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ACCC’s 2018 enforcement priorities – what you need to know

Background

If 2017 was the year that the ACCC emphasised consumer and small business protection (including an effective focus on achieving higher penalties), 2018 is set to be the year of cartels and the continued evolution of the ACCC into a ‘proactive economic regulator’.

Rod Sims (Chairman of the ACCC), launched the ACCC’s 2018 Compliance and Enforcement policy earlier today to the Centre for Economic Development of Australia. Mr Sims announced a focus on:

  • misuse of market power
  • protecting small businesses through the unfair contract terms legislation
  • compliance with the Franchising Code of Conduct with particular emphasis on national and multi-national franchise systems
  • new car retailing and the application of the consumer guarantee regime to that industry
  • broadband performance speeds.

Enforcement Priorities

Misuse of market power

The new amendments to the Competition and Consumer Act 2010, which came into force in November 2017 (implementing the Harper Report recommendations), will be a major focus for the ACCC this year. These new provisions, including the amended misuser of market power provisions and a new provision prohibiting ‘concerted practices’ will effectively give the ACCC a greater ability to tackle commercial conduct with anti-competitive effects. Mr Sims stated that the ACCC fought hard for these provisions and intends to use them.

Protection of small businesses – unfair contract terms

The ACCC will continue its focus on protecting small businesses from unfair contract terms. While the ACCC undertook a number of actions on this issue in 2017, we can expect more action this year, as the ACCC looks to change commercial attitudes and practices in business to business dealings so that one-sided and unfair terms being presented on a take it or leave it basis are no longer the norm.

Franchising Code of Conduct

In late 2017, the ACCC resolved its first proceedings (against Pastacup) for breaches of the Franchising Code of Conduct. Over the past year, the franchising sector has been the subject of intense media scrutiny with troubles being reported across multiple brands. We expect that this heightened scrutiny will have led to a spike in complaints to the ACCC and will mean that the ACCC will again focus on the sector. Mr Sims gave particular emphasis to a focus on larger national brands, which we haven’t seen in quite some time.

Motor vehicles — consumer guarantees and warranties

The new car retailing industry has been on the ACCC’s radar for a while now. Following the release of its report on the sector in December 2017, the ACCC recommended that the new car retailing industry ensure they provide clarity to consumers surrounding the differences between the consumer guarantees provided by the ACL and the manufacturer’s warranties offered at the point of sale. Given the importance placed by the ACCC on compliance with consumer guarantees and warranties, the ACCC’s continued action against dilatory car manufacturers is entirely expected. We predict that the ACCC will be focussed on the provision of misleading and deceptive responses to consumer claims and refusals by manufacturers to abide by Australia’s consumer guaranty regime.

Broadband speed and performance claims

The ACCC plans to continue its enforcement of advertising standard against internet service providers. In 2017, the Telecommunications Industry Ombudsman received close to 4,000 complaints about slow internet data speed during 2016-17, particularly for advertised speeds under the National Broadband Network. After accepting a court-enforceable undertakings from several retail service providers over customers being misled about maximum speeds, the ACCC will likely use the data it gathered from 2017 in order to ready themselves for further enforcement in 2018. The ACCC will focus on enforcement action against service providers who mislead consumers by advertising misleading off-peak speeds and fail to provide information about the speeds of its services during peak periods.

What else for the year?

Cartel Conduct

Since introduction of criminal penalties for cartel conduct in 2010, big business has watched and waited for the first criminal cartel proceedings to be brought by the ACCC. In the intervening years, the question ‘When will we see our first Australian company director jailed for cartel conduct?’ remained unanswered – almost to the point where some questioned whether we would ever see that occur. In our view though, the ACCC was merely biding its time: building its expertise in the area, its protocols with the Commonwealth Department of Prosecutions (DPP) and waiting for the right ‘first’ case to bring.

