INSIGHT

Federal Court orders penalties against Viagogo; ACCC commences new civil proceedings; Rod Sims continues to advocate for law changes; and other developments

By Jacqueline Downes
ACCC Consumer law Infrastructure Technology Telecommunications

In brief 6 min read

The Federal Court ordered Viagogo AG to pay penalties of $7 million for misleading consumers in connection with its online ticket resale business.

The ACCC instituted civil proceedings against:

  • NQCranes for allegedly engaging in market sharing conduct;
  • B&K Holdings, trading as FE Sports, for allegedly engaging in resale price maintenance; and
  • Fuji Xerox for allegedly using unfair contract terms in its small business standard form contracts.

The ACCC received payment for infringement notices it issued to:

  • Amaysim ($126,000) and Lycamobile ($12,600) for alleged false or misleading representations that their mobile phone plans were 'unlimited'; and
  • Union Dairy Company ($10,500) for allegedly failing to comply with its Dairy Code publishing obligations.

The ACCC:

  • released two reports as part of its inquiry into the prices, profits and margins in the supply of the electricity in the National Electricity Market;
  • allowed a resale price maintenance notification to stand in relation to sales on HP's Online Marketplace Stores managed via a third party; and
  • announced it had made a class exemption due to commence early 2021 for small businesses and franchisees / fuel retailers to collectively bargain with customers, suppliers, franchisors or fuel wholesalers by lodging a one-page form instead of using the traditional Authorisation or Notification processes.

Laundering businesses Alsco and South Pacific Laundries withdrew their bids in relation to Spotless Laundries after the ACCC expressed preliminary competition concerns about each proposed transaction.

In a speech to the National Press Club, ACCC Chair Rod Sims continued the ACCC's advocacy in favour of changes to Australia's merger, consumer and small business protection and regulatory access laws in the context of the accumulation and use of market power and Australia's COVID recovery.

Federal Court orders penalties against Viagogo

Viagogo to pay $7 million penalty for misleading consumers in relation to its online ticket resale business

As discussed in a previous edition of InTouch, in April 2019 the Federal Court found that Viagogo AG (Viagogo) engaged in misleading or deceptive conduct in connection with its online ticket resale business.

Viagogo was found to have made the following false / misleading representations:

  • that it was the official ticket seller for certain events;
  • tickets were scarce; and
  • the price advertised represented the full and final amount (when further additional fees were payable).

Viagogo was also found to have breached the component pricing rules as it did not specify in a prominent way and as a single figure, the total price for each ticket.

On 2 October 2020, the court ordered Viagogo to pay $7 million in penalties for engaging in this conduct. In imposing the penalty, Justice Burley stated:

'there is a need for a strong signal to be sent to other corporations which conduct internet based operations that, despite the borderless operation of the internet, they are nonetheless subject to the ACL when they conduct business in Australia'.

The court also made orders restraining Viagogo from engaging in further conduct in breach of the Australian Consumer Law, and requiring it to establish and implement a compliance program.

ACCC commences civil proceedings against NQCranes, B&K Holdings and Fuji Xerox

ACCC commences cartel proceedings against overhead crane company

On 19 October 2020, the ACCC instituted civil proceedings against NQCranes Pty Ltd (NQC) for allegedly engaging in cartel conduct. The ACCC alleges that:

  • NQC entered into a signed distribution agreement with its competitor in the overhead crane market, MHE-Demag Australia Pty Ltd (Demag);
  • this agreement contained a provision that the companies would not target each other's existing service customers in Brisbane and Newcastle; and
  • correspondence indicated that NQC had given effect to these provisions. For example, NQC and Demag managers discussed complaints raised by each company regarding the other's non-compliance with the anti-targeting provision of the agreement. NQC senior managers also communicated to NQC operational managers that they should not target Demag's customers.

The ACCC is seeking civil penalties, declarations and orders against NQCranes for the alleged conduct.

ACCC puts the brakes on FE Sports' alleged resale price maintenance conduct

On 14 October 2020, the ACCC instituted proceedings against B&K Holdings (QLD) Pty Ltd, trading as FE Sports, for allegedly engaging in resale price maintenance for the wholesale supply of bicycle products and accessories.

The ACCC alleged that FE Sports provided dealer agreements to existing or prospective dealers containing a term that prohibited them from advertising goods for sale below a recommended retail price specified by FE Sports. For example, some of the dealer agreements contained a clause that stated:

'the Dealer is permitted to advertise and promote [Brand] products through its internet home page provided that no reference is made to a price other than RRP. Under no circumstances is a [Brand] product to be advertised for sale by the Dealer at a discount.'

The ACCC also alleged that FE Sports subsequently entered into dealer agreements containing such terms.

FE Sports allegedly engaged in this conduct despite receiving several letters from the ACCC specifically raising concerns about suspected resale price maintenance conduct.

The ACCC is seeking declarations, injunctive relief, pecuniary penalties, an order for corrective notices, a compliance program, and costs.

