In an address to the Committee for Economic Development of Australia, the Chairman of the Australian Competition and Consumer Commission (ACCC), Rod Sims, released the watchdog’s Compliance and Enforcement Policy (Policy) for 2015. It could be argued that 2014 was a year where perhaps too much of the Commission’s focus was directed inwardly, due in large part to its ‘financial inefficiency’ in what Sims had called his ‘major focus’. This inefficiency has subsequently been allayed by a 12.5% reduction in staff, significant restructuring and an extra $20million in funding from the Federal Government. However, the Policy indicates that the year ahead will see the ACCC build on its productivity by focusing its actions and directing its resources in an informed and considered manner towards both longstanding and emerging concerns. The ACCC Chairman announced a bolstered commitment to enduring issues such as anti-competitive agreements, misuse of market power and product safety, while also putting certain key players on notice as to the ACCC’s annual ‘plan of attack’, including franchisors, businesses tendering for major government contracts, stakeholders across the breadth of the medicine and health sectors, and even governmental departments that are preparing for proposed public asset sales or leases.
Significance of the ACCC’s Compliance and Enforcement Policy
The inaugural ACCC Compliance and Enforcement Policy was released in 2012, with the ACCC since declaring its commitment to publicly releasing such a policy in each successive year. The Policy includes an outline of its updated position for the year ahead, which is formulated in light of identified and emerging issues impacting on consumer welfare and the competitive landscape, supplemented through consultation with ACCC’s stakeholders and key industry and business groups. The Policy also outlines the factors the ACCC relies upon when making a decision to take enforcement action against an individual or organisation for a suspected or actual contravention of the Competition and Consumer Act 2010 (Cth) (Act), as well as the particular strategies the ACCC uses to achieve compliance with the Act and to educate the market (both generally and in particular sectors) about issues affecting them.
ACCC priorities for 2015
Each year the Policy contains priority areas for attention, updated to reflect the changing marketplace, emerging industries and any number of additional factors that may be, in nature, either both microeconomic (e.g. monopolistic or oligopolistic behaviour by organisations in a particular industry) or macroeconomic (e.g. the introduction of a new tax or fluctuations in the supply and demand of an internationally sourced commodity). While the ACCC has stated that some of the priorities included in the Policy will almost certainly always include those based on the ACCC’s founding responsibilities (anti-competitive practices, instances of misuse of market power, and compliance with consumer and product safety standards), the Policy acknowledges and seeks to respond to emerging issues in the market.
With the above in mind, the Policy lists the following priorities as being of particular importance for the watchdog’s enforcement and compliance activities in 2015:
1. Cartel conduct
A new dedicated group within the ACCC has been established to investigate serious cartel conduct, with the area of government procurement identified as a particularly prevalent area for cartel activity due to the unique and high-budget nature of the tendering processes involved with the contracts available. With approximately 12 in-depth cartel investigations currently underway, the ACCC is stamping its authority to put would-be cartels on notice. The ACCC also stated that there will also be a number of actions taken to educate and improve awareness of cartel behaviour amongst procurement agencies, anti-corruption bodies and the police.
One of the strategies discussed in the Policy for making headway with this priority is an immunity policy designed to encourage self-reporting of cartel involvement, which confers immunity from ACCC action to the first eligible cartel participant to come forward and provide evidence against cartel members (subject to full and frank disclosure and continuing cooperation).
2. Truth in advertising
Acknowledging truth in advertising as a fundamental element of the proper functioning of the Australian economy, the ACCC already has a steady stream of enforcement activities the ACCC has taken in relation to instances of advertising that could constitute a breach of the misleading and deceptive conduct and/or false or misleading representations provisions of the Australian Consumer Law (ACL). With a renewed focus on misleading advertising by large businesses with high potential for widespread consumer detriment, this will continue to be a key ACCC priority for 2015.
3. Industry codes
The recent introduction of new or overhauled industry codes of conduct has also naturally translated into a key priority for the ACCC in respect of increasing awareness and ensuring compliance with those new codes. Most noteworthy amongst the codes of conduct is the Franchising Code of Conduct (FCC) which came into effect on 1 January 2015. The FCC gives the ACCC increased powers in respect of infringement notices (which may carry fines of up to $8,500 for body corporates and $1,700 for individuals) and the penalties it may seek judicially (up to $51,000). The infringement notices should prove to be a particularly handy tool in deterring contraventions of the FCC, as these notices may be validly issued where the ACCC has reason to believe a contravention has occurred – that is, there is no strict requirement for a breach to be proven.
