INSIGHT

ACCC seeks clarity on unconscionable conduct; Medibank receives $5 million penalty for misrepresentations to members; continued cooperation in the era of COVID-19; and other developments

By Jacqueline Downes
Consumer law Infrastructure Technology Telecommunications

In brief 6 min read

The ACCC has appealed the Federal Court's decision that Quantum Housing Group did not engage in unconscionable conduct in its dealings with investors regarding the National Rental Affordability Scheme. 

The US-based Elanco Animal Health's acquisition of German pharmaceutical company Bayer AG's animal health business has been given the go-ahead, after Elanco provided a court-enforceable undertaking to divest four animal parasite treatment brands.

APRA - the Australasian Performing Right Association - has had its music licensing arrangements reauthorised for a further four years, subject to greater transparency about licence fees and royalties.

Medibank Private has been ordered to pay $5 million in penalties for making false representations to its members about the benefits offered by their ahm health insurance policies.

The Federal Court has found that Kogan made false and misleading representations about a tax time sales promotion in breach of the Australian Consumer Law, with the company raising the price on hundreds of products just prior to offering a 10% discount on them.

And finally, as the COVID-19 pandemic continues, the ACCC is continuing to consider urgent requests for authorisation of coordinated activities related to the pandemic, particularly in the case of supermarket chains and hospitals (both private and public).

ACCC seeks clarity on unconscionable conduct

The ACCC has appealed the Federal Court's decision that Quantum Housing Group (Quantum) did not engage in unconscionable conduct in its dealings with investors regarding the National Rental Affordability Scheme (NRAS).

Both Quantum and its director, Cheryl Howe, admitted liability and made joint submissions to the Federal Court that it had engaged in both false or misleading representations and unconscionable conduct. The Federal Court found that Quantum had made false or misleading representations when it sent a series of letters and emails to investors who had rental properties participating in the NRAS and pressured them to terminate their existing property managers and instead use property managers approved or recommended by Quantum. However, the trial judge was not satisfied that the admitted conduct was unconscionable because the conduct did not depend on exploiting a special disadvantage or vulnerability on the part of the investors.

The ACCC has stated it is 'appealing this decision in order to seek clarity from the Full Federal Court on whether the Australian Consumer Law (ACL) requires there to be special disadvantage on the part of the target or victim of alleged unconscionable conduct for that conduct to be unconscionable in breach of the ACL'.

ACCC clears Elanco's acquisition of Bayer's animal health business

US-based Elanco Animal Health's acquisition of German pharmaceutical company Bayer AG's animal health business has been cleared by the ACCC, after Elanco provided a court-enforceable undertaking to divest four animal parasite treatment brands. The undertaking will see Elanco divest Avenge + Fly (a sheep lice treatment), and Drontal, Profender and Droncit (which treat gastro intestinal worms in cats and dogs).

The ACCC commenced informal review of the acquisition in December 2019. In May 2020, the ACCC commenced consultation on a proposed divestiture undertaking.

The ACCC had concerns about the effect of Elanco's acquisition in the markets for sheep lice treatments, and worming treatments for cats and dogs. In the ACCC's view, the acquisition was likely to raise competition concerns in the supply of sheep lice treatments without the divestment of Avenge + Fly, an established and popular sheep lice treatment brand. The ACCC also considered that the acquisition would have removed Bayer as one of Elanco's closest competitors in the supply of gastro intestinal worming treatments for cats and dogs. The undertaking provided by Elanco addressed the ACCC's concerns in these areas.

ACCC chimes in on transparency in music licensing

The ACCC has reauthorised the Australasian Performing Right Association's (APRA) music licensing arrangements for a further four years, subject to greater transparency about licence fees and royalties.

The ACCC consulted on the reauthorisation in which concerns were raised about APRA's licensing fees, as well as a perceived lack of transparency and accountability by APRA to both its members and to the businesses from which it collects licence fees.

The conditions the ACCC has imposed as part of the reauthorisation will require APRA to:

  • publish its methodologies for calculating the rates for each category of licence it offers;
  • publish an explanation each time it increases licence rates by more than CPI;
  • publish more detailed information about its royalty distributions to its members; and
  • publish an annual transparency report with information on rights revenue, operating costs and payments to members.

If the information APRA publishes about how it calculates its licence rates is not sufficiently clear and detailed, the ACCC will be able to require that an independent report be prepared.

Medibank receives $5 million penalty for misrepresentations to members

On 16 July 2020, the Federal Court ordered Medibank Private to pay $5 million in penalties for making false representations to its members about the benefits offered by their ahm health insurance policies, following Medibank's admission of liability and joint submissions with the ACCC.

The false representations were made to Medibank members who had lodged claims or made enquiries about their level of cover on ahm's 'lite' or 'boost' policies. Medibank falsely said they were not covered for certain procedures, when in fact they were. Medibank self-reported the issue to the ACCC in August 2018 and has paid more than $775,000 in compensation to members.

The ACCC has also accepted an undertaking from Medibank that it will contact the policyholders who have not taken up Medibank's offer for compensation and provide them with a further chance to claim. These members will be offered an additional $400 as a one-off payment. Medibank has also undertaken to review its compliance procedures and amend its incident management procedures.

Kogan misled consumers with EOFY promotion, Federal Court finds

The Federal Court has found that Kogan made false and misleading representations about a tax time sales promotion in breach of the Australian Consumer Law.

Kogan advertised to consumers in June 2018 that they could use a discount code to receive 10% off prices at the checkout. Kogan advertised the promotion widely, both on its website and in emails and SMS messages to consumers.

Kogan had increased the prices of more than 600 of its products immediately before the promotion, in most cases by at least 10%, then reduced the prices of these products shortly after the promotion ended.

A penalty hearing will follow at a later date. The ACCC is seeking declarations, injunctions, pecuniary penalties, corrective notices and costs.

Continued cooperation in the era of COVID-19

As the COVID-19 pandemic continues, the ACCC is continuing to consider urgent requests for authorisation of coordinated activities related to the pandemic.

The ACCC has issued a draft determination permitting Coles, Woolworths, Aldi and Metcash to continue working together to ensure consumers have fair and reliable access to groceries during the COVID-19 pandemic. Interim authorisation was first granted to the supermarkets on 26 March 2020. Coles, represented by Allens, applied for authorisation on behalf of itself and the other supermarket chains. The ACCC is proposing to grant authorisation until March 2021. A consultation period on the draft determination is open now, with the final determination due in September.

The ACCC has also issued draft determinations to allow private and public hospitals and government health authorities in each state and territory to continue working with each other in response to the COVID-19 pandemic. The ACCC is proposing to grant authorisation to permit a coordinated response to the pandemic until 30 September 2021. A consultation period on the draft determinations is open until 24 July 2020, with final determinations due in August.