Australia’s antitrust and consumer protection legislation is contained in the Competition and Consumer Act 2010 (CCA).1 The object of the CCA is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.
The Competition and Consumer Act
The CCA is based on similar principles to North American and European competition laws. It has three key pillars:
- competition provisions, which prohibit anti-competitive behaviour either on a per se basis or a rule-of-reason basis. Cartels are prohibited per se and may attract criminal or civil sanctions. All other forms of anti-competitive behaviour, except for vertical price fixing and one type of tying conduct, require an assessment of the substantial purposes of the behaviour or the likely effect of the behaviour on competition. The competition provisions include a merger control regime;
- access provisions, which enable market participants to obtain access to monopoly or ‘essential’ infrastructure; and
- consumer protection provisions.
The Australian federal government has announced that it will conduct a ‘root and branch’ review of the competition provisions of the CCA in 2014. At the time of writing, the details of the review were yet to be released.
Australian Competition and Consumer Commission
The CCA is administered by a single, independent federal agency, the Australian Competition and Consumer Commission (ACCC). The ACCC includes the Australian Energy Regulator (AER), which regulates Australia’s national energy market. The ACCC currently employs about 798 full-time staff and has budgeted to slightly increase its staff to about 802 in 2013–2014. The current chairperson of the ACCC is Rod Sims, who succeeded Graeme Samuel on 1 August 2011. Rod Sims has stated that his priorities for his term as chairperson include closer scrutiny of acquisitions of non-controlling stakes in businesses and the pursuit of strategic litigation where the outcome may be less predictable (as evidenced by the ACCC’s appeal against the Metcash decision, discussed below). Rod Sims also made it clear that mergers and acquisitions in concentrated markets will be subject to close scrutiny and that the ACCC will ‘take a long hard look’ at mergers that reduce the number of key players in a market from three to two.
The ACCC actively investigates possible breaches of the CCA and is a regular litigator.
The ACCC may accept court-enforceable undertakings (remedies) to address concerns it may have about potential breaches of the CCA.
The ACCC may also apply to the Federal Court of Australia for orders to injunct conduct, orders for divestiture, orders to void acquisitions ab initio, orders for substantial civil pecuniary penalties (against companies and individuals), orders disqualifying directors from managing corporations for a period of time, orders for legal costs and other forms of relief.
The ACCC may also commence representative actions for classes of persons for awards of civil damages and orders for legal costs in the Federal Court of Australia, and in relation to its consumer protection powers, issue infringement notices, substantiation notices and public warning notices.
In the 2012–2013 financial year, the ACCC had revenues of A$150.2 million. In relation to competition matters, in 2012–2013 the ACCC processed approximately 839 complaints and enquiries, reviewed about 289 mergers and was involved in 15 proceedings before the Federal Court of Australia on competition matters (including 11 for civil cartel conduct) with five proceedings relating to the air freight cartel, as well as the Viscas Corporation land cable cartel and Koyo ball bearing cartel proceedings being finalised.
In relation to consumer protection matters in 2012–2013, the ACCC instituted 54 proceedings, issued 18 substantiation notices and issued 27 infringement notices across 10 matters resulting in over A$300,000 in penalties being paid. In 2013, the ACCC issued its first infringement notice to a public listed company, iiNet Limited who paid A$106,000 for alleged misleading naked DSL advertisements. This infringement notice is also reflective of one of the ACCC’s consumer protection priorities: the telecommunications sector. Since 2011, the Federal Court has ordered penalties totalling almost A$22 million for breaches of the consumer law provisions of the CCA in 33 cases, including in 2013 a significant A$3 million penalty against Hewlett-Packard for false representations about customer statutory consumer guarantee rights and a A$1.55 million penalty against AGL for false representations and in misleading and deceptive conduct during door-to-door sales activities.
