Australia: Competition review: May 2015/1

RECENT ENFORCEMENT DEVELOPMENTS

ACCC takes action against Clinica and Radovan Laski alleging false or misleading representations and unconscionable conduct

On 14 May 2015, the ACCC filed an originating application with the Federal Court of Australia (Court) to commence proceedings against Clinical Internationale Pty Ltd (Clinica). The application alleges that Clinica breached the Competition and Consumer Act 2010 (Cth) by engaging in unconscionable conduct and by making false and misleading representations.

The ACCC's claim is based on the understanding that participants paid significant fees to participate in the program based on representations by Clinica that they would be provided with sponsors and regional cleaning jobs which would result in Australian permanent residency. It is alleged that not only did Clinica fail to have employment positions available for participants, but even if it did provide employment in regional cleaning jobs they would not have satisfied the skilled employment prerequisites for a permanent residency visa.

The ACCC is seeking declarations, injunctions, compensation orders for the clients, pecuniary penalties, costs and a disqualification order against the company's sole director, Mr Radovan Laski.

This action is consistent with one of the ACCC's enforcement priorities on consumer protection issues affecting vulnerable and disadvantaged consumers.

Spreets to pay penalties of $600,000 for misleading consumers

On 23 April 2015, in proceedings brought by the ACCC, the Court ordered by consent that Spreets Pty Ltd (Spreets) pay penalties of $600,000 for making false or misleading representations to consumers about deals offered on its online buying group website, in contravention of the Australian Consumer Law (ACL). Additionally, the Court ordered that Spreets pay the ACCC's legal costs of $25,000 and made declarations that Spreets had contravened of the ACL. Spreets and the ACCC agreed that Spreets would continue its ACL compliance program for the next three years.

Spreets engaged in four broad types of contravening conduct by:

1. making misleading representations about the price of the deals. It advertised the "headline" price of skydiving flights, but in the body of "the fine print" section customers had to pay an additional levy;
2. making misleading representations about the statutory consumer guarantees which are safeguarded by the ACL, by representing that refunds for faulty products were not available or would not be accepted after seven days;
3. making misleading representations to consumers about their rights under the Spreets' terms and conditions by representing that Spreets could only assist where the voucher had not expired or recently expired; and
4. failing to disclose limitations on the use of the vouchers when it knew certain vouchers could not be redeemed either on certain days or for the entirety of the validity period.

The Court found that the contraventions "went to the core" of Spreets' business and breached the ACL in several ways. The contravening advertisements would have been viewed by many consumers and clearly caused loss to those consumers who bought the falsely-advertised vouchers. The misrepresentations as to the consumer guarantees were also considered to be very serious, as they directly undermined the ACL. The effect of these misrepresentations meant that customers would have been reluctant to seek Spreets' assistance where they had a problem.

AGL SA ordered to pay penalties of $700,000 and to offer refunds to consumers for false or misleading discount representations

On 29 April 2015, in proceedings brought by the ACCC, the Court ordered by consent that AGL South Australia Pty Ltd (AGL SA) pay penalties of $700,000 and offer refunds totalling approximately $780,000 to 23,000 consumers for making false and misleading representations about discounts under AGL SA's energy plans, in breach of the ACL.

Although these consumers initially received the represented discount, in mid-2012 AGL SA increased the rates applicable to this group of consumers. In a letter sent to these consumers advising them of their new rates, AGL SA stated they would continue to receive their discount, when that was not the case. This was because, following the rate increase, their rates before the discount was applied were higher than the rates for those consumers who were supplied under AGL SA's standard retail contract.

Justice White noted that the "serious nature of AGL's contraventions, its previous record of contraventions, and the fact that AGL has not disclosed all the material bearing upon the full extent of its culpability may well have warranted the imposition of a higher penalty than that upon which the parties have agreed". Notwithstanding this comment, he found the agreed penalty to be within the acceptable range.

Electronic Arts undertakes to provide refunds to consumers

On 28 April 2015, Electronic Arts Inc and related companies (Electronic Arts) provided an undertaking to the ACCC, acknowledging that it made representations to consumers, which were likely to have breached the ACL. Electronic Arts sells digitally downloadable games through its Origin website. The company is located in the USA and Switzerland and submitted to the jurisdiction of the Court for the enforcement of the undertaking.

