2020 ACCC Year in Review

What a year it's been…

Each year, Maddocks publishes the Australian Competition and Consumer Commission (ACCC) Year in Review , in which we take a look at the ACCC's leading cases in 2020 and consider how well the ACCC performed against its 2020 enforcement and other ongoing priorities. While the entire publication is way too long to publish here, I set out below a version of my introduction. The full version is available at https://loom.ly/gaUuC88

The impact of COVID-19

This past year was extraordinary for all of us (we won't say ‘unprecedented’) and the ACCC was equally impacted. So much so, I was tempted to rename this year's Year in Review as the ‘Covid Edition’, given the extent to which the pandemic impacted the ACCC, its enforcement priorities and its overall activities.

As a country, we are genuinely lucky to have such an engaged, nimble and ‘mission focussed’ competition and consumer regulator. The speed with which the ACCC pivoted to address the impact of COVID-19 on consumers and businesses was truly commendable.

The ACCC was required to address the impact of COVID-19 on the economy – responding to specific COVID-19 related consumer issues (most notably in the travel and hospitality industries) through dissemination of information, leaning on businesses to provide appropriate refunds and flexibility and preventing false and misleading product health claims. It also granted a series of rolling authorisations to permit cooperation between competitors to facilitate appropriate responses to the economic and health emergency - especially in energy and retail.

Is the ACCC now done with its focus on higher penalties?

Since 2017, the ACCC has focussed on driving up penalties for both cartel conduct and consumer law breaches. In 2019, the ACCC Chairman Rod Sims, noted that the ACCC wanted penalties that inflicted "financial pain" on businesses and adversely impacted their share price – noting that fines of $5 - $10 million were "loose change" for larger companies. Overall, the ACCC appears to have successfully changed the attitudes of the Courts to higher consumer law penalties – so the question is whether any further increases to civil penalties are required?

Last year saw the ACCC secure some significant penalties against various companies, including $24 million against Wallenius Wilhelmsen Ocean AS$50 million agreed with Telstra (though not yet Court approved) and $8.5 million against iSelect .

However, these penalties fell well short of penalties of more than $100 million predicted by Mr Sims in early 2019, following changes to the Competition and Consumer Act 2010 (CCA) penalty regime.

We also saw some lower penalties for severe or widespread conduct, for instance, a penalty of only $2.9 million against Health Engine for conduct over four years involving publishing misleading reviews, ratings and referrals and sharing personal patient information without their consent. In the Kogan decision, the Court rejected the ACCC's proposed $2 million penalty as too high and instead imposed a fine of only $350,000.

Given these outcomes, in our view, the ACCC will still be heavily focussed on convincing State and Federal Courts that higher penalties are warranted to deter unlawful behaviour. As the CCA's new penalty regime impacts more business conduct, we expect the ACCC to continue its drive to extract ever higher penalties from the courts against wayward businesses. In short, we've still got a long way to go on penalties.

Some significant wins and developments

Media Code

Other than COVID-19, the ACCC initiative that garnered the most notice (including worldwide media and regulatory attention) was the proposed News Media and Digital Platforms Mandatory Bargaining Code (Media Code). The Media Code seeks to ensure that Australian news media businesses are fairly paid for the content they generate through a range of measures, including (controversially) a process for binding' final offer' arbitration to set the compensation payable.

Digital Platforms

In addition to the Media Code, the ACCC prioritised their work on the Digital Platforms Inquiry, waded into consumer data privacy issues with Court proceedings against Google and Facebook, continued to take action against retail service providers and NBN Co for misleading and unconscionable conduct impacting Indigenous consumers.

Retail Food Group

We have been predicting for a few years now that the ACCC would bring proceedings against one of the major established franchise brands, most likely Retail Food Group. In fact, we've been predicting it for so long that we were almost about to give up on it. Fortunately, at the end of last year, the ACCC commenced landmark proceedings against Retail Food Group for misuse of marketing funds and failing to provide proper disclosure to incoming franchisees on the financial performance of franchise businesses. The franchise sector is keenly observing how the Court will deal with these issues, which have been controversial in the franchise sector for many years.

Changes to the Franchising Code of Conduct

The other significant development in franchising was the Government's release of its proposed amendments to the Franchising Code of Conduct (arising out of the 2019 'Fairness in Franchising Report'). The proposed regulations focus on better disclosure; changes to regulations concerning termination and early exit; new dispute resolution processes; and increases to penalties. The regulations have a start date of 1 July 2021, meaning that franchisors will need to focus at the start of this year on preparing their businesses for these changes .

