Competition law update

By Fiona Crosbie
Competition law Consumer law Litigation

In brief

In touch: Competition law update is a regular publication by the Allens Competition group to keep you informed of the latest news and developments in this area. For more information or for legal advice, please contact one of the Partners listed below. We look forward to hearing from you.

Significant news

Competition law and policy 'root & branch' review – update

The Federal Government has released the final terms of reference for the 'root & branch' review of competition laws and announced the composition of the review panel.

The final terms do not differ from the draft terms released in December 2013 (read In Touch 20 December 2013). The review panel is required to consider a range of matters, including:

  • the responsiveness of Australia's highly codified competition laws to economic policy objectives;
  • whether current legislative provisions, such as the misuse of market power provisions, are functioning as intended;
  • the effectiveness and efficiency of regulatory agencies such as the ACCC;
  • the competitiveness of key markets such as utilities, groceries and automotive fuel; and
  • whether government business activities and service providers serve the public interest and promote competition and productivity.

The review panel will consist of:

  • Chair - Professor Ian Harper, a director of Deloitte Access Economics and former chairman of the Australian Fair Pay Commission;
  • Peter Anderson - former head of the Australian Chamber of Commerce and Industry;
  • Su McCluskey, Chief Executive of the Regional Australian Institute; and
  • Michael O'Bryan SC, barrister.

The panel will release an issues paper shortly, undertake broad consultation, take submissions and hold public hearings. The final report to government will be delivered within 12 months.

The final terms of reference and other relevant material can be found here. Read the Allens Client Update: Competition policy 'root and branch' review final terms of reference released.

$11 million penalties imposed on Flight Centre

On 28 March 2014, the Federal Court ordered that Flight Centre pay penalties totaling $11 million for attempting to enter into price-fixing arrangements with three international airlines. This is one of the highest penalties awarded for attempted price-fixing by the Federal Court.

In the liability decision handed down on 6 December 2013 (read the Allens Focus: Agents, airlines, and ash – the ACCC's 'A'-list bring less than 'A'-grade results and read In Touch 20 December 2013), the Federal Court found that Flight Centre, even though it sold international air fares as an agent, competed with its principal, the international airlines, for the retail or distribution margin on the sale of international air fares. The Federal Court also found that, between 2005 and 2009, Flight Centre had sought on six occasions to prevent certain airlines from undercutting Flight Centre on international air fares when offering these fares directly to consumers.

Flight Centre has appealed the liability decision. You can read about the penalty decision below under Recent cases. Read the ACCC media release.

Amendments released to the Franchising Code and the Competition and Consumer Act for public consultation

The Federal Government has released an exposure draft of amendments to the Franchising Code of Conduct (the Code) and relevant provisions in the Competition and Consumer Act 2010 (Cth) (the CCA) for public consultation.

The exposure draft legislation:

  • introduces a general duty on franchisors and franchisees to act in good faith during their dealings with each other;
  • enhances the ACCC's enforcement powers to deal with serious breaches of the Code by amending the CCA to allow the ACCC to seek civil pecuniary penalties of up to $51,000, and issue infringement notices of up to $8500 without obtaining a court order;
  • improves disclosure and transparency of marketing funds and online sales arrangements;
  • ensures that prospective franchisees are provided – at an early stage before they become emotionally and financially committed – with short form, easy-to-understand information regarding the risks and rewards of franchising to the franchisee; and
  • clarifies and streamlines the operation of the Code, with a view to reducing the compliance burdens on business.

The changes are expected to take effect from 1 January 2015. As there has already been extensive consultation to date concerning the policy underpinning these reforms, comments are sought only on the issues associated with that implementation.

Stakeholders are invited to comment on the draft bill and regulations during the three-week consultation process ending on 30 April 2014. Read the Allens Focus: It's crunch time! Changes to the Franchising Code are nigh and the Treasury consultation page.

ACCC news

ACCC seeks views on CBH's proposed new port terminal access undertaking – 4 Apr 2014

The ACCC is seeking submissions from interested parties in the bulk wheat export industry on CBH's proposed new Port Terminal Services Access Undertaking. The undertaking would provide access for third party exporters to CBH's port terminal services for bulk wheat export at its four port terminals in Western Australia. CBH is proposing to introduce long-term agreements, which will make available up to 66 per cent of port terminal capacity for customers to book for three years. Capacity not covered by long-term agreements will be available to all exporters through the existing processes. Currently, CBH allocates port terminal capacity to exporters for only one year at a time via annual auctions and a first-come-first-served process.

