It’s been a hugely busy year for the ACCC as Gina Cass-Gottlieb, ACCC Chair wraps up her first full year in the job.
In 2023, we’ve seen the ACCC consider the toolkit available to it and take a more flexible approach to enforcement, particularly in combatting misleading and deceptive conduct. On the other hand, the ACCC has taken a more vigorous approach to mergers. Other notable activity has included a resurgence in resale price maintenance actions, the ACCC changing tack when enforcing cartel conduct law, and a continued focus on the agricultural sector.
Here we give a snapshot of each of these developments:
In a demonstration of flexibility, the ACCC uses its full Toolkit to Combat Misleading and Deceptive Conduct
In one of her first in depth interviews in 2022 after becoming Chair of the ACCC, Gina Cass-Gottlieb, flagged that she favoured a non-adversarial approach but she would litigate the more serious cases. She also said the ACCC’s enforcement approach would include looking at the ACCC’s toolkit and asking “What’s the right step?”. In 2023, the ACCC instituted Federal Court proceedings for breach of the misleading and deceptive conduct provisions of the Competition and Consumer Act 2010 (Cth) (CCA) in a limited number of cases, with infringement notices and other non-adversarial outcomes being used as an enforcement tool more predominantly.
Infringement Notices and other Non-Adversarial Outcomes:
- Infringement notices amount to a fraction of what the ACCC could seek in terms of penalties if it were to pursue litigation against a company in the Federal Court. However, they are a speedy and efficient way for the regulator to effect enforcement outcomes. In July 2023, the ACCC issued two infringement notices amounting to $33,000 against Costco for alleged false or misleading labels declaring the place of origin of their lobster products. Millell, trading as Pet Circle, paid penalties of $26,640 in August after receiving two infringement notices. Pet Circle allegedly misled two customers about the price of their pet supplies when ordering online. In November, Riff Raff Baby faced penalties of $132,000 after eight infringement notices regarding statements about their comforter toys being safe for sleep from birth.
- There were also other non-adversarial outcomes. In June, the ACCC announced resolution of a matter involving Mitsubishi Motors Australia. Mitsubishi represented that Queensland Farmers Federation members were entitled to a 15% discount on all Mitsubishi vehicles. However, this only applied to the Mitsubishi Triton. Mitsubishi agreed to provide partial refunds to affected customers, with the ACCC neither seeking to impose infringement notices nor seeking a Court-enforceable undertaking. In November, in what is a surprising outcome given the ACCC’s focus on environmental claims, MOO Premium Foods provided a Court-enforceable undertaking to the ACCC under which MOO admitted that its “100% ocean plastic” claims were likely false and misleading. It committed to removing the “ocean plastic” representations from its yoghurt packaging, social media, and website, while also publishing corrective notices.
- Six proceedings were commenced for false or misleading conduct up to December this year. In May 2023, the ACCC sued Meg’s Flowers, an online trader, for making allegedly false and misleading claims that it was a local florist. In July, the ACCC instituted proceedings against Secure Parking for allegedly misleading claims about their “Secure-a-Spot” service, while in August they launched action against Qantas alleging deceptive advertising of more than 8,000 tickets for flights which were already cancelled. In September, the ACCC commenced proceedings against eHarmony for allegedly making misleading statements about the pricing, renewal and duration of its memberships, while EnergyAustralia allegedly breached the Electricity Retail Code with misleading representations about their pricing. In November, the ACCC commenced proceedings against RSA Express, trading as Express Online Training, for allegedly false representations that their online training courses only required payment if the student passed, and that the courses could be completed in one day.
These enforcement outcomes are possibly not surprising given Gina Cass-Gottlieb’s preference for a non-adversarial approach except in serious cases. However, they do seem to suggest a change in focus for the ACCC.
In Mergers, the ACCC has been Willing to Play Hard Ball
It’s been a particularly busy year for the ACCC mergers team, with a flurry of merger decisions coming out in the last week or so.
Change in approach
In 2023, there has been a distinct change in approach by the ACCC when it assesses mergers. The ACCC is increasingly prepared to play hard ball and to take a robust approach to questioning and at times blocking mergers, especially in markets it believes are concentrated or where there is a real risk of consumer harm. This has played out with the ACCC not hesitating to flag concerns about deals, being sceptical about information presented by merger parties and repeatedly going back to merger parties and the public to gather additional information.
