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ACCC’s 2019 enforcement priorities – what you need to know

Background

If any clear theme emerges from a review of the Australian Competition and Consumer Commission’s (ACCC) enforcement activity in 2018, it would have to be ‘penalties’ with the ACCC successfully pushing the boundaries on penalties for both breaches of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL). When Rod Sims (Chairman of the ACCC), launched the ACCC’s 2019 Compliance and Enforcement priorities earlier today, he was very clear that this focus will continue in 2019.

To a packed room at the annual Centre for Economic Development of Australia enforcement priorities lunch, Mr Sims emphasised that he wants markets to take notice of penalties – both for cartel offences and for consumer law breaches. It was Mr Sims’ view that we will only see real changes in the culture, management and behaviour of big business when the penalties are large enough to have a significant impact on those businesses.

In addition to higher penalties, Mr Sims also announced that the ACCC would be focussed on enforcement of:

  • consumer guarantees on high value electrical and whitegoods products, in particular those supplied by large retailers and manufacturers
  • conduct that may contravene the misuse of market power provisions and the concerted practices provisions
  • anti-competitive conduct and competition issues in the financial sector, including issues in foreign exchange services
  • competition and consumer issues arising from customer loyalty schemes.

Importantly, and building on last year’s speech, Mr Sims emphasised the critical importance of its role in conducting market studies in driving real changes in behaviour in market sectors. Given the ongoing ’world first’ inquiry by the ACCC into digital platforms this emphasis by Mr Sims was particularly telling.

A new approach to competition investigations?

Of particular note, Mr Sims said that increased budget support from the Government at the end of last year has allowed the ACCC to start an ‘SLC Unit’ (‘substantial lessening of competition’ Unit) to experiment with a different approach to competition investigations to allow the ACCC to gain an early understanding of ‘what is going in’ in the relevant market. Mr Sims said that, by reaching a deep understanding of the nature and extent of the conduct of concern early in an investigation, he hopes that the length of investigations and complexity of proceedings with be simplified. An obvious result of this is that the ACCC will be able to commence more cases and in a shorter amount of time.

2019 Enforcement Priorities

Consumer guarantees

We noted in our recent ACCC Year In Review article that 2018 saw less prosecutions than we expected in this area. Unsurprisingly then, compliance with the consumer guarantees provisions (particularly in the sale of high value electrical and whitegoods products) will be a top priority for the ACCC.  Mr Sims observed today that, “the ACCC remains concerned that many…retailers and manufacturers are not complying with the consumer guarantee laws.”

Customer loyalty schemes

This appears to be a new area of focus for the ACCC building on its enforcement activity last year designed to drive better behaviours in the online market place (particularly, with its actions against Meriton and Trivago). Such schemes are increasingly becoming an everyday part of modern life and the ACCC is concerned about both competition and consumer issues in this space, with Mr Sims particularly concerned about the collection and use of data by such schemes noting:

While these schemes are a ubiquitous part of a modern marketplace, questions arise about whether consumers are properly informed and receive the benefits touted by many of these programs, and about the impact of customer loyalty on competing firms and, in particular, new entrants”.

Misuse of market power

As we canvassed in our ACCC Year In Review article, in 2018 there was little public evidence of the ACCC taking any major steps in the new misuse of market power and concerted practices provisions, likely due to investigations of this kind taking significant time to complete. That all looks to change in 2019, with the ACCC having a particular focus on this area this year. The ACCC is confident that it will bring proceedings under these provisions in 2019, so it will be interesting to see how these new provisions are applied and the type of conduct the ACCC is concerned about and the sectors in which it is occurring.

Competition issues in the financial sector

In the aftermath of the Royal Commission, the ACCC will continue its focus on the financial services sector and the proceedings brought by it against ANZ, Citibank and Deutsche Bank. Mr Sims noted that “the underlying theme of the Final Report of the Royal Commission was that competition is not vigorous among the major banks or in some parts of the financial sector” and so we can expect to see a lot of action in this area in the coming year. The ACCC is seeking to build on its relatively recent work in conducting market studies in the sector by establishing a dedicated competition team at the ACCC focused on financial services.

What else for the year?

