Risk-advisory-umbrella-insurance-law-risk

The perfect storm… for competition law risk

Authors: Claire Forster, Charlotte van Beek and Christy Lee

Publication January 23, 2020


Introduction

The first concerted practices enforcement action has resulted from posts on a Facebook roofing industry page. The Australian Competition and Consumer Commission (ACCC) has accepted enforceable undertakings from two roofing companies and their directors for attempting to price fix and engaging in concerted practices. It illustrates how opportunistic conduct may cross the line into illegal behaviour.

What happened?

After a damaging Sydney hailstorm in December 2018, the directors of the two roofing companies posted the following in a Facebook roofing industry group (usually used to advertise jobs and discuss industry issues).

  • ANZ Roofing: “I think this latest storm is the perfect opportunity for the roofers of Sydney to increase pricing across the board as a standard that doesn’t decrease!”
  • Ivy Contractors Pty Ltd: “Let’s agree that we start from $65 and go up”, about a particular roofing service supplied by the metre.

The posts speak for themselves; it is not often the ACCC is gifted with such clear evidence of anti-competitive intent.

The allegations

The ACCC alleged the Facebook posts were:

  • likely an attempt to fix prices for roofing services in contravention of s 45AJ of the Competition and Consumer Act 2010 (Cth) (Act); and
  • likely contravened s 45(1)(c) of the Act – which prohibits engaging in a “concerted practice” that has the purpose, effect or likely effect, of substantially lessening competition.

First concerted practices action

For the first time since they were introduced in 2017, the concerted practices prohibitions have been activated in an enforcement outcome. A “concerted practice” is described as cooperation between two parties, or conduct likely to establish cooperation, where the conduct substitutes, or would be likely to substitute, cooperation in place of the uncertainty of competition. Concerted practices are only prohibited when they have the purpose or likely effect of substantially lessening competition.

Although this is a fairly clear cut example, it is a helpful signal of the ACCC’s focus on this new prohibition.

Outcome

Considering the small size of the companies and their cooperation, the ACCC decided not to institute proceedings. Instead, the ACCC accepted court-enforceable undertakings that the companies and directors admit the behaviour, not repeat the behaviour and undertake relevant training. ANZ Roofing is also required to publish a Facebook post on prohibited anti-competitive conduct.

Had the ACCC commenced proceedings, it would have had to establish (among other things) the requisite ‘meeting of the minds’ to prove an attempted contravention of the price fixing sections of the Act. It would also have had to demonstrate the requisite anti-competitive purpose to demonstrate an illegal concerted practice.

Communicating with competitors carries risk

The case underscores the known risk of engagement in industry groups, and highlights the particular risks for the social media versions of those groups, in which it is more tempting to make comments in a knee-jerk manner, without considering legal and other risks. Concerted practices is of particular relevance in this space, where information sharing is central to the use of the medium.

Opportunistic conduct or anti-competitive behaviour?

Businesses understandably seek to turn external events to their advantage to maximise profits. Sometimes this can be pro-competitive, such as where it results in innovative products or services. Opportunistic firms can also enter markets to take advantage of a new niche created by an external event, making markets more competitive. Indeed coordination between competitors is permissible if properly structured, such as through a joint venture.

However, the roofing case provides a clear illustration of circumstances in which opportunistic conduct can break the law. This can happen in a number of ways, including:

  • communications with competitors crossing the line between legitimate sharing of information about an external event that impacts the industry into cartels or anticompetitive concerted practices;
  • misleading or deceptive conduct (e.g. if an external event gives a particular attribute newly heightened value to consumers, and a business falsely represents that its products or services have that attribute); or
  • unconscionable conduct, which can occur where opportunistic conduct is deliberate, clearly unfair or unreasonable and is particularly harsh or oppressive to consumers - recent instances in the wake of the Australian bushfires, for example, have been a focus for the ACCC.

In order for businesses to ensure they stay on the right side of the line in relation to concerted practices, they need to ensure that any steps they take to respond to an opportunity (including public communications) remain consistent with continued competition.



Recent publications

Subscribe and stay up to date with the latest legal news, information and events...