This new approach shouldn’t come as a surprise though. The writing was on the wall soon after Gina Cass-Gottlieb took office. She made it clear in the media that she’d be taking a practical approach to mergers, asking “What is really going on here?” and also a broad view of economic harm. She also warned companies against the approach in global transactions of dealing with the ACCC late in the process and drip-feeding information or proposing undertakings to address competition concerns at the 11th hour, saying the ACCC would “not hesitate to push back”. We’ve seen this play out this year and it comes amidst the continued calls from the ACCC that the current merger regime is broken.
Authorisations rising in popularity
We’ve also seen the ACCC increasingly being approached to clear mergers by way of the statutory authorisation process. This process mandates a statutory test (with a 90 day statutory timeframe) which requires the ACCC not to grant authorisation unless it is satisfied in all the circumstances that the proposed acquisition would not be likely to substantially lessen competition, or that the likely public benefits would outweigh the likely public detriments. Three large and complex authorisation applications have been before the ACCC this year:
- Linfox Armaguard/Prosegur (June 2023) – the authorisation was granted, allowing the parties to merge their cash distribution and management businesses (cash-intransit), as the ACCC was satisfied that the cash-in-transit industry is in structural decline and without the merger, one of the applicants would be likely to exit in the short term. This would disrupt the availability of cash-in-transit services and significantly, customers’ access to cash.
- ANZ/Suncorp (August 2023) – the ACCC refused to authorise ANZ’s acquisition of Suncorp Group’s banking arm after a lengthy process as it was not satisfied it would not substantially lessen competition in the supply of home loan market and SME banking and agribusiness banking in Queensland and it would further entrench the position of the four major banks. An appeal has been lodged with the Australian Competition Tribunal which is set down for hearing in 2024.
- Brookfield/Origin Energy (October 2023) – the ACCC granted the authorisation on conditions despite its concerns about vertical integration. The ACCC made an evaluative judgment and though finely balanced, was satisfied that the deal was likely to result in a number of environmental benefits that it considered to be material public benefits (being important and of value to Australians and likely assist in global efforts to combat climate change). For example, the ACCC was persuaded (interestingly without quantification data) that the deal would likely accelerate additional renewable generation and storage build-out development which may lead to a decrease in emissions intensity and in turn result in a reduction of greenhouse gas emissions.
The ACCC has continued to strongly argue that the current merger regime is no longer fit for purpose. It is pushing for better tools to assess mergers especially with rapidly changing markets and where complex commercial considerations are at play. The ACCC says it’s hamstrung by several things – parties either not notifying mergers at all or notifying late and often with insufficient or inaccurate evidence; the onus being on the ACCC to prove a merger’s anti-competitive effect, with information asymmetry and evidentiary problems. The ACCC says the current system is skewed to clearing potentially anti-competitive mergers which it would like to oppose but cannot as it’s unable to prove their anti-competitive effect to the standard required by a court.
Against this backdrop, in August 2023, the Federal Government announced a two-year Competition Review, and in November, a consultation paper on merger reform was released. The Government is seeking views from various stakeholders about current merger rules and processes. If the ACCC can convince the Competition Review and government that the current system is broken, in future, we will have a far stricter merger clearance regime to grapple with as well as a new merger test. It’ll then be a brave new world for mergers in Australia.
Resale Price Maintenance Actions make a Resurgence
The ACCC has always been effective in running resale price maintenance (RPM) proceedings that it chooses to pursue, even though these proceedings are not very common. In 2023, the ACCC negotiated two Court-enforceable undertakings, one against Hornet Industries and the other against Brilliant Lighting, revoked a notification of RPM involving Graco Australia, and obtained a record RPM penalty of $15 million against Techtronics.
- In August 2023, recreational bike supplier Hornet Industries admitted that it had likely engaged in RPM by requiring its independent resellers not to sell products at or below its specified minimum prices in the agreement in place with Hornet and directing them not to sell below those prices. Hornet provided a Court-enforceable undertaking to the ACCC that it would advise all its independent resellers that agreements containing minimum price requirements have been withdrawn and that they are free to set their own prices. Hornet also undertook to notify these resellers that any prices contained in its communications are recommended prices only and there is no obligation to comply with the recommendation.
