INSIGHT

Penalties for Garuda and Jetstar; the ACCC investigates the wine grape market; and consultation on the ACCC's proposed collective bargaining class exemption.

By Jacqueline Downes
Consumer law

In brief

PT Garuda grounded as air cargo cartel penalties get heavier

The Federal Court has ordered PT Garuda Indonesia to pay penalties totalling $19 million for its involvement in a global air cargo cartel. This follows the ACCC's court action against 14 international airlines between 2008 and 2010, which have resulted in combined penalties amounting to $132.5 million.

After more than nine years of litigation, the ACCC successfully demonstrated that Garuda made and gave effect to price-fixing arrangements in relation to various pre-determined surcharges on the supply of air cargo services from overseas ports to ports in Australia.

On conclusion of this case, ACCC Chair Rod Sims commented that the ACCC is 'committed to pursuing cartel conduct from both domestic and overseas operators', and warned that 'any business anywhere that enters an agreement that affects Australian businesses and consumers should clearly take note'.

Jetstar lands a $1.95 million penalty for misleading representations

The Federal Court has imposed a $1.95 million penalty on Jetstar Airways Pty Ltd for engaging in misleading or deceptive conduct, and for making false or misleading representations on its website about consumer guarantees, under the Australian Consumer Law (the ACL). The representations included that:

  • certain Jetstar fares were not refundable unless an additional 'flight bundle' was purchased;
  • Jetstar's flight services were not subject to statutory guaranties and warranties; and
  • Jetstar's liability under the ACL consumer guarantees was limited either to supplying the services again or paying the cost of having the service supplied again, at Jetstar's discretion.

The representations were misleading because Jetstar's supply of flight services was subject to consumer guarantees under the ACL that could not be excluded, restricted or modified by contract, and under which consumers may have been entitled to a range of refunds or other remedies.

Jetstar admitted to the contraventions. The ACCC and Jetstar made joint submissions in support of the $1.95 million penalty, which the court accepted. Jetstar also provided a court enforceable undertaking to amend its policies and procedures to ensure compliance with the ACL, and to review customer complaints during the period of the contravening conduct and offer refunds or other remedies where necessary.

Seller to cellar, the ACCC investigates the wine grape market

The ACCC has released its interim report on the wine grape market study. It identifies a range of concerning practices, which it considers produces inefficient outcomes in grape production and pricing. The ACCC also makes a number of recommendations to facilitate more efficient grape production and processing.

Key findings from the report include:

  • the domestic retail market is highly concentrated, which results in winemakers having limited power in their negotiations with retailers;
  • there are low levels of competition for grapes, due to the high degree of market concentration in wine making, a lack of price transparency, and limited switching between winemakers and growers;
  • growers have limited visibility over the prices set by winemakers and quality assessment procedures;
  • a number of terms contained in grape supply agreements may constitute unfair terms under the unfair contract terms regime; and
  • the voluntary Australian Wine Industry Code of Conduct has not been effective in addressing issues in the industry.

Submissions in response to the interim report are due by 28 June 2019, with the final report due in September 2019.

Bargaining for a class exemption

The ACCC is seeking views on its proposal to introduce a collective bargaining class exemption from competition laws, under which:

  • businesses with an annual turnover of less than $10 million in the preceding financial year will be able to collectively bargain with customers or suppliers without requiring pre-approval from the ACCC; and
  • all franchisees and fuel retailers governed by the Franchising Code of Conduct or the Oil Code of Conduct, irrespective of turnover, will be able to collectively bargain with their franchisor or fuel wholesaler without requiring pre-approval from the ACCC.

Under the existing law, competitors are precluded from engaging in certain joint activities, such as collective bargaining, without first obtaining formal approval from the regulator. The ACCC can grant approval if the arrangement is unlikely to substantially lessen competition or if it is likely to result in a net public benefit.

The ACCC has released a draft version of the class exemption, and associated documents, for public consultation. In particular, it is seeking views on the eligibility criteria, the one-page notice that groups must fill out and provide to the ACCC and the target in order to be eligible, and the draft legislative instrument. Stakeholders have until 3 July 2019 to provide submissions.

Next chapter of the gas inquiry

The ACCC has released the sixth interim report of its inquiry into the demand for, and supply of, wholesale gas in Australia. Continuing the trend of the inquiry so far, the interim report focuses on the east coast gas market. Key points the ACCC makes in the report are:

  • commercial and industrial gas users in the east coast market continue to face high prices, and many users believe these prices may make their operations unsustainable in the medium to longer term;
  • it will be monitoring whether gas suppliers revise down their offer prices to reflect the significant fall in LNG netback prices over the past six months; and
  • as noted in the December 2018 interim report, further investment in exploration and development, as well as key infrastructure, is required to guarantee security of supply and sustainable prices.

ACCC Chair Rod Sims discussed the interim report in his address to the 2019 APPEA Oil and Gas Conference, and commented on the increasing likelihood that commercial and industrial gas users will relocate from the east coast or wind up their operations if wholesale gas prices do not soften. He also reiterated his views that investment is required to secure supply and reduce prices, and urged state governments to reconsider blanket moratoria and regulatory restrictions.

Increased transparency hits the right note for APRA authorisation encore

The ACCC has proposed to reauthorise the licensing arrangements of the Australasian Performing Right Association (APRA) for a further five years, with strengthened conditions, subject to industry feedback. APRA grants licences to those wishing to broadcast or perform musical works in public on behalf of its members, who include composers, songwriters and publishers.

In its assessment, the ACCC considered the likely public benefits that would arise from allowing APRA members to collect royalties jointly, and balanced these considerations against the likely public detriments associated with APRA's near-monopoly over the music licensing market. To reduce the detriments likely to result from the conduct, the ACCC proposed additional conditions to increase transparency and accountability.

Submissions on the ACCC's proposed reauthorisation and conditions are due on 5 July 2019.