Competition news

In Touch looks at what's been happening in Competition this fortnight, 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.

Arrow-Apotex merger just the right medicine

On 20 September 2018, the ACCC announced that it would not oppose the merger of generic pharmaceutical companies Arrow and Apotex, both of which import and distribute generic prescription and over-the-counter (OTC) pharmaceuticals. The ACCC characterised the parties as two of the four largest suppliers of generic pharmaceuticals in Australia, and that combined they would supply around half of the market for generic prescription pharmaceuticals to Australian pharmacies.

The ACCC found the merger would be unlikely to substantially lessen competition in the following markets:

  • the supply of generic prescription pharmaceuticals to pharmacies in Australia;
  • the supply of OTC pharmaceuticals to pharmacies in Australia; and
  • the supply of individual generic molecules to state and territory purchasing authorities.

The ACCC found that there were a number of alternative suppliers which would provide a competitive constraint in each market. The ACCC noted that while it contacted many pharmacies, banner groups and wholesalers, many were unconcerned with the merger or did not engage at all.

Gift Cards Bill unwrapped by the Lower House

On 20 September 2018, the Treasury Laws Amendment (Gift Cards) Bill 2018 was introduced to the House of Representatives, proposing a national regime to regulate gift cards. The Bill follows similar amendments introduced in South Australia (yet to be passed) and in NSW, both of which impose a three-year minimum expiry period for gift cards sold in those states.

The Bill seeks to amend the Australian Consumer Law to:

  • impose a three-year expiry period for all gift cards supplied on or after 1 November 2019. This includes rendering void any terms and conditions that reduce the expiry period to less than three years, eg, a term that requires a card to be activated within 30 days, and failing which the funds are forfeited;
  • require information about the expiry of the gift card to be displayed prominently on the card itself in an easily understandable format; and
  • ban certain post-supply fees, including charges that are deducted and thereby erode gift card balances and operate as a de-facto expiry date.

The Bill proposes strict liability offences for breach of the new provisions, carrying maximum penalties of $30,000 for corporations and $6,000 for individuals.

Divergent findings on training colleges' unconscionable conduct

On 19 September 2018, contrasting decisions were handed down in relation to two vocational training colleges that were both alleged to have engaged in systemic unconscionable conduct in enrolling consumers into diploma courses. In ACCC v Cornerstone Investment Aust Pty Ltd, the Federal Court found that Cornerstone Investment (trading as 'Empower Institute') engaged in a system of unconscionable conduct, while in Unique International College Pty Ltd v ACCC, the Full Federal Court upheld an appeal by Unique International against the trial judge's finding that it had similarly engaged in a system of unconscionable conduct.

In each case, the ACCC alleged that the training college had acted unconscionably in two respects:

  • its behaviour towards specified individuals who were vulnerable or disadvantaged, using incentives such as free laptops and cash payments; and
  • its overall marketing and enrolment processes targeting vulnerable or disadvantaged consumers, as evidenced by its behaviour towards the specified individuals.

The Federal Court was satisfied that Cornerstone Investment had engaged in a system of conduct or pattern of behaviour that was unconscionable. That finding was based predominantly on evidence relating to the training college's marketing and enrolment processes as a whole, rather than the 15 individual consumers about whom evidence was led.

However, the Full Federal Court overturned a finding that Unique International had engaged in systemic unconscionable conduct on the basis that there was insufficient evidence to support the finding that a 'system of conduct' existed. This was in circumstances where the ACCC's case depended on evidence relating to six individual consumers and the ACCC had failed to demonstrate that the attributes or circumstances of those individuals was representative of the broader student population, namely the 3,600 consumers who were enrolled in courses with the college in 2014-15.

Both cases will return to the Federal Court for determination of relief. For more information, see our Focus article on the Full Federal Court's decision in Unique International College Pty Ltd v ACCC.

ACCC not a fan of celebrity endorsement scams

The ACCC has warned consumers to be wary of scams involving celebrity endorsements, following a 400% increase in the number of these scams being reported to the ACCC's Scamwatch website to date in 2018. Scamwatch estimates that these scams have cost Australians more than $142,000 in 2018. Celebrities who have been used in celebrity endorsement scams include Meghan Markle, Dr Oz and Oprah Winfrey.

The scam commonly takes the form of advertisements, sponsored stories on social media or standalone websites that use celebrity images or fictional quotes to endorse products and encourage consumers to sign up to a 'free trial'. Consumers are asked to provide their credit card details, which allows scammers to take payment where certain 'terms and conditions' of the free trial are not met. These terms and conditions are usually strict and difficult to satisfy, such as returning the product in an unrealistic timeframe, or at times are only provided with the product itself.

While the ACCC urged consumers to be sceptical about ads they read on social media and websites, it also called on Google, Facebook and Instagram to do more to prevent scammers reaching potential victims on their platforms.

ACCC commences inquiry into foreign exchange

The ACCC has announced it will commence an inquiry into foreign currency conversion services. Its issues paper indicates that the ACCC will examine the nature and extent of price competition between suppliers, including barriers to entry and the manner in which prices are communicated to customers.

This follows a report released by the World Bank in June 2018 which found that Australia was the third most expensive G20 country for consumers and small businesses to send money from. The Productivity Commission also released its Inquiry Report on 'Competition in the Australian Financial System' in June 2018, recommending that the ACCC, in consultation with ASIC, investigate additional disclosure methods that could be used to improve consumer understanding and comparison of fees for foreign transactions.

The ACCC is expected to provide its final report to the Treasurer in May 2019. The inquiry will be undertaken by the ACCC’s Financial Services Unit which is also currently undertaking the residential mortgage products price inquiry.

ACCC uncorks investigation into wine grapes industry

The ACCC has announced it will conduct a market study into the wine grape industry. The study follows concerns raised in a survey issued by the ACCC by wine grape growers about a range of competition issues and contracting practices in the industry.

The ACCC has released an issues paper that indicates the market study will focus on:

  • the state of competition between purchasers of wine grapes;
  • bargaining power and risk allocation issues in the wine grape supply chain;
  • issues around price and quality assessment;
  • contracting practices and transparency between growers and winemakers;
  • the effect of the existing voluntary industry code and dispute resolution processes; and
  • the use of collective bargaining by growers.

The ACCC is seeking submissions by 2 November 2018, and will also hold public forums in a number of wine grape growing areas to hear directly from interested stakeholders. The ACCC has indicated that it intends to publish its draft findings for further comment in the first quarter of 2019, with a final report before the end of June 2019.