INSIGHT

The ACCC's vision for the future of Australia's merger regime; and other developments

By Jacqueline Downes
ACCC Consumer law Infrastructure Technology Telecommunications

The latest in competition and consumer law 7 min read

The ACCC has unveiled its long-awaited proposal to overhaul Australia's merger review regime.

The Commonwealth Director of Public Prosecutions has withdrawn criminal cartel charges against the CFMMEU and its ACT Divisional Branch Secretary for alleged cartel conduct.

The ACCC has authorised the payment system merger between BPAY, eftpos and NPPA after accepting a court-enforceable undertaking by the parties.

The ACCC considers that new rules, regulations and a coordinated approach with overseas regulators may be needed to address concerns about the dominance of Apple and Google in app marketplaces.

The ACCC has denied authorisation for Qantas and Japan Airlines to coordinate flights between Australia and Japan.

Bathroomware brand Nero has admitted to engaging in resale price maintenance, and has provided a court-enforceable undertaking to the ACCC.

ACCC unveils its vision for the future of Australia's merger regime

On 27 August 2021, ACCC Chairman Rod Sims unveiled for debate the ACCC's long-awaited vision for an overhaul of Australia's merger review regime. The proposal follows the ACCC's longstanding criticism of the current regime as being 'skewed towards clearance' and impeding its ability to block anti-competitive mergers.

The key elements of the ACCC's proposals would operate to:

  • make merger clearances mandatory, that is, replace our current voluntary 'informal' merger review process with a mandatory formal clearance process;
  • make it easier for the ACCC to oppose mergers by:
    • requiring merger parties to 'satisfy' the ACCC that the proposed acquisition is not likely to have the effect of substantially lessening competition;
    • lowering the standard of proof for finding that a merger is likely to substantially lessen competition; and
    • deeming mergers that entrench, materially increase or materially extend a party's substantial market power, illegal;
  • curtail the role of the court and limit parties' ability to challenge the ACCC's decision to a 'limited merits review'; and
  • establish a specific regimeto apply to big tech with separate jurisdictional thresholds and a lower legal threshold for opposing mergers.

You can read our deep dive analysis here.

CDPP withdraws criminal cartel charges against CFMMEU

On 17 August 2021, the Commonwealth Director of Public Prosecutions (CDPP) withdrew criminal cartel charges against the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) and Mr Jason O'Mara, ACT CFMMEU Divisional Branch Secretary.

The charges were laid in August 2018 for attempting to induce suppliers of scaffolding services to reach arrangements or understandings containing cartel provisions in relation to scaffolding services provided to builders in the Australian Capital Territory in 2012 to 2013.

ACCC Chair Rod Sims said the decision to withdraw the charges was made in the context of the extended period of time which had elapsed since the alleged conduct occurred, and the challenges that posed for witnesses’ memories of relevant events.

The CDPP withdrew similar charges against the CFMMEU and Mr O’Mara in relation to allegations involving steelfixing services in February this year.

Payments systems merger is cleared

On 9 September 2021, the ACCC authorised the proposed merger of BPAY Group Holdings Pty Ltd (BPAY), eftpos Payments Australia Ltd (eftpos) and NPP Australia Ltd (NPPA) after accepting a court-enforceable undertaking offered by the parties.

BPAY, eftpos and NPPA each provide payment services to consumers and businesses through their respective payment systems. BPAY's core service facilitates bill payments, eftpos' core service facilitates retail debit card payments and NPPA's core service facilitates fast account-to-account payments.

ACCC Chair Rod Sims said the ACCC did not consider that the merger will substantially lessen competition in any payments market after taking into account the court-enforceable undertaking.

'The ACCC found that, at a high level, the services of the three companies do not compete closely. We considered a number of potential impacts on competition, including concerns raised by industry participants about the impact of the amalgamation of eftpos' services and least cost routing'.

Least cost routing allows merchants to choose the payment scheme that processes transactions when consumers use a dual network debit card. This can help reduce fees merchants pay for processing of debit cards.

In the undertaking accepted by the ACCC, the merger parties committed to ensure that:

  • for a term of four years, eftpos will do everything in its control to make least cost routing available and promote it;
  • the eftpos payments scheme and eftpos card-based issuing and accepting infrastructure and services are maintained;
  • eftpos and NPPA develop and make available a set of prescribed services within agreed timeframes; and
  • BPAY, eftpos and NPPA agree to an industry-wide standard supporting payments with QR codes by the end of June 2022.

