the prohibitions on misuse of market power, agreements that substantially lessen competition and exclusive dealing carry maximum penalties for corporations of up to the greater of A$10 million, three times the total value of the benefits gained that are reasonably attributable to the conduct (if it can be determined) or 10 per cent of the annual turnover of the corporate group in the 12 months ending at the end of the month when the conduct occurred. For individuals who are knowingly involved in the conduct, the maximum penalty is A$500,000.
i Significant cases
ACCC v. Ramsay Health Care Australia Pty Ltd
On 1 May 2017, the ACCC brought proceedings in the Federal Court against Ramsay Health Care for alleged anticompetitive conduct involving misuse of market power and exclusive dealing in the Coffs Harbour region. Ramsay Health Care operates the only private hospital and private day surgery facilities in the Coffs Harbour region. Coffs Harbour surgeons use operating theatres at these facilities to perform surgical procedures on private patients. The ACCC alleges that Ramsay Health Care became aware that a group of Coffs Harbour surgeons was planning to establish a competing private day surgery facility in Coffs Harbour. In response to this threat, the ACCC alleges senior Ramsay Health Care executives told these surgeons that if they were involved with the proposed new day surgery they would have their access to operating theatre time at the private hospital substantially reduced or withdrawn. The ACCC alleges that Ramsay engaged in this conduct for the purpose of deterring or preventing a new entrant in the day surgery market in Coffs Harbour, or substantially lessening competition in that market. The matter is listed for hearing in August 2018.
ACCC v. Cement Australia
In 2014, the Federal Court heard the penalty aspects of this case,42 having found that Cement Australia and related companies had breached the CCA by making and giving effect to a contract, arrangement or understanding that had the purpose or likely effect of substantially lessening competition in the market for the supply and acquisition of fly ash. The Court, however, rejected the ACCC’s claim that Cement Australia engaged in misuse of market power. On 29 April 2016, the Federal Court ordered penalties totalling A$17.1 million against Cement Australia companies. Appeals and cross-appeals were lodged and heard in February 2017. The Full Court of the Federal Court upheld the ACCC’s appeal, and dismissed a cross-appeal by Cement Australia against the penalties imposed on Cement Australia Pty Ltd and its related companies for making and giving effect to anticompetitive agreements. The trial judge had imposed penalties of A$17.1 million against the Cement Australia companies. The Full Court has now ordered these companies to pay increased penalties totalling A$20.6 million.
ACCC v. Construction, Forestry Mining and Energy Union
In November 2014, the ACCC brought proceedings against the Construction, Forestry Mining and Energy Union (CFMEU) alleging secondary boycott conduct at 12 commercial construction sites across metropolitan Melbourne. CFMEU was found to have contravened Section 45D(1) of the CCA by engaging in conduct in concert with a shop steward at both sites that hindered or prevented the acquisition of concrete from Boral and its subsidiary Alsafe for the purpose of causing substantial loss or damage to Boral’s business. It further ruled that the conduct was likely to have the effect of causing substantial loss or damage to Boral. In November 2017, the Federal Court published its judgment on liability and ordered CFMEU to pay A$1 million in penalties (A$500,000 for each contravention) for secondary boycotts against Boral and Alsafe at construction sites in Hawthorn and Richmond, Victoria. This is the highest penalty ever awarded for a breach of the secondary boycott provisions. CFMEU was also ordered to include practical training about Section 45D of the CCA in each of its shop steward training courses in Victoria for five years.
ii Trends, developments and strategies
The continuing trend of lack of success in cases in which misuse of market power is alleged has not been a deterrent to the investigation or prosecution of new cases. This lack of success fuelled support from the ACCC for the amendments to Section 46 of the CCA to introduce an effects test, which has now been introduced and in force since November 2017.
In addition to its continued pursuit of misuse of market power cases, particularly now armed with a reformed Section 46, which includes an effects test, the ACCC can be expected to focus on cases involving anticompetitive agreements and practices. Recent successes in cases involving resale price maintenance (a per se breach under Section 48 of the CCA)43 and
exclusive dealing (prohibited under Section 47 of the CCA)44 are likely to ensure that the ACCC continues its vigorous pursuit of alleged contraventions in this area.