The ACCC has yet to refer participants in a cartel to Australia’s Federal Director of Public Prosecutions (DPP) for criminal prosecution; however, it recently stated that it will pursue the right matter ‘with vigour’. According to Rod Sims, the ACCC has ‘a number of cartel investigations under way, and if […] they involve serious cartel conduct they will be referred to the DPP as soon as possible’.
In response to globalisation of the world economy and antitrust regulation, the ACCC cooperates with foreign competition regulators, and is an active participant in various international and Asian forums of national competition law agencies and advisers that share information and expertise, including OECD committees and the International Competition Network.
The ACCC’s compliance and enforcement policy outlines the ACCC’s general approach to compliance and enforcement. In enforcing the provisions of the CCA, the ACCC’s primary aims are to stop the unlawful conduct, deter future offending conduct, undo the harm caused by the contravening conduct, encourage the effective use of compliance systems and, where warranted, punish the
offender by the imposition of penalties or fines. The ACCC also has regard to a number of factors when determining whether to pursue particular conduct, including whether the conduct:
- is of significant public, national or international interest or concern;
- results in a substantial consumer (including small business) detriment;
- demonstrates a blatant disregard for the law; or
- involves concentrated markets or significant new or emerging market issues.
In February and then again in August 2012, the ACCC identified its current competition priorities as:
- cartel conduct;
- anti-competitive agreements; and
- misuse of market power.
The ACCC has had an increasing focus on enforcement of the consumer protection provisions, with its current enforcement priorities identified as:
- the telecommunications and energy sectors, particularly door-knocking and misleading discount claims;
- credence claims, with a focus on those in the food industry such as ‘organic’, ‘free range’ and ‘made in Australia’ on the basis that they have the potential to have a significant impact on consumers or the competitive process;
- misleading carbon pricing representations;
- the consumer guarantees regime;
- product safety issues that have the potential to cause serious harm to consumers; and
- consumer protection issues impacting on indigenous consumers.
In particular, the ACCC has stated a commitment to prioritising:
- online competition issues including conduct that may impede emerging competition between online traders or limit the ability of small businesses to effectively compete online; and
- competition issues in highly concentrated sectors, in particular in the supermarket and fuel sectors with scrutiny of supermarket ‘shopper docket’ discount petrol schemes and potential misuse of market power by supermarkets dealing with suppliers.
Private litigants may apply to the Federal Court of Australia for awards of civil damages and other relief for breaches of the CCA. Class actions are a well-established instrument in the toolkit of mainstream commercial litigation in Australia, with a growing number of litigation funders. There is one class action currently on foot in Australia for damages in respect of an alleged air freight cartel. The most significant class action result was achieved in 2011, when settlement of the corrugated cardboard box cartel resulted in A$95 million being distributed to group members.
New prohibition on price signalling
The Australian government amended the CCA in 2012 to prohibit price signalling in the Australian banking sector. The regulations enacted in 2012 clarify that the new prohibitions only apply to a good or service provided by an authorised deposit-taking institution consisting of, to any extent, either taking money on deposit (other than as part-payment for identified goods or services) or making advances of money. The regulations also provide that, before the new prohibitions are extended to other sectors, the minister must be satisfied that any consultation that he or she considers to be appropriate and reasonably practicable has been undertaken.
The amendments comprise two new civil prohibitions. One of the prohibitions is per se in nature and will apply even if the price information that is signalled from one competitor to another is not confidential and where it is signalled through a third party. The per se prohibition will not be contravened if the disclosure is made in the ordinary course of business. The second prohibition applies to information about price, capacity or strategy, but only where the information is signalled for the purpose of substantially lessening competition in a market.
While these laws currently only apply to specified conduct in the banking sector, they may be extended by regulation to other conduct and/or other sectors of the economy in the future. There have been no prosecutions under the new prohibitions and we are not expecting to see any because of the limited nature of their application and the substantial number of exemptions that apply to them.
