Pursuant to the Competition and Consumer Amendment Regulation 2012 (Regulation), made on 24 May 2012, pricing and other competitively sensitive disclosures made by Australian banking businesses have now been officially singled out as requiring exceptional scrutiny.
The price signalling amendments to the Competition and Consumer Act 2010 (Act) and Regulation come into effect on 6 June 2012. Meanwhile, other industries remain unaffected.
The Regulation ( which is unchanged from the draft that we reported on in February 2012), requires a "banking business", as defined in the Banking Act 1959, to comply with the price signalling prohibitions contained in a new Division 1A of Part IV of the Act. This means that subject to certain exceptions, banking businesses must not:
- make private disclosures of pricing information to a competitor which are not made in the ordinary course of business; or
- make any other disclosures of pricing information or other competitively sensitive information if the disclosure is made for the purpose of substantially lessening competition.
The price signalling legislative package was developed to serve two different objectives.
- The first (the competition policy objective) was focussed on filling a perceived gap in Australia's existing competition laws that are presently only triggered where parties have formed a "contract, arrangement or understanding" to allow forms of tacit collusion (such as information exchange) to be caught.
- The second (the banking policy objective) ( on which we reported in a previous article) arose from substantial political debate about the state of competition in Australia's banking sector
Whilst the banking policy objective might be said to have aided the competition policy objective by bringing the issue to the forefront of the political agenda, there have been numerous assertions from competition law circles that the resulting law may not properly answer the competition policy objective1.
- It is worthy of note that the Act prohibits forms of unilateral information disclosures (either privately from one competitor to another or from one person to another publicly or privately where it has the purpose of substantially lessening competition). Where collusion has occurred culminating in unilateral disclosure, this could be viewed as warranting regulation. However, the new provisions capture the scenario where a disclosure is made and no such collusion has occurred but a level of anti-competitive purpose can be inferred. This arguably goes further than many overseas jurisdictions have seen fit to prohibit2.
- The singular focus of the Regulation on the banking industry does not fit comfortably with well-established principles of the general or universal application of competition law. It is true that information exchange can be of greater concern in concentrated markets, of which the banking industry in Australia is a good example. At the same time, however, there are other sectors that have been cited as eligible candidates, such as petrol retail3. Subject to observing a prescribed procedure, it is open to the Minister to prescribe additional classes of goods or services to be covered by the price signalling laws. However, this does not answer the concern that the price signalling law should apply universally.
- The prescriptive approach to regulating anti-competitive information disclosures contained in the Act creates many challenges. We have variously discussed these in our previous articles but in summary, the difficulty lies in the fact that it can often be difficult to distinguish legitimate and potentially pro-competitive information exchange from anti-competitive communications. To that end, in very few countries (and notably not the EU, UK or USA) do competition laws explicitly list information exchange as an anti-competitive practice 4. It is left to the courts and regulators to assess the egregiousness of information exchange on a case-by-case basis. Australia has accordingly adopted a novel approach.
Despite the criticisms of the law, it is uncontroversial that it is advantageous to prohibit information disclosures (particularly of future pricing intentions between competitors) that dilute competitive rivalry in the marketplace. The Act and Regulation are equipped to prevent that, assuming an exception is not relied upon. Banking businesses should accordingly ensure that their processes are reviewed and ensure that there can be no suggestion that disclosures of pricing and other competitively sensitive information could be interpreted as having an anti-competitive object.
1 See, for example, submissions by the Law
Council of Australia and RBB Economics on the draft of the
Regulation (22 March 2012), available from the
Australian Treasury Wesbsite.
2 Although an approach has developed in the European Union to the effect that the mere receipt of future pricing information by a competitor through private contact with another competitor may be capable of constituting a competition law infringement. See EC Guideline on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (2011/C 11/01) .
3 Fisse, Brent Misleading, Deceptive and Bankrupt: The Second Reading Speech on the Competition and Consumer Amendment Bill (No 1) 2011 (24 September 2011) p3, available at www.brentfisse.com.
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