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
Regulation of competition in specific industries, including franchising, telecommunications, ports, water, energy, grocery retailing, horticulture supply and retail petrol supply, occurs by way of specific sectoral laws in the CCA and other legislation. This includes:
- a Part 111AA of the CCA, which contains provisions establishing the Australian Energy Regulator;
- b Part 111A of the CCA, which contains provisions governing access to essential facilities by third parties;
- c Part X of the CCA, which contains provisions for the regulation of international liner cargo shipping services; and
- d Parts XIB and XIC of the CCA, which contain regulations governing competition and access in the telecommunications industry.
Particular industries or sectors are also regulated through various voluntary or mandatory industry codes. The franchising sector is regulated through the Franchising Code of Conduct, which is a mandated code under Part IVB of the CCA. Other mandatory codes under the CCA are the Horticulture Code of Conduct, the Oil Code and the Retail Unit Pricing Code. The Food and Grocery Code of Conduct is a recently introduced voluntary code that is prescribed under the CCA.
In addition to these specific sectoral regulations, the ACCC conducts market studies or is directed by the government to commence inquiries into specific industries. Where anticompetitive practices in breach of the CCA are identified, this can result in prosecution.
As at the start of 2018, the ACCC’s ongoing inquiries and market studies included the dairy industry, electricity and gas, residential mortgage products, insurance in Northern Australia, the communications sector and, most recently, digital platforms. In December 2017, the government directed the ACCC to undertake an 18-month inquiry into digital platforms, and tasked it with examining the impact of search engines, social media and other internet aggregators on competition in markets for media and advertising services.45 The ACCC has stressed that this is a ‘fundamentally important inquiry’ and that ‘a key question will be how much consumers know about the amount of use of the data about them that is collected and sold by the digital platforms’.46 The ACCC recently completed a study into the new car retailing industry, and has recently instituted proceedings in the Federal Court against Ford and accepted a court-enforceable undertaking from Holden in relation to its concerns about alleged Australian Consumer Law non-compliance issues.47
ii Trends, developments and strategies
The ACCC continues to be heavily involved in monitoring specific sectors and, where it considers it appropriate, taking action against anticompetitive conduct. For example:
- in the retail petrol industry, it monitors retail prices of unleaded petrol, diesel and LPG in all Australian capital cities and in around 180 regional locations.48 The successful resolution of the proceedings against Informed Sources means that from 20 May 2016, petrol price information is available to consumers for free on a near real-time basis at the same time as it is received by retailers. The ACCC has completed four petrol market studies since it received the monitoring direction, and in 2016 and 2017, the ACCC’s petrol price cycle webpage was the second most viewed page, receiving 310,185 page views.49 On 23 February 2018, the ACCC encouraged consumers to fight back against record retailers’ margins by using fuel price websites and apps to shop around;50
- in the postal industry, it assesses notifications of proposed price increases for Australia Post’s reserved services, enquires into disputes about the terms and conditions on which Australia Post provides bulk mail services, and monitors for cross-subsidy between reserved and non-reserved services;51
- in the telecommunications industry, it continues to play a significant role in the economic regulation of the National Broadband Network. The ACCC is part way through its market study into the communications sector, and is due to publish its final report in early 2018. The ACCC took a number of enforcement actions against retailers relating to speed claims, and it has foreshadowed further interventions in 2018;52
- in May 2016, regarding the water industry, the ACCC reviewed its water charge rules, which regulate charges for water infrastructure, planning and management that concern the charges imposed on rural water users in the Murray-Darling Basin; and
- on 14 December 2017, the ACCC released its final report from the market study into the new car retailing industry. The final report’s key observations were that:
• car manufacturers need to update their complaint handling systems and improve their approach to the handling of consumer guarantee claims;
• a mandatory scheme should be introduced for car manufacturers to share technical information with independent repairers; and
• new car buyers need more accurate information about their cars’ fuel consumption and emissions.