Extraterritorial reach of the CCA
The CCA applies to conduct engaged in outside Australia where the party engaging in the conduct is incorporated in Australia, registered as a foreign company in Australia, carries on business in Australia (including through their nominees or agents) or is ordinarily a resident of Australia.
Australia’s merger control regime
The CCA prohibits direct and indirect acquisitions of shares or assets that would, or would be likely to, have the effect of substantially lessening competition in a market in Australia, or a state, territory or region of Australia. The CCA also applies to offshore acquisitions of shares where the acquisition would result in a change of control of an Australian subsidiary, and this change of control would be likely to substantially lessen competition in Australia and would not be offset by public benefits.
The ACCC is responsible for investigating proposed mergers to assess whether or not they would be likely to have the effect of substantially lessening competition.
In the 2012–2013 financial year, the ACCC assessed 289 acquisitions. Of these, 213 were assessed without requiring a public review, while 76 underwent a public or confidential review. Of the 76 reviewed, the ACCC did not oppose 55, publicly opposed six and accepted undertakings in two.
There is little case law regarding the merger provisions, likely due to the reluctance of sellers to delay a transaction until proceedings conclude and the costs involved. The most recent case involving a merger occurred in December 2010 when the ACCC applied, on an expedited basis, to the Federal Court of Australia to injunct Metcash from acquiring Franklins (each of which carries on business in the Australian grocery sector). The Federal Court declined, after more than eight months, to injunct the merger. The ACCC appealed the decision to the Full Court of the Federal Court on an expedited basis. The ACCC also sought an interim injunction to prevent Metcash from completing its acquisition. The Court declined to grant this, which allowed Metcash to complete its acquisition of Franklins before the appeal was decided. The appeal involved three key issues: whether the trial judge correctly defined the grocery market; the standard of proof required to show that there was a viable, alternative bidder to Metcash for Franklins (the counterfactual); and the likely effects on competition of Metcash’s acquisition of Franklins. The Full Federal Court dismissed the appeal on all three grounds on 30 November 2011 and the ACCC decided not to seek leave to appeal to the High Court of Australia. The case provides clarity around how grocery markets should be defined, and confirms that markets may be defined based on multiple functional levels, where one functional level constrains another. The case also confirms that the standard of proof for assessment of the counterfactual is the ordinary civil standard of the balance of probabilities. The case may also lend support for calls for the Commission to give acquirers greater transparency about the evidence the Commission intends to rely on to oppose their acquisitions, before any litigation, consistent with the practice in other jurisdictions.
Australia’s merger control regime is not subject to turnover thresholds. Rather, the ACCC’s policy is to further investigate proposed acquisitions which would be likely to result in:
- the acquirer having a market share of 20 per cent or more; and
- the products of the merger parties being either economic substitutes or complements.
Australia’s merger control regime does not contain a mandatory notification procedure.
However, where a proposed merger would be likely to substantially lessen competition in Australia and the parties proceed with the merger without first having obtained clearance from the ACCC, they bear the risk that the ACCC will seek either an injunction, or orders for divestiture or to void the acquisition, civil pecuniary penalties and orders for legal costs.
The practical effect of the ACCC’s enforcement powers is that Australia has a much-used voluntary notification procedure for mergers.
In practice, acquirers usually seek clearance from the ACCC in advance of completion if their proposed acquisition would:
- result in the acquirer having a market share of 20 per cent or more;
- remove a vigorous and effective competitor;
- create significant vertical integration issues or conglomerate effects;
- be likely to be referred to the ACCC by other regulators (including, for example, Australia’s Foreign Investment Review Board (FIRB), the Australian Communications and Media Authority, the Australian Securities and Investments Commission and Australia’s prudential agencies); or
- attract public attention or complaints from competitors, suppliers or customers.
An acquirer of shares or assets may notify the ACCC of their proposed acquisition as a matter of courtesy (including on a confidential basis), or seek formal or informal clearance for their proposed acquisition from the ACCC, or (based on public benefits) apply to the Australian Competition Tribunal for authorisation of their proposed acquisition.
