ACCC sets the stage for debate on changes to merger control laws
The Australian Competition and Consumer Commission ("ACCC") has argued for sweeping reforms to impose significantly higher barriers to proposed mergers.
Rod Sims, the Chair of the ACCC, announced the proposals during his speech at the Law Council of Australia's Competition and Consumer Workshop on 27 August 2021.
Mr Sims said that the ACCC has long held concerns that Australia's current merger regime is not 'fit for purpose' and is out of step with most merger regimes internationally. Four key reasons for this were outlined:
- the ACCC must meet a high evidentiary burden to establish that future anti-competitive effects of an acquisition are 'likely';
- the current approach requires courts to focus on the likely state of competition in the future with and without the merger, at the expense of looking at how the acquisition will change the structural conditions for competition today;
- a perception that the merger control regime is skewed towards clearance; and
- insufficient regulation of digital platforms acquiring nascent rivals.
In light of the ACCC's concerns with the current regime, three key features have been put forward for a new merger control regime:
- a new formal merger review process which is mandatory for certain mergers;
- expanding the test for what might constitute an anti-competitive merger; and
- increased scrutiny for acquisitions by large digital platforms.
Unfair contract terms set to become illegal and subject to penalties
The Australian Government treasury released an exposure draft on 23 August 2021 detailing a range of proposed reforms to the unfair contract terms ("UCT") regime, including pecuniary penalties on companies and individuals. If enacted, these reforms will require businesses to closely review their contracts for potential UCTs given the substantial financial penalties associated with getting it wrong.
The UCT regime sits under the Competition and Consumer Act 2010 ("CCA") and is regulated by the ACCC.
The exposure draft aims to strengthen and clarifies the existing UCT regime. The most significant proposal is the introduction of pecuniary penalties. Currently where a term is declared by a court as 'unfair', it will be void and unenforceable. However, under the proposed reforms, breach of the UCT regime could result in fines for companies of up to the greater of AUD 10 million (approximately USD 7 million), three times the value of any benefit from the contravention, or 10% of the annual turnover in the prior 12 months. For individuals, a fine of up to AUD 500,000 (approximately USD 367,000) may be imposed. Separate penalties may also be imposed for each UCT and each time a UCT is relied on or applied.
Other key reforms include:
- significantly expanding the scope for "small business" contracts, including where one party to a standard form contract employs more than 100 employees (currently 20) or has a turnover of greater than AUD 10 million (removing upfront contract value thresholds);
- more flexible remedies available where a term has been declared 'unfair';
- introduction of a rebuttable presumption so that terms will be presumed 'unfair' in certain circumstances; and
- further clarity on what a 'standard form contract' is.
Bathroom brand, Nero Tapware, admits to likely RPM
Nero Bathrooms International Pty Ltd (trading as Nero Tapware) ("Nero") admitted it likely engaged in resale price maintenance ("RPM") by withholding supply of its products to a small retailer that failed to increase its advertised prices of Nero products. Nero admitted to making statements in March 2020 to a retailer that:
- its prices were too low;
- it should not advertise Nero products at a price lower than 15% off the recommended retail price ("RRP"); and
- it should raise its online advertised prices so that those prices were not lower than 15% off the RRP.
On 8 September 2021, Nero provided a court-enforceable undertaking to the ACCC that it will:
- not engage in RPM;
- write to all of its retailers reiterating their freedom to set prices for Nero's products; and
- implement and maintain a practical legal training program for sales staff on the requirements of the Competition and Consumer Act 2010 (Cth), including RPM.
Because RPM is a 'per se' or 'hardcore' contravention under Australian competition law, great care should be taken when discussing pricing with downstream retailers, and when developing a pricing strategy. It is imperative that employees involved in discussions about pricing are adequately trained to identify potential RPM risks and to avoid high-risk communications. While certain pricing strategies are permissible, businesses should be aware of the kinds of communications may fall foul of Australia's RPM laws.
ACCC continues its focus on technology and digital platforms
The ACCC has reiterated the need for additional regulation to address concerns about the dominance of digital platforms.
On 19 August 2021, in a speech to the Global Competition Review Webinar about the ACCC's digital platforms services inquiry report on app marketplaces, the Chair of the ACCC, Rod Sims:
- indicated that further regulation may be needed in addition to enforcement action by competition regulators around the world to address concerns about the dominance of large digital platforms in app market places; and
- emphasised the importance of aligning with competition regulators internationally to address these concerns.
On 28 September 2021, the ACCC published its final report as part of its inquiry into the markets for the supply of ad tech services and ad agency services, which:
- identifies significant competition concerns and likely harms to publishers, advertisers and consumers;
- calls out specific digital platforms with dominant market positions in key sectors of the ad tech supply chain; and
- concludes that enforcement action under Australia's existing competition laws alone is not sufficient to address the competition concerns in this sector and that the ACCC should be given powers to develop specific rules to regulate digital platforms in this space.
On 17 September 2021, it was also announced that Rod Sims was appointed to the International Competition Network ("ICN") as the Vice Chair Digital Co-ordination and Asia-Pacific Liaison. His appointment aligns with the ACCC's advocacy in this space, and may lead to increased focus on digital platforms across the ICN's member agencies.