September 2018 (Edition 1)
In Touch looks at what's been happening in Competition this fortnight, 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.
- ACCC to monitor electricity prices
- Trivago action highlights ACCC's spotlight on comparator websites
- Consumer law penalties increased
- ACCC clears the path for two outdoor advertising mergers
- Heinz fed $2.25 million penalty for misleading health claims
- ACCC advocating for unfair contract terms reform
The ACCC has been directed by the Federal Government to monitor and report on prices, profits and margins in the supply of electricity in the National Energy Market. The ACCC will be able to use its information gathering powers in carrying out the Government's directive, meaning the ACCC will be able to require electricity companies to provide information and documents.
The ACCC will consider a range of market features through the inquiry, including:
- wholesale electricity prices and the factors contributing to prices, such as input costs and bidding behaviour;
- the relationship between wholesale electricity prices and retail electricity prices;
- the profits made by electricity generators and retailers;
- the effect of vertical integration on competition in the National Energy Market; and
- the effect of any policy changes on consumers, including changes flowing from the ACCC's July electricity report.
The ACCC may ultimately make recommendations to the Government on how to improve outcomes for electricity customers.
The ACCC will report to the Government every six months until 2025, with the first report due by 31 March 2019.
The ACCC has instituted Federal Court proceedings against Trivago for allegedly making misleading representations about hotel prices in its television advertising and on its website.
Trivago aggregates deals offered by online travel sites and hotel proprietors and presents a range of prices, including one highlighted price. In the ACCC's view, Trivago represented that the highlighted price was the lowest price available with Trivago. However, the ACCC alleges that Trivago in fact highlighted the deal which would give Trivago the highest cost per click from its advertisers.
The ACCC also alleges that 'strike-through' price comparisons made by Trivago were misleading, because comparisons were not on like-for-like products: Trivago allegedly compared the price of luxury rooms to the price of standard rooms, creating a false impression of the savings available.
The ACCC released comparator website guidance in 2015 and appears to have renewed its focus on these platforms, with commentary about comparator websites in its recent Retail Electricity Pricing Inquiry Final Report (July 218) and in its Communications Sector Market Study Final Report (April 2018).
Substantial increases to the maximum penalties for contraventions of the Australian Consumer Law come into effect this week.
The amendments have aligned the maximum penalty for consumer law contraventions with the competition provisions. As a result, maximum penalties for a corporation's breach of the ACL have been raised from $1.1 million to the greater of:
- $10 million;
- three times the value of the benefit received; or
- where the benefit cannot be calculated, 10 per cent of annual turnover in the preceding 12 months.
Penalties for individuals have also increased from $220,000 to $500,000 for each contravention.
This follows the Consumer Affairs Australia and New Zealand review of the ACL, which found that the previous maximum penalties were insufficient to deter non-compliant conduct.
The ACCC has announced it will not oppose two proposed acquisitions in the out-of-home advertising services market:
- JCDecaux SA's proposed acquisition of APN Outdoor Group Limited; and
- oOh!media Limited's proposed acquisition of Adshel Street Furniture Pty Ltd.
Allens acted for APN Outdoor Group in this bid for ACCC clearance.
The ACCC concluded that the merger parties in both transactions operate in complementary segments of out-of-home advertising and that the merged entities would continue to be constrained in each segment post-acquisition.
The outcome contrasts to the 2017 proposed merger between oOh!media and APN Outdoor. As we discussed in In Touch June 2017, the ACCC expressed preliminary concerns that the transaction could substantially lessen competition in the large format billboards segment and the parties abandoned the transaction.
The Federal Court has ordered Heinz to pay a $2.25 million penalty for misleading representations about its Little Kids Shredz product.
As we discussed in In Touch March 2017, the Federal Court found in March 2017 that Heinz represented the product was beneficial for young children.
This representation arose from the packaging of the Shredz products, which included prominent pictures of fresh fruit and vegetables, in conjunction with statements such as '99% fruit and veg'. Taken together, these suggested to consumers that the products were a healthy and nutritious food for children.
However, the Heinz products contained almost 60 per cent sugar, and the court determined that Heinz's nutritionists ought to have known that the representations made on the packaging, which marketed the product as a healthy and nutritious snack for children aged one to three years, misrepresented: (a) the quantity of sugar; (b) the likelihood that the products would assist in children developing healthy eating habits; (c) and the health benefits of the product.
In addition to the penalty, the Federal Court ordered Heinz to establish a consumer law compliance program and to pay the ACCC's costs.
Heinz has filed a Notice of Appeal.
The ACCC has advocated for a review of the unfair contract term regime, and the Government has committed to commence a review before the end of this year.
In a recent speech to the COSBOA National Small Business Summit, ACCC Chairman Rod Sims said that the current regime forces the ACCC to act as a 'compliance agency for companies'. Chairman Sims identified key areas of the unfair contract term regime which the ACCC believes are ripe for reform.
Currently, the ACL allows for unfair contract terms to be declared void in court, but it does not prohibit companies from using unfair contract terms. The ACCC considers that the current unfair contract term laws are not in line with other provisions of the Competition and Consumer Act 2010 (Cth) (the CCA) and is advocating for the CCA to prohibit unfair contract terms in standard form contracts.
If implemented, this would have two key impacts on businesses:
- the ACCC would be able to use its powers under section 155 of the CCA to compulsorily gather documents and information to investigate potential breaches of the unfair contract term laws; and
- the ACCC would be able to seek pecuniary penalties and issue infringement notices against companies for a breach of the unfair contract term laws. The ACCC's view is that penalties are necessary to incentivise businesses to avoid using unfair contract terms.
The ACCC also considers changes should be made to clarify the definition of 'standard form contract' and to raise the thresholds for a 'small business' such that more companies would be subject to the unfair contract term regime.
- Jacqueline DownesPartner, Practice Group Leader, Competition, Consumer & Regulatory,
Ph: +61 2 9230 4850
- Fiona CrosbieChairman,
Ph: +61 2 9230 4383
- Carolyn OddiePartner,
Ph: +61 2 9230 4203
- Ted HillPartner,
Ph: +61 3 9613 8588
- John HedgePartner,
Ph: +61 7 3334 3171
- Rosannah HealyPartner,
Ph: +61 3 9613 8421
- Robert WalkerPartner,
Ph: +61 3 9613 8879
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