Informing the ACCC of a proposed acquisition as a matter of courtesy is an abridged form of the informal clearance process. It is usually used where the acquirer is confident that the ACCC will not identify any substantial issues with their proposed acquisition, and their transaction documents do not contain a condition precedent to closure of the acquisition that requires clearance from the ACCC, but the acquirer wishes to avoid delay as a result of FIRB seeking the ACCC’s views or to avoid a ‘please explain’ letter from the ACCC after the acquisition is announced.
Informal clearance process
Informal clearance is a popular notification method. It allows the acquirer to approach the ACCC on a confidential basis for a non-binding view before the acquisition is announced, or on a non-confidential basis once the acquisition is announced, or both.
Approaching the ACCC on a confidential basis is desirable because it gives the acquirer and the ACCC an opportunity to identify and narrow any issues before the ACCC commences its market inquiries to assess the likely effect on competition of the proposed acquisition. During market inquiries, the ACCC actively canvasses information from competitors, suppliers and customers of the parties to the proposed acquisition, as well as other interested persons (including government departments and agencies).
The ACCC does not publish applications for clearance, but may make non-confidential information contained in applications available to market participants when it seeks their views.
Most mergers receive informal clearance from the ACCC within eight weeks from the date on which the ACCC commences its market inquiries.
More complex mergers may require a two-stage review, which involves the ACCC conducting two rounds of market inquiries, punctuated by the publication by the ACCC of a Statement of Issues. A Statement of Issues sets out the concerns identified by the ACCC during its first round of market inquiries and forms the focus of the ACCC’s second round of market inquiries. In cases where the ACCC publishes a Statement of Issues, the clearance process takes 12 weeks or – as is usually the case – substantially longer. For example, the clearance processes for Metcash’s acquisition of the Franklins supermarket chain, Foxtel’s acquisition of Austar, APA’s acquisition of Epic, APA’s acquisition of Hastings Diversified Utilities Fund and Nestlé’s acquisition of Pfizer’s infant nutrition business each took at least six months. In 2012–2013, the ACCC issued Statements of Issues in 10 mergers.
Informal clearance results in the ACCC providing a letter of comfort to the acquirer, stating that it does not intend to oppose the acquisition based on the information considered. It does not confer statutory immunity and is not subject to merits review. It is rare for the ACCC to provide a letter of comfort to the acquirer and subsequently decide to oppose an acquisition. We are only aware of two instances where this has occurred since 1974. In one of those instances, we understand the ACCC considered that the acquirer deliberately misled it. In the other instance, the ACCC considered that a material change in circumstances occurred after it issued the letter of comfort.
During the informal clearance process, the ACCC will protect the identity of complainants.
Formal clearance process
Formal clearance results in statutory immunity from prosecution for the acquirer to undertake the proposed acquisition or, if the ACCC declines to grant formal clearance, a right to apply to the Australian Competition Tribunal for limited merits review of the ACCC’s decision (but only based on the information before the ACCC).
Applications for formal clearance are subject to transparent statutory procedures, including requirements to submit an application form prescribed by the regulations (which is similar to the European Union’s Form CO).
If the formal clearance procedure is used, the ACCC must make its decision within 40 business days of receiving a valid application, subject to any extensions of the 40-business-day period. In all but one instance, extensions to the 40-business-day period require the consent of the acquirer.
There have been no applications for formal clearance in Australia to date. However, the formal clearance process may be used in Australia in the future, especially where the acquirer is expecting complaints and desires greater transparency around the identity of the complainants and nature of the complaints than is currently allowed under the informal clearance procedure.
Authorisation based on public benefits
An acquirer may apply to the Australian Competition Tribunal for authorisation of a proposed acquisition on public benefit grounds.
