Australia: Government softens Price Signalling Bill for the banking sector

Last Updated: 2 August 2011
Article by Michael Corrigan

The Government has responded to concerns and narrowed the scope of the Competition and Consumer Amendment Bill (No. 1) 2011 which will introduce a new prohibition on public and private "disclosures" of pricing and other information to competitors in prescribed industries.

Originally the Federal Government proposed the Bill to address a claimed weakness in Australian competition laws not applying, where competitors may "signal" pricing or strategic information to each other in order to weaken competition but without actually colluding or reaching any "understandings".

The Bill has been proposed to introduce prohibitions, in defined industry sectors:

  • on making a private disclosure of pricing information to competitors; or
  • a public disclosure of pricing, supply capacity or strategic information of any kind, where the disclosure is made for the purpose of substantially lessening competition in a market.

The Government has reaffirmed that it intends this reform will apply initially only to the banking sector, although no details have yet been provided as to how the "banking sector" will be defined for this purpose.

The concerns and the Government's response

These are new prohibitions which significantly extend the reach of the Competition and Consumer Act addressing anti-competitive arrangements between competitors.

For this reason much attention has been focused on the permitted exceptions to the new Bill and concerns over unintended consequences. A number of concerns were raised in the House of Representatives Economics Committee Report into the Bill of May this year, which split along party lines.

In response to these and other concerns, the Government has amended the Bill in the House of Representatives, offering the following additional exceptions to the prohibition of private disclosures:

  • the prohibition will only apply to a private disclosure to competitors that is "not in the ordinary course of business";
  • the private disclosure will not apply in relation to syndicated loans and similar arrangements where two or more competitors exchange information about loans or credit supplied or likely to be supplied to a single borrower;
  • private disclosure of pricing information by a credit provider to another person who provides a credit service such as a finance broker or similar will be permitted; and
  • work outs – a private pricing disclosure will be permitted to a competitor where the competitors have lent money to a borrower and have been notified of a "borrowing insolvency situation" and the disclosure is for the purpose of addressing, avoiding or reducing the risk of insolvency.

These new exceptions are welcome, although the work out exception is very narrow – it will only be available where a borrower is prepared to notify its lenders that there are reasonable grounds for suspecting that the borrower is or may become insolvent. We expect many borrowers considering work out discussions with their lenders may be reluctant to accept or state that they are or may become insolvent in the near future.

However the "ordinary course of business" exception does offer a general safe harbour for workouts and other arrangements which can clearly be seen to be standard commercial transactions or arrangements

Adding in other industry sectors?

The Bill now provides that regulations will proscribe the process by which additional industry sectors – for example, unleaded petrol – may later be brought under the Bill.

There were criticisms that the Bill should say more about that process, such as by specifying the relevant criteria to which the Minister should have regard before bringing a sector under the Bill, or requiring public consultation. However it remains to be seen from regulations how far the Government is prepared to go to introduce these procedural steps.

Other exceptions to the Bill remain, such as:

  • within joint ventures;
  • disclosures to customers;
  • accidental disclosures;
  • ACCC specific authorisations;
  • by formal notifications to the ACCC under section 93; and
  • compliance with the continuance disclosure requirements for public disclosures.

Next steps

The Bill will be introduced into the Senate during the next sitting which starts on Tuesday 16 August 2011.

There may be scope for further suggestions or changes to the Bill, especially as the Government does not have a majority in the Senate and both the Greens and Opposition have amendments which they failed to make in the House of Representatives.

The Bill is expected to come into force six months after it receives Royal Assent.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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