- In October, the ACCC accepted a Court-enforceable undertaking from lighting distributor Brilliant Lighting, which admitted to writing to 42 retailers and distributors informing them that they should not display headline prices on their websites below certain minimum prices and that their distribution rights were based on adhering to those prices. In its undertaking to the ACCC, Brilliant Lighting committed to sending corrective notices to all affected retailers and distributors, establishing a compliance program, and agreeing not to enforce minimum resale prices.
Revocation of notification:
- In November, the ACCC decided to revoke the RPM notification lodged by paint sprayer supplier Graco Australia in March. That notification, if allowed to stand, would have allowed Graco to stipulate a minimum advertised price below which distributors could not advertise Graco’s airless and air-assisted paint sprayers. Graco claimed that heavily discounted online prices meant online distributors were “free-riding” off high-service distributors, and that guaranteed retail margins would improve services offered to consumers. Noting the market concentration in this segment, the ACCC considered the proposal was likely to result in public detriment in the form of increasing prices for at least some customers by softening distributors’ ability and incentive to compete on price and offer significant discounts. The ACCC also concluded that the proposal was unlikely to result in any significant public benefit, noting there was limited evidence of “free-riding” by the discounting distributors.
- On 1 December, power tool supplier Techtronics was ordered by the Federal Court to pay penalties totalling $15 million after admitting it had engaged in RPM, setting a new record for RPM penalties in Australia. Between January 2016 and July 2021, Techtronics entered into 97 agreements with distributors and retailers which restricted the sale of its Milwaukee branded products below specified minimum prices. It enforced these RPM provisions 29 times, including by issuing warnings and withholding supply. In its media release, the ACCC stated that the level of penalty was appropriate “given the seriousness, duration and extent of Techtronic’s conduct” and should serve as “a warning for all other businesses”.
Cartel Conduct: the ACCC achieves success in Prosecuting Civil, rather than Criminal, Cases
Cartel conduct is an enduring priority for the ACCC as a serious economic crime. Following the setbacks the ACCC has faced in recent years in the Country Care, ANZ bank cartel and CFMEU cases, 2023 has seen the ACCC make a comeback with significant enforcement outcomes against cartel conduct. Most of the ACCC’s successful cases were civil cases (which involve a lower burden of proof than criminal cases) and a number related to unsuccessful cartel attempts. To summarise:
- Aussie Skips, February 2023 (criminal) – Aussie Skips Recycling and Aussie Skips Bin Services (Aussie Skips) and their CEO, Emmanuel Roussakis, pleaded guilty to a criminal cartel offence following an investigation by the ACCC and referral to the Commonwealth Director of Public Prosecutions, which laid the charges. The parties admitted that, in mid-2019, Aussie Skips agreed with Bingo Industries (prosecuted in 2022 for the same cartel) to increase and fix prices for the supply of skip bins and processing services for building and demolition waste in Sydney.
- ARM Architecture, April 2023 (civil) – ARM Architecture and its former managing director, Anthony John Allen, attempted to rig bids for a tender for architecture services for Charles Darwin University’s $250 million building project in Darwin. In September 2020, Mr Allen, on ARM Architecture’s behalf, emailed eight other architecture firms asking the firms not to submit a tender for the project’s second phase. ARM Architecture was fined $900,000 and Mr Allen was fined $75,000.
- Delta Building Automation, August 2023 (civil) – Delta Building Automation and its sole director, Timothy Davis, attempted to induce a competing supplier of building management and security systems to rig the bid for the National Gallery of Australia’s building management system tender so Delta would be more likely to win. Penalties are yet to be determined.
- Swift Networks, September 2023 (civil) – Swift Networks admitted it agreed with DXC, a competing supplier of technology infrastructure and services, to rig bids by one of them submitting a higher price than the other for a tender for three Pilbara mining village projects. The Federal Court ordered Swift Networks to pay a $1.2 million penalty.
