As the weather and the enforcement appetite of the Australian Competition & Consumer Commission (ACCC) continues to heat up, we look at recent trends in Australian competition law. Amongst high profile criminal cartel prosecutions and active participation in the reform agenda, the ACCC has also been focussing on businesses in concentrated and critical sectors.1
Big business. Big penalties.
The ACCC is continuing to further its pursuit of higher penalties, following research conducted by the OECD advocating for higher penalties for competition infringements, and last year’s introduction of higher penalties for breaches of the Australian Consumer Law.
In the last quarter, we have seen a second global shipping cartel participant convicted of criminal cartel conduct and ordered to pay a fine of $34.5 million. It is the largest criminal fine imposed under the Competition & Consumer Act 2010 (Cth) (CCA), and the second largest fine or penalty against a corporation in a competition case, behind the landmark $46 million civil penalty ordered against Yazaki Corporation last year. The Federal Court also recently ordered a 14th airline to pay penalties of $19 million for its involvement in a global air cargo cartel, bringing the ACCC’s total penalties in its air cargo litigation to $132.5 million.
The ACCC has indicated that it intends to publish guidelines soon on its approach to penalty submissions in competition and consumer law cases, providing further guidance to businesses on its case for higher penalties and deterrence aims.
Big businesses continue to be in the spotlight in recent consumer law enforcement proceedings. In the last quarter, enforcement action was taken against major businesses including Bupa, Optus, Samsung and Sony for false or misleading conduct. No doubt the ACCC will be putting the higher penalty regime to the test where it can – where corporations now face maximum fines up to the greater of $10 million, three times any benefit gained and 10% of the corporation’s turnover in the preceding 12 months.
Active criminal cartel enforcement
The ACCC is continuing to be an active enforcer in criminal cartels, with two further criminal cartel prosecutions referred by the ACCC and instituted by the Commonwealth Director of Public Prosecutions in the last quarter. These include charges laid against a Norwegian-based global shipping company, the third company in the global shipping cartel investigation mentioned above, as well as an Australian-based money transfer business.
These new prosecutions add to a range of contested criminal cartel matters currently making their way through the courts against the CFMMEU, Country Care, and three major banks. Holding individuals to account for criminal cartel conduct is also high on the ACCC’s enforcement agenda, with multiple individuals, including senior executives, also charged in these cases.
Whilst we have mentioned some of the ACCC’s case successes above, the ACCC has also had some losses. However, this has not lead the ACCC to [shy] away from the more complex cases with less clear-cut outcomes2. This has been borne out both in the commencement of first-instance proceedings by the ACCC and the taking of appeals across competition and consumer law matters. Success for this regulator comes not only in wins but in clarifying the law and seeking outcomes beneficial to the public.
In addition to taking advantage of its remit to seek higher penalties (as foreshadowed above), the next frontier will be testing the (relatively) new prohibition against misuse of market power under section 46 of the CCA. The ACCC has predicted that its first case will commence this year.
Honing in on concentrated and critical industries
The ACCC is also taking a strategic approach to understand concentrated and critical industries.
There has been an increasing regularity of market studies and sectoral investigations. The ACCC notably published its final reports in its digital platforms and foreign currency conversion services inquiries this quarter, as well its interim report into the wine grape sector.
This shift is also evident from earlier moves to establish dedicated enforcement teams focussed on the financial services, agriculture and construction sectors. It is likely that the ACCC will continue this approach, with its digital platforms inquiry final report calling for the establishment of a dedicated branch within the ACCC tasked with monitoring and investigating competition and law issues facing the digital platforms sector.
Similarly, the ACCC’s mergers and acquisitions activity shows that while a reasonably consistent number of informal clearance applications have been made to it over the last five years, it appears to be being more strategic about which matters it takes to a public review, and progresses to an in-depth investigation. Year to date, the number of matters being progressed to a second stage of inquiry following the publishing of a Statement of Issues is half the number that progressed that far around five years ago.
Impact of digital platforms inquiry on reform agenda
The ACCC recently published its final report in its digital platforms inquiry, following an 18-month market study into the sector. The final report delivered 23 recommendations to the Government – spanning competition law, consumer protection, media regulation and privacy law. The ACCC’s report is one of a number of significant inquiries that regulators around the world have undertaken to look more closely at digital markets and the strength of certain platforms.
Some of the ACCC’s recommendations include a number of potential reforms to the CCA including:
- incorporating additional merger assessment factors relating to whether a merger or acquisition would remove a potential competitor and the nature and significance of the assets being acquired (including data and technology);
- prohibiting unfair contract terms and having them attract civil pecuniary penalties (rather than the current position whereby unfair contract terms are only voidable); and
- including a prohibition on certain unfair trading practices.
In advocating for the above potential reforms to the CCA, the Chairman of the ACCC has also been vocal in his desire to achieve more significant changes to the test for whether or not a merger will contravene the CCA. Mr Sims views the ACCC’s burden of proof to be too high, especially in circumstances where the likelihood of a lessening of competition may be more uncertain, but could be very substantial in effect, if it does occur.
Changes to intellectual property licensing protections
The Government’s repeal of the intellectual property exception under the CCA took effect on 13 September 2019. Before then there was a limited exception to the application of certain competition provisions of the CCA (excluding misuse of market power and resale price maintenance) to conditions imposed in licenses or assignment of patents, registered designs, copyrights and circuit layouts.
In August, the ACCC published its final Guidelines on the repeal of subsection 51(3) of the Competition and Consumer Act 2010 (Cth), which provides greater clarity to businesses on the approach that the ACCC will take to its compliance and enforcement activities following the repeal of the exception and areas that may raise concerns.
The new guidelines suggest that by-and-large, most licensing or assignment arrangements that impose conditions on a licensee are likely to enhance competition, by providing for a greater exploitation of intellectual property rights than a scenario without the license or assignment. It appears more likely the ACCC will take an interest in matters where a right holder seeks to impose conditions that seek to confer an advantage on the right holder collateral to the subject of the license, or extend any market power a party may have, where this has the purpose or effect of substantially lessen competition.
Nonetheless, technical cartel issues are more likely to arise and we have made recommendations on what businesses should be doing to ensure that their arrangements are compliant. Please see our previous article published on this topic: link.