Australia: Trade Practices Newsletter

Originally published June, 2006

Late in 2005, GM Holden Limited used a high profile advertising campaign headlined "You pay what we pay" which claimed to allow the general public to receive the same benefits as Holden employees in purchasing cars. The advertising included fine print referring to options, accessories and dealer delivery fees, which Holden considered limited the offer to the base price of vehicles.

The ACCC did not agree because the price paid by Holden employees included discounts on factory fitted options and accessories and a discounted dealer delivery fee and other special discounts in particular types of vehicles which in some cases meant that a Holden employee would pay nearly $5,000 less than a member of the public taking advantage of the offer. The ACCC’s view was that the statement "You pay what we pay" was so powerful and prominent that the fine print did not undo the message it conveyed to consumers.

The ACCC accepted undertakings that Holden would give consumers who had purchased cars in the relevant period the option to return them for a full refund. Holden also agreed to improve its trade practices compliance.

It is essential that advertising tells the whole truth, and not half-truths, and fi ne print only goes so far to qualify large and prominent claims. Businesses must consider the overall impact of an advertisement or campaign, bearing in mind that it will be seen by members of the public who will not pay much attention to the small print or may not have much opportunity to do so. You should ask whether a campaign may have a misleading effect in that context, rather than if read carefully and at leisure. What would an ordinary reader, reading in a hurry, think it means?

In 2003, the ACCC introduced a Leniency Policy to encourage individuals or companies involved in cartel behavior (such as price fixing, collusive tendering and market sharing) to report it to the ACCC. Experience with that policy has now resulted in the ACCC revamping its policy as an Immunity Policy which gives complete immunity from prosecution to the first cartel participant to disclose the cartel to the ACCC, provided the individual or company meets some onerous conditions.

To qualify for immunity, the ACCC must be short of evidence to launch a prosecution before the disclosure is made. The party seeking immunity has to make prompt, full and frank disclosure and continue to co-operate with the ACCC, and failure to do so results in the withdrawal of the offer of immunity. The ACCC can then use the information against the party which contributed it.

A person or company seeking immunity can indicate that intention to the ACCC, and get a mark in a queue as the first party potentially entitled to indemnity. If that party does not fully meet its obligations, the next party who has approached the ACCC will become the potential beneficiary of immunity, and so on.

Given the substantial potential penalties for cartel behavior, the opportunity of immunity (which extends to past and present company employees involved in cartel behavior) is significant. But it comes at significant risk. Any company intending to seek immunity has to be prepared to co-operate fully or risk losing the benefit of the immunity application, and exposing itself to prosecution at the same time.

Since the Dawson Committee reported in 2003, a number of suggestions for amendments to the Trade Practices Act have been accepted by the government and proposed as legislation. However, none of them have yet passed the Senate. Senator Joyce and some other National Party senators oppose some elements of the package, and the ALP will refuse to support others. The Government refuses to split the package, so it seems that none of it will pass.

The stalled legislation deals with:

• loosening the application of competition law to joint ventures;
• allowing collective bargaining by small business in some circumstances; and,
• substantially increased penalties (expanding the level of penalty to include gaol for executives involved in serious cartel conduct, and fines equivalent to 3 times the benefit obtained from illegal conduct or 10% of annual turnover where those amounts are greater than the maximum $10m penalty already available).

At the time of writing it seems likely that all measures may be stalled indefinitely.

The ACCC has recently had success in two cases involving price fixing in the petrol industry, one concerning relatively small-scale price-fixing arrangement between a couple of players in the Brisbane market and the more notable relating to an extended cartel in the Ballarat area.

In the Ballarat case, some petrol distributors regularly agreed between themselves when to bring an end to a discount cycle, and alerted others in the market to their intentions and pressed them to join in if they did not respond immediately. The ACCC proved that this arrangement for bringing an end to discounting was implemented on 69 occasions by most of the parties it sued. The penalties imposed on companies and individuals exceeded $23m.

However, APCO and its director Mr Anderson, escaped liability on appeal. The fine of $200,000.00 against Mr Anderson and $3m against his company were overturned on the basis that it was not sufficiently clear that Mr Anderson was a party to any "arrangement or understanding" to end discounting. The ACCC proved that members of the price fixing ring telephoned Mr Anderson and made veiled suggestions of their intention to increase prices, but there was no evidence that he agreed to act accordingly, or took any other part in the price fixing arrangement. He only increased prices on 29 out of the 69 occasions and treated the tip offs as market intelligence, about which he made his own decisions rather than having made any commitment to the price fixing players. He and APCO were therefore on the right side of the fine line between being part of, or outside, an "understanding".

The decision is subject to further appeal to the High Court. However, even if that appeal fails, so that Mr Anderson and APCO remain in the clear, the costs of litigation, the publicity and the time taken by substantial ACCC proceedings demonstrates that taking such a risk, and being just on the right side of the fi ne line, can have signifi cant costs. Risk management suggests Mr Anderson should have done something positive to distance himself from the price fixers.

A full appreciation of the risks is an important issue on which Coleman & Greig can assist you, if you consider that there are trade practices risks in your commercial environment. Identifying, managing and avoiding these risks is also part of Trade Practices Act compliance training, which Stephen Booth regularly undertakes for Coleman &Greig clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.