Applications for authorisation are subject to transparent statutory procedures, including requirements to submit an application form prescribed by the regulations. The tribunal must make its decision within three months – or, if the acquisition raises complex issues, within six months – from the date on which it receives an application for authorisation of a merger, subject to any extensions agreed by the applicant.
If the tribunal grants authorisation, the parties obtain statutory immunity from prosecution for the acquisition. Decisions by the tribunal are subject to review in the Federal Court of Australia.
Applications for authorisation of mergers are uncommon. In 2013, the ACCC granted authorisation, subject to a condition, for an alliance between Qantas Airways and Emirates on the basis that the relevant net public benefit test was met. At the time of writing, Murray Goulburn was in the process of seeking public authorisation from the Australian Competition Tribunal for its proposed acquisition of the Warrnambool Cheese & Butter company. Otherwise, there have not been any applications for authorisation of mergers since 2002.
Cartel conduct is currently a high enforcement priority for the ACCC.
Parallel civil and criminal regimes
In Australia, cartel conduct is subject to parallel regimes of civil prohibitions and criminal offences. Except for the standard of proof and the requirement to demonstrate intentional participation for the criminal offence, the civil prohibitions and criminal offences have identical elements.
Definitions of cartel conduct
The CCA defines cartel conduct to comprise provisions in contracts, arrangements and understandings between actual or potential competitors that have:
- the purpose or likely effect of fixing, controlling or maintaining prices (or components of prices) for goods or services; or
- the purpose of restricting output, allocating customers or suppliers, or rigging bids.
At the time of writing there have been no criminal prosecutions for cartel conduct in Australia since the criminal regime was introduced in Australia in the second half of 2009. One reason for this may be that the ACCC must refer criminal cartel matters to the Federal Director of Public Prosecutions (DPP) for criminal prosecution and may only be likely to do so in exceptional cases where, for example, there is recidivism.
Immunity and leniency policies
The ACCC has immunity and leniency policies which encourage participants in cartels to voluntarily notify the existence of cartel conduct in return for full or partial immunity from civil prosecution by the ACCC and from criminal prosecution by the DPP.
The ACCC has the power to grant immunity to corporations and their officers and employees from civil prosecution for cartel conduct. However, only the DPP has the power to grant immunity to corporations and their officers and employees from criminal prosecution for cartel conduct. In making decisions to grant immunity from criminal prosecution for cartel conduct, the DPP takes into account recommendations made by the ACCC and applies the same criteria as the ACCC when it assesses whether to grant immunity.
The ACCC’s immunity policy provides that only one participant in a cartel will be eligible for immunity, and they need to be first through the door to the ACCC and to fully cooperate with the ACCC’s (or the DPP’s) investigation and prosecution of the cartel.
Where a company applies for immunity, it is possible for the company to gain derivative immunity for its officers and employees.
The ACCC’s immunity policy includes an amnesty-plus regime for cartelists who are not eligible for immunity in a cartel already being investigated by the ACCC but who provide the ACCC with evidence of a second cartel, of which the ACCC was not previously aware. If they satisfy the ACCC’s amnesty-plus policy, they gain immunity from prosecution for both cartels.
No double jeopardy
The CCA avoids double jeopardy for cartelists by allowing civil proceedings to be postponed until criminal proceedings are completed. If the defendant is convicted in criminal proceedings, the civil proceedings will be permanently stayed.
Complete defences and exceptions
There are a range of complete defences and exceptions available for cartel conduct, including for limited types of joint ventures.
Authorisation on public benefit grounds
Proposed cartel conduct may be authorised by the ACCC if the parties can demonstrate that the public benefits of the cartel conduct would likely outweigh the anti-competitive detriment from the cartel conduct.
Seeking authorisation involves a transparent process that is subject to statutory time frames and that can take up to six months. The ACCC does not have power to authorise cartel conduct that has already occurred. Rather, it may only grant authorisation on a prospective basis.