In addition to the ‘big-ticket’ priorities set out above, Mr Sims announced that the ACCC would:

  • closely monitor advertising practices on social media and, in particular subscription services where the costs are not clearly explained to consumers, especially young consumers
  • review the complexity and opacity of pricing in the energy and telecommunications sectors
  • monitor the impact on consumers arising from the collection and use of data by digital platforms (with a focus on transparency of data practices and the adequacy of disclosure to customers).

Enduring priorities

Mr Sims also confirmed the ACCC’s ongoing focus on some of its enduring priorities, including:

  • in a continuation of its efforts from 2018, continue to push for much higher penalties for breaches of both the CCA and ACL – with Mr Sims noting that the ACCC’s view is that Parliament’s intention with the recent legislative changes was that there should be penalties of over $100 million for consumer law breaches and that he now regards the 6 million penalty against an individual secured last year as “the new bar for ACCC staff to beat”
  • compliance by franchisors with the Franchising Code of Conduct with several current investigations underway in this sector
  • cartel conduct, with significant numbers of immunity applications being sought from the Commission, we can expect two to three criminal cartel matters to be in Court by the end of 2019
  • the business-to-business unfair contract term laws, with Mr Sims again calling (as we predicted) for legislative reform to impose penalties for the inclusion of unfair contract terms in standard form contracts
  • product safety, most notably ensuring the effectiveness of the compulsory recall of vehicles with Takata airbags (which was a major drain on resources last year for the Commission)
  • the new car retailing industry, following on from its action against Ford last year.

Policy

Finally, the ACCC believes that enforcement on its own (even with higher penalties) will not change sector behaviours and that its role in conducting market studies is a significant part of encouraging businesses to comply with the law. The ACCC will be using such studies to look closely at agriculture, electricity, gas and the digital marketplace. In addition, the ACCC will be exploring whether current protections for vulnerable consumers (such as the prohibition on misleading conduct and unconscionable conduct) are sufficient or whether a new prohibition that fall short of the high Court imposed threshold on unconscionable conduct is necessary.

AUTHORS
Shaun Temby | Partner
T +61 2 9291 6287
shaun.temby@maddocks.com.au 
Christopher Marsh | Senior Associate
+61 2 9291 6196
christopher.marsh@maddocks.com.au

Background

If any clear theme emerges from a review of the Australian Competition and Consumer Commission’s (ACCC) enforcement activity in 2018, it would have to be ‘penalties’ with the ACCC successfully pushing the boundaries on penalties for both breaches of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL). When Rod Sims (Chairman of the ACCC), launched the ACCC’s 2019 Compliance and Enforcement priorities earlier today, he was very clear that this focus will continue in 2019.

To a packed room at the annual Centre for Economic Development of Australia enforcement priorities lunch, Mr Sims emphasised that he wants markets to take notice of penalties – both for cartel offences and for consumer law breaches. It was Mr Sims’ view that we will only see real changes in the culture, management and behaviour of big business when the penalties are large enough to have a significant impact on those businesses.

In addition to higher penalties, Mr Sims also announced that the ACCC would be focussed on enforcement of:

  • consumer guarantees on high value electrical and whitegoods products, in particular those supplied by large retailers and manufacturers
  • conduct that may contravene the misuse of market power provisions and the concerted practices provisions
  • anti-competitive conduct and competition issues in the financial sector, including issues in foreign exchange services
  • competition and consumer issues arising from customer loyalty schemes.

Importantly, and building on last year’s speech, Mr Sims emphasised the critical importance of its role in conducting market studies in driving real changes in behaviour in market sectors. Given the ongoing ’world first’ inquiry by the ACCC into digital platforms this emphasis by Mr Sims was particularly telling.

A new approach to competition investigations?

Of particular note, Mr Sims said that increased budget support from the Government at the end of last year has allowed the ACCC to start an ‘SLC Unit’ (‘substantial lessening of competition’ Unit) to experiment with a different approach to competition investigations to allow the ACCC to gain an early understanding of ‘what is going in’ in the relevant market. Mr Sims said that, by reaching a deep understanding of the nature and extent of the conduct of concern early in an investigation, he hopes that the length of investigations and complexity of proceedings with be simplified. An obvious result of this is that the ACCC will be able to commence more cases and in a shorter amount of time.