In August 2017, the ACCC successfully brought proceedings in the Federal Court against Japanese shipping company Nippon Yusen Kabushiki Kaisha for criminal cartel conduct and was fined $25 million – the second-highest penalty imposed in ACCC history.Off the back of this success, in February 2018, the ACCC commenced an action in the Magistrates Court of Victoria against assistive technology products company, Country Care Pty Ltd, as well as its director and a former employee of the company.

Mr Sims indicated that he sees it as a priority for the ACCC to have a regular flow of cartel prosecution matters before the Courts to drive changes in the Australian marketplace. In this regard, he noted that the ACCC currently has five such matters with the DPP: describing the ‘pipeline’ as very good.

Other matters

This year will also see the outcome of some current matters before the court commenced by the ACCC in 2017, including the ACCC’s focus on the airline industry with Garuda’s and Air New Zealand’s appeal to play out in the High Court of Australia, as well as some results in the private health sector with actions against NIB Health and Pfizer Australia likely to conclude. The ACCC will be focussed on:

  • ensuring that the penalties given to large companies are appropriate for their size and sufficient to deter similar behaviour
  • making recommendations that will improve electricity affordability across the National Electricity Market
  • consumer guarantees involving large or national traders avoiding or misrepresenting consumer guarantee rights.

The increasing importance of ‘proactivity’

A key focus of today’s speech was the ever-increasing role of the ACCC as a result of the sheer number of matters referred to it by Government and also its evolution away from being purely a reactive competition regulator into a proactive economic regulator. Mr Sims cited the ACCC’s success in the gas market recently and noted that several further studies are currently underway, including the digital and internet economy. He observed that,

‘The ACCC is the national competition champion. We cannot, however, be the competition champion if we are only reactive. Equally, we cannot be the competition champion if we don’t fully understand some of the complex markets we work in.’

Those studies have given the ACCC the capacity to investigate how markets are really working and to develop a deep understanding of the commercial realities of those markets. The result is that the ACCC is now engaged in more sectors in a focussed way than ever before. Importantly, Mr Sims noted that a market study is not the end of the ACCC’s work in a market, rather, it is almost always the beginning.

Background

If 2017 was the year that the ACCC emphasised consumer and small business protection (including an effective focus on achieving higher penalties), 2018 is set to be the year of cartels and the continued evolution of the ACCC into a ‘proactive economic regulator’.

Rod Sims (Chairman of the ACCC), launched the ACCC’s 2018 Compliance and Enforcement policy earlier today to the Centre for Economic Development of Australia. Mr Sims announced a focus on:

  • misuse of market power
  • protecting small businesses through the unfair contract terms legislation
  • compliance with the Franchising Code of Conduct with particular emphasis on national and multi-national franchise systems
  • new car retailing and the application of the consumer guarantee regime to that industry
  • broadband performance speeds.

Enforcement Priorities

Misuse of market power

The new amendments to the Competition and Consumer Act 2010, which came into force in November 2017 (implementing the Harper Report recommendations), will be a major focus for the ACCC this year. These new provisions, including the amended misuser of market power provisions and a new provision prohibiting ‘concerted practices’ will effectively give the ACCC a greater ability to tackle commercial conduct with anti-competitive effects. Mr Sims stated that the ACCC fought hard for these provisions and intends to use them.

Protection of small businesses – unfair contract terms

The ACCC will continue its focus on protecting small businesses from unfair contract terms. While the ACCC undertook a number of actions on this issue in 2017, we can expect more action this year, as the ACCC looks to change commercial attitudes and practices in business to business dealings so that one-sided and unfair terms being presented on a take it or leave it basis are no longer the norm.

Franchising Code of Conduct

In late 2017, the ACCC resolved its first proceedings (against Pastacup) for breaches of the Franchising Code of Conduct. Over the past year, the franchising sector has been the subject of intense media scrutiny with troubles being reported across multiple brands. We expect that this heightened scrutiny will have led to a spike in complaints to the ACCC and will mean that the ACCC will again focus on the sector. Mr Sims gave particular emphasis to a focus on larger national brands, which we haven’t seen in quite some time.