- BlueScope, August 2023 (civil) – The Federal Court ordered BlueScope to pay a record cartel fine of $57.5 million for attempting to induce eight steel distributors in Australia and an overseas manufacturer to enter agreements to fix and/or raise domestic prices for flat steel products. BlueScope’s former general manager, Jason Ellis, was ordered to pay a $575,000 fine for his involvement in the attempt, which, by Court order, cannot be recovered through directors and officers insurance. Both liability and penalty decisions are on appeal.
These cases are a sign of what’s to come in 2024 as the ACCC continues its broad and robust program against cartel conduct.
The ACCC’s spotlight on the Agricultural Sector Continues
In 2023, the ACCC has continued its focus on fair trading issues in agricultural supply chains. This comes as no surprise given that the ACCC has a dedicated Agricultural Unit and for the last two years, has earmarked the agricultural sector as a key compliance and enforcement priority.
The ACCC has made no secret of the fact that it listens to stakeholders in this sector and regularly conducts compliance checks on participants to ensure compliance with the CCA and specific industry codes, such as the Dairy Code and Horticultural Code of Conduct.
The ACCC’s targeted focus on the agricultural sector has resulted in several enforcement outcomes, including:
- Lactalis’ milk supply agreements breach the Dairy Code – The ACCC’s biggest scalp in the agricultural sector was Lactalis, with the Federal Court ordering Lactalis to pay $950,000 for contravening the Dairy Code by failing to publish their milk supply agreements in the manner required by the Code and for publishing agreements that gave Lactalis the right to unilaterally terminate them in circumstances that didn’t involve a material breach by farmers.
- Cotton Seed Distributors entered into agency agreements which the ACCC alleged had an anti-competitive effect – Cotton Seed Distributors (CSD), the sole supplier of cotton planting seed in Australia, gave a Court-enforceable undertaking to the ACCC in relation to what the ACCC alleged to be anti-competitive agreements with its agents. CSD’s agency agreements prohibited agents from facilitating the over-treatment of cotton seed. The ACCC was concerned about the potentially anti-competitive effects of this prohibition on the basis it considered that agents and growers had little choice but to use CSD-approved seed treatments applied by CSD. CSD agreed not to enforce those agreements.
- Unfair terms in fertiliser supply agreement – Suppliers in the fertiliser industry agreed to amend their contracts following an ACCC investigation into unfair contract terms. The allegedly unfair terms included provisions giving the supplier the right to unilaterally vary the quantity to be delivered to the buyer or to terminate the agreement if the supplier believed it would not be able to supply the goods.
- Multiple breaches of the Horticulture Code of Conduct – Green Endeavour, Bache Bros and Getfresh Merchants each paid penalties for allegedly breaching the Horticulture Code of Conduct by failing to prepare, publish and make publicly available the terms of trade on which they were prepared to trade with growers. Seven Fields Operations (trading as Nutrano), a selling agent for other growers, paid penalties for failing to specify the price it received for produce in grower statements and trading under a non-compliant Horticulture Produce Agreement (HPA). Nutrano also gave a Court-enforceable undertaking to remove certain terms which the ACCC alleged were unfair from its HPA.
Participants in the agricultural sector should expect this close scrutiny to continue in 2024 with ongoing monitoring of small business contracts for unfair terms and checks on compliance with industry codes.
In 2023, the ACCC has clearly been experimenting with its toolkit and making conscious decisions about which form of enforcement action to take. We can see that in relation to the misleading and deceptive conduct matters it has decided to pursue, and those in the agricultural sector. The ACCC also seems to be following an evolving strategy in relation to cartel conduct cases. To try to give it the best chance of success, there is far more emphasis from the ACCC on taking on civil, rather than criminal cartel conduct cases. RPM is back in the spotlight in a reminder to maintain vigilance in this area. Mergers is possibly the area where we have seen the biggest change in approach from the ACCC. Its position on mergers has been clear for some time – the ACCC thinks the system is broken. However, the ACCC has been far clearer in practice as to why this is so with rigorous lines of questioning and challenges to information merger parties provide, both adding to merger timelines and cost for parties undertaking mergers.
We expect 2024 to be just as busy for the ACCC.