Australia: Australian Competition and Consumer Commission

The year 2015 is set to be a momentous year for competition policy and law in Australia. The independent panel charged with conducting a ‘root and branch’ review of Australia’s competition laws and policy is expected to provide a final report to government by 31 March 2015.

The Australian Competition and Consumer Commission (ACCC) has been a keen and active participant in the once-in-20-year review and the wider debate. Our submissions to the review focused on three key areas of competition policy: opening up as many sectors as possible to the discipline of competition; getting the settings of the competition law right; and establishing processes and institutions that continually foster competition and drive reform. The broad-ranging review also presented an opportunity to press for changes to parts of Australia’s competition laws to bring them more in line with approaches taken internationally.

At the time of writing, the overall signs are promising. The review panel’s draft report sets out principles and recommendations which, if adopted by the government, could enhance Australia’s economic productivity for decades to come.

Enforcement

In February, following an annual strategic review and wide consult­ation, the 2014 edition of the ACCC’s Compliance and Enforcement Policy was issued. The policy outlines compliance and enforcement priority areas for the year and sets out the factors taken into account when deciding whether to pursue matters.

The ACCC has again made it clear that cartel conduct, anti-competitive agreements and the misuse of market power are perennial enforcement and compliance priorities. In fact, the ACCC is now focusing approximately half of our enforcement resources on competition matters, including a new dedicated group responsible for serious cartels.

Last year, there were many notable competition enforcement activities, some of which will continue to unfold in the Federal Court of Australia in 2015. Some of the highlights include:

• The Federal Court ordered, by consent, penalties totalling A$8.3 million against a Sydney forklift gas cartel. The court found that from at least 2006 until 2011, Renegade Gas and Speed-E-Gas, through their senior officers and sales staff, gave effect to a no-poaching understanding.
• The Federal Court ordered, by consent, a penalty of A$3 million against NSK Australia Pty Ltd for its involvement in cartel conduct in relation to the price of ball bearings in Australia. The case came to the ACCC’s attention following other investigations arising out of the US Department of Justice’s investigation into auto-parts cartels.
• The Federal Court ordered a penalty of A$11 million against travel agency group Flight Centre Limited for attempting to enter into anti-competitive arrangements with three international airlines. Flight Centre has appealed the judgment and penalties and the ACCC filed a cross appeal relating to the penalty.
• Instituting proceedings in the Federal Court against Pfizer Australia for alleged misuse of market power and exclusive dealing regarding supply of atorvastatin to pharmacies. Atorvastatin is a medication used to lower cholesterol. Pfizer’s original brand of atorvastatin, Lipitor, was protected by patent until May 2012. The ACCC alleges that, in early May 2012, Pfizer offered significant discounts and rebates on sales of Lipitor, provided pharmacies bought a minimum volume of Pfizer’s generic atorvastatin product. The case is currently reserved in the Federal Court.
• Instituting proceedings in the Federal Court against Informed Sources (Australia) Pty Ltd and several petrol retailers alleging breaches of section 45 of the Act. The ACCC alleges that the information sharing arrangements between Informed Sources and the petrol retailers, through a service provided by Informed Sources, allows those retailers to communicate with each other about their prices, and that these arrangements had the effect or likely effect of substantially lessening competition in markets for the sale of petrol in Melbourne. The case continues.
• Instituting proceedings in the Federal Court against the Construction Forestry Mining and Energy Union, alleging it engaged, or attempted to engage, in secondary boycott conduct directed at Boral Resources (Vic) Pty Ltd and Alsafe Premix Concrete Pty Ltd.
• Instituting proceedings in the Federal Court alleging that Calvary Healthcare, a national private health care organisation implemented an anti-competitive by-law relating to the use of hospital facilities by medical practitioners.
• Instituting proceedings in the Federal Court 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 Federal Court dismissed proceedings brought by the ACCC against Air New Zealand Ltd and PT Garuda Indonesia Ltd for alleged price fixing in the air cargo industry. That matter is being appealed by the ACCC.
• Instituting proceedings in the Federal Court against OmniBlend Australia Pty Ltd, an online supplier of kitchen blenders, alleging that it attempted to engage in price fixing with a competitor. It is also alleged that OmniBlend Australia induced a supplier to direct Omniblend Australia’s key competitor not to discount its prices for blenders.
• Instituting proceedings in the Federal Court against the Australian Egg Corporation Limited (AECL) and others for alleged cartel conduct. The ACCC alleges that the AECL and other corporate and individual respondents attempted to induce egg producers who were members of the AECL to enter into an arrangement to cull hens or otherwise dispose of eggs, for the purpose of reducing the supply of eggs available to Australian consumers and businesses. It is not alleged that the attempt to make a cartel arrangement involving Australian egg producers was successful.

