Enforcement proceedings in dominance in Australia

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The ACCC is responsible for investigating and prosecuting civil contraventions of the CCA. It has extensive powers of investigation under Part XID of the CCA. These powers include:

• the power to compel the production of information and documents that relate to the alleged contravention;
• the power to compel particular persons to appear before the ACCC and provide oral or written evidence under oath; and
• the power to enter and search premises either with consent or pursuant to a warrant. While on the premises, the ACCC can ask questions of the occupants, make copies of material or seize relevant material (including electronic material).

The majority of prohibitions, including the prohibition on misuse of market power, are subject to judicial enforcement.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

For a contravention of section 46, the following sanctions and remedies may be imposed by the Federal Court:

• a declaration that the conduct contravenes the CCA;
• an injunction restraining the parties from engaging in the conduct or a mandatory order that a person engage in particular conduct;
• an order disqualifying a person from managing a corporation;
• an order for damages for those who have suffered loss or damage from the conduct including individuals; and
• ancillary orders.

Only the ACCC may seek pecuniary penalties. The maximum penalty for each contravention by a corporation of section 46 is the greater of the following:

• A$10 million;
• when the value of the benefit from the conduct is ascertainable, three times the value of the benefit that is reasonably attributable to the conduct; or
• when the value of the benefit from conduct is unascertainable, 10 per cent of the annual turnover of the body corporate and its related bodies corporates in the 12 months preceding the conduct.

For individuals, the maximum penalty is A$500,000. In rare circumstances, an individual may be liable as an accessory under section 75B of the CCA, if they have aided or abetted, or been knowingly concerned in, a contravention of section 46.

To assess the size of the penalty to be imposed, the court generally considers a number of factors, including the conduct, the loss or damage caused, the size of the company and the market, the degree of power and whether the conduct was deliberate.

To date, the highest penalty that has been imposed for a breach of section 46 is A$14 million, which was imposed in the ACCC’s proceedings against Cabcharge (see question 29).

In addition to the sanctions and remedies mentioned above, the court may accept undertakings from parties that they will not engage in particular conduct. The ACCC may also accept court-enforceable undertakings under section 87B of the CCA.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

As noted in question 26, the ACCC has extensive powers of investigation. However, the ACCC does not have the power to determine whether section 46 has been contravened or to impose penalties. Rather, the ACCC must institute proceedings in the Federal Court of Australia for an alleged contravention and seek remedies. As noted in question 27, those remedies may include a pecuniary penalty, as well as declarations and injunctions.

What is the recent enforcement record in your jurisdiction?

The ACCC receives thousands of complaints annually regarding conduct potentially in breach of Part IV of the CCA. These would include complaints relating to alleged misuse of market power under section 46 of the CCA. While the ACCC would be likely to investigate some of these complaints on a confidential basis, very few cases proceed to court, and of those that do, many cases settle. The section 46 cases that do proceed to a court hearing often take years to resolve. In the past five years, the ACCC has commenced a number of proceedings alleging contraventions of section 46 (among others) with limited success. As at the date of writing, no cases have been initiated by the ACCC under the new section 46 prohibition that came into effect on 6 November 2017. The cases referred to below were all brought under the previous prohibition. However, ACCC chair Rod Sims has stated publicly that the ACCC will commence its first action under new section 46 in 2019.

On 1 May 2017, the ACCC instituted proceedings against private hospital operator Ramsay Health Care Australia for allegedly misusing its market power by making threats to reduce a group of surgeons’ access to the only private hospital and private day surgery facilities in the Coffs Harbour region if they were involved in establishing a competing private day surgery facility in Coffs Harbour. The ACCC alleged that Ramsay engaged in this conduct to deter or prevent new entry in the day surgery market in the region or to substantially lessen competition in that market. As at the time of writing, a trial has been set down for three weeks, commencing on 25 February 2019.

On 13 February 2014, the ACCC instituted proceedings in the Federal Court of Australia against Pfizer Australia Pty Ltd (Pfizer) for alleged misuse of market power and anticompetitive exclusive dealing in relation to the supply of its branded and generic atorvastatin medicines to pharmacies. Atorvastatin is a pharmaceutical drug used to lower cholesterol and at the time of the alleged conduct was the highest selling drug in Australia. The ACCC sought pecuniary penalties, declarations and costs. Part of the ACCC’s case was that prior to the expiration of Pfizer’s patent, Pfizer offered pharmacies discounts if they purchased significant volumes of Pfizer’s branded atorvastatin product (Lipitor) and its own generic atorvastatin, for the purpose of preventing generic companies for competing with Pfizer. The Federal Court handed down judgment on 25 February 2015 (ACCC v Pfizer (2015)) and found that although the patent had not yet expired, Pfizer’s market power was no longer substantial at the time it made the offers to pharmacies in January 2012 owing to the imminent entry of a significant number of generic competitors. The ACCC also failed to establish that Pfizer had a proscribed anticompetitive purpose. The ACCC appealed. In a judgment handed down on 25 May 2018, the Full Court of the Federal Court found that Pfizer did have market power in the lead up to expiry of its patent, and had taken advantage of that market power, but affirmed the trial judge’s findings that at no time did Pfizer have an anticompetitive purpose. The appeal was, therefore, dismissed. The ACCC then sought special leave to appeal the findings to the High Court, for which application was refused on 19 October 2018.

