As the independent Commonwealth body responsible for enforcing the Competition and Consumer Act 2010 (CCA), the Australian Competition and Consumer Commission (ACCC) works to promote competition and fair trading, and regulate national infrastructure for the benefit of all Australians. Our role is to protect, strengthen and supplement the way competition works in Australian markets and industries, to improve the efficiency of the economy and to increase the welfare of Australians.
Record penalties for competition and consumer law contraventions were imposed in Australia in 2018, in what was a year of exciting firsts in the application of the CCA. The ACCC laid the first criminal cartel charges against an Australian corporation and individuals, brought proceedings for 'gun jumping' conduct, and assessed the first major cross-media merger following amendments to the media ownership rules.
Action against criminal cartels
In 2018, the first criminal cartel charges were laid against an Australian corporation and individuals from the Country Care Group Pty Ltd in relation to alleged cartel conduct involving assistive technology products used in rehabilitation and aged care facilities.
Subsequently, following a detailed ACCC investigation, criminal cartel charges were laid by the Commonwealth Director of Public Prosecutions against three major banks and several senior executives from Citigroup Global Markets Australia Pty Ltd (Citigroup), Deutsche Bank Aktiengesellschaft (Deutsche Bank) and Australia and New Zealand Banking Group Pty Ltd (ANZ). The alleged cartel arrangements relate to trading in ANZ shares held by Deutsche Bank and Citigroup, with ANZ and each of the individuals alleged to be knowingly concerned in some or all of the conduct.
We also took action in relation to gun jumping conduct by commencing civil proceedings against Cryosite Limited for alleged cartel conduct in relation to its entry into an asset sale agreement with Cell Care Australia Pty Ltd. Gun jumping occurs when merger parties are competitors and they combine or coordinate their conduct before the actual completion of the transaction, undermining competition and the merger approval process.
Record penalty judgments in Australia
We saw some record penalty judgments in 2018, with a A$46 million penalty being imposed against Yazaki Corporation (Yazaki) for cartel conduct. This penalty was a substantial increase on the A$9.5 million ordered by the trial judge in May 2017, reflecting the size of their global operations and the serious nature of the conduct. Importantly, the Full Court rejected Yazaki's argument that the relevant annual turnover for determining penalty should be limited to the contravening body corporate's turnover.
After the Flight Centre price-fixing attempt case was remitted from the High Court to the Full Federal Court, in 2018 the Court increased the penalty from A$11 million to A$12.5 million. And in response to legal action brought by the ACCC in relation to the global Air Cargo cartel, this year a further A$15 million in penalties was imposed against Air New Zealand Ltd. Since the ACCC first launched its Air Cargo cartel investigation in 2006, penalties totalling A$113.5 million have been imposed against 14 international airlines.
While these are strong penalty results in the Australian context, a 2018 report by the Organisation for Economic Cooperation and Development (OECD), Pecuniary Penalties for Competition Law Infringements in Australia, highlighted that average and maximum penalties imposed by Australian courts for breaches of competition laws are significantly lower than in other OECD jurisdictions. The ACCC continued its push over the year to advocate for higher competition and consumer law penalties. To achieve deterrence, penalties must be large enough to be noticed by senior management, company boards and shareholders.
Action under Australia's antitrust provisions
In December 2018, the ACCC instituted proceedings in the Federal Court against NSW Ports and two of its subsidiaries, alleging that the agreements they made with the state of New South Wales at the time of the privatisation of Port Botany and Port Kembla had an anticompetitive purpose and effect, because they contained provisions that would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal.
In 2018, we received the decision of the Full Federal Court dismissing our appeal against Pfizer Australia Pty Ltd (Pfizer) alleging a misuse of its market power in relation to its supply of atorvastatin to pharmacies in contravention of the CCA. We brought the appeal because we were concerned that Pfizer's use of its market position as supplier of the top selling drug branded atorvastatin, immediately before generic products were able to enter the market, harmed the competitive process and therefore consumers.
However, although the Full Federal Court found that Pfizer took advantage of its substantial market power, it held that Pfizer did not act for the purpose of substantially lessening competition or deterring or preventing competitors from competing. The ACCC's application for special leave to appeal this decision to the High Court was also dismissed, bringing an end to this case.
As discussed below, earlier in the year we also commenced proceedings against Pacific National Pty Limited (Pacific National) and Aurizon in relation to the proposed acquisition by Pacific National of Aurizon's Queensland intermodal business and the Acacia Ridge Terminal in Brisbane. In these proceedings, which will continue in early 2019, we also allege that the terminal services sub-contract they had entered into in connection with Acacia Ridge Terminal had the effect of substantially lessening competition in breach of section 45.
We will continue to pursue companies that we consider use their market position to harm competition and consumers, and are expecting to rely on the new section 46 misuse of market power prohibition in proceedings brought in 2019.
Market studies and inquiries
We use our investigative and other expertise to advise on issues and advocate for consumers and competition in Australia, working with government and other organisations and agencies on legislative or policy reforms affecting consumer and competition law. Market studies and inquiries can be instrumental in achieving policy and legislative change through recommendations to government, and in some instances can lead to enforcement investigations.
