Competition news

By Jacqueline Downes
Competition, Consumer & Regulatory Disputes & Investigations Government Healthcare Mergers & Acquisitions Risk & Compliance

Competition reforms pass Parliament

On 5 September 2017, the Competition Policy Review Bill was passed without amendment by the House of Representatives. It was introduced into the Senate on 6 September 2017. The Competition Policy Review Bill is the one of two key Bills that will implement the Government's response to the Harper Review recommendations.

The first Bill, the Misuse of Market Power Bill, which implements the 'effects test' for the misuse of market power provision, was passed on 16 August 2017 by the House of Representatives after amendment by the Senate; however, it will not come into force until the Competition Policy Review Bill is passed by both houses.

The Competition Policy Review Bill implements the remaining major changes to the competition laws, including changes to the merger clearance process and cartel provisions and the introduction of a prohibition on 'concerted practices'. Read our summary of the changes here.

Labour has signalled that it broadly supports the Government's implementation of the Harper Review reforms. However, in a press release on 4 September 2017, Labour announced that it will seek to remove Schedule 6, which proposes to increase the maximum penalty for breaches of secondary boycott provisions, from the Bill. 

The Government has also introduced an Abolition of Limited Merits Review Bill, to remove the ability of energy networks to seek merits review of certain decisions of the Australian Energy Regulator. The Government was concerned that merits reviews were resulting in consumers paying higher energy bills. The Bill has also been passed by the House of Representatives, and has been referred to a Senate Committee for report by 16 October 2017.

Medibank wins ACCC court action

Medibank has won a case brought against it by the ACCC for alleged contraventions of the Australian Consumer Law.

The action related to changes Medibank made to its health insurance policies in September 2014, which had the effect of reducing coverage for members who had previously been completely covered for costs in relation to certain in-hospital pathology and radiology services.

Between January 2012 and September 2014, Medibank covered out-of-pocket costs charged to its members by health care providers in excess of the coverage provided by Medicare in relation to diagnostic services such as blood tests and MRI scans. However, these costs were no longer completely covered since September 2014, when Medibank phased out agreements with pathology and radiology providers who supplied services to hospital patients.

The ACCC argued that Medibank had acted unconscionably and engaged in misleading and deceptive conduct in contravention of the ACL. These alleged contraventions were said to stem from:

  • representations that members would not incur any out-of-pocket expenses in relation to in-hospital diagnostic services;
  • representations that Medibank would notify policy holders in writing of any 'detrimental changes' to the benefits it offered; and
  • a failure to provide notice to members in circumstances where members were vulnerable and unlikely to become aware of the changes.

However, Justice O'Callaghan found that Medibank had not engaged in misleading and deceptive conduct, as its pre- and post-policy materials were not misleading, and it had not given any assurances, nor was it under an independent legal duty, to notify policy holders of the changes to the level of coverage for in-hospital diagnostic services. Justice O'Callaghan also found that the decision not to communicate the changes directly to members was a business judgement made by the management of Medibank and while 'some may agree with it, some may disagree with it… there was nothing remotely unconscionable about it'.

Commenting on the decision, Rod Sims stated that the ACCC 'took this case because we believed that Medibank's failure to advise customers of the changes to their cover for in-hospital pathology and radiology services affected vulnerable consumers'.

The ACCC is considering whether to appeal the decision.

ACCC takes action against ticket reseller

The ACCC has taken action in the Federal Court against Swiss-based ticket reseller Viagogo AG in relation to alleged breaches of the Australian Consumer Law.

The ACCC alleges that Viagogo engaged in misleading and deceptive conduct when reselling tickets to entertainment, music and live sport events, including failure to disclose significant booking fees of up to 27.6 per cent. The ACCC also alleges that Viagogo made misleading online statements about the scarcity of tickets which related to availability on the Viagogo website, rather than total tickets available for the event. Lastly, Viagogo is said to have acted deceptively by representing to consumers via Google advertisements that it was an authorised ticket seller.

ACCC loses consumer guarantees case

The ACCC has lost a significant consumer law case against LG. The judgment in this case provides much needed clarity to Australian manufacturers grappling to understand their obligations when handling warranty claims from consumers.

The ACCC alleged that LG made misrepresentations that the remedies available to consumers for faulty televisions were limited to LG's manufacturer's warranty and that LG had also misrepresented its obligations following the expiry of that warranty.

