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.
- Changes to competition law and merger process
- $25m penalty for criminal cartel conduct
- Prysmian pays $3.5m for cartel conduct
- New car industry put on notice by ACCC draft report
- ACCC investigation into Takata airbag recall
- Egg producer fined $750,000 for misleading 'free range' claim
Controversial reforms of Australia's 'misuse of market power' law have passed the Senate and the House of Representatives with minor amendments, signalling its passage into law.
The new 'misuse of market power' law changes the test that applies when assessing whether a corporation has misused its market power – from a purpose-based test to an effects test. The misuse of market power amendments to the Competition and Consumer Act will not come into force until the second Bill in the Harper legislative package is passed – the Competition Policy Review Bill – which contains the bulk of government's amendments implementing the Harper Review recommendations. The Competition Policy Review Bill is also awaiting consideration by the House of Representatives, after which it will go to the Senate.
Read our analysis of the new misuse of market power law here.
In other regulatory news, ACCC Chairman Rob Sims has announced a change to the ACCC's merger clearance policy. The ACCC will scrutinise mergers more closely and gather substantially more evidence from merger parties during its assessment than has been the ACCC's previous practice. Such evidence could include documents and data, as well as evidence obtained from examination of executives and relevant officers of merger parties.
A key impact of the ACCC's new approach will be to extend merger assessment timelines. Mr Sims acknowledged this impact; however, he commented that the ACCC will continue to benchmark its timelines against those of overseas regulators and will take into account the commercial context of each assessment.
Want to know more? Read our detailed article on these changes to merger policy here.
For the first time in Australia, a company has been charged and fined under the criminal cartel provisions that were introduced in 2009. Global shipping company Nippon Yusen Kabushiki Kaisha (NYK) was ordered by the Federal Court to pay a fine of $25 million after pleading guilty to allegations of criminal cartel conduct by the Commonwealth Department of Public Prosecutions (CDPP) following an investigation and referral from the ACCC. The ACCC continues to treat enforcement of the cartel provisions as a priority and has indicated that it is conducting a number of other investigations.
Although the maximum penalty that NYK could have incurred was $100 million, the Federal Court ultimately imposed a fine of $25 million, which incorporated a significant discount of 50 per cent. In determining the discount, the Federal Court took into account NYK's early guilty plea, level of contrition, present cooperation and assurances of future assistance to authorities. NYK's future cooperation specifically accounted for 10 per cent ($5 million) of the discount.
Read our take on what this decision means for you here.
Italian cable supplier Prysmian has been fined $3.5 million for engaging in cartel conduct in relation to the supply of high voltage land cables in Australia. The conduct involved a 2003 Australian project for the supply of high voltage land cables and accessories to the Snowy Mountains Hydro Electric Scheme.
The penalty was imposed after the Federal Court found in July last year that Prysmian entered into an agreement with other cable manufacturers and suppliers to 'allocate' a particular tender to Prysmian. Prysmian gave effect to this agreement by providing pricing guidance to its competitors so that they could submit higher amounts in an attempt to ensure that Prysmian won the tender.
The ACCC has had varied success with bringing proceedings against other alleged members of this cable cartel. In July 2016, proceedings against Nexans SA were dismissed and in 2013 Viscas Corporation agreed to settle its ACCC proceedings.
The ACCC had sought a penalty of $7 million. However, the court held that, while the contravening conduct was serious and deliberate, it occurred over a relatively short period of time in 2003, Prysmian did not ultimately secure the contract to supply the Snowy Mountains scheme and, as such, Snowy Hydro did not suffer a loss from the conduct.
This penalty is the most recent regulatory action in relation to a power cable cartel that ran for almost 10 years from 1999. Prysmian has been fined €104.6 million by the European Commission for its role in this arrangement, the largest fine imposed on a cable firm for the power cable cartel that ran for almost 10 years from 1999.