Fuji Xerox in court over alleged unfair contract terms

On 22 October 2020, the ACCC instituted Federal Court proceedings against printing company Fuji Xerox Pty Ltd (Fuji) alleging that some of Fuji’s standard form contracts, which related to Fuji's supply of printing goods and services and technical assistance to small businesses, contained unfair contract terms.

The ACCC alleges many of Fuji's terms in these contracts are unfair, including those that allow automatic renewals, excessive exit fees and unilateral price increases.

In its media release the ACCC noted that although courts can declare unfair terms to be void and consequently unenforceable, they cannot impose penalties on companies using these unfair terms. The ACCC continues to advocate for changes to the Australian Consumer Law to make it illegal for businesses to use unfair contract terms and for the courts to have the power to impose penalties on businesses using them.

Infringement notices paid by Amaysim, Lycamobile and Union Dairy Company 

Amaysim and Lycamobile to dial back ads for 'unlimited' mobile plans

On 15 October 2020, Amaysim Australia Ltd (Amaysim) and Lycamobile Pty Ltd (Lycamobile) paid penalties of $126,000 and $12,600, respectively, after the ACCC issued each with an infringement notice.

The ACCC alleged that the businesses made misleading representations about their mobile plans in unqualified advertisements on social media. For example:

  • on or around 1 January 2020, Amaysim published an advertisement on its Twitter account with the statement '…your mother loves the Unlimited Mobile Data offer from amaysim’ and the hashtag ‘#UnlimitedMobileData’. However, the advertised plans only provided an unlimited data allowance for the first three renewals, after which they would revert to a data cap and consumers would be charged for exceeding that cap; and
  • on or around 29 November 2019, Lycamobile published an advertisement on its Facebook page which referred to ‘Unlimited Plan S’ and ‘Unlimited Plan M'. However, each of these plans had a capped data allowance and consumers were charged for exceeding the allowance.

In the media release, Rod Sims noted that 'Consumers who saw the word ‘unlimited’ in the advertisements without any explanation of the limits of the plans were likely to expect they would not be charged additional fees for mobile data, no matter how much data they used'.

Union Dairy Company pays penalty for alleged breach of Dairy Code

On 21 October 2020, Union Dairy Company (UDC) paid a penalty of $10,500 after the ACCC issued it with an infringement notice for allegedly failing to comply with publishing obligations under the Dairy Code.

The ACCC alleged that dairy farmers had to fill in a form on UDC's website before they could access UDC's exclusive supply agreement from the website. In filling out this form, dairy farmers were required to disclose data to UDC, including their herd size and current milk processor. The ACCC was concerned that by placing its exclusive agreement behind a website portal which required farmers' data, UDC did not meet the Code requirement that processors make milk supply agreements publicly available.

The ACCC also alleged that UDC failed to publish a non-exclusive supply agreement until two months after the Code's 2.00pm, 1 June deadline. The ACCC indicated that the delay may have suggested UDC was not obliged to offer such non-exclusive agreements at a time when processors make time-critical milk supply decisions (ie in June).

National Electricity Market inquiry report; resale price maintenance decision and small business class exemption

Next chapter of the Inquiry into the National Electricity Market

The ACCC has released two reports as part of its inquiry into the prices, profits and margins in the supply of electricity in the National Electricity Market.

The main report assesses the early effects of the Default Market Offer (DMO) and Victoria Default Offer (VDO) reforms, and examines the outcomes for different residential and small and medium enterprise customer groups such as those on hardship programs or payment plans, and those with solar photovoltaic systems. Some of the key findings in the report include:

  • the median effective price paid by standing offer customers decreased between 2018 and 2019;
  • the median effective price paid by market offer customers decreased, likely due to a range of factors, including lower supply costs. The ACCC found that at this early stage, the DMO and VDO reforms do not appear to have had adverse effect on prices paid by market offer customers even though some advertised lower-price market offers were withdrawn after the reforms;
  • the proportion of residential customers on market offers with conditional discounts decreased;
  • switching from a standing offer to a market offer could save customers a significant sum, with customers of the big three retailers potentially saving the most by shopping around;
  • best practice is for retailers to ensure that payment plan customers are on offers that most suit their circumstances, including retailers transferring payment plan customers to offers that minimise their energy costs; and
  • SME customers are less engaged in the market than residential customers, and retailers could do more to help SME customers minimise their costs.
ACCC decides not to 'shut down' resale price maintenance for HP online marketplace stores

On 2 October 2020, the ACCC considered that a resale price maintenance notification lodged by HP PPS Australia Pty Ltd (HP), allowing it to maintain pricing control over a third party distributor's management of HP-branded online stores, would result in net public benefits.

Under the proposed business model, orders placed with HP Online Marketplace Stores (ie HP's eBay Store and other prospective HP-branded stores listed on other online marketplaces) will be managed by a third party. The sale agreement will be between the third party and the customer (rather than between HP and the customer). However, HP will maintain control over all other aspects of the online stores, including product and marketing strategies, and setting prices for which the third party will sell the HP products to customers (ie the resale price maintenance conduct).

