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Providing strategic advice on expansion structures November 16, 2018

Founded in Bondi Beach in 2012, Bailey Nelson has rapidly grown into a global eyewear retailer and service provider with boutiques in Australia, London, Canada and New Zealand. The strong demand for their products and … Continued

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Record penalties, some wins, some losses – the ACCC’s 2019

Later this month, ACCC Chair Rod Sims will be announcing the enforcement priorities at the annual Centre for Economic Development lunchtime event. It’s historically a sell-out event, as CEOs, directors, managers and general counsel gather to hear which sectors and what conduct will be the focus of the ACCC’s educational, regulatory and enforcement activity throughout the year.

Before the focus turns to 2020, Maddocks has set the scene by examining the ACCC’s performance over the past 12 months in our 2019 in Review. Here are some of the major trends and developments from the ACCC’s work in 2019.

A year for record penalties

In 2018, we commented that it was a record year for penalties and that the ACCC, aided by legislative reform in late 2018, was starting to deliver on its goal of pushing the upper limits on penalties.  We saw that trend continue in 2019, with new record penalties obtained for breaches of:

  • the Australian Consumer Law (ACL) against Empower Institute in September 2019 ($26.5 million), then, in December 2019, $125 million against Volkswagen AG (after the Court rejected the original agreed penalty of $75 million as ‘insufficient’ given the ‘scale, impact and deliberateness’ of the company’s misconduct).
  • the Competition and Consumer Act (CCA) in August 2019, against Kawasaki Kisen Kaisha Ltd ($34.5 million).

Other firsts

In another first for the ACCC, it successfully prosecuted biotech company, Cryosite Limited for cartel conduct in its entry into an asset sale agreement with its main competitor, Cell Care Australia Pty Ltd under which the parties effectively agreed to cease competing with each other in a number of respects in the lead up to the completion of that transaction. Referred to as ‘gun jumping’ in overseas jurisdictions – in the sense that the parties to a transaction that are otherwise competitors unlawfully ‘jump the gun’ by prematurely ceasing to compete in anticipation of a pending transaction – it’s the first time such conduct has been prosecuted in Australia.

The ACCC used its new ‘bulked up’ prohibition on misuse of market power for the first time in proceedings commenced late last year against Tasmanian Ports Corporation Ltd (TasPorts) for an alleged breach of the amended provision. The relevant conduct allegedly involved TasPorts misusing its market power (as the owner of all but one port in Northern Tasmania) to impede Engage Marine Tasmania Pty Ltd from competing with it by providing towage and pilotage services in Tasmania.

In December 2019, the ACCC enjoyed its first enforcement success under the ‘concerted practices’ prohibition, which came into effect in November 2017.

Some losses

The ACCC also suffered some high-profile losses against Woolworths and Kimberly Clark, respectively, in two cases that raise interesting legal questions about the Court’s approach to implied representations about the future performance of a product that the ACCC asserted arose from statements about the product’s characteristics – a key strategy frequently used by the ACCC (as discussed in this Maddocks article).  This is one area of the law that we are looking forward to the Full Court resolving this year when it separately hears appeals by the ACCC against both judgements.

The Federal Court also dismissed the ACCC’s case against TPG Internet Pty Ltd’s (TPG) for alleged false or misleading representations it made about plan ‘pre-payments’ and related alleged unfair contract terms.  The trial Judge found that TPG’s statements about pre-payments were not misleading or deceptive because the ordinary purchaser of retail mobile, internet and home telephone services would take the time to understand the key contractual terms, including reading the whole of the clause concerning forfeiture of the pre-payment, and would understand the consequences if they decided to cancel the contract.  The Court adopted similar reasoning when rejecting the allegation that the relevant contracts contained unfair contract terms, also finding that the clauses were reasonably necessary to protect TPG’s legitimate interests.  Given how few people actually read contract fine print (with all respect to the trial Judge), we aren’t surprised that the ACCC has appealed the decision.

Finally, in May 2019, the Full Federal Court dismissed the ACCC’s appeal of its loss against PZ Cussons Pty Ltd (Cussons) for allegedly engaging in cartel conduct in connection with the transition of the market to ultra-concentrated detergent from standard concentrates. While both Colgate-Palmolive Pty Ltd and Woolworths had admitted involvement in the cartel in 2016, the Court was not prepared to find that all of the parties involved were acting pursuant to a collusive arrangement or understanding. Rather, it found that the evidence suggested it was Woolworths and Coles that had driven the timing of the transition and that Cussons was, to a large extent, ignorant of what the other suppliers and retailers were doing.  On appeal, the ACCC primarily argued that the Court erred in searching for a contract (rather than the lower standard of an arrangement or understanding) and that, in doing so, his Honour had applied an inappropriately high standard of proof.  The Full Court disagreed with the ACCC, finding it had misread the trial Judge’s reasons.

A world first

In July, the ACCC released its final report following its world-first Digital Platforms Inquiry. The ACCC concluded that Google and Facebook have immense market power in a number of markets and that gives them a competitive advantage to an extent that the ACCC recommended that the Government step in to change or increase regulation in competition law, consumer protection, media regulation and privacy law to specifically address those concerns.

And where we expected more

Finally, there were a few areas where we expected the ACCC to do more, including:

  • in connection with customer loyalty schemes (following on from the publication of their report last year); and
  • more cases brought concerning conduct in breach of:
    • the new ‘beefed up’ prohibition on misuse of market power (particularly given how emphatic the ACCC was about the need for these changes); and
    • the prohibition for concerted practices.

