LegalVision is excited to launch its weekly update on all things consumer law. This update will follow the activities of the national regulator, the Australian Competition and Consumer Commission (ACCC) – and keep you informed about key developments relating to the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL).

The first instalment of this update comes at the end of a relatively quiet week for the ACCC. But there has still been some excitement in the world of competition and consumer law. This week’s highlights:

  • The ACCC issued a public warning about misleading representations relating to government grants;
  • An international consumer protection network released guidelines for online reviews; and
  • The Australian Competition Tribunal waved through an acquisition that the ACCC previously opposed.

Permission Not Granted

In the final days of June, the ACCC issued a public warning notice regarding alleged misleading representations by the Australian Business Funding Centre (ABFC) about government grants.

For small businesses, a grant from the government can make a big difference. According to complaints made to the ACCC, ABFC exploited this vulnerability through its website www.australiangovernmentgrants.org and its sales reps. ABFC took fees of around $500 to $700, supposedly to give small businesses access to a treasure trove of government grants and loans. Unfortunately, many businesses paid the fees only to find out that the grants were not right for their purposes.

ABFC’s business model seems particularly strange, considering that small businesses can access information about government grants without paying a cent at www.business.gov.au/Assistance.

Worse still, the ACCC followed up some of the testimonials listed on ABFC’s website and discovered that the businesses in question hadn’t benefited from ABFC’s services or given permission for the ABFC to use their testimonials.

On both counts – the utility of ABFC’s service and the validity of the testimonials – the ACCC suspected that ABFC had made false or misleading representations (in breach of sections 29(1)(f) and (g) of the ACL). The ACCC took action by issuing a public warning notice.

A quick recap on this enforcement tool available to the ACCC. Under section 223 of the ACL, the ACCC can issue a public warning notice if:

  • The ACCC suspects a breach of consumer protections;
  • The ACCC is satisfied that people have suffered as a result of the breach; and
  • The ACCC is satisfied that it is in the public interest to issue the notice.

International Guidelines for Online Reviews

Next up this week, the International Consumer Protection and Enforcement Network (ICPEN) published a set of three guidelines dealing with online testimonials and reviews. The ICPEN is a collection of regulators from over 50 countries. The ACCC is a member of the ICPEN.

Testimonials and reviews form an important online resource for consumers – but only if the reviews are reliable, accurate and independent. This explains the importance of section 29(1)(f) of the ACL relating to false or misleading testimonials, which appeared earlier in this update.

The ICPEN has developed three sets of guidelines:

The overarching theme of the guidelines is to use common sense when it comes to online reviews:

  • Administrators need to be equal and fair in collecting reviews;
  • Businesses must not hide bad reviews from consumers or pay for fake testimonials; and
  • Influencers need to disclose commercial interests and offer their genuine opinion in reviews.

The ICPEN guidelines will hopefully help improve the reliability of online reviews – and make sure that reviews are, for the most part, a useful source of information for consumers. However, as the ACCC emphasised, the guidelines won’t replace the ACL. When in doubt, it’s always a good idea to speak to a consumer lawyer.

Public Benefit Outweighs Reduction in Competition

Finally this week, some competition news. The Australian Competition Tribunal authorised a deal for marine freight assets in Australia’s far north-east to change hands between two competitors. This decision is interesting because the ACCC announced that it would oppose the proposed transaction back in July 2015.

To understand the dynamics at play here, we need a quick refresher course on Australian merger law. Section 50 of the CCA prohibits mergers or acquisitions that would have the likely effect of substantially lessening competition. As I have explained elsewhere, Australia has an informal merger review process. Through this process, merger parties can notify the ACCC about proposed transactions and the regulator will indicate whether or not it intends to oppose the deal. In making this assessment, the ACCC applies the test in section 50. The only consideration is whether the deal will reduce competition.

However, under section 95AT of the CCA, the Tribunal can authorise an acquisition – meaning that section 50 will no longer stand in the way of the transaction. The Tribunal can only grant authorisation if it is satisfied that the acquisition will result in a sufficient benefit to the public. The Tribunal’s job, therefore, involves weighing up competing considerations: the damage caused by reduced competition on one hand and the benefit to the public on the other.

In this case, the ACCC formed the view that the acquisition – under which Sea Swift (majority owned by private equity firms) proposed to purchase assets from Toll (ultimately owned by Japan Post) – would result in less competition for scheduled marine freight services. The ACCC noted that these services are critical for deliveries of essential goods such as food and fuel to remote communities.

Despite the ACCC’s concerns, the Tribunal decided that the acquisition would lead to such a public benefit that it should be given the green light. Nonetheless, the Tribunal’s blessing comes with some behaviour conditions for Sea Swift. The conditions include a cap on prices in the future and a commitment to maintain freight services to remote communities for up to five years.

Merger authorisation has always been a somewhat obscure area of competition law. There have only ever been four applications to the Tribunal for merger authorisation – including a 2015 application for authorisation of the Sea Swift acquisition, which was withdrawn early. The Tribunal has granted authorisation in just one other case.

The Tribunal is yet to publish reasons for its decision to approve the latest Sea Swift application. The competition community will highly anticipate the Tribunal’s analysis of the case – which should shed further light on when a merger that hurts competition will nonetheless be seen to deliver public benefit.

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Tune in next week for more Consumables and let us know your thoughts on Twitter @legalvision_au.

Thomas Kaldor

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