- The ACCC has also taken action involving numerous manufacturers in the motor vehicle industry, including Ford, Holden, VW and Audi.53
In addition to the sector-specific focuses referred to above, the ACCC can be expected to focus on:
- conduct that not only results in greater consumer detriment but that may also influence the behaviour of other market participants;54 and
- competition issues in financial services: although there are no specific laws regulating competition financial services, as part of the 2017–18 Budget, the government provided the ACCC with additional funding of A$13.2 million over four years to establish a Financial Services Unit (FSU) to undertake regular inquiries into competition issues across the financial system. An additional A$1.2 million has been provided for 2017 and 2018 for the FSU to undertake a price inquiry into residential mortgage products.55 The FSU will monitor competition in Australia’s financial services sector by assessing competition issues, undertaking market studies, and reporting regularly on emerging issues and trends in the sector. The ACCC has indicated that post-1 July 2018, it will be proactively identifying and investigating competition issues in the sector.56
V MERGER REVIEW
Section 50 of the CCA prohibits acquisitions of shares or assets that have, or are likely to have, the effect of substantially lessening competition in a market. The ACCC has power to apply to the Federal Court for orders preventing a proposed merger or acquisition from proceeding, or to unwind a completed merger or acquisition, where it considers that the merger or acquisition would have the effect of substantially lessening competition in a market.57
There is no compulsory merger notification process in Australia, or any notification thresholds, but parties are encouraged to notify the ACCC where a merged entity has a combined market share of 20 per cent or more. The CCA was amended in late 2017, whereby the formal notification procedure was removed and the ACCC (as opposed to the Australian Competition Tribunal (Tribunal)) was granted the sole power to determine applications for the authorisation of a merger, and can now do so if there is no substantial lessening of competition or where the public benefits that result from the merger outweigh any public detriment.
While some merger parties may choose simply to notify the ACCC of a proposed merger or acquisition as a courtesy, there is a process for obtaining informal merger clearance, which is set out in the ACCC’s Informal Merger Review Process Guidelines 2013.58 The informal merger clearance process, which monitors merger activity in the press and other public sources, can be activated upon the application of a party or by the ACCC. The process provides for the conduct of market inquiries (where the ACCC considers it appropriate and the parties have consented), for the issue of statements of issues (where the ACCC considers that the merger may give rise to competition issues) and for the issue of public competition assessments (in which the ACCC outlines the reasoning behind its decision in a particular matter). The ACCC frequently accepts court-enforceable undertakings from parties to address competition issues as a condition of not opposing a merger (which undertakings need to be structural in nature – e.g., divestment of assets – rather than behavioural). The informal merger clearance process remains, and it is expected to continue to be the most popular method of obtaining merger clearance, with the authorisation process only being used for contention mergers.
i Significant cases
The success of the informal merger clearance process and the ability to negotiate outcomes with the ACCC as part of that process means that there are few contested merger clearance cases in Australia. In 2017, the ACCC contested Tabcorp’s application to the Tribunal for authorisation of its proposed acquisition of Tatts. The application was made after the ACCC indicated its intention (as a result of informal notification) to oppose the acquisition in March 2017. In June 2017, the Tribunal granted authorisation, and the ACCC subsequently applied to the Federal Court in July 2017 for judicial review of the Tribunal’s decision. The Full Federal Court upheld the ACCC’s application for judicial review, setting aside the original decision of the Tribunal to grant authorisation, and remitted the matter back to the Tribunal for reconsideration. On 17 November 2017, the Tribunal made a further determination granting merger authorisation for Tabcorp to acquire Tatts. The result in this matter is significant, as it represents another loss for the ACCC in the Tribunal – a tally which stands at five out of five losses and no wins – and amplifies the magnitude of the recent changes that made the ACCC the primary decision maker in authorisation applications. The Tribunal is now only empowered to review the merits of the ACCC’s authorisation decision, with the only avenue of appeal of the Tribunal determination being judicial review before the Federal Court.
