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.

Significant news

Australia and China sign memorandum of understanding to increase cooperation on mergers regulation

On 22 May 2014, the ACCC and the Ministry of Commerce of the People's Republic of China (MOFCOM) signed a memorandum of understanding (MOU), which, according to ACCC Chairman Rod Sims, paves the way for increased communication and cooperation between the agencies on mergers which affect both the Australian and Chinese markets.

MOFCOM is one of three agencies administering China's Anti-Monopoly Law (AML), and is the agency responsible for merger regulation. The other agencies are the State Administration for Industry and Commerce (SAIC) which enforces non-price related matters under the AML, and the National Development and Reform Commission (NDRC) which enforces price-related matters, including anti-competitive agreements and abuse of dominance. Australia already has in place an MOU with the SAIC, which was signed in September 2012. The object of that MOU is to promote cooperation and coordination of enforcement and training activities on consumer protection and competition issues.

The stated purpose of the MOU between the ACCC and MOFCOM is to 'enhance the partnership of [these regulators] by providing a sound mechanism for their communication and cooperation in the fields of competition law and policy, including enforcement' (Article 1). Article 2 provides that where cases being reviewed by both the ACCC and MOFCOM are subject to confidentiality requirements, the regulators may exchange information on issues including market definition, theory of harm, competitive impact assessment and remedies. Other areas of cooperation between the ACCC and MOFCOM will be based on a workplan agreed in advance each year in relation to areas such as developments in competition legislation and policy, competition law enforcement experience and issues relating to international cooperation on competition law and policy. Read the MOU and the ACCC media release.

Extending the unfair contract terms provisions to small business

On 23 May 2014, the Treasury released a consultation paper entitled Extending unfair contract term protections to small businesses. Treasury is undertaking the consultation on behalf of Consumer Affairs Australia and New Zealand.

The paper seeks stakeholder's views on the scope of the problems encountered by small businesses when dealing with standard form contracts with larger businesses. The paper also considers the following possible options to address the problems (see page 2):

• Option 1 – Maintain the status quo.
• Option 2 – Light touch or non-regulatory responses – this might include industry-led initiatives, government awareness and information campaigns for small business, information disclosure requirements for standard form contracts and/or guidance for business as to what is seen as an 'unfair term'.
• Option 3 – Legislative amendment to extend existing Australian Consumer Law unfair contract term (UCT) provisions to contracts involving small businesses.
• Option 4 – Legislation to require contracts with small businesses to be negotiated on request.

The paper states that Option 3 is the preferred option, and the Treasury seeks feedback on the design of this option, particularly the definition of the term 'small business' in the proposed legislation and whether the provisions would apply to both acquisitions and supplies of goods or services.

The paper also sets out a series of focus questions for interested stakeholders to address in a formal submission, including:

• How widespread is the use of standard form contracts for small business and what are their benefits and disadvantages?
• To what degree do small businesses try to negotiate standard form contracts?
• What terms are businesses encountering that might be considered unfair?
• What protections are currently available to businesses when they encounter UCTs and are they sufficient?
• What regulatory responses are already in place that aim to protect small business from UCTs and how effective are these mechanisms?

In relation to the policy response, the questions include:

• Should the UCT provisions be extended to cover small businesses defined using contracting party characteristics or transaction size? Should small business to small business contracts be included?
• Should the extension of the UCT provisions provide protection for small businesses when they both acquire and supply goods or services?

A fact sheet has also been released with an overview of the key issues in the paper.

The deadline for submissions is 1 August 2014. Responses can be also be submitted by participating in a survey – please follow this link to the Treasury consultation page to read the consultation paper and take part in the survey.

This consultation is significant for large and small businesses. Any changes to the ACL resulting from the consultation could have a significant impact on the way large and small businesses interact and may necessitate the redrafting of many standard form contracts used in everyday business dealings. We will follow this consultation closely and keep you informed of its progress. If you would like to discuss what the consultation will mean for you, or want to consider preparing submission, please contact us.

ACCC news

ACCC action against alleged egg cartel attempt demonstrates risks associated with industry meetings – 28 May 2014

The ACCC has commenced proceedings in the Federal Court against the Australian Egg Corporation Limited (AECL), two egg producing companies (Twelve Oaks Poultry and Farm Pride Foods Limited) and three individual directors of these companies, alleging that they attempted to induce egg producers who were members of AECL to enter into an arrangement to reduce the amount of eggs available for supply to consumers and businesses in Australia.

The AECL is an industry body that represents the interests of its members, which are generally egg producers. At the time of the alleged conduct, AECL had between 100 and 150 egg producer members.

It is also alleged that in February 2012, AECL held an 'Egg Oversupply Crisis Meeting' attended by egg producers in Sydney, where it allegedly sought a coordinated approach by egg producers to reduce the supply of eggs. The three individuals who have been joined to the proceedings were present and had roles at this meeting.

It is not alleged that this attempt was successful.

The ACCC seeks declarations, injunctions, pecuniary penalties, compliance, an adverse publicity order and a community service order against AECL, disqualification orders against the individuals and costs. Read the ACCC media release.

ACCC reports on breaches of Telstra's SSU – 26 May 2014

The ACCC has tabled its annual report on Telstra's compliance with its Structural Separation Undertaking (SSU) in Federal Parliament. The report outlines a number of occasions during the 2012-13 financial year where the ACCC considers Telstra did not meet certain commitments in its SSU. In particular, the report provides that Telstra failed to:

• properly secure protected information from disclosure to Telstra's retail employees. This included confidential or commercially sensitive information provided to Telstra concerning Telstra's wholesale customers; and
• introduce ADSL broadband service enhancements to retail and wholesale customers at the same time.

