Australia: Competition and Consumer Commission
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As Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC) is tasked with protecting competitive processes by taking action against unlawful anticompetitive behaviour and highlighting practices that can inhibit these processes. We enforce the Competition and Consumer Act 2010 (CCA), promote competition and fair trade, and regulate national infrastructure for the benefit of all Australians. That includes advocacy of the benefits of particular competition policies, as well as leveraging the findings and insights we gain from our enforcement and broader work.
The year 2019 was a busy one for the ACCC. There were a number of significant developments ranging from the release of the final report of our Digital Platforms Inquiry to the filing of our first case under the amended misuse of market power provisions against Tasmanian Ports Corporation Pty Ltd (TasPorts), and the decision to oppose the proposed TPG Telecom Limited (TPG) and Vodafone Hutchison Australia Pty Ltd (Vodafone) merger.
Digital Platforms Inquiry
In August 2019, the ACCC delivered its final report from its 18 month inquiry into digital platforms. The Digital Platform Inquiry (DPI) looked at the competition and consumer protection implications of digital platforms for consumers and businesses, as well as the specific impact on news, journalism and the advertising market. The ACCC’s inquiry was wide-ranging, and in the final report set out 23 recommendations relating to competition, consumer protection, privacy and media regulatory reform.
The government response was to support, or support in principle, 18 of our 23 recommendations, and to begin developing a comprehensive roadmap for reform, identifying areas for immediate reform as well as those requiring longer term work and consultation.
The government also committed to the establishment of a dedicated Digital Platforms Branch within the ACCC. This branch will provide continuous and consistent scrutiny of digital platforms, and support the proactive investigation and enforcement of consumer and competition law cases involving digital platforms.
The ACCC was also tasked with overseeing the development of a new code to address the inherent power imbalance between platforms and media companies in Australia. In addition, the ACCC will start a new inquiry into the ‘ad tech’ supply chain, which delivers targeted display advertisements online.
Action against cartels
In 2019, the Federal Court ordered PT Garuda Indonesia Ltd to pay penalties of A$19 million for colluding on fees and surcharges for air freight services. The penalties follow the ACCC’s court action against a global air cargo cartel, which has so far resulted in penalties of A$132.5 million against 14 airlines, including Air New Zealand, Qantas, Singapore Airlines and Cathay Pacific.
The ACCC also commenced civil proceedings against BlueScope Steel Limited (BlueScope) and a former executive, Mr Jason Ellis, in relation to alleged cartel conduct in the supply of flat steel products. The Commonwealth Director of Public Prosecutions laid two charges against Mr Ellis for inciting the obstruction of a Commonwealth official in the performance of their functions. Those charges relate to actions allegedly taken by Mr Ellis during the ACCC’s investigation. Both matters have been set down for further case management hearings in early 2020.
In relation to criminal cartels, cartel charges have been laid against a money transfer business and five individuals for allegedly fixing the Australian dollar–Vietnamese dong exchange rate and fees they charged their customers.
There were also committal proceedings in two further matters. The Country Care Group Pty Ltd, its managing director and a former employee were committed to stand trial in the Federal Court of Australia on charges relating to alleged cartel conduct involving assistive technology products used in rehabilitation and aged care facilities. The trial is expected to commence in April 2020. Further, committal proceedings began 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. The committal hearing is scheduled to continue in February 2020.
We also continued to pursue alleged criminal cartel conduct involving the supply of ocean shipping services. Following an extensive investigation by the ACCC and the laying of charges by the Commonwealth Director of Public Prosecutions, Kawasaki Kisen Kaisha Ltd (K-Line) was convicted of criminal cartel conduct and ordered by the Federal Court to pay a fine of A$34.5 million. The conviction follows the conviction of another cartel participant, Nippon Yusen Kabushiki Kaisha, in 2017. The ACCC’s investigation in relation to other alleged cartel members is continuing. In addition, following continuing investigations by the ACCC, charges were also laid against a Norwegian corporation, Wallenius Wilhelmsen Ocean AS, with a sentencing hearing expected to be set down in early 2020.
The ACCC also took the opportunity to strengthen its cartel immunity and cooperation policy. The immunity policy offers the first party to report a cartel an avenue to avoid potential jail time and substantial fines. The revised policy will continue to cover cartel conduct such as price-fixing, market-sharing, bid-rigging and customer allocation, but does not cover anticompetitive concerted practices. It also clarifies a number of issues related to eligibility for immunity, the level of cooperation required, how information is used and confidentiality. The updated policy came into effect on 1 October 2019.
