Australia: Competition and Consumer Commission

The first conviction under the criminal cartel regime in the Competition and Consumer Act (CCA) has been recorded in 2017. The CCA has also seen sweeping amendments to update the Australian misuse of market power provision and include a concerted practices prohibition. These are the most significant developments in what has been another busy year for the Australian Competition and Consumer Commission (ACCC).

Australia’s first criminal conviction under the CCA

Following charges being laid by the Commonwealth Director of Public Prosecutions (CDPP) in July 2016, Nippon Yusen Kabushiki Kaisha was convicted of cartel conduct in the shipping of cars, trucks and buses to Australia. The criminal penalty was A$25 million. The ACCC investigates cartel conduct, manages the immunity process and refers serious cartel conduct to the CDPP for consideration for prosecution. We set out to enforce the criminal cartel provisions with a clear message that we will not tolerate cartel conduct. A criminal trial against another party to the same arrangement is set for August 2018. We have five further matters with the CDPP in 2018, recommending prosecution, and we expect at least another two in 2018.

Reform of the CCA’s antitrust provisions

In 2017, the Australian parliament passed sweeping reforms to our antitrust provisions in Part IV of the CCA to bring them into line with overseas provisions. Importantly, the misuse of market power provision (section 46) which had long been subjected to the ‘take advantage’ test, has been liberated and given the threshold of its fellow restrictive trade practice provisions: the ‘substantial lessening of competition’ test. Among countries with antitrust legislation, Australia was one of only two that had this ‘take advantage’ limb. As part of the same suite of reforms, the CCA now has a prohibition on concerted practices that substantially lessen competition. We expect that these provisions will allow us to regulate conduct which is clearly doing damage to the competitive process but which we had previously been unable to tackle with the tools given to us in the way of legislative proscriptions. Accordingly, we have established a new arm of our enforcement activities devoted purely and specifically to tackling the types of conduct targeted by the new section 46 and the concerted practices regime.

Competition litigation and the need for appropriate penalties

The ACCC has several important appeals before the courts to determine some fundamental competition issues, including the importance of appropriate penalties for restrictive trade practices that injure the strength of our economy.

We won in the High Court against Garuda and Air New Zealand, a long-running chapter of litigation about price fixing agreements between airlines for fuel, security, insurance surcharges and a customs fee for the carriage of air freight from ports of origin in Hong Kong, Singapore and Indonesia, to destination ports in Australia. This case has helped us to solidify what a ‘market in Australia’ is. A hearing on penalty will take place in 2018.

The ACCC lost its appeal against 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.

The penalties in the Cement Australia matter were increased from the A$17.1 million ordered at first instance to A$20.6 million. We had submitted that penalties of more than A$90 million were appropriate: it is imperative that penalties be commercially relevant; they must be high enough for businesses not to see them as merely an acceptable risk of doing business. Penalties must be a deterrent to contravening conduct rather than an inconvenience of unlawful anticompetitive behaviour. We will continue to advocate that position in the matters we put before courts. One such matter is our appeal proceedings against Yazaki, in which a penalty of A$9.5 million was imposed at first instance and where we will submit to the court on appeal that the more appropriate penalty is in the range of A$42 to A$55 million. This was a matter where the judge found that the firm’s conduct was deliberate, sophisticated and devious. We believe the penalty should better reflect the gravity of the unlawfulness and the size of the firm.

Market studies and inquiries

Now more than ever, market studies and inquiries are a crucial feature of our work in shining a light on important factors affecting competition across the Australian economy. Several market studies and inquiries were begun in 2017. Following the completion of the market study into the east coast gas market in 2016, we have begun two inquiries into energy. One is an inquiry into the supply and demand for wholesale gas in Australia, which we will do through to 2020 with biannual reporting along the way. The other is an inquiry into the supply of retail electricity and the competitiveness of retail electricity prices, which we will report on in June 2018. We have completed our industry-wide market study into new car retailing, which highlighted the need for better access to data for independent mechanics, and emphasised a range of consumer issues across the sector. We are also undertaking a communications sector market study, an inquiry into the supply of home, contents and strata insurance in Northern Australia, an inquiry into residential mortgage products, and an inquiry into the competitiveness, trade practices and transparency in the Australian dairy industry. Perhaps of most interest, we have also commenced an inquiry into the effect that digital search engines, social media platforms and other digital content aggregation platforms have on competition in media and advertising markets, which will run through to the middle of 2019.

Merger reviews and authorisations

The ACCC welcomes the amendments to the CCA in 2017 making us the first-instance decision-maker for merger authorisations. During 2016–17 we considered 288 mergers and conducted 33 public and two confidential reviews. We cleared 79 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. A complex and indeed contentious transaction is BP Australia’s proposed acquisition of Woolworths’ network of retail service station sites. Woolworths is a vigorous and effective competitor in the retail fuel market, and they have an important influence on fuel prices and price cycles across the country. We have opposed the transaction, given our view that it will see higher petrol prices and have reached that decision following a significant investigation.

International cooperation

The ACCC continues to participate actively in international fora, including the International Competition Network and the Organisation for Economic Co-operation and Development, and cooperate with counterpart agencies, particularly in merger and cartel investigations. In addition, we continue to invest heavily in capacity-building in our region through our Competition Law Implementation Program in South East Asia. Competition agencies face similar economic mischief, and a key to our combined success is the ability to exchange views and learn from each other.

We are looking forward to hosting the annual East Asian Top Officials Meeting (EATOP) in Sydney on 28–30 August this year.