Competition Law

Australian Competition Law and Policy Discussion

Private member’s bill madness

Posted by Julie Clarke on 18 June 2013

A couple of private member’s bills were introduced yesterday to get the ball rolling on this election season’s competition law craziness.

Supermarket shopping

First up we have Rob Oakeshott MP’s  Competition and Consumer Amendment (Strengthening Rules About Misuse of Power) Bill 2013. This proposes insertion of a subsection 46(1AAAA) – just to keep with the Act’s horrendous numbering trend and would introduce an effects based test for conduct engaged in by corporations with substantial market power. It also proposes further investigation powers for the ACCC where the ACCC ‘reasonably believes that circumstances exist to indicate that there has been or might be a contravention of section 46’. The EM talks a lot about cheap milk and Rob Oakeshott’s press release emphasises the bill’s aim to ‘help farmers’, so there’s no need to guess at the genesis for the bill.

This, however, is nothing compared to the industry-specific and convoluted bill introduced by Bob Katter MP and, not suprisingly at all, supported by Nick Xenophon MP and Andrew Wilkie MP.  The Supermarket Dominance Bill 2013 would make it an offence (subject to $50m penalty) to operate a supermarket business where that business (and related supermarket businesses) has a supermarket market share of: more than 40% for year 2 or more than 35% for year 3 etc to more than 20% for any later year. Essentially it requires reduction in market share of the major supermarkets to no larger than 20% progressively over a six year period. Other similar offences are included. It goes beyond supermarket retailing to ‘household retail businesses’ as well, aiming to ‘ensure that the supermarket giants’ vast operations in “household retail businesses” are progressively reduced to 20% total market share throughout a 6 year period’ (EM). This bill also involves setting up a Commissioner for Food Retailing.

The Katter bill is one of the strangest bills I’ve read … and there have been some shockers relating to competition policy in Australia. Margy Osmond of the ANRA has described the bill as ‘ill-conceived and populist’ (see Jacob Greber and Claire Stewart, ‘MP’s pressure supermarkets’ (Australian Financial Review, 18 June 2013). Hard to argue with that assessment.  Fortunately, as private member’s bills they are unlikely to come to anything; but let’s just hope they’re not an early indication of the craziness that awaits as we head full swing into election campaigning in a climate where supermarket bashing is as popular as ever.

Posted in Legislation, Legislation (TPA/CCA), Misuse of Market Power | Leave a Comment »

ACCC releases quarterly report

Posted by Julie Clarke on 21 May 2013

The ACCC has released its March 2013 quarterly report and associated press release. In relation to competition enforcement the following points are notable:

  • There are eight carry over cases and one new case alleging misuse of market power
    • The new case is the Visa case, initiated in Sydney on 4 Feb (case NSD164/2013), alleging Visa ‘misused its market power for the purposes of preventing the expansion of DCC to new merchant outlets in Australia and preventing businesses in Australia from supplying DCC services on ATMs in competition with Visa’s own currency conversion service’). The next directions hearing is listed for 27 June 2013 before Justice Jacobson.  The respondents are represented by Herbert Smith Freehills in Sydney.
    • There eight ongoing cases involve seven cases of cartel conduct and/or price fixing and one involving misuse of market pwoer (the Cement Australia; commenced 12 September 2008 and still awaiting decision despite being heard before Justice Greenwood nearly two years ago).
  • The ACCC secured one s 87B undertaking for alleged anti-competitive behavior by All Homes Pty Ltd.
  • 65 mergers considered this quarter (51 pre-assessed as not requiring review; of the remaining matters 12 were cleared unconditionally, one was cleared on a confidential basis and in the remaining case the ACCC ‘formed the view that it could nto make a decision without conducting public inquiries’). The report summarises the more significant merger reviews.
  • Eight draft authorisation decisions, 12 final authorisation determinations and 6 interim decisions, the most significant being the Qantas/Emirates authorisation.
  • Ninety-six exclusive dealing notifications were received and 78 were allowed to stand (the report sets out the more significant notifications).
  • One collective bargaining notification – by the Manning Valley dairy farmers
    • These were lodged on 25 March so a decision was not made in the quarter; however, on 18 April the notifications were allowed to stand.
  • Continuing investigations include
    • price information sharing between fuel companies
    • shopper docket schemes
    • supermarket conduct (including allegations of MMP) and
    • online competition issues.
  • The revised Compliance and Enforcement Policy was also released in February.

Posted in Competition Policy | 2 Comments »

ACCC releases new Compliance and Enforcement Policy

Posted by Julie Clarke on 21 February 2013

The ACCC’s new Compliance and Enforcement Policy was released today, outlining ‘the ACCC’s priority areas for the year and sets out the factors to be taken into account when deciding whether to pursue matters.’ The document itself runs to 5 pages (including a cover page). View press release. View Sims’ speech, launching the new policy, at a CEDA function in Sydney. There is nothing much new on the competition law front, other than Sims’ repeated promise that we can expect ‘an increase its rate of intervention in competition matters’ by the ACCC. Reference to prioritising concentrated sectors, particularly supermarkets and fuel also came as no surprise.