Action under Australia’s antitrust provisions
In December 2019, the ACCC instituted proceedings in the Federal Court of Australia in Melbourne against Tasmanian Ports Corporation Pty Ltd (TasPorts) in the first case taken by the ACCC under the amended misuse of market power provision. TasPorts, a corporation wholly owned by the State of Tasmania, owns all the ports in northern Tasmania except for the privately owned Port Latta. Up until the emergence of new entrant Engage Marine Tasmania Pty Ltd (Engage Marine), TasPorts was the monopoly service provider of marine pilotage and towage services in all northern Tasmanian ports.
The ACCC alleges that TasPorts misused its market power in contravention of section 46(1) of the CCA by engaging in a variety of conduct that hindered or prevented Engage Marine from supplying pilotage and towage services in Port Latta and Tasmania respectively. It alleges that TasPorts’ conduct had the purpose or had, or was likely to have, the effect of substantially lessening competition in the relevant markets.
In 2019, significant work also continued in our proceedings against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries, Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd (together, NSW Ports), for making agreements with the state of New South Wales (NSW). The ACCC alleges this agreement had an anticompetitive purpose and effect. In July 2019, NSW Ports filed a cross-claim against Port of Newcastle Operations Hold Co Pty Ltd, Port of Newcastle Investments (Property) Pty Ltd and Port of Newcastle Investments Pty Ltd (together, the Port of Newcastle) and the state of NSW. The hearing in this matter is scheduled to take place in late 2020. Our action in these proceedings seeks to remove a barrier to competition in an important market, the supply of port services, which has significant implications for the cost of goods across the economy, not just in NSW. The impact of any lessening of competition is ultimately borne by consumers.
We will continue to pursue companies that we consider use their market position to harm competition and consumers, and are expecting to deal with further matters involving the amended section 46 misuse of market power prohibition in 2020.
Market studies and inquiries
We use our investigative powers and expertise to advise 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 2019, we released reports arising from inquiries into digital platforms and foreign currency conversion services, as well as our wine grapes market study and review of customer loyalty schemes.
The ACCC’s foreign currency conversion services inquiry was undertaken by our Financial Services Competition Branch, who proactively monitor and promote competition in Australia’s financial services sector. This inquiry found consumers pay too much for foreign currency conversion services due to confusing pricing and lack of robust competition. It also highlighted important competition and consumer issues affecting individuals and small businesses who use international money transfers, foreign cash, travel cards, and credit cards or debit cards for transactions in foreign currencies.
In September 2019, we released our final report from our wine grapes market study. We made 10 recommendations to improve the efficiency and fairness of wine grape markets in Australia’s warm climate grape growing regions, where most of Australia’s wine is produced. The ACCC’s final recommendations include measures to address the imbalance between grape growers and large winemakers, and to boost transparency in the market and improving grape quality assessment. This report found that Australia’s winemakers should review contracts with grape growers and immediately remove potentially unfair contract terms, including those imposing lengthy payment periods on grape growers.
In December 2019, we released a final report of our review of customer loyalty schemes. The report made five recommendations around improving the way information about customer loyalty schemes is communicated to consumers and increasing transparency on how consumer data is used.
We also continued a number of wide-ranging inquiries into prices, profits and margins in the supply of electricity in the National Energy Market, the supply and demand for wholesale gas in Australia, and the supply of home, contents and strata insurance in Northern Australia.
In 2019, the government tasked the ACCC with new market studies. The first is an inquiry into home-loan pricing, with an interim report due to the government in March 2020 and a final report in September 2020. The second inquiry is into markets for tradeable water rights in the Murray-Darling Basin, with an interim report due in May 2020 and a final report in November 2020.
Penalty judgments and fines in Australia
The largest ever criminal fine under the Competition and Consumer Act was imposed in August 2019 against K-Line. K-Line was convicted of criminal cartel conduct and ordered by the Federal Court to pay a fine of A$34.5 million.
In February 2019, the Federal Court of Australia ordered Cryosite Limited to pay A$1.05 million for engaging in cartel conduct. Cryosite entered into an agreement to sell the assets of its private cord blood and tissue banking business to Cell Care Australia Pty Ltd with a clause requiring Cryosite to refer all customer enquiries to Cell Care before the sale was completed, and subsequently giving effect to that provision.
As part of our continued action taken as part of the global Air Cargo cartel investigation that commenced in 2006, A$19 million was ordered against PT Garuda Indonesia Ltd, bringing the total penalties arising from this cartel investigation to A$132.5 million 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 some other OECD jurisdictions. To achieve deterrence, the ACCC considers that penalties must be large enough to be noticed by senior management, company boards and shareholders. Since the OECD research was published, the ACCC has continued its push for more sizable penalties for substantial businesses in competition cases, and recent cases demonstrate some momentum.
Merger reviews and authorisations
The past year has presented a range of mergers that required detailed informal reviews to be undertaken by the ACCC. While there were a number of problematic mergers that were ultimately cleared following divestiture remedies being offered by the parties, for a small number it was decided that only an outright oppose decision was appropriate.
