Competition law update

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 matters

ACCC announces its 2015 compliance and enforcement priorities

On 19 February, ACCC Chairman Rod Sims launched the 2015 version of the ACCC's Compliance and Enforcement Policy. Each year, the ACCC updates its policy to outline its priority areas for the year and sets out the factors it will consider when deciding whether it will pursue matters.

Key points in the 2015 policy include that:

• cartel conduct, anti-competitive agreements and practices and misuse of market power remain enduring priorities, along with product safety, and Mr Sims noted that the ACCC is now directing half of its enforcement resources to competition matters.
• the ACCC will focus on cartel conduct in government procurement, by raising awareness about cartels with procurement agencies, anti-corruption bodies and the police, and by helping government procurement officers to identify the signs of cartel conduct.
• the medical and health sector is a new priority area for both anti-competitive conduct and consumer protection.
• the ACCC will focus on compliance with industry codes of conduct, including the recently commenced changes to the Franchising Code of Conduct, and on preparing for the introduction of the Food and Grocery Code.
• the ACCC will work with industry to improve product safety through minimising the supply of unsafe goods, by focusing on good practice in the manufacture, sourcing and quality assurance of consumer products.
• competition and consumer issues in highly concentrated sectors remain a priority, including issues identified through its monitoring of the fuel industry.
• the ACCC will finalise its role in ensuring that carbon tax cost savings are being passed through to consumers.

On the consumer protection side, the ACCC will concentrate on:

• truth in advertising;
• emerging systemic consumer issues in the online marketplace; and
• issues impacting on Indigenous consumers and vulnerable and disadvantaged consumers.

Mr Sims also outlined the ACCC;s role in ensuring privatisation delivers for consumers, improving the functioning of the financial system given the competition focus of the Murray report, ensuring a smooth transition for consumers to NBN services and reviewing water rules to improve outcomes in the Murray-Darling Basin. Read the speech, the ACCC media release and the Compliance and enforcement policy.

ACCC news

Misleading or deceptive conduct – False or misleading representations: Capped price servicing – 23 Feb 2015

Following an ACCC investigation, Kia Motors Australia Pty Limited has agreed to amend the terms and conditions of its capped price servicing offer to consumers. Beginning in 2012, Kia made statements on its website and in other material which represented to consumers that its scheduled service prices for Kia vehicles were capped at a maximum price. However, Kia's terms and conditions allowed scheduled service prices to be amended at any time and, in fact, the prices had been changed by Kia four times since 2012. The ACCC considered that Kia's advertising was likely to amount to a misleading representation to consumers in contravention of the Australian Consumer Law. Read the ACCC media release.

Franchising and small business: ACCC releases report – 23 Feb 2015

The ACCC has released the latest of its twice-yearly Small business in focus report, summarising ACCC activities in the small business and franchising sectors and providing an update on industry codes, for the period July-December 2014. Read the ACCC media release.

Mergers and acquisitions: ACCC will not oppose GSK-Novartis deal – 20 Feb 2015

The ACCC will not oppose a series of transactions involving GlaxoSmithKline and Novartis, as a result of which:

• GSK will acquire Novartis' global human vaccines business, except the influenza vaccines business;
• GSK and Novartis will combine their global consumer health business in a new joint venture entity, which includes products such as Panadol, Voltaren and Zovirax; and
• Novartis will acquire certain oncology products from GSK.

GSK and Novartis overlap in the supply of Meningococcal vaccines in Australia and over the counter products including smoking cessation and pain management products. In relation to oncology products, Novartis has a number of drugs in development used to treat advanced melanoma, which are likely to compete with existing GSK products.

GSK and Novartis have given undertakings to the ACCC and the European Commission, under which:

• as a result of undertakings to the ACCC, GSK will divest Meningococcal vaccine products in Australia and Novartis will divest its smoking cessation products, including the Nicotinell brand; and
• as a result of the undertaking to the European Commission, Novartis is divesting, on a global basis, two in-development drugs to treat advanced melanoma.

Read the ACCC media release.

NBN Co costs: Draft determination on costs recovery methodology – 19 Feb 2015

The ACCC has issued a draft determination on NBN Co's Long Term Revenue Constraint Methodology. The proposal sets out the values and calculations required to determine the amount of revenue NBN Co is allowed to earn each financial year to recover its costs of providing services. Where NBN Co is unable to recover the allowed revenue in a particular year, any shortfall is put into NBN Co's cost recovery account. NBN Co will have the opportunity to recover its accumulated losses over time as the take-up of NBN services increases.

The ACCC invites views on the draft determination by Friday, 27 March. Read the ACCC media release and LTRCM Draft Determination.

Mergers and acquisitions: ACCC releases Statement of Issues on proposed acquisition by Sea Swift of Toll Marine Logistics – 19 Feb 2015

The ACCC has released a Statement of Issues on the proposed acquisition by Sea Swift of the Northern Territory and far north Queensland marine freight business of Toll Marine Logistics, a subsidiary of Toll Holdings Limited. Sea Swift and Toll Marine Logistics are both suppliers of scheduled and chartered marine freight services to the Northern Territory, far north Queensland and coastal communities including the Torres Strait Islands.