In his speech Sims spoke a bit about mergers (there is not a single reference to mergers in the Policy document itself). He noted that ‘ACCC has responded to calls by   the trade practices and business community for increased transparency   and engagement with the ACCC during the course of merger reviews’, but also noted that the ‘increased level of transparency and engagement must, however, slow the process down’ (it has been widely observed tha the process has slowed since the Metcash decision; see, for example, ‘Howzat! The War on Mergers‘ from the crew at State of Competition).  In his speech he went on to say that the ACCC is revising its Informal Merger Process Guidelines and will be consulting with stakeholders on a revised draft in the coming months.

Posted in Uncategorized | Tagged: , , | 2 Comments »

Fortune Telling: Australian Competition Law in 2013

Posted by Julie Clarke on 29 January 2013

I’ve written a brief piece for the CPI Antitrust Chonical’s fortune telling issue on what we might expect from competition law in Australia in 2013.

https://www.competitionpolicyinternational.com/fortune-telling-australian-competition-law-in-201/

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Postgraduate Workshop on Competition Law Enforcement – Dublin

Posted by Julie Clarke on 13 November 2011

International Postgraduate Workshop on Competition Law Enforcement

This annual workshop, run by the PhD Community at the University College Dublin School of Law, is calling for papers by 7 December 2011 .

The Workshop will be held in March 2012.

For more details see: http://www.ucd.ie/law/phdworkshop/

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Price signalling bill passes through House

Posted by Julie Clarke on 11 July 2011

Following amendments, brought about by negotiation with the opposition over their proposed amendments, the Competition and Consumer Amendment Bill (No. 1) 2011 has passed through the House (on 7 July 2011). It remains an appalling piece of legislation – Brent Fisse has described it as ‘on the lunatic fringe of international competition laws’.  The retention of broad per se prohibition (accompanied by complex exemptions) and the industry-specific (banking) nature of the legislation is very disappointing; it exempts (at the moment) most of the economy while over-regulating the banking industry and ignoring other forms of anti-competitive collusion altogether.  It is an utter failure as far as good competition policy is concerned. Unfortunately it is unlikely to find much resistance in the Senate when Parliament resumes after the winter break.

For details relating to the bill, including extracts from the numerous second reading speeches, amendments etc (and commentary to follow), visit my Competition and Consumer Amendment Bill (No. 1) 2011 page.

Posted in Competition Policy, Legislation (TPA/CCA) | Tagged: | Leave a Comment »

Report on Price Signalling bills now released

Posted by Julie Clarke on 23 June 2011

The House of Representatives Standing Committee on Economics has now released (three weeks late) the ‘Advisory Report on the Competition and Consumer (Price Signalling) Amendment Bill 2010 and the Competition and Consumer Amendment Bill (No. 1) 2011‘.

The (government) majority recommended that “The House of Representatives pass the Competition and Consumer Amendment Bill (No.1) 2011 and reject the Competition and Consumer (Price Signalling) Amendment Bill 2010.” A dissenting report was prepared by opposition members of the Committee.

The government bill is due to be debated in the House today.

More details on the inquiry and report are on my web site – here.  I will provide further commentary on the report on that site throughout today and tomorrow.  Briefly, it does not look particularly thorough or impressive.  Repeated reference to (perceived) deficiencies highlighted by the ‘Apco’ case are particularly odd, given the proposed limitation of the legislation to the banking industry – at least for the foreseeable future.

Posted in Cartels, Competition Policy, Legislation (TPA/CCA) | Tagged: | Leave a Comment »

Creeping acquisition bill back in Parliament

Posted by Julie Clarke on 15 June 2011

In 2010 the Government announced it would introduce laws to deal with ‘creeping acquisitions’.  In May 2010 they introduced a bill which they claimed would do this (see my blog post discussing the proposed amendments).  That bill was considered by the Senate Economics Legislation Committee which, on 15 June 2010 (precisely a year ago!) recommended that it be passed.  The bill subsequently lapsed as a result of the 2010 Federal Election.

Today the Government re-introduced this bill (in the same terms as far as mergers are concerned – the bill also deals with unconscionable conduct).  View also David Bradbury’s second reading speech.

More to follow …

Posted in Legislation (TPA/CCA), Mergers | Tagged: , , , | Leave a Comment »

Submissions on price signalling bills due Friday

Posted by Julie Clarke on 18 May 2011

Late yesterday the Government announced that submissions to the House Standing Committee on Economics on both the opposition and the government price signalling bills (the Competition and Consumer (Price Signalling) Amendment Bill 2010 and the Competition and Consumer Amendment Bill (No.1) 2011 respectively) were due THIS FRIDAY 20 MAY … yes, they’ve given interested parties less than three days to make a considered submission.

