21 February 2019
In Touch looks at what's been happening in the Australian competition, consumer and regulatory world, 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, feel free to get in touch with our team.
- ACCC will not oppose budding acquisition of PGG Wrightson Seeds by DLF Seeds
- Siemens and Alstom global merger blocked by European Commission
- Penalties imposed on Cryosite for jumping the gun
- Federal Court finds Geowash's hands not so clean
- ACCC focuses on agriculture and franchising in small business report
- NBN consumers benefit from higher-speed plans
On 14 February 2019, the ACCC announced that it would not oppose the proposed acquisition by DLF Seeds of PGG Wrightson Seeds.
Both parties are suppliers of forage seeds and turf seeds. DLF Seeds is a Danish company that does not have business operations in Australia; however, its seeds are imported and distributed throughout Australia via third-party distributors. PGG Wrightson Seeds is a New-Zealand-based company that develops breeds and supplies seeds in Australia and New Zealand, and exports overseas.
The ACCC's investigation focused on the market for specialised seed product endophytes, which are perennial ryegrass seeds containing fungi. The ACCC decided that DLF Seeds and PGG Wrightson Seeds would continue to face competition from other suppliers of endophytes, including global seed producers such as Heritage Seeds. The ACCC also considered the effect of the proposed acquisition on R&D. Ultimately, the regulator found that the proposed acquisition would be unlikely to lessen competition in R&D for the development of new seeds.
In 2017, German electronics conglomerate Siemens and the maker of France's TGV high-speed train, Alstom, agreed to merge their rail operations. According to the parties, the deal would have created a 'European rail champion' better positioned to challenge competition from a larger Chinese competitor, CRRC Corp. The merger was subject to scrutiny by competition regulators around the world, including in the EU, Australia and New Zealand.
The ACCC commenced an informal review into the proposed merger in April 2018; and in September 2018, the regulator issued a statement of issues, which outlined concerns that a combined Siemens-Alstom would be, by far, the largest supplier of heavy rail signalling in Australia, and that the reduction in competition may lead to higher prices and/or lower levels of service to customers, and/or less innovation, particularly in relation to heavy rail signalling projects for passenger rail networks that involved interlocking systems and/or trackside automatic train protection.
On 7 February 2019, the ACCC discontinued its review of Siemens' proposed acquisition of Alstom, following the European Commission's decision to prohibit the transaction under the EU Merger Regulation. The European Commission found that the remedies proposed by the parties (including proposals to divest parts of their signalling businesses in Europe) were insufficient to address concerns that the merged entity would significantly reduce competition in the markets for signalling and high-speed trains in Europe.
The ACCC indicated that it worked closely with overseas competition regulators during its review of the merger.
On 13 February 2019, the Federal Court imposed civil penalties of $1.05 million on Cryosite Limited for engaging in cartel conduct. This was the first case brought by the ACCC alleging 'gun jumping' in a merger, involving the merging competition parties coordinating their conduct pre-completion. See our Client Update: Penalties ordered in ACCC cartel action against Cryosite are a strong reminder of rules prohibiting 'gun jumping', which also provides tips to merging parties for managing their risk in similar situations.
On 8 February 2019, the Federal Court found that former hand car wash and detailing franchisor Geowash engaged in unconscionable conduct, made false or misleading representations, and breached the Franchising Code of Conduct by failing to act in good faith in relation to the sale and marketing of its franchises. In the case brought by the ACCC, the Federal Court held that Geowash made false or misleading representations on its websites by:
- suggesting that prospective franchisees would generate certain revenues and average profits, without any basis for these claims; and
- representing that Geowash had a commercial relationship or affiliations with major companies, including Audi, Shell, Emirates, Ikea and Thrifty, when this was not true.
Geowash's director was found to have been knowingly involved in all of Geowash's conduct, and its franchising manager was found to have been knowingly involved in some of the conduct.
Geowash went into voluntary administration in October 2016.
The ACCC released its half-yearly Small business in focus report, which addressed developments in the small business, franchising and agriculture sectors. Agriculture-related initiatives reported on include:
- the ACCC's continued focus on addressing unfair contract terms, particularly in milk supply agreements;
- court proceedings against Landmark Operations Limited (trading as Seednet) for false or misleading advertising to farmers in relation to 'Compass' barley, in which the Federal Court imposed penalties of $1 million for misleading barley performance claims (see our previous In Touch coverage, Farmer fact sheet has a crop of false claims); and
- commencement of the wine grape industry market study.
In relation to franchising, the ACCC reported on the Franchising Project launched in December 2018, which will involve the regulator undertaking targeted compliance checks to address specific issues. It will also include an education campaign to assist prospective franchisees.
On 12 February 2019, the ACCC released its quarterly NBN Wholesale Market Indicators Report. The ACCC reports that almost 4.8 million Australians are now connected to the NBN, which represents a 6.8 per cent increase for the December quarter when compared with the previous three months. Approximately 2.7 million users are subscribed to higher-speed plans of 50Mbps or more. In December 2017, only 159,000 consumers were on these higher-speed plans.
- 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
- Felicity McMahonManaging Associate,
Ph: +61 2 9230 5242
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