ACCC’s 2021 enforcement priorities – what you need to know
One of the last things addressed today by the current Chairman of the Australian Competition & Consumer Commission (ACCC), Mr Rod Sims, will ultimately prove to be the most significant – changes to the merger control regime.
Speaking at CEDA’s ‘ACCC's enforcement and compliance policy update 2021’ lunch, Mr Sims detailed the real challenges for the ACCC in seeking to prevent anti-competitive mergers and that the ACCC is increasingly concerned that the merger control regime may not be fit for purpose. In making these comments, Mr Sims advocated that Australia’s approach to merger control needs to be ‘rebalanced’ and that the ACCC is exploring merger law reform options in 2021 in order to overcome the current skew in the Australian merger control regime towards granting clearances.
Mr Sims also announced the ACCC’s enforcement priorities for 2021. He noted that, in light of the ACCC taking "too many cases in relation to telecommunications and energy," the pricing and selling practices of essential services will continue to be a major area of concern for the ACCC in 2021. Not surprisingly, the ACCC’s other enforcement priorities for 2021 will focus on a number of sectors impacted by the COVID-19 pandemic, including the travel and aviation sectors, together with sectors that were slated to be a focus for the ACCC in 2020 (prior to the ACCC’s pivot in March last year due to the emerging pandemic), including funeral businesses.
Merger control – changes on the way?
Mr Sims observed that the increasing uncertainty inherent in Australia’s ‘forward looking’ merger test has become a reason for courts to approve mergers opposed by the ACCC. This approach has resulted in merger parties and the courts being too focussed on what is likely to happen in the future without the acquisition (known as the ‘counterfactual’), which is challenging to 'prove' in court. Mr Sims expressed concern that the test is open to manipulation and that the focus on the counterfactual in many cases risks overlooking the likely anti-competitive effects of the merger itself.
Under the current regime, Mr Sims suggests that insufficient weight is placed on the risks to competition, such as potential competition being lost and barriers to entry being raised, and that the net result is that our merger control regime is ‘skewed’ towards clearance. In light of this and the ACCC’s goal of preventing anti-competitive mergers in order to preserve or promote competition, this year the ACCC will explore merger law reforms to ‘rebalance’ Australia’s approach to merger control to ensure good outcomes for consumers and the economy.
2021 enforcement priorities
Mr Sims also outlined the ACCC’s other enforcement priorities for 2021.
Mr Sims foreshadowed more enforcement activity in the electricity and telecommunications sectors this year, as a result of ongoing concerns held by the ACCC with the pricing and selling practices for essential services. This has been an area of focus for the ACCC for a number of years – so it is no doubt concerning to the ACCC that it is not seeing a change in the market to these practices.
The ACCC also remains concerned at the lack of transparency in the pricing of essential services and it is actively monitoring the extent to which electricity generators and retailers comply with their new obligations (under amendments introduced by the Prohibiting Energy Market Misconduct Act 2019) to pass on the significant reductions in wholesale electricity costs that we have seen over the past year. Mr Sims commented that "consumers saw their electricity prices rise enormously over many years; now they need to see them fall considerably." Energy generator retailers are effectively on notice to pass on savings or face prosecution.
Sectors impacted by the pandemic
The ACCC will continue to take particular interest on the impact of the pandemic on the travel and aviation sectors, with its COVID-19 taskforce actively monitoring forward sales practice by travel businesses and looking for misrepresentations in advertising and marketing material, particularly given the obvious uncertainty around travel restrictions.
In the aviation sector, due to the fragility of market participants, the ACCC will also be concerned with preventing any behaviours that adversely affect the competitive process. In particular, the ACCC will be closely monitoring the plans by the regional operator Rex to enter the major domestic routes, including those connecting Sydney, Melbourne and Brisbane, with a particular focus on Rex’s ability to access slots at Sydney Airport. While not mentioned today, Rex’s recent complaints that Qantas is opening up regional routes that (Rex argues) can only support one airline, will also no doubt be subjected to ACCC scrutiny – particularly if it has the purpose or effect of lessening competition.
Mr Sims announced at the same lunch last year, that the funeral business sector would be a priority for the ACCC in 2020. As noted in our ACCC 2020 Year In Review publication, the ACCC did not engage in any public activity in this sector in 2020 (understandable given the shift in its priorities due to the pandemic), so it is really about the ACCC picking back up an issue that has been of concern to it for a while. This concern and focus is understandable given how closely held and vertically integrated many of the funeral businesses in Australia are, which has allowed them to bundle services and block new entrants to the market. The customer base of these businesses is also very vulnerable to aggressive sales strategies and pricing, which the ACCC is concerned may be unconscionable conduct. As the sector has had more than a year to get its house in order, we predict that the ACCC will have little sympathy for ongoing unlawful conduct.
In 2021 the ACCC will be following through on the recommendations from the ACCC’s Home Loan Price Inquiry final report, which was released by the Treasurer in December 2020. These recommendations included a prompt to alert borrowers to available prevailing rates and lowering the administrative burden on consumers who wish to switch home loan providers.
In addition, as Australia returns to more ‘normal’ funding levels post-pandemic, the ACCC is concerned that more people will find themselves in a vulnerable position and will be keeping a keen eye out for any concerning behaviour from lenders.
What else for the year?
In addition to the ‘big-ticket’ priorities set out above, Mr Sims announced that the ACCC would:
- continue its work to ensure that small businesses receive the protections guaranteed by the competition and consumer laws, with a particular focus on the franchise sector
- monitor supply chain relationships in the agriculture sectors, which is one of its enduring priorities
- continue its focus on conduct affecting competition in the commercial construction industry
- take enforcement action against motor vehicle dealers to achieve broader industry behavioural change, particularly relating to consider guarantees
- continue to advance its investigations into the practices of the digital platforms.
Policy and advocacy
Mr Sims announced that the ACCC will continue to advocate for reforms to the consumer guarantee regime and that the unfair contract term provisions to address ‘important deficiencies’ in the law needs to be addressed. He also noted the ACCC’s view that Australia’s consumer law framework needs an ‘unfair trading practice’ prohibition, which Australian governments and agencies are already discussing following the review of the Australian Consumer Law in 2018. We haven’t heard much from the ACCC on this issue for some time, but given its success in pushing through its desired ‘unfair contract terms’ changes, it obviously now has the bandwidth to return to this issue.
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