This hopelessly inadequate time frame for considered submissions is all the more farcical given the criticisms of government bill raised first by the Senate Economics Committee in their Banking inquiry Report (chapter eight) and more recently by the Senate Standing Committee for the Scrutiny of Bills, which raised concerns about the fact that the ‘scope of the prohibitions introduced by this bill are to be determined entirely through delegated legislation.’ (see Senate Standing Committee for the Scrutiny of Bills Altert Digest 4 (pages 19-20)).

For those interested in the issue and in making a submission I also recommend reading the op-ed on page 63 of today’s Fin Review by Caron Beaton-Wells and Brent Fisse, who have been the most vocal commentators on the Government’s proposed price signalling laws. You may also wish to read the submission made by Caron and Brent to the Treasury following the release of their initial exposure draft bill – other submissions relating to that draft can be found here (there may have been more considered submissions on that draft had the submission period not been over the Christmas/school holiday period!)

View the Inquiry home page.

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Milk inquiry second interim report released

Posted by Julie Clarke on 10 May 2011

The Senate has released its 98 page second interim report on ‘The impacts of supermarket price decisions on the dairy industry‘.

Committee comments

The committee notes that many of the issues raised by the inquiry ‘require scrutiny over a longer period of time’.  Accordingly, it concludes that ‘it is not able to draw final conclusions or make recommendations at this stage’. Recommendations will be made in the final report to be released in October.

The report is divided into five chapters.  The first is introductory, discussing the referral of the inquiry, the conduct of the inquiry and an outline of the report.  Chapter 2 deals with the supermarkets’ recent pricing decisions, chapter 3 with the Australian dairy industry, chapter 4 with prices and profitability in the supply chain and chapter 5 with the supplier-purchaser relationships.

In chapter 3 they make the important point that only about 25 per cent of Australian milk production is used for drinking milk and only about 13 per cent of national milk production is sold in supermarkets as drinking milk.  Coles estimates its share of this ‘drinking milk market’ to be approximately 17 per cent (total sales accounting for only four per cent of the national milk production) (p 33) – this gives a perspective rarely reported.

In concluding comments the report observes (at p 64):

While the committee is mindful of the  many submissions outlining the potential impacts of lower supermarket milk prices on the dairy industry, it is equally cognisant of the benefits to consumers from sustained lower prices.  As a general rule, lower  pries are good for consumers. …

They reserve final conclusions until they know the duration of the ‘Down Down’ campaign and the ‘outcome of renegotiated contracts with the processors and impact on farmgate prices’.  Further submissions are invited regarding these two matters to help inform the final report and recommendations to be released by 1 October.

Then there are two sets of Additional Comments.

Additional Comments by Xenophon, Heffernan, Williams and Milne

The first ‘Additional Comments’ are by a group Senators comprising Nick Xenophon, Bill Heffernan, John Williams and Christine Milne.  Of this group only Senator Xenophon is a member of the Committee; the others are participating members in the inquiry.

The Comments by this group are entirely predictable.  They’re not happy with the Government and they’re not happy with the ACCC, for whom they reserve their most vicious attack.  Their comments start with a lengthy and emotive extract from a letter by a dairy farmer worried about the future of the industry.  More comments from dairy framers follow.  They conclude (without any apparent justification) that the ‘benefits of the milk price war will inevitably be short lived’ and could result in higher future prices and ‘irrevocable damage to Australia’s dairy industry’ (p 66).

They then refer to the 2009/2010 milk inquiry resulting in the report: ‘Milking it for all it’s worth‘.  The Government (to the relief of many) has not acted on this report which included, among its 16 recommendations, that anti-price discrimination provisions be enacted and that a specific market share be presumed to constitute market power.  The Senators claim that had the recommendations been adopted the ‘current difficulties being felt by the dairy industry could have been ameliorated’ (they do not explain how) (p 67).

Then they turn their attention to the ACCC’s role (or, as they claim ‘lack thereof’).  They claim the ACCC’s evidence to the inquiry has been ‘less than satisfactory’ and that they have taken a ‘wait and see’ approach to the  milk price war which is unsatisfactory ‘given the statutory powers and enforcement mechanisms available to it’ (p 68).  They  note that the ACCC told the Committeee that it has to have ‘reason to believe that there may’ be a ‘breach of the law or predation’ before acting.  The Senators dismiss this as only the ‘ACCC’s interpretation of the Act’ (p 69).  They rely on evidence from highly self interested parties (Woolworths and processors) to claim that there is sufficient evidence of future harm (p 69) and further cirticise the Treasurer for also adopting an apparent ‘wait and see’ approach.