The ACCC considered that the likely benefit from the conduct outweighed the likely public detriment. The ACCC noted that the conduct was likely to allow HP to realise public benefits in the form of efficiencies through combining the respective expertise of HP and the third party. In addition, the ACCC had regard to the fact that the resale price maintenance conduct applied only to sales by HP's third party through the HP Online Marketplace. This represented a very small proportion of total sales of HP products, meaning competing suppliers were likely to constrain any attempt by HP to use the resale price maintenance conduct as a means to increase prices.

In October 2019, the ACCC allowed a related resale price maintenance notification to stand in relation to HP's own online store. The ACCC's current decision effectively extends that original notification to HP-branded stores operated on online marketplaces.

Class exemption will enable small businesses to collectively bargain

On 22 October 2020, the ACCC announced it had made a ‘class exemption’ due to commence early 2021 which will allow:

  • small businesses (ie with a turnover of less than $10 million in the preceding financial year) to collectively bargain with customers or suppliers; and 
  • franchisees and fuel retailers to collectively bargain with their franchisor or fuel wholesaler (respectively) regardless of their size.

The class exemption will allow these businesses to collectively negotiate without having to seek ACCC approval. The class exemption is a way for the ACCC to grant businesses an exemption from competition law for certain types of conduct that may otherwise risk breaching competition laws, but that:

  • do not substantially lessen competition; and/or
  • are likely to result in overall public benefits.

To obtain the protection of the class exemption, prospective bargaining groups will have to complete a one-page notice and provide it to:

  • the ACCC when the bargaining group is formed; and
  • each target business the group proposes to collectively bargain with, when they first approach the target business.

The ACCC will announce when the class exemption is ready for use (subject to Parliamentary sitting dates in 2021). The ACCC will also publish the form of the one-page notice that businesses will need to lodge and the Guidelines for using the class exemption when the exemption is ready for use.

Businesses that fall outside the class exemption may still seek legal protection by applying directly through the ACCC's existing  'authorisation' and 'notification' processes.

Bids withdrawn for Spotless Laundries

On 22 October 2020 and 4 November 2020, rival bidders for Spotless Laundries withdrew their requests for informal merger clearance after the ACCC expressed preliminary competition concerns about each clearance application.

In one clearance application, the ACCC’s investigation indicated that Alsco Pty Ltd (Alsco) and 'Spotless Garments' (Spotless Laundries' garment laundering business) were the two largest garment laundry suppliers in most states, and the only two major suppliers offering garment laundering services across multiple states. The ACCC's preliminary view was that Alsco's proposed acquisition would substantially lessen competition in the supply of commercial laundry services for garments in each Australian state and across multiple states.

In the other clearance application, the ACCC’s preliminary view was that South Pacific Laundry (SPL) and Spotless Laundries may be important constraints on each other as two of the key suppliers in each capital city, although each historically specialised in serving different types of customers (ie SPL focuses on linen services for accommodation providers while Spotless Laundries focuses on linen and garments services to healthcare and industrial customers). The ACCC identified that customer switching can occur in this market and that most other commercial laundry suppliers operate across more than one area, such that the transaction would remove the possibility of closer future competition between the parties.

Rod Sims continues to advocate for law changes

On 21 October 2020, Rod Sims gave a speech at the National Press Club in Canberra on ‘Tackling Market Power in the Covid-19 Era’

He said it was crucial for Australia to tackle the issue of market power to ensure a strong economic recovery and to deal with the implications of an ever-growing digital economy. Mr Sims highlighted the ACCC's activities that related to the accumulation and use of market power across four areas:

  • Competition law – He noted that the ACCC continues to confront difficulties in contested merger cases where the ACCC attempts to prevent what it considers to be anti-competitive mergers. Mr Sims said that Australia's merger laws cannot prevent all inappropriate increases in market power, referencing the strength of Facebook and Google after their numerous acquisitions. While he acknowledged the ACCC's successes in the informal merger review process, he highlighted that the ACCC had not won a merger litigation since the substantial lessening of competition test was introduced in 1992. He foreshadowed that the ACCC will put forward its ideas for changes to Australia's merger laws in 2021.
  • Consumer law – Mr Sims considered that Australia's consumer and small business protection laws deal with some damaging uses of market power, but not directly or comprehensively. For example, he said that price gouging of consumers and small businesses was not illegal. He also argued that Unfair Contract Terms should be made illegal and attract penalties so that companies are deterred from using them. Mr Sims highlighted the ACCC's concerns with the difficulty in establishing unconscionable conduct and emphasised the importance of a broad 'unfair practices prohibition' to deal with unfair conduct that causes significant detriment but fails to meet the unconscionable standard. Finally, he suggested that the Australian Consumer Law be renamed the 'Australian Consumer and Fair Trading Law' to emphasise that this law regulates how businesses deal with both consumers and other businesses.
  • Regulatory law – He argued in favour of a 'Part IIIB' monopoly regulation regime that would see owners of significant infrastructure with market power subject to some form of price regulation, citing his concerns in telecommunications, rail and more generally in the states' approaches to privatisation of key assets without regulatory controls.
  • Market studies and the digital economy – Mr Sims considered that most market studies undertaken by the ACCC at the direction of the Government related to issues of market power. He said that a 'coming battleground is data' and suggested Australia may need more regulation of digital platforms.