ACCC's 2019 priorities: strong enforcement action with a focus on anti-competitive practices and consumer law penalties

Announcing the ACCC's enforcement priorities for the year ahead, ACCC Chairman Rod Sims said that until the ACCC can impose penalties that are large enough to have a significant impact and "see share prices dip", he does not think we are likely to see any material change in the behaviour of big businesses.

The following specific areas are likely to see more ACCC activity in 2019:

Key competition enforcement priorities

Cartel conduct

In 2018, the ACCC launched its first criminal cartel case against an Australian company and also in another case, obtained its largest ever cartel penalty of $46 million. Enforcement action against cartels is an enduring ACCC priority and continued immunity applications suggest that ACCC action against cartel conduct is likely in the year ahead. Mr Sims indicated that at least three significant cartel investigations are likely to be referred to the Commonwealth Director of Public Prosecutions for a decision on whether to prosecute criminally.

Misuse of market power and concerted practices

The ACCC will have a particular focus on conduct which may contravene the misuse of market power and concerted practices provisions of the CCA. Both provisions are subject to a "purpose or effect of substantially lessening competition" test (SLC) and investigated by a dedicated "SLC unit" within the ACCC. Two sectors of focus in this area are the financial services and construction industries.

This year the ACCC expects to take two or three cases concerning market power or concerted practices contraventions to Court.

Competition issues in the financial services sector

The ACCC will continue to focus on the financial services sector in the wake of the Royal Commission, noting its current market study in respect of foreign exchange services. Mr Sims observed that "an underlying theme of the Royal Commission Final Report was that competition is not vigorous among the major banks or in some parts of the financial sector". The ACCC plans to "chip away" at the banking oligopoly and lack of price competition in the sector through a combination of investigation and enforcement action, and the work it is currently doing in sectoral inquiries.

The Financial Services Competition Branch has been focusing on the inquiries in the financial sector for over a year. It includes a permanent competition investigation team to complement the market studies team. Financial services inquiries and market studies will play an important role in improving competition in the sector: enforcement action alone cannot be effective in changing the conduct and culture of big business without the benefit of findings and insights gained from market studies.

Competition issues in the commercial construction sector

The ACCC is currently prioritising anti-competitive conduct and unfair practices in commercial construction markets and has established a Commercial Construction Unit focused on the construction sector. To assist the identification and investigation of problematic conduct, the ACCC has created an anonymous reporting tool in an effort to encourage those affected by anti-competitive conduct to come forward and report it to the ACCC.

Key consumer enforcement priorities

One of Mr Sims' key messages was the ACCC's intention to investigate and punish breaches of the ACL in 2019, and to give effect to Parliament's intention that penalties for ACL breaches increase. The ACCC now has a team of 70 investigators considering consumer law complaints.

Following the alignment in September 2018 of penalties under the ACL with the maximum available under the competition provisions of the CCA (which is the greater of $10 million, or 3 times the benefit from the conduct or, where the benefit cannot be calculated, 10% of annual Australian sales turnover), Mr Sims identified the $18 million penalty in the "We Buy Houses" case as "setting a new bar" (in particular in relation to the $6 million penalty imposed on an individual in that case).

Consumer guarantees

The ACCC is concerned that many manufacturers and large retailers are still not complying with consumer guarantee laws. Electrical and whitegoods products are the "second most complained about industry after motor vehicles" and will be a particular focus area for the ACCC this year.

Customer loyalty schemes

This is a new priority area and the ACCC will focus on the data that is collected from consumers, their understanding of what is being collected and how it is used, and whether they are receiving the promised benefits. It will see the ACCC consider competition and consumer laws in the context of data privacy.

Digital Platforms and advertising on social media

The ACCC’s Preliminary Report on Digital Platforms was released last year. It sets out a number of potential enforcement areas that are now under investigation including the impact on consumers arising from the collection and use of consumer data by digital platforms, the transparency of data practices, and the adequacy of disclosure to consumers.

In particular, advertising practices on social media platforms and "subscription traps" will be under the spotlight, and there are likely to be some cases this year in these areas.

