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In touch
 

Competition news

June 2018

 
Jacqueline Downes

Jacqueline Downes
Partner, Practice Leader, Competition
+61 2 9230 4850
Email Jacqueline

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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.

iPhone and iPad 'error 53'

Apple Inc has been ordered by the Federal Court to pay $9 million in penalties for making false or misleading representations to customers about their rights under the Australian Consumer Law (ACL). The ACCC's investigation related to 'error 53', which disabled some iPhones and iPads after the owners downloaded an update to Apple's 'iOS' operating system.

Apple admitted that it had represented to at least 275 Australian customers affected by error 53 that they were not eligible for a remedy if their device had been repaired by a third party. The court declared that the mere fact that the device had been repaired by a third party did not (and could not) result in the consumer guarantees ceasing to apply or the right to a remedy being extinguished.

Following the ACCC's investigation, Apple has implemented an outreach program to compensate consumers who were affected by error 53, and has offered an undertaking to improve staff training and provide new, instead of refurbished, phones as a replacement if requested by the consumer.

Apple US was held responsible for the conduct engaged in by its Australian subsidiary. This is yet another reminder to global companies that their Australian operations need to comply with the ACL.

MYOB/Reckon abandoning the deal

Accounting services provider MYOB abandoned its proposed acquisition of Reckon's Accountants Group two months after the ACCC outlined 'red light' concerns in its Statement of Issues (SOI) on the proposed acquisition. The ACCC considered that the proposed merger would likely create a monopoly for the supply of practice management software suitable for medium-to-large accounting firms. The parties abandoned the deal leading up to the ACCC's final decision.

MYOB boss Tim Reed claimed that the ACCC's view incorrectly focussed on the competitive dynamic of the past rather than how things are today, claiming '…there are multiple providers of these solutions in the market today and there are a number of them committed to being in the market tomorrow.'1 This is not the first time the ACCC has been criticised for not taking a sufficiently robust forward-looking approach in fast-moving technology markets.

Wisdom's unfair contract terms

Home building company Wisdom Properties Group gave the ACCC a court-enforceable undertaking to remove unfair contract terms from its standard home building agreements.

From October 2008 onwards, more than 3000 Wisdom agreements contained non-disparagement clauses that allowed Wisdom to control or prevent public statements made by the customer about Wisdom, such as through online reviews. The agreements prevented public statements by allowing Wisdom to suspend construction and hold customers liable for any losses arising from public statements.

The ACCC regards online reviews as an important influence on consumer-purchasing decisions. The ACCC Commissioner, Sarah Court, noted that consumers are increasingly relying on online reviews when making purchasing decisions, and businesses must not prevent genuine, relevant and lawful reviews by their customers. She added that the outcome for Wisdom should serve as a warning to other businesses.

Misleading conduct

The past month has seen the ACCC take action in a number of matters concerning misleading conduct, including against Wilson Security, Fitbit, Jenny Craig, Dreamz and Alinta Energy.

Wilson Security

The ACCC accepted a court-enforceable undertaking from Wilson Security to refund a total of $740,000 to customers charged for services not provided and undertake nationwide improvements to staff training and the monitoring and recording of services.

The ACCC's investigation revealed that between 2011 and 2017, Wilson Security charged 320 customers in Western Australia for internal premises security patrols where they had actually conducted external perimeter security patrols, which are cheaper and less time-consuming. Wilson Security admitted that by charging for services they had not provided, they engaged in misleading or deceptive conduct and made false or misleading representations.

Fitbit

The ACCC accepted a court-enforceable undertaking from Fitbit to amend the information provided by Fitbit to its customers on consumer guarantees under the ACL.

Between November 2016 and March 2017, Fitbit told customers that its warranty against faulty products was only valid for one year, and that faulty Fitbit products would only be replaced for the remainder of the calendar year or 30 days (whichever was longer).

Fitbit acknowledged it may have breached the ACL by misrepresenting consumer entitlements in relation to faulty products. The ACCC held that retailers must provide a remedy for faulty goods to comply with their ACL obligations and cannot exclude, restrict or modify the ACL rights.

Jenny Craig

Jenny Craig paid $37,800 in penalties following three ACCC infringement notices for alleged false or misleading representations involving:

  • television ads representing that customers could lose up to 10kg for a program fee of $10, without adequately disclosing that customers also had to buy food at an additional cost;
  • the failure to disclose that the individual featured in an online testimony was a Jenny Craig employee; and
  • a requirement in the standard form membership that the customer notify and return the goods within a set period in order to obtain a refund for a faulty product.

The ACCC expressed concerns that the advertisements may have misled consumers about the cost of the program. Additionally, the ACCC stated that businesses must be clear about relationships with people providing testimonials, and ensure that any standard form membership agreement accurately represents the consumer-guarantee rights.

Organic Claims

Dreamz, trading as GAIA Skin Naturals, paid $36,800 in penalties for alleged false or misleading representations made about its products as 'pure', 'natural' and 'organic' when they contained two synthetic chemical preservatives.

The ACCC said businesses making organic claims must be able to substantiate those claims. The ACCC's infringement notices form part of its broader enforcement activity relating to misleading organic representations.

Alinta Energy

Alinta Energy has undertaken to compensate customers for representations concerning electricity price comparisons that the ACCC considered were likely in breach of the ACL.

Alinta's advertisements compared increases in its competitors' standing and undiscounted rates to its decreases and discounted rates. The ACCC expressed concern that Alinta's comparison advertising gave a false impression of Alinta's electricity price reduction and prevented customers from making an informed choice.

Alinta has ceased its advertising campaign and will implement a review of its advertising processes, contact all affected customers to honour the advertised price reduction, and conduct refresher staff training on the ACL.

ANZ, Citigroup and Deutsche Bank face criminal cartel charges

Citigroup, Deutsche Bank and ANZ have been charged with criminal cartel offences following an investigation by the ACCC. Criminal charges have also been laid against six senior executives.

The charges involve alleged cartel arrangements relating to trading in ANZ shares held by Deutsche Bank and Citigroup. ANZ and each of the individuals are alleged to have been knowingly concerned in some or all of the alleged conduct.

The cartel conduct is alleged to have taken place following an ANZ institutional share placement in August 2015. The placement involved $2.5 billion worth of shares and was organised and underwritten by Citigroup, Deutsche Bank and JPMorgan.

Charges have not been brought against JPMorgan, and newspaper reports suggest that JPMorgan has received immunity from the ACCC.

Footnotes
  1. The Australian

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