The Government yesterday introduced its new laws to outlaw price signalling practices and other information disclosures into Parliament. The Competition and Consumer Amendment Bill (No. 1) 2011 (Bill) retains the key prohibitions proposed in the Exposure Draft but contains some important amendments.
Click here to download our marked-up version of the Exposure Draft showing the amendments made in the Bill.
Key Features of the Bill
The key features and concerns in relation to the Government's proposed measures are discussed in our previous publication in the context of the Exposure Draft on the Bill.
Despite strong opposition from business and industry in submissions to the Treasury, the Bill maintains the:
- unilateral nature of the prohibitions;
- restricted application of the measures to prescribed classes of goods and services; and
- per se character of the private disclosure prohibition to competitors.
The main differences between the Bill and the Exposure Draft are as follows:
The Bill proposes to extend the existing notification regime operating under the Competition and Consumer Act 2010 (Cth) (CCA) (previously the Trade Practices Act 1974) to conduct that would otherwise breach the per se prohibition. Under current regulations, this means that any proposed private disclosures to competitors which are notified to the Australian Competition and Consumer Commission (ACCC) will be afforded immunity under a 14-day timeframe unless the ACCC formally objects to the conduct described in the notification. However, the Explanatory Memorandum to the Bill states that the "[e]xisting regulations will be amended to establish the requirements for the new notices".
The ACCC will assess notifications in relation to private disclosures by applying a public benefits and detriments test. A notification will be allowed to stand unless ACCC is satisfied that the likely benefit to the public from the notified conduct would not outweigh any likely resulting detriment. Significantly, the ACCC may revoke the immunity afforded by a notification at a later stage if it is satisfied that the likely public benefit from the conduct will not outweigh the likely detriment to the public.
A number of exceptions have been added to the Bill, which apply to both the per se prohibition and the general prohibition subject to a substantial lessening of competition test:
Disclosures covered by standing notifications and authorisations
New exceptions apply to disclosures of information that fall within conduct already authorised by, or notified to, the ACCC. A party that has obtained authorisation from, or validly notified, the ACCC in relation to certain specified conduct will therefore be able to rely on the exception where the party makes a disclosure in relation to the authorised or notified conduct.
- Conduct authorised by the ACCC – Information that has been disclosed in the course of engaging in conduct that has been authorised by the ACCC will be exempt. For example, this would mean that a party who has obtained authorisation from the ACCC in relation to certain conduct prior to enactment of the Bill, will still be able to disclose information so long as such disclosures are made in the course of engaging in that authorised conduct.
- Conduct notified to the ACCC – Disclosures that fall within the description of conduct notified to the ACCC will also be exempt. For example, section 93 of the CCA currently provides that notifications may be granted by the ACCC in relation to exclusive dealing conduct under section 47 of the CCA. So, if a disclosure relates to exclusive dealing conduct notified to the ACCC, the disclosure will be exempt from the prohibitions under the Bill.
- Collective bargaining conduct notified to the ACCC – A separate exception applies to disclosures made to contracting parties of a collective bargaining arrangement that is subject to a standing notification. The information disclosed must have been required by the collective bargaining agreement, or must have been made in the course of negotiations for a proposed agreement.
Disclosures in compliance with continuous disclosure requirements
A separate exception now applies to disclosures made for the purpose of complying with the continuous disclosure provisions under Chapter 6CA of the Corporations Act 2001 (Cth). The additional exception appears to address the significant concerns raised in submissions to Treasury that the exception in relation to disclosures "authorised by law" did not sufficiently capture these disclosure requirements.
Exceptions that have been modified and which only apply to the per se prohibition include:
Disclosures to acquirers or suppliers of goods or services
The modified exception is cast more broadly to capture a wider range of vertical arrangements and distribution models by removing the requirement that disclosures to recipients must have been made for the "purpose of re-supply" (as worded in the Exposure Draft). The exception now only requires that the information disclosed is related to the goods and services acquired from or supplied to a recipient.
Disclosures related to established or proposed joint ventures
The joint venture exception under the Bill has been modified to cover both disclosures made for the purpose of the joint venture as well as those made in the course of negotiation of the joint venture. A corporation proposing to enter into a joint venture will therefore be able to disclose price-related information to any proposed joint venture participants. The exception however only applies to joint ventures or proposed joint ventures for the production or supply of goods or services, excluding joint ventures for the acquisition of goods or services.
Other changes made to the Bill include clarifying the status of a disclosure where there is an agency arrangement between the disclosing corporation and the recipient as well as clarifying the anti-avoidance provision in relation to disclosures made through intermediaries:
- Own agency arrangements – Disclosures made by a corporation to a person acting as an agent of the corporation will be disregarded, provided the disclosure is not made with the purpose of the agent acting as an intermediary by disclosing the information to others.
- Anti-avoidance through intermediary – A corporation will only be taken to have made a disclosure to its competitors through an intermediary where it directed or requested the intermediary to disclose the information for the purpose of anti-avoidance. The intermediary must have also disclosed the information for that purpose.
The extension of the existing notification regime to the per se prohibition appears to be an implicit acknowledgment that many legitimate business practices may not fall within the exceptions, even as extended and modified. It is unlikely, for instance, that collaborative activities such as corporate restructuring and workout arrangements will satisfy the joint venture exception. Businesses will therefore have to rely on the notification process, or alternatively seek authorisation, to obtain immunity for any legitimate practices that may otherwise contravene the prohibitions and do not fall within any of the exceptions.
However, the notification process will impose a significant regulatory burden on businesses preparing a notification as parties will need to assess risk and seek advice, which may include detailed evidence to demonstrate how the public benefits of the notified conduct will outweigh any detriments. In addition, immunity from legal action will not extend to any conduct engaged in before a notification takes effect, and even where the proposed conduct is successfully notified, significant uncertainty remains as the ACCC may at any time revoke the standing notification.
The Senate Economics References Committee is due to release its report on its inquiry into banking competition by 27 April 2011 (extended deadline). The inquiry extensively assessed the package of measures released by the Government aimed at increasing competition in banking, which the Bill formed part of.
Public hearings by the House of Representatives Standing Committee on Economics into the Coalition's Competition and Consumer (Price Signalling) Amendment Bill 2010 concluded on 18 February. The Committee is now due to release its final report by 30 May 2011.