INSIGHT

ACCC to monitor domestic airlines; Qantas refunds for flight cancellations; High Court appeal for Pacific National/Aurizon decision; and other developments

By Jacqueline Downes
Consumer law Infrastructure Technology Telecommunications

Latest news and developments 7 min read

The Federal Treasurer has directed the ACCC to monitor and report on the prices, costs and profits of Australia’s domestic airline industry. Also in aviation news, the ACCC has issued a formal media release commenting on Qantas' communications with customers regarding refunds for cancelled flights, offering a timely reminder that consumer protection laws continue to apply during the pandemic.

In other ACCC news, the regulator recently announced it will seek special leave to appeal to the High Court against Aurizon's proposed sale of the Acacia Ridge rail terminal to Pacific National. If special leave is granted, the appeal will be the first time the High Court determines a case brought under Australia's merger control laws in section 50 of the CCA. 

The ACCC has also reinforced its ongoing focus on unfair contract terms, which it says should be prohibited and subject to civil pecuniary penalties (rather than merely voidable). In the latest move, it has contacted a number of winemarkers after its market study identified numerous terms in grape supply agreements which may be unfair. 

New research conducted jointly by the ACCC and the Australian Energy Regulator shows how consumers understand (or rather may not understand) electricity offers, which will inform the ACCC's work in enforcing the Electricity Retail Code and the AER’s review of its Retail Pricing Information Guidelines.

And finally, the ACCC proposes to grant final authorisation for coal producers to negotiate collectively for access to the Port of Newcastle. The ACCC has indicated it expects to make a final decision in August – September this year. 

Eyes on the skies: ACCC to monitor domestic airlines

On 19 June 2020, the Federal Treasurer directed the ACCC to monitor and report on the prices, costs and profits of Australia’s domestic airline industry. This follows the significant impact of the COVID-19 pandemic on the aviation industry and was stated to give effect to the Government's policy that a sustainable, competitive aviation sector is in the national interest.

The Treasurer's direction was issued as a legislative instrument under the price surveillance provisions of the Competition and Consumer Act 2010 (Cth) (CCA). It enables the ACCC to obtain information and documents from relevant airlines, and requires the ACCC to provide quarterly reports on its findings to the Treasurer for a period of three years. The Treasurer's action follows informal comments of the ACCC to the media in April and May that it would closely watch the aviation sector in the context of the pandemic.

In a media release, the Treasurer stated that a key matter covered would be the level of capacity put by airlines on each route and whether this occurs in a way that may damage competition. The ACCC made a similar statement and noted it would be looking out for any early signs of damage to competition in the industry which could harm consumers.

Consumer laws continue during COVID-19: Qantas offers refunds for flight cancellations

In a further development in the aviation industry, the ACCC has issued a formal media release commenting on Qantas' communications with customers regarding refunds for cancelled flights.

The ACCC's release is a reminder that consumer protection laws continue to apply during the pandemic, and that businesses should be aware of their obligations under the consumer guarantees regime.

The ACCC stated it had received numerous complaints from passengers who were given credits from Qantas for suspended or cancelled flights, rather than refunds. The ACCC's COVID-19 Taskforce raised concerns with Qantas, which is reported to have since begun contacting customers to inform them they are entitled to a refund for flights cancelled or suspended due to COVID-19 restrictions.

The ACCC's release is a reminder that consumer protection laws continue to apply during the pandemic, and that businesses should be aware of their obligations under the consumer guarantees regime. It is also a public example of the actions of the ACCC's COVID-19 Taskforce, which was created to address consumer-related issues arising during the pandemic related to cancellations, refunds and the suspension of services. The Taskforce is focusing on early intervention by engaging directly with businesses, government agencies and consumer groups regarding such issues.

This train will terminate here: High Court appeal for Pacific National/Aurizon decision

The ACCC has announced it will seek special leave to appeal to the High Court against Aurizon's proposed sale of the Acacia Ridge rail terminal (Terminal) to Pacific National.

In May 2019, the trial judge found that the proposed acquisition would not substantially lessen competition, after accepting a behavioural undertaking from Pacific National to the effect that it would not engage in discriminatory conduct against competitors when providing access to the Terminal.

The Full Federal Court dismissed an ACCC appeal in May 2020. In that appeal, the central issue was whether Pacific National's ownership of the Terminal would deter new entry of a rail linehaul service provider by reason of Pacific National's ability to discriminate against that entrant. Ultimately, the Full Court found that the prospect of new entry was only a mere possibility and speculative, and accordingly, that the acquisition was unlikely to substantially lessen competition. In turn, the Full Court released Pacific National from its behavioural undertaking.

