Australia: Competition review: August 2015

RECENT ENFORCEMENT DEVELOPMENTS

Federal Court penalises OmniBlend Australia $17,500 for Resale Price Maintenance

On 17 August 2015, the Federal Court of Australia declared, by consent that OmniBlend Australia Pty Ltd (OmniBlend) breached the retail price maintenance provisions of the Competition and Consumer Act 2010 (Cth) (CCA) by aiding, abetting, counselling or procuring Taiwan Star International (TSI) to engage in the practice of resale price maintenance. OmniBlend encouraged TSI to induce or attempt to induce a competitor not to sell certain OmniBlend blenders at prices less than those specified by TSI. As a result of OmniBlend's conduct, TSI also withheld the supply of blenders from its competitor when it did not agree to sell the blenders at the price specified by TSI.

By consent, the Court ordered that OmniBlend and its sole director give undertakings regarding its future conduct, that OmniBlend participate in compliance training and that it contribute $10,000 towards the ACCC's legal costs. Without any input from the parties regarding quantum, the Court also ordered that OmniBlend pay a penalty of $17,500 for the contravention. In reaching that figure, the Court considered what OmniBlend was capable of paying and penalties imposed in similar cases.

RECENT MERGER DEVELOPMENTS

ACCC will not oppose Pfizer's proposed acquisition of Hospira

On 13 August 2015, the ACCC announced that it will not oppose Pfizer Inc's (Pfizer) proposed acquisition of Hospira Inc (Hospira). Pfizer and Hospira both supply small molecule medicines and biological medicines. The transaction between the two global pharmaceutical companies is worth US$17 billion.

In considering the effect of the acquisition on the supply of small molecule medicines, the ACCC determined that a merged entity would face competition from a number of alternative suppliers. In particular, competition from generic suppliers has meant that for some medicines there are one or two suppliers who compete for "the market".

The ACCC also considered the effect of the merger in regard to biological pharmaceutical molecules and their biosimilars. The ACCC concluded that there was a high degree of uncertainty regarding the development and supply of new biological medicines. In particular there was uncertainty in relation to the regulatory framework and approvals to market new products, the ability for the merged entity to successfully develop new products and the likely success in marketing any new products.

ACCC will not oppose global stationery acquisition

On 13 August 2015, the ACCC announced that it would not oppose Staples Inc's (Staples) acquisition of Office Depot Inc (trading in Australia as OfficeMax). During the review, the ACCC liaised with the NZ Commerce Commission, the US Federal Trade Commission and the European Commission.

The ACCC considered the effect of the merger in the market for the supply of office products to large corporate and government customers in Australia. While the ACCC was initially concerned about the increase in Staples' market share post-acquisition, it found that the merged entity would continue to face strong competition. In particular, the ACCC found that the market was highly price-sensitive, office products are highly commoditised, customer switching costs are low, and category specialists and original equipment manufacturers are an alternative source of supply.

Staples' main competitors, COS and Lyreco, will also act as a competitive restraint on Staples in this highly price-sensitive market. In addition, Officeworks, the market leader for office products generally, already supplies some large corporates and is actively pursuing tenders to supply government customers.

TPG Telecom Limited – proposed acquisition of iiNet Limited

On 20 August 2015, the ACCC announced that it would not oppose TPG Telecom Limited's (TPG) acquisition of iiNet Limited (iiNet), as it was not satisfied that the merger would substantially lessen competition.

In considering retail fixed broadband suppliers, the ACCC found that other retail suppliers, including Telstra, Optus and M2 would act as a competitive constraint on the merged entity. However, it noted that as a result of the increased market concentration from this acquisition, any future merger between the remaining four large suppliers would be subject to close scrutiny. The ACCC also considered wholesale transmission services, again noting that any future acquisition would raise serious competition concerns. A public competition assessment will be released in due course.

RECENT AUTHORISATION DEVELOPMENTS

ACCC grants five-year authorisation for BP / Velocity Frequent Flyers Program

On 18 August 2015, the ACCC issued a final determination granting BP Australia Pty Ltd (BP) and its resellers authorisation to collectively participate in the Velocity Frequent Flyer Program, a loyalty program associated with Virgin Australia, for a period of five years. Under that collective participation BP and reseller customers are able to earn frequent flyer points through purchases at participating BP sites.

