It's questionable whether the shareholder's
comments could have breached price signalling laws.
ACCC Chair Rod Sims recently suggested that public statements by
a shareholder in Virgin Australia and by the CEO of Qantas would
have risked breaching Australian price signalling laws, if those
laws applied across the economy, instead of being confined to the
Would they have? More importantly, should price signalling laws
The shareholder's comments on the Australian airline
The statements which Rod Sims apparently took exception to were
attributed to Mr James Hogan, the CEO of Etihad Airways, which is a
major shareholder in Virgin. He was reported as questioning the
capacity war, saying he would like "to see the market
correct" and his opinion was there is a "market where
both the airlines should be profitable".
The statements attributed to Mr Joyce of Qantas were that
"for every extra seat that Virgin added to its routes, Qantas
would add two to maintain the airline's 65% market
How do price signalling laws work?
Australian price signalling law is currently limited to the
banking sector. Currently it prohibits two main types of
any and all "private disclosures" of pricing
information, if given to any competitor (unless an exception
any other disclosure of pricing or strategic or supply
information, if it was made for a purpose of substantially
There are exceptions for disclosures made in the ordinary course
of business and in a range of other circumstances which are viewed
as legitimate, such as joint ventures, mergers and acquisitions,
consortium projects, bank workouts.
In judging whether a disclosure was made for a purpose of
substantially lessening competition the law could catch a
disclosure intended to reduce competition, if that was merely one
of the reasons for the statement.
To disclose information "for a purpose of substantially
lessening competition" means the disclosure was something that
was otherwise confidential and which was communicated partly for a
purpose of interfering with competition in some way. The extent of
the intended interference in competition must be "meaningful
or relevant" to the normal workings of the market.
The law also requires some consideration of the nature of the
statement, whether it was public or private:
How specific was the information?
Was it about future activities;
Was the information available to the public and was it part of
a pattern of similar disclosures.
In the light of all of this, its seems questionable that these
comments would have been a risk if the price signalling laws had
applied to the aviation sector. It is difficult to see how Mr
Hogan's statements could be said to be made for the purpose of
substantially lessening the competition. Any shareholder would be
concerned at the value of their investment and questioning why it
is not possible for that company and the industry to be more
profitable. The comments did not involve any invitation and gave no
specific invitation to achieve any level of capacity or pricing
In addition, the ACCC's guideline on the law indicates that
"Statements that genuinely describe market reality are
unlikely to raise concerns under the general prohibition",
which presumably would cover My Joyce's comments.
Should price signalling laws be extended?
Perhaps the ACCC's comments should rather be interpreted as
looking to provoke a debate about extending the reach of the price
signalling laws, in the upcoming "root and branch" review
of the Competition legislation.
If the ACCC were to be given a broader mandate and obtain more
power over price signalling across the economy, the bankcentric
provisions of the current law would need a thorough revision before
they could apply more generally.
It's got to be remembered, however, the law is complicated
and untested, and has numerous exceptions and qualifications. No
one in the banking sector has been found to have breached the laws,
and many doubt anyone will be in the foreseeable future.
It seems to us that, rather than being extended, the price
signalling laws should be rethought and redrafted, with the current
version consigned to the bin under one of the current
Government's repeal days, aimed at unnecessary red tape.
If the law was to be applied generally, one wonders why they
couldn't be simplified and confined to signalling which:
is likely to involve a purpose; or
alternatively, has when combined with other signals, comments
or other conduct a likely effect of substantially reducing
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
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In some cases these fees or surcharges are higher than what a bank charges to these merchants for use of the system.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).