INSIGHT

GSK-Pfizer consumer health care deal found to be painless; ACCC milks competition in dairy industry; and ACCC inquiries and investigations feature in election policies.

By Jacqueline Downes
Consumer law

In brief

ACCC intolerant to lactose products RPM notification

The ACCC has published a draft notice proposing to revoke a resale price maintenance (RPM) notification by Meredith Dairy.

Under the Competition and Consumer Act 2010 (Cth), a wholesale supplier must not engage in RPM by setting a minimum resale price for their goods or services. However, it is possible for a business to obtain legal protection for RPM by notifying or seeking authorisation from the ACCC. Where a party lodges a notification, the ACCC may issue a revocation notice where it is satisfied that the public benefit will not outweigh the detriment from the conduct.

Meredith Dairy submitted that it sought to engage in the notified RPM conduct to manage increasing incidents of loss leading conduct by retailers and to ensure that its reputation as a price point does not mean it is forced to underwrite competition against itself.

However, in its draft notice, the ACCC stated that it was not satisfied that the detriment to the public would be outweighed by public benefits. It has invited submissions and further information from Meredith Dairy and interested parties. Although there is no statutory deadline for the ACCC to make a final decision, it has indicated that it expects to do so in June or July 2019.

GSK-Pfizer consumer healthcare deal to be painless

The ACCC has announced it will not oppose GlaxoSmithKline plc's proposed acquisition of Pfizer Inc's consumer healthcare business.

GSK and Pfizer supply prescription and over-the-counter medication; however, GSK only proposes to acquire Pfizer's over-the-counter business. The proposed acquisition would combine GSK's Panadol and Voltaren pain management brands with Pfizer's Advil, as well as Pfizer and GSK's over-the-counter gastrointestinal and cold and flu products.

The ACCC concluded that the proposed acquisition was unlikely to substantially lessen competition in either the over-the-counter pain management market or the gastrointestinal and cold and flu products market. While Pfizer's Advil is a leading brand in America, the ACCC considered its market share in pain management products in Australia to be very limited and therefore unlikely to become a significant constraint on market leaders. In addition, no competition concerns were raised in relation to the parties' gastrointestinal and cold and flu products, given the low market shares of these products and the range of alternative options.

ACCC milks competition in dairy industry

ACCC Commissioner Mick Keogh gave an overview of the competition landscape in the dairy industry in a speech at the Trans-Tasman Dairy Leaders Forum. The conclusions were consistent with the Final Report in the Dairy Inquiry, with the Commissioner focusing on the relationship between processors and dairy farmers.

Commissioner Keogh made the following points:

  • supermarkets have bargaining power relative to processors – however, processors are generally large companies with some countervailing bargaining power and are armed with market information for negotiations with retailers. Processors also have the genuine alternative of supplying products into export markets;
  • $1 per litre of milk (now $1.10 per litre of milk) is not a key factor driving the profitability of most processors and farmers;
  • the supply of private label milk is not of itself very profitable for processors – however, it can result in efficiencies that reduce average processing costs for some processors;
  • while there is strong competition between processors for private label milk contracts, processors are not required to enter into these contracts, and the ACCC found evidence of processors electing not to participate in private label tenders that they did not consider would generate acceptable margins; and
  • the trading arrangements between processors and retailers are already governed by the Grocery Code, which has been subject to a review in recent times.

ACCC inquiries and investigations a feature of election policies

Both the Liberal and Labor parties have indicated their intention to involve the ACCC in reviews and investigations of certain markets if elected.

Prime Minister Scott Morrison and Water Minister David Littleproud have announced that, if re-elected, the Liberals and Nationals will request that the ACCC review the water markets in the Southern Murray Darling Basin. The review would look at the water market's operation and transparency, and the role of brokers, traders and investment funds. Labor has pledged to direct the ACCC to investigate the childcare industry, including in relation to excessive fee increases and mechanisms for ensuring child care fee increases are controlled.

TPG / Vodafone merger opposed

The ACCC has decided to oppose the proposed merger between Vodafone Hutchison Australia Pty Ltd and TPG Telecom Limited. It considered that the proposed merger would preclude TPG entering the market as a mobile network provider, and reduce competition and contestability in the mobile services market.

The merger parties have said that they will commence proceedings in the Federal Court, seeking a declaration that the transaction will not have the effect alleged by the ACCC.

ACCC issues new report tracking internet activity

As part of the Internet Activity Record Keeping Rule, the ACCC has issued its first report tracking the speed and volume of data downloaded and the number and type of retail internet services in operation. Previously, the Australian Bureau of Statistics collected similar information through the Internet Activity Survey.

The report found that whilst mobile handsets are the most common way to access the internet, fixed line connections are preferred for large downloads. The most popular internet speed tier (excluding mobile handsets) is less than 24 megabits per second. 

The ACCC will issue its next report in June 2019, which will be in a different format providing a richer dataset and a greater level of granularity and disaggregation.