COVID-19: competition and consumer law 6 min read
Industry collaboration in a time of coronavirus; ACCC grants urgent interim authorisations to banks and supermarkets to cooperate during pandemic; COVID-19's impact on the speed of ACCC merger reviews and the issues the ACCC will consider in distressed sales; your obligations regarding cancelled events and orders; promoting goods and services during the pandemic; and the ACCC's Scamwatch on high alert.
The Australian business community is currently facing stock and staff shortages, supply chain difficulties, the effects of business premises closures and significant uncertainty. Collaboration between industry participants may help address some of these issues. However, businesses must bear in mind that the usual rules of competition law still apply in these uncertain times, in particular the laws against cartel conduct and concerted practices.
businesses must bear in mind that the usual rules of competition law still apply in these uncertain times, in particular the laws against cartel conduct and concerted practices.
The following types of behaviour could raise competition law issues:
- sharing information or collaborating with competitors to manage pandemic-related supply or demand shocks;
- sharing staff with competitors in the event of staff illness;
- agreeing with your competitors to only supply specific markets (eg geographic areas or types of customer) to manage the effect of the crisis on your business;
- coordinating with your competitors on bids or tenders, even in response to emergencies; and
- allowing industry organisations (eg a trade association) to make pricing, output or supply decisions on behalf of its members during the pandemic.
There are specific exemptions to the cartel provisions (including for legitimate pro-competitive joint ventures), and the ACCC is able to grant authorisations - including urgent authorisations - for some forms of restrictive practices that result in a net public benefit. If you are planning to engage in any form of collaboration with your competitors in response to COVID-19, we recommend seeking legal advice as soon as possible.
On 23 March 2020, the ACCC granted urgent interim authorisation to permit Coles, Woolworths, Aldi and Metcash to work together during the COVID-19 pandemic. Cooperation will be permitted to ensure that consumers have fair and equitable access to groceries while the pandemic persists. Coles, represented by Allens, applied for authorisation on behalf of itself and the other supermarket chains. The ACCC granted interim authorisation within two business days, having received the application on Friday.
On 20 March 2020, the ACCC granted urgent interim authorisation to allow the Australian Banking Association and participating member banks to implement a small business relief package to small businesses impacted by COVID-19. The package will allow deferrals of principal and interest repayments for loans to small business customers with less than $3 million in total debt owed to credit providers. The ABA had applied for authorisation on behalf of its members. The ACCC granted interim authorisation in one day, on 20 March 2020, after the ABA lodged its application on the evening of 19 March 2020.
Both decisions demonstrate the ACCC's ability and willingness to deal urgently with issues raised by COVID-19. The ACCC will now conduct public consultations on both applications before making a final determination. Businesses that are considering industry solutions to the challenges posed by COVID-19 should consider whether ACCC authorisation is needed.
COVID-19 will impact the speed with which the ACCC can review mergers and the issues the ACCC will consider in distressed sales.
The ACCC is adopting measures to protect the well-being of its staff and of the parties with which it engages. It is transitioning a large proportion of its staff to remote working and all external meetings are being conducted by phone and video conference. These measures are aimed at ensuring the ACCC can continue to operate, however, the ACCC has forewarned that in certain cases there may be a need to extend review timetables.
At this stage, the ACCC has not asked parties to delay merger review applications but is requesting parties to consider whether some reviews could be postponed – eg those where the transaction is at a very early stage.
If the situation worsens, the ACCC has indicated it may need to prioritise matters further.
In distressed sales, the ACCC will consider the financial status of the target. However, the ACCC also adopts a longer-term view of the market impact of a merger. It is therefore important to consider the potential competition issues posed by distressed sales.
COVID-19 is having an immediate impact on Australian businesses, with supply chain issues and travel restrictions requiring rapid adjustments to everyday operations. Among the hardest hit are the events, travel and tourism industries. The crisis is forcing businesses to reassess their ongoing operations, which may include the cancellation of contracts.
Consumer protection laws continue to apply, and businesses should be aware of their obligations under the consumer guarantees regime and the general prohibitions on misleading or deceptive and unconscionable conduct.
The ACCC has released guidance for consumers that will also assist consumer-facing businesses during this time. For example, the ACCC has made it clear that:
- Businesses that have chosen to cancel events, tours, flights and the like as a result of COVID-19 are expected to provide refunds or other remedies such as credits or vouchers in most circumstances;
- Businesses must not take payments for goods or services where there are reasonable grounds to believe the goods or services won't be supplied - eg gyms that have decided to close should not continue to debit membership fees and should refund any fees already taken for the period of closure; and
- Businesses may not be required to provide refunds where cancellations etc are required as a result of government restrictions, or if consumers or other businesses simply choose to cancel orders or return products of their own accord. Nonetheless, the ACCC has encouraged all businesses to treat consumers fairly and has reminded businesses that even in these circumstances refunds etc may still be required under the terms of relevant contracts.
Promoting goods and services during the pandemic poses a number of specific considerations:
- Misleading representations: The general prohibition on misleading and deceptive conduct in trade remains important, as do the specific prohibitions on false or misleading representations in relation to matters such as price, uses, standards and sponsorship of goods or services. Particular care should be taken when identifying the reasons for any price increases or stock shortages, for example, to ensure all statements are accurate.
- Supply chain disruptions: Disruptions to supply chains may cause certain goods to become unavailable for periods of time. To avoid bait advertising risks, businesses need to monitor their stock and advertising, and avoid advertising goods that they do not have in stock.
- Price gouging: Competition and consumer law does not specifically prohibit 'price gouging'. However, depending on the circumstances, price gouging may be caught by the general prohibitions on misleading or deceptive conduct and unconscionable conduct.
The ACCC has warned that its Scamwatch service is receiving an increasing number of reports of coronavirus-related scams. These have included:
- stores purporting to sell healthcare products such as face masks and not delivering the goods;
- phishing attempts, where scammers impersonate government bodies, utility providers or travel agents to obtain personal information, credit card details etc;
- the spreading of misinformation around potential cures or preventative measures for the virus, including the sale of goods that claim to cure or prevent COVID-19; and
- investment scams claiming opportunities to make money out of the fears surrounding COVID-19.
Potential scams can be reported to Scamwatch.