The Australian Competition and Consumer Commission (ACCC) released its Compliance and Enforcement Policy on 21 February 2014 setting out its key priorities for 2014 (Policy).
For the most part, the Commission’s areas of focus for 2014 are no real surprise, reflecting a continuation of many of the previous years’ themes and the reappearance of some historical issues with a new take.
In his speech to launch the Policy, the ACCC’s Chairman Rod Sims emphasised the importance of court action by the regulator in enforcing the law, because it acts as a deterrent, clarifies the law and allows appropriate levels of penalties to be set.
The speech follows a statement by Mr Sims in January warning large companies that the ACCC will pursue large penalties where they breach the Australian Consumer Law (ACL) and a number of cases late last year which set a high watermark for penalties.
This approach has also been reflected in the very substantial increase in the number of ACL matters where the ACCC has pursued court action rather than accept an administrative settlement such as section 87B undertakings.
Mr Sims’ observations are also consistent with the overarching “strong enforcement” message and commitment to taking on more cases where the outcome is less certain, that has become synonymous with his tenure as Chairman of the ACCC.
A look at the areas of focus
Enduring targets – cartels, anti-competitive agreements and misuse of market power
Cartel conduct, anti-competitive conduct and misuse of market power remain “enduring priorities” for the ACCC.
In terms of cartels, the ACCC has over 15 in-depth cartel investigations underway and expects that 2 or 3 of these will be heard by the courts this year.
The ACCC’s testing of whether principal/agent arrangements can constitute cartel conduct will also continue with its appeal against the loss in the Federal Court last year in the ANZ case and a likely appeal by Flight Centre against the judgment against it delivered last December.
Competition issues in highly concentrated sectors, but specifically supermarkets and fuel, remain a priority for the ACCC. While its long-term investigation into whether shopper dockets are anti-competitive was thought to be resolved late last year by way of enforceable undertakings, the ACCC announced in February that it has instituted proceedings against Woolworths and Coles for alleged non-compliance with the terms of those undertakings.
The ACCC’s investigation into unconscionable conduct in the supermarket sector has also continued over from last year, with at least some aspect of this due to be concluded and announced this month.
Petrol price information sharing arrangements continue to be a priority for the ACCC with Mr Sims hinting at a conclusion to its complex investigation by the end of April this year.
The ACCC is not shying away from its 2011 commitment to focus more on misuse of market power cases. This is not surprising given the current political debate about the effectiveness of the prohibitions on misuse of market power in the lead up to the Abbott Government’s root and branch review of Australia’s competition law regime.
In the past couple of weeks, the ACCC has instituted proceedings against Pfizer for alleged misuse of market power in the supply of its Atorvastatin product, Lipitor, to pharmacies. The ACCC has around 15 in-depth investigations underway into alleged misuse of market power matters and expects one matter that is unrelated to supermarkets or petrol to be before the courts soon.
A new competition priority - secondary boycotts
An interesting and new addition to this year’s competition priorities is secondary boycotts. There has been no court action or publicly announced investigations in relation to these provisions in the last decade. According to Mr Sims, the common reluctance by some businesses to provide evidence because of continuing relationships with unions allegedly involved, means these matters may not get before the courts notwithstanding that secondary boycotts can be extremely detrimental to businesses, consumers and the competitive process. Despite these difficulties, the ACCC anticipates proceedings will be issued this year.
BAU for regulatory priorities
The ACCC’s priorities for 2014 do not raise any significant new or unexpected matters from a regulatory perspective, with business as usual for the ACCC in its work in various infrastructure sectors including an ongoing role in many things NBN-related in the wake of finalising NBN Co’s Special Access Undertaking last year and the Australian Energy Regulator continuing its somewhat new role under the National Energy Retail Law in relevant jurisdictions.
A new focus in product safety
The ACCC has been active in relation to product safety since the commencement of the new national regime in 2010 and this remains a continuing priority. The ACCC will have a particular focus this year on low cost imported goods sold in major stores.