Merger cases that the ACCC informally cleared in 2017 include General Electric Company’s acquisition of Baker Hughes Incorporated, the merger of Foxtel and Fox Sports, and Essilor International SA’s merger with the Luxottica Group.
ii Trends, developments and strategies
The ACCC continues to assess a significant number of mergers and acquisitions each year. In 2016 to 2017, it considered 288 mergers. This resulted in 33 applications proceeding to public review, and the ACCC released a statement of issues in relation to 13 of the 33 applications. Overall, 23 were unconditionally cleared, and two matters required court-enforceable undertakings to be entered into by the parties to alleviate the ACCC’s concerns. The remaining eight applications were all withdrawn. A statement of issues had been released for each of these eight proposed mergers.
It is expected that the majority of mergers and acquisitions will continue to be assessed by the ACCC pursuant to the informal merger clearance process. The two most recent Federal Court decisions concerning mergers include the Metcash59 case in 2011 and the decision concerning the ACCC’s appeal of the Tribunal’s Tatts/Tabcorp determination in 2017.60 In Metcash,61 the Full Federal Court clarified the standard of proof that should be used when assessing the counterfactual to be applied in the determination of the likely effect on competition of allowing the merger to proceed. In a later determination by the Tribunal following the Sea Swift application,62 it preferred the actual evidence of the merger parties over the ‘real chance’ of the economic theory propounded by the ACCC. This determination provides further welcome guidance on how to approach the counterfactual.
In relation to the Federal Court’s decision concerning the ACCC appeal of the Tribunal’s determination concerning the Tatts/Tabcorp merger,63 the Full Federal Court provided further guidance regarding the process to be used when weighing up the public benefit and detriment (being the test used by the Tribunal when authorising a merger). In that case, the Full Federal Court made it clear that in assessing whether to authorise a merger, the Tribunal is required to take into account all competitive detriments and benefits that are likely to result from the proposed merger, and is not required to first make a finding that the lessening of competition is substantial before it can be taken into account. This guidance continues to be of relevance as, although recent changes to the law make the ACCC the primary decision maker for authorisation of a merger, these changes also now allow the ACCC to use a ‘public benefits’ test where previously it has been limited to assessing a merger on the basis of whether it substantially lessened competition.
The ACCC is a proactive regulator that has been, and continues to be, prepared to actively enforce the anticompetitive conduct provisions of the CCA. Consistent with statements made by its Chairman, it is prepared to litigate cases in order to obtain judicial clarification of the scope and application of those provisions. This is nowhere more apparent than in cases concerning cartel conduct. Now that the misuse of market power includes an effects test and with the introduction of a new concerted practices prohibition, it can be expected that the ACCC will move quickly to test these new laws. Its enforcement powers and agenda are underpinned by extensive market research and analysis and compulsory powers of investigation and examination, which ensures that it is a well-prepared litigant. Those facing enforcement activities by the ACCC can expect that it will be requesting Australian courts ‘to emphasise that the size of penalties in particular cases must be sufficient to provide appropriate deterrence’,64 and are likely to find that those courts are willing to make that emphasis. A number of ACCC appeals in the past two years have been to seek higher penalties for contraventions of the law, and so far, the ACCC has had an impressive success rate.
1 Kathryn Edghill is a partner at Bird & Bird. The assistance of Cicely Sylow, senior associate, is gratefully acknowledged.
2 The Competition and Consumer Act 2010 (Cth).
3 At www.accc.gov.au/publications/compliance-and-enforcement-policy.
4 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018. Text of the speech can be found at www.accc.gov.au/speech/2018-compliance-enforcement--priorities.
5 2018 compliance and enforcement policy at www.accc.gov.au/publications/compliance-and-
7 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
8 2018 compliance and enforcement policy at www.accc.gov.au/publications/compliance-and-
9 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 19 February 2015.
10 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 24 February 2017.
11 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 19 February 2015.
12 2018 compliance and enforcement policy.
14 2015 compliance and enforcement policy, at 5.