Consumer Data Right

The ACCC is continuing to undertake a lot of work in respect of the Consumer Data Right (CDR), and this will also be a key focus for the ACCC. The ACCC is refining the CDR for implementation in the banking sector before it is rolled out to energy and telecommunications. The ACCC envisages the CDR as "a game changer" which will enable consumers to freely access their data, more easily move from one bank to another without the need to fill in "endless forms", and to more readily compare products on a "like for like basis".

Pricing in the energy and telco sectors

The ACCC is also concerned about the complexity and opacity of pricing in the energy and telecommunications sectors.

Notably, the Government has recently released the draft Competition and Consumer (Industry Code— Electricity Retail) Regulations 2019 which will give effect to the Default Market Offer (DMO) by introducing a price cap for standing offers to be set by a determination of the Australian Energy Regulator. The DMO price will also act as a reference price, requiring electricity retailers to advertise their standing and market offers against a common price benchmark.

The DMO will apply from 1 July 2019, and as the Code will be prescribed as a mandatory industry code for the purposes of Part IVB of the CCA, the enforcement of its provisions will be the responsibility of the ACCC, and therefore we are likely to see more action in this space.

Market studies

Market studies will continue to play a pivotal role for the ACCC in a number of areas because the ACCC cannot simply "use enforcement to turn a sector which isn't competitive into one that is".

Ongoing areas of focus include:

• Financial sector: in addition to the Northern Australia Insurance Inquiry, the banking system will be under scrutiny with a focus on unlocking what needs to be done to achieve more competition;
• Technology: the Digital Platform Inquiry will be completed in mid-2019 and the ACCC is consulting and refining the recommendations outlined in its December 2018 draft report. Through that process, some of the recommendations may change.
• Electricity: the ACCC now has a seven-year standing inquiry into electricity affordability; and
• Gas: the ACCC will continue to have a role in monitoring gas pricing. Prices have rapidly increased resulting in industry closures. This means that ensuring increased gas supply in the face of shortages is a key concern for the ACCC.

Advocacy to focus on changes in regulation

Advocacy continues to be a priority for the ACCC and Mr Sims expressed a strong view that the ACCC should have a voice despite criticism that this is not the ACCC's role. The ACCC would like to see the following developments:

• Unfair contracts: Businesses that include unfair contract terms should be subject to penalties like other consumer law breaches, not only a declaration that the unfair term is void and unenforceable. Mr Sims observed that current unfair contract laws are a "classic case of laws we don't like because we have to go to court to have it declared void and unenforceable. That doesn’t work for us".
• Unsafe goods: Suppliers of unsafe goods should be subject to penalties where they cannot demonstrate that they have taken all reasonable steps to ensure that the goods are safe.
• Harsh and unfair conduct: As demonstrated by the decision in Australian Competition and Consumer Commission v Medibank Private Limited [2018] FCAFC 235, some conduct may be harsh and unfair, but neither false, misleading nor unconscionable under the ACL. The ACCC will be advocating that some "unfair" practices in the grey area between harsh conduct and unconscionability become subject to sanction under the ACL.

• Presumptions of SLC in mergers: Mr Sims said that the onus on the ACCC to prove a price increase or loss of competition in the future is too difficult and a common sense approach should be taken to demonstrating SLC. In his opinion, there is too much emphasis on the ability of market forces to overcome anti-competitive behaviour and too much optimism regarding the potential for new entrants. Mr Sims specifically raised the question of whether to reverse the onus of proof in mergers based on market share thresholds, as is the case for some mergers in the US. His suggestion was that the current merger test is not fit for purpose and that Australia could perhaps consider a more appropriate test to make it easier for the ACCC to show that a merger is anti-competitive.

Other areas of focus

In addition to the key priorities set out above, Mr Sims stated that the ACCC will also focus on:

• franchising, particularly in the agricultural industry;
• new car retailing (cases of suppliers breaching consumer guarantees already in the pipeline);
• unfair contract terms in agriculture, especially business-to-business;
• product safety – ensuring the effectiveness of the compulsory recall of vehicles with Takata airbags, and improving the safety of quad bikes; and
• releasing a separate Product Safety Priorities at the Consumer Congress next month.

Getting ready for the ACCC in 2019

As always, businesses should expect the ACCC to be proactive during 2019. Businesses, especially those which are well established in the ACCC's priority areas, should familiarise themselves with the ACCC's agenda and prepare for scrutiny. Should you require assistance with any of these issues please get in touch.