INSIGHT

COVID-19 and competition and consumer law issues; concerns over Google's proposed acquisition of Fitbit; and ACCC says proposed 'loyalty program' may raise competition issues

By Jacqueline Downes
Consumer law Infrastructure Technology Telecommunications

In Touch: latest news and developments 7 min read

In COVID-19 news, the authorisation permitting insurers to coordinate on temporary relief measures is proposed to be extended; and the ACCC has imposed further conditions on coordination between health insurers.

Elsewhere, the ACCC has rejected a proposal to set minimum advertised prices for Dewalt power tools, declaring any public benefit was outweighed by the potential consumer detriments. 

The Federal Court has declined to make declaration that Quantum Housing engaged in unconscionable conduct; and also found in favour of Kimberly-Clark Australia by dismissing the ACCC's appeal regarding Kleenex flushable wipes.

Finally, the ACCC has raised concerns with Google's proposed acquisition of Fitbit; and also stated that Caravanning Queensland's proposed 'loyalty program' may raise competition concerns.

COVID-19 and competition and consumer law issues

Authorisation permitting insurers to coordinate on temporary relief measures proposed to be extended

In April 2020, the ACCC granted an urgent interim authorisation for certain insurers and brokers to coordinate on a range of COVID-19 related relief measures.

On 10 June 2020, the ACCC released a draft determination proposing to continue the authorisation to 31 December 2020, citing the greater transparency and consistency of relief that the authorisation provides to policyholders.

The relief measures will continue to include collaboration in relation to:

  • offering small business policyholders who are experiencing financial hardship from the impact of COVID-19 the ability to defer premium payments for up to six months;
  • offering small business customers refunds on unused premiums for any insurance policy they need to cancel as a result of the COVID-19 pandemic; and
  • providing all policyholders who cannot travel as planned (due to the impact of COVID-19) a credit or a refund for any unused travel insurance premiums.

The ACCC is currently seeking feedback on the draft determination, with submissions due by 23 June 2020.

ACCC imposes further conditions on coordination between health insurers

Another urgent authorisation granted by the ACCC in light of the COVID-19 pandemic was in respect of Private Healthcare Australia Limited, on behalf of itself, Members Health Fund Alliance and both bodies' members.

On 8 April 2020, the ACCC granted authorisation permitting certain collaborative conduct in relation to the broadening of private health insurance coverage to include additional treatments and the implementation of financial relief measures with respect to insurance premiums.

On 2 June 2020, the ACCC revoked the urgent interim authorisation and replaced it with a revised interim authorisation that imposes additional reporting conditions and requires advance notice to the ACCC of any measures to be implemented pursuant to the authorisation.

The ACCC has commenced a public consultation process on the authorisation, with a final determination due in September 2020.

A (resale price) maintenance worker's tools: ACCC rejects proposal to set minimum advertised prices for Dewalt power tools

Stanley Black & Decker (SBD) lodged a resale price maintenance (RPM) notification in October 2019, seeking to set minimum advertising prices for its Dewalt-branded power tools, accessories and attachments. RPM refers to the stipulation by a supplier of a minimum price below which its goods or services must not be advertised or sold.

On 4 June 2020, the ACCC rejected SBD's request for notification. In doing so, the ACCC accepted there was a possible public benefit associated with the conduct, since implementation of a minimum advertised price may have encouraged more retailers to stock Dewalt tools and therefore resulted in increased consumer choice. However, the ACCC determined that any such public benefit was outweighed by the potential consumer detriments.

In the ACCC's view, consumers would face difficulties knowing which retailers would be prepared to offer the best price and would lose the bargaining power of being able to ask retailers to match one another's advertised prices. The ACCC considered that the conduct could also lead retailers of other power tools to increase their own prices.

Home truths: Federal Court declines to make declaration that Quantum Housing engaged in unconscionable conduct

The Federal Court has declined to make a declaration that Quantum Housing (currently in liquidation) engaged in unconscionable conduct in proceedings brought against it by the ACCC.

Quantum Housing was an approved participant of the National Rental Affordability Scheme. The ACCC alleged that Quantum Housing falsely represented to investors that they would be in default of their agreements unless they replaced their property managers with those approved by Quantum Housing, and unconscionably pressured investors to change their property managers.