Is ‘drip pricing’ a new addition?
The ACCC has signalled that so-called ‘drip pricing’, particularly in the travel industry and event ticketing, will be a 2014 priority and that it will shortly be the subject of enforcement action.
‘Drip pricing’ is described by the ACCC as the incremental disclosure of fees and charges over an online booking process. The ACCC’s concern is that consumers are attracted by an attractive headline price advertised at the start of the booking process but as they progress to payment, additional fees and charges are added. The ACCC also considers that this conduct may detrimentally impact those competitors who are more transparent and upfront about their pricing.
In many respects, drip pricing appears to be a new name for an old problem. Since at least 2009 (and before this under the component pricing provisions), the ACCC has pursued businesses for failing to comply with the single price provisions of the ACL, misleading consumers about the true cost of goods and services by advertising only part of the total cost with disclosure of other components inadequate or only revealed at point of sale. Concern over airline and travel agent advertising of cheap flights where taxes and other charges were not effectively disclosed, were at least in part the impetus for the current provisions.
The travel industry has again been identified as an area of concern but the only difference today seems to be that the ACCC is shining its spotlight on this type of conduct in the context of online bookings, likely given the increasing prevalence of online shopping and transactions.
In a speech in June last year, Deputy Chair of the ACCC, Ms Delia Rickard, announced concerns with misleading savings representations in the retailer energy sector. The ACCC also wrote to all energy retailers in August highlighting the issue of ‘discounts off what?’ as an industry one. In December, the ACCC instituted proceedings against AGL alleging representations about the level of discounts available off usage charges on certain energy plans were misleading.
It comes as no surprise to see savings claims named as a priority for the ACCC this year. Similar to the enforcement approach taken by the ACCC against energy retailers for door-knocking activities in the last couple of years, we expect to see the ACCC institute further proceedings against energy retailers for alleged misleading savings claims.
More of the same…
The other areas of focus for the ACCC in relation to consumer protection are generally a continuation of its 2013 priorities, namely:
- activity in the telecommunications and energy sectors, including door-to-door sales and telemarketing. Given the largest energy retailers have largely ceased door-to-door sales in the wake of the ACCC’s action against them, telemarketing could be the real focus;
- emerging consumer issues in the online marketplace, including misleading representations on comparator websites - the ACCC successfully took action against EnergyWatch for such conduct in 2011;
- unfair contract terms. The ACCC had a win last year in its first enforcement action under these provisions. It also investigated and publicly reported on the fairness of standard form agreements in a number of industries including car hire, domestic airline, fitness and telecommunications and we anticipate it continuing this industry by industry review;
- credence claims. While last years’ focus on food related misrepresentations may continue, the ACCC has signalled a shift towards misrepresentations in marketing and labelling that portray large manufacturers as small niche businesses;
- misleading carbon pricing representations. The ACCC’s original focus had been representations by businesses about the effect of the introduction of the carbon tax scheme on the price of goods and services. Now some two or so years later it will scrutinise representations by businesses about the effect of the repeal of the tax. It has today also been tasked with the formal role of monitoring prices, costs and profits of suppliers of gas and electricity to assess the general effect of the scheme;
- consumer guarantees with a focus on the sale of extended warranties. Last year the ACCC commenced its first court proceedings relating to misleading representations about these rights in the context of extended warranties with Mr Sims indicating further action against “some quite large companies which should know better” in 2014; and
- consumer protection issues impacting Indigenous communities.
Although not expressly mentioned, following on from its success in the High Court with the Lux decision, it can be expected that the ACCC will take more action challenging business systems and practices it regards as unconscionable.
The ACCC’s enforcement priorities this year do not represent a marked departure from those identified in previous years. Its vigorous approach to enforcement is equally set to continue, despite the distraction of the government’s broad ranging root and branch review and questions regarding the ACCC’s financial position, with the regulator already signalling the launch of proceedings in respect of many of its priority areas in upcoming months.
Consistent with recent years, 2014 is set to be busy from a competition and consumer law perspective.