In 2018, we released four final reports arising from our retail electricity pricing inquiry, residential mortgage price inquiry, dairy inquiry and communications sector market study. The ACCC's residential mortgage price inquiry monitored the prices charged by the five banks affected by the government's Major Bank Levy between 9 May 2017 and 30 June 2018. The ACCC's final report found the unnecessarily high search costs or effort required by borrowers to find better prices reduces their willingness to shop around, but that many borrowers who negotiate with their bank can get a much better price. The ACCC found no evidence that the five banks changed prices specifically to recover the cost of the Major Bank Levy, whether in part or in full, during the price monitoring period. The ACCC did find, however, that measures announced by the Australian Prudential Regulation Authority in March 2017 to limit new interest-only residential mortgage lending created an opportunity for banks to synchronise increases to headline variable interest rates for interest-only mortgages.
In December 2018, we released a preliminary report in our digital platforms inquiry. The report has raised important competition and consumer protection issues in media and advertising services markets, including the impact of digital platforms on the supply of news and journalistic content. We will continue consulting with market participants on the findings of the report, including our proposals to address these issues, before releasing a final report in June 2019. We also issued interim reports for the northern Australia insurance inquiry, and the east coast gas transparency and supply inquiry.
The ACCC also monitors and reports on sectors such as airports, stevedoring, petrol, wheat ports and water. Following the retail electricity pricing inquiry, on 20 August 2018 the then treasurer directed the ACCC to hold a public inquiry into the prices, profits and margins in the supply of electricity in the National Electricity Market. We will provide a first report by 31 March 2019, with further reports to be provided at least every six months until 31 August 2025.
Merger reviews and authorisations
The past year saw a number of significant acquisitions requiring public review, which demonstrated the way we assess markets, the role of divestments and other remedies in addressing competition concerns and the importance of emerging barriers to entry and expansion such as access to data. The ACCC's approach to clearing non-contentious mergers expeditiously continues to provide an efficient mechanism for business while maintaining appropriate safeguards of oversight. During 2017–18, we considered 281 proposed acquisitions, clearing 90 per cent of them without the need for public review.
In 2018, we decided not to oppose three acquisitions based on the acceptance of court-enforceable undertakings by the relevant parties. In the first matter, Saputo Dairy Australia Pty Ltd (Saputo) offered a court-enforceable undertaking to divest Murray Goulburn's Koroit plant, facilitating its acquisition of Murray Goulburn's assets. The divestiture undertaking addressed the ACCC's concerns that Saputo would otherwise own the two largest processing plants near Warrnambool. Likewise, in the second matter, Transurban offered a court-enforceable undertaking requiring it to publish important traffic data that will now be available to all bidders competing for future toll road concessions. With the acceptance of this undertaking we didn't oppose a Transurban-led consortium's acquisition of the majority interest in the Sydney WestConnex project. In the third matter, the ACCC did not oppose the proposed acquisition of APA Group by the CK Consortium, after accepting a court-enforceable undertaking from the CK Consortium to divest significant gas assets in Western Australia.
The ACCC's decision to commence proceedings against Pacific National and Aurizon has attracted significant attention. The litigation relates to the proposed acquisition by Pacific National of Aurizon's Queensland intermodal business and the Acacia Ridge Terminal, as well as an agreement for Pacific National to operate the interstate part of the Acacia Ridge Terminal. The ACCC sought and obtained an interlocutory injunction to prevent Aurizon from closing its Queensland intermodal business, which was subsequently sold to Linfox. The substantive trial will continue in early 2019.
The ACCC also assessed the first major cross-media merger since the amendments to the media ownership rules, the Nine/Fairfax merger. The key issue was whether the merger would substantially lessen competition in the provision of Australian news content, leading to less journalistic effort in the creation and dissemination of Australian news. We ultimately concluded there was not likely to be a substantial lessening of competition. We recognised that there will likely be changes to the way Fairfax and Nine operate in future, either due to the changing media landscape more generally or due to the merger itself. However, we reached the conclusion that if such changes do occur, they would not be, to a significant extent, caused by the merger reducing the level of competition.
These merger assessments touch on issues being contemplated by competition regulators around the world, from the relevance of access to data as a barrier to entry (Transurban), the interaction between merger proposals and parallel agreements (Pacific National/Aurizon), and the nature of competition in two-sided media content and advertising markets (Nine/Fairfax).
In 2018, there was continued take-up of the collective bargaining authorisation and notification processes. Continuing the streamlining of these processes, the ACCC is moving to introduce a 'class exemption' to allow small businesses, agribusinesses and franchisees to negotiate collectively with their customers or suppliers, including franchisors. Under the new class exemption process a 'safe harbour' is given so businesses that qualify can collectively bargain without the risk of breaching competition law and without the need to make an application or notification to the ACCC.
The ACCC engages closely with competition and consumer protection counterparts around the world. It collaborates with international counterparts through forums such as the OECD, the International Competition Network and the Competition Law Implementation Program in South-East Asia. To achieve our aims under our priority areas, we work through our regional and international partnerships by engaging and sharing information with overseas regulators, helping to combat anticompetitive conduct in our region, and cooperating with international investigations and proceedings.
In August 2018, competition agency leaders and officials from the Association of Southeast Asian Nations (ASEAN), Japan, Australia, China, Korea, Mongolia, Chinese Taipei and New Zealand came together for three events in Sydney, specifically:
- the ASEAN Australia New Zealand Free Trade Area Heads of Agency Roundtable;
- the East Asia Top Level Officials Meeting on Competition Law, an annual conference sponsored by the Japan Fair Trade Commission and Asian Development Bank in which competition agencies at different stages of development discussed topics including national competition law and policy across the region, cross-border enforcement and cooperation, advocacy, and the inter-agency provision of technical assistance; and
- the East Asia Conference on Competition Policy and Law, which served as a broader forum in which the academic and legal community had the opportunity to participate in discussions alongside the competition agencies.