Read the report and the ACCC media release.

ACCC consultation on regulated access to wholesale telecommunications services – 23 May 2014

The ACCC has released a consultation paper seeking views on non-price terms of access for the regulated fixed line services supplied using Telstra's copper network, and the regulated transmission and mobile terminating services.

The ACCC has decided to consult separately on setting the primary prices for the regulated services (which includes the monthly or annual access charges and usage charges) and on setting non-price terms and other charges incurred in using the regulated services (such as connection charges).

This consultation forms part of the ACCC's broader inquiries into making final access determinations for a range of regulated wholesale telecommunications services. The final access determinations will specify price and other terms and conditions that will apply when access providers and access seekers cannot reach agreement through commercial negotiations. Read the ACCC media release.

ACCC clarifies disconnection arrangements for certain customers moving to the NBN – 22 May 2014

Recent media reports have noted that Telstra will commence disconnecting existing copper and HFC telecommunications services in a number of areas from 23 May 2014. The ACCC has sought to clarify that safeguards exist to protect consumers that are facing disconnection.

Under its migration plan, Telstra is required to commence disconnecting premises in a geographic location 18 months after NBN services are available in that area. However, Telstra's migration plan also specifies a number of disconnection exceptions, including where:

• consumers and businesses have placed an order for NBN services but NBN Co has not completed the connection process;
• particular services are not yet able to be supplied over the NBN (primarily specialist business services); and
• premises have been added to the NBN rollout region within six months of the scheduled disconnection date.

Read the ACCC media release.

Telstra and NBN Co have also agreed on additional safeguards to apply. Under these arrangements, Telstra and other service providers will case manage their customers in these areas. Read the ACCC media release.

ACCC will not oppose the acquisition of the fuel division of the Scotts Group by Caltex following divestiture remedy – 22 May 2014

The ACCC will not oppose the acquisition by Caltex Australia Limited of the fuel division of the Scotts Group after accepting an undertaking from Caltex to sell four retail fuel sites in South Australia and Victoria.

The Scotts Group's fuel division owns a number of retail fuel sites and fuel depots predominantly in regional areas of South Australia, Victoria, New South Wales and the Northern Territory. Caltex is involved in the importation, production, wholesale distribution and retail supply of fuel in all states and territories of Australia.

In Mt Gambier (South Australia) and Nhill (Victoria), the ACCC considered the acquisition would result in competition concerns as it would result in Caltex controlling the majority of retail fuel sites in both towns. To address these concerns, Caltex provided a court-enforceable undertaking to sell three sites in Mt Gambier and one in Nhill to an ACCC-approved purchaser, Agostino, which is an independent operator of BP branded retail fuel sites in South Australia.

The ACCC concluded that in other local retail markets for the supply of fuel, Caltex would be competitively constrained by alternative retail suppliers. Read the ACCC media release.

ACCC re-authorises MFAA disciplinary rules – 21 May 2014

The ACCC has re-authorised the Mortgage and Finance Association of Australias (MFAA) Disciplinary Rules until June 2019. The MFAA is a voluntary industry organisation that represents over 10,000 mortgage and finance brokers, mortgage managers and aggregators.

Members are required to comply with the MFAA governance regime, including a Code of Practice which outlines the requirements and professional standards expected of members. The Disciplinary Rules for which the MFAA is seeking authorisation enforce this governance regime. The rules contain the process for the investigation of complaints against members, expulsion of members and hearing of appeals against refused applications for membership or accreditation. Read the ACCC media release.

ACCC releases quarterly report – 20 May 2014

The ACCC has published its March 2014 quarterly report entitled ACCCount, which highlights some of the ACCC's key activities for the quarter, including the following:

• The ACCC has commenced monitoring prices, costs and profits to assess the general effect of the carbon tax scheme in Australia in preparation for the repeal of the carbon tax post-July 2014;
• The ACCC commenced three new competition enforcement matters and obtained a penalty of $11 million against Flight Centre Limited (read In touch 8 April 2014) (now on appeal and cross-appeal) and one new consumer law matter in the telecommunications industry; and
• The ACCC's decision to oppose the acquisition of the assets of Macquarie Generation by AGL Energy Limited. The acquisition is now the subject of an authorisation application by AGL to the Australian Competition Tribunal, being heard this week.

Read the ACCC media release.

Harvey Norman franchisees ordered to pay total penalties of $234,000 for misleading consumers – 19 May 2014

The Federal Court has recently ordered a further three Harvey Norman franchisees to pay a total of $60,000 in civil pecuniary penalties for making false or misleading representations regarding consumer guarantee rights. The Federal Circuit Court has also ordered another Harvey Norman franchisee to pay a pecuniary penalty of $26,000. The nine judgments to date in proceedings brought by the ACCC against Harvey Norman franchisees have led to penalties of $234,000. Read the ACCC media release.

Cases

The Flight Centre decision, which has been reported in previous editions of In touch, is the subject of an appeal by Flight Centre (read In touch 8 April 2014) and cross-appeal by the ACCC (read In touch 20 May 2014). The hearing for the appeal by Flight Centre is set down for November 2014.

The Federal Court's decision against the ACCC in relation to allegations of price fixing by ANZ Bank (read In touch 25 November 2013) is also on appeal and cross-appeal by the ACCC. The hearing of both is set down for August 2014.