The ACCC has received submissions indicating that the proposed acquisition would result in significantly higher prices and diminished service levels in the supply of marine freight services in the Northern Territory and Queensland, including the Torres Strait Islands, which may harm standards of living in the remote communities that are dependent upon sea freight. The communities are home to many disadvantaged and vulnerable consumers, often with very low incomes.

The ACCC invites further submissions by Friday, 13 March and will announce its final decision on Thursday, 16 April. Read the ACCC media release.

Authorisations:

Suspension and termination regulations – 12 Feb 2015

The ACCC has re-authorised the suspension and termination provisions of the Australian Payments Clearing Association's Australian Paper Clearing System regulations for 10 years. Read the determination.

International pooling arrangements – 12 Feb 2015

The ACCC has issued a determination granting authorisation to Tabcorp, TAB, Tabcorp Europe & Tabcorp ACT in relation to international pooling arrangements with HKJC Horse Race Betting Limited and to allow for the transmission of bets by Australian punters into Hong Kong pools. Read the determination.

The ACCC has also issued a determination authorising Racing and Wagering Western Australia in relation to current and future pooling arrangements with overseas wagering operators to allow for the transmission of bets by Western Australian punters into overseas pools. Read the determination.

Collective bargaining by international airlines – 11 Feb 2015

The ACCC has issued a draft determination proposing to re-authorise the Board of Airline Representatives of Australia to collectively bargain on behalf of its current and future members and to give effect to arrangements for the acquisition of essential aviation services from operators of international airports and other particular service providers. Read the draft determination.

Misleading or deceptive conduct – Door-to-door sales: Energy company pays penalty – 11 Feb 2015

Simply Energy has paid a penalty of $20,400 following the issue of two infringement notices by the ACCC for alleged misleading door-to-door sales conduct. During 2014, sales representatives selling Simply Energy electricity products visited the homes of two consumers in Victoria for the purpose of switching them from their existing electricity supplier to Simply Energy, allegedly telling the consumers that there was an 'urgent problem' or 'something wrong' with their existing electricity supply, when this was not the case. 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.

Cases

Misleading or deceptive conduct – Penalty hearing – Reebok Australia penalised for claims about 'EasyTone' shoes

ACCC v Reebok Australia Pty Ltd [2015] FCA 83 (Justice McKerracher, 17 February 2015)

Key issues:

• The court may consider that where the same or similar conduct has been penalised in other jurisdictions to the knowledge of the local operator, that should inform an adequate local response.
• Failure to act appropriately on this knowledge can be of 'particular significance' in assessing the appropriate penalty.

Summary

The ACCC commenced proceedings against Reebok Australia in 2013 in relation to statements made by Reebok Australia about its 'EasyTone' shoes on shoe boxes and other in-store promotional materials, that the ACCC alleged contravened the ACL. The statements were to the effect that wearing 'EasyTone' shoes would result in the wearer having increased muscle tone in their legs greater than any increase that would result from wearing a traditional walking shoe.

Reebok Australia admitted the contraventions and the parties submitted agreed orders to the court.

Justice McKerracher commented on the fact that Reebok Australia's conduct in this case continued after similar conduct by Reebok International in the USA had been settled with the Federal Trade Commission, a circumstance of which Reebok Australia was aware. Justice McKerracher highlighted the 'inadequate response' of Reebok Australia to the settlement with the FTC as a factor of 'particular significance' (at [167]) in considering the quantum of penalty.

Justice McKerracher made the agreed declarations in relation to the conduct, granted injunctive relief for three years, ordered Reebok Australia to pay a penalty of $350,000 and contribute to the ACCC's costs in the amount of $35,000, establish a compliance program, undertake corrective advertising and repay affected consumers an amount of $35 per pair of shoes.

Source: AustLII

False or misleading representations – Federal Court orders energy companies to pay penalties in relation to discount offers

ACCC v Origin Energy Ltd [2015] FCA 55 (Justice White, 9 February 2015)

Key issues

• The court may consider that representations made by sizeable and reputable organisations may have more impact on consumers.
• These factors may be relevant in assessing penalty amounts.
• The court may also consider that representations made in more than one medium have a further reach in assessing the impact of those representations.

Summary

During 2013, the Origin Energy Group ran a campaign which featured two 12-month DailySaver Energy Plans that purportedly gave discounts on electricity and gas usage charges. Origin made these representations on its website and in confirmation packs sent to consumers who agreed to commence one of these plans.

The ACCC alleged that the discounts offered were misleading because Origin did not clarify that the rates applicable to the DailySaver Energy Plans were higher than those under the standard retail contracts generally applied to consumers.

Origin admitted that its conduct contravened the ACL. Justice White ordered Origin to pay a total penalty of $325,000, noting that the size and reputation of Origin would have made it likely that consumers would believe that its representations were accurate. Justice White also noted that, as the representations were made in two separate media, this would have increased their reach. Justice White also ordered Origin to notify consumers of the misleading representations.

As mitigating factors, Justice White noted that:

• Origin had no history of contraventions;
• it had in place, and continued to have in place, systems intended to prevent similar contraventions;
• there was no evidence that the contraventions were deliberate; and
• Origin had co-operated during the ACCC's investigation.

Source: AustLII

Read the ACCC media release.