Laws prohibiting anti-competitive price signalling and information disclosures were introduced in June 2012. At present these laws only apply to the banking sector in relation to taking deposits and making loans, but they may extended by regulation in the future to other sectors of the economy.
Price signalling occurs when banking companies:
- disclose prices to competitors in private where doing so is not in the ordinary course of business (the per se prohibition)
- discloses information (in public or in private) for the purpose of substantially lessening competition in a market (the general prohibition). The information may relate to price, capacity or commercial strategy.
A range of exceptions have been created to prevent legitimate business activities from falling within the prohibitions.
Exceptions to both the prohibitions exist for disclosures that are covered by an authorisation or notification or made to comply with a company’s continuous disclosure obligations.
Exceptions to the per se prohibition exist for:
- private disclosures between parties in a joint venture
- to an acquirer or supplier in relation to an acquisition of shares or assets, or
- as part of a corporate work out.
The per se prohibition is an outright prohibition against the private disclosure of pricing information to one or more actual or potential competitors where the disclosure does not occur in the ordinary course of business.
The per se prohibition does not draw a distinction between past, current and future price information, and does not require proof of an anti-competitive purpose or effect. It also applies to use of an intermediary or to a non-competitor, for the purpose of circumventing the prohibition.
Conduct that would be entirely unremarkable to an objective bystander is likely to be in the ordinary course of business and will not fall within the per se prohibition.
Examples of conduct that would raise concerns under per se prohibition
- Bank A privately discloses future pricing information to Bank B. The information is communicated using code words in order to avoid the disclosure being detected.
- Employees from competing banks meet at a social occasion. An employee of Bank A discloses current and future specific pricing information to employees of Bank B and C.
The general prohibition prohibits companies making certain disclosures related to prescribed goods or services, for the purpose of substantially lessening competition.
This general prohibition applies to public or private disclosures of information relating to the:
- price of goods or services (supplied or acquired by the firm)
- capacity or likely capacity of the firm to supply or acquire, or
- commercial strategy of the firm.
Statements that genuinely describe market reality are unlikely to raise concerns under the general prohibition. The prohibition will not impede a firm from advertising their price to customers, such as on websites, via billboards, newspaper or television advertisements. Further it will not impede a firm from disclosing an intended change in pricing policies to shareholders.
Of course, at all times it will be necessary for firms to ensure their statements are truthful and are not false or misleading.
Examples of conduct that would raise concerns under general prohibition
- Bank A devises a campaign to signal its intention not to reduce its rates and test rivals’ willingness to do the same. In doing so, it wants to reduce the pressure of competition. The campaign includes Bank A executives making a series of public statements indicating its reluctance to pass through (or fully pass through) reductions in the cash rate ahead of an announcement by the Reserve Bank.
- An Australian banking executive announces at an industry conference that they would be reluctant to lift rates beyond that of the Reserve Bank cash rate or introduce new fees, but if the others did, they would be prepared to follow.
Applying for exemptions - protection from legal action where the public benefit outweighs any public detriment