Many of the ACCC’s consumer protection activities under the Australian Consumer Law also benefit competition. For example, when making promotional claims about food products, the ‘what’, ‘where’ and ‘how’ must be accurate. When credence claims are misused, the damage is done in three ways: consumers are misled; competitors who can legitimately make a credence claim unfairly lose their competitive advantage; and innovation suffers. In 2014, the ACCC took a string of enforcement actions covering credence claims made about eggs, beer and honey, to name just a few.

Mergers

Section 50 of the Competition and Consumer Act 2010 prohibits mergers and acquisitions that substantially lessen competition in any market in Australia or are likely to do so. In 2013–14, the ACCC considered 297 matters under section 50 of the Act. Of these, 242 were assessed as not requiring a public review.

In the area of ‘merger authorisations’, some new ground was covered. In November 2013, the first direct merger authorisation application was made to the Australian Competition Tribunal when Murray Goulburn filed an application to acquire Warrnambool Cheese and Butter (WCB). In merger authorisation determinations, the Tribunal must apply a public benefit test. This differs to reviews under section 50 of the Act where a substantial lessening of competition test is applied. However, before the Tribunal had heard the application, control of WCB was acquired by rival bidder Saputo, leading to Murray Goulburn withdrawing its application in January 2014.

In a subsequent separate application in March 2014, AGL filed an application with the Tribunal for authorisation to acquire the assets of Macquarie Generation. Macquarie Generation, which was a New South Wales (NSW) state-owned corporation, was being offered for sale as part of the broader privatisation of NSW electricity generation assets by the NSW government. AGL’s application for authorisation to the Tribunal followed a decision by the ACCC that it would oppose the proposed acquisition on the basis that it was likely to have the effect of substantially lessening competition in breach of section 50. In June, the Tribunal granted conditional authorisation to AGL after concluding that the proposed acquisition would result in such public benefit that it should be allowed to occur.

Authorisations and notifications

Under the Act, the ACCC can give anti-competitive conduct legal protection when the public benefit outweighs the public detriment. Depending on the type of conduct, businesses may apply for an ‘authorisation’ or submit a ‘notification’ to the ACCC.

Between 2013 and 2014, the ACCC issued 36 final authorisation decisions, for arrangements involving a wide range of industries, and assessed more than 720 exclusive dealing notifications involving 503 separate matters.

In December 2014, the ACCC granted conditional authorisation to the first application for resale price maintenance (RPM) lodged under the Act. Tooltechnic Systems (Aust) Pty Ltd was granted conditional authorisation to set minimum retail prices on Festool branded power tools until 31 December 2018. The conditions will allow the ACCC to monitor the impact of the RPM conduct and will inform consideration of any future application for reauthorisation by Tooltechnic.

Regulatory

The ACCC is a multi-sector regulator. In practical terms, this means we have an important role in key infrastructure such as water, communications, ports, rail, airports and fuel.

In 2015, the communications industry in Australia will continue a long transition process brought about by technological developments, changes in consumer usage and, most significantly, policy-induced structural change. Despite these changes, the majority of end-users will remain on the copper network for some time. It is important to continue to regulate these fixed-line services, until the National Broadband Network (NBN) is further progressed. The ACCC is considering a number of complex pricing issues. Most significant are: how to account for the impacts of the transition to the NBN in prices for Telstra’s declared fixed line services; the more general decline in use of Telstra’s fixed line network; and the approach to the allocation of costs to access services.

As foreshadowed in my previous reports, increased consumer consultation is a major focus for all our regulatory areas. For example, in the coming year, the Australian Energy Regulator (AER) will continue to draw on input provided by consumer and small business groups as part of its regulatory processes and functions. In 2014, the AER appointed a mix of representatives from consumer advocacy organisations and small business groups to its Customer Consultative Group. Membership provides organisations with the opportunity to tell the AER about energy issues that impact on the groups that they represent. It also enables the AER to seek advice and input on key issues and to share information on its activities through these networks.

It will also be a busy year for the AER’s Consumer Challenge Panel. Members of the panel will assist the AER in making decisions on a large number of revenue proposals from energy network businesses. The expert members of the panel bring consumer perspectives to the AER to better balance the range of views considered as part of its decisions.

2014 saw a change in the ACCC’s regulatory role in relation to access to wheat ports. The Port Terminal Access (Bulk Wheat) Code of Conduct took effect replacing the previous wheat port access undertaking regime. The Code regulates the conduct of port terminal service providers to ensure that exporters of bulk wheat have fair and transparent access to the ports.

An area of continued high concern for Australian consumers is retail fuel pricing. To address these concerns, the ACCC monitors prices, costs and profits in the Australian downstream petroleum industry under a ministerial direction. The Australian government minister responsible for competition policy has directed the ACCC to continue monitoring the sector for a further three years from December 2014, with new arrangements involving at least quarterly reporting.

In 2015, the ACCC will continue to use the complementary tools of competition law, consumer protection and economic regulation to improve the long-term welfare of Australians. We look forward to seeing you Down Under for the International Competition Network Annual Conference in April.