The introduction of a mandatory good faith provision between franchisees and franchisors entering into and performing their obligations under franchise agreements has also been predicted by the ACCC to naturally lead to a significant amount of enforcement activity.
4. Competition and consumer issues in the health sector
A new priority introduced into the Policy is increased attention and resources being directed towards the medical and health sector. The ACCC has formulated this as a priority based on the high number of complaints received and allegations made towards stakeholders at all levels of the sector’s chain of supply and service. In particular, the ACCC suspects that competition may be at risk due to attempts to limit access across the market to certain products, patients, procedures and facilities. Another area of concern is the number of claims made against medical professionals for engaging in both unconscionable conduct and misleading and deceptive conduct.
5. Highly concentrated sectors
The prevalence of competition and consumer issues in highly concentrated sectors, such as the fuel and supermarket sectors, are addressed in the Policy. The relatively immaterial penalties imposed as a result of ‘successful prosecutions’ against Coles and Flight Centre in 2014 ($10million for unconscionable conduct and $11million for attempted price-fixing, respectively) when contrasted to the organisations’ revenues are acknowledged by the ACCC as highlighting the need for the ACCC to continue advocating for the courts to impose penalties that are not just seen as ‘simply a cost of doing business’. However the significance of pursuing such large players in dense sectors should create an element of deterrence towards others.
6. Vulnerable consumers
The Policy also lists potential consumer protection issues in respect of certain types of consumers as a priority for 2015. Elderly and indigenous consumers and those consumers who have recently moved or migrated to Australia have been identified in the Policy as vulnerable and the ACCC will look to introduce appropriate initiatives to protect their interests of the vulnerable and ensure they are aware of the rights afforded to them by the ACL and other areas of the law.
7. Repeal of the carbon tax
The ACCC will continue assessing the savings to be spread amongst consumers as a result of the repeal of the carbon tax in 2014, which will culminate in the release of two reports in April and July this year which will outline how the savings are to be passed through to end-consumers.
At a glance – other key activities planned for the year ahead
Whilst not listed in the Policy as priorities for 2015, there are a number of other significant areas to which the ACCC will direct its resources towards in 2015:
Acknowledging concerns amongst the public that privatisation often results in higher prices imposed on them for the services being privatised, the ACCC stated that the ACCC will continue to monitor asset sales and leases proposed by State and Territory governments to ensure that any such privatisation is conducted for the purposes of commercial efficiency (in addition, of course, to fiscal advantages for governments) that will ultimately lead to positive outcomes for consumers.
2. Financial System Inquiry (Murray Report)
Released in December 2014, the final report into the Financial System Inquiry (otherwise known as the ‘Murray Report’) made a number of major recommendations calling for significant reforms to Australia’s financial services industry to improve its overall efficiency and functioning. In respect of competition and consumer issues, the ACCC welcomes recommendations in the Murray Report that would result in greater competitive pressure being placed on the ‘Big Four’ banks currently dominating the banking sector. Pending further investigation, the Policy also indicates that the ACCC would be supportive of any further reform that would lead to the Australian Securities Exchange, currently holding a monopoly over equities clearing, being opened up to competition.
3. Competition Policy Review (‘Harper Competition Review’)
The ACCC is also looking forward to the release of the final report into the Competition Policy Review in just a matter of weeks after being first announced in late 2013. Otherwise known as the ‘Harper Competition Review’ (Review) and being the first of its kind in over 20 years, the Review will deal with removing barriers to competition and implementing or improving corresponding competition laws. The release of the final report and the recommendations contained within it may inevitably lead to further key activities being initiated by the ACCC in 2015.
The ACCC is to be commended for its commitment to releasing this Policy each year. It provides a transparent means by which consumers can be assured that the ACCC is not only responsive to public concerns but also proactive in fulfilling its enforcement responsibilities under the Act. Businesses and other industry stakeholders should also view the Policy as an catalyst to look and reflect on their own activities and operations heading into 2015 to ensure they are not inadvertently engaging in conduct contrary to the Act.
The priorities listed in the Policy are formulated after careful consideration and businesses are to be put on notice as to the ACCC’s enforcement and compliance agenda for the year ahead.