Australian Competition and Consumer Commission – 2016 in Review
A summary of the ACCC's enforcement priorities and key cases of 2016
Each year, the Australian Competition and Consumer Commission (ACCC) releases their Compliance and Enforcement Policy highlighting the areas they will be focusing on in the coming year.
With the ACCC Chairman, Rod Sims, due to reveal the 2017 Compliance and Enforcement Policy on 24 February 2017, we take a look back on the ACCC enforcement priorities and some key cases of 2016. Overall, it was a successful year for the ACCC with some significant wins and record penalties: the only real exception being the result in ACCC v Woolworths.
2016 enforcement priorities
In February 2016, the ACCC outlined the following areas were those it intended to pay particular attention. Its continuing priorities from 2015 included:
- cartel conduct
- protecting Indigenous and vulnerable consumers
- health, with particular attention to private healthcare insurers, misleading health statements about foods and disclosures by health service providers.
Its new priorities for 2016 included:
- industry codes, in particular the Food and Grocery Code of Conduct, Franchising Code of Conduct and Horticulture Code of Conduct
- new car retailing, particularly warranty conditions and claims
- the new unfair contract terms, which applied to small business contracts from November 2016.
Some of the leading cases from 2016 included:
ACCC v Colgate-Palmolive Pty Ltd (No 2)
In April, the Federal Court handed down its judgment against Colgate-Palmolive Pty Ltd (Colgate) finding that between 2008 and 2009, Colgate, Cussons Australia Pty Ltd (Cussons), and Unilever Australia Limited (Unilever) engaged in cartel conduct during their transition from standard concentrate to ultra-concentrate laundry powder. Woolworths Limited (Woolworths) was also found to be knowingly concerned in that conduct. The Court handed down the following agreed penalties against Colgate, which were the equal third largest penalty handed down for breaches of the competition provisions of the Competition and Consumer Act 2010 (Cth):
- $12 million for the agreement to transition to ultra-concentrate
- $6 million for the sharing of information and agreement on the price of the products.
The ACCC’s case against Cussons was listed for hearing in June 2016 but at the time of writing, we are still awaiting judgement.
Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha
The Japanese global shipping company, Nippon Yusen Kabushiki Kaisha (NYK), pleaded guilty to criminal cartel conduct relating to the transportation of motor vehicles to Australia between 2009 and 2012. This was the first time that charges for criminal cartel conduct had been brought in Australia, since the laws were introduced in 2009. No penalty has yet been imposed, however, NYK is facing maximum fines for each offence in the greater amount of either $10 million, or three times the total benefits obtained from the offence or 10% of NYK’s annual turnover.
ACCC v Australia and New Zealand Banking Group Limited
In December, the Federal Court handed down its decision against Australia and New Zealand Banking Group Limited (ANZ) and Macquarie Bank Ltd (Macquarie) finding they had attempted to reach arrangements with other banks to manipulate the Malaysian ringgit (MYR) exchange rate. The Court imposed agreed penalties of $9 million against ANZ and $6 million against Macquarie.
ACCC v Flight Centre Travel Group Limited
In December, the High Court allowed the ACCC’s appeal against Flight Centre Travel Group Limited (Flight Centre). This decision affirmed the trial Judge’s decision that Flight Centre had engaged in cartel conduct between 2005 and 2009 by attempting to agree with Singapore Airlines, Malaysia Airlines and Emirates to not sell airline tickets at a cheaper rate than that offered by Flight Centre. On appeal, the High Court found that despite acting as agents for the airlines, Flight Centre and the airlines were in competition in selling airline tickets to customers, and accordingly, Flight Centre had engaged in anti-competitive conduct.
The Full Federal Court will now hear appeals made by both parties regarding the $11 million penalty imposed by the trial Judge.
ACCC v Medibank
The ACCC commenced proceedings against Medibank for making false or misleading representations and engaging in misleading and deceptive and unconscionable conduct by:
- representing to its policy holders that under its policies, services were fully covered unless Medibank provided them with notice in advance of any change to this
- subsequently (and without proper notice to its policy holders) limiting the benefits paid under certain policies causing those customers to be liable for out-of-pocket expenses.
Medibank has defended the allegations and the proceedings are ongoing.
ACCC v Reckitt Benckiser
Reckitt Benckiser was found to have made false and misleading claims that its Nurofen Specific Pain Products were formulated to treat a specific kind of pain, when in truth the products were identical. Initially, as well as being required to remove the products from shelves and publish corrective notices, Reckitt Benckiser was ordered to pay a penalty of $1.7 million. Unhappy with this result, the ACCC appealed the size of the penalty arguing that it was insufficient given the nature and extent of the conduct and loss caused to consumers (some $25 million). At the end of last year, the Full Federal Court agreed increasing the fine to $6 million, which is the highest corporate penalty that has been awarded for misleading conduct. Reckitt Benckiser now face a consumer class action for the misleading advertising.
ACCC v Woolworths Limited
The ACCC was unsuccessful in its claim against Woolworths Limited (Woolworths) in which it alleged the supermarket chain had engaged in unconscionable conduct in the design and implementation of a scheme to seek payments from suppliers (known as the ‘Mind the Gap’ scheme) (Scheme). From the outset, Woolworths denied the allegations and defended the proceedings on the basis that:
- the requests made under the Scheme were consistent with supermarket retailer market practices and an ordinary part of negotiations between Woolworths and its suppliers
- Woolworth’s approach to, and methodology for, the Scheme was reasonable and considered.
These arguments were supported by detailed evidence led by Woolworths, including evidence on the usual nature of conduct in the supermarket industry, the usual types of communications between suppliers and retailers and different types of support sought by retailers from suppliers (and vice versa).
In a judgment handed down in December 2016, the Court accepted the evidence led by Woolworths’ and agreed that the requests for payments were not unconscionable, being a part of Woolworth’s ordinary trading relationship with its suppliers. This decision is interesting given the ACCC’s 2015 win against Coles Supermarkets Australia Pty Ltd (Coles), which also dealt with the payment of monies by suppliers to Coles – the key difference being that the Coles claim concerned its particular dealings with specific customers (rather than the design and implementation of a scheme, as was the case with Woolworths) and that Coles chose not to defend the allegations. The ACCC has indicated it will not appeal this decision.
ACCC v Pastacup
The ACCC has instituted proceedings against Pastacup’s current franchisor Morild Pty Ltd (Morild) and that company’s former director, Mr Stuart Bernstein. The ACCC alleged that Morild has breached the Franchising Code of Conduct when it failed to disclose that Mr Bernstein had been a director of two previous Pastacup franchisors, both of which had been declared insolvent. Morild and Mr Berstein are defending the allegations. These proceedings are the first in which the ACCC has sought penalties for breaches of the Franchising Code of Conduct.
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