The Full Federal Court also held that the court only has the power to accept an undertaking as a remedy after a contravention of the CCA is found, and that the undertaking offered by Pacific National should not have been taken into account as part of the relevant factual matrix when assessing whether the acquisition would substantially lessen competition.

If special leave is granted, the appeal will be the first time the High Court determines a case brought under Australia's merger control laws in section 50 of the CCA. In announcing its intention to appeal, the ACCC stated it would also seek the High Court's ruling on the scope of the court's power to accept an undertaking as a remedy after finding that a proposed acquisition contravenes s50.

For more information, please see our previous analysis of the decision of the Federal Court at first instance here and of the Full Federal Court on appeal here.

The vines they are a'changin: wine grape contract terms under scrutiny

The ACCC has contacted a large number of winemakers following its market study of the wine grape industry in 2018-19, with several large Australian winemakers agreeing to amend contractual terms which the ACCC considered were likely to be unfair. This reflects the ACCC's ongoing focus on unfair contract terms, which the ACCC has advocated should be prohibited and subject to civil pecuniary penalties (rather than merely voidable).

This reflects the ACCC's ongoing focus on unfair contract terms, which the ACCC has advocated should be prohibited and subject to civil pecuniary penalties (rather than merely voidable).

The ACCC's market study identified a number of terms in grape supply agreements which may be unfair, including:

  • 'right to renew' clauses, requiring growers to enter into new supply agreements with winemakers upon expiry of existing agreements, but without requiring winemakers to match competitor offers;
  • terms that allow winemakers broad unilateral discretion to vary terms of supply agreements;
  • termination clauses allowing winemakers to terminate where grapes become surplus to their requirements, for any reason, and at short or immediate notice; and
  • lengthy payment period terms.

The changes agreed to by winemakers are reported to include amendments to terms which allow unilateral changes to supply contracts, as well as terms relating to quality assessments, contractual disputes, winemakers' right to enter vineyards for inspections and growers' rights to seek legal or financial advice.

The ACCC has noted it remains concerned about the ongoing use of lengthy payment periods in grape supply agreements, stating that the majority of payment periods continue to extend well beyond the ACCC's recommended 30-day standard for large winemakers.

Bright ideas: ACCC and AER research on consumer understanding of electricity offers

The ACCC and the Australian Energy Regulator (AER) have jointly released new research into how consumers understand electricity offers, which will inform the ACCC's work in enforcing the Electricity Retail Code (the Code) and the AER’s review of its Retail Pricing Information Guidelines (RPIG).

The Code came into effect mid-2019, following recommendations made by the ACCC in its Retail Electricity Pricing Inquiry. It applies to electricity offers in NSW, SA and South East QLD, and requires retailers to advertise energy offers in specific ways to ensure that such offers are easily understood and comparable. In particular, the Code requires electricity retailers to advertise by comparing prices to a common 'reference price' and by stating the 'lowest possible price' which would be paid if the conditions for any conditional discounts were met. The Code requires retailers to do so 'clearly and conspicuously'.

The research focused on how these concepts are presented to consumers, by testing example ads with interview participants. It found that consumers generally did not understand the example ads, including the terms such as 'reference price' and 'lowest possible price'. The research recommends using simple descriptive terms to convey these concepts – eg referring to discounts against 'the benchmark price set by the government' rather than against 'the reference price'.

The research notes that it may be incorporated into both a new version of the RPIG, and the ACCC's Guide to the Electricity Retail Code. The current version of the ACCC's Guide, also released in June, contains updates to reflect unrelated amendments to the Code made in February 2020.

Coal-oriented: ACCC authorises coal producers to negotiate collectively

The ACCC proposes to grant final authorisation for coal producers to negotiate collectively for access to the Port of Newcastle.

The ACCC granted interim authorisation in April 2020, covering the NSW Mineral Council and ten coal producers. The ACCC now proposes to grant final authorisation for these arrangements for a period of ten years, issuing a draft determination to that effect in June, for which public submissions are due by 10 July.

The proposed collective negotiations are voluntary for coal producers, and the proposed authorisation does not cover the sharing of commercially sensitive information about customers, marketing strategies, coal volumes or future projections.

Authorisation is sought for a period of ten years, on the basis that this reflects the prospective term of an access agreement. The NSW Mineral Council has also indicated its intention to apply for declaration of the Port's channel services in mid-2020 (which would allow ACCC arbitration of access disputes), and that a ten-year authorisation would allow for collective negotiation after the declaration application is determined. The previous declaration of the shipping channel service was revoked in September 2019.

When considering whether to grant the final authorisation, the ACCC will need to be satisfied that the likely public benefit from the conduct outweighs any likely public detriment. The ACCC has indicated it expects to make a final decision in August – September this year.