Australia: Competition review: September 2014/1

RECENT ENFORCEMENT DEVELOPMENTS

ACCC takes action against Informed Sources and petrol retailers for price data sharing

The ACCC has commenced proceedings in the Federal Court against Informed Sources (Australia) Pty Ltd (Informed Sources) and a number of petrol retailers, alleging that their information sharing arrangements, allows those petrol retailers to communicate with each other about their prices, and that this had the effect or likely effect of substantially lessening competition in markets for the sale of petrol in Melbourne. The exchange of this information allows retailers to respond to each other's prices and analyse the pricing behaviours and strategies of their competitors. According to the ACCC, price coordination and cooperation is increased and competitive rivalry is decreased.

The matter is listed for a directions hearing in Melbourne on 26 September 2014.

Further, the ACCC has accepted a court enforceable undertaking from Mobil Oil Australia Pty Ltd (Mobil), that it will not subscribe to Informed Sources information exchange service. Mobil was a subscriber until October 2010 when it sold its interest in fuel retailing assets in Australia. The ACCC has accepted the undertaking and has not joined Mobil to the proceedings after taking into account that Mobil ceased subscribing some time ago and has undertaken not to subscribe to similar services for five years.

ACCC brings proceedings against Valve for alleged misleading consumer guarantee representations

The ACCC has brought Federal Court proceedings against Valve Corporation (Valve), a US-based software company, alleging that it made false or misleading representations regarding the application of the consumer guarantees under the ACL. Although Valve has no physical presence in Australia, the ACCC emphasised that Valve is carrying on a business in Australia by selling games to Australian consumers through the 'Steam' distribution platform and, to that extent, the ACL applies to Valve's activities.

ACCC institutes proceedings against OmniBlend Australia for alleged price fixing

The ACCC has instituted proceedings in the Federal Court against OmniBlend Australia Pty Ltd (OmniBlend Australia), who supplies various kitchen blenders through its online store to businesses and consumers in Australia, New Zealand and the UK. The ACCC alleges that OmniBlend Australia attempted to enter into an agreement with its competitor to fix prices. The ACCC further alleges that when this attempt failed, it induced the supplier to engage in resale price maintenance by refusing to supply the competitor unless it stopped discounting the price of certain blenders.

ACCC takes action against Lyoness for alleged pyramid scheme operations

The ACCC has instituted proceedings against Lyoness International AG, Lyoness Asia Limited, Lyoness UK Limited and Lyoness Australia Pty Limited (together Lyoness). The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers 'cash back' rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers. Although Lyoness has been investigated by regulators for conduct in other countries, this is the first court action taken against Lyoness alleging that the Lyoness Loyalty Program constitutes a pyramid scheme.

ACCC takes action against Coverall Melbourne for alleged unconscionable conduct

The ACCC has brought Federal Court proceedings against Coverall Cleaning Concepts South East Melbourne Pty Ltd (Coverall Melbourne), a master franchisor of a franchise system that establishes and operates professional cleaning services. The ACCC is alleging that Coverall Melbourne engaged in unconscionable conduct, made false or misleading representations, engaged in conduct that was misleading or likely to mislead, and contravened the Franchising Code of Conduct. The matter was originally referred to the ACCC by the office of the Victorian Small Business Commissioner.

RECENT MERGER DEVELOPMENTS

ACCC not to oppose Woolworths/Lowe's JV's proposed acquisition of Hudson Building Supplies

On 7 August 2014, the ACCC announced that it will not oppose the proposed acquisition of Hudson Building Supplies Pty Limited (Hudson) by Woolworths Limited and Lowe's Companies Inc (Joint Venture). Hudson operates a chain of stores in NSW and Queensland that supply building materials, hardware, and home improvement products. The ACCC considered that the proposed acquisition was not likely to substantially lessen competition in any of the local markets for the retail supply of hardware, building supplies and home improvement products.

The ACCC noted that the primary customer segment serviced by Hudson is builders who have materials delivered to building sites, with some overlap between Hudson and the Joint Venture's Masters stores in the supply of products and services to smaller trade customers from their respective retail outlets. The ACCC found that the degree of overlap in this customer segment was limited and that the Joint Venture would be likely to be competitively constrained by a number of retail competitors in each of the relevant local markets following the proposed acquisition.

RECENT ACCC DEVELOPMENTS

Bill to introduce penalty provisions to franchising code

On 4 September 2014, the Federal Parliament passed the Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 (Cth) (the Bill). The Bill introduces civil penalty provisions which enable pecuniary penalties to be imposed and infringement notices to be issued for breach of the Franchising Code of Conduct (the Code) by franchisors or franchisees. The ACCC will have the power to issue infringement notices of $8,500 to franchisors and franchisees who breach a civil penalty provision and the Court will have the power to impose a pecuniary penalty of up to $51,000 for these breaches.

Additional reforms to the Code are expected to be introduced later this year, which will include obligations for franchisors and franchisees to act in good faith, improve disclosure to franchisees, reduce red tape, improve transparency of marketing funds and limit the enforceability of restraint of trade clauses in special circumstances.

ACCC releases second carbon monitoring report

Following the repeal of the carbon tax, the ACCC has issued over 250 carbon tax removal substantiation notices to businesses that retail electricity and natural gas, produce electricity or bulk import synthetic greenhouse gases. The businesses must provide a carbon tax removal substantiation statement to the ACCC and publish these on their websites until 30 June 2015.

On 29 July 2014, the ACCC released its second carbon monitoring report.

Based on responses to voluntary information requests issued during the March and June quarters, the ACCC has prioritised industries according to the level of ACCC scrutiny they are expected to attract:

• Tier 1 – industries that supply regulated goods and in which the effects of the carbon tax are likely to be complex, being wholesale and retail electricity, natural gas and synthetic greenhouse gas;
• Tier 2 – industries that do not supply regulated goods but include liable entities and additional entities for which the effect of the carbon tax are mixed (for example, some entities may have passed through the carbon tax but others did not), including paper, glass and plastic, construction materials, high technology and transport; and
• Tier 3 – industries consisting of liable entities and additional entities in which the effects of the carbon tax were non-complex or the costs of the carbon tax were absorbed (for example, metals, retail property and prepared food). These entities are unlikely to receive further information requests.

The report identified a number of complexities, including:

• the retrospective effect of the carbon tax repeal legislation which was passed on 17 July 2014 operates from 1 July 2014. Electricity and gas suppliers may continue to pass through carbon tax costs after 1 July 2014, making a windfall gain unless credits or rebates are provided to customers;
• the method for the calculation of savings in the electricity market, specifically the impact of the carbon tax on prices paid for hedging contracts, the development of "carbon inclusive" contracts between energy retailers and commercial and industrial customers, and the joint impact of the carbon tax and network costs on retail electricity prices; and
• the price exploitation prohibition requires suppliers of regulated goods to pass through all cost savings that are directly or indirectly attributable to the carbon tax repeal. The monitoring report notes that businesses have adopted varying interpretations of costs that are "indirectly attributable" to the carbon tax repeal. For example, some businesses factored in the costs of their employees' time and others did not.

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