The ACCC consulted with the Reserve Bank of Australia as Australia's payment systems regulator. The Reserve Bank will continue to take action to safeguard least cost routing.

The ACCC's determination is available here.

New regulations for big tech?

On 28 September, the ACCC published its final report on the advertising technology (ad tech) sector (Report). The Report concludes that Google is dominant in key parts of the ad tech supply chain and that it has used its position to preference its own services and shield itself from competition. These concerns are similar to those raised by the ACCC in relation to other digital platform markets such as online search, social media and app marketplaces.

The ACCC is considering allegations against Google relating to its conduct in the ad tech sector under existing competition laws. However, it has indicated investigation and enforcement proceedings are not well suited to address its concerns, including because these processes can take too long if anti-competitive harm is to be prevented. The Report therefore recommends regulations be considered to manage conflicts of interest, prevent self-preferencing and ensure rival ad tech providers can compete on their merits.

This is in keeping with recent calls by ACCC Chair Rod Sims for regulation specific to digital platforms. Mr Sims emphasised new rules and regulations may be needed to address concerns about the dominance of Apple and Google in app marketplaces in his speech on 19 August 2021 to the Global Competition Review webinar about the ACCC's Digital Platforms Services Inquiry interim report on app marketplaces

The ACCC has also continued to emphasise the need for a globally coordinated approach to regulating digital platforms. In his speech, Mr Sims indicated the ACCC is cooperating closely with, and is closely monitoring moves by, overseas governments and regulators because 'the global presence of digital platforms requires a global response'.

Indeed, many major jurisdictions are currently grappling with how best to regulate digital platforms. Legislative responses overseas have included bills introduced in the US to target major digital platforms and address anticompetitive behaviour by mobile app marketplaces, the European Commission's draft Digital Markets Act to regulate digital firms designated as 'gatekeepers', the UK’s consultation on introducing new rules to particular digital firms with ‘strategic market status', Germany's new competition legislation for digital firms of 'paramount significance', and South Korea's recently passed legislation targeting mobile app marketplaces.

The ACCC will be looking at whether a sector-specific regulatory scheme is needed to address its concerns in relation to the ad tech sector and the common competition and consumer concerns it has identified in digital platform markets more generally. It is due to publish its recommendations by September 2022.

Qantas and Japan Airlines alliance fails take-off

On 13 September 2021, the ACCC denied authorisation for Qantas and Japan Airlines to coordinate flights between Australia and Japan under a joint business agreement.

The alliance would have allowed the airlines to stop competing on all aspects of price and service for three years.

The ACCC declined to authorise the alliance. While the ACCC accepted there was likely to be some short-term benefits from the alliance (eg to jointly reinstate services more quickly when borders are reopened, which may initially stimulate tourism), the ACCC was not satisfied these benefits would outweigh the harm to competition.

It found that the agreement would likely lead to reduced competition as international travel resumes, to the detriment of passengers travelling between Australia and Japan. The ACCC concluded that in addition to removing competition between Qantas and Japan Airlines, the alliance would also make it very difficult for other airlines (like Virgin Australia) to operate on routes between Australia and Japan.

In the year prior to the pandemic, Qantas and Japan Airlines collectively accounted for 85% of airline passengers between Australia and Japan. They were each other's closest competitors on the largest route, Sydney-Tokyo, and the only airlines operating on the second largest route, Melbourne-Tokyo.

The ACCC found the longer-term benefits of competition between airlines are cheaper flights and better services for consumers, which is vital to the recovery of tourism over the coming years after the pandemic.

More information, including the ACCC's final determination, is available here.

From Nero to zero: bathroomware brand admits to likely resale price maintenance

On 8 September 2021, bathroomware brand Nero Bathrooms International Pty Ltd (Nero), a national supplier of bathroom products to over 1000 independent chain stores across Australia, has admitted it likely engaged in resale price maintenance.

Nero admitted that, in March 2020, it made statements to a retailer that the retailer's prices were too low and that it should not advertise Nero products at a lower price than 15% off the recommended retail price. When the retailer did not raise prices, Nero stopped supplying them.

Nero has provided a court-enforceable undertaking to the ACCC committing to advise all Nero retailers they are free to set their own prices, and to ensure Nero staff receive compliance training.