The parties submitted agreed facts which included admissions by Quantum Housing as to misleading and unconscionable conduct. On 9 June 2020, the court declined to make a declaration that Quantum Housing engaged in unconscionable conduct. In coming to this conclusion, the court analysed the recent High Court decision in Kobelt and concluded that the majority reasoning's requirement of 'exploitation of disadvantage… that is well outside the bounds of what is generally seen to be moral, right or acceptable commercial behaviour' was not satisfied in this case.

This had consequences for the penalties to be imposed. The ACCC had proposed a $700,000 penalty on the basis of two types of agreed contravention. The court found that on the original facts, a penalty of $700,000 would have been inadequate. However, since only the contravention relating to false representations was substantiated, the ACCC's proposed penalty of $700,000 was considered by the court to be appropriate. This reflects a willingness on behalf of the Federal Court to criticise or reject penalties that are deemed too low, such as in the Volkswagen case where the court imposed a penalty $50 million higher than that proposed by the parties.

Federal Court dismisses appeal on Kleenex flushable wipes

The Full Federal Court has found in favour of Kimberly-Clark Australia Pty Ltd (Kimberly-Clark) in proceedings brought against it by the ACCC. The ACCC had alleged that Kimberly-Clark made false or misleading representations as to the 'flushable' wipes it marketed and supplied in Australia.

At first instance, the Federal Court found that, while Kimberly-Clark had made a representation as to the 'flushability' of the wipes, it had not been established that this representation was false or misleading. The Full Court of the Federal Court reaffirmed the primary judge's decision, dismissing the ACCC's appeal.

The key issue raised by the ACCC on appeal was whether the primary judge had erred by requiring proof of actual harm by Kimberly-Clark wipes. The Full Court found that the evidence had demonstrated that wipes generally caused blockages to wastewater systems, but not that Kimberly-Clark wipes caused such blockages. The ACCC argued it was not necessary to show actual harm and it would be sufficient to show that the wipes posed a 'real risk of harm'. The Full Court rejected this argument on the basis that it was not run at trial and could not be run for the first time on appeal.

Not a bit player: ACCC raises concerns with Google's proposed acquisition of Fitbit

The ACCC has raised preliminary competition concerns regarding Google's proposed acquisition of Fitbit.

Fitbit is a startup that makes wearable fitness devices. These devices collect detailed health information from users, including step counts and heart rates. Fitbit's data sets span ten years.

The ACCC has released a Statement of Issues raising two main concerns. First, the ACCC has alleged that Google's increased consumer health data could result in higher barriers to entry into data-dependent health markets and further entrench Google's dominant position. Second, the ACCC has stated that Google controls a number of the inputs required for the supply of wearable devices (such as Wear OS, Google Maps and Android smartphone software). The ACCC is concerned that the acquisition of Fitbit may provide Google with the incentive to restrict competitors' access to these products, foreclosing competition in the supply of wearable devices.

The proposed acquisition is subject to investigation by regulators around the world, including the European Commission and US Department of Justice. This reflects an increased focus among competition regulators on the acquisition of startups in the digital space. The increased scrutiny arises in light of concerns expressed by regulators that Google has substantial market power in a number of digital markets, that this strong position is entrenched by a concentration of data and that acquisitions of apparently small players could potentially still have an effect on competition in rapidly evolving digital markets.

Wheeling and dealing? ACCC says Caravanning Queensland's proposed 'loyalty program' may raise competition concerns

The ACCC has issued a draft notice proposing to revoke an exclusive dealing notification lodged by the Caravan Trade and Industries Association of Queensland (Caravanning Queensland). The notification relates to the implementation of a loyalty program that would give members a discount to exhibit at Caravanning Queensland's trade shows, provided the members exclusively participated in Caravanning Queensland's events that year.

Caravanning Queensland is the peak body for the caravan, manufactured home and camping industries in Queensland. Eighty-five percent of caravan manufacturers are members, and it organises some of the major exhibition events in the area.

The ACCC's reasoning indicates that a loyalty program rewarding consumers for increased purchases of a company's goods or services would ordinarily be fine. While such loyalty programs may encourage consumers to deal exclusively with that one company due to the discounts earned, they do not mandate exclusivity. The ACCC's concern with Caravanning Queensland's proposed loyalty program is that it links the reward given to consumers to an agreement not to purchase competitor services. Given the size of Caravanning Queensland and its events, and the potential impact on competitor events, the ACCC considers that the program has the purpose and likely effect of substantially lessening competition in the supply of caravanning exhibition event services in South-East Queensland.

Caravanning Queensland and interested parties will have the opportunity to comment on the ACCC's draft notice before a final decision is made.