Competition law update

In brief

In touch: Competition law update is a regular publication by the Allens Competition group to keep you informed of the latest news and developments in this area. For more information or for legal advice, please contact one of the Partners listed below. We look forward to hearing from you.

1 September 2014

Significant news

'Root & branch' review news

A further group of submissions to the 'root & branch' review of competition laws has now been uploaded to the Review website, including two supplementary submissions from the ACCC discussing issues relating to:

Submission 1 – 8 Aug 2014

• the ability for the ACCC to take into account global factors in merger assessments;
• merger timelines;
• avenues for review and appeal of merger decisions (including further discussion on the ACCC's recommendation in its main submission that merger authorisation by the Australian Competition Tribunal be replaced with merger authorisation by the ACCC, with the right of merits review by the Tribunal); and
• transparency and disclosure to merger parties of the record on which the ACCC makes its informal clearance decisions.

Submission 2 – 15 Aug 2014

• the appropriateness of mechanisms for dealing with competitive neutrality complaints, particularly in respect of local government;
• how the Competition and Consumer Act 2010 (Cth) applies to the human services sector;
• the relationship between the Competition and Consumer Act and industrial relations legislation; and
• how a market study function could operate in practice.

The next stage is the release of the draft report towards the end of September 2014, after which there will be further opportunity for consultation. We will continue to keep you updated on the review's progress. If you would like to discuss what the review will mean for you, please let us know.

ACCC news

ACCC institutes proceedings against Valve for making alleged misleading consumer guarantee representations – 29 Aug 2014

The ACCC has instituted proceedings in the Federal Court against Valve Corporation alleging that Valve made false or misleading representations regarding the application of the consumer guarantees under the Australian Consumer Law.

Valve is an entertainment software and technology company located in the USA, which owns and operates an online computer game distribution platform called ‘Steam’, with over 65 million users worldwide. Valve sells computer games through Steam to Australian consumers, but does not have a physical presence in Australia.

The ACCC alleges that Valve made false or misleading representations to Australian customers of Steam that:

• consumers were not entitled to a refund for any games sold by Valve via Steam in any circumstances;
• Valve had excluded, restricted or modified statutory guarantees and/or warranties that goods would be of acceptable quality;
• Valve was not under any obligation to repair, replace or provide a refund for a game where the consumer had not contacted and attempted to resolve the problem with the computer game developer; and
• the statutory consumer guarantees did not apply to games sold by Valve.

The ACCC is seeking declarations, injunctions, pecuniary penalties, disclosure orders, adverse publicity orders, non-party consumer redress, a compliance program order and costs. The first directions hearing is on 7 October 2014 at the Federal Court in Sydney before Justice Jagot. Read the ACCC media release

ACCC takes action against alleged pyramid scheme operator – 28 Aug 2014

The ACCC has commenced proceedings against Lyoness International AG and certain related companies for operating a pyramid selling scheme and engaging in referral selling.

The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers. The ACCC alleges that the scheme offers commissions to members who recruit new members who make a down payment on future shopping. The ACCC also alleges that Lyoness' conduct breached the ACL prohibition on referral selling, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.

The ACCC is seeking declarations, pecuniary penalties, injunctions, an order requiring the Lyoness website to link to the case report and costs. The first directions hearing will be at 9.30am on 16 September 2014 before Justice Flick in Sydney. As three of the Lyoness companies are located overseas, the ACCC will be making arrangements for service on those entities. Read the ACCC media release

ACCC acts on AFL membership representations – 28 Aug 2014

The ACCC has warned the Australian Football League (AFL) and a number of AFL clubs about their failure, in the ACCC’s view, to adequately disclose to consumers that attendance at certain high demand games would incur costs in addition to membership fees.

The ACCC was concerned that the AFL and certain clubs used marketing material that was likely to have created the impression that the membership fee entitled a member to attend a specified number of games for no additional cost. In fact, AFL members and general admission AFL club members were required to pay additional costs in order to attend ‘reserve’ classified games that had originally been promoted as part of their membership entitlements. The additional costs were between $8.50 and $39 for general admission AFL club members and $7.50 for AFL members.

Following public reports and the ACCC’s intervention, the AFL removed all reserve classified games from Round 15 onwards, so that these additional costs were no longer charged. A number of AFL clubs also made changes to their websites in response to the ACCC’s concerns.

The ACCC will closely monitor this issue and will consider whether enforcement action is appropriate if there are further complaints that the AFL or AFL clubs have not fully disclosed conditions or restrictions or additional costs of membership. Read the ACCC media release

ACCC issues draft decision on GrainCorp's wheat port access undertaking – 21 Aug 2014

The ACCC has issued a draft decision proposing to consent to GrainCorp Operations Limited’s application to extend and vary its 2011 Port Terminal Services Access Undertaking. The undertaking governs third-party access to port terminal services at GrainCorp’s East Coast Australian bulk grain ports, and is set to expire on 30 September 2014 with a mandatory code of conduct anticipated to commence on 1 October 2014.

GrainCorp has applied to extend the operation of the undertaking for a year in the event that the code does not commence as expected. The ACCC’s draft consent is subject to GrainCorp incorporating reporting provisions on key service performance indicators to cover the period of the extension.

The ACCC seeks views from interested parties on its draft decision by 5 September 2014. Read the ACCC media release

ACCC will not oppose Aquis' acquisition of the Reef Hotel Casino – 21 Aug 2014

The ACCC will not oppose the acquisition by Aquis Reef Holdings (Aus) Pty Ltd of the Reef Hotel Casino (Reef Casino). The Reef Casino is a large combination hotel and casino complex in Cairns.

