As the price signalling laws move closer to being enacted (at the time of writing the laws had passed the House of Representatives, and were awaiting a third reading in the Senate), it is timely to examine the interaction of the price signalling laws with a fundamental obligation imposed upon listed entities: continuous disclosure.
In Australia, listed entities have continuous disclosure obligations pursuant to the combination of Chapter 6CA of the Corporations Act 2001 and Chapter 3 of the ASX Listing Rules. In essence, once a listed entity becomes aware of any information concerning it that would reasonably be expected to have a material effect on the price or value of its securities, that entity must immediately disclose that information to the ASX.
When details of the proposed price signalling prohibitions were first released, the Government received submissions from various parties regarding the need to include a specific exception for disclosures that occur in compliance with continuous disclosure obligations. Concerns focussed upon the need to ensure that companies could continue to comply with their continuous disclosure obligations (particularly where disclosures relate to pricing, capacity or business strategies).
These submissions were heeded to a degree: a new provision was introduced that provides that the price signalling prohibitions “do not apply to the disclosure of information by a corporation if the disclosure is made for the purpose of complying with Chapter 6CA of the Corporations Act 2001” (see proposed section 44ZZY(6)).
Whilst this exception is useful and needed, it is not a complete solution to the potential price signalling implications of a listed entity complying with its continuous disclosure obligations. Scenarios where a corporation disclosing information regarding pricing, capacity or strategy should be cautious include:
- where pricing information previously disclosed to the ASX pursuant to continuous disclosure obligations is later privately disclosed to competitors. The fact that that information was previously disclosed in line with the continuous disclosure exception (and is public) does not prevent any later disclosure of that information from potentially contravening the price signalling prohibitions;
- where a corporation makes a disclosure pursuant to overseas continuous disclosure obligations. A disclosure of this sort would be subject to the prohibitions on price signalling, particularly where the overseas disclosure is more detailed or in different terms to any ASX disclosure, or where the overseas disclosure precedes the ASX disclosure; and
- where a corporation makes a disclosure in compliance with Australian disclosure obligations other than those referred to in Chapter 6CA of the Corporations Act 2001. The continuous disclosure exception to the price signalling laws only relates to a listed entity’s continuous disclosure obligations under Chapter 6CA of the Corporations Act (though there is also an exception regarding disclosures authorised under Commonwealth, State or Territory laws which may apply in these circumstances).
Disclosures that occur in these circumstances will not always be problematic: a public disclosure is only prohibited under the price signalling provisions where the purpose of the disclosure is to substantially lessen competition in a market.
Ultimately, corporations complying with continuous disclosure obligations (whether under Australian or overseas laws) should be conscious of the soon‑to‑be enacted price signalling laws, confident that the purpose of disclosure is not anti-competitive and satisfied that the disclosure falls within the continuous disclosure exception.