The ACCC this month released a draft report following its market study into Australia's new car retailing industry. The study arose from concerns raised with the ACCC and other fair trading agencies about the operation of new car retail markets. The concerns related primarily to defects with vehicles, misrepresentations to consumers, and issues in post-sale service markets. The ACCC has made three key market observations arising from the study:
- consumers are being prevented from obtaining the remedies they are entitled to under the Australian Consumer Law because of car manufacturers' complaints handling systems and policies;
- a mandatory scheme should be introduced for car manufacturers to share technical information with independent repairers; and
- more accurate information must be provided to buyers of new cars about the vehicle's fuel consumption and emissions.
The ACCC has also identified five key issues contributing to the difficulties consumers are facing in enforcing their consumer guarantee rights:
- emphasis on warranty obligations;
- a 'culture of repair' embedded in systems and policies;
- non-disclosure agreements in complaint resolution;
- lack of effective independent dispute resolution options; and
- particular features of the arrangements between car manufacturers and dealers.
The ACCC is accepting comments on the draft report until 7 September 2017. A final report is expected to be released in late 2017.
The ACCC has begun an investigation into one of the largest recalls in automotive history. In Australia, since 2009, more than 2.3 million vehicles have become subject to the recall of airbags produced by Japanese manufacturer Takata. The recall affects 60 makes of cars, as well as a small number of motorbikes and trucks sold in Australia.
The ACCC's action followed less than 24 hours after consumer advocacy group Choice published findings from its three-month investigation into the recall. Choice found that, as of April 2017, more than two-thirds of the 2.1 million cars affected in Australia had still not had their faulty airbags replaced, with car owners being told by manufacturers there is a minimum six-month wait to have their airbags replaced.
The ACCC is seeking information from the Department of Infrastructure and Regional Development, the government department responsible for motor vehicle safety standards that is overseeing the airbag recall. The ACCC has indicated that it will examine the current recall strategies to ensure each manufacturer is complying with its obligations under the Australian Consumer Law.
Rod Sims has also indicated that the ACCC will not hesitate to advocate for further pressure to be put on manufacturers conducting a recall. Mr Sims noted that 'If [the ACCC] find[s] that manufacturers are not responding quickly enough to get these airbags out of cars as fast as possible, we can go to [Small Business] Minister Michael McCormack recommending a mandatory recall … which will then have prescriptive requirements'.
The Federal Court has fined Western Australian egg producer Snowdale $750,000 plus costs of $300,000 for making false or misleading representations that its eggs were 'free range'.
The order follows the Federal Court's determination in May 2016 that Snowdale had engaged in misleading or deceptive conduct, and made false or misleading representations by selling eggs in cartons labelled as 'free range' in circumstances where most of the hens from Showdale's sheds did not go outside due to unfavourable farming conditions.
The Federal Court noted that the contraventions were deliberate and particularly serious given 'free range' eggs are a staple food product bought by a very large group of consumers for a premium price.
This penalty is yet another example of the ACCC's focus on credence claims, with the ACCC pursuing a number of successful court proceedings involving egg producers. Misleading 'free range egg' claims have resulted in considerable penalties: in 2016, Derodi Pty Ltd and Holand Farms Pty Ltd were fined $300,000; in 2015 Darling Downs Fresh Eggs was imposed a penalty of $250,000 in 2015, and in 2014 Priovic Enterprises Pty Ltd was fined $300,000 for engaging in such conduct.
In addition to issuing a pecuniary penalty, the court made an order preventing Snowdale from using the words 'free range' in connection with its eggs unless the eggs are produced by hens that are able to go outside on ordinary days, and most of which actually go outside on most days; and an order that Snowdale implement a consumer law compliance program and pay a contribution towards the ACCC's costs.
- Jacqueline DownesPartner, Practice Leader, Competition, Consumer & Regulatory,
Ph: +61 2 9230 4850
- Fiona CrosbieChairman,
Ph: +61 2 9230 4383
- Carolyn OddiePartner,
Ph: +61 2 9230 4203
- Kon StelliosPartner,
Ph: +61 2 9230 4897
- 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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