ACCC 2022 In Review | Other conduct affecting competition (misuse of market power)
In March last year, the ACCC announced that it would focus on anti-competitive exclusive arrangements by firms with market power. Mr Sims, noted that the ACCC was particularly concerned about firms with market power restricting access to bottleneck goods or services impacting the ability of competitors or new entrants to compete and firms utilising ‘most favoured nation clauses’ to prevent competitors from obtaining better terms. Additionally, one of the ACCC’s more recent enforcement priorities is to promote competition and investigate allegations of anti-competitive conduct in the financial services sector, particularly on payment services.
Despite the ACCC’s heightened focus on exclusive arrangements by firms with market power, we did not see an increase in these types of proceedings brought by the ACCC. The ACCC did commence proceedings against Mastercard for allegedly engaging in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services. It also successfully obtained a $12 million penalty against Peters Ice Cream for engaging in exclusive dealings. The ACCC also obtained penalties against the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) and construction company J Hutchinson Pty Ltd (Hutchinson) in long-running proceedings concerning an agreement to boycott a sub-contractor that was not a party to an enterprise agreement. Further, the ACCC obtained an undertaking from Lawn Solutions Australia Group concerning a possible breach of the CCA’s concerted practices provisions. This is only the second concerted practice action taken by the ACCC following the 2017 Harper reforms that introduced provisions prohibiting this conduct.
Interestingly, there was a notable uptick in the number of court-enforceable undertakings obtained by the ACCC from companies following its investigations into their conduct. It’s not yet clear whether this approach to enforcement represents a change under Ms Cass-Gottlieb, with a focus on quick and practical solutions rather than protracted litigation. Given the ACCC’s recent settlement of the proceedings against RFG, we suspect that it is – a move towards more immediate pragmatic and commercial outcomes over protracted litigation similar to what we saw when former ACCC Graeme Samuels took over from his predecessor Alan Fells.
Key enforcement activity
Misuse of market power proceedings
On 30 May 2022, the ACCC commenced proceedings in the Federal Court of Australia against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd (together, Mastercard). The ACCC alleges that, from 6 November 2017 to at least 5 November 2020, Mastercard entered into agreements with more than 20 major retail businesses in response to the Reserve Bank of Australia’s (RBA) ’least cost routing‘ initiative. This initiative allowed businesses to choose the lowest-cost network to process their transactions and would, in theory, increase competition in the supply of debit card acceptance services.
The ACCC alleged that the Mastercard agreements reduced the rates for Mastercard credit card transactions, provided that the businesses also agreed to process all or most of their Mastercard debit card transactions through the Mastercard network rather than the competitive EFTPOS network. EFTPOS was the only supplier besides Mastercard of debit card acceptance services for dual Mastercard-EFTPOS debit cards and did not offer credit acceptance services. Accordingly, EFTPOS could not match Mastercard’s offer of discounts on credit card transactions.
At the time, Ms Cass-Gottlieb, observed that,
"We are concerned that Mastercard’s alleged conduct meant that businesses did not receive the full benefit of the increased competition that was intended to flow from the least cost routing initiative … Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment systems, is a priority for the ACCC. Financial service providers should be on notice that we will not hesitate to take action in response to concerns raised about anti-competitive conduct in this important sector of Australia’s economy."
The ACCC alleges that the various retail businesses that were party to the agreements would not process significant debit card volumes through the EFTPOS network, even if EFTPOS was the lowest cost provider. In short, the ACCC believes that the agreements would have the effect of substantially lessening competition in the supply of debit card acceptance services.
The parties have exchanged their pleadings and the matter is set down for a four-week trial commencing on 8 July 2024.
Australasian Food Group
$12 million penalty for exclusive dealing
In our ACCC 2020 Year in Review, we discussed the ACCC commencing proceedings against Australasian Food Group Pty Ltd (trading as Peters Ice Cream) in which it alleged that Peters Ice Cream engaged in exclusive dealing in contravention of the CCA. On 25 March 2022, following admissions by Peters Ice Cream, the Federal Court found in favour of the ACCC and ordered Peters Ice Cream to pay a $12 million penalty for this conduct.
Peters Ice Cream is one of two major manufacturers of single-serve ice cream products sold in Australian petrol stations and convenience stores. From November 2014 to December 2019, Peters Ice Cream admitted that it engaged PFD Food Services (PFD) to provide distribution services on the condition that PFD could not distribute any competing ice cream products in various geographic areas in Australia, including Western Australia, Tasmania, South Australia, ACT, Darwin and regional areas of New South Wales, Victoria and Queensland. Peters Ice Cream admitted that, in doing so, it had engaged in exclusive dealing in breach of the CCA as competitors were unable to distribute their products in petrol stations and convenience stores (which were a material segment of the single-serve ice cream product market) across Australia. In addition to the penalty, Peters Ice Cream was also ordered to establish a three-year compliance program.