With respect to LG's obligations as a manufacturer, the court noted it would have been a half-truth to only refer to the LG warranty if a consumer asked to be advised of their legal rights generally in relation to a faulty television. However, if a consumer made an enquiry about the LG warranty or requesting a specific remedy, a 'confined response' to such a specific enquiry would not be misleading, 'even if no mention was made of the ACL'.

Nor did the court consider that the ACL required LG to inform consumers of their ACL rights, noting that, 'LG had no reason to assume that a consumer was not aware of the ACL'. This was especially so in this matter because, 'all consumers would have received a LG warranty card at the time of purchase… which [included the mandatory ACL text required by reg. 90(2)]'.

Further, the court found that the ACL does not contain a prohibition on a manufacturer requiring that a consumer prove or demonstrate or (at first instance) pay for an assessment or test that might establish the nature and cause of an alleged defect in circumstances where the nature or cause of the defect is otherwise not known.

In circumstances where LG did decide to offer a remedy for a fault that occurred after the warranty period has expired, the court accepted that LG could make offers that were below the amount to which a consumer would have been entitled, had they relied upon their ACL rights to claim damages from LG. Such statements, the court held, are mere 'offers' and should not be considered as representations as to the rights a consumer may have. The extension of this finding is that LG could rightly describe these offers as gestures of 'goodwill'.

Interestingly, the court found that LG could make such offers:

[e]ven if one assumes that the overwhelming inference … is that the consumer guarantee applied, and that there was a major failure and [the consumer] could have been entitled to a refund, replacement or damages.

In light of the above findings, the ACCC was unsuccessful in proving its case that:

LG's conscious decision not to mention the ACL was a half-truth [and that] by consciously omitting to mention the ACL in the context of the consumer's requests, LG made a representation as to the non-existence of a consumer's rights outside the manufacturer's warranty.

Following this decision, the ACCC has noted that it is considering the judgment closely. It may yet decide to appeal.

ACCC brings first small business unfair contract terms case

The ACCC has brought proceedings against waste management company JJ Richards & Sons Pty Ltd in its first court action under new laws that seek to protect small businesses from contract terms deemed under the Australian Consumer Law to be 'unfair'.

The unfair contract terms provisions of the ACL were extended to cover standard form contracts involving small businesses in November last year.

The ACCC alleges that the following eight clauses in JJ Richards' standard form small business contract are void because they are 'unfair' under the ACL:

  • binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term;
  • allowing JJ Richards to unilaterally increase its prices;
  • removing any liability for JJ Richards where its performance is 'prevented or hindered in any way';
  • allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer's control;
  • granting JJ Richards exclusive rights to remove waste from a customer's premises;
  • allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days;
  • creating an unlimited indemnity in favour of JJ Richards; and
  • preventing customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to continue charging customers equipment rental after the termination of the contract.

Notably, the ACCC is alleging that JJ Richards' exclusivity clause is an unfair contract term, as opposed to considering whether the clause has the effect or likely effect of substantially lessening competition under competition laws. The ACCC has argued that the clause is an unfair contract term as it prevents JJ Richards' customers from obtaining additional waste management services from an alternative supplier (and therefore prevents them from seeking a better or lower priced service for any additional services). This pleading opens up the possibility that similar such clauses in standard form agreements with small businesses could be on the ACCC's radar.

Woolworths and BP discounting gets draft conditional approval

The ACCC has issued a draft determination proposing to conditionally authorise a partnership between BP and Woolworths.

If BP is successful in acquiring Woolworths' service stations, participating BP service stations will be allowed to accept Woolworths shopper docket discounts and participate in Woolworths' loyalty program.

Authorisation is conditional on the parties not offering fuel discounts in excess of 4 cents per litre, in light of the ACCC's concerns that 'fuel discount offers in excess of 4 cents per litre could have longer-term effects on the structure of the retail fuel markets and that the detriments from reduced competition may outweigh any benefits'. The ACCC has in previous years taken action against supermarket chains in circumstances where they offered fuel discounts in excess of 4c per litre.

The ACCC is separately conducting a merger review of BP's proposed acquisition of Woolworths' service stations. The proposed authorisation will only take effect if that acquisition is approved and completed. The ACCC expects to release its final decisions on both the authorisation and the proposed acquisition in October 2017.