Aquis currently has no existing casino interests in Australia or elsewhere, but proposes to develop a large resort and casino 15km north of Cairns (the Aquis Resort). The proposed Aquis Resort would be the second casino in Cairns, and is one of two proposals shortlisted by the Queensland Government for the award of up to two casino licences as part of regional integrated resort developments.

The ACCC was satisfied that the Aquis Resort would be focused primarily on international VIP customers whereas the majority of the Reef Casino's customers were local residents and domestic tourists.

The Queensland Government expects to make a final decision on whether the Aquis Resort will receive a casino licence in 2015. Read the ACCC media release

Petrol companies and information sharing – 26 and 20 Aug 2014

The ACCC has instituted proceedings in the Federal Court against Informed Sources (Australia) Pty Ltd (Informed Sources) and several petrol retailers (BP Australia Pty Ltd, Caltex Australia Petroleum Pty Ltd, Eureka Operations Pty Ltd, Woolworths Ltd and 7-Eleven Stores Pty Ltd) alleging that they contravened section 45 of the Competition and Consumer Act.

Subscribers to the Informed Sources service provide pricing data to Informed Sources at frequent, regular intervals and, in return, receive from it collated data from the other subscribers, and various reports containing pricing information across particular regions.

The ACCC alleges that the information sharing arrangements between Informed Sources and the petrol retailers allow those retailers to use the service to exchange information on the price they each offer at their petrol stations on a private and near real-time basis. The exchange of this information allows retailers to monitor and respond to each other’s prices and observe and analyse the pricing behaviours and strategies of their competitors. The Informed Sources service covers most capital cities and many regional centres across Australia, but the ACCC's allegations relate to markets for the sale of petrol in Melbourne.

The ACCC is seeking declarations, injunctions, pecuniary penalties and costs and the matter is listed for a directions hearing in Melbourne on 26 September 2014. Read the ACCC media release

The ACCC has accepted a court-enforceable undertaking from Mobil Oil Australia Pty Ltd, in which Mobil agrees that it will not subscribe to the Informed Sources' retail petrol price information exchange service, or any similar service for the next five years. Mobil was a subscriber to the Informed Sources service until October 2010 when it sold its interest in fuel retailing assets in Australia.

In view of the terms of the undertaking, and as Mobil has not subscribed to Informed Sources for a number of years, the ACCC has not joined it to the Federal Court proceedings. Read the ACCC media release

Maggie Beer Products acknowledges labelling likely to be misleading – 19 Aug 2014

The ACCC has accepted a court-enforceable undertaking from Maggie Beer Products Pty Ltd (MBP). The undertaking relates to MBP's place of origin representations:

• on the labelling of certain ice cream, vinegar, olive oil and biscuits;
• made at a 'Local Fair' held in Mitcham, South Australia; and
• made in correspondence sent by MBP to Woolworths.

The ACCC considered that the place of origin representations would give the reasonable consumer the impression that each of the products was manufactured in the Barossa Valley and/or South Australia when this was not the case.

MBP has acknowledged that these representations were likely to have been misleading, in breach of the ACL. MBP has cooperated with the ACCC’s investigation and, as part of the undertaking, will amend its labelling so that the place of manufacture for products made outside of South Australia is made clear to consumers, and publish an educative article in Food Magazine. Read the ACCC media release

* The summaries provided are a condensed version of the relevant ACCC media release linked at the conclusion of each news item.

New cases

Federal Court agrees on penalty orders for breaches of unsolicited consumer agreement protections involving vulnerable consumers

ACCC v Titan Marketing Pty Ltd [2014] FCA 913 (Justice Rangiah, 25 August 2014)

Key issue

• The court will view as serious, systemic conduct that breaches the ACL, particularly where the conduct involves vulnerable consumers.

Summary

Between 2011 and 2012, Titan Marketing Pty Ltd conducted a business involving door-to-door sales of first aid kits, predominantly targeting certain indigenous communities in Queensland and the Northern Territory. During that time, Titan entered into more than 8000 separate agreements with consumers. The second respondent, Mr Okumu, was managing director of Titan and ran its day-to-day operations.

The ACCC commenced proceedings against Titan and Mr Okumu alleging breaches of various provisions of the ACL, including that:

• Titan made false and misleading representations that its products had sponsorship approval in breach of s29, among other things by representing that a substantial portion of sales proceeds would go to a charity;
• Titan engaged in unconscionable conduct in its system for selling its products, and in relation to two particular customers, one of whom was in poor health and could not read, write or understand English in breach of s21;
• Titan induced customers to enter into unsolicited consumer agreements in breach of the unsolicited consumer agreement provisions of the ACL, by not taking steps to ensure consumers understood the contract and not advising them of their cooling-off rights; and
• Mr Okumu was directly and knowingly concerned in the systemic unconscionable conduct by Titan.

Judgment

The parties filed a joint statement of agreed facts, admissions and proposed orders. Justice Rangiah considered that the proposed orders for a pecuniary penalty of $750,000 on Titan and $50,000 on Mr Okumu were appropriate. In making the penalty order, Justice Rangiah highlighted the systemic nature of the conduct, the deliberate untruths told to consumers, the deliberate ignoring of the ACL's unsolicited consumer agreement protections, and that Titan deliberately targeted vulnerable consumers. Justice Rangiah noted as a significant mitigating factor that Titan and Mr Okumu had acknowledged the contraventions and cooperated with the ACCC. Justice Rangiah also granted the declarations and injunctions and made the other orders agreed by the parties, including a costs order for $100,000.

Source: AustLII