Criminal cartel proceedings

The ACCC and Commonwealth Department of Public Prosecutions (CDPP) successfully shepherded the first full criminal defended criminal cartel prosecution through the Court''s committal process – though it proved far more painful and protracted than we expected. Before being transferred to the Federal Court, the matter experienced significant delays during the committal stage. The Court had contend with a small army of Senior and Queens Council, grapple with parties' attempts to access critical documents and resolve disputes concerning legal professional privilege.

At one stage, Magistrate Atkinson criticised the delays and observed that "we’ve reached the point where enough is enough. We have to move this forward”.

Whether or not this is the mould for future criminal cartel prosecutions is yet to be seen, but the ACCC and CDPP would undoubtedly be hoping that isn’t the case.

The ACCC and CDPP were more effective in achieving a speedy resolution of the criminal proceedings against Mr James Ellis for inciting the obstruction of Commonwealth public officials in the performance of their functions. In September 2020, Mr Ellis pleaded guilty to inciting two fellow BlueScope employees to give false information and evidence to the ACCC. On 15 December 2020, Mr Ellis was fined $10,000 and sentenced to eight months imprisonment, but without entering custody and subject to two years ‘good behaviour’. This case is significant as it is the first jail sentence handed down in connection with a cartel matter – even if it was for obstruction, rather than actual cartel conduct.

Unfair contract terms

Finally, the ACCC succeeded in its public relations and policy campaign and convinced the Government that it needed to make more changes to address ongoing use of ’unfair’ contract terms by businesses in consumer and business to business contracts. Expected changes include greater clarity on what constitutes a ‘standard term contract’, expansion of the small business definition and, critically, for the first time the imposition of civil penalties for the use of such terms. The Government hasn’t yet announced a specific timeline for any statutory changes. Still, we expect it to be in the second half of this year with a short transitional period.

Some significant setbacks

Of course, it didn’t always go the ACCC’s way last year. The ACCC suffered some high-profile losses in 2020 against TPG, Pacific National, Woolworths, Kimberley-Clark and Ramsay Healthcare. Some of these cases will have a long term impact on the ACCC’s approach to prosecuting potential breaches of the CCA, while others have led to calls from Chairman Rod Sims for further changes to the CCA, notably, in the area of merger regulation.

Pacific National

On the issue of mergers, The ACCC’s dogged opposition to Pacific National’s acquisition of the Acacia Ridge Terminal (a rail freight terminal being acquired by a freight company) finally came to an end in December last year, when the High Court dismissed the ACCC’s application for special leave to appeal.

Famously in 2019, the ACCC lost its challenge to the merger as the Judge accepted a ‘last-minute’ undertaking from Pacific National concerning non-discriminatory access to the freight terminal by other parties.

On appeal, the Full Federal Court rejected the need for the undertaking, finding that the ACCC’s case about the negative impact of the merger to deter a possible new entrant to the market was ‘speculative’.

Vodafone and TPG

The ACCC also lost its challenge to it’s the proposed merger between Vodafone and TPG where the ACCC was concerned that it would stop any chance of TPG becoming Australia’s fourth mobile network operator. The Court rejected this view of the future market finding that TPG had dropped its plans to build a mobile network after the Government banned its technology provider, Huawei, and there was no likelihood of any other entrant even without the merger. Early last year, the ACCC announced its decision not to appeal the Federal Court’s decision.

1. Following both decisions, Mr Sims complained about the difficulty that the ACCC faces in applying the current test for mergers and commented that the ACCC would continue to consider the changes that it believed were needed to improve Australia's merger laws.

Woolworths and Kimberley-Clark

On the consumer law front, in two similar matters last year, the ACCC suffered a significant setback, as the courts repeatedly rejected one of the ACCC’s favoured approaches to prosecutions of product claims that it believes to be misleading. In decisions in favour of the Woolworths and Kimberley-Clark, the Court was not willing to accept that product claims made by both companies were predictive, finding instead that the statements only concerned the products’ present characteristics.

The case is significant for the ACCC, as it means that in similar future actions the ACCC will carry the burden of proving that product claims are false. The flow-on effect of these decisions is yet to be seen, but it has the potential to impact the ACCC’s ability to address product labelling as one of the 2020 enforcement priorities effectively.

And where we expected more

Finally, there were a few areas where we expected the ACCC to do more, including:

• customer loyalty schemes (following on from the publication of the ACCC’s report in 2019)
• last year’s priorities ‘wildcard’ – the protection of vulnerable consumers in the funeral industry where the ACCC failed to take any action against funeral operators
• misleading claims in food marketing (though this priority area was potentially impacted by the ACCC’s losses against Woolworths and Kimberley-Clark)
• the strengthened prohibition on misuse of market power (particularly given how emphatic the ACCC was about the need for these changes), as well as the prohibition of concerted practices.