15 Legal Services Direction 2005, Appendix B, Note 2.
16 2018 compliance and enforcement policy.
17 The criminal offence is found in Sections 44ZZRF(1) and 44ZZRG(1) of the CCA. The civil prohibition is found in Sections 44ZZRJ and 44ZZRK(1) of the CCA.
18 Section 44ZZRD of the CCA.
19 Section 76(1A)(aa) of the CCA.
20 Section 79(1) (e) of the CCA.
21 Section 76(1B)(b) of the CCA.
22 Commonwealth Department of Public Prosecutions v. Nippon Yusen Kabushiki Kaisha  FCA 876
23 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
24 Egg Industry Services Provision Act 2002 (Cth).
25 ACCC media release: ‘ACCC takes action following alleged egg cartel attempt’, 28 May 2014, www.accc.gov.au/media-release/accc-takes-action-following-alleged-egg-cartel-attempt.
26 Australian Competition and Consumer Commission v. Australian Egg Corporation Limited  FCA 69 (10 February 2016).
27 Id., at .
28 ACCC v. Australian Egg Corporation Limited  FCAFC 152.
29 Commonwealth Department of Public Prosecutions v. Nippon Yusen Kabushiki Kaisha  FCA 876.
30 Australian Competition and Consumer Commission v. Prysmian Cavi E Sistemi SRL (No. 12)  FCA 822.
31 Australian Competition and Consumer Commission v. Prysmian Cavi E Sistemi Energia SRL (No. 5)  FCA 294.
32 Australian Competition and Consumer Commission v. Prysmian Cavi E Sistemi SRL (No. 13)  FCA 851.
33 Australian Competition and Consumer Commission v. Colgate-Palmolive Pty Ltd & Ors, New South Wales Federal Court proceedings NSD 2510 of 2013.
34 Australian Competition and Consumer Commission v. Yazaki Corporation (No. 3)  FCA 465.
35 Competition Policy Reform (Victoria) Act 1995 (Vic).
36 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
37 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
38 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 23 February 2016.
40 ACCC Press Release dated 5 November 2015 at www.accc.gov.au/media-release/australia-and-china-to-
41 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
42 Australian Competition and Consumer Commission v. Cement Australia Pty Limited  FCA 909.
43 Australian Competition and Consumer Commission v. OmniBlend Australia Pty Ltd  FCA 871.
44 Australian Competition and Consumer Commission v. Little Company of Mary Health Care Limited  FCA 1144 (26 October 2015).
46 Speech by Mr Rod Sims, Chairman of the ACCC at the Committee for Economic Development of Australia conference on 20 February 2018.
47 New car retailing industry market study Final Report (14 December 2017).
49 ACCC Annual Report 2016–2017.
50 ACCC media release ‘Consumers urged to fight back against record retailers’ margins’ (23 February 2018) www.accc.gov.au/media-release/consumers-urged-to-fight-back-against-record-retailers-margins.
52 ACCC media release ‘ACCC focuses on energy, broadband, net economy and financial services in 2018 (20 February 2018).
54 2018 compliance and enforcement policy.
55 ACCC Submission, Productivity Commission Inquiry into Competition in the Australian Financial System (September 2017).
56 ACCC media release ‘ACCC focuses on energy, broadband, net economy and financial services in 2018 (20 February 2018).
57 Sections 80(1) and 81 of the CCA.
59 Australian Competition and Consumer Commission v. Metcash Trading Limited  FCAFC 151.
60 Australian Competition and Consumer Commission v. Australian Competition Tribunal  FCAFC 150.
61 Australian Competition and Consumer Commission v. Metcash Trading Limited  FCAFC 151.
62 Application by Sea Swift Pty Limited  ACompT 9.
63 Australian Competition and Consumer Commission v. Australian Competition Tribunal  FCAFC 150.
64 ACCC media release, ‘ACCC announces priorities and strives for tougher penalties’, 19 February 2015, www.accc.gov.au/media-release/accc-announces-priorities-and-strives-for-tougher-penalties.