INSIGHT

No criminal conduct found in Australia's first competition law matter heard by a jury; and other developments

By Jacqueline Downes
ACCC Consumer law Infrastructure Technology Telecommunications

Latest competition and consumer law developments 6 min read

Mobility aid supplier Country Care, its CEO, Robert Hogan and former employee Cameron Harrison have been acquitted of criminal cartel conduct in the first competition law matter heard by a jury in Australia.

The ACCC has made a class exemption for collective bargaining for small businesses, as well as franchisees and fuel retailers governed either by the Franchising Code of Conduct or the Oil Code of Conduct (regardless of turnover).

Mosaic Brands Limited, a fashion retail group that owns brands such as Noni B, Katies and Rivers, has been issued infringement notices totalling $630,000 for breaches of the Australian Consumer Law.

The ACCC is proposing to grant conditional authorisation for Honeysuckle Health and nib health funds to form and operate a health services buying group for five years.

Franchisor Jump Swim (in liquidation) has been ordered by the Federal Court to pay $23 million in penalties for making false or misleading representations to franchisees, and accepting payments from franchisees when it knew, or ought to have known, that it would not be able to supply the franchisee within 12 months or a reasonable period of time.

The ACCC announced it will not oppose Salesforce's proposed acquisition of Slack. Salesforce supplies customer relationship management software internationally, while Slack is a global enterprise collaboration platform.

Country Care, CEO and former employee walk away from criminal cartel offences

Mobility aid supplier Country Care, its CEO Robert Hogan and former employee Cameron Harrison have been acquitted of criminal cartel conduct in the first competition law matter heard by a jury in Australia. Country Care is a supplier of rehabilitative and assistive technology products, based in Mildura. After an 11-week trial in the Federal Court, the defendants were unanimously acquitted of eight charges after a jury deliberated for around four hours.

Following a referral by the ACCC, the Commonwealth Director of Public Prosecutions brought the charges in relation to conduct by Country Care that it alleged amounted to bid rigging and price fixing in the market for mobility aids. Country Care, Mr Hogan and Mr Harrison had overseen the process leading up to submissions of a tender process led by the federal Department of Veterans' Affairs and HealthShare NSW (a state government agency).

This case was the first time competition matters were put to a jury and the first time individuals had been charged with criminal cartel offences. The outcome of this case was being closely watched in the lead-up to next year's trial in the ACCC's share underwriting criminal cartel case against ANZ, Citibank and Deutsche Bank, and individuals from those banks.

ACCC shows its class and authorises collective bargaining by small business

The ACCC has made a class exemption for collective bargaining for small businesses, as well as franchisees and fuel retailers governed either by the Franchising Code of Conduct or the Oil Code of Conduct (regardless of turnover). Under this class exemption, these businesses will be able to negotiate with their suppliers, franchisors or fuel wholesalers without the risk of the ACCC commencing action for a breach of competition laws.

Since 2017 the ACCC has had the power to make class exemptions for types of business conduct where it is satisfied that the conduct it is exempting is unlikely to substantially lessen competition, or is likely to result in a net public benefit. Previously, businesses the subject of this class exemption would need to apply for ACCC authorisation or notification.

The ACCC believes this class exemption will help the majority of small businesses and franchisees share the cost and time of negotiating contracts, and have more say when negotiating. To engage in collective bargaining, eligible business groups must provide the ACCC with a one-page notice setting out the details of their collective bargaining plans. The class exemption has been in effect since 3 June 2021.

$630,000 in penalties ordered for Mosaic Brands' COVID-related 'health essentials'

Mosaic Brands Limited, a fashion retail group that owns brands such as Noni B, Katies and Rivers, has been issued infringement notices totalling $630,000 for breaches of the Australian Consumer Law.

Between March and June 2020, Mosaic brands made a number of representations in relation to hand sanitiser and face masks on its websites and in direct marketing, which the ACCC alleged were misleading or deceptive. These included: advertising a hand sanitiser as containing 70% alcohol when an independent test found it only contained 17% alcohol; marketing hand sanitiser as 'WHO-approved' when this was not the case; advertising KN95 face masks as certified by American and European regulators; and Health Essentials products being advertised as non-refundable, though consumers have a statutory right to refunds under the consumer guarantee remedies.

The ACCC issued five infringement notices in relation to these representations. Mosaic Brands admitted it contravened the ACL, and signed a court-enforceable undertaking to refund consumers; implement a three-year compliance program; and properly substantiate its claims in relation to hand sanitiser and face masks, including with independent product testing.

ACCC proposing to authorise Honeysuckle Health and nib buying group

The ACCC is proposing to grant conditional authorisation for Honeysuckle Health and nib health funds to form and operate a health services buying group for five years.

The proposed buying group aims to collectively negotiate and manage contracts with healthcare providers on behalf of private health insurers. The ACCC has formed the preliminary view that the buying group's public benefits will outweigh any adverse effects on competition. The regulator anticipates that increased competition between buying groups will incentivise better value for health insurers, which could reduce upwards pressure on member premiums.

Honeysuckle and nib modified their original proposal so that major insurers cannot participate in the buying group, except in one program, the Broad Clinical Partners Program. However, the ACCC remained concerned that this modified proposal could still reduce competition. As a result, it has proposed a condition on the authorisation that the buying group for the Broad Clinical Partners Program not account for more than 40% of private health insurance policies in any state or territory.

Submissions on the draft determination are due by 11 June 2021.

Jump Swim in deep water, ordered to pay penalties of $23 million

Franchisor Jump Swim (in liquidation) has been ordered by the Federal Court to pay $23 million in penalties for making false or misleading representations to franchisees, and accepting payments from franchisees when it knew, or ought to have known, that it would not be able to supply the franchisee within 12 months or a reasonable period of time. The ACCC first brought proceedings against Jump Swim in June 2019, and the court ordered it be wound up as insolvent and liquidated in July 2019.

Jump Swim falsely represented to 174 franchisees that their franchised swim schools would be operational within 12 months of signing a franchise agreement. The court also found that the founder and former managing director of Jump Swim, Mr Ian Campbell, was knowingly concerned in Jump Swim's contraventions. He was ordered to pay $500,000 in compensation to franchisees and a penalty of $400,000. Mr Campbell was also restrained from carrying on a business as, or of, a franchisor in Australia for three years.

As Jump Swim is in liquidation, franchisees are unlikely to ever be fully compensated for their loss and the penalties are unlikely to be paid; however, the ACCC considers that the penalties nonetheless send a strong deterrence message.

ACCC picking up the slack: Salesforce/Slack merger given the green light

The ACCC announced it will not oppose Salesforce's proposed acquisition of Slack. Salesforce supplies customer relationship management (CRM) software internationally, while Slack is a global enterprise collaboration platform.

The ACCC formed the view that the acquisition would not substantially lessen competition; Salesforce and Slack supply different types of software with distinct purposes. It concluded that the acquisition would be unlikely to result in Salesforce preventing Slack's competitors in team collaboration solutions from competing effectively and it would be unlikely Salesforce's competitors in CRM solutions would be competitively disadvantaged.

The ACCC highlighted that the majority of interested parties raised no concerns. Market participants said that if Salesforce engaged in anti-competitive bundling or foreclosure conduct, customers could switch to alternative CRM and team collaboration solutions. In addition, the ACCC considered that Salesforce would be unlikely to degrade the interoperability between its CRM platform and competitors' team collaboration solutions, or Slack's team collaboration solution and competitors' CRM platforms, due to the reputational and commercial risks associated with such conduct.

The acquisition is still subject to competition clearance by some overseas regulators, including in the United States.