The proposed undertaking would commence after the expiry of CBH's current undertaking on 30 September 2014, if a mandatory industry-wide code of conduct governing access to bulk wheat ports is not introduced before then. CBH has proposed that the new undertaking apply until 30 September 2017, or until a mandatory industry-wide code of conduct is implemented.

The ACCC has published an Issues Paper outlining the changes in CBH's proposed undertaking. The closing date for submissions is 30 April 2014. Read the ACCC media release.

ACCC to not oppose Transurban Consortium's acquisition of tollroad assets – 4 Apr 2014

The ACCC will not oppose the acquisition by the Transurban Consortium of the tollroad and associated assets of Queensland Motorways Group. The consortium consists of AustralianSuper Pty Ltd, Tawreed Investments Limited, Transurban Holdings Limited, Transurban International Limited and Transurban Infrastructure Management Limited. It is proposed that Transurban would be the entity responsible for operating the QM Group tollroad assets, should the consortium's bid be successful.

Both Transurban and QM Group are currently involved in the ownership or operation of tollroads in Australia. Both entities also have substantial electronic tag issuing businesses in Australia. However, there is no geographic overlap between Transurban and QM Group's activities with Transurban's tollroad operations and tag issuing businesses based in NSW and Victoria and QM Group's activities limited to Queensland.

The ACCC concluded that while the proposed acquisition would increase Transurban's electronic tag base nationally, due to the limited degree of interstate travel by motorists, the aggregation of Transurban's NSW and Victorian businesses with QM Group's Queensland business was unlikely to increase Transurban's ability to raise roaming fees and thereby impact on the competitiveness of rival bids in each relevant state. The ACCC also concluded that the proposed acquisition was unlikely to substantially lessen competition in the market for the supply of electronic tolling services to tollroad owners and operators. The ACCC also considered that the countervailing power possessed by state governments, as the entities responsible for awarding new tollroad concessions, would likely constrain Transurban in relation to both the market for the supply of tolling services to tollroad concession-holders and the market for the award of tollroad concessions. Read the ACCC media release.

ACCC concludes its inquiry on transmission regulation – 28 Mar 2014

The ACCC has concluded its inquiry under Part XIC of the CCA into the regulation of the Domestic Transmission Capacity Service (DTCS). The ACCC has decided to maintain regulation for a further five years until 31 March 2019.

The DTCS is a high capacity wholesale service used by communications companies to carry large volumes of data, video and other communications traffic. It is a critical input for the supply of other telecommunications services that are delivered to consumers and businesses, including services provided over both fixed and mobile networks.

Given the high capital costs in building transmission networks, competition is less developed in a number of geographic areas, including outer metropolitan and regional areas. The ACCC considered that maintaining regulation where there is insufficient competition was important to ensure that those who wish to access the declared DTCS can continue to do so at regulated rates. Further information is available at the ACCC website. Read the ACCC media release.

ACCC grants interim authorisation for coal producers to coordinate transportation – 27 Mar 2014

The ACCC has granted interim authorisation for Rio Tinto, Peabody and Pacific National to coordinate transportation of coal in the Goonyella Coal Chain.

Rio Tinto and Peabody operate coal mines in central Queensland. Coal from these mines is transported via the Goonyella Coal Chain rail system to the Dalrymple Bay Coal Port Terminal, where it is loaded for export. Pacific National is a rail operator that transports coal for Rio Tinto, Peabody and other coal producers in the Goonyella Coal Chain. The Goonyella Coal Chain has been operating well below its potential throughput capacity, resulting in lost exports.

The arrangements allow Rio Tinto and Peabody to coordinate operational arrangements relating to their transportation of coal through to the Dalrymple Bay Coal Port Terminal. It is proposed that after an initial three-month trial period, these arrangements will be open to all coal producers and rail operators. Read the ACCC media release.

