In case you have not had the opportunity to read our latest updates or are otherwise unsure of recent changes in Australian competition and consumer law, we summarise below five topics that should be on your radar.
1. Clarity in pricing
On 25 May of this year, a new section 53C of the Trade Practices Act 1974 (Cth) (Act) (and a new version of its criminal counterpart) came into effect. It was introduced in an attempt to quell the use of component pricing (such as advertising the cost of an international flight but not disclosing, or not prominently disclosing, the associated taxes and charges). A form of component pricing was already prohibited by the Act. However, many felt that there were limits to its ability to prevent certain misleading pricing behaviours. The new law requires corporations to prominently specify, as a single figure, what a consumer must pay to obtain goods or services. The provisions are concerned with business to consumer transactions and do not apply to inter-corporation supplies. However, in certain circumstances they can have a broader application.
A price is generally required to be stated if it can be quantified at the time of the representation. If the price cannot be readily ascertained at the time of the representation, it does not have to be disclosed. To read more about the new law, please refer to our recent article by clicking here. The ACCC has also released guidelines to assist businesses to comply with the new requirements which are available on its website at http://www.accc.gov.au/content/index.phtml/itemId/816199.
2. Prohibition against below cost pricing
Section 46 of the Act has been modified on two occasions in the past 18 months in an attempt to deal expressly with behaviour known as “predatory pricing”. Section 46 prohibits a corporation from engaging in below cost pricing for a “sustained period” if it engages in that conduct for the purpose of eliminating or substantially damaging a competitor or from preventing the entry of a person from entering or engaging in competitive conduct in a market.
There has been some difficulty expressed about the manner in which the below cost pricing provisions interact with the existing provisions of section 46 which have always centred around a threshold concept requiring a corporation to have a “substantial degree of power” in a market. The concept of “substantial share” of a market was incorporated in the first tranche of amendments to section 46 (known as the Birdsville Amendments). Following a conclusion that this concept was uncertain and difficult to reconcile against the existing (and judicially considered) concept of “market power”, a subsequent amendment was proposed to deal with this inconsistency. However, the current Government was unsuccessful in dismantling the Birdsville Amendments from section 46, the result being that the section is now extremely complex and is likely to continue to create uncertainty for business.
To read more about the current form of the prohibition against predatory pricing, please refer to our recent article by clicking here.
3. New Merger Guidelines
At the end of 2008, the ACCC updated its Merger Guidelines. The Merger Guidelines provide parties with an indication of the framework and considerations that come into play when the ACCC considers whether to approve a merger and, in particular, the likely effects of a merger on competition in a market. The key differences between the new Merger Guidelines and its predecessor are that:
- the ‘safe harbour’ thresholds contained in the previous Merger Guidelines have been eliminated meaning that a party can no longer rely on them in determining whether it is necessary to seek merger clearance from the ACCC. Instead, they indicate that a party should generally notify a pending merger where the products of the merger parties are either substitutes or complements or the merged firm will have a market share exceeding 20%;
- there is a new protocol for assessing market concentration before and after the proposed merger through the use of a tool known as the Herfindahl-Hirschman Index;
- there has been an expression of preference for the use of divestiture undertakings for international mergers in order to permit the proposed merger to satisfy the competition test; and
- they confirm that the ACCC intends to subject mergers to closer scrutiny through the greater use of company documents such as board papers and the use of its information-gathering powers.
To read more about the new Merger Guidelines, please refer to our recent article by clicking here .
4. The criminalisation of cartel conduct
A bill to criminalise cartel conduct was passed by Parliament on 16 June 2009. Under the legislation, a corporation that engages in price fixing or bid rigging, that restricts output or allocates customers, suppliers or territories could face criminal sanctions. It is intended that a criminal prosecution will be pursued in cases involving serious or hard core cartel conduct. Individuals could face imprisonment for up to ten years and/or fines up to $220,000 per contravention. Corporations could be subject to a fine up to the greater of $10,000,000, three times the total value of the benefits obtained attributable to the contravention or, where the gain cannot be estimated, 10% of the corporate group’s annual turnover.
Civil provisions that prohibit the same conduct will co-exist with the criminal provisions and will carry with them civil penalties for breach. These are available to the ACCC as an alternative to pursuing the criminal route. However, the ACCC has indicated that whenever possible, it intends that serious cartel conduct be prosecuted criminally. Unsurprisingly, there are some concerns about how the legislation will operate, how, in practice, distinctions will be drawn and decisions made by the ACCC as to whether to pursue a criminal prosecution, how the ACCC and the Commonwealth Director of Public Prosecutions will interact and how the ACCC will use other investigative powers available to it (which include telephone interception and surveillance and search warrants).
5. A National Consumer Law
In an effort to harmonise the consumer law regimes that currently differ between Australian jurisdictions, the Council of Australian Governments has released a consultation paper detailing a reform proposal. In its current form, it is possible that the new law will extend beyond the reach of current consumer protection laws by extending the definition of “consumer” and by introducing a prohibition against the use of “unfair” contractual terms in consumer contracts to standard form contracts entered into by businesses. Submissions on the consultation paper closed in March 2009. Likely to follow will be further consultation on an exposure draft of the new law. It is expected that it will still be some time before the form of the new law is finalised and the transition to it can proceed. To read more about the National Consumer Law, please refer to our recent article by clicking here.