Competition Law

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Posts Tagged ‘ACCC’

Harper Review in full swing

Posted by Julie Clarke on 2 July 2014

The Harper Review (Competition Policy Review) is in full swing.  The wide ranging Issues Paper has led to an equally wide ranging set of submissions (currently standing at 236 publicly released).  I have begun to summarise and collate them here (the Review site keeps changing the URL on the submissions page which is most unhelpful).  For the most part they are not an impressive bunch – plenty of self interest, industry-specific requests/recommendations and lots of supermarket bashing (sometimes thoughtful and measured; often not), but there are exceptions.  So far (and noting that I have not read all of the latest 74 submissions released last Friday) they can be classified into:

  • broad policy submissions, often referencing particular industry-specific competition issues or excess regulatory
  • submissions on secondary boycotts (many submissions arguing to retain exceptions relating to environmental issues and consumer welfare and several employee groups arguing that they should extend to protect secondary industrial action)
  • shipping submissions (to retain Part X)
  • consumer law submissions (mixed bunch; many to extend unfair terms laws to small business – several opposed to such a move as well as broader submissions on unconscionable conduct and other consumer laws)
  • IP exemptions (lots of submissions with mixed bag for/against retaining s 51 exemption (eg CHOICE against and Australian Copyright Council for) and more discussing parallel imports and international price discrimination and a few arguing for a ‘fair use’ exemption to copyright laws)
  • Part IV CCA discussion (relatively few submissions discuss Pt IV issues)
    • cartels (several calls for simplification and JV clarification; see, eg, Beaton-Wells and Fisse)
    • price signalling (mainly to repeal; some suggest expand industry wide (eg, ACCC))
    • misuse of market power (largely around effects test; some for (like ACCC); other opposed; some to scrap Birdsville (worth a try – but compare Aust Dairy Farmers Ltd); some for divestiture powers in cases of MMP contravention)
    • mergers (a few on creeping acquisition laws – grocery sector focus; a few on notification process.  See in particular Herbert Smith Freehills focusing exclusively on mergers)
    • exclusive dealing – third line forcing (for removal of per se ban – even the ACCC is seeking competition test)
    • price discrimination (some recommend re-introduce/some oppose – but not much here – main focus on international price discrimination)
    • RPM (some to remove per se ban; some to retain (eg ACCC); Minter Ellison goes further)
  • Access (mixed bag)
  • Powers and functions of ACCC (most want to keep ACCC in tact – no comp/consumer etc split; some call for more powers; some call for market studies and ex post review powers/obligations; some discussion of s 155 powers (ACCC want extended; others critical of breadth of s 155)
  • Government and competitive neutrality (mixed bag)

Of those released so far the ACCC’s 145 page submission (view on ACCC website), which it released on 25 June, has probably received the most attention.  For a brief overview click here.

More detail will follow once I get a chance to review all the most recent submissions.  However, based on the scope and diversity of the submissions released so far, I don’t envy the Panel their task!

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Sims’ Law Council speech

Posted by Julie Clarke on 12 August 2013

ACCC Chairman, Rod Sims’ address to the Law Council of Australia’s Competition and Consumer Workshop is now available from the ACCC website. In it, he provides a tribute to Ron Bannerman, sets out regulatory issues for 2013, discusses the review of the Merger Review Process Guidelines, talks about compliance and enforcement, addresses some consumer issues and discusses ACCC engagement in the region.

Mergers

In relation to mergers Sims noted that the ACCC’s ‘main focus will be on a real world understanding of market structure and import competition, entry barriers, countervailing power and the overall competition process’ rather than ‘complex theories and detailed modelling’. He also noted that the ACCC was ‘close to finalising the revised Process Guidelines’, noting one of the key changes was to move away from the practice of setting 6-8 week standard review periods for all public merger reviews, noting that in complex cases reviews will often take longer than eight weeks and that in some cases review periods will be extended to coordinate reviews with other agencies. Sims also acknowledged concerns about the timeframes for publishing public competition assessments, noting that the ACCC has ‘undertaken steps internally to streamline our processes for preparing PCAs’ and will aim to publish within 30 days of announcing its final decision.

Compliance and enforcement

Sims noted that the ACCC wins around 80 per cent of cases it takes. Focus is consumer law, but Sims also focussed a lot on the ‘largest penalties for cartel conduct in the history of the ACCC’ – this is cumulatively and relates to the international air cargo cartel, for which many regulators can claim success. Sims also noted there had been five competition proceedings instituted in the 2011-2012 financial year (four alleging cartels and one (against Visa) alleging misuse of market power and exclusive dealing). Once again Sims promised more competition cases in the coming year. Sims also spoke about the ACCC’s review of its immunity policy for cartel conduct, which he anticipates will be finalised in the coming months, with a discussion paper to be released in September.

International engagement

Sims described the ACCC’s efforts to maximise engagement in the Asian region and noted that the ACCC will host the ICN annual conference in 2015.

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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.