The Senators then turn their attention to claims of misleading conduct – in particular, they claim Coles’ Down Down campaign is misleading.  They criticise the ACCC for not taking pre-emptive action for misleading and deceptive conduct:

[p 70]: … the ACCC again advised that it cannot investigate any misleading or deceptive conduct around this claim until the conduct has occurred.  This sort of reactive approach is a fundamental flaw in the role, the operations and the attitude of the ACCC

How odd that a regulatory body should not be able to sue someone for a crime or regulatory breach before it has occurred!  So apparently they wish Coles to be sued for misleading conduct without any evidence of that breach on the off-chance their statements may prove to be misleading in the future … clearly the Senators don’t bother reading the act or understanding the policy behind it.

Then we turn to the infamous Birdsville Amendment and to nobody’s surprise they rely on evidence from Frank Zumbo, drafter of the bill, whose obsession with it is legend.  It was enacted in 2007; the Government has sought to amend it to remove its most offensive aspects but has been prevented by a hostile Senate; an OECD report has recommended that it be repealed.  Yet Zumbo and these Senators press on, criticising the ACCC for not having tested the provision and claiming that the ‘ACCC should pursue this matter as a test case to see how the courts will rule on this key predatory pricing provision’.

They claim the ‘inaction of the ACCC … is extraordinary’ (at p 73) and claim there has been an ‘apparent lack of enforcement of current competition laws’. Clearly they suggest that the only conduct on the ACCC’s part that would be considered ‘action’ involves suing Coles, as the ACCC has given an abundance of evidence that it has been monitoring the pricing situation.

They further claim that divestiture powers should be introduced (their targets are clearly Coles and Woolworths), claiming (falsely) that the US use these powers to break up companies that become too large (while certain divestiture powers do exist the US takes a very hostile approach to just breaking up companies which succeed in acquiring market power/share)

They also recommend that unfair contract terms provisions under the Australian Consumer Law be extended (it’s an amendment smorgasbord that’s proposed).

Finally they claim that ‘a floor price should be implemented for domestic drinking milk supply as an urgent interim measure’ (p 73) – this is highlighted in a media article by Julian Drape in the SMH yesterday (‘Dairy farmers need floor price: Xenophon‘)

Additional Comments by Senator Scott Ryan

Fortunately Senator Scott Ryan, who provided the voice of reason in the Senate hearings, has provided an equally well reasoned ‘Additional Comment’ of his own beginning p 74, which points out some of the flaws in the Additional Comments by the other group of senators.  He first sets out the purpose of competition and competition policy, noting, in particular, that

‘competition policy is not designed to protect particular players, institutions or firms.  To do so at the expense of consumers would be a retrograde step, and represent a significant regression of the reform agenda of the last two decades.’

He also observes that while there have been many submissions to the inquiries from those in the industry, the inquiries do not ‘hear from the great mass of consumers. Consumer preferences are expressed and revealed through their spending’ (p 75).

He also notes the important point that supermarkets do not source their drinking milk directly from farmers, but rather from processors who have the contractual relationship with the dairy farmers.  In this respect, he observes that some of ‘the most concerned witnesses and submissions about the retail price cuts were the milk processors’.  He notes that a decline in the value of processor-owned brands through exercise of consumer preference to generics ‘is not something that should be discouraged by public policy’, pointing out that in other areas – such as medicines, the government encourages the use of generic brands.  He observed (at p 77) that there was unchallenged evidence before the committee that current milk competition was saving consumers $1m per week.  It should, he claimed, be acknolwedged ‘that consumers are experiencing an improvement in their welfare through lower prices’.

He further notes – sensibly – that, contrary to what certain Senators seem to believe,

‘Supermarket chains should not be forced to defend themselves in the first instance for behaviour thatthe market itself encourages and which we generally desire – in this case lowering prices.

Allegations of predatory behaviour or misleading conduct are serious and should be investigated – but they need to be proven.’

He notes that the recent milk competition has illustrated ‘the competitiveness of the supermarket retailing sector, at least at the moment and in this instance’ (pp 77-78) and this should be considered a positive outcome.

Senator Ryan then turned (briefly) to the ACCC.  He noted that many years ago Parliament had made a decision to create an ‘independent’ body to make determinations regarding the operation of markets which would be free from the interests of politics and politicians.  He did, however, acknowledge concerns about enforcement by the ACCC, attributing some concern to lack of public awareness about ACCC activity; in this respect he suggested providing greater public information about ACCC activities to build public confidence and knowledge, thereby increasing accountability.

The well reasoned and sensible approach taken by Senator Ryan in his remarks is in stark contrast to the reactive and emotional rant evident in the Additional Comments by the other group of Senators; one can only hope that the final report will follow Senator Ryan’s approach.

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