Competition and consumer laws are, around the world, in a state of flux and re-evaluation. Big questions are being asked about whether critical industries have been allowed to become too concentrated, whether existing legal frameworks are up to the challenges of regulating digital markets prone to oligopoly, and whether the core mission of such laws should be broadened to encompass issues such as employment, security, data privacy and media diversity.
While that introspection occurs, existing laws are already being applied by enforcement agencies including the ACCC to a much broader range of conduct than ever before – creating new, and often under-appreciated, risks for businesses.
Historically, the categories of conduct vulnerable to challenge were predictable. In broad terms, merger enforcement primarily focused on horizontal overlaps, market power enforcement focused on conventional categories of conduct such as predatory pricing, refusals to supply and bundling, and cartel enforcement focused on explicit collusion in relation to the pricing and supply of rivals’ output. In all cases, the focus was on the aggregation or use of economic power in a manner that could (or did) lead to increased prices, lower service levels or reduced output.
Examples of a new, more expansive approach to enforcement include:
- Cartels – As traditional immunity applications decline, regulators are increasingly pursuing less conventional cartel cases. In the US, the antitrust agencies are focused on ‘no poach’ agreements between employers and competition in M&A bid processes – a focus echoed in the ACCC’s litigation against Pacific National and Aurizon. Similarly, the ACCC’s proceedings against ANZ, Deutsche Bank, Citi and various executives relating to the operation of an underwriting syndicate surprised many, but were quickly followed by similar action focused on capital markets activity in the UK.
- Market power – In Europe, significant findings of previously rare ‘exploitative’ abuses of a dominant position (a category of market power misuse not recognised in Australia) have recently been made against Pfizer for excessive pricing and against Facebook for data privacy infringements.
- Mergers – Less conventional theories of harm are being pursued in major merger decisions, for example:
- the testing of ‘common control’ theories relating to co-ordination between competitors arising from cross-shareholdings and directorships held by institutional investors;
- “potential” competition concerns arising from the acquisition of nascent competitors;
- the focus of regulators on the implications of mergers that combine data sets or data capabilities; and
- the US Department of Justice’s failed attempt to block AT&T’s acquisition of Time Warner on the basis of a vertical foreclosure theory.
- Fairness – Laws regarding corporate ethics, whether framed as matters of unconscionability or unfairness, have been a strong focus of the ACCC in recent years. As it has bumped up against the limits of unconscionability, the ACCC has become increasingly vocal in advocating for a further expansion of existing laws voiding unfair contract terms to incorporate prohibitions and the introduction of a wide prohibition on ‘unfair practices’.
- Data issues – In the context of its Digital Platforms Inquiry, the ACCC appears to be intending to pursue consumer protection cases relating to concerns that are fundamentally data privacy issues. The German Facebook decision referenced above is an instance of a competition law contravention said to arise by virtue of a data privacy infraction.
Paired with the above issues are some increased practical risks.
Regulators are increasingly prepared to ‘chance their arm’ and may see a dignified loss in a marginal case as a worthwhile exercise – particularly in sensitive sectors. In Australia, the ACCC is also showing signs of a preference to litigate rather than settle certain cases and to seek fines of a different order of magnitude than it did previously. The prevalence of private damages claims following enforcement action has exploded in Europe (typified by the trucks cartel, in which total claims have been estimated to exceed €150billion), and the arrival of this trend to Australia is a matter of when not if.
The cutting edge of competition and consumer law enforcement has moved markedly in recent years. Large Australian corporates need to rethink the conventional assumptions about their exposure and ensure their compliance programs have kept pace.
A black-letter understanding of the laws will tell only half the story – a deep understanding of both the public policy pressures on an industry and the broader enforcement trends, in Australia and around the world, is critical.