A lot can happen in a year.
In his first year as Chairman of the Australian Competition and Consumer Commission (ACCC), Mr Rod Sims’ articulation of the ACCC’s policy agenda indicates a more pro-active role for the regulator. Mr Sims has identified the ACCC’s role as “making markets work for consumers now and in the future”, including through maintaining and promoting competition and fixing market failures.
Mr Sims’ involvement with competition law harks back to his days as Deputy Secretary of the Commonwealth Department of Prime Minister and Cabinet as a key participant in the Hilmer reforms of competition policy. Together with his experience as a corporate strategy consultant, he draws from those experiences a more general view of using competition law to reshape markets to secure improved consumer outcomes. This update is an overview of the implementation of Mr Sims’ agenda in his first year in office.
Shortly after taking office, Mr Sims laid out a bold agenda for the ACCC and his vision for his role:
- the ACCC will sometimes take on cases where the outcome is less predictable and less certain. That is, it will “back its judgment” and will seek to enforce the law where the ACCC sees what it believes to be a breach of the Competition and Consumer Act 2010 (Cth) (CCA);
- if, after litigating and gaining clarification on issues by the courts, the ACCC sees issues that require a policy or legislative response or change, it will advocate publicly for such a response;
- the ACCC will be a “noisy proponent” of the view that carefully thought-out competition policy provides benefits for consumers and society overall, and that in considering policies, the question to ask is whether proposed changes will promote increased competition and appropriate behavioural incentives; and
- the ACCC will employ effective communication so people can know what the ACCC is doing, what it is not doing, and why.
Mr Sims has identified that the ACCC will focus on the following sectors: telecommunications, energy, retail petrol, supermarkets and liquor, the digital and online economy, banking and small retail acquisitions. In this context, Mr Sims has set out the following enforcement objectives:
- maintaining or enhancing competition in concentrated markets;
- invigorating the debate on the effective regulation of monopolies;
- increasing the ACCC’s engagement internationally, including with its counterparts in developed economies and developing countries (particularly within the Asia-Pacific region);
- making full use of the changes in the Australian Consumer Law; and
- particularly focussing on vulnerable consumers (eg elderly and Indigenous consumers).
Consistent with this agenda, the ACCC has been an active regulator over the last year and has made reference to broader policy objectives and principles in explaining its reasons for undertaking proceedings. For example:
- in deciding to appeal the Federal Court’s decision in ACCC v Metcash, the ACCC explained that it had done so because of the adverse effect of the proposed acquisition on competition, and because if left unchallenged, the Federal Court’s interpretation of fundamental principles could have “serious implications for the ACCC’s ability to block anti-competitive mergers and so protect consumers in the future”;
- in relation to the ongoing Google litigation (currently on appeal to the High Court), Mr Sims stated that “the role of search engine providers as publishers of paid content needs to be closely examined in the online age” and that it is “very important that the law in this area is clarified and fully understood”; and
- in February of this year, possibly the most significant competition restructuring in Australia occurred; the ACCC accepted Telstra’s structural separation and migration plan that put in place arrangements for the migration of its services from its fixed line access networks to the NBN, with a key principle being “equivalent and effective access” by Telstra’s competitors to Telstra’s wholesale services. The NBN Co-Optus deal to decommission the Optus HFC network also was authorised. Although the agreement sees the exit of a facilities-based competitor, the ACCC focused on the bigger picture of facilitating the fundamental restructuring of the industry (in particular Telstra’s structural separation) through the NBN project. Mr Sims has indicated that ensuring “these arrangements work in ways that promote competition” is a “key focus area” for the ACCC.
The ACCC has also highlighted its increased interaction and engagement with competition agencies in other jurisdictions, and an even greater level of coordination and cooperation with those other competition agencies. Exchanging information about conduct that may have an effect in multiple jurisdictions is increasingly likely.
Set out below is a snapshot of some key matters that the ACCC is undertaking:
- criminal cartel conduct investigations – although there have been no prosecutions under the cartel conduct provisions implemented in 2009, Mr Sims has stated that the ACCC “currently has a number of important cartel investigations underway, including cartels that potentially involve criminal conduct”;
- proceedings involving the digital/online economy – Mr Sims has observed that “the online economy poses the biggest regulatory challenge in a generation” and that “online technology is revolutionising competitive dynamics”. The ACCC’s key challenges are ensuring that consumers enjoy the same protections in the digital/online economy as they do elsewhere, and preventing incumbents from misusing their market power against the many new and innovative competitors that will emerge from the digital/online economy. Significant proceedings in this sector include those against Google, Apple, ANZ, Flight Centre and Ticketek;
- petrol retailing investigation – the ACCC is concerned that petrol price sharing arrangements between major petrol retailers allow them to signal price information, monitor competitors’ responses and react to them. It sees this issue as being of significant public interest and is willing to undertake this investigation even though it “will not be straight forward or free from challenge”; and
- small retail acquisitions – the ACCC has been “paying increased attention to incremental acquisitions” such that further acquisitions do not “ultimately lead to retail or… wholesale industry structures that may adversely affect the competitiveness of these markets or reduce choice for customers”. Examples include the ongoing assessment of a number of proposed small retail acquisitions of hotels and liquor stores in NSW by major supermarket chains, a number of hardware stores in Ballarat and two supermarkets in Western Australia.
The ACCC’s recent track record in relation to merger review is addressed in a separate, forthcoming, update.
What does this mean for businesses?
We anticipate that the ACCC will continue to advance the clearly articulated policy agenda that Sims has outlined. This will involve detailed investigations, often broader in scope and conducted with a greater degree of public transparency than business historically may have experienced. Arising out of these investigations, we expect the ACCC to commence a number of complex cases consistent with its policy objectives, even where the likelihood of success may be uncertain. More than ever, it is imperative to ensure rigorous strategies are in place for managing competition law compliance risk.