Australia: Competition Review: December 2015

Last Updated: 8 December 2015
Article by Eddie Scuderi and Mark McCowan

RECENT ENFORCEMENT DEVELOPMENTS

Court finds that Jetstar and Virgin Australia engaged in misleading 'drip pricing' practices

On 17 November 2015, the Federal Court of Australia found that Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd (Virgin) contravened the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct and making false or misleading representations about the price of particular advertised airfares.

In relation to Jetstar, the Court found that representations about specific advertised airfares made on its website in 2013, and its mobile site in 2014, were false or misleading. However, the Court held that the ACCC had not established that the alleged misleading representations were made by Jetstar on its 2014 website, nor in its promotional emails in 2014.

In relation to Virgin, the Court found that the representations made on its mobile site in 2014 about specific advertised airfares were false or misleading. The Court held that the ACCC had not established that the alleged misleading representations were made by Virgin on its website, nor in its promotional emails of 2014.

The relevant conduct in both of these proceedings is an example of 'drip pricing'. Drip pricing is where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges (which may be unavoidable or applied in most transactions) are then incrementally disclosed. This can result in consumers paying a higher price than the advertised price and spending more than they realise.

The ACCC alleged in these proceedings that, in relation to specific advertised airfares, Jetstar and Virgin failed to adequately disclose an additional Booking and Service Fee ($8.50 and $7.70 respectively) which was charged on bookings paid using most credit cards or PayPal (and additionally in the case of Virgin, by debit card).

Drip pricing conduct was a priority enforcement area in the ACCC's 2014 Compliance and Enforcement Policy with the ACCC addressing identified behaviour across a number of industries. It remains a focus for the ACCC, as part of the ACCC's current priority area of systemic consumer issues in the online marketplace.

A hearing on relief will be held on a date to be fixed by the Court.

Federal Court finds Chrisco's lay-by agreements contained unfair contract term

On 11 November 2015, the Federal Court has found that Chrisco Hampers Australia Ltd (Chrisco) breached the ACL in relation to its sale of hampers to consumers by lay-by agreement, in proceedings brought by the ACCC.

The Court found that Chrisco included an unfair contract term in its 2014 lay-by agreements relating to its "HeadStart Plan", which allowed Chrisco to continue to take payments by direct debit after the consumer had fully paid for their lay-by order. Consumers were required to 'opt out' in order to avoid having further payments automatically deducted by Chrisco after their lay-by had been paid for.

In concluding that the HeadStart term was unfair, Justice Edelman considered the contract as a whole, including the transparency of the term, and concluded that the term caused a significant imbalance in the rights and obligations between Chrisco and its customers.

The matter is now to be set down for a penalty hearing on date to be fixed.

RECENT MERGER DEVELOPMENTS

Iron Mountain Incorporated – proposed acquisition of Recall Holdings Limited

On 5 November 2015, the ACCC released a Statement of Issues (SOI) (see here) on the proposed acquisition of Recall Holdings Limited (Recall) by Iron Mountain Incorporated (Iron Mountain).

Iron Mountain proposes to acquire Recall by a scheme of arrangement. Under the proposed transaction, Iron Mountain will acquire all of Recall's operations, including in Australia, North America, South America, Europe and the Asia-Pacific.

Iron Mountain is a global supplier of information management services based in the United States, with operations in every state and territory in Australia. Recall is an Australian public company that is also a global supplier in the information management industry. Recall has operations in every Australian state and territory, with the exception of the Northern Territory.

The ACCC is concerned that the proposed acquisition would:

  1. likely lead to a substantial lessening of competition in a national market for the supply of physical document management services; and
  2. may lead to a substantial lessening of competition in regional markets, centred on each state and territory capital city (excluding the Northern Territory).

For the national market, the ACCC is specifically concerned that the proposed acquisition would lessen constraints faced by Iron Mountain and would be likely to lead to an increase in prices and/or a reduction in service. Recall and Iron Mountain are the two largest providers of physical document management services in Australia. The combined national market share of the merger parties would be between 59 and 71 per cent, and regional markets would be similarly concentrated.

For the regional market, the ACCC is specifically concerned about the merged parties enjoying high market shares in each regional market, limited competitive constraints and barriers to entry.