Other forms of anti-competitive conduct
The CCA also prohibits misuse of substantial market power for an anti-competitive purpose, resale price maintenance, provisions in contracts, arrangements and understandings that have the purpose or likely effect of substantially lessening competition, and certain types of vertical conduct (either on a per se basis or where the conduct has the purpose or likely effect of substantially lessening competition).
In each of those cases, the prohibitions are civil in nature.
The ACCC regularly seeks relief in the Federal Court of Australia for breaches of these prohibitions. For example, the ACCC has obtained civil penalties of A$4.9 million from Baxter Healthcare for breaches of the prohibitions on misuse of market power and vertical conduct; A$14 million against Cabcharge for breaches of the prohibition on misuse of market power; and A$2.5 million against Ticketek for breaches of the prohibition on misuse of market power. In cartels, the ACCC has obtained civil penalties of A$8.2 million from suppliers involved in a fine paper cartel; A$36 million from Visy for its involvement in the corrugated cardboard box cartel; and A$98.5 million from 13 airlines involved in the air freight cartel.
Penalties for contraventions of the CCA
The Federal Court of Australia may impose substantial penalties for breaches of the competition provisions in the CCA. For both civil and criminal prohibitions, corporations face maximum fines and pecuniary penalties of the greater of:
- A$10 million;
- three times the gain from the contravening conduct; or
- where the gain cannot be ascertained, 10 per cent of the corporate group’s annual turnover attributable to Australia.
Individuals face up to 10 years in prison, or fines of up to A$340,000, or both for contravening the criminal prohibition on cartel conduct. For civil contraventions, the maximum penalty for individuals is A$500,000.
ACCC’s investigatory powers
The ACCC has a broad remit to investigate suspected breaches of the CCA. While the ACCC can and does instigate investigations on its own account, it also receives thousands of complaints each year from businesses and consumers.
Power to compel the production of information and documents and to cross-examine individuals
In addition to its ability to request information on a voluntary basis, the ACCC’s most effective investigatory tool is the section 155 notice. This is a statutory notice requiring recipients to produce information and documents, and to make available individuals for cross-examination under oath and without privilege against self-incrimination. Information which is subject to legal professional privilege can be withheld from the ACCC.
Section 155 notices often impose a considerable burden on their recipients by requiring the analysis, collation and production of a large number of documents and, in some cases, a significant amount of information within a limited time frame. The ACCC is usually willing to negotiate over the scope of a notice to ensure that it obtains the most relevant material in the shortest possible time frames, including in tranches.
Recently there has been an increase use by the ACCC of these notices. For example, during 2012–2013, the ACCC issued 358 notices under section 155 compared to only 175 in 2011–2012. The ACCC has made the observation that there is an increase in the instances of possible non-compliance by recipients of section 155 notices.
Search and seizure powers
The ACCC may apply to Federal Magistrates to obtain warrants to conduct ‘dawn raids’ or to enter and search premises, make copies of the material specified in the warrant, and to seize equipment, CDs, files and other storage devices.
When the ACCC conducts a search pursuant to a warrant in relation to a criminal matter, it has the ability to seize material not specified in the warrant if:
- there are reasonable grounds to believe that the material is evidence of an indictable offence against the CCA; and
- seizure of the material is necessary to prevent it from being destroyed or concealed.
Access to infrastructure
The CCA contains a statutory access regime which allows third parties to acquire services produced by natural monopoly infrastructure (such as rail, port and transmission facilities). Some Australian states and territories have enacted legislation that contains access regimes which sit along side the Commonwealth regime. The state and territory access regimes are not administered by the ACCC.
The purpose of the access regimes is to promote the economically efficient operation and use of infrastructure, including by removing bottlenecks in Australia’s supply chains.
The CCA’s access regime is conceptually similar to the United States’ ‘essential facilities’ doctrine, though it differs significantly in procedure and substance. Under the CCA, specific services produced by means of infrastructure are ‘declared’ by the Federal Treasurer, based on a recommendation from the National Competition Council (NCC).
