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In touch
 

Competition news

March 2017

 
Jacqueline Downes

Jacqueline Downes
Practice Leader, Competition
+61 2 9230 4850
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In Touch looks at what's been happening in Competition this month, and what it means for your business.

We hope you find this issue interesting and helpful. Please let us know if you would like us to investigate any competition news in the next month and, as always, get in touch.

Interesting Competition facts

  • ACCC announces enforcement priorities for 2017 – Sectors on the ACCC's radar for 2017 include the energy, private health insurance, construction and agricultural industries. Among the ACCC's key priorities are unfair contract terms, consumer rights and criminal cartels. Read our publication on the ACCC's 2017 priorities here.
  • Senate Committee supports changes to broaden misuse of market power prohibition – The Senate Economics Legislation Committee said the current prohibition on misuse of market power is deficient and it supports changes to broaden the section including by making it subject to an effects test. It is expected that the Federal Government will now seek to expeditiously progress the Competition and Consumer Amendment (Misuse of Market Power) Bill through Parliament. Read our update on the Senate Committee report and the Bill here.
  • Bob Katter introduces Bill to protect indigenous artists and culture – If passed, the Competition and Consumer Amendment (Exploitation of Indigenous Culture) Bill 2017 would prohibit the sale of goods containing expressions of indigenous culture, except where the goods are made in Australia and are either supplied by an indigenous community or artist, or supplied pursuant to an agreement with them.

Mergers: ACCC clears deals between closely competing suppliers

The ACCC has announced it will not oppose the proposed merger of PMP Limited and the IPMG Group, the two largest suppliers of heatset web offset printing services in Australia. This type of printing is commonly used for printing high volume magazines, newspaper inserts and advertising catalogues. In 2001, the ACCC opposed the merger between the two printing specialists, stating it would 'give them more than 75 per cent of this market, worth in excess of $1.5 billion per annum'.

In clearing the deal this time round, the ACCC focused on significant changes in market conditions including reduced demand for heat set web offset printing services due to the increased digitisation of media, the expansion of the IVE Group into the heatset web offset printing market through its December 2016 acquisition of a number of specialist printing entities in Victoria and competition with smaller printers and newspaper providers.

Last month the ACCC also announced it will not oppose an acquisition between two Tasmanian rural merchandise retailers: Roberts Limited (a wholly-owned subsidiary of Ruralco Holdings Limited) and TP Jones Pty Ltd. Both companies sell products such as fertiliser, agricultural chemicals, animal health products and farm merchandise.

The ACCC took into account the competitive constraint imposed by wholesale buying groups, the competitive constraint imposed by rival retailers (including retailers located approximately 70 kilometres away) and the ability for farmers to have products delivered.

What this means
  • The ACCC is increasingly recognising that the competitiveness of digital and online media is changing the structure of media-related markets.
  • The ACCC continues to assess mergers at a local, state and national level, but in appropriate cases will be open to arguments that consumers are prepared to travel for certain products.

If you would like more information on this issue, get in touch with Jacqueline Downes.

Anti-competitive conduct: ACCC focusing on price parity deals

The ACCC has announced it will be focusing on the use of price parity or MFN clauses following the High Court's landmark Flight Centre decision.

The ACCC previously investigated the use of these types of clauses by online travel agencies, including Booking.com and Expedia. The online travel agencies had required accommodation providers to offer the best room price and availability on the online travel agent's website, preventing hotels from offering cheaper rates on their own direct channels (such as their own websites) or on competing online platforms.

In September last year, the ACCC reached an agreement with the online travel agencies about their use of parity or MFN clauses. The ACCC said online travel agents could use what are termed 'narrow MFNs' to prevent hotels offering better rates and availability on the hotels' own websites than what they offer on the online travel agent's platform. However, the online travel agents agreed they would not prevent hotels offering lower rates on competing online travel agent platforms, or offering lower rates to customers who book by phone or when walking in.

The ACCC recently announced a renewed focus on the use of parity clauses in its 2017 enforcement priorities, with Rod Sims stating that '[parity clauses] can cause great anti-competitive harm through higher prices or reduced innovation… The recent Flight Centre case in the High Court has strengthened our resolve in this area'.

In the Flight Centre case, Flight Centre had requested that airlines not sell directly to customers at a price lower than the price the airlines offered to Flight Centre. The High Court found that this constituted an attempted price fix because Flight Centre and the airlines were competitors for the supply of airline tickets and Flight Centre had attempted to fix the price at which the airlines would sell to customers directly. This finding was made notwithstanding the fact that Flight Centre supplied airline tickets as an agent for the airlines. Read our summary of the Flight Centre decision here.

What this means
  • The ACCC will closely scrutinise the use of price parity or MFN clauses, particularly in the online context.

If you would like more information on this issue, get in touch with Kon Stellios.

Consumer Protection: New country of origin laws in force

The Australian Consumer Law's safe harbour defences for country of origin representations have been amended. The amendments potentially make it easier for businesses to establish that their goods were made, manufactured or originated in a particular country.

Sections 18 and 29 of the Australian Consumer Law (ACL) prohibit a person from making misleading representations about the country of origin of goods. Businesses can be assured that their country of origin claims are not false or misleading if they meet certain criteria set out in the ACL, known as the ‘safe harbour defences'.

Previously, businesses which represented that goods were 'Made in' a particular country had to meet two criteria in order to rely on the safe harbour defences. The goods had to have been 'substantially transformed' in the nominated country of origin, and at least 50 per cent of production costs had to have been incurred in that country of origin.

The 50 per cent production costs test has now been removed. It was considered costly for businesses to prove, and meaningless to consumers. The new law amends the definition of 'substantially transformed'. Businesses will now have to show that the goods are fundamentally different in identity, nature or essential character from any imported components as a result of one or more processes undertaken in the nominated country of origin.

There are additional country of origin requirements for certain food products. Currently these requirements are set out in the Food Standards Code. From July 2018, businesses will instead need to comply with the Country of Origin Food Labelling Information Standard in the ACL.

What this means
  • Businesses making country of origin claims in respect of goods which comprise imported components should be aware of the new definition of 'substantially transformed' goods.

If you would like more information on this issue, get in touch with Carolyn Oddie.

Investigations and Enforcement: ACCC using infringement notices for misleading representations

Energy retailer Lumo Energy Australia Pty Ltd has paid a $10,800 penalty following the issue of an ACCC infringement notice. The notice was issued in respect of alleged false or misleading representations made by Lumo's call centre staff. The staff had represented to numerous consumers that the Australian Energy Regulator was responsible for increases in Lumo's retail gas tariffs. In reality, the increased tariffs were the result of an internal commercial pricing decision made by Lumo.

Hoyt's Food Manufacturing Industries Pty Limited has also paid a $10,800 penalty after it received an infringement notice in relation to representations it made about its oregano products. Hoyt's had included on its oregano packaging, ‘Oregano Leaves’ and ‘Oregano has a strong aromatic camphor like scent’. In fact, testing indicated that the product contained fifty per cent olive leaf.

What this means
  • The ACCC continues to take interest in representations made about the reasons for increased prices.
  • The ACCC is taking a closer look at representations made on product packaging.

If you would like more information on this issue, get in touch with Fiona Crosbie.

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