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 2018–2019, we considered 331 proposed acquisitions, clearing 92 per cent of them without the need for public review.
One of the significant decisions of 2019 was in relation to the proposed merger between TPG Telecom Limited (TPG) and Vodafone Hutchison Australia Pty Ltd (Vodafone). The ACCC decided to oppose the merger because it was likely to substantially lessen competition in the supply of mobile services by precluding TPG entering as the fourth mobile network operator in Australia. Vodafone subsequently commenced proceedings in the Federal Court seeking a ruling the merger would not be likely to substantially lessen competition. As at the date of writing this publication, the Court’s judgment has not yet been delivered.
In September 2019, the ACCC decided to oppose the acquisition of B&J City Kitchen by Jewel Fine Foods. The ACCC alleged that these were the two largest competitors, and also one another’s closest competitors in the supply of ready meals, and that the proposed merger would concentrate most of the manufacturing capacity of chilled ready meals in one business.
Last year, we reported on the ACCC’s decision to commence proceedings against Pacific National and Aurizon. This litigation is currently awaiting an appeal hearing in February. This follows the Federal Court’s decision in May 2019 to accept an access undertaking for Acacia Ridge rail terminal, which Pacific National is seeking to acquire from Aurizon. The Court noted that the proposed acquisition would be likely to substantially lessen competition in contravention of section 50, but for the undertaking provided to the Court. The case included important findings in relation to market definition, including the first judicial finding of a market based around a subset of customers, and in relation to the importance of barriers to entry in maintaining competition.
The Pacific National/Aurizon judgment is currently being appealed by the ACCC to the Full Federal Court, with cross-appeals by Pacific National and Aurizon. The appeal raises a number of significant questions about the application of the section 50 test and the ability of the Court to accept undertakings in relation to a merger, and will be heard by the Full Court in February 2020.
During 2019 the ACCC received the first merger authorisation application since the legislative change in 2017, which reinstated the ACCC as the first-instance decision-maker for merger authorisations. AP Eagers proposed to acquire Automotive Holdings Group and sought authorisation. The ACCC conditionally authorised the proposed acquisition following an undertaking from AP Eagers to sell its existing new car dealerships in the Newcastle and Hunter Valley region. The ACCC had been concerned that the merged entity would own about half of the dealerships in the Hunter Valley region and about three quarters of the dealerships in metropolitan Newcastle that sell the top 10 car brands.
Non-merger authorisation applications to the ACCC in 2019 included a number relating to collective tendering and procurement of waste-processing services by local councils, which were granted. The ACCC also authorised collective procurement of electricity across Australia by members of the Large Format Retail Association.
In 2019, the ACCC acted to prevent a dairy company from gaining legal protection for proposed resale price maintenance conduct. Meredith Dairy had notified the ACCC that it proposed to ensure that retailers did not sell its cheese products below a specified price. The ACCC considered that the proposed conduct was not likely to result in public benefits such as reduced transaction costs in Meredith Dairy’s operations or greater innovation or investment in the market, and was likely to result in public detriments through higher prices.
In mid-2019, the ACCC consulted on a draft legislative instrument implementing a class exemption for small businesses to engage in collective bargaining. Class exemptions provide a ‘safe harbour’ for classes of conduct, meaning that specific ACCC approval is not required for that conduct to be exempted from competition law. This was the ACCC’s first consultation on a possible class exemption under 2017 laws introduced following the 2015 Harper Review. In December 2019, the ACCC released a discussion paper regarding a possible class exemption for ocean carriers providing international liner cargo shipping services to and from Australia.
Increased cooperation between competition agencies around the world is an essential component of improving competition enforcement practices and outcomes. The ACCC relies on close and productive partnerships with our international counterparts to achieve our compliance and enforcement objectives. This involves not only cooperating on individual investigations, but also sharing information about experiences and practices to enhance the capability of competition agencies to address anticompetitive conduct.
The ACCC also takes an active role in international forums such as the OECD and the International Competition Network. In addition, we directly support regional capacity building through the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) Competition Law Implementation Program (CLIP). This programme delivers targeted capacity building and technical assistance to Association of South-East Asian Nations (ASEAN) member states to help combat anticompetitive activities in individual markets and the ASEAN region.
In 2019, one of the key activities delivered by CLIP was a Commissioners Retreat for competition agency leaders from ASEAN countries, hosted by the ACCC, with contributions from a range of ASEAN speakers and New Zealand. This event provided a forum for the open and frank exchange of views and information on current competition law issues in the region, as well as how agencies and commissioners work to protect and support fair and open competition in their markets. We recognise that competition agencies worldwide benefit greatly through the sharing of experiences and expertise. Events like the Commissioners Retreat provide a foundation for dialogue and cooperation between competition agencies to build the trust and understanding that underpins effective international cooperation.