In our inaugural survey of corporate counsel, competition concerns ranked highly amongst the issues occupying in-house lawyers in their increasingly busy and diverse practices.
In June 2011 Mallesons conducted an online survey of corporate counsel across a wide variety of industries. The survey asked corporate counsel about the issues and challenges they are facing in the current regulatory environment. The results, compiled in the Compass Report released on 26 August 2011, are based on the responses provided by over 370 corporate counsel across more than 20 industries.
Concern around the increasing risk of exposure to regulatory action from the Australian Competition and Consumer Commission (ACCC) was one of the key issues identified by corporate counsel in the Compass survey, along with:
- the expanding role of corporate counsel, including their growing role as strategic advisors to the business on a variety of issues and an emphasis on legal risk management;
- the additional pressures of regulatory and legal developments;
- industry specific regulation and compliance; and
- the need for harmonisation of federal/state and territory laws, and the reduction of red tape.
Of the respondents, 22% rated competition concerns in their top three compliance issues, with 14% specifically nominating ACCC investigations as a top-three issue.
We consider this to reflect both the substantive reforms of recent years, including the introduction of criminal penalties for cartel behaviour, and a heightened awareness of the consequences of breaching competition laws, given recent penalties ($14 million against Cabcharge in 2010, $36 million against Visy and $1.5 million against its CEO in 2007) and damages paid in settlement of class actions ($95 million in the Amcor/Visy cartel class action).
In addition, of those respondents whose organisations had been subject to a regulatory investigation in the last 12 months (40%, rising to 50.7% for ASX 200 companies), 32% were subject to investigation by the ACCC, coming second only to the Australian Securities and Investments Commission.
This is not surprising, and is in line with the most recent enforcement statistics from the ACCC. For example, in the 2010-11 fiscal year, the ACCC issued 268 section 155 notices. Section 155 of the Competition and Consumer Act is the ACCC’s mandatory information-gathering power, giving the ACCC the power to require a person to provide information, documents and/or give evidence under oath or by way of affirmation.
The survey results demonstrated that 14.5% of survey respondents have had a greater focus on compliance in the last three years. However, despite this, of those who were subject to investigation by the ACCC, 38% felt they could have been better prepared for the investigation.
The ACCC also continues to take enforcement action as a result of its investigations into alleged breaches of the competition laws. The ACCC:
- concluded 33 litigation maters during the 2010-11 fiscal year - six in relation to lawful competition and informed markets, 22 in relation to consumer protection and fair trading and five other matters;
- had 40 ongoing litigation matters at the end of the 2010-11 fiscal year - 14 in relation to lawful competition and informed markets, 20 in relation to consumer protection and fair trading and six other matters; and
- accepted 36 enforcement-related court-enforceable undertakings pursuant to section 87B during the 2010-11 fiscal year - 16 in relation to lawful competition and informed markets and 20 in relation to consumer protection and fair trading.
ACCC enforcement is expected to step up a notch further. Shortly after starting as chairman at the ACCC in August 2011, Rod Sims stated in a speech to the Law Council that he intended the ACCC to be strategic and take on more cases where the outcome may be less predictable - commencing proceedings “where we see the wrong but court success is less assured”.
We have already seen this new approach in action, with appeals being lodged against the Metcash decision in September, and the Google Adwords decision earlier this month. In the Metcash instance, the ACCC sought (but was refused) an injunction to prevent Metcash from completing the Acquisition of Franklins while the appeal was conducted.
Sims has also stated that the ACCC will be looking to test the application of section 46, which prohibits misuses of market power, and in a speech at the Melbourne Press Club on 10 October 2011 he pointed to supermarkets, airports, telecoms, electricity and petrol prices as areas of particular interest. He has since stated that the ACCC will actively pursue unconscionable conduct cases.
Sims, in his speech to the Law Council, also suggested that the ACCC will “increasingly assessing whether quick action in applying for interlocutory orders is necessary to stop conduct that is detrimental to consumers or the market.”
The ACCC has also shown a willingness to use its power to issue infringement notices in respect of alleged contraventions of various consumer protection provisions (read more here). Sims has confirmed that the ACCC will continue to make full use of its powers under the Australian Consumer Law, and will provide further guidance as to how and when it will use these relatively new powers.
In addition to considering the prevalence of regulatory action by the ACCC and others, the Compass Report considered counsel’s views on the law reform process, changes to the executive remuneration regime and the impact of the continuous disclosure scheme. If you would like a copy of the Report please click here.
It will be interesting see how the recent change in leadership, and revitalisation of the ACCC’s enforcement agenda, affects the views of corporate counsel, to be reported in next year’s Compass Report.