Download the 2019 in Review – ACCC from the Maddocks website.

Later this month, ACCC Chair Rod Sims will be announcing the enforcement priorities at the annual Centre for Economic Development lunchtime event. It’s historically a sell-out event, as CEOs, directors, managers and general counsel gather to hear which sectors and what conduct will be the focus of the ACCC’s educational, regulatory and enforcement activity throughout the year.

Before the focus turns to 2020, Maddocks has set the scene by examining the ACCC’s performance over the past 12 months in our 2019 in Review. Here are some of the major trends and developments from the ACCC’s work in 2019.

A year for record penalties

In 2018, we commented that it was a record year for penalties and that the ACCC, aided by legislative reform in late 2018, was starting to deliver on its goal of pushing the upper limits on penalties.  We saw that trend continue in 2019, with new record penalties obtained for breaches of:

  • the Australian Consumer Law (ACL) against Empower Institute in September 2019 ($26.5 million), then, in December 2019, $125 million against Volkswagen AG (after the Court rejected the original agreed penalty of $75 million as ‘insufficient’ given the ‘scale, impact and deliberateness’ of the company’s misconduct).
  • the Competition and Consumer Act (CCA) in August 2019, against Kawasaki Kisen Kaisha Ltd ($34.5 million).

Other firsts

In another first for the ACCC, it successfully prosecuted biotech company, Cryosite Limited for cartel conduct in its entry into an asset sale agreement with its main competitor, Cell Care Australia Pty Ltd under which the parties effectively agreed to cease competing with each other in a number of respects in the lead up to the completion of that transaction. Referred to as ‘gun jumping’ in overseas jurisdictions – in the sense that the parties to a transaction that are otherwise competitors unlawfully ‘jump the gun’ by prematurely ceasing to compete in anticipation of a pending transaction – it’s the first time such conduct has been prosecuted in Australia.

The ACCC used its new ‘bulked up’ prohibition on misuse of market power for the first time in proceedings commenced late last year against Tasmanian Ports Corporation Ltd (TasPorts) for an alleged breach of the amended provision. The relevant conduct allegedly involved TasPorts misusing its market power (as the owner of all but one port in Northern Tasmania) to impede Engage Marine Tasmania Pty Ltd from competing with it by providing towage and pilotage services in Tasmania.

In December 2019, the ACCC enjoyed its first enforcement success under the ‘concerted practices’ prohibition, which came into effect in November 2017.

Some losses

The ACCC also suffered some high-profile losses against Woolworths and Kimberly Clark, respectively, in two cases that raise interesting legal questions about the Court’s approach to implied representations about the future performance of a product that the ACCC asserted arose from statements about the product’s characteristics – a key strategy frequently used by the ACCC (as discussed in this Maddocks article).  This is one area of the law that we are looking forward to the Full Court resolving this year when it separately hears appeals by the ACCC against both judgements.

The Federal Court also dismissed the ACCC’s case against TPG Internet Pty Ltd’s (TPG) for alleged false or misleading representations it made about plan ‘pre-payments’ and related alleged unfair contract terms.  The trial Judge found that TPG’s statements about pre-payments were not misleading or deceptive because the ordinary purchaser of retail mobile, internet and home telephone services would take the time to understand the key contractual terms, including reading the whole of the clause concerning forfeiture of the pre-payment, and would understand the consequences if they decided to cancel the contract.  The Court adopted similar reasoning when rejecting the allegation that the relevant contracts contained unfair contract terms, also finding that the clauses were reasonably necessary to protect TPG’s legitimate interests.  Given how few people actually read contract fine print (with all respect to the trial Judge), we aren’t surprised that the ACCC has appealed the decision.

Finally, in May 2019, the Full Federal Court dismissed the ACCC’s appeal of its loss against PZ Cussons Pty Ltd (Cussons) for allegedly engaging in cartel conduct in connection with the transition of the market to ultra-concentrated detergent from standard concentrates. While both Colgate-Palmolive Pty Ltd and Woolworths had admitted involvement in the cartel in 2016, the Court was not prepared to find that all of the parties involved were acting pursuant to a collusive arrangement or understanding. Rather, it found that the evidence suggested it was Woolworths and Coles that had driven the timing of the transition and that Cussons was, to a large extent, ignorant of what the other suppliers and retailers were doing.  On appeal, the ACCC primarily argued that the Court erred in searching for a contract (rather than the lower standard of an arrangement or understanding) and that, in doing so, his Honour had applied an inappropriately high standard of proof.  The Full Court disagreed with the ACCC, finding it had misread the trial Judge’s reasons.

A world first

In July, the ACCC released its final report following its world-first Digital Platforms Inquiry. The ACCC concluded that Google and Facebook have immense market power in a number of markets and that gives them a competitive advantage to an extent that the ACCC recommended that the Government step in to change or increase regulation in competition law, consumer protection, media regulation and privacy law to specifically address those concerns.

And where we expected more

Finally, there were a few areas where we expected the ACCC to do more, including:

  • in connection with customer loyalty schemes (following on from the publication of their report last year); and
  • more cases brought concerning conduct in breach of:
    • the new ‘beefed up’ prohibition on misuse of market power (particularly given how emphatic the ACCC was about the need for these changes); and
    • the prohibition for concerted practices.

Download the 2019 in Review – ACCC from the Maddocks website.