Iron Mountain and Recall compete closely for both national customers who require document storage in multiple locations, and local customers who require storage in just one region. Few other suppliers can supply customers in multiple regions. The individual regional markets are also concentrated, despite the presence of several smaller suppliers in each.

Submissions in relation to the SOI closed on 19 November 2015 with the ACCC aiming to announce its final decision on 15 December 2015.

RECENT AUTHORISATION DEVELOPMENTS

ACCC extends decision date after ihail revises taxi booking app

On 10 November 2015, the ACCC extended the timeframe for making a final decision on ihail's application for authorisation.

On 12 October 2015, the ACCC released a draft determination proposing to deny authorisation to a joint venture between a number of Australian regional taxi cab companies and other operators to launch the ihail smartphone application (ihail) within the Australian market.

In the draft decision the ACCC raised concerns that the joint venture could reduce competition between taxi networks and reduce the viability of existing taxi booking apps. Importantly, passengers would only be able to pay for fares booked with ihail through the app, and these payments would be exclusively processed by Cabcharge. The ACCC was concerned this would shut out opportunities for Cabcharge's competitors to provide non-cash payment processing services to ihail customers, and therefore this would significantly reduce competition between taxi payment processing providers.

ihail has since made a revised submission proposing changes to how its smartphone taxi booking app will operate and its proposed business model.

Changes include:

  • amending the exclusive Cabcharge booking feature to allow for in car payment. This change will allow consumers to choose to pay in-car, using cash or any chosen credit or debit card;
  • disabling the tipping and priority dispatch payments for taxi services; and
  • amending the app to allow customers to choose which taxi network they wish to book on, thereby giving taxi's an incentive to compete on price, dispatch times and via customer ratings.

A final decision is now expected in February/March 2016.

Sea Swift withdraws application for merger authorisation

Sea Swift Pty Ltd (Sea Swift) has withdrawn its application to the Australian Competition Tribunal for authorisation to acquire the Northern Australia based marine freight business of Toll Marine Logistics Australia, which is a division of Toll Holdings Limited.

On 9 July 2015, the ACCC announced its decision to oppose Sea Swift's proposed acquisition because it was likely to have the effect of substantially lessening competition.

ACCC DEVELOPMENTS

Federal government releases response to the Harper Competition Policy Review

On 24 November 2015, the Federal Government released its response to the Competition Policy Review chaired by Professor Ian Harper (Harper Review). The government states that it supports 44 of the Harper Review recommendations in full or in part and "remains open to" the remaining 12 recommendations subject to further review and consultation. Once implemented, there will be significant changes to the Competition and Consumer Act 2010 (Cth), ACCC processes (e.g. merger clearance) and significant changes to a number of industries. For more information, see the Corrs in Brief article here.

Unfair Contract Terms Regime for Small Businesses

On 12 November 2015, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth) was given Royal Assent. This legislation extends the application of the unfair contract term provisions in the Australian Securities and Investment Commissions Act 2001 (Cth) and the ACL to apply to small business contracts and supplements the existing law on unfair contract terms for consumers.

The protections will come into effect on 12 November 2016. Businesses have a one year grace period to review and amend their standard form contracts in order to comply with the new regime. On 17 November 2015, the ACCC's media release reminded businesses to closely review the standard form contracts they use when dealing with other businesses and released two videos to help small businesses understand their rights and obligations under the new law.

For more information, see the Corrs in Brief article here.

Australia and China to cooperate on cartel investigations

On 5 November 2015, it was announced that the ACCC and the National Development and Reform Commission of the People's Republic of China (NDRC) signed a memorandum of understanding, which is envisaged to increase engagement between the ACCC and NDRC on international cartel investigations affecting Australian and Chinese markets. Where the ACCC and NDRC take action in relation to the same or related anti-competitive conduct, the parties may exchange information and evidence regarding the action.

The NDRC's Bureau of Price Supervision and Antimonopoly is one of three bodies administering China's Anti-Monopoly Law. It is the agency responsible for price supervision and related enforcement action. The ACCC now has cooperation agreements in place with all three of China's competition agencies.

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.

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