ACCC will not oppose acquisition of lease to operate automotive terminal at Port of Melbourne – 27 Mar 2014

After accepting a court-enforceable undertaking, the ACCC has announced that it will not oppose the acquisition by Melbourne International RoRo & Auto Terminal (MIRRAT) of a long-term lease to operate the Webb Dock West automotive terminal at the Port of Melbourne. The Port is currently under the control of the Port of Melbourne Corporation. The undertaking seeks to address the ACCC's competition concerns by ensuring that the terminal will be operated on an open access basis until 30 June 2040 to the extent MIRRAT is successful in its bid to redevelop the automotive terminal at Webb Dock West.

MIRRAT's ultimate parent company, Wallenius Wilhelmsen Logistics AS (WWL), operates an ocean shipping business in competition with other terminal users at the Port of Melbourne. The ACCC was concerned that:

  • MIRRAT could use its position as a vertically integrated operator of the sole automotive terminal at the Port of Melbourne to discriminate against rival automotive shipping lines and other terminal users that MIRRAT may compete with in future; and
  • MIRRAT could provide preferential treatment to WWL, to the detriment of other shipping companies, including through shipping schedules, berthing allocations and the provision of ancillary services.

To address these concerns, the undertaking:

  • requires MIRRAT to comply with open access conditions and berthing allocation rules in its operation of the terminal and to 'ring fence' the confidential information of terminal users to ensure that confidential information is not disclosed to unauthorised personnel;
  • provides mechanisms for independent resolution of price and non-price related disputes if terminal users consider they have been discriminated against or have other concerns relating to the supply of terminal services by MIRRAT; and
  • enables terminal users to request that the ACCC-approved independent auditor conducts an audit check of MIRRAT's compliance with the undertaking at any time if the terminal user is concerned that MIRRAT has breached its undertaking obligations.

Read the ACCC media release.

Be retail ready for new portable pool safety requirements – 27 Mar 2014

The ACCC is reminding pool suppliers that the new mandatory safety standard for portable swimming pools commences on 30 March 2014, and that it will be conducting further marketplace surveillance in the coming months to check for compliance with the new standard. Read the ACCC media release.

ACCC to authorise Victorian newsagents to collectively bargain with Tatts and Intralot – 26 Mar 2014

The ACCC has issued a draft determination that proposes to allow the Victorian Association of Newsagents (VANA) to negotiate on behalf of its members. The proposed 10-year authorisation covers collective negotiations with Tattersall's Sweeps Pty Ltd (Tatts), Intralot Australia Pty Ltd and any other public lottery provider which may become licensed to operate a public lottery in Victoria in the future. VANA represents about 460 newsagents in Victoria, many of which are lottery agents selling Tatts and Intralot products. At present, Tatts and Intralot are the only licenced lottery providers in Victoria. Both have exclusive licences to operate until 2016. Read the ACCC media release.

ACCC grants authorisation to David Jones for 'stores within stores' promotions – 26 Mar 2014

The ACCC has granted authorisation to David Jones to invite businesses operating within its stores to participate in various promotions for a further five years. David Jones allows a number of merchandise and service suppliers to operate businesses within David Jones stores. These 'stores within stores' display and sell only the brand of product promoted and sold by the relevant licensee business, and operate independently of David Jones. Read the ACCC media release.

ACCC does not oppose IAG's insurance acquisition – 26 Mar 2014

The ACCC will not oppose IAG's acquisition of Wesfarmers' insurance underwriting business, which was publicly announced in December 2013.

The ACCC closely reviewed the acquisition, as IAG and Wesfarmers are the first and fifth or sixth-largest general insurers in Australia, respectively, and the largest suppliers of rural insurance products:

  • IAG underwrites insurance sold through well-recognised brands, including NRMA, SGIO, SGIC, RACV, CGU and Swann. IAG's Australian operations distribute a range of personal, commercial, and rural insurance products, both directly to customers and indirectly through intermediaries, including insurance brokers. IAG also has a joint venture with Vero (owned by Suncorp), National Transport Insurance, which supplies heavy vehicle insurance in Australia.
  • Wesfarmers underwrites insurance sold through established brands, including Wesfarmers Federation Insurance (WFI), Lumley and Coles Insurance. WFI is a significant rural and business insurer dealing directly with clients and via intermediaries. Lumley specialises in intermediated commercial and rural insurance products, and Coles Insurance offers car and home insurance to consumers through Coles supermarkets and online.

