18 October 2018
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 and, as always, get in touch.
- Public LNG netback price to fuel competition
- CMA publishes report on algorithms
- Rod Sims' speech on the digital economy
- Possible investigation of Amazon by the European Commission
- Continued push to implement the ACCC's electricity recommendations
The ACCC has commenced publishing the LNG netback prices on its website, to improve the transparency of the gas market.
The LNG netback price represents the price at which a gas supplier is indifferent between selling gas to a domestic buyer and exporting it. It is calculated by taking the delivered price of LNG and subtracting the costs of liquefying natural gas and shipping it to the destination port.
The publication of the LNG netback price is a trial measure aimed at increasing transparency across the supply chain, and forms part of the ACCC's inquiry into the supply of, and demand for, wholesale gas. The ACCC will seek industry views on the publication throughout 2019, and make a recommendation at the end of the gas inquiry as to whether the publication should continue.
The UK regulator, the Competition and Markets Authority (the CMA), has published a study into pricing algorithms and how they interact with competition. The report centred around two main issues with algorithms:
- whether they can facilitate price coordination between competitors; and
- whether they can aid personalised pricing, and the effects on competition.
The CMA found that algorithms could assist tacit coordination between competitors because they could monitor prices, facilitate parallel conduct or even learn to coordinate with competitors themselves. However, the extent to which this could have an impact beyond traditional risk factors is difficult to prove. As such, it remains likely that human intervention is necessary to establish collusive conduct.
The report also concluded that, while there is currently little evidence of personalised pricing in practice, there is concern that the increasing availability of data will enable suppliers to charge consumers an individualised price based on their personal data.
The ACCC's Digital Platform's inquiry will also examine the effect of algorithms on competition, particularly in relation to big data, advertising and journalistic services. A preliminary report is due by 3 December 2018.
Rod Sims, Chairman of the ACCC, gave a speech on 15 October on the digital economy.
Mr Sims noted that the ACCC has not yet formed a view on whether the 'merger factors' should be amended to address the challenges of digitalisation. At the same time, Mr Sims flagged that mergers involving digital services are difficult cases. The full consequences of acquisitions sometimes only becomes fully apparent well after the fact, such as with Google's acquisition of Double-Click and Facebook's acquisition of Instagram. He noted that the ACCC is 'now very much alive to the significance of data, the implications of the network effects associated with these platforms and the potentially far-reaching consequences of smaller rivals.'
Mr Sims made some comments about the Consumer Data Right (CDR), in particular that the CDR is not an access regime for competitors – it is fundamentally a regime for consumers. He considered overseeing the implementation of the CDR was an exciting new role for the ACCC but that it was presenting difficult issues and the ACCC was consulting widely. While it is intended that the CDR will be extended to new industries, Mr Sims commented that extending the regime to social media and other digital platforms will present a number of issues, in particular in relation to privacy.
Finally, Mr Sims made some comments on the ACCC's enforcement actions. He noted that the ACCC is examining instances in which companies have not disclosed 'the extent of gathering, changed their position on gathering or use of data and not adequately informed or obtained consent'. Some terms and conditions regarding the gathering and use of data are being examined to determine whether they are unfair contract terms. The ACCC is also looking at the sharing of commercially sensitive data and whether some market behaviour could involve anti-competitive practices.
The European Commissioner for Competition, Margrethe Vestager, has announced that the Commission has opened a preliminary investigation into whether Amazon unfairly uses the data it collects from independent third-party sellers who use Amazon as a platform, to give itself an anti-competitive edge. The Commission is currently gathering information from market participants, but has not yet made a decision on whether to open a formal investigation.
The preliminary investigation reflects the European Commission's increasing eagerness to close in on potentially anti-competitive conduct engaged in by big technology players.
ACCC Chairman Rod Sims has reinforced the ACCC's recommendation for state governments to write down inflated electricity network valuations as a means to bring down electricity prices. This recommendation was one of 56 in the ACCC's Retail Electricity Pricing Inquiry Final Report. Mr Sims was quoted as saying that excessive network costs are the 'biggest single driver of high electricity prices', and that he will be advocating for the write-down of network valuations for as long as he can.
Mr Sims has also expressed confidence that implementation of the ACCC's recommendations will decrease prices by 25 per cent, even without the National Electricity Guarantee. The Government has already committed to some of the recommendations, including default electricity pricing and the underwriting of new firm generation. However, Mr Sims has commented that, in order to drive a 25 per cent reduction in prices, the Government needs to implement 10 to 12 of 56 recommendations.
- 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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