Client Update: Prohibiting price signalling
13 December 2010
In brief: An exposure draft of legislation to introduce a new civil prohibition regarding the exchange of sensitive information between competitors has been released by the Federal Government. Partner David Brewster (view CV) looks at the implications of the new legislation.
The move comes after concerns expressed by the Australian Consumer & Competition Commission (the ACCC) and politicians regarding public statements by Australian bank executives about the need for bank interest rates to rise above corresponding Reserve Bank increases. These statements were alleged to constitute price signalling, however, the ACCC claimed that a number of court decisions, particularly an unsuccessful ACCC action in relation to alleged price fixing in the retail petroleum industry, meant that there was nothing it could do to prevent price signalling under the current provisions of the Trade Practices Act 1974 (Cth).
The Competition and Consumer Amendment Bill (No 1) 2011 proposes to amend the Trade Practices Act and introduce a new civil prohibition against certain information disclosures by companies that supply goods or services of a type that are prescribed by regulation. While the immediate focus of the Bill is the Australian banking industry, it could apply to any sector that is prescribed by the Federal Government.
The Bill contains two main prohibitions in relation to the disclosure of information:
- a 'private disclosure' prohibition, which prevents a corporation from any private disclosure of information to competitors regarding the price of goods or services to be acquired or supplied by the corporation.
Private disclosures are defined as the disclosure of information between competitors and not any other person. However, if a disclosure is made to an intermediary (who is not a competitor) who then discloses the information to a competitor, this may still be treated as a private disclosure. This would appear to extend the reach of the prohibition beyond private disclosures, eg by potentially capturing the disclosure of information to industry information providers or industry analysts.
- a 'general disclosure' prohibition, which prevents a corporation from any disclosure (private or public) of information regarding:
- prices for goods or services to be acquired or supplied by the corporation;
- the capacity of the corporation to acquire or supply goods or services; or
- any aspect of the corporation's commercial strategy.
However, the disclosure is only illegal where it is made for the purpose of substantially lessening competition in a market. This prohibition, in particular, the catch all relating to commercial strategies, clearly applies to a broader range of conduct than 'price signalling'.
The Bill lists a number of factors to which a court may have regard in determining if a corporation has a purpose of substantially lessening competition, and also provides that the existence of a corporation's purpose may be ascertained even if only by inference from the corporation's conduct.
The consequences of a contravention of the 'private disclosure' or the 'general disclosure' prohibitions are:
- for a corporation, the greater of $10 million, three times the benefit of the conduct or 10 per cent of turnover; and
- for an individual, up to $500,000.
The Bill contains a number of exceptions, including information that is required to be disclosed by law, or disclosure between related bodies corporate or members of a joint venture. It also contains an exception in relation to information that is supplied by a corporation to a competitor where those parties are in a supplier/customer relationship. However, this important exception is significantly limited, for it only applies to situations where the customer acquires goods or services for the purpose of re-supply. Any communication that occurs where the customer does not re-supply the relevant goods or services is not exempt (eg, where the customer uses up the goods and does not re-supply them). This seems to be a significant deficiency in the Bill, since the 'private disclosure' prohibition may prevent a corporation from telling its customer the price that it proposes to charge the customer.
The Government proposes to introduce the Bill in the first sitting of Parliament in 2011, following a period of targeted consultation.
- David BrewsterPartner,
Ph: +61 3 9613 8707
- Fiona CrosbiePartner,
Ph: +61 2 9230 4383
- Carolyn OddiePartner,
Ph: +61 2 9230 4203
- Kon StelliosPartner,
Ph: +61 2 9230 4897
- Jacqueline DownesPartner,
Ph: +61 2 9230 4850