The proceedings related to actions taken by the ANZ in 2004 to seek to limit the refund offered on the bank’s loans by a mortgage broker Mortgage Refunds Pty Ltd (Mortgage Refunds). Mortgage Refunds was a mortgage broking business that offered refunds to borrowers based on the value of their loan if successful. In 2004 the ANZ had written to Mortgage Refunds seeking to limit the amount of refund offered on the ANZ’s loan to $600 so that it matched the amount of the banks’ loan application fee.

The Australian Competition and Consumer Commission (ACCC) brought proceedings against the Australia and New Zealand Banking Group Limited (ANZ) under sections 45 and 45A of the Trade Practices Act 1974 on the basis that the ANZ’s actions had the purpose or effect of substantially lessening competition.

The issues before the Court included:

  • whether the ANZ’s conduct had the effect of lessening competition between the ANZ and mortgage brokers
  • whether the ANZ’s mortgage division was in competition with mortgage brokers
  • whether mortgage brokers and the ANZ both provided loan arrangement services and thus competed in the same market.

In its analysis of ANZ’s conduct the Court applied the hypothetical monopolist test – namely what effect would a “small but significant non-transitory increase in price” have.

In its Statement of Claim, the ACCC had identified the relevant market as the market for “loan arrangement services”, a market in which ANZ itself participated, as did Mortgage Refunds, other lenders and brokers, agents and franchisees of loan providers.

In approaching the relevant market, the Court found that there were separate markets that provided “loan arrangement services”. On the one hand, there were loan providers’ own in-house or tied channels, which only offered the loan products offered by that particular loan provider. On the other hand there were brokers, who were able to offer the products of many different loan providers. The Court also struggled to describe the relationship between lenders who had their own in-house sales teams as well as using brokers, and the brokers themselves, as competitive. The Court found that it was, at least at some times, a collaborative relationship.

The Court found against the ACCC. After lengthy consideration of industry and expert evidence it concluded that ANZ branches and franchises did not participate in any market in which the brokers provided loan arrangement services to potential borrowers. Therefore ANZ was not in any relevant sense in competition with Mortgage Refunds.

The case highlights the difficulties that may be encountered by those seeking to establish that particular activity is anti- competitive. The ACCC has lodged an appeal to the Full Federal Court.