Australia: Competition Review: January 2016

RECENT ENFORCEMENT DEVELOPMENTS

ACCC takes action against Woolworths for alleged unconscionable conduct towards supermarket suppliers

In proceedings filed in the Federal Court on 10 December 2015, the ACCC alleges that Woolworths Limited (Woolworths) engaged in unconscionable conduct in dealings with a large number of its supermarket suppliers through its 'Mind the Gap' scheme (the Scheme).

The ACCC alleges that the Scheme was designed to reduce Woolworths' expected significant half year gross profit shortfall, by obtaining payments from a group of 821 "Tier B" suppliers. These payments would range from $4,291 to $1.4 million and would be seen as "supporting" Woolworths (or, if not agreed, as not supporting Woolworths).

The ACCC alleges that these requests were made in circumstances where Woolworths was in a substantially stronger bargaining position, with the knowledge or indifference towards the fact that they had no contractual entitlement to seek payments or a legitimate basis for requesting a Mind the Gap payment from every targeted supplier.

Woolworths allegedly sought approximately $60.2 million in these payments and ultimately captured approximately $18.1 million. The ACCC alleges that these requests were unconscionable in all circumstances and commented that suppliers cannot properly budget for arbitrary claims for payments outside of trading terms.

The ACCC is seeking pecuniary penalties for the alleged conduct and costs. The penalty amount to be determined by the court will largely depend on how the court 'counts' the number of contraventions if Woolworths is found to have engaged in unconscionable conduct in contravention of the Australian Consumer Law (ACL).

In addition, the ACCC is also seeking a declaration that Woolworths engaged in unconscionable conduct and injunctions that Woolworths refund the $18.1 million in payments received under the Scheme to suppliers. The first Directions Hearing is on 1 February 2016 before Justice Yates.

Harvey Norman franchisee ordered to pay penalties of $52,000 for false or misleading representations about consumer rights

On 14 January 2016, the Federal Court ordered Bunavit Pty Ltd (Bunavit) (a Harvey Norman franchisee) to pay $52,000 in penalties for making false or misleading representations about consumer guarantee rights, in contravention of the ACL.

The Court held that sales representatives made misleading representations when they stated that Bunavit had no obligation to provide remedies such as refunds, replacements or repairs. Instead, the sales representatives stated that the consumer would have to pursue the manufacturer's warranty directly with the manufacturer, or pay for the cost of the repair.

The Court considered factors including that there were more impugned statements than in other comparable cases, the conduct occurred over a longer period, more staff members were involved, and Bunavit's turnover and profit were substantially higher than other offending companies. However, unlike some of the other cases, none of Bunavit's senior staff were involved.

The Court declined to make declarations because it considered the penalties were sufficient to address the conduct. It also declined to order injunctions, in part because Bunavit has ceased trading.

The ACCC has now obtained penalty orders totalling $286,000 against ten Harvey Norman franchisees for false or misleading representations regarding consumer rights.

Federal Court orders Electrodry franchisor to pay $215,000 in penalties for fake testimonials

On 18 December 2015, the Federal Court ordered the franchisor of the Electrodry Carpet Cleaning business, A Whistle & Co (1979) Pty Ltd (Electrodry), to pay penalties of $215,000 for its involvement in the publishing of fake testimonials on the internet. The Court found that Electrodry posted, and requested that its franchisees post, customer testimonials about the quality of carpet cleaning services, when those customers were fabricated and the services had not been provided. The relevant review websites included Google, True Local, and Yelp.

The Court noted that in deciding the amount of penalty to impose on Electrodry, a substantial discount for Electrodry's co-operation in the investigation and proceedings was warranted in the circumstances.

Kogan pays $32,400 penalty for alleged false or misleading representations in a Father's Day promotion

On 18 January 2016, the ACCC announced that online retailer Kogan.Com Pty Ltd (Kogan) paid $32,400 after the ACCC issued three infringement notices for false or misleading representations about the price of computer monitors. Kogan is a major online retailer and is well-known for selling electronic products.

The ACCC issued the infringement notices because it had reasonable grounds to believe that Kogan had made false or misleading representations about the price of three computer monitors advertised during its Fathers' Day promotion 2015 on its eBay store, in contravention of the ACL.