Motor vehicles — consumer guarantees and warranties

The new car retailing industry has been on the ACCC’s radar for a while now. Following the release of its report on the sector in December 2017, the ACCC recommended that the new car retailing industry ensure they provide clarity to consumers surrounding the differences between the consumer guarantees provided by the ACL and the manufacturer’s warranties offered at the point of sale. Given the importance placed by the ACCC on compliance with consumer guarantees and warranties, the ACCC’s continued action against dilatory car manufacturers is entirely expected. We predict that the ACCC will be focussed on the provision of misleading and deceptive responses to consumer claims and refusals by manufacturers to abide by Australia’s consumer guaranty regime.

Broadband speed and performance claims

The ACCC plans to continue its enforcement of advertising standard against internet service providers. In 2017, the Telecommunications Industry Ombudsman received close to 4,000 complaints about slow internet data speed during 2016-17, particularly for advertised speeds under the National Broadband Network. After accepting a court-enforceable undertakings from several retail service providers over customers being misled about maximum speeds, the ACCC will likely use the data it gathered from 2017 in order to ready themselves for further enforcement in 2018. The ACCC will focus on enforcement action against service providers who mislead consumers by advertising misleading off-peak speeds and fail to provide information about the speeds of its services during peak periods.

What else for the year?

Cartel Conduct

Since introduction of criminal penalties for cartel conduct in 2010, big business has watched and waited for the first criminal cartel proceedings to be brought by the ACCC. In the intervening years, the question ‘When will we see our first Australian company director jailed for cartel conduct?’ remained unanswered – almost to the point where some questioned whether we would ever see that occur. In our view though, the ACCC was merely biding its time: building its expertise in the area, its protocols with the Commonwealth Department of Prosecutions (DPP) and waiting for the right ‘first’ case to bring.

In August 2017, the ACCC successfully brought proceedings in the Federal Court against Japanese shipping company Nippon Yusen Kabushiki Kaisha for criminal cartel conduct and was fined $25 million – the second-highest penalty imposed in ACCC history.Off the back of this success, in February 2018, the ACCC commenced an action in the Magistrates Court of Victoria against assistive technology products company, Country Care Pty Ltd, as well as its director and a former employee of the company.

Mr Sims indicated that he sees it as a priority for the ACCC to have a regular flow of cartel prosecution matters before the Courts to drive changes in the Australian marketplace. In this regard, he noted that the ACCC currently has five such matters with the DPP: describing the ‘pipeline’ as very good.

Other matters

This year will also see the outcome of some current matters before the court commenced by the ACCC in 2017, including the ACCC’s focus on the airline industry with Garuda’s and Air New Zealand’s appeal to play out in the High Court of Australia, as well as some results in the private health sector with actions against NIB Health and Pfizer Australia likely to conclude. The ACCC will be focussed on:

  • ensuring that the penalties given to large companies are appropriate for their size and sufficient to deter similar behaviour
  • making recommendations that will improve electricity affordability across the National Electricity Market
  • consumer guarantees involving large or national traders avoiding or misrepresenting consumer guarantee rights.

The increasing importance of ‘proactivity’

A key focus of today’s speech was the ever-increasing role of the ACCC as a result of the sheer number of matters referred to it by Government and also its evolution away from being purely a reactive competition regulator into a proactive economic regulator. Mr Sims cited the ACCC’s success in the gas market recently and noted that several further studies are currently underway, including the digital and internet economy. He observed that,

‘The ACCC is the national competition champion. We cannot, however, be the competition champion if we are only reactive. Equally, we cannot be the competition champion if we don’t fully understand some of the complex markets we work in.’

Those studies have given the ACCC the capacity to investigate how markets are really working and to develop a deep understanding of the commercial realities of those markets. The result is that the ACCC is now engaged in more sectors in a focussed way than ever before. Importantly, Mr Sims noted that a market study is not the end of the ACCC’s work in a market, rather, it is almost always the beginning.