2019 Enforcement Priorities

Consumer guarantees

We noted in our recent ACCC Year In Review article that 2018 saw less prosecutions than we expected in this area. Unsurprisingly then, compliance with the consumer guarantees provisions (particularly in the sale of high value electrical and whitegoods products) will be a top priority for the ACCC.  Mr Sims observed today that, “the ACCC remains concerned that many…retailers and manufacturers are not complying with the consumer guarantee laws.”

Customer loyalty schemes

This appears to be a new area of focus for the ACCC building on its enforcement activity last year designed to drive better behaviours in the online market place (particularly, with its actions against Meriton and Trivago). Such schemes are increasingly becoming an everyday part of modern life and the ACCC is concerned about both competition and consumer issues in this space, with Mr Sims particularly concerned about the collection and use of data by such schemes noting:

While these schemes are a ubiquitous part of a modern marketplace, questions arise about whether consumers are properly informed and receive the benefits touted by many of these programs, and about the impact of customer loyalty on competing firms and, in particular, new entrants”.

Misuse of market power

As we canvassed in our ACCC Year In Review article, in 2018 there was little public evidence of the ACCC taking any major steps in the new misuse of market power and concerted practices provisions, likely due to investigations of this kind taking significant time to complete. That all looks to change in 2019, with the ACCC having a particular focus on this area this year. The ACCC is confident that it will bring proceedings under these provisions in 2019, so it will be interesting to see how these new provisions are applied and the type of conduct the ACCC is concerned about and the sectors in which it is occurring.

Competition issues in the financial sector

In the aftermath of the Royal Commission, the ACCC will continue its focus on the financial services sector and the proceedings brought by it against ANZ, Citibank and Deutsche Bank. Mr Sims noted that “the underlying theme of the Final Report of the Royal Commission was that competition is not vigorous among the major banks or in some parts of the financial sector” and so we can expect to see a lot of action in this area in the coming year. The ACCC is seeking to build on its relatively recent work in conducting market studies in the sector by establishing a dedicated competition team at the ACCC focused on financial services.

What else for the year?

In addition to the ‘big-ticket’ priorities set out above, Mr Sims announced that the ACCC would:

  • closely monitor advertising practices on social media and, in particular subscription services where the costs are not clearly explained to consumers, especially young consumers
  • review the complexity and opacity of pricing in the energy and telecommunications sectors
  • monitor the impact on consumers arising from the collection and use of data by digital platforms (with a focus on transparency of data practices and the adequacy of disclosure to customers).

Enduring priorities

Mr Sims also confirmed the ACCC’s ongoing focus on some of its enduring priorities, including:

  • in a continuation of its efforts from 2018, continue to push for much higher penalties for breaches of both the CCA and ACL – with Mr Sims noting that the ACCC’s view is that Parliament’s intention with the recent legislative changes was that there should be penalties of over $100 million for consumer law breaches and that he now regards the 6 million penalty against an individual secured last year as “the new bar for ACCC staff to beat”
  • compliance by franchisors with the Franchising Code of Conduct with several current investigations underway in this sector
  • cartel conduct, with significant numbers of immunity applications being sought from the Commission, we can expect two to three criminal cartel matters to be in Court by the end of 2019
  • the business-to-business unfair contract term laws, with Mr Sims again calling (as we predicted) for legislative reform to impose penalties for the inclusion of unfair contract terms in standard form contracts
  • product safety, most notably ensuring the effectiveness of the compulsory recall of vehicles with Takata airbags (which was a major drain on resources last year for the Commission)
  • the new car retailing industry, following on from its action against Ford last year.

Policy

Finally, the ACCC believes that enforcement on its own (even with higher penalties) will not change sector behaviours and that its role in conducting market studies is a significant part of encouraging businesses to comply with the law. The ACCC will be using such studies to look closely at agriculture, electricity, gas and the digital marketplace. In addition, the ACCC will be exploring whether current protections for vulnerable consumers (such as the prohibition on misleading conduct and unconscionable conduct) are sufficient or whether a new prohibition that fall short of the high Court imposed threshold on unconscionable conduct is necessary.

AUTHORS
Shaun Temby | Partner
T +61 2 9291 6287
shaun.temby@maddocks.com.au 
Christopher Marsh | Senior Associate
+61 2 9291 6196
christopher.marsh@maddocks.com.au