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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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Government nominates Rod Sims as next ACCC Chairman

Posted by Julie Clarke on 3 May 2011

The Gillard Government has nominated Rod Sims to be the next Chairman of the ACCC. The nomination requires majority support from the States and Territories; presuming that is received, Mr Sims will be appointed on 1 August for a 5 year term, replacing current Chairman, Graeme Samuel. View photo (source: Daily Telegraph)

Sims has previously worked for the Australian Government, including as the Deputy Secretary in the Department of Prime Minister and Cabinet and Deputy Secretary responsible for Transport in the Department of Transport and Communications.  From 1988 to 1990, he was the economic adviser to the then Prime Minister, Bob Hawke.  He is currently:

Mr Sims holds a  degree in Commerce from the University of Melbourne (first class honours) and a Master of Economics from the Australian National University.

He conducted the research for Business Council of Australia report (Strategic Framework for Emissions Reduction, 3 April 2007), which challenged the Rudd Government’s emissions trading scheme (in the proposed form) – see ‘The Strategist‘ (The Australian,  17 October 2008).

See also the Report by Mr Sims, ‘Seizing the Opportunity to Reform and Restore Australia’s Economic Infrastructure‘, contained in the BCA’s report ‘Groundwork for Growth: Building the Infrastructure that Australia Needs

The Australian Industry Group has responded, stating that Rod Sims ‘is a sound appointment that will be well received by business’

Related news:

UPDATE: Rod Sims was confirmed as the next ACCC Chairman following unanimous support for his appointment by the states and territories.  His five year term will start on 1 August.  View Treasury media release.

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Metcash v ACCC

Posted by Julie Clarke on 24 November 2010

The fight is on.

Metcash have announced that they will proceed with its planned takeover of Franklins, despite the ACCC last week announcing that it would oppose the acquisition (view press release and informal merger decision).  Yesterday’s media release stated, in part:

Metcash Trading Limited has notified the ACCC that, in not fewer than 5 business days from today, it intends to take further steps to proceed with the Proposed Transaction.

This is the first such challenge since the Toll Holdings showdown in 2006 (which was ultimately resolved with undertakings) and AGL in 2003, which was successful in its Federal Court challenge (in which it sought and was given a declaration that its merger would not contravene s 50 (see AGL case).  I can’t wait.

Thanks to the usual suspects (Nationals Senator Ron Boswell and independents Nick Xenophon and Steve Fielding, supported by the opposition) the Senate Economics Committee is also going to consider the ACCC’s decision in this (see Senate Hansard, 23/11/2010 at p 37) – this is an extraordinary referral to the Committee and it’s not entirely sure what it is designed to achieve, other than political point scoring and an undermining of the ACCC’s independence.  Submissions are due by 29 November (less than a week, which just adds to the  farcical nature of this inquiry).  The report is due on 17 December 2010 (because it takes non-expert Senators much less time to get their head around the complex law and economics issues associated with mergers than the expert lawyers and economists at the ACCC).  Another extraordinary waste of time and money.

Much more to follow on this one.

There’s plenty of media on this, including:

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Market definition in Australia

Posted by Julie Clarke on 20 October 2009

Earlier this month (on 2 October 2009) the Full Federal Court dismissed Singapore Airlines’ appeal against a decision of Justice Middleton which challenged ACCC investigation powers under s 155. A key issue was whether ‘routes between two points wholly outside Australia could be within a “market in Australia”.’ In rejecting the appeal, the Full Federal Court held that ‘prices fixed for legs of a journey which take place wholly outside Australia may ultimately affect competition in a market in Australia’. ACCC Chairman, Mr Graeme Samuel, noted that the decision was crucial in that it

‘confirms that the Act is able to reach cartels formed outside Australia affecting Australians. The Full Federal Court has also confirmed that the ACCC is fully able to investigate conduct occurring overseas. Here we are investigating a worldwide market for air cargo services.’  See ACCC Press Release.

The decision is a positive one. The definition of market in s 4E of the Trade Practices Act as one within Australia is artificial and distorting in cases where the reality is that the market is global or, at least, transnational.  It is not a problem that appears to arise in other jurisdictions which more sensibly focus on local effect on competition without the artificial market restriction.  Confirmation that a global market might be classified as a ‘market in Australia’, even where relevant conduct occurs entirely outside Australia is a positive step – and consistent with foreign approaches to the application of competition laws to conduct occurring abroad – but it is not a complete panacea for the problems generated by our restrictive market definition.

The last time this was officially reviewed was during the course of the Dawson Review of the competition law provisions of the Act which addressed it very briefly in the context of mergers (in which the definition of market is defined as a substantial market for goods or services in Australia, a State, a Territory or a Region of Australia: s 50(6)).  The Report concluded that this definition is not too restrictive and that it allows regard to be paid to foreign competition.  However it entirely glossed over the point that a market which is transnational cannot be.  I briefly discussed this in ‘The Dawson Report and Merger Regulation’ (2003) 8 Deakin Law Review (pages 59-61).   See also submission by Dr Maureen Brunt – ‘Market Definition in the Trade Practices Act: the Challenge of Globalization’.

The issue has arisen in a number of cases recently, with judges taking vastly different approaches to the meaning of market in the TPA.  The importance of defining market in a realistic, rather than artificial, way has increased with the globalisation of markets and will continue to do so as more conduct occurring outside our territorial shores impacts on our domestic competitive environment.  It is time to revisit the issue of market definition for purposes of the competition law provisions of the TPA.

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

 
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