The ACCC's public review focused on the likely impact of the proposed acquisition in specific insurance markets in Australia where IAG and Wesfarmers both underwrite the supply of insurance products, including home and contents insurance, domestic motor insurance, rural insurance products, and commercial insurance products, such as heavy vehicle insurance. The ACCC also examined how the proposed acquisition may affect competition for the acquisition of key inputs by insurers, particularly smash repair and windscreen repair/replacement services. The ACCC concluded that the proposed acquisition is unlikely to substantially lessen competition in any insurance market or in relation to IAG's acquisition of smash repairs or windscreen replacement services. Read the ACCC media release.

* The summaries provided are a condensed version of the relevant ACCC media release linked at the conclusion of each news item.


Federal Court imposes significant penalties for attempted price fixing

ACCC v Flight Centre Ltd (No 3) [2014] FCA 292 (Justice Logan, 28 March 2014)

Key issues

  • The court is likely to award higher penalties against large corporations which breach the CCA. This case reflects one of the highest penalties to date for attempted price fixing.
  • Failing to plead 'aggravating circumstances' cost the ACCC the right to pursue a larger maximum penalty. The ACCC is unlikely to make this procedural error in future cases.
  • Respondents are entitled to appeal liability decisions without being penalised for lacking contrition.
  • The court can consider imposing a larger penalty where the conduct is more than an 'attempt'.


In this decision, Justice Logan made declarations and ordered penalties totaling $11 million following the liability decision handed down on 6 December 2013 (read the Allens Focus: Agents, airlines, and ash - the ACCC's 'A'-list bring less than 'A'-grade results and read In Touch 20 December 2013).

In the liability decision, Justice Logan held that Flight Centre had contravened the Trade Practices Act 1974 (Cth) (the TPA) on six separate occasions between 2005 and 2009. The contraventions related to Flight Centre's attempts to induce Singapore Airlines, Emirates and Malaysian Airlines to enter into arrangements, which would ensure that these airlines did not sell international air fares at prices lower than those offered by Flight Centre.

Before 1 January 2007, the maximum penalty for a contravention of Part IV of the TPA was $10 million. Since 1 January 2007, the maximum penalty for each contravention of Part IV is the greatest of: $10 million; three times the size of the benefit directly or indirectly obtained by the contravening party that is reasonably attributable to the contravention; and if the court cannot determine the value of that benefit, 10 per cent of the annual Australian turnover.

As the first contravention occurred more than six years before the commencement of proceedings, no civil penalty could be recovered for that contravention. As for the remaining five contraventions, Justice Logan considered that they were to be assessed by reference to a maximum penalty of $10 million for each contravention. In reaching this decision, Justice Logan rejected the ACCC's submission that the third to sixth contraventions were to be assessed by reference to a substantially higher maximum penalty, as they had occurred after 1 January 2007. The ACCC relevantly submitted that the maximum penalty was 10 per cent of Flight Centre's annual Australian turnover in the year each contravention occurred. Justice Logan rejected this submission on the basis that the ACCC had failed to plead during the liability proceedings the material facts which justified a maximum penalty higher than $10 million.

Justice Logan ultimately ordered Flight Centre to pay $2 million in respect of each of the second, third, fourth and fifth contraventions, and $3 million in respect of the sixth contravention, recognising the direct and personal involvement of Flight Centre's CEO and Managing Director, Graham Turner.

Overall, Justice Logan considered the total penalty of $11 million was appropriate to address the 'flagrant conduct by a major, profitable, public company enjoying a significant market stake' (at [60]). Justice Logan noted that a greater total penalty would have been imposed if Flight Centre's conduct had constituted more than a mere 'attempt' to induce the airlines to contravene the TPA. His Honour also noted the total penalty had been moderated to reflect Flight Centre's exposure to costs and the fact that Flight Centre had not continued the impugned conduct, despite its belief that it had not contravened the TPA.

Finally, Justice Logan held that account could not be taken in the assessment of penalties of the fact that Flight Centre had publicly announced its intention to appeal the liability decision, and had not shown contrition, believing that its conduct did not involve a contravention of the TPA.
Source: AustLII