- The Government has reintroduced a Bill to address so-called ‘creeping acquisitions’.
- The Bill also clarifies the scope of the statutory rules on unconscionable conduct.
- The ‘price signalling’ Bill is also progressing through Parliament.
On 17 August 2011, the Competition and Consumer Legislation Amendment Bill 2011 (Bill) was passed by the House of Representatives. The Bill is now before the Senate and likely to become law later this year. The Bill was first introduced into parliament in 2010, but lapsed after the government called the election.
The Bill proposes to amend the merger provisions of the Competition and Consumer Act 2010 (Cth) (CCA) to address the issue of ‘creeping acquisitions’ and enhance and simplify the unconscionable conduct provisions of the CCA and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
‘Creeping acquisitions’ are a series of small-scale acquisitions that although individually do not substantially lessen competition in contravention of section 50 of the CCA, may collectively have that affect. Concerns about creeping acquisitions have been raised in recent years in relation to the Australian grocery sector. These amendments were discussed in more detail when first introduced in our June 2010 article ‘Creeping acquisitions: a non-solution in search of a non-problem?’1
The Bill proposes to:
- replace references to ‘a market’ in subsections 50(1) and (2) with ‘any market’, and
- remove from the definition of market in subsection 50(6), the requirement that the market be ‘substantial’.
The proposed amendments are intended ensure that section 50 applies to acquisitions in local markets and that the impact of the acquisition on competition can be considered in any market, including upstream and downstream markets. In this regard, the proposed amendments simply confirm the Australian Competition and Consumer Commission’s (ACCC) current approach to merger review.
However the amendments do not actually appear to address the so-called problem with creeping acquisitions. The Bill confines the focus of section 50 to a single acquisition and does not allow the ACCC to consider the cumulative effect of a series of acquisitions.
The Bill proposes to make two significant amendments to the prohibition against unconscionable conduct contained in connection with goods or services contained in the Australian Consumer Law and the ASIC Act.
The Bill will introduce interpretative principles which clarify the intended application of the prohibition and address concerns that it has been applied too narrowly by the courts.
The interpretative principles clarify that:
- conduct which is, in all the circumstances, unconscionable is not limited by the unwritten law (thus confirming that the scope of the statutory protection extends beyond equitable doctrines of unconscionable conduct or that involve unconscionability as an element),
- systems of conduct and patterns of behaviour over a period of time can be unconscionable, whether or not a particular individual disadvantaged by the conduct is identified, and
- in considering whether conduct which relates to a contract is unconscionable, a Court may examine the contract’s terms and the extent to which it has been carried out (confirming that unconscionable conduct is not limited to a party’s bargaining practices prior to entering a contract).
The Bill will also remove the current distinction between unconscionable conduct that affects businesses and that which affects consumers, thereby eliminating the potential for diverging meanings to develop. Currently the CCA and ASIC Act contain separate prohibitions for unconscionable conduct in the context of consumer and business transactions, and provide separate factors that a court may have regard to in determining whether there has been a contravention. The Bill will rationalise the law into a single prohibition containing a single set of factors for a court to consider.
Meanwhile, the separate bill relating to price signalling, (discussed in our earlier articles in March 2011, ‘Government releases Price Signalling Bill’2 and July 2011, ‘Price signalling bill passes Lower House, with new amendments’3), has now been introduced in the Senate, the next step in the legislative process. While this bill has attracted some controversy, it appears to have political momentum.
Although the Bill may not significantly amend the existing law, it is a helpful reminder of the potential breadth of the CCA. You should continue to keep competition laws in mind:
- when considering even minor acquisitions, it may be appropriate to consider a courtesy contact to the ACCC, and
- especially in dealings with consumers or small business, the unconscionable conduct provisions are just one of a number of consumer protection provisions contained in the Australian Consumer Law.