As part of the promotion, Kogan advertised that consumers would receive a 20% discount on the computer monitors if they were purchased between 24 and 29 August 2015. Before or at the start of the promotion, Kogan increased the prices of the three computer monitors. As a result, although consumers received a 20% discount off the newly increased prices, they in fact only received a 9% discount off the previously advertised prices for each of the monitors. Shortly after the promotion ended and the 20% discount offer ceased, the advertised prices of the three computer monitors returned to the lower prices offered on Kogan's eBay store before the promotion commenced.

ACCC accepts undertakings from BP, Caltex, Woolworths, 7-Eleven and Informed Sources

On 22 December 2015, the ACCC accepted from BP Australia Pty Ltd (BP), Caltex Australia Petroleum Pty Ltd (Caltex), Woolworths Ltd (Woolworths), 7-Eleven Stores Pty Ltd (7-Eleven), and Informed Sources (Australia) Pty Ltd (Informed Sources) a court enforceable undertaking in relation to its subscription to a petrol price information sharing service operated by Informed Sources.

The undertaking requires that Informed Sources will not supply a petrol price information exchange service unless it makes the information available to Australian consumers and third party information service providers.

The undertakings for BP, Caltex, Woolworths and 7-Eleven require that they will not enter into or give effect to any price information exchange service unless the petrol price information that they receive is made available to consumers and third party organisations.

The Federal Court has also ordered that proceedings against BP, Caltex, Woolworths, 7-Eleven and Informed Sources be discontinued. In August 2014, the ACCC instituted proceedings against Informed Sources and several petrol retailers alleging that the information sharing arrangements between Informed Sources and the petrol retailers allowed the retailers to communicate prices with each other and that these arrangements had the effect or likely effect of substantially lessening competition.

In August 2015, Mobile Oil Australia Pty Ltd accepted a court enforceable undertaking that it would not subscribe to the Informed Source information sharing service for a period of five years. In December 2015, Eureka Australia Petroleum Pty Ltd (trading as Coles Express) also accepted a court enforceable undertaking that it would not enter into any price information sharing service agreement that is similar to the one operated by Informed Sources.

ACCC accepts undertaking to preserve competition in child restraint wholesaling

On 18 December 2015, the ACCC announced it would accept a court enforceable undertaking offered by Nordic Capital Fund VII (Nordic) and Max-Inf Holdings Limited (Max-Inf). Nordic is proposing to acquire a controlling interest in Max-Inf.

Max-Inf is a Chinese manufacturer of child restraint systems, and supplies Infa-Secure Pty Ltd's (Infa-Secure) child restraint systems. Infa-Secure is one of the three main wholesalers of these products in Australia. Britax Childcare Pty Ltd (Britax), which is ultimately owned by Nordic, is a close competitor of Infa-Secure.

The undertaking requires Max-Inf to comply with the terms of a Transitional Supply Agreement between Max-Inf and Infa-Secure, which provides for continuity of supply and access to intellectual property rights to allow Infa-Secure to establish alternative supply arrangements. It also prevents Max-Inf and Britax from doing anything to hinder Infa-Secure obtaining child restraint systems, or accessing or using confidential information.

ACCC accepts undertaking from Optus

On 17 December 2015, Optus Internet Pty Limited (Optus) paid penalties totalling $51,000 for alleged false or misleading representations in relation to cable broadband internet speeds.

Between January 2015 and August 2015, Optus used the term 'nbn-like speeds' (a reference to the nbn" network) in advertising both its cable broadband service and particular cable broadband plans. The advertised price referred to a 30/2 plan, when nbn speed tiers go up to 50/20 and 100/40. Optus also offered a higher priced 100/2 service. However, in each case, the upload speeds were not comparable to upload speeds available over the nbn" network.

Optus also gave the ACCC a five year court enforceable undertaking, agreed to write to customers who joined its service during the advertised period and allow no cost cancellation (including refund of set up fees) and engage a third party to review its trade practices compliance (and implement any recommendations made).

LEGISLATIVE DEVELOPMENTS

Australian Consumer Laws Set For Review in 2016

On 1 December 2015, ACCC Chairman Rod Sims announced that Consumer Affairs Australia and New Zealand will conduct a review of the ACL in 2016. The final report is expected in March 2017.

During the keynote address at the Consumer Law Roundtable, Mr Sims flagged some possible areas for review, including:

  • the adequacy of the ACL penalty regime in delivering deterrence;
  • the application of the ACL to the sharing economy;
  • challenges around adopting trusted international product safety standards; and
  • in relation to phoenix companies.

On international product safety standards, Mr Sims said that the ACCC welcomes moves to reduce duplicative domestic regulation.

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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