Electronic Arts made representations that Australian consumers had no rights to refunds for any Electronic Arts games purchased through the Origin website. It also represented that it had modified or restricted the statutory consumer guarantees in relation to games purchased by Australian consumers.

In compliance with the undertaking the company is to implement a consumer redress program and, for the next 90 days, publish a Consumer Rights Notice on the front page of the Origin online store. Electronic Arts will also amend various terms and conditions and policies (including terms on its Australian Returns and Cancellations webpage and its Great Game Guarantee Policy), add a webpage which includes information about consumer rights and establish and implement an ACL Compliance Program.

RECENT AUTHORISATION DEVELOPMENTS

Interim authorisation for joint tendering for recycling services

On 11 May 2015, the ACCC granted interim authorisation for the Metropolitan Waste and Resource Recovery Group (MWRRG) and the Brimbank, Melbourne, Port Phillip and Wyndham local councils (Councils) to enter into an arrangement where MWRRG negotiates and procures services for kerbside collected recyclable material on the Councils' behalf. The authorisation was granted on the condition that no contracts will be entered into for the services until a final determination is made.

The applicants are seeking authorisation for 12 years, comprising of a 12-month tender process and 11-year contract term. Contracts with successful tenderers are anticipated to be executed by February 2016.

OTHER DEVELOPMENTS

ACCC releases March 2015 quarterly petrol report

On 11 May 2015, the ACCC also released its second quarterly report on the Australian petroleum industry, which examines prices up to March 2015. According to the report, retail petrol prices fell to their lowest price in over 15 years during the quarter, following the collapse of international crude oil and refined petrol prices.

However, these low prices were short lived due to increased political tensions in the Middle East and improved market sentiment due to the reduction in the number of active oil rigs in the USA that was further affected by the falling AUD-USD exchange rate. As a result, retail prices increased by around 30 per cent from early February to the end of the March quarter in Sydney, Melbourne, Brisbane, Adelaide and Perth (Large City).

The report found that retail prices in regional locations were slower to fall in line with international price movements in comparison to larger cities, and as such, were slower to increase their prices during the quarter. Additionally, compared to the last quarter, the differential between regional and Large City retail prices significantly narrowed.

Also relating to the petrol industry, on 8 May 2015, the ACCC announced that it will commence its second regional petrol market study in Launceston. The ACCC commenced its first regional market study in Darwin in March 2015 and will release the report of that study later this year. Lastly, on 18 May 2015, the ACCC concluded its investigation into alleged anti-competitive conduct by fuel retailers in Armidale, where it did not find any evidence of cartel conduct. The investigation began in late 2014, following concerns raised about high petrol prices.

Rod Sims' address to the CEDA about the Harper Review

On 23 April 2015, Rod Sims addressed the Committee for Economic Development of Australia and emphasised that "advocates of competition want two things; more sectors exposed to competition and laws that seek to ensure firms do not behave in an anti-competitive way". He outlined three key issues affecting the competitiveness of markets in Australia: misuse of market power, concerted practices and privatisation.

Misuse of market power – Mr Sims argued that the debate around the Harper Review recommendations relating to the misuse of market power had been mischaracterised as simply introducing an "effects test", which mistakenly suggests that the proposed changes just add an effects test to the current law. He also noted that the recommendations are aimed at making an important law of general application workable and that the recommended changes will not increase consumer prices but ultimately work to reduce them.

Concerted practices – Mr Sims noted that the ACCC particularly welcomes the Harper Review recommendation to introduce provisions dealing with concerted practices to address a gap in Australia's current competition law. Concerted practices "usually involves some form of 'tacit collusion'... which significantly alters the uncertainty or strategic risk that would otherwise deliver price competition and innovation."

Privatisation – Mr Sims also outlined concerns about actions taken by Governments to sell significant assets without appropriate market structures and/or regulatory arrangements being put in place upfront. "We need to be careful to ensure that privatisation boosts economic efficiency rather than detracts from it," Mr Sims said. "Otherwise we risk giving privatisation a bad name because consumers will continue to associate privatisation with higher prices."

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.

Most awarded firm and Australian deal of the year Australasian Legal Business Awards	Employer of Choice for Women Equal Opportunity for Women in the Workplace (EOWA)