The NCC cannot recommend declaration of a service unless it is satisfied of each of the factors set out in the CCA, including that:
- the access would promote a material increase in competition in at least one market, other than the market for the service (namely, there must be a benefit to competition in an upstream or downstream market different to the relevant infrastructure services market);
- it would be uneconomical for anyone to develop an alternative facility to provide the service; and
- the facility is of national significance, in terms of size, trade or economic value.
Once the service is ‘declared’, the service is provided on terms and conditions agreed by the provider of the service and its customers or determined in a binding arbitration conducted by the ACCC.
The ACCC may make a range of arbitral determinations, including requiring the access provider to expand the infrastructure. However, the ACCC cannot make a decision that would prevent an existing user (including, where relevant, the infrastructure owner) obtaining sufficient capacity to meet its actual or reasonably anticipated requirements.
The statutory access regime in the CCA also allows owners of infrastructure to seek approval from the ACCC for voluntary access undertakings, which set out the terms and conditions on which they will provide certain services.
In 2012, the High Court of Australia handed down its judgment in the long running case of Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal. The High Court of Australia adopted the ‘privately profitable’ test in relation to criterion (b). Criterion (b), one of the six criteria of which the Minister must be satisfied before making a decision to declare a service, is that it would be uneconomical for anyone to develop another facility to provide the relevant service. The High Court of Australia considered that this criteria is assessed by asking whether it would be profitable or economically feasible for any actual or potential market participant to do so, which differs to the interpretation taken to date. The decision is considered to significantly reshape the access regime by making the declaration process easier, quicker and less expensive.
Unlike other jurisdictions, access to infrastructure plays an important role in Australia’s economy and occupies a significant portion of the resources of the ACCC and state regulators in Western Australia, Queensland, New South Wales and Victoria.
Australia’s consumer protection provisions are backed by substantial penalties for breaches and additional enforcement powers for the ACCC.
Australia’s consumer protection regime extends to:
- unfair contract terms;
- unconscionable conduct;
- misleading or deceptive conduct, which includes misleading and false advertising, names and market practices (including lookalike products);
- bait advertising, referral selling, inertia selling and multiple pricing;
- door-to-door sales and outbound telesales;
- consumer guarantees for goods and services (including manufacturer and extended warranties); and
- product safety and recalls.
The ACCC enforces consumer protection laws vigorously at the national level. State and territory consumer regulators (such as the New South Wales Office of Fair Trading and Consumer Affairs Victoria) also enforce consumer protection laws at the local level.
There has been a marked increase in the ACCC’s focus on and enforcement of the consumer protection provisions in the last three years. This has generally been attributed to the introduction of the new Australian Consumer Law which harmonised and modernised the plethora of inconsistent consumer protection laws applying at a federal and state/territory level, including introducing new powers for the ACCC (including to issue substantiation notices, infringement notices and public warning notices) and higher penalties for breach of certain provisions.
Importantly, the unfair contract terms regime requires businesses to ensure that any standard form contracts with consumers do not contain any unfair terms. An ‘unfair term’ is void and consumers and regulators have the ability to seek a declaration from a court that a term is unfair. A term will be ‘unfair’ if:
- it would cause a significant imbalance in the parties’ rights and obligations arising under the contract;
- it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- the term would cause detriment (whether financial or otherwise) to a party if it were applied or relied upon.
In 2013, the ACCC instituted its first proceedings for a breach of the unfair terms regime against ByteCard (trading as Netspeed Communications). The Federal Court of Australia declared, by consent, that a number of clauses in ByteCard’s standard form consumer contracts were unfair and therefore void.
The Australian federal government has publicly stated its intention to extend the unfair terms provisions to apply also to standard form contracts with small business customers. At the time of writing, no further details had been provided by the government.
- The legislation was formerly known as the Trade Practices Act 1974.