ACCC not entitled to issue Competition Notice

The Australian Competition and Consumer Commission is disappointed with today's decision that it was not entitled to issue the Part A Competition Notice in April 2006.

The Federal Court held that the Competition Notice differed in substance from the earlier Consultation Notice in the kind of anti-competitive conduct it described.

In December 2005, the ACCC issued a Consultation Notice to Telstra because it increased its wholesale prices for line rental above the vast majority of its retail prices for the line rental component of fixed line plans. The Notice gave Telstra over five weeks to make a submission about the matter.

In April 2006, the ACCC issued a Competition Notice which provided some information that was not in the Consultation Notice. This followed consideration of the material provided by Telstra during the consultation process, including Telstra's requests for further information. The ACCC considered that the differences between the Consultation Notice and Competition Notice were not substantial, but rather provided particularisation and focusing of the allegations.

In May 2006, Telstra challenged the validity of the Competition and Consultation Notices on a wide variety of grounds. Today, Justice Bennett dismissed the large majority of Telstra's complaints, holding that:

• differences between the Notices were to be expected because the Consultation Notice need only describe conduct in summary form and because the ACCC is obliged to consider Telstra's submission before issuing a competition notice
• the terms of the Consultation Notice did not lack clarity and were not circular but were certain and sufficiently clear
• the terms of the Competition Notice were clear and set out the matters as required by the statute
• the ACCC did not need to provide all the material and analysis sought by Telstra, but only notice of additional material that went to matters not described in the Consultation Notice, or the substance of those matters
• the ACCC acted lawfully in not furnishing Telstra with reasons for issuing the notices.

However, the Court found that the ACCC was not entitled to issue the Competition Notice because it differed from the Consultation Notice in respect of only two matters held to be of substance. The Court also found that because Telstra was not given details of those matters when the ACCC consulted with it, that Telstra was not afforded the opportunity to address relevant issues.

The decision potentially protracts the procedural process before the ACCC can issue a competition notice. This may delay or frustrate the ACCC's ability to respond quickly to potential anti-competitive conduct. It may also provide the recipient of a notice with incentives to challenge procedural aspects instead of addressing the substantive underlying conduct.

The ACCC will assess the full impact of the decision on the application of the law and options to address any impediments in its effective operation.

The competition concerns relating to pricing of the wholesale line rental service continue to be effectively addressed by the declaration processes which the ACCC in instituted in July 2006.