A longstanding dispute between the ANZ and the ACCC has finally been resolved, with the Federal Court dismissing the allegations of the ACCC in a decision handed down by Justice Dowsett on Monday 18 November 2013.
In 2007 the ACCC accused ANZ of engaging in price fixing behaviour in proceedings launched in the Federal Court. The ACCC’s case was pleaded under the previous price fixing provisions of the Trade Practices Act 1974 (Cth), s. 45A (although the new cartel conduct provisions in the Act, which is now the Competition and Consumer Act 2010, use largely the same wording).
The ACCC’s allegation was that ANZ had committed price fixing in 2004 by seeking to restrict Mortgage Refunds Pty Ltd, an intermediary company that represented mortgage brokers, from providing refunds of more than $600 to customers of its brokers who were successful in obtaining loans from ANZ. The basis of the ACCC argument was that the ANZ was competing with the brokers and Mortgage Refunds in a market the ACCC labelled “loan arrangement services”.
The conduct in question came about when ANZ withdrew its accreditation of Mortgage Refunds for providing large refunds to consumers out of the commission paid to it by ANZ for its involvement in the brokering of their mortgage products. ANZ felt these refunds breached their accreditation agreement by offering inducements to prospective customers. ANZ reinstated the contract on the condition that Mortgage Refunds would cap their refunds at $600, allowing ANZ branches to match the deal by waiving their loan establishment fee.
Were the parties in competition with each other?
Dowsett J’s judgment focused predominantly on the ACCC’s specific pleadings and the particular facts of the case and did not propound much in the way of legal principle.
Central to the decision were the conclusions that the banks did not provide “loan arrangement services” and therefore did not compete in that market, as alleged by the ACCC, and that there was not sufficient rivalry to show that the parties were competitors.
ANZ asserted that it was in the business of selling ANZ loan products, of which Mortgage Refunds and its brokers were merely parts of its various distribution channels. It rejected the ACCC’s argument that its own branches and the ANZ Mortgage group should be treated as separate economic entities.
Dowsett J concluded that ANZ franchises and branches always acted on behalf of ANZ, rather than supplying loan arrangement services independently, and should not be regarded as participants in such a market. Moreover, applying his own form of “desk top” SSNIP test, he concluded that it was unlikely that the services provided by bank branches and in-house lenders were substitutable with those provided by brokers.
The Judge also found that there was little evidence of rivalrous conduct between ANZ’s in-house and other distribution channels and did not accept that in this case ANZ was pursuing “channel neutrality” for an anti-competitive purpose. He was inclined to believe that ANZ was simply trying to keep its own branches and other distributors happy by avoiding conflict between them. His Honour appeared to place some significance on the evidence that ANZ valued brokers as an important distribution channel, supported them and did not expect to diminish the volume of loans that they handled.
Conduct of the case
Dowsett J noted that the ACCC had taken excerpts from ANZ’s documentation as their primary evidence of certain matters, but that the surrounding context of those documents in fact often supported ANZ’s case.
His Honour also disregarded a number of the conclusions drawn by the ACCC’s expert economic witness, on the basis that the industry evidence contradicted, or failed to support, those conclusions. He felt the evidence could be accepted in relation to economic principles, but not with regards to a number of the factual assumptions and conclusions that were adopted.
The proceeding raised previously untested questions about the nature of the relationship between service providers and their selling agents for competition law purposes. The potential implications for such relationships may have been very significant if the ACCC had been successful in this proceeding, as many vertically aligned principal/agent relationships might then be characterised as competitive for those purposes.
However, having been decided on its particular facts and pleadings, this decision provides little guidance on the general question of whether agreements and arrangements between principals and agents can constitute unlawful price fixing.