In March 2022, the ACCC accepted a court-enforceable undertaking from N.A.S.R. Incorporated, trading as Speedway Australia (Speedway Australia). The ACCC was concerned that an agreement between Speedway Australia and the Sprintcar Control Council of Australia, which had the effect of removing the ‘VSC Sprintcar’ class from the list of classes covered under its public liability insurance policy, may have hindered or prevented the ‘VSC Sprintcars’ from competing at speedway racing tracks affiliated with Speedway Australia. The ACCC was concerned that the agreement may have limited the tracks’ ability to host events with certain racing divisions and classes, which would, in turn, reduce the variety of racing that racing venues could offer to spectators.
In the undertaking, Speedway Australia acknowledged the ACCC’s concerns. It undertook to, among other things, not prohibit its affiliated tracks from conducting racing events that include divisions or classes that are not approved by Speedway Australia and to establish and implement a compliance program for three years.
Lawn Solutions Australia Group
Potential concerted practice
In November 2022, the ACCC accepted a court-enforceable undertaking from Lawn Solutions Australia Group (LSA). The ACCC was concerned that LSA may have engaged, or attempted to engage, in a concerted practice, or attempted to induce others to engage in a concerted practice, by suppressing or hindering price competition in the retail supply of instant turf in the greater Sydney region.
LSA is one of Australia’s largest networks of Australian turf specialists and develops, licenses and markets instant turf grass products. The ACCC alleged that, on various occasions between November 2017 and May 2021, LSA circulated price surveys requesting that growers and resellers set their prices to the recommended retail prices (RRP). These communications also put pressure on individual growers or resellers to increase prices if they sold turf at a price below the RRP.
In its undertaking, LSA acknowledged that its conduct could suppress or hinder price competition and raised questions about its compliance with the concerted practices prohibition. LSA also undertook to implement a competition law compliance program for its staff and LSA growers for three years.
ACCC Commissioner Liza Carver commented that,
"When a business sells products to retail customers through licensed retailers or intermediaries, it risks engaging in an unlawful anti-competitive concerted practice if it seeks to facilitate cooperation between those retailers or intermediaries, replacing or reducing competitive, independent decision-making."
This action against LSA represents only the second such action since the introduction of the laws in 2017 that the ACCC has taken concerning a breach of the concerted practices provisions.
Judgment received, but under appeal
On 4 December 2020, the ACCC commenced proceedings in the Federal Court against Hutchinson the CFMMEU. The ACCC alleged that Hutchinson and CFMMEU agreed to boycott a subcontractor because that subcontractor was not covered by an enterprise bargaining agreement with CFMMEU. See our Development section of this report for further information on these proceedings.
On 14 February 2022, the Federal Court found that the parties’ agreement contravened sections 45E and 45EA of the CCA as the agreement was for the purpose of preventing or hindering the acquisition of goods or services from a supplier. Subsequently, in August 2022, the Federal Court ordered CFMMEU and Hutchinson to pay penalties of $750,000 and $600,000, respectively. The $750,000 penalty imposed on CFMMEU is the maximum penalty that could have been imposed under the CCA. The Court considered that,
"no lesser penalty will be an effective deterrent against future contraventions of like kind by [CFMMEU] as well as by others which are in the same position as [CFMMEU]."
CFMMEU and Hutchinson have appealed the Federal Court’s decision to award penalties. We expect that the appeal will be heard sometime in 2023.
In our publication examining the ACCC’s 2022 enforcement priorities, we posited that 2022 might be the year that we finally see the wave of prosecutions for misuse of market power that the ACCC foreshadowed several years ago. This obviously wasn’t the case, but if recent history is anything to go by, we anticipate that the ACCC will commence at least one new misuse of market power proceeding in 2023 and procure a handful of undertakings from companies under investigation for other anti-competitive behaviour.
Following on from the undertaking it obtained from LSA we also expect the ACCC to pursue further breaches of the Act’s concerted practices provisions. In fact, we predict a move by the ACCC to prosecute a test case before the end of the year where the facts are such that it is confident that it will win. Otherwise, we expect to see greater use of undertakings and consent orders to resolve matters over protracted Court proceedings.
Tipping the balance – a fresh look at the impact of the 2021 defamation law reforms (Part 2)
We consider further key reforms in this area following their introduction in 2021.
Changes to the Unfair Contract Terms Regime. It’s here – Developers, are you ready?
The amendments to the laws governing UCT came into effect and apply to new contracts made at or after 9 November 2023
Navigating major state tax changes in Victoria – what property developers need to know
We break down the the State Taxation Acts Amendment Bill 2023 for property developers.
‘Jack’ and ‘Mac’ recognisably different: McDonald’s loses trade mark beef with Hungry Jack’s
McDonald’s has failed in its trade mark claim against Hungry Jack’s for the sale of its ‘Big Jack’ burger.