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In touch
 

Competition news

July 2017

 
Jacqueline Downes

Jacqueline Downes
Partner, 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.

Tobacco companies denied boycott

The ACCC has denied authorisation to a group of tobacco companies which had sought approval to boycott retailers they believed to be supplying illicit or illegal tobacco products. British American Tobacco, Imperial Tobacco and Philip Morris – which together supply over 90 per cent of the Australian tobacco market – had argued that collective action was required to deter retailers from supplying illicit tobacco to consumers.

The collective action, if authorised by the ACCC, would have involved the tobacco companies sharing information, carrying out investigations and potentially suspending supply of lawful tobacco to retailers suspected of also selling illegal 'chop-chop' tobacco. The applicants argued that sale of illegal products would be reduced which would create public benefits by increasing the overall amount of excise tax collected, reducing sales of tobacco products which do not carry the required health warnings or comply with fire hazard regulations and reducing competition from illegal products.

However, the ACCC considered that the detriments outweighed the public benefits. The ACCC found that significant competition concerns arose from the three dominant market players in Australia engaging in 'repeated interactions to share commercially sensitive information about retailers and to reach agreements with each other to boycott particular retailers'. Moreover, the ACCC considered that the authorisation would give the tobacco companies a 'quasi-regulatory role' to pursue commercial objectives that did not necessarily align with government policy. The ACCC was also concerned that granting authorisation would create a community perception of cooperation or partnership with the tobacco industry.

Taxi merger approved

Cabcharge, which has been in the ACCC's firing line in recent years, has had a win with the ACCC announcing that it will not oppose Cabcharge's acquisition of Yellow Cabs' Queensland arm. Cabcharge is Australia's largest taxi payment service provider and Yellow Cabs is one of two large taxi networks in Brisbane.

The ACCC considered the effects of the acquisition in markets for:

  • the supply of taxi network services to taxi operators in Brisbane;
  • the supply of booking and dispatch services to personalised transport service operators and drivers nationally and locally;
  • the supply of personalised transport services to the public in Brisbane; and
  • the supply of non-cash payment processing services to personalised transport service operators in Australia.

The ACCC noted Cabcharge did not have an existing taxi network in Queensland and that developments such as new non-cash payment processing providers and the expansion of ride-sharing services lessened the likelihood that Cabcharge could foreclose rival payment processing system providers. The ACCC also considered whether there could be a substantial lessening of competition or other anti-competitive effects as a result of Cabcharge having access to information from Yellow Cabs' competitors by virtue of its payment processing business. In this respect, the ACCC considered that if Cabcharge were to use its customers' information in this way, the ACCC could take action under other provisions of the Competition and Consumer Act 2010 (Cth). For these reasons, the ACCC concluded that the acquisition would not result in a substantial lessening of competition in any of the relevant markets.

Small businesses get ready for excessive payment surcharges ban

Small business should be aware that from 1 September 2017, laws will come into force that extend to small business the current ban on large businesses imposing excessive surcharges on customers for making a payment using certain credit, debit or prepaid cards. Under the new laws, surcharges for using electronic payments must not exceed the 'cost of acceptance'. This refers to the costs of processing the payment such as bank fees and terminal costs but excludes internal costs such as labour and electricity.

As of 1 June 2017, banks must provide businesses with statements that specify the average costs of acceptance for electronic payment methods that include, Eftpos, MasterCard, Visa, and American Express companion cards.

The ACCC also has powers to enforce the ban. The ACCC can issue a surcharge information notice that compels a business to provide evidence of their costs of processing a payment. If the ACCC finds a business has breached the ban, it may issue an infringement notice or take court action and seek pecuniary penalties of up to $1.1m per contravention.

The ban does not affect the existing requirements for businesses to state the total price when presenting prices to consumers and to not otherwise make misleading claims about prices.

Want to know more? Read our quick guide here.

Federal court finds against training colleges

The Federal Court has found both Unique and Get Qualified Australia made false or misleading representations and engaged in unconscionable conduct.

Get Qualified Australia (GQA) was found to have contravened the Australian Consumer Law (ACL) for representations it made about being able to guarantee consumers qualifications. In fact, qualifications must be assessed by registered training organisations and cannot be guaranteed prior to an assessment process. GQA also made representations about a 'money back guarantee' but then pursued consumers who refused to pay by taking debt recovery action.

The sales tactics used by GQA were also considered misleading and unfair. The court found that consumers were pressured to enrol, not provided sufficient opportunity to consider the information provided by its sales representatives and GQA made uninvited sales phone calls to consumers. The sole director of GQA was also found liable for contraventions of the ACL because he was 'intimately involved in devising and implementing GQA's marketing scheme, sales tactics and business strategy'.

Unique International College (Unique) was found by the court to have targeted disadvantaged and vulnerable groups and mislead consumers that courses Unique offered were free (when in fact they would incur a debt under the VET FEE-HELP scheme). Gifts including laptops and iPads were used to encourage consumers to sign up. This judgment comes after the ACCC first took action against Unique in October 2015 following a joint investigation with NSW Fair Trading into the training colleges sector.

