Australia: Competition and Consumer Commission

The first criminal cartel prosecution has been taken under the Competition and Consumer Act (CCA). This is the most significant milestone in what has been another busy and full year for the Australian Competition and Consumer Commission (ACCC).

Australia’s first criminal cartel prosecution under the CCA

On 14 July 2016, the Commonwealth Director of Public Prosecutions (CDPP) laid charges against Nippon Yusen Kabushiki Kaisha, a global shipping company based in Japan, in relation to a cartel involving the shipment of cars, trucks and buses to Australia. The ACCC investigates cartel conduct, manages the immunity process and refers serious cartel conduct to the CDPP for consideration for prosecution.

Amendments criminalising cartel conduct came into force in July 2009 and we are unapologetic for a cautious start in taking action. We want to lay strong foundations for a continuing programme of cases. Indeed, in November 2016, criminal charges were laid against a second company, Japan-based Kawasaki Kisen Kaisha, alleging involvement in the same cartel.

In other cartel news, we resolved our laundry detergents cartel civil litigation against Colgate Palmolive with an A$18 million penalty and Woolworths with a A$9 million penalty. The court has reserved its decision in this contested case against PZ Cussons Australia. In June 2016, the ACCC started civil proceedings against four companies and three individuals alleging they were involved in cartel conduct relating to the supply of polycarbonate roofing. In July 2016, the Federal Court found an Italian corporation, Prysmian Cavi E Sistemi SRL, engaged in cartel conduct in supplying high voltage land cables in Australia. The case now moves to a hearing on penalty and other relief.

Competition cases raise important issues for our market economy

The ACCC has several important appeals before the courts to determine some fundamental competition issues.

We welcomed the High Court’s decision in the Flight Centre case, in which we alleged that the travel agency attempted to induce three international airlines to enter into price-fixing arrangements. The High Court found that Flight Centre and the airlines competed in the market for the sale of international airline tickets, notwithstanding that Flight Centre was an agent for each of the airlines. The case provides important guidance for the future application of competition laws in Australia to other situations where competing offers are made directly to consumers by both agents and their principals. The matter is now back before the Full Federal Court for the determination of penalties.

We are also awaiting judgment from the Full Federal Court following a decision at first instance that Pfizer did not misuse its substantial market power or engage in exclusive dealing with an anticompetitive purpose when making particular offers to supply its cholesterol-lowering product Lipitor in 2012. It is important that the ACCC seeks clarity from the courts on issues of market power and anticompetitive purpose.

The ACCC also appealed the decision by the Federal Court dismissing our allegations that Australian Egg Corporation Limited attempted to induce egg producers to enter into an arrangement or understanding to restrict or limit the production or supply of eggs. Again, it is important we seek clarity from the courts on what will and will not constitute an attempt to induce cartel conduct, particularly in the context of conduct by a trade association interacting with its members.

We have also appealed the penalties imposed by the trial judge in the long-running Cement Australia case. We will argue to the Full Court that the A$17.1 million in penalties imposed against Cement Australia is inadequate, and not of appropriate deterrent value; we had submitted that penalties of more than A$90 million were appropriate. Penalties must be commercially relevant; they must be high enough for businesses not to see them as merely an acceptable risk of doing business, in order to act as a deterrent to contravening conduct.

The debate on privatisation

This year we ignited debate about the importance of establishing competitive market structures when privatising monopoly assets, such as ports, rather than focusing solely on maximising the sale price of the assets. We are not against privatisation. The private sector will generally operate commercial enterprises more efficiently than government. However, when the government sells assets, unless they face competition, there needs to be effective regulation. The framework and thinking around privatisation into non-competitive markets needs resetting and we are pleased there is now a healthy debate about these issues.

Market studies feature

Market studies are now a prominent part of our work. In 2016, the ACCC completed a very resource-intensive market study into the east coast gas market. We also increased our focus on the agriculture sector: we are close to completing a market study into the beef and cattle sector, and we have started our formal inquiry into Australia’s dairy industry. The ACCC continues to shine a light on the factors driving petrol prices in regional areas through targeted studies. We also launched an industry-wide study of new car retailing, which will examine important competition and consumer issues. We have completed our annual report on the private health insurance industry focusing on how insurers notify their customers about reductions in their coverage and benefits. Finally, we announced a major study into the rapidly changing communications industry.

Merger reviews and authorisations

The ACCC considered 319 mergers and conducted 31 public reviews during 2015–2016. We cleared 90 per cent of mergers without the need for a public review. We believe we are getting the right balance in ensuring our focus is on the more complex or contentious end of the merger spectrum while we clear the non-contentious transactions quickly. We have some fascinating applications for authorisation before us, including a submission from several major banks looking to collectively bargain with mobile wallet providers such as ApplePay.

Law reforms start to unfold

We are keeping a close eye on parliament as the Australian government is taking steps to amend the CCA as recommended by the 2015 Harper Review Panel. This year, the government released an Exposure Bill to implement reforms, which includes two key proposals: amending the misuse of market power provision (section 46) to introduce a substantial lessening of competition test and the creation of a prohibition against concerted practices that substantially lessen competition.

Review of consumer law continues

The Australian Consumer Law and the supporting regulatory model are under review with a report expected in March 2017. I draw attention to this review because consumer laws not only protect consumers, but they also have a powerful effect on competition. They enable businesses and retailers to compete on their merits, not falsehoods. We usually take action against large companies to maximise the deterrence value.

International cooperation

The ACCC continues to participate actively in international fora including the International Competition Network and the Organisation for Economic Cooperation and Development and cooperate with counterpart agencies, particularly in merger and cartel investigations. In addition, the ACCC continues to invest heavily in technical assistance with our competition enforcement colleagues in South East Asia through our Competition Law Implementation Program. Competition agencies often grapple with similar issues, and a key to our combined success is the ability to exchange views and learn from each other.

There is a lot happening and much to look forward to.