On 4 February 2013, the ACCC instituted proceedings against Visa Inc alleging, among other things, a misuse of market power in relation to payments systems to prevent competition in relation to direct currency conversion services that might otherwise be offered at point of sale or at ATMs, as well as anticompetitive exclusive dealing. The proceedings were settled on 4 September 2015, with Visa admitting a contravention of section 47 of the CCA (exclusive dealing with the likely effect of substantially lessening competition in the market in Australia for currency conversion services on the Visa network). Visa paid an A$18 million penalty and A$2 million in respect of the ACCC’s legal costs (ACCC v Visa (2015)). Visa did not admit the misuse of market power allegation under section 46 and the ACCC agreed not to pursue the claim as part of the settlement.

The ACCC settled two other section 46 cases before the substantive proceedings were heard by the Federal Court. In ACCC v Ticketek Pty Ltd (2011), the penalties totalled A$2.5 million, and in ACCC v Cabcharge Australia Ltd (2010), the penalties totalled A$14 million (including A$3 million for Cabcharge’s admitted predatory pricing and A$11 million for admissions in relation to refusals to supply in breach of section 46).

In ACCC v Cement Australia Pty Ltd & Others (2013), which was initiated by the ACCC in 2008 and heard by the Federal Court in 2010-2011, the court found that Cement Australia did not contravene section 46. While Justice Greenwood found that Cement Australia had market power in the South East Queensland fly ash market, his Honour held that Cement Australia did not take advantage of its market power in entering the sourcing contracts, because another corporation in Cement Australia’s position, but in a workably competitive market, could have entered into the contract on those same terms and conditions.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Where the court has found a contravention of section 46 or 46A, contracts entered into will not automatically lose their validity. However, the court has discretion to make ancillary orders, including that contracts entered into are void (in whole or in part) or must be varied.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private litigants can institute proceedings for a contravention of section 46. Private litigants are able to seek the same remedies and orders as the ACCC can seek, except for pecuniary penalties (see questions 32 and 34). Private litigants may proceed as a class action (representative proceedings) in appropriate circumstances.

While the new section 46 has not yet been tested substantively in court, in Unlockd Limited v Google Asia Pacific Pte Limited (2018), Unlockd obtained interim injunctive relief in a claim alleging a contravention of section 46. Unlockd, an advertising technology start-up, commenced proceedings against Google in May 2018, alleging (in part) that a threat by Google to ban the Unlockd application from its Google Play Store constituted a misuse of market power. The court made interim orders preventing Google from proceeding with the ban, noting that the likely effect of excluding Unlockd from distributing its app through the Google Play Store would be that the Unlockd business would cease to exist. Subsequently, Unlockd entered voluntary administration, blaming the legal dispute with Google, and thereafter, the liquidators discontinued the action against Google.

In terms of refusal to supply and refusal of access, there are clear precedents that this conduct could constitute a misuse of market power (see Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) and NT Power Generation Pty Ltd v Power & Water Authority (2004)). Private litigants can, therefore, bring an action in these circumstances. Moreover, as noted above, Part IIIA provides a regime by which third parties can seek access to infrastructure owned by another.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Private litigants may institute proceedings seeking damages arising for loss or damage suffered as a result of a contravention of section 46 (section 82). Actions for damages under the CCA must be brought within six years of the accrual of the cause of action (section 82(2)).

Under section 87(1B), the ACCC can bring an action on behalf of people who have suffered damage or loss. Alternatively, a class action can be brought by seven or more persons who have similar claims for damages arising from a breach of section 46 (see section 33C(1) of the Federal Court of Australia Act 1976 (Cth)).

Section 82 does not provide express guidance to the court in assessing the amount of any loss or damage suffered by a company. In Kizbeau Pty Ltd v WG & B Pty Ltd (1995), the High Court suggested that the rules for assessing damages in tort are the appropriate guide in most, if not in all, cases. However, it has also been recognised that the statutory right to damages conferred by section 82 serves a wider purpose and is intended to have a broader ambit than a common law action.

As mentioned in question 29, the ACCC tends to settle most section 46 cases. The two most recent cases that involved settlement in relation to contraventions of section 46 are ACCC v Ticketek Pty Ltd (2011) and ACCC v Cabcharge Australia Ltd (2010). In the penalty judgment for ACCC v Ticketek Pty Ltd (2011), Justice Bennett stated that the agreed figure was ‘meaningful and substantial, serving the objects of general and specific deterrence and serving the public interest in encouraging the cooperation of parties the subject of Part IV investigation and litigation’.

To what court may authority decisions finding an abuse be appealed?

The ACCC does not have the power to determine whether there has been a contravention of section 46 or impose penalties. Rather, a finding of a misuse of market power can only be made by the Federal Court. The Federal Court hears the matter at first instance and its decision may be appealed to the Full Federal Court on a question of law. A decision of the Full Federal Court may also be appealed to the High Court, with leave.