A number of cases the ACCC has brought against training colleges are still awaiting judgment, including AIPE, Empower and Phoenix Institute.

ACCC and Crownbet appeal Tatts/Tabcorp decision

The ACCC and corporate bookmaker Crownbet have appealed the Tribunal's decision to authorise the acquisition of Tatts by Tabcorp to the Federal Court. The appeal is a rare example of the ACCC seeking judicial review of a Tribunal decision.

On 22 June 2017, the Tribunal granted authorisation to Tabcorp to acquire Tatts. The Tribunal found that the merger would result in such public benefits that the acquisition should be allowed to occur, and that the public detriments identified by the ACCC and others were 'unlikely to either arise or are not of significance'. The ACCC's concerns centred on the perceived advantages of the exclusive retail licences held by Tatts and Tabcorp; whether there were any other likely bidders for state gaming licences when the retail licences came up for renewal; and whether Tabcorp would have the ability and incentive to raise prices for racing vision post-merger.

In applying for judicial review of the Tribunal's decision, the ACCC will argue that the Tribunal misapplied the 'net public benefit test'. The appeal will focus on three alleged legal errors:

  • That the Tribunal erred in only considering detriments which were 'substantial' rather than all detriments. The ACCC considered that the Tribunal should have given weight to any lessening of competition which would be likely to result from the acquisition, not only factors which would be likely to cause a substantial lessening of competition;
  • That the Tribunal should have considered the likely future state of competition 'with and without' the acquisition in determining whether the merger would be likely to result in any detriment. The ACCC has taken issue with the Tribunal's reasoning that the 'with and without' analysis is only necessary if the merger would cause public detriment; and
  • That the Tribunal should not have haven given weight to private benefits in assessing the acquisition. Such benefits include revenue synergies and cost savings that would not necessary flow to consumers. In the ACCC's view, the Tribunal should give more weight to benefits that would flow to consumers rather than the private companies involved in the acquisition.

Crownbet raised similar grounds of review. The bookmaker also argued that the decision was unreasonable having regard to these errors and certain 'unreasonable' conclusions reached by the Tribunal. These include: that the merger was necessary for the parties to compete effectively; that there are doubts about the future viability of Tatts; and that revenue increases should be considered as contributing to cost savings.

Productivity Commission and competition in Australia's financial system

On 6 July 2017, the Productivity Commission released the consultation paper on its inquiry into competition in the Australian financial system. The paper is intended to assist interested parties in preparing their submissions and provides an overview of the scope of the inquiry as well as the particular issues that the Commission will focus on.

This follows the Australian Government's request to the Commission, announced as part of the Federal Budget, to conduct a 12-month inquiry into competition in Australia's financial system. The inquiry commenced on 1 July 2017, and the Commission is due to deliver its final report to the Government by 1 July 2018.

In the consultation paper, the Commission indicates a central focus of the inquiry will be to establish whether there are barriers to, and enablers of, competition in the financial sector particularly as a result of innovation, but also as a result of current government policy and regulation. In terms of consumer outcomes, the Commission also seeks to determine if any benefits of innovation by financial service providers are targeted towards or ultimately reach consumers. In doing so, the Commission seeks to determine a coherent framework for the future operation of Australia’s financial sector to best achieve benefits from competition within it.

The Commission has indicated that the review of competition in the financial system will be broad and holistic, and will include the examination of products and services provided to households, small businesses and large corporations. The review will also look at key segments of financial system infrastructure, including the degree of vertical and horizontal integration between them. The inquiry will also assess the efficacy of existing policy and regulatory reforms as well as reforms which the Government is already considering.

The inquiry complements other reviews by the Commission which will also have an impact on the financial system, including the recently completed inquiry into Data Availability and Use and the ongoing inquiry into the Competitiveness and Efficiency of Australia's Superannuation System.

Any interested parties should be aware that initial submissions are due by 15 September 2017.

ACCC completes beer investigation

The ACCC has concluded an investigation into the beer supply arrangements between pubs and major brewers, Carton United Breweries and Lion, concluding that the arrangements in place were unlikely to substantially lessen competition.

The investigation followed a series of complaints from craft brewers, which alleged that exclusivity and minimum volume requirements in beer supply agreements between pubs and major brewers made it difficult for smaller brewers to access 'tap space' in pubs. A number of craft brewers had indicated that certain supply contracts required pubs to dedicate up to 80 per cent of the available 'tap space' to major brewers.

In carrying out its investigation, the ACCC examined the beer supply arrangements at 36 venues across metropolitan sites in NSW and Victoria, and reviewed 33 contracts from small brewers and 140 contracts from Lion and Carlton United Breweries.

In finding that the arrangements were unlikely to substantially lessen competition, the ACCC noted that most pubs and clubs felt free to supply beer from a range or breweries, including small craft brewers. These venues pointed to customer preference as the key factor driving which beers are offered on tap.

The ACCC said it will continue to monitor developments in the industry as craft beer sales continue to increase.

For further information, please contact:

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