Consumables is LegalVision’s weekly update on all things competition and consumer law. The update follows the activities of the national regulator, the Australian Competition and Consumer Commission (ACCC) – and keeps you informed about key developments relating to the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL).
The ACCC’s media team was working hard this week, sending out ten press releases covering a broad range of competition and consumer law topics. Some highlights from a busy week:
- A multi-national shipping company pleaded guilty to the first-ever criminal cartel charges brought under the CCA;
- A cinema chain was fined for failing to show online booking fees in the total price for movie tickets;
- The ACCC approved undertakings that clear the way for Metcash’s bid to purchase Home Timber & Hardware from Woolworths; and
- The regulator warned businesses in the agricultural industry to make sure their houses are in order before the unfair contract term protections are extended in November.
The biggest news this week came from the Federal Court where a multi-national shipping company pleaded guilty to cartel conduct. This case is a milestone because it is the first criminal cartel prosecution under the CCA.
As we’ve said before, the golden rule of competition law is that competitors must act independently. When competitors make key business decisions in concert, this is known as cartel conduct. Common examples of cartel conduct include fixing prices for competing products and services or agreeing to split markets between competitors.
The CCA contains two categories of prohibitions against cartels: civil penalty provisions and criminal offences. The main difference between these categories is that the criminal offences include a fault element – that the company in question had knowledge of, or a belief about, the cartel conduct.
In this case, the ACCC had been investigating rumours about coordinated conduct among businesses transporting vehicles to Australia between 2009 and 2012. For a civil penalty case, the regulator will handle the court action itself. But where the ACCC thinks there are signs of criminal conduct, it makes a referral to the Commonwealth Director of Public Prosecutions.
The company at the centre of this case is Nippon Yusen Kabushiki Kaisha (NYKK), which has offices across the world and over 30,000 staff. But, as the saying goes, “it takes more than one company to commit cartel conduct” – and the regulator continues its investigation into other members of the alleged vehicle transportation racket.
The ACCC also operates an immunity policy to encourage businesses to come forward about cartel conduct.
The ACCC kept its comments on this matter brief, as the criminal proceedings are still on foot. But NYKK could face maximum penalties of $10 million, three times the total value that can be attributed to its cartel behaviour or 10 percent of its annual turnover in the year leading up to the offence.
In other cartel news this week, the Federal Court handed down a decision in civil penalty proceedings relating to the Australian market for high voltage cables. This decision is the latest instalment in ACCC litigation against participants in the alleged cartel. Back in 2013, the Federal Court dished out a hefty penalty of $1.35 million to a Japanese company for its involvement in the cartel. That company had admitted its sins and made joint submissions with the regulator.
In this recent decision, the Federal Court agreed with the ACCC’s claims against an Italian company but decided that the regulator hadn’t made good on its case against a French company. The Court will determine the fate of the Italian company at a later hearing.
Movie Ticket Pricing
This week’s infringement notice award goes to Palace Cinemas, for failing to display a clear total price for online ticket purchases. Consumables hasn’t yet had an opportunity to discuss the total minimum price rule in its weekly updates – but we have previously written about how the rule can cause issues for café menus.
A quick summary of the rule: section 48 of the ACL prohibits a business from making a representation about a part or component of the price for goods or services, unless the business also prominently specifies the total minimum price for the goods or services.
Many goods and services we purchase have various components beyond the main price – such as taxes, installation fees and other costs. In this case, the ACCC was concerned that Palace was not properly disclosing the total price of its online tickets because it was failing to include a mandatory booking fee component.
This outcome is the result of a wider project by the regulator to clean up pricing for online movie tickets. So next time you are booking movie tickets on your computer, you can thank the ACCC for the seamless process and transparent pricing information.
Consumables have previously reported on Metcash’s bid to scoop up the Home Timber & Hardware business from Woolworths. That bid became even stronger this week after the regulator decided not to oppose the transaction on the basis of undertakings put forward by Metcash.
ACCC Chair, Rod Sims, said the decision was “finely balanced”. But in the end, the ACCC was comfortable that the undertakings would sufficiently protect independent retailers from the prospect of Metcash wielding its power as the only full-service hardware wholesaler. The ACCC was also satisfied that the might of Bunnings in the retail market would provide an indirect constraint on Metcash’s wholesale activities. In the ACCC’s view, the undertakings also leave space for a new wholesaler to enter the market.
This development makes it very likely that the transaction will go ahead. But if Metcash doesn’t adhere to its undertaking down the track, the ACCC can take court action to pull Metcash into line or seek compensation for its breaches.
Unfair Contracts for Farmers
Since it came into force, the ACL has contained provisions dealing with unfair contract terms. These provisions have protected consumers entering into standard form contracts with businesses in various industries – like airlines, mobile service providers, gyms and car rental agencies.
But last year, the government passed legislation extending the unfair contract terms protections to small businesses. These reforms will come into operation in November – and we have previously explored how they might affect the franchise industry.
This week, the ACCC was warning businesses in the agricultural sector to prepare for the new laws by reviewing their standard form contracts with small businesses.
As the ACCC observed, the agricultural industry is particularly prone to power imbalances in the supply chain. The extension of the unfair contract terms protections will hopefully give smaller businesses – like independent farmers – a better chance when dealing with larger corporations.
To help spread the work about the new laws, the ACCC has put together some educational videos. The ACCC’s particular focus on how these reforms will affect farmers follows closely after the regulator published a guide about collective bargaining that was also pitched at farmers. Both initiatives reflect the ACCC’s recent priority on competition and consumer issues in the agricultural sector.
Dysfunctional Medical Treatments
Finally this week, the Full Federal Court has handed down the latest chapter in the Advanced Medical Institute (AMI) saga.
AMI supplies products and services directed at men with sexual dysfunction issues. In 2010, the ACCC brought proceedings against the company and its director – and in 2015, the Federal Court made findings of unconscionable conduct.
AMI appealed, arguing that the primary judge’s fact finding went overboard and was not supported by evidence. AMI also felt that the relief granted against it was unwarranted. The business was particularly concerned about an order that prevented it from making statements to patients about the utility of its treatments.
AMI’s appeal was wholly unsuccessful. The Full Court considered that the ongoing restraint on statements about the treatments was justified to protect vulnerable consumers from unconscionable conduct.
As noted above, the regulator’s media team were very active this week – so plenty of news can’t be squeezed into this update. Here are some other stories in brief:
- The ACCC is seeking feedback on a proposed variation to NBN Co’s Special Access Undertaking, which sets out the terms and conditions on which NBN Co must provide the National Broadband Network to retailers for the next few decades. Submissions close in late August. The regulator also signed off on a change to Telstra’s plan for migrating its telecommunications services to the National Broadband Network.
- The ACCC published a report into petrol prices in Launceston. Apparently motorists in the Tasmanian town fork out an extra 12 cents per litre more for fuel on average than motorists in major cities in other Australia states. Unsurprisingly, the regulator suggests that the missing ingredient is competition.
- The ACCC has waved through an acquisition in the freight industry. The regulator set out its analysis of the issues in a Public Competition Assessment.
Questions? Get in touch with our consumer lawyers and tune in next week for more Consumables.