Overall, the ACCC found that the conduct would lead to several public benefits and was unlikely to lead to any significant public detriment. These public benefits included greater opportunities for consumers to earn and redeem their Velocity points and increased price and non-price competition in fuel markets and between loyalty programs

ACCC re-authorises Virgin and Delta Trans-Pacific alliance

The ACCC has re-authorised an alliance between Virgin Australia Airlines Pty Ltd (Virgin) and Delta Air Lines Inc (Delta). As part of the alliance, the airlines are able to offer a single integrated network by coordinating their passenger and freight services between Australia and the US and within their domestic networks. The ACCC was satisfied that the alliance offered a public benefit. To date the alliance has resulted in better connections, scheduling, loyalty program benefits and lounge access.

The airlines sought reauthorisation for ten years. However, given the ongoing changes occurring in the aviation industry and the development of services on Australian-US legs, the ACCC granted re-authorisation for five years.

ACCC DEVELOPMENTS

ACCC releases comparator website guidance

On 3 August 2015, the ACCC released consumer and industry guidance on the operation and use of comparator websites. The review was prompted by complaints from consumers and businesses relating to the provision of misleading information to consumers, particularly comparing energy plans.

The consumer guidance sets out tips designed to help consumers understand and benefit from comparator websites, while the industry guidance sets out how industry can comply with competition and consumer laws.

New country of origin labelling scheme approved

On 21 July 2015, the Federal Government announced its approval of new country of origin food labels, which will inform consumers where products are made, grown and/or packaged. The new framework is designed to provide a clearer and more consistent system of food labelling in order to help consumers make informed purchasing decisions. The proposed system is also designed to avoid imposing excessive costs on industry.

The new labels incorporate the existing "made in Australia" green and gold kangaroo and introduce a mandatory gold bar chart that shows whether a product was made or grown in Australia, as well as the percentage of local ingredients in the product, and the country in which a product was packed. Examples of the proposed new labels can be found here.

It is anticipated that the new system will be in place by mid-2016, following State and Territory approval of the regime. The labels will apply to fruit and vegetables, including packaged fruit and vegetables, meat products, eggs, dairy products, juices, packaged and frozen 'ready to eat' meals, baked goods, meal bases, dressings, sauces, cereals, muesli bars, cooking ingredients, rice, noodles, pasta, jams and spreads. Producers of foodstuffs not on the list may also choose to use the food labels.

Country of origin labelling continues to be an area of concern for the ACCC. On 20 August 2015, Conroys Pty Ltd (Conroys) paid a $10,200 infringement notice issued by the ACCC for making a false or misleading representation that its Breakfast Bacon was made in Australia when it was actually imported. Conroys also gave an undertaking to the ACCC, published a corrective notice on its website and will establish a compliance program.

Competition law within the industrial relations area

During a speech given to the Law Council of Australia's Business Law Competition and Consumer Committee AGM on 15 August 2015, ACCC Chairman Rod Sims discussed enforcing competition law within the industrial relations context.

Sims noted that the CCA has always had clear exemptions for agreements relating to employment conditions, which do not fall within the ACCC's jurisdiction. Nevertheless, unions are not free to regulate markets by participating in practices which eliminate participants from the market, allocate bids or result in price-fixing.

The comments were made in light of alleged union behaviour, raised in the Royal Commission into Trade Union Governance and Corruption (Royal Commission) hearings in Canberra. The ACCC will be making submissions to the Royal Commission in relation to the difficulties with the secondary boycott provisions.

On 30 July 2015, the ACCC acknowledged the allegations of cartel conduct in the Canberra construction industry, particularly in relation to concreting and scaffolding. The allegations came to light during the Royal Commission. Cartel conduct remains an enforcement priority for the ACCC, with Rod Sims describing the allegations as a "grave concern". An ACCC specialist team will conduct the enquiries into the conduct.

While the ACCC does not typically comment publically on its investigations, it released a media statement given the public nature of the allegations. In that statement, the ACCC has appealed for anyone with information to come forward. No further comment will be issued by the ACCC during the investigation.

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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